NZLII Home | Databases | WorldLII | Search | Feedback

Motor Vehicles Disputes Tribunal of New Zealand
You are here:  NZLII >> Databases >> Motor Vehicles Disputes Tribunal of New Zealand >> 2022 >> [2022] NZMVDT 8

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

Wang v R K Cars Ltd - Reference No. MVD 412/202 [2022] NZMVDT 8 (9 February 2022)

Last Updated: 18 March 2022

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

MVD 412/2021
[2022] NZMVDT 8

BETWEEN CHENCHEN WANG

Applicant

AND R K CARS LTD
Respondent





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

HEARING at Auckland on 20 January 2022 (by audio-visual link)



APPEARANCES
C Wang, Applicant
Y Liu, Witness for the Applicant
P Raniga and N Jani for the Respondent

DATE OF DECISION 9 February 2022

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

  1. The agreement to purchase the vehicle dated 26 April 2016 is declared void from the date of this decision.
  2. R K Cars Ltd shall, within 10 working days from the date of this decision, pay $16,500 to Ms Wang.

_________________________________________________________________

REASONS

Introduction

[1] On 26 April 2016, Chenchen Wang purchased a 2015 Nissan Juke for $21,500 from R K Cars Ltd. Ms Wang now seeks to return the vehicle and obtain compensation from R K Cars, alleging that R K Cars engaged in misleading conduct regarding the vehicle’s history as an Australian statutory write off and its odometer reading. R K Cars denies engaging in misleading conduct.

Relevant background

The vehicle is a statutory write off

[2] The vehicle was written off in Australia due to water damage in about May 2015. Records from the Personal Property Securities Register (PPSR) operated by the Australian Financial Services Authority, show that the vehicle was written off because it was water damaged, with the PPSR entry stating that the reason for the vehicle being written off was “[ Water [salt or fresh) I Whole vehicle I Water (fresh) ]”.
[3] The vehicle was imported into New Zealand in October 2015, where it was inspected by Auto Compliance as part of the importation compliance process. A Light vehicle repair record of certification dated 19 November 2015 records that Auto Compliance found:
[4] Auto Compliance replaced the driver’s seat belt pre-tensioner assembly, as it was concerned that the assembly had been immersed in water. No other repairs were performed, and the vehicle then passed its compliance inspection. The vehicle was also assessed by Jay Bee Auto Electrical as part of the compliance process. Jay Bee Auto Electrical considered that none of the vehicle electrical components, including wiring, control modules and airbags, had been affected by water ingress.
[5] Ms Wang says that R K Cars did not tell her that the vehicle had been written off due to water damage. She therefore alleges that R K Cars engaged in misleading conduct because it failed to advise her of the vehicle’s history as a water damaged statutory write off.

The odometer inconsistencies

[6] Ms Wang also alleges that R K Cars has engaged in misleading conduct because the odometer has been tampered with or is otherwise faulty, leading to inconsistent odometer readings. The following evidence is relevant:

The issues

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

Issue 1: Has R K Cars engaged in conduct that breached s 9 of the FTA?

[8] Section 9 of the FTA provides:
  1. Misleading and deceptive conduct generally

No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

[9] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[1]

The question to be answered in relation to s 9 ... is ... whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established.

The vehicle’s history

R K Cars had an obligation to disclose the vehicle’s history as a statutory write off

[10] 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.[2]
[11] 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.[3] In Des Forges v Wright, Elias J (as she then was) stated:[4]

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.

[12] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[5] 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.
[13] 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, for the reasons that follow, I consider that a reasonable person in Ms Wang’s situation would expect R K Cars to advise it that the vehicle was classified as imported as damaged and had previously been written off in Australia.
[14] R K Cars did disclose, on the Consumer Information Notice (CIN) provided to Ms Wang, that the vehicle was imported as damaged. However, R K Cars had a separate obligation to disclose that the vehicle had been written off in Australia due to water damage.
[15] 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.

R K Cars did not disclose that the vehicle was a statutory write off

[16] Pranesh Raniga, a director of R K Cars, and Nilesh Jani, the sales manager who dealt with Ms Wang, both accepted that R K Cars did not tell Ms Wang that the vehicle was a statutory write off. R K Cars’ failure to advise Ms Wang that the vehicle was a statutory write-off is therefore misleading conduct that breached s 9 of the FTA. R K Cars had an obligation to inform Ms Wang that the vehicle was a statutory write-off. It did not do so.

The inconsistent odometer readings

[17] There is clearly an inconsistency of approximately 27,000 km in various official documents relating to the vehicle’s odometer reading, but I am not satisfied that this inconsistency proves that the odometer was tampered with or that the vehicle’s odometer is defective.
[18] This Tribunal has heard other cases where odometer reading discrepancies were caused by the vehicle’s odometer reading being inaccurately recorded at border checks, compliance testing and/or warrant of fitness inspections, leading to a discrepancy between official records and the vehicle’s actual odometer reading.
[19] That is the most likely explanation for the odometer reading being recorded at 29,999 km during the border inspection. R K Cars provided a photograph taken by Ewan Clark, which shows mileage of 29,999 km on the dashboard display. Beside that mileage reading is a spanner symbol.
[20] Mr Haynes, the Tribunal’s Assessor, advises that the presence of the spanner symbol is evidence that the dashboard display is showing the vehicle’s service reminder settings and that the 29,999 km figure is not the vehicle’s odometer reading but is instead the number of kilometres remaining until the service reminder will be triggered. Mr Haynes says that this service reminder appears briefly (as a reminder of the next service) every time the ignition is turned on, so it could easily be mistaken for the odometer reading if the person taking that reading is unaware of this feature. That is also the most likely explanation for the discrepancy in odometer readings between January 2018 and January 2019 shown on the VIR obtained by Ms Wang.
[21] It would therefore seem that the inspector who assessed the vehicle at the border and recorded the odometer reading as 29,999 km mistakenly recorded the mileage counter for the vehicle’s next service and that the vehicle’s odometer is accurate, the odometer has not been tampered with and the discrepancy in the odometer readings in Waka Kotahi records was caused by human error, for which R K Cars should not have liability.
[22] I also note that the vehicle was first registered in Australia on 30 January 2015 and was then written off on about 31 May 2015 – only four months later. It is highly unlikely that the vehicle could have travelled 29,999 km in that short space of time, adding weight to the conclusion that the odometer discrepancies showing in official records have been caused by human error.
[23] Ms Wang therefore has no claim against R K Cars under the FTA for the inconsistent odometer readings.

Issue 2: What remedy is Ms Wang entitled to under the FTA?

[24] The remedies available for a breach of the FTA are set out in s 43 of the FTA which is as follows:

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.

(4) In subsection (3)(a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3)(a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) subpart 5 of Part 2 of the Contract and Commercial Law Act 2017; or

(b) section 317 of the Accident Compensation Act 2001.

[25] As set out above, Ms Wang was misled by R K Cars’ failure to disclose that the vehicle was a statutory write off from Australia. She will therefore be entitled to a remedy under s 43(2) and (3) if she proves that she has suffered or is likely to suffer loss or damage.
[26] The normal measure of loss under s 43 is the “difference between the value of what was acquired and the price paid”.[7] That means Ms Wang will have suffered loss recoverable under s 43 of the FTA if she proves that she paid more for the vehicle than it was worth.

The parties’ submissions

[27] Ms Wang paid $21,500 for the vehicle. Ms Wang says that the vehicle is now worth much less. Following the hearing, she sought trade-in valuations from Honda Cars Newmarket and East Auckland BMW & Mini. Both declined to accept the vehicle as a trade-in due to its history. Ms Wang obtained a valuation from City Motor Group, which valued the vehicle at $8,000. Ms Wang says that City Motor Group also advised that it would not purchase the vehicle due to its history.
[28] R K Cars says that the purchase price properly reflected the vehicle’s history as a statutory write off. It provided information from the Trade Me and Auto Trader websites. That information contains several listings for 1.5 litre 2015 Nissan Jukes with an odometer reading of less than 50,000 km. The listed price for those vehicles was between $15,500 and $18,890. None of those vehicle’s appeared to have been a statutory write off. I understand R K Cars to rely on these listings as evidence that Ms Wang paid a fair market price for the vehicle.

The Tribunal’s assessment

[29] The Tribunal often encounters cases involving vehicles that have been written off in Australia that are then repaired and sold. Common to those cases is evidence that:
[30] Consequently, the fact that the vehicle had undisclosed damage does not necessarily mean that Ms Wang has suffered loss if the price she paid for the vehicle was a fair reflection of the vehicle’s value as a repaired statutory write off.
[31] This vehicle has some value (and certainly more than the $8,000 valuation provided by City Motor Group – which in this Tribunal’s experience is much too low even for a vehicle that has previously been written off for minor water damage). Nonetheless, I am satisfied that the undisclosed fact that the vehicle was written off in Australia due to water damage has a significant impact on the vehicle’s value and that Ms Wang is likely to have paid more for the vehicle than it was worth.
[32] Water damage, even as minor as that present in this vehicle, has a significant impact on a vehicle’s value. Mr Haynes advises that vehicles that have been subject to water damage can, over time, develop significant ongoing electrical issues because of water damage to important electrical components. Although this vehicle does not currently exhibit signs of any ongoing electrical faults, Mr Haynes says that such issues can take some time to manifest themselves and may arise in the future. This risk of ongoing electrical issues is why it is important that traders openly disclose pre-existing water damage to enable consumers to make an informed decision as to whether or not they want to take the risk of purchasing a water damaged vehicle. In this case Ms Wang was not given that choice because R K Cars failed in its obligation to disclose that important information to her.
[33] Although it is difficult to quantify the precise value of the vehicle as a water damaged statutory write off, I am satisfied that it is unlikely that a fully informed consumer would have paid as much as $21,500 for this vehicle. On the basis of the information provided by the parties – particularly the internet listings provided by R K Cars for vehicle’s that have not been written off– I consider it likely that the price paid by Ms Wang was equivalent to the market value for an undamaged vehicle. If the vehicle’s history had been properly disclosed, I am satisfied that a reasonable consumer would have paid much less.
[34] I am therefore satisfied that Ms Wang has suffered loss by purchasing the vehicle, and that R K Cars’ misleading failure to disclose the vehicle’s history as a water damaged statutory write off was the cause of that loss.

The remedy

[35] 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 to protect 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.[8]
[36] I consider that the remedy that best does justice to the parties in the circumstances of this case are:
[37] A reduction of the amount to be paid to Ms Wang to reflect her use of the vehicle is appropriate. Ms Wang has owned the vehicle for nearly six years and has driven in excess of 14,000 kms in that time. Ms Wang has obtained real value from the use of the vehicle in that time and the vehicle has depreciated in value because of that use. I would not be doing justice by the parties if I failed to take account of the value of that use. Accordingly, I intend to reduce the amount payable to Ms Wang by $5,000 to reflect the benefit Ms Wang has received from her use of the vehicle.

Outcome

[38] The Tribunal therefore declares the agreement to purchase the vehicle dated 26 April 2016 void from the date of this decision and orders that R K Cars must pay $16,500 to Ms Wang.

DATED at AUCKLAND this 9th day of February 2022

B.R. Carter
Adjudicator


[1] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

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

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

[4] At 764.

[5] 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 [31] and [32].

[6] McBride Street Cars Limited Ltd v District Court (Dunedin Registry) [2018] NZHC 111, [2018] NZAR 289.
[7]Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2012) 13 NZCPR 123 at [49].

[8]Red Eagle Corp Ltd v Ellis, above n 1 at [31].

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/cases/NZMVDT/2022/8.html