Cadwallader v OzCars Limited Reference No. MVD 349/2023 [2023] NZMVDT 262 (6 December 2023)

Last Updated: 25 January 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 349/2023 [2023] NZMVDT 262 BETWEEN KRISTEN LOUISE CADWALLADER Applicant AND OZCARS LTD Respondent

HEARING at AUCKLAND on 16 November 2023 MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator S Haynes – Assessor

APPEARANCES

P Cadwallader for the Applicant (by audio-visual link) K Pemberton, Witness for the Applicant (by audio-visual link)

D Blaxall for the Respondent

DATE OF DECISION 6 December2023

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DECISION OF THE TRIBUNAL

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Kristen Cadwallader’s claim is dismissed.

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REASONS

Introduction

[1] Kristen Cadwallader wants to reject the 2018 Kia Sportage she purchased for $23,995 from Ozcars Ltd in July 2022. Mrs Cadwallader says that Ozcars Ltd has engaged in misleading conduct by failing to disclose that the vehicle had previously been written off due to engine damage.
[2] Ozcars Ltd denies engaging in misleading conduct. It says that it did not know that the vehicle had previously been written off due to engine damage and would have disclosed that information if it had known.

The issues

[3] The sole issue requiring the Tribunal’s consideration in this case is whether Ozcars Ltd engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA).

The relevant facts

[4] The vehicle suffered significant engine damage in about September 2021, when its odometer reading was 58,671 km. An invoice from Giltrap Kia records that no engine repairs were performed because the “vehicle ended up being written off” due to that engine damage. Based on the evidence provided by the parties, including photographs of the vehicle from around that time, it seems that only the engine was damaged. There is no evidence to show that any other part of the vehicle was damaged.
[5] Karl Pemberton of Auto Assess Ltd has assisted Mrs Cadwallader and her husband Peter, who appeared at the hearing, in gathering evidence for this claim. The evidence gathered by Mr Pemberton shows that the engine damage was not covered by the manufacturer’s warranty, although why the engine damage was not covered is not clear. Capricorn Mutual Ltd, the insurer of the vehicle at the time, then deemed that the vehicle was uneconomic to repair. The vehicle was then sold in a damaged vehicle auction conducted by Turners. Because the vehicle was uneconomic to repair and sold at a damaged vehicle auction, Mrs and Mr Cadwallader say the vehicle was “written off” by Capricorn Mutual.
[6] Ozcars Ltd has provided a Vehicle Information Report (VIR), which shows that the vehicle was then sold by Turners on 27 January 2022. That owner then sold the vehicle three weeks later to another private owner, which then sold the vehicle three weeks after that. Ozcars Ltd then purchased the vehicle from that owner, which it says was a Bay of Plenty based wholesaler, on 26 June 2022. Ozcars Ltd then sold the vehicle to Ms Cadwallader in July 2022.
[7] Mrs and Mr Cadwallader saw the vehicle advertised on the Trade Me website. They have provided a copy of the Trade Me listing that they saw. That listing does not mention that the vehicle had previously been written off or suffered engine damage.
[8] In early August 2023, the vehicle developed a fuel injector and fuel system fault. By that time Mrs and Mr Cadwallader had driven approximately 40,000 km in the vehicle. Mrs Cadwallader then attempted to make a claim under the vehicle’s five year/100,000 km manufacturer’s warranty. It seems that Kia declined that claim for two reasons. First, the vehicle’s odometer reading by that time already exceeded 100,000 km, meaning the manufacturer’s warranty had expired. Second, and most concerning to Mrs and Mr Cadwallader, Kia advised them that the manufacturer’s warranty would not have applied in any event because the vehicle had previously been written off.
[9] Only at that time did Mrs and Mr Cadwallader discover that the vehicle had been written off due to engine damage, so they contacted Ozcars Ltd and rejected the vehicle. Mrs and Mr Cadwallader then filed this claim alleging that Ozcars Ltd has engaged in misleading conduct because it either knew, or ought reasonably to have known, that the vehicle was written off due to engine damage and that it failed to disclose that fact.

Has Ozcars Ltd engaged in conduct that breached s 9 of the FTA?

[10] Section 9 of the FTA provides:

9. 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.

[11] 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.

[12] Mrs and Mr Cadwallader bear the onus of proof. That means that they must prove that it is more likely than not that Ozcars Ltd has engaged in the alleged misleading conduct by failing to disclose that the vehicle had been written off due to engine damage.
[13] Silence can constitute misleading conduct where “something is known by the vendor to be of consequence to the purchaser”.[2] However, when I consider all the evidence presented, I am not satisfied that Mrs and Mr Cadwallader have proven that Ozcars Ltd has engaged in misleading conduct in breach of s 9 of the FTA. That is because Mrs and Mr Cadwallader have not proven that Ozcars Ltd knew, or ought reasonably to have known, that the vehicle had been written off due to engine damage when the vehicle was sold to Mrs Cadwallader.
[14] Mrs and Mr Cadwallader say that Ozcars Ltd knew that the engine had been replaced when it sold the vehicle. They point to a further Trade Me listing (the second Trade Me listing) that Ozcars Ltd provided to the Tribunal before the hearing. The second Trade Me listing states that the vehicle’s engine was replaced in March 2022. I understood Mr Cadwallader to say that Darren Blaxall of Ozcars Ltd has admitted that the second Trade Me listing was prepared and published before the vehicle was sold to Mrs Cadwallader, and therefore demonstrates that Ozcars Ltd knew that the engine had been replaced.
[15] Mr Blaxall says that he did not know that the vehicle had been written off or that the engine had been replaced when the vehicle was sold to Mrs Cadwallader. Mr Blaxall says Ozcars Ltd purchased the vehicle from an unnamed wholesaler. That wholesaler did not tell Mr Blaxall that the vehicle had been written off or that the engine had been replaced. Mr Blaxall also says that he also obtained a VIR when Ozcars Ltd purchased the vehicle, and that VIR contained no mention of the vehicle having been written off, de-registered or previously repaired.
[16] Mr Blaxall says that he only discovered the vehicle’s true history after he was contacted by Mr Pemberton. He says that he then conducted further research and discovered that, in about March 2022, the engine was replaced with a secondhand engine that had travelled about 19,000 km.
[17] Mr Blaxall says that Ozcars Ltd would have disclosed that the engine had been replaced if it had known. Mr Blaxall says that he provided the second Trade Me listing to the Tribunal as an example of what the advertising for the vehicle would have looked like if Ozcars Ltd had known of the engine replacement. Mr Blaxall says that the second Trade Me listing was not prepared or published before Mrs Cadwallader purchased the vehicle. Mr Blaxall says that he prepared the second Trade Me listing in September 2023, after it had received Mrs Cadwallader’s complaint, to demonstrate what its listing would have looked like if it had known about the replaced engine.
[18] I accept Mr Blaxall’s evidence that he prepared the second Trade Me listing as an example only and that the second Trade Me listing is not evidence that Ozcars Ltd knew that the engine had been replaced. Ozcars Ltd has since provided an email from Trade Me confirming that the second Trade Me listing was first published on 4 September 2023 and withdrawn two hours later.
[19] I therefore find that Mrs and Mr Cadwallader have not proven that Ozcars Ltd knew that the vehicle had been written off or that its engine had been replaced. Information about the vehicle having been written off is not publicly available and I accept Mr Blaxall’s evidence that he only discovered that fact following discussions with Mr Pemberton, who was investigating the vehicle’s history on behalf of Mr and Mrs Cadwallader.
[20] Mrs and Mr Cadwallader also say that Ozcars Ltd ought reasonably to have known that the vehicle was written off due to engine damage because:

• (a) the engine number on the current engine is different from the engine number when the vehicle was manufactured, which is evidence that the engine was changed; and
• (b) the ownership of the vehicle changed frequently between January and July 2022.

[21] Mr and Mrs Cadwallader have proven that Ozcars Ltd ought reasonably to have known that the vehicle had been written off due to a damaged engine. That information is not publicly available or readily accessible. As noted above, there is no publicly available record that Ozcars Ltd had access to that disclosed that the vehicle was written off or that the engine had been replaced.
[22] Further, the circumstances were not such that Ozcars Ltd should have known that the vehicle had been written off because the engine had been replaced. Mr Cadwallader suggested that Ozcars Ltd could have taken steps to discover that the vehicle had previously been written off and the engine and been replaced, including by checking the vehicle’s engine number and contacting Kia to obtain the service history for the vehicle.
[23] In the absence of evidence that might put it on notice that the vehicle had been written off or that the engine had been replaced, Ozcars Ltd had no obligation to check the vehicle to determine whether its engine had been replaced or to obtain the service and repair history from any workshop that has worked on the vehicle. Also, although the vehicle’s ownership changed three times over a space of five months between January and June 2022, those changes of ownership on their own are not sufficient to trigger any obligation to perform further research to determine the vehicle’s history.

Outcome

[24] Mrs and Mr Cadwallader have not proven that Ozcars Ltd has engaged in misleading conduct by failing to disclose that the vehicle had previously been written off or that the engine had been replaced. The claim is therefore dismissed.

B R Carter
Adjudicator

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

[2] McBride Street Cars Ltd v District Court (Dunedin Registry) [2018] NZHC 111 at [54]–[55],