Patel v Toyota NZ Limited - Reference No. MVD 255/2024 [2024] NZMVDT 172 (26 September 2024)

Last Updated: 1 November 2024

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

	MVD 255/2024 [2024] NZMVDT 172
BETWEEN	UMANG PATEL Applicant
AND	TOYOTA NEW ZEALAND LIMITED First Respondent
AND	HOWARD TRADING LIMITED TRADING AS TOYOTA BOTANY Second Respondent

HEARING at Auckland on 20 August 2024 (via MS Teams)

MEMBERS OF TRIBUNAL

Shaurya Malaviya, Barrister – Adjudicator

Sean Gregory – Assessor

APPEARANCES

Umang Patel, Applicant

Ross O’Dea, for the Respondent

Liane Clarke, for the Second Respondent

DATE OF DECISION 26 September 2024

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DECISION OF THE TRIBUNAL

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1. Mr Patel’s claim is dismissed.

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REASONS
Relevant Background

• [1] Mr Patel purchased a 2020 Toyota RAV4 (‘the vehicle”) on or around 7 March 2020 as new from Howard Trading Limited (“HTL”).
• [2] On 24 December 2022, Mr Patel had a minor accident while driving on a beach when his vehicle was hit by a sudden high tide resulting in the underbody guard being broken (“the incident”).
• [3] Mr Patel made a claim under his insurance with Toyota Insurance (“TI”) and the vehicle was taken to a workshop recommended by it. The mechanic at the workshop found widespread rust under the car. TI informed Mr Patel that rust damage was not covered under the insurance policy under clause 3.5 which states:

3.5 No cover for certain kinds of damage

a) Depreciation, wear and tear, rust or corrosion.

• [4] As a result, TI only paid to replace the broken under guard.
• [5] Mr Patel says he was advised to contact the manufacturer, Toyota NZ (“TNZ”) in relation to the rust issue.
• [6] Mr Patel through HTL contacted TNZ seeking that the rust damage be repaired at TNZ’s or HTL’s cost as he believed the rust was caused due to a manufacturing defect in the vehicle.
• [7] After considering the matter, TNZ disagreed with Mr Patel’s claim that there was a manufacturing defect in the vehicle. It took the view that the corrosion and rust found in the vehicle was due to environmental factors including exposure to salt, air and water. Mr Patel’s claim for contribution towards the costs to repair the rust was declined.
• [8] Mr Patel initially brought this claim against the deemed manufacturer of the vehicle in New Zealand, TNZ, to the Disputes Tribunal. The matter was then transferred to Motor Vehicle Disputes Tribunal (“the Tribunal”). As the vehicle was purchased from HTL, the Tribunal added HTL as an additional Respondent by way of a direction dated 11 June 2024. Prior to this, Mr Patel also confirmed that he was claiming against both parties.
• [9] HTL submits it is not the correct party in this claim and has asked to be struck out from the proceedings. It denies all liability in the matter.
• [10] TNZ maintains that the vehicle does not have a manufacturing fault and that it stands by its decision not to repair the rust or contribute towards the cost of repair.

The issues

• [11] Against this background, I outline the following issues as requiring the Tribunal’s consideration in this case:

(a) Should the claim against HTL be struck out?

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

Should the claim against HTL be struck out?

• [12] Ms Clarke, appearing on behalf of HTL, says that HTL should be struck out as a party to the claim as it is neither the manufacturer nor the insurer.
• [13] She says HTL has limited involvement in the sale and the subsequent issues with rust. In her view even if the vehicle has rust, TNZ will be liable as a manufacturer and not HTL.
• [14] The sale of the vehicle is subject to provisions of the CGA. Under the CGA, the supplier or the retailer can be held liable for supplying defective goods even if the supplier was unaware of the defect at the time of supply or could not have prevented the defect.
• [15] In Contact Energy Ltd v Jones,^[1] Miller J stated the following in relation the CGA:

The Act attaches to all goods supplied to consumers a guarantee that the goods are of acceptable quality. The guarantee is met if the goods are, among other things, as fit for all purposes for which goods of that type are commonly supplied, as free from minor defects, and as safe, as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would think acceptable having regard, among other things, to the nature and price of the goods and any representations that the supplier or manufacturer made about them. Liability is strict, in the sense that it is no defence for the retailer to show that a manufacturer or other supplier was at fault, or that the retailer could not have detected or prevented the defect.

• [16] Miller J went on to say that:^[2]

[133] ... Hence the retailer's liability does not depend on proof of fault; it is enough that it supplied defective goods. The legislation also established a hierarchy of remedies in s 18. But it does not mandate a particular approach to calculating damages. Section 18 provides that the consumer may recover for any loss or damage “resulting from the failure ... which was reasonably foreseeable as liable to result from the failure.” That language evokes the common law, with its commonsense approach to causation and remoteness; the phrase “reasonably foreseeable” is drawn from Victoria Laundry (Windsor) Limited v Newman Industries Limited [1949] 2 KB 528. Causation is a question of fact and degree, and the chain of causation may be broken by an intervening cause such as the plaintiff's unreasonable conduct: Fleming v Securities Commission [1995] NZCA 320; [1995] 2 NZLR 514, 524. The ultimate question is whether the particular damage claimed is sufficiently connected to the breach of the particular duty to merit recovery in all the circumstances.

• [17] Therefore, the High Court has made it clear that retailers can be held strictly liable for manufacturing defects in a product if the purchaser can show causation or a linkage between the damage claimed and the breach.
• [18] Additionally, the evidence before the Tribunal shows that HTL are not just mere suppliers of the vehicle but were intrinsically involved in the dispute. I note an email from TNZ dated 11 September 2023 addressed to Mr Patel says the following:

We have reviewed your case internally and discussed with Botany Toyota (HTL) as they act as our eyes and ears in all areas of concerns that our customer may have from time to time. From the information provided and the details in the report from Botany Toyota, we have concluded that the rust on your vehicle is a result of salt, or an environmental where salt can affect the vehicle, and the vehicle hasn’t been cleaned effectively follow this exposure.

• [19] It is clear to me HTL has taken an active role in the matter and more importantly, the provisions of the CGA can find a supplier liable for manufacturing defects. Therefore, if Mr Patel’s claim is successful, HTL may be liable to some extent for its role in selling a vehicle with manufacturing defects.
• [20] Accordingly, I find that HTL has been appropriately added as a party to this claim and I do not strike it out.

Has the vehicle been of acceptable quality for the purposes of s 6 of the CGA?

• [21] 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”.
• [22] “Acceptable quality” is defined in s 7 of the CGA 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.

[23] 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. 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.

• [24] There is no dispute that the vehicle has rust and corrosion on the underbody. A service inspection carried out by HTL on 4 September 2023, which was prior to the Disputes Tribunal hearing, found that:
  1. A number of bolts and washer were heavily rusted;
  2. Suspension components rusting more than others;
  3. Weld points and edge areas of metal components rusting;
  4. Corrosion was present on items;
  5. Sea salt and sand present under the hood;
  6. Both strut towers showing rust and corrosion;
  7. A number of engine components corroding and rusting;
  8. Rear brake rotors corroded;
  9. Found sand under floor carpet; and
  10. Top of front shocks also have signs of rust.
• [25] This report recommended that Mr Patel monitor the issue and may need underbody rust treatment. It also noted that the report along with images of the underbody were sent to TNZ for reviewing and it confirmed that this was not a manufacturing defect.

Mr Patel’s position

• [26] Mr Patel says that the insurance assessor for TI claimed that the rust could not have happened recently, given the scale of spread. When advised that the vehicle was only three years old, the assessor suggested this could be a manufacturing defect.
• [27] He submitted when the vehicle was up on a hoist after the incident for repairs, the technician told him that the rust looked to be as old as the vehicle. He was asked if he drove regularly on a beach or lived near the sea. Mr Patel says that he has not driven the vehicle on a beach other than the incident and does not live near the beach. He says the level of rust is entirely inconsistent with his manner of use and he categorically rules out any external factors having caused it.
• [28] TI has refused to give a statement or any document to confirm its opinion that this is a manufacturing issue.

TNZ and HTL’s position

• [29] Mr O’Dea said that TNZ’s technical experts were supplied all the information along with photos of the rust for an opinion as to whether this can be due to a manufacturing defect. The photos supplied were taken six–to–nine months after the incident. The technical experts confirmed that the corrosion seen is consistent with the vehicle being driven on or near salt water and then not being properly cleaned or maintained. They deny this is a manufacturing defect.
• [30] Ms Clarke says the vehicle came to HTL for a routine service in March 2023 where it saw the presence of some corrosion. HTL does not offer a full groom service, so it asked Mr Patel to properly wash the car. She says when HTL checked the vehicle again in September 2023, it found nothing had been done to mitigate the saltwater exposure. She referred to the notes of the technician who checked the vehicle where he noticed sand inside the floor of the car, moisture was present and wetness behind the trim.

Tribunal’s assessment

• [31] I am not required to assess the merits or the validity of TI’s position as the insurer. The question for the Tribunal is simply whether it can be proven on the balance of probabilities that the vehicle’s rust and underbody corrosion is due to a manufacturing defect.
• [32] Upon questioning from Mr Gregory, the Tribunal’s Assessor, regarding the incident and his use of the vehicle, Mr Patel said the following:

(a) He drove the car on a black sand beach on 24 December 2022;

(b) After the incident he did not wash the car;

(c) The vehicle passed its recent warrant of fitness (“WOF”) inspection and Mr Patel was advised that there was rust present but not so extensive that the vehicle would fail a WOF.

• [33] Mr Patel said that the rust was already present by March 2023 when the vehicle was seen by HTL so he did not believe that washing the underbody of the vehicle would make a difference. Mr Gregory advised that doing so prevents the spread of rust. Mr Gregory also advises, and I accept, that the underbody of vehicles in conditions where a vehicle comes in contact with saltwater spray from the road or beach should be regularly washed with fresh water, which was not done after the incident.
• [34] At the hearing, Mr Patel said that there was a vehicle inspection or service carried out prior to the incident in 2022 where some rust was noted in the vehicle. Mr Patel was asked to submit this document. But in an email dated 27 August 2024, he confirmed to the Tribunal that the rust was first noted in March 2023 which was after the incident.
• [35] This indicates that there is no evidence of any rust or corrosion being present in the vehicle prior to the incident. It is likely that rust started to form under the vehicle as salt water from the incident was never properly washed off. Over a period of time it had spread and now needs anti-rust treatment.
• [36] I note the spread of rust is not so extensive that it deems the vehicle unwarrantable. The vehicle has a current WOF. Had the rust started to form soon after purchase, it is likely to have been more extensive.
• [37] Mr Gregory advises that the photographs produced to the Tribunal show corrosion consistent with many of the vehicle’s different components having been exposed to a high salt environment. He advises that the exposure has affected many different components that are manufactured by different companies, processes and materials. The galvanic corrosion to the aluminium casings is telling and can only be caused by salt exposure. I accept that advice as I do not have evidence before me to show that the rust arose as a consequence of some paint or application defect.
• [38] Accordingly, I find that vehicle has not suffered from any manufacturing defect that caused the rust. Furthermore, I do not find that the vehicle breached any of the quality elements 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”
• [39] In reaching this conclusion, I reiterate that it was not up to TNZ to prove that the vehicle did not have a manufacturing defect but for Mr Patel to prove that it did, on the balance of probabilities. Considering the events leading up to the discovery of the rust and corrosion coupled with a lack of any technical evidence from Mr Patel, I do not find that the vehicle was not of acceptable quality.
• [40] Mr Patel’s claim is, therefore, dismissed.

S Malaviya
Adjudicator

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^[1] Contact Energy Ltd v Jones [2009] 2 NZLR 830 (HC) at [2].
^[2] At [133].