Khan v Auto Access NZ Ltd - Reference No. MVD 275/2024 [2024] NZMVDT 158 (27 August 2024)

Last Updated: 1 November 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

	MVD 275/2024 [2024] NZMVDT 158
BETWEEN	SOJHAN KHAN Applicant
AND	AUTO ACCESS NZ LIMITED Respondent

HEARING at Auckland on 22 August 2024 (by audio-visual link)

MEMBERS OF TRIBUNAL

D Watson, Adjudicator

S Haynes, Assessor

APPEARANCES

S Khan, Applicant

R McCall, for the Respondent

DATE OF DECISION 27 August 2024

_________________________________________________________________

DECISION OF THE TRIBUNAL

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1. The claim of Sojhan Khan to reject the vehicle is allowed.
2. Auto Access NZ Ltd, must, within ten working days of the date of this decision, pay $6,182.56 to Mr Khan. If any further payments are made by Mr Khan to Oxford Finance Ltd after 22 August 2024 then these must also be reimbursed by Auto Access NZ Ltd to Mr Khan within ten working days of the date of this decision.

100. The rights and obligations of Mr Khan under the loan agreement entered into with Oxford Finance Ltd dated 21 February 2024 are assigned to Auto Access NZ Ltd from the date of this decision.

4. Once the payment referred to in B above has been made, Auto Access NZ Ltd must uplift the Toyota Hilux (QLY83) vehicle from Mr Khan at a time and date convenient to him and at its cost.

_________________________________________________________________

REASONS
Introduction

• [1] Sojhan Khan purchased a 2018 Toyota Hilux^[1] from Auto Access NZ Ltd (Auto Access) on 21 February 2024 for $38,614.00. The vehicle had then travelled 117,500 kms.
• [2] He claims that the vehicle has suffered from a number of faults, discovered not long after he purchased the vehicle. He wants to reject the vehicle.

The issues

• [3] The issues requiring the Tribunal’s consideration in this case are:

(a) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?

(b) Are the vehicle’s defects a failure of a substantial character?

(c) What remedy is Mr Khan entitled to under the CGA?

Relevant background

• [4] Mr Khan and his wife Farina Munaf borrowed the full purchase price of the vehicle from Oxford Finance Ltd. Mr Khan produced a copy of the loan agreement, dated 21 February 2024 (the Oxford Finance loan).
• [5] Mr Khan uplifted the vehicle on 2 March 2024. He noticed at that time that there was an issue with the fuel cover trim and that the glovebox was broken. He pointed these and other issues out to the salesperson he dealt with, who reassured him that Auto Access would fix these issues.
• [6] He commenced his drive home to Napier. On the journey home, he realised that the vehicle seemed to have an out of balance tyre and various loose parts.
• [7] He subsequently had the vehicle assessed by Blenheim Toyota. It produced a diagnosis dated 20 March 2024 which recorded the following faults:

  a) there was evidence of excessive surface rust underneath the vehicle

  b) all under trays were missing (including fuel tank under tray)

  c) the left rear wheel was damaged on the inside, possibly from coming loose. One wheel nut and stud were missing and incorrect nuts were fitted.

  d) the replacement deck was missing the fuel filter neck plastic surround and the paint job on the deck was extremely poor.

  e) the vehicle has been reregistered but the warrant of fitness (WOF) sticker has not been updated

  f) the handbrake was out of adjustment

  g) the upper glove box was broken

  h) various interior trim plastics, roof mouldings and brake pedal rubber were missing

  9. the rear window de-icer had no wiring to it

  j) the plastic front guard trims were missing from under the bonnet

  k) battery is the incorrect size and has no clamp

  12. anti-lock braking system (ABS) pump not bolted down

  m) air box mount broken

  n) intercooler piping not bolted down

  o) brake booster pipes not bolted down

  p) ambient temperature sensor not working

  q) engine cover not secure

  r) left front wheel bearing dragging

  s) registration light has been painted over

  t) one new tyre has been fitted

  u) rear driveshaft damaged

  5. right front guard liner damaged
• [8] The report concluded: “NOTE: this vehicle is unsafe to drive and should not have a warrant of fitness”. The cost of the diagnosis was $193.20.
• [9] Mr Khan provided a copy of the Blenheim Toyota report to Auto Access and asked for a remedy.
• [10] Auto Access appears to have accepted responsibility early on. In an email dated 26 March 2024 it advised “... You have my assurance that Auto Access NZ Ltd will put it right”.
• [11] The various emails provided to the Tribunal show Mr Khan following up with Auto Access on subsequent occasions, but there were delays because it appeared Auto Access was attempting to obtain recovery from the prior owner of the vehicle.
• [12] On 17 April 2024, Mr Khan sent a further email mentioning that it had now been weeks and he had not heard back from Auto Access.
• [13] On 2 July 2024, the parties had a telephone conversation where Mr Khan made it clear he was no longer interested in repair because he had now been chasing the issue since March 2024. The parties then discussed and agreed on rejection of the vehicle, with Auto Access to take over payments to Oxford Finance.
• [14] An email dated 9 July 2024 from Auto Access and Mr Khan says he agreed to that option, but nothing further has happened.
• [15] The position of Auto Access at the hearing is, to its credit, it apologies to Mr Khan. It is not really in a position to oppose the application by providing any cogent form of opposition, however, it says it has been let down by other parties.

Issue 1: Was the vehicle of acceptable quality?

• [16] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods a guarantee that the goods are of acceptable quality. Section 2 of the CGA defines “goods” as including vehicles.
• [17] The expression "acceptable quality" is defined in s 7 as follows:
  7. Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

(2) Where any defects in goods have been specifically drawn to the consumer's attention before he or she agreed to the supply, then notwithstanding that a reasonable consumer may not have regarded the goods as acceptable with those defects, the goods will not fail to comply with the guarantee as to acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be treated as having been specifically drawn to the consumer's attention for the purposes of subsection (2) are those disclosed on a written notice displayed with the goods.

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and

(b) the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.

(5) A reference in subsections (2) and (3) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.

• [18] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in s 7(1)(a)–(e) of the CGA as modified by the factors set out in s 7(1)(f)–(j), from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view of those factors from a purchaser’s subjective perspective.
• [19] I accept that this vehicle has all of the faults that were diagnosed by Blenheim Toyota and as recorded above.
• [20] Mr Haynes, the Tribunal’s Assessor advises that eight of these represent warrant of fitness (WOF) failures, namely items c), f), o), l), u), r) and v) from the list recorded above. He also advises that these faults meant that the vehicle would have been unsafe to drive.
• [21] The CGA provides important protections for consumers, including that goods will be reasonably durable and free of major defects. I consider that each of the faults that this vehicle has had represents a failure of the guarantee of acceptable quality. I consider that a reasonable purchaser of this vehicle would not expect to encounter any one of these faults, let alone all of them at, or shortly after, the time of purchase. They would not expect to encounter these sorts of faults so soon into their ownership of the vehicle. I note the evidence of Mr McCall that the vehicle was apparently in good condition when it left the wholesaler who sold the vehicle to Auto Access and that it had a fresh WOF at the time of sale but I find that the vehicle has a large number of faults, most if not all of which were pre-existing. I have little hesitation that clearly the vehicle has simply not been as acceptable or as durable as would be expected by a reasonable purchaser, given its age, price and mileage at the time of purchase.

Issue 2: Are the vehicle’s defects a failure of a substantial character?

• [22] Under s 18(3) of the CGA, Mr Khan may reject the vehicle if its defects amount to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the CGA:
  21. Failure of substantial character

For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where—

(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b) the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or

(c) the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or

(d) the goods are not of acceptable quality within the meaning of section 7 because they are unsafe.

• [23] The question I must answer is whether the faults that this vehicle has, are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle. Alternatively, did the failures mean that the vehicle was unsafe?
• [24] I have little difficulty in concluding that in this case, the vehicle's faults, taken together, amount to a failure of a substantial character. Considering that eight of the faults amount to a WOF failure, meaning that the vehicle was unsafe, I consider that any reasonable purchaser, fully acquainted with the true nature and extent of the faults would have declined to purchase the vehicle.
• [25] Not all pre-existing defects are a failure of a substantial character, of course. The Tribunal regularly encounters cases where vehicles are supplied with pre-existing defects. A common feature of those cases is that the purchasers are often prepared to allow the supplier to rectify those defects, particularly where the repairs are straightforward, and the defect is unlikely to return once repairs are affected. Here, there are just too many faults, and with a large number of them amounting to WOF failures.
• [26] I have easily concluded the failures were, collectively, of a substantial character.^[2] A reasonable purchaser would reach the view they held no confidence in the reliability of the vehicle. Further, I consider that the vehicle’s WOF failures meant that it was unsafe.

Issue 3: What remedy is Mr Khan entitled to under the CGA?

• [27] The relevant remedies are set out in s 18 of the CGA, which provides:
  18. Options against suppliers where goods do not comply with guarantees

(1) Where a consumer has a right of redress against the supplier in accordance with this Part in respect of the failure of any goods to comply with a guarantee, the consumer may exercise the following remedies.

(2) Where the failure can be remedied, the consumer may—

(a) require the supplier to remedy the failure within a reasonable time in accordance with section 19:

(b) where a supplier who has been required to remedy a failure refuses or neglects to do so, or does not succeed in doing so within a reasonable time,—

(i) have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied; or

(ii) subject to section 20, reject the goods in accordance with section 22.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21, the consumer may—

(a) subject to section 20, reject the goods in accordance with section 22; or

(b) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.

(4) In addition to the remedies set out in subsection (2) and subsection (3), the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.

• [28] Under s 18(3) of the CGA, Mr Khan has the right to reject the vehicle because the vehicle’s faults are a failure of a substantial character. Because I have found that most, if not all, of the faults were pre-existing, I consider that he had the right to reject the vehicle at the date of sale.

Reimbursement of all amounts paid in respect of the vehicle

• [29] Mr Khan is entitled to a refund of all amounts paid in respect of the vehicle.^[3]
• [30] In this case, Mr Khan paid no deposit, but he has made the loan payments to Oxford Finance. A statement of those payments was provided to the Tribunal after the hearing. It records that he has paid the sum of $5,989.36 in interest and principal payments, with the most recent payment being made on 22 August 2024. These payments are being made fortnightly.
• [31] I consider that Auto Access should reimburse the sum of $5,989.36 to Mr Khan with respect to these loan repayments. There is to be no deduction from this sum because I consider there was a right of rejection at the time of sale and Mr Khan has scarcely had the use of this vehicle. Also, he has been put to significant inconvenience in dealing with this vehicle and awaiting an outcome.
• [32] If any further loan repayments are made by Mr Khan after the 22 August 2024, then those payments should also be reimbursed by Auto Access to Mr Khan in full.

Assignment of the loan agreement

• [33] Mr Khan is also entitled to have his ongoing rights and obligations under the loan assigned to Auto Access. The relevant statutory provisions are set out in ss 89(2) and (3) of the Motor Vehicle Sales Act 2003 (the MVSA), which state:
  89. Jurisdiction of Disputes Tribunal

...

(2) A Disputes Tribunal may order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader if—

(a) the collateral credit agreement is associated with the contract for the sale of that motor vehicle; and

(b) the motor vehicle trader is a party to that contract for sale; and

(c) either one of the following circumstances applies:

(i) the buyer exercises the right conferred by the Consumer Guarantees Act 1993 to reject that motor vehicle and, on a claim by the buyer under section 47(1) of that Act, the Disputes Tribunal orders the motor vehicle trader to refund any money paid, or other consideration provided, for that motor vehicle; or

(ii) the Disputes Tribunal finds that the buyer has suffered, or is likely to suffer, loss or damage by the conduct of the motor vehicle trader that constitutes, or would constitute, any of the conduct referred to in section 43(1) of the Fair Trading Act 1986 and the Disputes Tribunal makes an order under section 43(2) of that Act declaring the whole or any part of the contract for sale to be void.

(3) For the purposes of subsection (2), collateral credit agreement, in relation to a contract for the sale of a motor vehicle, means a contract or agreement arranged or procured by the motor vehicle trader or the buyer for the provision of credit by a person other than by the motor vehicle trader to enable the buyer to pay the price reserved by the contract for sale in respect of the motor vehicle.

• [34] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to Auto Access are all met in this case:

(a) the loan is a collateral credit agreement for the purposes of s 89(2) of the MVSA in that it was associated with the agreement for sale and purchase in respect of the vehicle (the purchase agreement). The loan was arranged or procured by Mr Khan for the provision of credit by Oxford Finance to enable him to purchase the vehicle;

(b) Auto Access sold the vehicle to Mr Khan, so it is a party to the purchase agreement; and

(c) Mr Khan has exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that Auto Access must refund any money paid, or other consideration provided, for that vehicle.

• [35] Accordingly, under s 89(2) of the MVSA, all of Mr Khan’s rights and obligations under the loan agreement are assigned to Auto Access from the date of this decision.

Other losses claimed

• [36] Pursuant to s 18(4) of the CGA, Mr Khan is additionally entitled to damages for any loss or damage resulting from the failure which was reasonably foreseeable as liable to result from the failures. I consider that Auto Access must therefore pay the diagnostic charges incurred by Mr Khan, being the sum of $193.20.

DATED at AUCKLAND this 27th day of August 2024

D Watson
Adjudicator

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^[1] Registration number QLY83.
^[2] Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC).
^[3] Consumer Guarantees Act 1993, s 23(1)(a).