Kaltenstadler v Good Cars Limited - Reference No. MVD 439/2023 [2024] NZMVDT 23 (16 February 2024)

Last Updated: 31 March 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 439/2023 [2024] NZMVDT 023 BETWEEN MICHAEL KALTENSTADLER Applicant AND GOOD CARS LIMITED Respondent

HEARING at CHRISTCHURCH on 19 December 2023 (by audio-visual link) MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator S Gregory – Assessor

APPEARANCES

M Kaltenstadler, Applicant C Hunton, Branch Manager for the Respondent

DATE OF DECISION 16 February 2024

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DECISION OF THE TRIBUNAL

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A Mr Kaltenstadler’s application to the reject the vehicle is upheld.

2. Within ten working days of the date of this decision Good Cars Limited is to refund Mr Kaltenstadler $24,032.40.

100. Upon receipt of payment, Mr Kaltenstadler is to make the vehicle available to Good Cars Limited for collection, at its expense.

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REASONS

Introduction

[1] This is Mr Kaltenstadler’s second application to the Tribunal in respect of the same vehicle, a 2013 Volkswagen Golf GT MK7 purchased in November 2022 from Good Cars Limited (Good Cars) for $23,830.00 (including a mechanical breakdown insurance policy and on road costs). In my decision [2023] NZMVDT 074 dated 28 April 2023 I dismissed Mr Kaltenstadler’s application to reject the vehicle, as he agreed to a blown head gasket being repaired by Good Cars. I ordered that Mr Kaltenstadler uplift the vehicle, which he did.
[2] Unfortunately, when he collected the vehicle, he identified some paint was scratched. Furthermore, the coolant light and low temperature gauge reading (both features of the problems experienced by Mr Kaltenstadler and canvassed during the hearing of his first application) returned during his use of the vehicle. Mr Kaltenstadler liaised with Good Cars who agreed to look into the problem. A new water pump was installed as well as a thermostat as a result.
[3] Mr Kaltenstadler experienced some problems with condensation building up in the head lights too but his second application is anchored on what happened to him in August 2023. On 21 August 2023, Mr Kaltenstadler was driving the vehicle when it “started to sound different and shake the entire vehicle when on the accelerator while at speed in the high 90s to 100 I immediately pulled over”. He stopped driving and had the vehicle towed. He says it now sounds like a diesel engine when you depress the accelerator. He has had the vehicle inspected by Miles Continental, who diagnose suspected “piston slap” which would require replacement of the pistons and engine block at considerable expense (in excess of $12,000.00).
[4] Fed up, Mr Kaltenstadler engaged local lawyers to write to Good Cars and reject the vehicle. This occurred on 5 September 2023. Good Cars responded to say it required a more detailed or definitive diagnosis. Mr Kaltenstadler’s lawyer did not entertain this request having already rejected the vehicle on his client’s behalf.
[5] Mr Kaltenstadler made enquiries regardless and learned that it might cost as much as $2,760 to diagnose the problem. His lawyer wrote to Good Cars to explain that the cost of a diagnosis alone and the fact that the vehicle would be rendered inoperable while being diagnosed evidenced a failure of substantial character.
[6] Good Cars did not respond. Mr Kaltenstadler applies for his rejection to be upheld and for consequential losses incurred by him. Good Cars are happy to repair any defects properly diagnosed but do not accept rejection.

The issues

[7] 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 Kaltenstadler entitled to under the CGA?

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

[8] 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”.
[9] “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;

(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.

[10] 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.
[11] When Mr Kaltenstadler’s application was heard, I pointed out to both parties that there was no definitive diagnosis of the problem available to the Tribunal. Mr Hunton adopted a practical and realistic approach to the issue, and invited Mr Kaltenstadler to agree to the vehicle being inspected by one of Good Car’s approved mechanics. Mr Hunton made it clear that any problems with the vehicle would be repaired. Mr Kaltenstadler agreed but on the basis that he did not waive any rights as to the validity of his rejection. The hearing was adjourned for the vehicle to be inspected.
[12] On 30 January 2024 Good Cars supplied a report from a third party repairer. The repairer’s notes record a comprehensive inspection of the vehicle using a methodology promoted by Mr Gregory, the Tribunal’s Assessor, during the hearing. The inspection found evidence of number 3 piston interfering with the cylinder head, metal in the sump and baffle plate, excessive movement of number 3 conrod big end, a failed bearing cap of number 3 conrod, number 3 crankshaft journal damaged, and cylinder 2 bearing shell showing signs of overheating from bearing particle contamination in the oil delivery system. The repairer states:

in my opinion, repair of the crankshaft and conrod and any potential damage caused by potential lubrication issues would make this engine uneconomical to repair. My recommendation would be to locate a second hand engine or similar or lower mileage to replace this engine.

[13] Mr Gregory has reviewed the evidence submitted and especially this latest diagnosis. He agrees that the failure of the number 3 piston and conrod big end has caused damage to the engine block as described. In a vehicle of 91,645 kms this is significant and were the vehicle continued to be driven a catastrophic engine failure would have occurred.
[14] I have no hesitation in finding that the defect described above is a failure of the guarantee of acceptable quality. The vehicle’s engine parts have not been as durable as they ought to have been for a vehicle of this age and mileage considering Mr Kaltenstadler’s limited use of it.

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

[15] 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.

[16] Again, Mr Gregory opines that the failure is so significant that no reasonable consumer, being aware of same, would have purchased the vehicle. I agree and I would add that Mr Kaltenstadler could point to the vehicle’s history regardless to advance a submission that he is entitled to reject, his having lost all confidence in the vehicle by virtue of an accumulation of defects (both minor and/or major). There is authority for this proposition namely Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC). There, the District Court noted that a purchaser may reject a vehicle where there has been an accumulation of minor defects that amount to a failure of a substantial character. The Court noted that a point will eventually be reached where the purchaser could “say convincingly that he or she had no ‘confidence in the reliability of the vehicle’”. (at p 417).
[17] I find the failure to be of substantial character.

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

[18] 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.

[19] Mr Kaltenstadler seeks to reject the vehicle. I uphold his rejection of 5 September 2023. He seeks a refund of the purchase price, on road costs, and the mechanical breakdown insurance policy purchased through Good Cars, a total of $23,830.00. He also seeks payment of $202.40 for the Miles Continental diagnosis of the problem, which ultimately proved to be close to the mark.
[20] Accordingly, I order that within ten working days of the date of this decision Good Cars Limited shall pay Mr Kaltenstadler $24,032.40. Upon receipt of payment Mr Kaltenstadler is to make the vehicle available for collection by Good Cars Limited, at its expense.

D M Jackson
Adjudicator