Szentesi v Affordable Kiwi Cars Limited - Reference No. MVD 534/2023 [2024] NZMVDT 59 (5 April 2024)

Last Updated: 24 May 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 534/2023 [2024] NZMVDT 059 BETWEEN KYLE SZENTESI Applicant AND AFFORDABLE KIWI CARS LIMITED Respondent

HEARING at AUCKLAND on 26 March 2024 (by audio-visual link) MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator S Gregory – Assessor

APPEARANCES

K Szentesi, Applicant J Wolf, Witness for the Applicant

T Singh, Director for the Respondent

DATE OF DECISION 5 April 2024

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DECISION OF THE TRIBUNAL

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A The application is upheld.

2. Within ten working days of the date of this decision Affordable Kiwi Cars Limited is to pay Kyle Szentesi $1,680.00.

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REASONS

Introduction

[1] Mr Szentesi is a mechanic. On 17 November 2023 he purchased a 2001 Lexus ES300 for $3,500 from Affordable Kiwi Cars Limited (Affordable). The vehicle had travelled 125,000 kms at the time of sale. Mr Szentesi inspected the vehicle with his friend, Mr Wolf. They took the vehicle for a short test drive and could not discern anything wrong with the vehicle.
[2] They checked the vehicle’s oil and found it to be clean, the coolant level was correct and there was a service sticker on the windscreen. This, along with assurances from Mr Singh that the vehicle was in good working order, gave Mr Szentesi the comfort to proceed with the purchase.
[3] Mr Szentesi complains that the vehicle barely made the trip from Auckland to his home in Northland. He described that the vehicle developed a noticeable hesitation approximately two hours from home and the oil light started flickering when coasting twenty minutes from home. He pulled over and checked the oil level which was halfway between the indicator marks but was dirty. The oil check light went off upon restarting the engine and it sounded normal. He continued his journey home but carefully and at a reduced speed.
[4] After letting the vehicle sit over night, he started it up the following morning. It emitted a large cloud of blue smoke for approximately 30 seconds and a high pitched whine was emitted from the front of the engine near the belts. He shut down the engine after a minute. Upon disassembly he found the engine had suffered oil starvation on the front cam journal from excessive oil sludge which had accumulated throughout the engine. He says the engine had clearly been worked on recently. Most of the plugs on the intake manifold were broken and, in some cases, wires had been pushed into sensors and glued in place. The underside of the valve covers had scratch marks from where someone had chipped off the sludge in what he believed was an attempt to clear the PCV valve. The sump had also been taken off; the excessive amount of poorly applied sealant was a clear give away.
[5] Mr Szentesi says the oil was changed shortly before he viewed the vehicle. When he drained the oil from the engine it was dirty and contained pea sized chunks of oil sludge, which had blocked the oil pickup tube and strainer. He supplied photographs of this debris to the Tribunal. Mr Szentesi contacted Affordable and sent pictures of the damage and oil sludge found within the engine. He says Affordable denied knowledge of the problem claiming the vehicle was a trade in and that Affordable did not have to provide a warranty of any sort. Affordable claimed the vehicle was sold as a trade in and that Mr Szentesi purchased it on an as is where is basis, which Mr Szentesi denies.
[6] Frustrated with his correspondence with Affordable, which refused to offer no more than $350 towards any repair, Mr Szentesi resolved to source a replacement engine and install it himself. He seeks an order for $1,860 being the second-hand engine replacement of $750, fluids of $150 and his labour cost being $960 (16h @ $60p/h).
[7] Affordable deny liability. It says the vehicle was sold as a trade in or on an as is where is basis. Before me, Mr Singh of Affordable submitted that the vehicle was sold for cash, by way of private sale and did not go through his trading company’s books. He says there are no warranties associated with such sales and Mr Szentesi’s claim should be declined.
[8] Both parties point to a lack of Consumer Information Notice and Vehicle Offer and Sale Agreement to support their respective cases. Mr Szentesi says this is evidence of his being duped; whereas Mr Singh says this is evidence proving the sale was a private sale.

The issues

[9] The issues requiring the Tribunal’s consideration in this case are:

• (a) Does the CGA apply to this transaction?
• (b) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
• (c) What remedy is Mr Szentesi entitled to under the CGA?

Issue 1: Does the CGA apply to this transaction?

[10] I am satisfied that the transaction between Mr Szentesi and Affordable was a sale for the purposes of the Motor Vehicle Sales Act 2003 (MVSA) and the CGA.
[11] Pursuant to s 89 of the MVSA this Tribunal only has jurisdiction to determine any application or claim if that application or claim is in respect of the sale of any motor vehicle. “Sale” is defined in the MVSA to mean the sale, lease, exchange or any other disposition of a motor vehicle or an interest in a motor vehicle and includes the display for sale or offer for sale of a motor vehicle.
[12] Affordable is in trade and is a registered motor vehicle trader. I heard evidence that the vehicle was sold by Affordable, having been displayed and offered for sale at its premises. Mr Singh explained that the vehicle had recently come into Affordable’s possession as a trade in agreed during the sale of another vehicle by Affordable. Mr Singh argued that Affordable selling a trade in vehicle owes none of the statutory guarantees provided under the CGA and that the sale itself is not a sale for the purposes of the MVSA. I reject both submissions.
[13] The MVSA applies to this transaction because Affordable has sold a motor vehicle to Mr Szentesi having displayed the vehicle for sale at its premises and having sold it to Mr Szentesi. The lack of a vehicle offer and sale agreement (VOSA) does not assist Affordable. Rather, it is evidence of Affordable having failed in its statutory obligation to respectively record/provide a consumer with a VOSA and Consumer Information Notice as required by s 21 of the MVSA and reg 4 of the Motor Vehicle Sales Regulations 2003, and cl 8 of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008.
[14] The CGA applies because Affordable has supplied a vehicle to a consumer; the term “supply” including the sale of goods under that Act.
[15] Mr Singh’s submission would, if correct, render the MVSA and CGA obsolete in respect of the sale of second hand vehicles by motor vehicle traders, where those vehicles were acquired as trade ins in the ordinary course of a trader’s business. Mr Singh cannot pick and choose when the CGA (or MVSA) applies to Affordable as contended for. I have jurisdiction to hear and determine the claim therefore.

Issue 2: Has the vehicle been of acceptable quality?

[16] 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”.
[17] “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.

[18] 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.
[19] Mr Gregory, the Tribunal’s Assessor,[1] reviewed the whole of the evidence and listened to Mr Szentesi outline the problems experienced with the vehicle. Mr Gregory confirms Mr Szentesi’s diagnosis and repair of the vehicle as correct. The vehicle’s engine has been damaged as a result of oil starvation, causing damage to the engine camshaft bearings and likely damage elsewhere. This was confirmed by the oil presenting as being clear at Affordable’s premises (having been recently changed) but deteriorating significantly during Mr Szentesi’s journey home (to the point where the oil was contaminated with engine debris as the result of the damage sustained to the vehicle through its oil starvation over time, likely caused by a poor servicing history).
[20] I agree and accept Mr Gregory’s opinion. I find the vehicle was suffering from the early stages of engine failure at the time of sale, which was disguised (I need not find whether that was intentional by Affordable or by the third party which traded the vehicle in with Affordable) by a change of oil at or close to the time of sale. It is a breach of the guarantee of acceptable quality therefore.

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

[21] 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.

[22] Section 18(2)(b)(i) of the CGA enables a consumer to have goods remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied, where a supplier has been required to remedy a failure but refuses, fails or does not succeed in doing so within a reasonable time.
[23] The evidence was clear that Mr Szentesi raised his concerns with the vehicle immediately upon arriving home in Northland, having experienced a delayed journey home due to engine problems. Mr Singh and Affordable tried to negotiate but it did not accept responsibility to repair, when called upon to do so by Mr Szentesi. In the end, Mr Szentesi chose to repair the vehicle himself and did so at, Mr Gregory estimates, a third of the cost that Affordable might have otherwise faced in similar circumstances.
[24] I am left in no doubt therefore that the appropriate remedy here is for Mr Szentesi to be paid $1,680 by Affordable within ten working days of the date of this decision.

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.