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Lawry v Auto Imports NZ Ltd - Reference No. MVD 329/2019 [2019] NZMVDT 238 (11 November 2019)

Last Updated: 20 December 2019

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

MVD 329/2019
[2019] NZMVDT 238

BETWEEN GAVIN LAWRY & TRACIE LAWRY

Purchasers

AND AUTO IMPORTS NZ LTD
Trader





MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S D Gregory, Assessor

HEARING at Auckland on 31 October 2019



APPEARANCES
G and L Lawry, Purchasers (by audio-visual link)
J Ngata, for the Trader (by audio-visual link)

DATE OF DECISION 11 November 2019

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

  1. Auto Imports NZ Ltd shall, within 10 working days of the date of this decision, pay $650 to Gavin and Tracie Lawry.

_________________________________________________________________

REASONS

Introduction

[1] On 22 July 2019, Gavin and Tracie Lawry purchased a 2012 Holden Cruze for $7,000 from Auto Imports NZ Ltd. The vehicle was imported as a damaged statutory write off from Australia, its odometer reading was inaccurate, and a security interest was registered against it at the time of sale. Auto Imports NZ Ltd disclosed none of this to Mr and Mrs Lawry.
[2] Upon learning of the vehicle’s history and inaccurate odometer, Mr and Mrs Lawry rejected the vehicle, and Auto Imports NZ Ltd has now refunded the purchase price. Mr and Mrs Lawry now seek to recover other costs and losses they say they have incurred in respect of this transaction.
[3] Auto Imports NZ Ltd says that Mr and Mrs Lawry are entitled to recover the cost of assessing the vehicle’s faults and of insuring the vehicle and a contribution towards any cost incurred in storing the vehicle, but they are not entitled to recover the other amounts sought.

The Issues

[4] Against this background, the issues requiring consideration are:

Has Auto Imports NZ Ltd engaged in misleading conduct?

[5] Mr and Mrs Lawry allege that Auto Imports NZ Ltd engaged in misleading conduct in two separate regards. First, they say that Auto Imports NZ Ltd made a misleading representation as to the vehicle’s odometer reading. Second, they say that Auto Imports NZ Ltd failed to disclose that the vehicle was an imported as a damaged statutory write off.

The inaccurate odometer reading

[6] The evidence is clear that the vehicle’s odometer reading was inaccurate. Mr and Mrs Lawry provided a Carjam report, which contains information sourced from New Zealand Transport Agency records. That information shows that the vehicle underwent a pre-registration check in May 2018, when its odometer reading was 184,905 km. When the vehicle underwent a warrant of fitness inspection in May 2019, its odometer reading was 27,487 km, more than 155,000 km less than one year earlier.
[7] There is also evidence to show that Auto Imports NZ Ltd made a misleading representation about the vehicle’s odometer reading. The Consumer Information Notice (CIN) provide to Mr and Mrs Lawry states that the “actual distance that the vehicle has travelled” was 29,300 kms. The vehicle had travelled much further, but its odometer has either been changed or tampered with to disguise its true mileage.
[8] Accordingly, I am satisfied that Auto Imports NZ Ltd has engaged in conduct that breaches s 9 of the FTA by representing that the vehicle had travelled 29,300 kms.

Did Auto Imports NZ Ltd engage in misleading conduct by failing to disclose the vehicle’s history?

[9] Mr and Mrs Lawry also say that Auto Imports NZ Ltd engaged in misleading conduct by failing to advise them that the vehicle had been imported as damaged and that it was a statutory write-off from Australia because of extensive structural damage. They say they would not have purchased the vehicle if they had been aware of these facts.
[10] To succeed in their claim that Auto Imports NZ Ltd has engaged in misleading conduct, Mr and Mrs Lawry must show that Auto Imports NZ Ltd failed to disclose that the vehicle was imported as damaged and a statutory write off due to accident damage, and that this failure was misleading or deceptive conduct in breach of s 9 of the FTA. This requires the Tribunal to consider the extent to which non-disclosure or silence can be a breach of s 9 and, if so, whether s 9 was breached on the facts of the present case.
[11] Under the common law principle of caveat emptor (let the buyer beware), a claimant needed to show that the other party had made a positive representation before it could succeed in any claim. Silence or the failure to disclose a material fact could not give rise to a claim.[1]
[12] This principle of caveat emptor has now been displaced by the FTA. Under the FTA, silence or the failure to disclose a material fact can constitute misleading or deceptive conduct.[2] In Des Forges v Wright, Elias J (as she then was) stated:[3]

Silence may constitute misleading or deceptive conduct, but whether it does is to be objectively assessed in all the circumstances ... Conduct may be misleading or deceptive within the meaning of s 9 of the Fair Trading Act 1986 by an omission to provide information even if no obligation to provide such information exists as a matter of general law, outside the standards of conduct required by the Fair Trading Act.

[13] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[4] Under that test, silence or the failure to disclose a material fact can be misleading where, taking account of the circumstances of the particular case, a reasonable consumer would expect the information to have been disclosed.
[14] Having regard to the “reasonable expectation of disclosure” test in light of the general test for whether conduct is misleading and deceptive in Red Eagle Corp Ltd v Ellis,[5] for the reasons that follow, I consider that a reasonable person in Mr and Mrs Lawry’s situation would expect Auto Imports NZ Ltd to advise them that the vehicle was classified as imported as damaged and had previously been written off in Australia.

Did Auto Imports NZ Ltd disclose that the vehicle was imported as damaged?

[15] Auto Imports NZ Ltd has a legal obligation to disclose on the CIN that the vehicle was imported as damaged. Sections 14 to 16 of the Motor Vehicle Sales Act 2003 impose an obligation on motor vehicle traders to display a CIN on all used vehicles and the CIN must contain all the information required by sch 2 to the Consumer Information Standards (Used Motor Vehicles) Regulations 2008. The information required by sch 2 includes a requirement that the trader must indicate, by ticking the appropriate box, whether the motor vehicle is recorded on the motor vehicle register as being damaged at the time of importation. The CIN has two boxes that can be ticked when disclosing whether a vehicle was imported as damaged, one box for “yes”, another for “no”.
[16] Auto Imports NZ Ltd ticked the “no” box, meaning that it represented that the vehicle had not been imported as damaged. That representation was false, because the vehicle was imported as damaged. Auto Imports NZ Ltd has therefore engaged in misleading conduct in breach of s 9 of the FTA.

Did Auto Imports NZ Ltd disclose that the vehicle was a statutory write off because of structural damage?

[17] Auto Imports NZ Ltd had a separate obligation to disclose that the vehicle had been written off in Australia due to structural damage. As recognised by the High Court in McBride Street Cars Ltd v District Court (Dunedin Registry), such information is material to any reasonable consumer’s purchasing decision.[6] It is material information because it enables a consumer to make an informed decision about the purchase — which includes the consumer then being able to make its own enquiries as to the future consequences of the vehicle being a statutory write-off. Those future consequences are important because a stigma attaches to vehicles that have been written off. This stigma significantly affects the resale value of those vehicles — irrespective of the nature of the damage that caused the vehicle to be written off. It is the fact that the vehicle has been written off that creates the stigma.
[18] In this case, Auto Imports NZ Ltd knew that the vehicle was a statutory write-off, but it did not disclose that information to Mr and Mrs Lawry. Accordingly, I am satisfied that Auto Imports NZ Ltd failed to advise Mr and Mrs Lawry that the vehicle was a statutory write-off from Australia due to structural damage. I consider that Auto Imports NZ Ltd’s failure to advise Mr and Mrs Lawry that the vehicle was a statutory write-off is misleading conduct that breached s 9 of the FTA.

What remedy is available to Mr and Mrs Lawry under the FTA

[19] The relevant remedies available for a breach of the FTA are set out in s 43(3) of the FTA which provides:

43 Other orders

(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(3) The orders are as follows:

(a) an order declaring all or part of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) to be void; and

(ii) if the court or the Disputes Tribunal thinks fit, to have been void at all times on and after a date specified in the order, which may be before the date on which the order is made:

(b) if an order described in paragraph (a) is made in respect of a contract that is associated with a collateral credit agreement, an order vesting in person B all or any of the rights and obligations of person A under the collateral credit agreement:

(c) an order in respect of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) varying the contract or the arrangement in the manner specified in the order; and

(ii) if the court or the Disputes Tribunal thinks fit, declaring the varied contract or arrangement to have had effect on and after a date specified in the order, which may be before the date on which the order is made:

(d) if an order described in paragraph (c) is made in respect of a contract that is associated with a collateral credit agreement, and if that order results in person A no longer having property in the goods that are the subject of the contract, an order vesting in person B the rights and obligations of person A under the collateral credit agreement:

(e) an order directing person B to refund money or return property to person A:

(f) an order directing person B to pay to person A the amount of the loss or damage:

(g) an order directing person B, at person B’s own expense, to repair, or to provide parts for, goods that have been supplied by person B to person A:

(h) an order directing person B, at person B’s own expense, to supply specified goods or services to person A.

[20] The remedies in s 43(3) of the FTA are discretionary and the discretion is to be exercised so as to give effect to the policy of the FTA, which includes protecting the interests of consumers. The object of the remedies in s 43(3) of the FTA is to do justice to the parties in the particular circumstances of the case.[7]
[21] Mr and Mrs Lawry seek to recover the following costs:

The cost of purchasing insurance and assessing the vehicle’s faults

[22] I am satisfied that Mr and Mrs Lawry are entitled to recover the cost of insuring the vehicle and of having its faults assessed by Pilott Automotive in Tokoroa.
[23] Mr and Mrs Lawry paid $55 to insure the vehicle with AMI Insurance. They have had no real benefit from that insurance, as the vehicle has been virtually unusable and has been kept in storage for almost their entire ownership. I am therefore satisfied that they are entitled to recover that cost.
[24] Likewise, on 7 August 2019, Mr and Mrs Lawry paid $95 to Pilott Automotive to have the vehicle’s many defects assessed. Among other things, Pilott Automotive identified that the vehicle’s odometer reading was too low and that the vehicle’s instrument cluster and odometer may have been replaced.
[25] Because this inspection was instrumental in Mr and Mrs Lawry discovering that the vehicle’s odometer reading was inaccurate, I am satisfied that they are also entitled to recover this cost from Auto Imports NZ Ltd.

The cost of purchasing a replacement vehicle

[26] Mr and Mrs Lawry also say that, because Auto Imports NZ Ltd was slow in refunding the purchase price, they had to purchase a replacement vehicle for $650 so Mrs Lawry could travel to and from work. That vehicle subsequently broke down and Mrs Lawry then purchased a Toyota Rav 4 for $3,000, which she has since spent $2,000 repairing. Mr and Mrs Lawry seek to recover $1,500, as a contribution towards the costs they have incurred.
[27] Although I accept that Mr and Mrs Lawry were inconvenienced by Auto Imports NZ Ltd selling them a vehicle that was entirely unfit for sale, and that they were then required to purchase a replacement vehicle, I am not satisfied that they are entitled to recover any of those costs from Auto Imports NZ Ltd.
[28] Under s 43(1), any loss recoverable under the FTA must be caused by Auto Import NZ Ltd’s misleading conduct. In this case, I am not satisfied that the costs Mr and Mrs Lawry have incurred in respect of the two replacement vehicles are attributable to Auto Imports NZ Ltd’s misleading conduct. I consider that any loss they may have suffered has arisen because of their decision to buy those particular vehicles, rather than because of any misleading conduct by Auto Imports NZ Ltd.

The cost of storing the vehicle

[29] Mr and Mrs Lawry also seek to recover $20 for each day that they have stored the vehicle. They say that they did not want to leave the vehicle on the roadside, so they have kept the vehicle secure in their garage. Because the vehicle has been stored in the garage, they have been required to store Mr Lawry’s vehicle beneath a carport.
[30] There was some dispute between the parties as to whether or not Mrs Lawry refused to release the vehicle to a towing company engaged by Auto Imports NZ Ltd. Ultimately though, in determining whether Mr and Mrs Lawry are entitled to recover the cost of storing the vehicle, it is a moot point as to whether Mrs Lawry refused to release the vehicle. That is because I am not satisfied that Mr and Mrs Lawry have proven that they have suffered any loss in storing the vehicle. They incurred no financial expense in storing the vehicle, and at most, they have suffered an inconvenience by being unable to use their garage to store other vehicles. I am not satisfied that this inconvenience gives rise to any loss or damage recoverable under the FTA.

Stress and inconvenience

[31] I am, however, satisfied that Mr and Mrs Lawry are entitled to damages for the stress and inconvenience arising from Auto Import NZ Ltd’s misleading conduct. In AMP Finance NZ Ltd v Heaven, the Court of Appeal recognised that damages for stress and inconvenience are, in certain cases, allowable.[8] I consider that this is one of those rare cases where such damages would be justified.
[32] Mr and Mrs Lawry’s lives and financial wellbeing have been adversely affected by being misled into purchasing a vehicle that was entirely unfit for their purposes and that should never have been offered for sale. Recognising the stress and inconvenience suffered by Mr and Mrs Lawry, I consider that the payment of $500 will go some way towards compensating them for this harm.

DATED at AUCKLAND this 11th day of November 2019

B.R. Carter
Adjudicator



[1] Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995) 5 NZBLC 103,878 (HC).

[2] Des Forges v Wright [1996] 2 NZLR 758 (HC).

[3] At 764.

[4] Hieber v Barfoot & Thompson (1996) 5 NZBLC 104,179 (HC); Tuiara v Frost & Sutcliffe [2003] 2 NZLR 833 (HC) at [91]; Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 (HC) at [21] and [32].

[5] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 (SC).

[6] McBride Street Cars Ltd v District Court (Dunedin Registry) [2018] NZHC 111, [2018] NZAR 289.

[7] Red Eagle Corp Ltd v Ellis, above n 5, at [31].

[8] AMP Finance NZ Ltd v Heaven (1998) 6 NZBLC 102,414 (CA).


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