Kavali v Trade In Garage Limited - Reference No. MVD 385/2023 [2024] NZMVDT 2 (15 January 2024)

Last Updated: 22 February 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 385/2023 [2024] NZMVDT 002 BETWEEN GRANT MARTIN KAVALI Applicant AND THE TRADE IN GARAGE LIMITED Respondent

HEARING at CHRISTCHURCH on 20 November 2023 (by audio-visual link) MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator S Cousins – Assessor

APPEARANCES

G Kavali, Applicant J Moore, General Manager for the Respondent

DATE OF DECISION 15 January 2024

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DECISION OF THE TRIBUNAL

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Within ten working days of the date of this decision The Trade In Garage Limited is to repair the oil leaks complained of by Mr Kavali.

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REASONS

Introduction

[1] On 29 April 2023, Mr Kavali purchased a 2011 Audi A6 All-Road from The Trade In Garage Limited (TIGL) for $12,650.00. The vehicle had travelled 153,218 kms at the time of sale.
[2] Mr Kavali complains that he has experienced multiple problems with the vehicle since purchase including a persistent oil leak, a faulty air conditioning unit, and various warrant of fitness failures (which ought to have been obvious to the pre-sale WOF inspector), which have since required his repair.
[3] His application to the Tribunal is two-fold: 1) he seeks orders requiring TIGL to pay for or carry out all necessary repairs; or 2) he seeks to reject the vehicle, obtain a refund and be reimbursed any consequential losses incurred by him to date.
[4] TIGL resists Mr Kavali’s application. That said, it is prepared to “reverse the deal”, take the vehicle back and refund Mr Kavali the purchase price. TIGL disputes Mr Kavali’s claim for consequential losses incurred by him (i.e. various diagnostic costs or repairs carried out by him) because it says he failed to follow the statutory procedure providing the Trader with the right of inspection and repair. Rather, TIGL says Mr Kavali carried out various repairs without notice to or reference to it. Further, it says Mr Kavali negotiated the asking price of $14,990 down on account of some of the defects or faults now complained of and purchased on an expressly “as is” basis. TIGL says Mr Kavali cannot have it both ways. Regardless, it complains that Mr Kavali has added 3,000 kms to the vehicle’s odometer since purchase, and in a short time, which makes its willingness to reverse the deal more than generous.

The issues

[5] 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) What remedy is Mr Kavali entitled to under the CGA?

Issue 1: Did the vehicle fail to comply with the guarantee of acceptable quality?

[6] 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”.
[7] “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.

...

(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.

[8] 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.
[9] Here, pursuant to s 7(2), I must have regard to the extent to which Mr Kavali was aware of any defects or faults with the vehicle prior to purchase (because TIGL says it heavily discounted the vehicle price on account of a number of agreed faults). TIGL have referred me to the special conditions of the Vehicle Offer and Sale Agreement (VOSA) dated 29 April 2023. The VOSA records as a special condition that the parties “have agreed on faults discussed grant is taking as is we have discounted the price to suit as agreed by both parties. No comeback only on consumer guarantees act 3 months on major failure engine/trans/airbags. MJ”.[1]
[10] Mr Moore did not contend, properly, that the special condition was an effective contracting out clause under the CGA. Rather, he contends that the special condition evidences that Mr Kavali purchased the vehicle with knowledge of certain defects, specifically identified or drawn to his attention (and agreed to by him). But what are the faults referred to? The special condition does not record them so I must consider the evidence of what was discussed by the parties leading up to their entry into the VOSA and determine whether that evidence sheds any light on what the special condition means or whether s7(2) of the CGA is engaged.
[11] I heard evidence from Mr Kavali that the vehicle was originally listed for $15,000 but was reduced, on Mr Kavali’s personal inspection of the vehicle, because of a door not closing correctly, a diesel particulate filter light showing, and the air conditioning not working properly. Despite the asking price, Mr Kavali offered and TIGL accepted a price of $12,700 less a $50 credit for an earlier flight cancellation fee incurred by Mr Kavali (who had arranged to fly from Queenstown to Christchurch to inspect the vehicle). I find that those are the faults or defects referred to in the special condition. Otherwise, Mr Kavali says that he was assured by a TIGL salesman that any oil leak (there had been one diagnosed and repaired pre-sale) was repaired.
[12] The pre-purchase correspondence confirms that a pre-purchase inspection was carried out for Mr Kavali (for $120) and that Mr Kavali was initially insistent on sighting and being satisfied with the vehicle’s full service history (the apparent absence of which, amongst other things mentioned in the pre-purchase correspondence, he described as a “red flag”).
[13] The correspondence confirms that prior to purchase TIGL disclosed to Mr Kavali that an oil leak identified during the pre-purchase inspection was likely a rear main seal and that the rear brake pads (which Mr Kavali had specifically asked about) were “low and lipped but still WOFable”).
[14] Further, in an email from TIGL dated 13 April 2023 Mr Kavali was informed “the oil leaks as discussed have been 90% tidied up and have been repaired, they were from the around the turbo oil feed, thre [sic] is still a minor leak around the rear man [sic] seal, we aren’t 100% sure that it’s the rear main or something around it.”
[15] By 20 April 2023, a more definitive statement was made by TIGL about the oil leaks in a text message from Mr Jones to Mr Kavali dated 20 April 2023, which (as a reason for TIGL insisting on $14,990 being paid for the vehicle) confirmed “the oil leaks are all now been fixed”.
[16] That text message sits comfortably with the surrounding email dialogue between the parties which record that while Mr Kavali offered to pay $12,000 for the vehicle, TIGL would only accept that price “as is with no oil leak’s repaired”. Otherwise, TIGL wanted $14,990 for the vehicle in return for which the oil leaks would be repaired. By 20 April 2023, TIGL’s position was that the leaks were repaired and I find that the vehicle was sold to Mr Kavali on that basis therefore. Mr Kavali did not accept the risk of a recurring oil leak in the discounted price ultimately agreed by the parties because he was told there was no oil leak.
[17] It appears from the correspondence that Mr Kavali was initially prepared to pay the $14,990 asking price but subject to clarification of a number of questions raised by him in the correspondence or over the phone. This correspondence led to his flying to Christchurch to inspect the vehicle and, upon his discovery of the problems listed in paragraph [11] above, explains the negotiated reduction in price which followed his inspection.
[18] Mr Kavali explained that early in his ownership he noticed some minor faults in the brakes, the fog lights, and a whiff of oil when shutting the vehicle down. On 15 June 2023, Mr Kavali emailed TIGL to notify that he had booked the vehicle in for the air conditioning fault to be repaired (at his cost) and for them to investigate various fault displays namely “brake centre light rear, rear window demisters” and for oil leaks. In his email Mr Kavali asks TIGL for permission to authorise repairs, if necessary, at “your cost”.
[19] Within twenty or so minutes of that email TIGL replied to Mr Kavali (by email) to deny liability for any replacement bulbs or fuses which might have caused the warning lights and to record “we heavily discounted the vehicle for you after agreeing on a price originally this sentence below has been copied and pasted from the VOSA you and I have”. The special condition wording is quoted and the email concludes that if the faults are minor, as was suggested by Mr Kavali, he ought to pay for those himself.
[20] There is then further email correspondence between the parties about the air conditioning fault and the oil leaks. TIGL denied liability for the air conditioning fault because it was a reason for the discounted price but said it would look into the oil leak with the original repairer.
[21] Mr Kavali took the vehicle into his local Audi dealership, which carried out a WOF inspection. The vehicle failed the inspection for rear brakes, headlight aim, and the lack of a compliant fuel actuator cap”. He was informed that the vehicle’s rear numberplate illumination lights were non-compliant and that a new assembly was required in order to make them road legal. Mr Kavali instructed the dealership to carry out these repairs including the replacement of the rear brakes. As for the oil leak, the dealership advised Mr Kavali that it was too difficult to quote for those repairs absent the removal of the engine and a more definitive (and expensive) diagnosis. Mr Kavali produced evidence that he had spent $1,472.68 on repairs to the actuator fuel cap, the licence plate illumination, and the installation of new rear brake pads and rotors.
[22] I note the invoice produced by Mr Kavali records the dealership’s advice that the oil leak was in the upper rocker cover area, which earlier repair had not been sealed properly. Mr Kavali was advised to take that leak back to the previous repairer. There is no evidence before me regarding the air-conditioning unit, its fault or the extent of its repair.
[23] Mr Cousins, the Tribunal’s Assessor, considers the headlight issue complained of by Mr Kavali to be minor and a normal everyday item of vehicle ownership. The fuel flap issue was noted at the point of sale and negotiated into the price. There is no evidence to confirm the nature of the fault or what is required to address it, and the vehicle had travelled 3,000 kms by the time it was noted by Mr Kavali’s Audi dealership. Mr Kavali would have had to refill the fuel tank numerous times during his 3,000 km ownership and was aware of the concern at purchase so it would seem this defect was known to and acceptable to Mr Kavali at the point of sale. Mr Kavali confirmed in his evidence that the emergency fuel flap release could be used to access the fuel cap,[2] so this negates it as a warrant of fitness issue.
[24] Mr Cousins advises the Vehicle Inspection Requirements Manual (VIRM) lists the following as the only reasons for rejection in relation to a fuel cap:[3]

8. The fuel filler cap or capless fuel filler seal is missing, insecure or likely to allow fuel spillage when the vehicle is in normal use.
9. The fuel tank is fitted with a ‘temporary use’ fuel filler cap.

[25] Mr Cousins notes the brakes were noted as worn pre-purchase. The pre-purchase WOF inspection sheet produced by TIGL records that the rear brakes were “low” and “old”. He notes that there is nothing unusual in such an observation in a vehicle of this age and mileage and that the repairs carried out to the rear brakes by Mr Kavali do not engage the guarantee of acceptable quality. Rather, they are a likely and expected cost of owning such a vehicle purchased at this age and mileage. I agree. The evidence is clear that Mr Kavali was on notice of the state of the rear brakes prior to his purchase. The condition of the brakes was expressly drawn to his attention in the pre-purchase inspection and in the correspondence. Mr Kavali accepted the condition of the brakes as part of the bargain he struck with TIGL.
[26] Mr Cousins notes the oil leaks were discussed and some repairs were completed to address this pre-purchase. Whether these leaks are additional to those repaired pre-purchase is unclear, but the evidence suggests oil is leaking in the same areas of concern. The repairs carried out to address the oil leaks pre-purchase, clearly have not been suitably durable to have failed in less than 3,000 kms. Mr Cousins opines that most, if not all, older model European diesel engines leak at various stages of their life. Here, he considers the oil leaks appear minor and would generally be considered acceptable for a vehicle of this age and mileage. Mr Cousins says it is odd that the dealership has not carried out a leak down and compression test and would have expected these to have been performed as part of preliminary diagnosis to ascertain whether there was a more serious underlying cause of the leaks, noting multiple oil leaks from different areas of the system can often indicate excessive crankcase pressure. That said, there is a leak which TIGL said was repaired prior to purchase, but which has returned. I agree with Mr Cousins and find that this oil leak is a breach of the guarantee of acceptable quality. The purchaser of a vehicle who has been promised a fault has been repaired prior to purchase, can reasonably expect that the underlying fault will not return so soon after purchase. I am satisfied that this is a breach of the guarantee of acceptable quality and will order that the oil leak be repaired by TIGL.
[27] Mr Cousins has reviewed the Audi dealership’s diagnosis of the air conditioning unit, which describes the air conditioning compressor as the root cause of failure. Mr Cousins notes the diagnosis provided is very basic, does not provide pressure readings and fails to distinguish between the compressor, clutch and input parameters which influence the operation of the compressor. There are numerous external and internal concerns which can develop and prevent the compressor from engaging and the system building pressure, many of which would generally constitute a far more economical repair than that proposed by the Audi dealership.
[28] Mr Kavali did not call any evidence from the Audi dealership so the Tribunal is unaware of any further investigations or diagnosis in this regard. Regardless, I find the air-conditioning unit was a defect specifically drawn to Mr Kavali’s attention and factored into the bargain (i.e. Mr Kavali took on the risk of the air-conditioning unit failing in the negotiated price agreed as evidenced by the special condition).
[29] Finally, Mr Cousins considers the Audi dealership’s diagnosis in respect of the WOF failure, noting the reason for rejection was “LH rego light out”. Mr Kavali provided testimony confirming the right-hand lamp was still functioning, illuminating the licence plate. Mr Cousins advises there is no WOF requirement for both registration plate lamps to operate provided they are from separate sources, even if one is not working. The following reasons for rejection are applicable to registration plate lamps as specified in the Vehicle Inspection Requirements Manual:[4]

1. A vehicle is not fitted with at least one rear-registration-plate illumination lamp.
...
7. The lamp does not illuminate the registration plate

[30] Mr Cousins considers the air-conditioning fault complained of to be inadequately diagnosed. Regardless, I find Mr Kavali purchased the vehicle with express knowledge of the fault and took on the risk of the fault and its repair in the purchase price negotiated by him and which is recorded in the special condition in the VOSA. Mr Kavali knew about the faulty air-conditioning prior to purchase and cannot call upon TIGL to repair it now. The oil leak is different because TIGL promised Mr Kavali that it had been repaired.

Issue 2: What remedy is Mr Kavali entitled to under the CGA?

[31] 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.

[32] The only defect, which I have found to breach the guarantee of acceptable quality is the oil leak. Mr Kavali was told that that had been repaired prior to purchase. I am satisfied that he would not have purchased the vehicle were it not for Mr Jones’ text message confirming that it had been repaired. Accordingly, within ten working days of the date of this decision TIGL is to repair the oil leak.
[33] I dismiss Mr Kavali’s application for all other costs incurred or for rejection of the vehicle on the basis that he has not made out any breach of the guarantee of acceptable quality but for the oil leak (which is to be repaired).

D M Jackson
Adjudicator

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[1] “MJ” is a Mr Mark Jones, a former employee and “Yard Manager” of TIGL.

[2] Mr Kavali when questioned during the hearing, confirmed that he was told on inspecting the vehicle that he needs to give the fuel cap a “whack” to get it to open. Mr Kavali confirmed that he has been using the emergency release for the duration of his ownership as giving the cap a whack had not worked for him.

[3] Waka Kotahi Vehicle Inspection Requirements Manual (as at 13 April 2023), In-service certification (WoF and CoF) – general vehicles – miscellaneous items – 13-2 fuel system.

[4] In-service certification (WoF and CoF) – general vehicles – lighting – 4-12 rear-reg.-plate illumination lamps.