Burns v Hamish's Vehicle Sales Limited - Reference No. MVD 471/2024 [2024] NZMVDT 281 (3 December 2024)

Last Updated: 25 January 2025

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 471/2024 [2024] NZMVDT 281 BETWEEN PETER JOSEPH BURNS Applicant AND HAMISH'S VEHICLE SALES LIMITED Respondent

HEARING at CHRISTCHURCH on 21 November 2024 (by audio-visual link) MEMBERS OF TRIBUNAL

M Orange, Barrister – Adjudicator

S Cousins – Assessor

APPEARANCES

Peter Joseph Burns, Applicant

Hamish Gardyne, Managing Director, for the Respondent

DATE OF DECISION 3 December 2024

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DECISION OF THE TRIBUNAL

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A The claim is dismissed.

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REASONS

Introduction

• [1] Mr Burns purchased a 2012 Turbo Diesel Mazda CX-5 XD for $16,650 from Hamish's Vehicle Sales Limited (HVS) on 2 April 2022. In 2024, it was established that significant damage to the engine had occurred. A mechanical breakdown insurance claim was made but was rejected on the basis that it was a known issue with that model of engine. Mr Burns rejected the vehicle. His rejection was not accepted. A claim was made to the Tribunal seeking rejection and repayment of finance payments.

The issues

• [2] The issues requiring the Tribunal's consideration are:

(a) Did HVS misrepresent the quality of the vehicle?

(b) Did the vehicle fail to comply with the guarantee of acceptable quality?

(c) If the answer to either of these questions is yes, what is the appropriate remedy?

Relevant background

• [3] The vehicle was purchased in April 2022. Mr Burns financed the purchase together with the cost of mechanical insurance.
• [4] In August 2023, a diesel particulate filter (DPF) warning light came on. Mr Burns thought the warning light was related to the alternator. On 18 August 2023, he had an alternator repaired by Sawyers Arms Automotive, and he raised the DPF light with them. He was advised that the DPF light should not come back on following the repair, but if it did, he should take the vehicle back to them. Mr Burns stated the DPF light did come back on in late September or early October. He took the vehicle back to Sawyers Arms Automotive, who informed him that he needed to consult a specialist.
• [5] It was not until 3 April 2024 that Mr Burns took further action. He took the vehicle to MPL Automotive (MPL), who diagnosed the following in early May 2024:

Place vehicle on scanner to check for fault codes. NOTED Oil Pressure, DPF Fault Code Blocked, Oil Contamination Code.

Check oil level – OK – NOTED found metal in oil. Found both cams damaged causing metal to go through engine.

Check & test turbo - not boosting correctly. Turbo blown from metal contaminants.

Result - internal damage to the engine. Reported customer to see if claimable. Strip top of engine to assess internal damage extent, photograph to insurance provider.

Claim has been declined.

• [6] On 18 August 2023, when the alternator was repaired, the mileage recorded on the invoice was 104,014 km. When MPL assessed the vehicle, the mileage was noted as 111,296 km. The vehicle travelled 7,282 km in the intervening period.
• [7] Mr Burns stated that approximately only 1,000 km of that distance had been travelled after the DPF warning light came on in late September or early October and that over 6,000 kms had been travelled in the approximately six-week period between the alternator repair and the DPF warning light appearing. Mr Burns outlined his use of the vehicle. The stated use and the distances travelled within the six-week period did not align, and I do not accept that only 1,000 km was travelled after the DPF light came on in late September or early October.
• [8] Mr Cousins, the appointed Assessor in this matter,^[1] explored possible causes of the vehicle damage. He has informed me that the diagnosis provided by MPL may not have been correct.
• [9] One possible cause Mr Cousins explored at the hearing was injector seal leakage. He has advised that leakage can lead to carbon deposits building up within the engine, causing blockage of the oil pickup strainer and starving the engine internals of sufficient lubrication. Mr Cousins noted that injector seals would ordinarily be checked as part of the vehicle's regular services. Mr Burns was offered the opportunity to obtain further evidence from workshops that carried out the servicing, but the offer was declined.
• [10] Regardless of the cause of the damage, it is clear that the vehicle has suffered a significant mechanical failure and requires extensive repairs. It is because of this that an insurance claim was made and it was why Mr Burns rejected the vehicle.
• [11] Mr Burns submitted that there was a known issue with the model of the vehicle's engine at the time of sale, and he had been sold a lemon. He produced a statement from Auto Super Shoppe Shirley dated 11 November 2024. The statement did not identify the author and was not signed. Mr Burns did not call the person who had provided the statement. He was offered an adjournment to arrange for the person to appear and give evidence, but he declined the offer.
• [12] The statement from Auto Super Shoppe Shirley outlined a known issue related to the diesel particulate filter, and it included the following statement:

These are known issues that Mazda is aware of and at one point in time, Blackwells Mazda were doing 2-4 engine swaps per week under warranty for this issue.

• [13] It was with respect to the above statement that Mr Burns was offered the opportunity to obtain further evidence, and in particular, whether the engine swaps referred to were occurring prior to the sale of the vehicle to Mr Burns.
• [14] Mr Gardyne stated that HVS had imported approximately 500 vehicles with the same engine and that they were unaware of an issue with the DPF at the time of sale. He further stated that it takes time for issues to become apparent, and when HVS becomes aware of an issue, they stop importing vehicles with that type of engine or look for a resolution. He estimated that HVS had had approximately 25 failures with that type of engine out of 500 vehicles over the period they had been importing and selling it.
• [15] Before Mr Burns made an application to the Tribunal, he had been offered $5,000 as a gesture of goodwill to settle the matter. He declined that offer as it would not cover his entire loss. At the hearing, Mr Gardyne once again offered $5,000 as full and final settlement. The offer was rejected.
• [16] After the hearing had finished but before this decision was issued, Mr Burns emailed the following statement:

I am writing this as I am very worried that I may have misled the Tribunal. I was asked by the Barrister early on as he was confused as to when the DPF and engine light came on. I think I incorrectly said that the warning lights came. on before the alternator and service at 104014kms. That is not true as the light did appear until 7000kms later and I immediately had the vehicle serviced again at 110919 km. The light appeared again three weeks after that service and was advised by Sawyers Arms Automotive to take the vehicle to MPL. I did not intentionally mean to mislead the Tribunal as I was rather flustered and overwhelmed by the video conference. I sincerely hope it is not too late to put this information in front of the adjudicator before a decision is made?

My humble apologies

• [17] The evidence was provided after the hearing concluded and there has not been an opportunity to examine Mr Burns further about it. Nevertheless, I have taken it into consideration.
• [18] Mr Burns was questioned at length during the hearing to seek clarification on his use of the vehicle after the DPF light came on. I have reviewed the hearing recording and am satisfied that the evidence received at the hearing is the evidence that should be relied on and that a resumption of the hearing is not required.

Did HVS misrepresent the quality of the vehicle?

• [19] If Mr Burns can establish that HVS misrepresented the quality of the vehicle when selling it to him, it could amount to a breach of s 9 of the Consumer Guarantees Act 1993 (the CGA), which is a guarantee that goods comply with their description.^[2] It could also be a breach of s 9 of the Fair Trading Act 1986 (the FTA), which states that "no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive". Further, under s 5 of the Contract and Commercial Law Act 2017, a contract can be cancelled if a party has been induced to enter it by a misrepresentation.
• [20] Mr Burns’ allegation was that there was a known issue with the engine in the vehicle at the time of its sale. As the Applicant, Mr Burns has to establish that there has been a misrepresentation. In support of his allegation, he has not provided any evidence that HVS was specifically aware of issues with the engine. He has provided a statement from Auto Super Shoppe Shirley, but it does not establish that in April 2022, when the vehicle was purchased, there was a known issue with the engine. What the statement alludes to is that at some unknown point in time, an issue with the DPF on that engine model has led to engine failures. As such, I do not consider that the evidence provided by Mr Burns establishes that there has been a misrepresentation. It follows that the contract can not be cancelled on that basis.

Has the vehicle been of acceptable quality?

• [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". 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.

• [22] The DPF warning light first manifested in August 2023 and then again in late September or early October 2023. Mr Burns did not take action, despite being advised by Sawyers Arms Automotive to do so, until April 2024, some six months later and after just over 7,000 kilometres of travel.
• [23] Because he failed to take action when the issue first arose, it is quite possible that his continued use of the vehicle contributed to or caused damage that now requires repair. Put another way, if action had been taken when the DPF light re-appeared, the subsequent damage may not have occurred. Further, I do not consider a reasonable consumer would continue to use a vehicle when they have knowledge of a potential fault without getting it diagnosed. In this respect, I note the provisions of s 7(4) of the CGA, which provides:

(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.

• [24] Mr Burns, when he continued to use the vehicle after the DPF light was re-displaying, used it in a manner or to an extent that was unreasonable because he was on notice that there was, at the least, a DPF fault. But for his continued use, the vehicle may have complied with the guarantee of acceptable quality.^[3]
• [25] For those reasons, I find that there has not been a breach of a guarantee of acceptable quality, and he is not entitled to a remedy under the CGA. His claim is dismissed.
• [26] I also note that MPL identified fault codes but did not establish the root cause of the fault. As outlined above, Mr Burns was provided with an opportunity to seek further information to clarify the root cause and further details of servicing throughout his ownership, but he declined.
• [27] Mr Cousins has noted that the type of engine does have a vulnerability due to the material composition of the running surfaces within the engine, although failure generally occurs due to exploitation of this vulnerability rather than because of it, including because of:

(a) High oil dilution due to impartial DPF regenerations resultant from short drive cycles, which did not appear, from the evidfence heard, to be the cause.

(b) Improper servicing, extended service intervals, or servicing where low‑SAPS^[4] engine oils are not used. With respect to this possible cause, Mr Burns was offered the opportunity to provide evidence from his servicing agents to allow the Tribunal to discount it but he declined the offer.

(c) Leaking injector seals, which lead to carbon deposits building up within the engine, causing blockage of the oil pickup strainer and starving the engine internals of sufficient lubrication. This may have been particularly relevant because the concern initially presented as a low oil pressure warning. Mr Cousins advises that an experienced service agent will generally check injector sealing integrity at routine servicing to assure continued serviceability. Again it was unclear whether this occurred during the four services carried out during Mr Burns' ownership, and he declined the opportunity to call the service agents to outline whether they did, in fact, check the injector seals.

• [28] Given the above factors, I find that even if Mr Burns had not continued to use the vehicle as described above, he has not established the cause of the damage that has occurred, and his claim would fail on that basis.
• [29] I would note, however, that because the root cause has not been established, it may be open to Mr Burns to conduct further investigation to identify the root cause of the engine failure and seek alternate remedies. In Mr Cousins' opinion, the root cause is most likely not related to the material composition of the engine internals, which was the reason for the declined insurance claim. He considers it more likely that the damage observed to the camshafts, turbo and other components was due to insufficient lubrication. Mr Burns should consider what other options are open to him.

Outcome

• [30] The claim is dismissed.

M Orange
Adjudicator

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^[1] Motor Vehicle Sales Act 2003, ss 82 and 88. The Assessor's role is to assist me in the determination of an application under the Motor Vehicle Sales Act 2003, sch 1, cl. 10.

^[2] According to s 2 of the CGA, “goods” includes vehicles.

^[3] Gault on Commercial Law (online looseleaf edition, Thomson Reuters) at [CG7.16].

^[4] Sulfated ash, phosphorus, and sulfur.