Svela v Trade In Warehouse Ltd - Reference No. MVD 230/2024 [2024] NZMVDT 161 (3 September 2024)

Last Updated: 31 October 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 230/2024 [2024] NZMVDT 161 BETWEEN IAN SVELA Applicant AND TRADE IN WAREHOUSE LIMITED Respondent

HEARING at CHRISTCHURCH on 24 July 2024 (by audio-visual link) MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator S Cousins – Assessor

APPEARANCES

I Svela, Applicant C Beale, Witness for the Applicant

N Boote for the Respondent M Davis, Witness for the Respondent

DATE OF DECISION 3 September 2024

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DECISION OF THE TRIBUNAL

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1. Within ten working days of the date of this decision Trade In Warehouse Limited is to pay Mr Svela $3,391.13.

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REASONS

Introduction

[1] On 17 January 2024 Mr Svela purchased a 2012 Peugeot 5008 from Trade In Warehouse Limited (the Trader) for $11,600. The vehicle’s odometer read 99,600 kms at the time of sale and had read 105,042 kms at the time of filing this application.
[2] Mr Svela applies to the Tribunal for orders upholding his rejection of the vehicle on the basis that it has multiple unresolved and serious defects.

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 Svela entitled to under the CGA?

Issue 1: Has the vehicle been of acceptable quality?

[4] Section 6(1) of the CGA provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”.
[5] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) 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.

[6] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[7] Mr Svela contends that while the vehicle was advertised and described by sales staff as being in excellent, used condition, it is not of acceptable quality and is unsafe.
[8] He explained that when he test drove the vehicle there was an obvious timing chain rattle, which he raised with the Trader. He says he was promised that it would be fixed as a condition of sale. He says that it was not fixed. Further, he explained that his finance broker insisted on a new Warrant of Fitness (WOF) being issued before the purchase funds would be released as the existing WOF was outside of the required 30-day period. The vehicle failed that WOF inspection because of a leak that Mr Svela was told was from the coolant system. He says that several days of delays ensued while it was being repaired. Throughout this period, Mr Svela says he was assured that the vehicle would be in quality condition and that he would be given the WOF paperwork and service paperwork. He says this information was not provided until 13 May 2024.
[9] Mr Svela explained that the Trader provided email confirmation that the timing chain was repaired. He says he received the vehicle on 18 January 2024 and that there was a chemical smell emanating from the engine bay intermittently from that day onwards. He noticed the smell on and off when driving the vehicle. A garage in Wellington looked at the coolant system as the source of a possible leak and the smell in late January. It was noted during the inspection that the engine had leaked before given the evidence of prior cleaning and that it was probably solvents burning off that could be smelt. That inspector did not realise it was a fuel line leak causing the smell because the engine had been cleaned recently and Mr Svela had not sought a full inspection. He says the smell became more frequent and obvious over time, especially when being started on cold mornings.
[10] On a different note, Mr Svela complains that on 24 February 2024 his vehicle was ticketed for not having an up–to–date registration despite what was stated on the Consumer Information Notice (CIN). He contacted the Trader via email, and it agreed to cover the cost of the ticket and three months registration but have not done so to date. The vehicle was ticketed because it did not display evidence of a current registration and had been placed on a registration exemption from 3 October 2023 to 25 April 2024.
[11] Mr Svela explained that considering the registration issue and because the petrol smell had worsened, he did not drive the vehicle from 24 February until 24 April 2024. He says he did not know what to do about the vehicle, seek out repairs or ask for a refund. He says he decided to seek out repairs. He completed a three-month registration for the vehicle and drove it to a local repairer on 24 April 2024. He describes the petrol fumes in the cabin as being so bad that he thought he might pass out. The repairer concluded it was a fuel line leak. Mr Svela contacted the Trader via email and says that at first it refused the repair. Mr Svela had the vehicle towed to a Peugeot dealership because he wanted the branded service garage to diagnose the issue and anything else.
[12] The specialist dealer carried out a full inspection of the vehicle at his request, which cost $300. An extensive list of faults was identified. The timing chain was found to rattle on cold start. The specialist suspected it was stretched and needed replacing. The specialist noted evidence of previous patch work on the fuel line. The specialist quoted repair costs of $7,557.35.
[13] Mr Svela produced proof of invoice and receipt confirming he paid $1,624.08 to have the fuel line leak diagnosed and repaired.
[14] The Trader acknowledged that the fuel line needed repair but says that it could have repaired it cheaper. It says the defects identified by the specialist repairer are more in the nature of a pre-purchase inspection checklist and that many of the items listed are in fact service or maintenance items. It says Mr Svela has travelled over 5,000 kms in four months and cannot call upon the statutory guarantee for such items.
[15] In an email to Mr Svela dated 15 May 2024, the Trader offered to cover: the replacement of the fuel line, the replacement of a badly cracked drive belt, the replacement of the rocker cover gaskets and the removal, stripping and refitting of the rocker cover bolts. The total cost of these items (as quoted by the specialist repairer) was $1,877.66.
[16] The parties tried to negotiate a settlement but failed. I encouraged them to negotiate further and accommodated a settlement dialogue during the hearing itself. That also failed.
[17] Mr Cousins, the Tribunal’s Assessor,[1] agrees that the fuel line leak is a fault which existed at the time of sale and is more than minor.
[18] Mr Cousins considers the following items, identified by the specialist repairer during its inspection of the vehicle, are service concerns or concerns which are related to the age and mileage of the vehicle:

• (a) Air filter;
• (b) Lower control arm bushes starting to crack;
• (c) Radiator coolant low (Mr Cousins says there is no evidence of a defect here other than the requirement to top up and potentially service the cooling system);
• (d) Weak battery;
• (e) Tyres;
• (f) Spark Plugs;
• (g) Brake Lines;
• (h) Front Lights;
• (i) Fuel filter;
• (j) Wiper rubbers;
• (k) Trims;
• (l) Rear light bulb not working;
• (m) Cabin/pollen filter;
• (n) Drivebelt cracked; and
• (o) Park brake difficult to disengage (Mr Cousins advises this is acceptable given this concern has developed recently, 5,000 kms has been travelled by Mr Svela, and the problem is a servicing issue. There is no evidence to confirm this is a component failure as opposed to a concern related to the wear and tear of the system and its maintenance).

[19] As to the other items raised by the specialist repairer, Mr Cousins advises me as follows:

• (a) Crack in rear taillight – 5,500 kms travelled, no evidence it was present at the time of purchase or pre-purchase WOF, evidence suggests this damage has developed during the applicant’s ownership.
• (b) Front windscreen washers leaking – Mr Cousins believes there is no diagnosis of this problem but suspects it is likely a hose failure consistent with the age and mileage of the vehicle.
• (c) Modified or non-OEM wiring, potentially resulting in communication fault codes logging with the information centre – Mr Cousins considers this concern is entirely asymptomatic; it is common that a 12-year-old vehicle which has travelled 100,000 kms may have had wiring repairs or modifications. This may have been done for numerous reasons, but being mindful of this being a Singaporean import, it may be that the repair is to overlay corroded or damaged wiring.

[20] As to the oil leaks complained of Mr Cousins believes that following the fuel leak repair the powertrain ought to be cleaned down and reinspected to confirm the root cause and scale of any suggested leaks. In part, this is because fuel contamination thins out other contaminants such as oil, grease and dust/dirt which can mislead the scale and location of any leaks. Mr Cousins agrees with the specialist repairer that the seals in a vehicle of this age will begin perishing and hardening, making them more likely to leak. He considers this is particularly true of a Singaporean import vehicle, where the relative humidity and vicinity to salt water tend to accelerate vehicle ageing. There is no evidence that these leaks are substantial, where potentially a substantial leak may be seen as a component failure, a minor leak or weep likely indicates worn and hardened seals, which as mentioned earlier is relatively acceptable for a vehicle of this age and mileage. Mr Cousins opines that unless there is a more substantial concern with the engine such as a blocked crank case ventilation, worn rings or similar which can cause multiple seals to leak due to excessive internal pressure, then the development of minor leaks on a vehicle of this age and mileage is likely considered acceptable.
[21] That said, Mr Cousins notes that the valve cover gaskets have been specifically identified as leaking and are a confirmed defect, which ought to be replaced to assure continued serviceability and prevent ongoing oil contamination of other powertrain components.
[22] Finally, Mr Cousins considered the evidence regarding the alleged failing or failed timing chain. Mr Svela alleged that the timing chain problem was identified as rattling prior to sale and that he insisted, and the Trader agreed, that it would be inspected and repaired. The Trader says it was inspected and no problem was identified at the time. It says that that remains the case.
[23] Mr Cousins notes that there is no evidence as to what exactly needed to be repaired, rather just that the noise may be the same or similar. Despite this, Mr Svela did not raise the rattle noise with the specialist repairer as part of its inspection. That this was confirmed by both Mr Svela and Mr Beale (who is employed by the specialist repairer and carried out the inspection of the vehicle) during the hearing suggests the noise noted pre-sale is not the same noise, which is being made by the chain, or after travelling 5,000 kms Mr Svela would have raised this directly with the specialist repairer as he did with his other concerns.
[24] The rattle is described as occurring on start-up, particularly from cold. It goes away once the vehicle warms up. Mr Beale explained that in his experience this concern will develop over time and eventually the rattle noise will be heard throughout the operating temperature range. Mr Cousins considers this is a clear description of wear and tear. After 5 000 kms, the concern appears to be minor to the extent Mr Svela did not consider having this specifically inspected.
[25] Mr Cousins considers that if the concern were pursued before travelling 5,000 kms or if the timing chain were stretched to the point of poor engine performance, hard starting, fault codes logging or a persistent noise, which did not resolve with operating temperature, then it may engage the guarantee, but as the evidence suggests this is a developing concern, wholly related to wear.
[26] While Mr Cousins agrees with Mr Beale’s assessment that this concern will likely develop over time and eventually require attention. However, Mr Cousins considers that these are the sort of issues which a person takes on in purchasing a vehicle of this age and mileage. A vehicle of this age and mileage will require both expected and unexpected maintenance on an ongoing basis. As Mr Beale said in his evidence the vehicle needs a thorough service and Mr Cousins considers that if these concerns were raised earlier in Mr Svela’s tenure, before he travelled 5,000 kms in the vehicle his claim would carry more weight.
[27] I note that during the hearing, discussions took place regarding inspection of the chain during the proposed valve cover gasket replacement. The Trader suggested they may be open to repairing the timing chain following inspection. Depending on what is discovered at that time, Mr Cousins advises that it is likely in the best interests of the Trader to assure the chain and guides are in an ongoing serviceable condition, if a guide were to break, or the chain itself, the engine would suffer catastrophic failure. There is merit in that observation noting the Trader may carry the risk of exposure to such a repair, particularly knowing that this is a concern prior to carrying out these repairs.
[28] The purchaser of a 12-year-old European vehicle (ex-Singapore) with an odometer reading of more than 100,000 kms should have realistic expectations as to its quality and durability and should understand that the vehicle is likely to have pre-existing defects consistent with its age and mileage or can develop defects and require ongoing maintenance of a sometimes unplanned and expensive nature. Here, the Trader has agreed to repair multiple problems, which arose after purchase. Other issues arose during Mr Svela’s ownership of the vehicle and his 5,000 kms travelled. A reasonable purchaser would understand that a supplier’s obligations under s 6 of the CGA are finite and, at some point, the risk of the vehicle developing defects must transfer from the supplier to the purchaser. The point in time at which that risk transfers is determined with reference to the factors in s 7(1)(f) to (j) of the CGA.
[29] I agree with Mr Cousins and adopt his analysis. I find that the fuel line leak is a clear breach of the guarantee of acceptable quality. I also find that the rocker cover gaskets and cover bolts breach the guarantee of acceptable quality, as does the badly cracked drive belt. These later items are a marginal call but given the Trader offered to repair them, I see that as an appropriate outcome and will order accordingly.
[30] As to the timing chain, I cannot be satisfied on the state of the evidence that the timing chain has failed. However, the experts agree that it is going to fail at some point. During the hearing, the Trader wanted to explore a repair, if necessary, noting that the timing chain would be accessible during other repairs to be carried out. I do not think it is fair to the parties for me to make an order which sees them have to return to the Tribunal for further or other directions. I will find that the timing chain breaches the guarantee of acceptable quality, but I will not order its repair or replacement by the Trader. I will order that it contributes an amount to that repair, if it is deemed necessary. Mr Svela will benefit from a new timing chain, and I need to account for betterment.

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

[31] A failure of a substantial character is defined in s 21 of the CGA:

21. 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.

[32] Given my findings above, I will not dwell on this issue because the answer is clear. None of the breaches amount to a failure of substantial character either individually or on a combined basis. I do not believe a reasonable consumer would not purchase a vehicle of this age and mileage armed with knowledge that these problems or faults might be experienced with the vehicle over 5,000 kms of use (and absent the regular servicing or maintenance of the vehicle).

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

[33] 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.

[34] I will make a financial award here to Mr Svela, which he can use to have repairs carried out. He will be reimbursed for his fuel line repair. I will add to that the quoted items agreed to be repaired by the Trader. This makes a total of $2,391.13. I will order a further $1,000 is paid by the Trader to account for labour and as a contribution to the resolution of the timing chain issue, when required.
[35] I order that within ten working days of the date of this decision the Trader is to pay Mr Svela $3,391.13 (GST inclusive). I make no other orders. I expect the Trader to honour its promise to pay the parking ticket as agreed.

D M Jackson
Adjudicator

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[1] Assessors are appointed by the Minister of Commerce and Consumer Affairs under s 88(2) of the Motor Vehicle Sales Act 2003, having regard to the Assessor’s personal attributes, qualifications and skills and knowledge of, or experience in, the different aspects of matters likely to come before the Tribunal. Under cl 10 of Sch 1 of the Motor Vehicle Sales Act, an Assessor sits as a member of the Tribunal and has a duty to assist the Adjudicator in the determination of the claim, although the Adjudicator alone determines the claim.