McBride Street Cars Limited v District Court (Dunedin Registry) [2018] NZHC 111 (12 February 2018)

Last Updated: 13 February 2018

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE CIV-2017-412-64 [2018] NZHC 111

BETWEEN	MCBRIDE STREET CARS LIMITED Plaintiff
AND	THE DISTRICT COURT (DUNEDIN REGISTRY) First Defendant STEPHEN AND DIANE LOACH Second Second Defendant

Hearing:	8 November 2017
Appearances:	L A Anderson for Applicant P J Page and J J Y R Pierce for Second Respondents
Judgment:	12 February 2018

JUDGMENT OF NICHOLAS DAVIDSON J

NTRODUCTION

Dunedin motor vehicle dealer imported a damaged Volkswagen Amarok (“the Amarok”) from Australia. It was a statutory write-off in Queensland, a fact known to the dealer. This judgment upholds on review a District Court decision which in turn upheld a decision of the Motor Vehicle Disputes Tribunal that the dealer breached the Fair Trading Act 1986 when it sold the Amarok in New Zealand. Not to have told the purchasers about the statutory write-off was held misleading and

MCBRIDE STREET CARS LIMITED v THE DISTRICT COURT (DUNEDIN REGISTRY) [2018] NZHC 111

[12 February 2018]

deceptive in all the circumstances, as was the purported disclosure that the vehicle had been imported as damaged.

he Amarok was imported by McBride Street Cars Limited (“McBride”) and sold to Mr and Mrs Loach of Otematata. When purchased at auction in Queensland by McBride, it was described on the sale invoice as “statutory write-off, unable to be re-registered – water affected – mechanical issues”. The vehicle developed transmission problems. The Loaches found out about the statutory write-off and wanted their money back.

r Cottle of McBride says that while he knew of the statutory write-off, he had not misled the Loaches. He said that at the time of sale he gave them a Customer Information Notice (“CIN”), as required by the applicable regulatory regime.¹ The CIN recorded that the vehicle was “imported as damaged”, and McBride’s position is that was true and as far as it needed to go as it had no obligation to tell the Loaches what it knew about the vehicle’s history.

he Loaches agreed they were given the CIN but said they did not read it, and did not have the “imported as damaged” reference drawn to their attention, nor did they sign the CIN in the space provided to acknowledge that they had read it.

ACTS

he Amarok was imported to New Zealand in January 2016. The border check recorded it as “damaged: storm, flood, other – written-off, QLD 06 May 2015, statutory write-off”. This Court was advised from the Bar that a statutory write-off has a different meaning state by state. On its arrival, the Amarok underwent tests by Vehicle Inspection New Zealand and Action Panelbeating. It was assessed as compliant with the Land Transport Rules: Vehicle Repair 1998, and a compliance certificate was issued.

he Loaches entered a Vehicle Offer and Sale Agreement (“VOSA”) to purchase the vehicle for $40,000 on 17 June 2016. McBride, trading as “Tokyo Auto

TTT

¹ Consumer Information Standards (Used Motor Vehicles) Regulations 2008 (“the Regulations”).

Town”, had listed the vehicle on Trade Me. The Loaches took it for at least two test drives, and it was inspected for them by another trader. It was described by Mr Loach as presenting “incredibly well”. They were informed that the vehicle had been imported from Australia, but there was no further discussion of the vehicle’s history, no oral mention that it had been damaged, nor of the statutory write-off.

he CIN recorded, under the heading “Information about used imported vehicles”, that the car was first registered in 2013 in Australia. The “‘Yes” box was ticked next to the reference “imported as damaged vehicle”. The circumstances in which the CIN was given to the Loaches, and their knowledge of its contents, is a point of contention.

he CIN records “If you buy this motor vehicle, the trader must give you a copy of this notice to keep” under which there is a heading “Trader confirmation” containing a statement by way of acknowledgment by the trader that he has supplied a copy of the notice to the buyer, including a copy of the information on the back of the CIN. The acknowledgement of McBride is dated 17 June 2016. There is a corresponding box for the purchaser to sign and date, worded “buyer confirmation”, which is blank, unsigned by the Loaches.

n the VOSA, there is a clause under the heading “Purchaser’s offer and agreement”:

2. Supplier Information Notice (“SIN”): I acknowledge that I have been given a copy of the SIN in the vehicle and that I have read, understood and accept the contents of the SIN (including the list of defects (if any) set out on the SIN.

Supplier Information Notice” (“SIN”), is a reference to the consumer information requirement of the previous regulatory regime. The SIN was replaced by the CIN in 2008.

wo months later, the Loaches noticed noises and shuddering from the vehicle’s transmission. After inspection, they were informed the transmission fluid could have been contaminated by water and/or glycol. They investigated the

Amarok’s history and discovered the statutory write-off, with the NZTA database recording it as “storm, flood, other – written off ...”, as above.

cBride refused to refund the purchase price, but offered to repair the vehicle. The Loaches brought a claim before the Motor Vehicle Disputes Tribunal.

EFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL²

r Cottle gave evidence that he had placed the CIN under the windscreen wiper, and he had seen Mrs Loach reading it. He said he gave the CIN to Mr Loach three or four minutes before giving him the VOSA for signature. Mr Loach said he could not recall seeing the CIN before agreeing to purchase the vehicle, and his recollection was that he was only given a copy of it as he and Mrs Loach were leaving in the Amarok they had just purchased.

he primary issue was whether Mr and Mrs Loach had proved the vendor breached s 9 of the Fair Trading Act 1986 by engaging in “conduct that is misleading or deceptive or is likely to mislead or deceive”. ³ The Tribunal referred to the test set out by the Supreme Court in Red Eagle Corporation v Ellis:⁴

The question to be answered in relation to s 9 in a case of this kind is accordingly 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. It is not necessary under s 9 to prove that the defendant's conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9. If it is likely to do so, it has the capacity to do so. Of course the fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.

he Tribunal recognised that the common law approach of caveat emptor (buyer beware) has in recent times moved towards a “reasonable expectation” test when issues of disclosure arise. Silence can constitute a misrepresentation. There

TTT

² Loach v McBride Street Cars Limited T/A Tokyo Auto Town MVD 287/2016, 14 December 2016.

3. Loach v McBride Street Cars Limited T/A Tokyo Auto Town MVD 287/2016 (WN82), 14 December 2016.

⁴ Red Eagle Corporation v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

need not be an overt misrepresentation. Whether particular non-disclosure amounts to misrepresentation involves analysis of all the circumstances.

he CIN contains a space for the purchaser to acknowledge receipt of the notice, and under the Regulations it is mandatory for vendor and purchaser to sign and date the form.⁵ On the Loaches’ form there was no acknowledgement of receipt, nor did they sign the form. The Tribunal found that the statutory write-off had not been disclosed to the Loaches (and McBride did not say it had), and that they had not read, or at least not absorbed, the CIN until after the sale of the vehicle, so had not seen or recognised the reference to it being “damaged”.

he Tribunal found that Mr Cottle had actively taken steps to discourage the Loaches from reading the CIN by requiring them to sign the VOSA only, with its reference to the SIN buried in the small print. That the Loaches did not ask questions about the history of the vehicle, it said, should not count against them.

oncluding that non-disclosure of the statutory write-off in this case constituted misleading conduct, the Tribunal said:

s I have already noted, Mr Cottle and Tokyo Auto Town accept they did not disclose to Mr and Mrs Loach that the vehicle is an Australian statutory write-off. In other words, there was silence on this aspect. In my view, having regard to the cases that have discussed the “reasonable expectation of disclosure” test in light of the overall test for whether conduct is misleading and deceptive Red Eagle (above), I consider that a reasonable person in Mr and Mrs Loach’s situation would likely have been misled or deceived by Tokyo Town’s conduct, specifically omitting to tell them that the vehicle is an Australian statutory write-off.

n addition, I accept Mr and Mrs Loach’s evidence that they were actually misled by Mr Cottle’s omission to disclose the vehicle is an Australian statutory write-off. Mr Loach’s evidence was that the car presented “incredibly well”. There was no outward indication that it had been written-off in Australia and I accept their evidence that they were shocked at discovering this fact.

more sophisticated purchaser may have noticed the disclosure that the vehicle was “imported as damaged” on the CIN and asked more questions, especially in combination with the knowledge that the vehicle was imported from Australia. Through their experience with this vehicle Mr and Mrs Loach have now become more sophisticated purchasers but I accept they were not so at the relevant time. In any event, as stated above, Mr

AAA

⁵ Consumer Information Standards (Used Motor Vehicles) Regulation 2008, schedule 1.

Cottle took steps to discourage Mr and Mrs Loach from reading the CIN, by getting them to sign the buyer acknowledgement on the VOSA rather than on the CIN itself.

he Tribunal declared the purchase agreement void, and ordered refund of the $40,000 purchase price.

PPEAL TO THE DISTRICT COURT⁶

n appeal McBride’s counsel Mr Andersen submitted that it had complied with its legal obligations of disclosure, and under s 17 of the Motor Vehicle Sales Act 2003 (MVSA), the acknowledgement of provision of the CIN may be on the VOSA. Reference to the SIN in the VOSA, he submitted, should be read as “CIN”. The vehicle was imported as damaged and this was disclosed on the CIN. He submitted the Loaches would not have purchased the vehicle if they had known it was imported as damaged, so it was their failure to read the CIN with its disclosure of “damage” and not any non-disclosure of the statutory write-off which led to the decision to purchase, and the resulting loss.

r Anderson submitted that Taco Co of Australia Inc & Anor v Taco Bell Pty Ltd 1982 is authority that conduct “cannot be characterised as misleading or deceptive or likely to be misleading or deceptive unless it contains or conveys a misrepresentation”.⁷ Here, he argued, there had been no misrepresentation by McBride to detract from the statement in the CIN that the vehicle was “imported as damaged”. The only obligation on McBride, he submitted, was to provide the CIN with this information, and it was reasonable to presume that it had been read. If there were any concerns about the reference to “imported as damaged”, it was incumbent on the purchaser to raise them. There was nothing in the circumstances of the transaction which gave rise to a reasonable expectation of disclosure of the fact the vehicle was a statutory write-off, so it was submitted.

n the District Court, His Honour Judge Phillips observed that the CIN is “an entirely different notice with different input from the reason for and supply of a

III

⁶ McBride Street Cars Limited v Loach [2017] NZDC 10758.

⁷ Taco Co of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177; ATPR 40-277.

SIN”.⁸ He considered that the reference to an SIN in the VOSA meant that the regulatory requirement on McBride to ensure acknowledgement of the CIN is signed by the purchaser had not been fulfilled. The Court found that:⁹

if the appellant... had carried out its statutory and regulatory requirements to have the CIN signed by the respondents then the information as to a damaged vehicle would have been clearly and directly in the eyes of Mr Loach as he was requested to acknowledge receipt of the CIN prior to the purchase of the vehicle.

he Court agreed with the Tribunal that getting the Loaches to sign the VOSA with a clause confirming they had seen the SIN rather than getting them to sign the CIN was a strategy to deflect attention away from the CIN.

urther, the Court found that describing the vehicle as merely imported “damaged” was itself misleading, deliberately obscuring the statutory write-off. Mr Cottle acknowledged in evidence that ‘damage’ can mean a number of different things. An informed purchase decision could only be made with knowledge that the vehicle had been written off.

ieber v Barfoot & Thompson is authority that silence of itself, or with other factors, can amount to misleading or deceptive conduct, depending on all the facts.¹⁰ The Judge affirmed the Tribunal’s reliance on Red Eagle and the statement that the position in New Zealand has moved away from the necessity for an explicit misrepresentation to “a reasonable expectation” test.

he Judge concluded that it was incumbent on McBride to disclose the fact the vehicle was a statutory write-off:

[77] In my view the argument in relation to the statement in the CIN as to the vehicle being “imported damaged”, even if this had been pointed to and the respondents had been made aware of it, only told a very small part of the overall relevant issues in respect of the vehicle. To the knowledge of the appellant it had been statutorily written-off in Australia. An experienced car trader, such as the appellant, would have been aware that was important information to a prospective purchaser. In terms of the New Zealand test of “reasonable expectation”, the circumstances that related to a well presented vehicle being sold at a price representative of motor vehicles of its age and

TTT

⁸ At [52].

⁹ At [54].

¹⁰ Hieber v Barfoot & Thompson Ltd (1996) 7 TCLR 301 (HC).

quality and no comment being made as to it having been subject to statutory write-off requirements in Australia, would be overall circumstances that the Tribunal would use to decide whether there should have been disclosure of the actual position. The Tribunal, as already stated, came to the decision that there was a duty to disclose and not to do so was a breach of s 9 of the FTA.

...

[82] When I have regard to the legal position as detailed by the Tribunal I consider that there was no error in any of its findings on matters of law. In its application of that law and the required test and applying the test to the facts that it had found and accepted the Tribunal was acting appropriately. I reject the appellant’s argument that it was not.

USTICIABILITY

lause 16 of the first schedule to the MVSA sets out the right of appeal from a decision of the Motor Vehicle Disputes Tribunal to the District Court. Subclause 6 states “to avoid doubt, nothing in this clause affects the right of any person to apply, in accordance with law, for judicial review”.

n Murphy v District Court at Auckland, Whata J discussed justiciability:¹¹

he High Court has inherent powers of judicial review to supervise public decisions and ensure that they are made according to law. The High Court is said to be a superior Court of general jurisdiction and is “therefore responsible for determining the jurisdiction and legality of the decisions and conduct of the inferior Courts and tribunals. This supervisory or judicial control is of constitutional importance in maintaining the proper observance of the law, and is not to be lightly shed.”¹²

udicial review is concerned with the processes of decision-making rather than the merits of the decision itself,¹³ and where there are reasonable grounds for the decision there is no authority to intervene.¹⁴ It is possible for a decision-maker to have a number of different decisions reasonably open to it, but there may (though rarely) be intervention in the case of a verified and material factual mistake on the face of the decision.

udicial review is not an opportunity for disgruntled litigants simply to reargue their case. In a case like the present, where a decision of an appellate Court is being reviewed, the justiciable issues will usually be narrowly confined.

JJJ

¹¹ Murphy v District Court at Auckland HC Auckland CIV-2010-404-2015, 6 May 2011.

¹² Auckland District Court v Attorney General [1993] 2 NZLR 129 (CA) at 133.

¹³ R v Sloan [1989] NZHC 406; [1990] 1 NZLR 474 (HC) at 479.

¹⁴ Progressive Enterprises v North Shore CC [2006] NZRMA 72, (2005) 11 ELRNZ 421 at [71].

cBride’s statement of claim reads:

he Reason the [District Court] dismissed the [appeal] was it determined that [McBride’s] conduct was misleading and/or deceptive and in breach of section 9 of the Fair Trading Act 1986 as [McBride] had a duty to disclose to the [Loaches] that the vehicle had been a statutory write-off in Australia.

he decision made by the [District Court] on the appeal is invalid as there was no legal basis upon which it could properly make that determination.

he sole ground of review is that the District Court erred in law in finding there was a duty on McBride to disclose the statutory write-off of the vehicle. This is clearly a justiciable issue – if the decision was made on an incorrect finding of law it is incumbent on this Court to rectify that. However, some of the points relied upon by McBride in support of its argument are essentially challenges to settled findings of fact, and it is not for this Court on judicial review to allow such re-litigation, nor to disturb the conclusions of the District Court on such facts. There may be exceptional circumstances where a clear mistake has been made which requires a remedy, but no such mistake is here asserted by either party.

he District Court’s factual findings will thus not be subject to scrutiny on review except on orthodox principles and they form the baseline for its decision:

he vehicle was well-presented with no indication of damage, and was being sold at a price representative of motor vehicles of its age and quality;¹⁵

he Loaches did not read, or at least did not absorb, the CIN until after the purchase of the vehicle;¹⁶

he CIN was not actually presented to the Loaches until after the sale;¹⁷

TTT

¹⁵ District Court at [77]; Tribunal at [56].

¹⁶ District Court at [59]; Tribunal at [58].

¹⁷ District Court at [76]; Tribunal at [55]-[58].

r Cottle deliberately tried to obscure the fact the vehicle was imported damaged by putting the acknowledgement of having read the “SIN” in a clause to the VOSA rather than requiring the Loaches to sign the CIN, where the information would have been more visible.¹⁸

he Cottles were actually misled by the omission of the information that the vehicle was a statutory write-off;¹⁹

he Loaches were not particularly sophisticated vehicle purchasers,²⁰ and Mr Cottle/McBride was an experienced vehicle trader.²¹

n particular, I draw attention to (d) above, which I consider a central issue on this review. Making this finding, the Tribunal said:

[38] Moreover, in my view, Mr Cottle’s method of getting Mr Loach to sign an acknowledgement on the VOSA rather that they had seen the “SIN”, rather than getting them to sign the acknowledgement on the CIN itself, was a deliberate strategy to deflect Mr and Mrs Loach’s attention away from the CIN, with the aim that they would not see or absorb the information on it.

s the District Court observed, this was a factual finding made after having “heard and seen the witnesses giving evidence”.²²

efore the Tribunal, Mr Cottle was asked whether he ever gets purchasers to sign the actual CIN notice rather than relying on the VOSA. He said no, and further that it is “not my responsibility to force someone to read the thing, if he chooses not to read it”. When it was suggested to him that provision for the purchaser’s signature on the CIN is there for the vendor’s protection, so there is clear evidence of the purchaser having read the document, he replied “well he’s got a copy of it and that’s all he has to have”. These comments and others convey a strong sense that Mr Cottle was satisfied to do the bare minimum required in terms of disclosure, and was prepared to benefit from any oversight of the purchaser. It was open to the Tribunal

BBB

¹⁸ District Court at [55]; Tribunal at [38].

¹⁹ District Court at [78]; Tribunal at [56].

²⁰ Tribunal at [57].

²¹ District Court at [77].

²² At [56].

to find a strategy in Mr Cottle’s conduct, misleading and deceptive in itself, in not making sure the CIN was signed in the acknowledgement of receipt, giving a false lead in the VOSA to the SIN which was not a document involved in the transaction at all.

Statutory/regulatory compliance

efore addressing the substantive question on review a further point must be addressed. Counsel Mr Pierce, for the Loaches, says the Court found as a “non-justiciable finding of fact that the applicant failed to carry out its statutory and regulatory duties in respect of disclosure”. Mr Anderson for McBride says the Tribunal “did not find a breach of statutory obligations but implicitly (if not explicitly) found compliance stating at [57] that a “more sophisticated purchaser may have noticed the disclosure that the vehicle was ‘imported as damaged’ on the CIN”. Mr Anderson says that as the Loaches “did not appeal this issue to the District Court” it was not open to the Court to find that the obligations had not been met and any comments by the Court to that effect are obiter dicta, and irrelevant to the issue on review.

do not accept the submission that the Tribunal implicitly found compliance with the regulatory regime. Simply noting the undisputed fact that the “imported as damaged” box was ticked on the CIN and that the Loaches were given the CIN cannot be read as a finding that there had been compliance. The regulations require more. Regardless, in accordance with r 18.19 of the District Court Rules, the appeal was by way of rehearing, and the Court was able to come to its own conclusion on any aspect of the case. It was immaterial whether the point was directly appealed or even raised by the Loaches’ counsel. On my reading of the District Court judgment, non-compliance with the regulatory regime was a material finding and one element of the Court’s overall conclusion that there had been misleading and deceptive conduct.

owever, I do not agree with Mr Pierce that this amounts to a “non-justiciable finding of fact”. The facts were not in issue – it was agreed that the Loaches signed only the VOSA and not the CIN, and that the acknowledgement

clause in the VOSA referred to an SIN rather than a CIN. There is a question of law as to whether that amounted to compliance although there is an associated factual element as to the conduct of McBride in provision of the CIN which is non- justiciable on review, and the first of two questions addressed in this judgment. As such this is an issue amenable to review, and I set out the reasons I agree with the District Court that McBride failed to comply with the regulations in the provision of the CIN.

ections 14-16 of the MVSA provide that a notice, containing the particulars prescribed under the regulations, must be displayed in a prominent place on the vehicle, and that a “written acknowledgment” from the buyer that they have received a copy of the notice must be obtained “immediately before the sale”. Section 17 provides that “nothing in section 16 prevents the acknowledgement being contained in the contract for sale”. Clause 7 of the regulations specifies the CIN as the required notice. Schedule 1 of the regulations specifies that “both the motor vehicle trader and a buyer of the motor vehicle must sign and date the [CIN] in order to provide written acknowledgement that the buyer has received a copy”.

accept that the signed acknowledgement may be in the VOSA rather than on the CIN itself. The written acknowledgement mentioned in ss 16 and 17 MVSA is not separate from that in the schedule to the regulations. Only one acknowledgement is needed, not two. I accept Mr Anderson’s submission, which was not in dispute before the District Court, that preference must be given to the primary legislation, so s 17 is engaged to achieve compliance with the regulations.

he requirement on the vendor therefore is twofold. The correct notice must be displayed prominently on the vehicle. Then, before sale, the same notice must be given to the purchaser, whose signed acknowledgement must be obtained. Both steps are equally important, aimed at ensuring the information on the CIN is made known to the purchasers prior to sale. I do not accept Mr Anderson’s submission that the ‘disclosure requirements’ are met when the right information is on the CIN on the vehicle, and that the signed acknowledgement is a separate matter. The signed acknowledgement is to ensure disclosure. “Disclosure” requires the information

being put before the purchasers, and the proof of this is the signed acknowledgement.

cBride correctly displayed the CIN. However, I agree with Judge Phillips that the reference to the ‘SIN’ in the VOSA was an error material enough that signing the VOSA could not constitute an acknowledgement under s 16 MSVA and schedule 1 of the Regulations. The error may have been mitigated if Mr Cottle had drawn attention to the CIN when explaining the clause in the VOSA, but he did not. There is no reason why the Loaches would have drawn the inference that ‘SIN’ in the VOSA referred to the CIN form that had been displayed on the vehicle. The fact that an SIN is another document, with different information and for a different purpose further adds to the confusion.

hat is more, the Loaches’ evidence was accepted that the form was not given to them by Mr Cottle until after the sale. This means that at the time of signing the VOSA, Mr Cottle was asking the Loaches to sign an acknowledgement that he had given them information which he had not. He could not rely on that in such circumstances.

hile in itself not determinative, the finding that McBride did not comply with its regulatory disclosure requirements is another aspect of the context within which the Court came to the view that there had been misleading or deceptive conduct.

RROR OF LAW

r Anderson submits that although the Court held there was “a duty to disclose that the vehicle was imported as a statutory write-off” no such duty exists, and that the obligation on McBride was to disclose that it was imported as damaged, which it did. He says the Court did not explain why it was misleading not to do so. Further, there was no conduct of McBride which misrepresented, or was inconsistent with, the true state of affairs, that the vehicle was imported as damaged.

his is a direct assertion that there was sufficient provision of the CIN, and its reference to “imported as damaged” was all it needed to say. Thus, McBride could keep to itself what it knew about the statutory write-off unless asked whether it had been damaged.

e refers to the Court of Appeal in Overton Holdings Ltd v APN New Zealand as authority that in the absence of a specific representation, there must be an implicit representation that makes the failure to disclose the further information misleading.²³ He says the Court there endorsed the statement of (then) Elias J, that “The Fair Trading Act is not designed to provide a guarantee to purchasers who fail to look after their own interests in a manner that is reasonable in the circumstances”.²⁴ He says, that the Loaches failed to do that by not reading the CIN, so they brought their misfortune on themselves.

e says that all of the cases of misleading conduct arising from silence involve representations which affected the aggrieved person’s perceptions so that failure to provide the extra knowledge was misleading. In Hieber v Barfoot & Thompson,²⁵ the vendor said a property had “magnificent sea and city views”. While true, the vendor failed to add that he also knew those views were likely to be short lived because of building plans for a neighbouring property. That silence was held to amount to be misleading and deceptive. Mr Pierce says that the situation here was similar. The sale involved a representation associated with the ordinary risks of purchasing a used vehicle, when the risks were far higher, and known to McBride.

Misleading and deceptive conduct

ection 9 Fair Trading Act states:

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.

SSS

²³ Overton Holdings Ltd v APN New Zealand Ltd [2015] NZCA 526, (2015) 17 NZCPR 251.

²⁴ Des Forges v Wright [1996] 2 NZLR 758 (HC).

²⁵ Hieber v Barfoot & Thompson Ltd, above n 10.

s Thomas J put it, s 9 uses “plain language and its meaning and intent are clear enough without refining or adding to its terms”.²⁶ The Courts have been reluctant to be more specific, instead preferring a broad fact-based enquiry. That is particularly apposite in the case of misleading or deceptive conduct by silence. Mr Pierce referred to Guthrie v Taylor Parris Group Cossey Ltd. Priestley J said:²⁷

... it would be wrong to approach the issue of whether an alleged failure to disclose information constitutes misleading or deceptive conduct in a mechanical or formulaic way. Whether or not an omission to disclose information crosses the boundary into misleading and deceptive conduct must ultimately depend on the circumstances of each particular situation.

evertheless, the section must be read in light of the purpose of the legislation as stated in s 1A:

1A Purpose

he purpose of this Act is to contribute to a trading environment in which—

he interests of consumers are protected; and

usinesses compete effectively; and

onsumers and businesses participate confidently.

he FTA is intended to strike a balance between the protection of consumers on the one hand, and the facilitation of business on the other. As explained by Elias J, facilitating business does not mean that the Act is to protect consumers who conduct business foolishly or carelessly.²⁸ Nevertheless, the FTA has tempered the common law doctrine of caveat emptor, and is symptomatic of a move towards greater protection of consumer rights.

o issue was taken with the District Court’s reliance on Red Eagle, binding on this Court. Its statement of the test is straightforward:²⁹

whether a reasonable person... with the characteristics known to the defendant or of which the defendant ought to have been aware — would likely have been misled or deceived.

NNN

²⁶ Paper Plus NZ Ltd v Robert Mitchell Ltd^TTT HC Auckland CL53/92, 10 March 1993.

²⁷ Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 (HC), at [32].

²⁸ Des Forges v Wright, above n 23.

²⁹ Red Eagle Corporation v Ellis, above n 4, at [28].

ilence can constitute misleading or deceptive conduct and that is now well accepted.³⁰ Mr Pierce referred to Overton Holdings Ltd, for the proposition that there must be an ‘implicit representation’ in order for silence to give rise to a breach, but that case concerned an alleged breach of s 14 of the FTA, which prohibits false representations and other misleading conduct in relation to land. While related, it refers explicitly to a misrepresentation, whereas s 9 is more broadly couched.

nsofar as Mr Pierce means by ‘implicit representation’ that there must be some sort of tacit assumption or default understanding derived from silence then I agree. The circumstances must be such that it is likely that a reasonable person in the purchaser’s shoes would be confirmed in their misapprehension by the vendor’s silence. Put another way if something is known by the vendor to be of consequence to the purchaser, the purchaser reasonably expects to be told.

part from these points no challenge has been made to the statement of the law by the Tribunal, confirmed by the District Court. Its lucid distillation of the application of Red Eagle and Guthrie was correct in law, and on the facts.

r Anderson frames the issue as whether there is a duty when selling a car subject to statutory write-off to disclose that aspect of the vehicle’s history. However, in all cases the particular circumstances must frame the answer whether s

9 FTA has been breached. Gummow J said of a corresponding provision in Australia:³¹

In my view to inquire ... whether an independent ‘duty to disclose’ has arisen is to digress from the application of the terms of [the legislation] ... [T]he question is whether in the light of all the circumstances constituted by acts, submissions or statements or silence, there has been conduct which is or is likely to be misleading or deceptive.

imilarly, Samuels JA said:³²

[S]ilence is not misleading only where there is a duty to disclose at common law or in equity. It may simply be the element in all the circumstances of a case which renders the conduct in question misleading or deceptive, whether or not it also constitutes breach of some other precept of law or equity.

SSS

³⁰ See for example Phyllis Gale v Ellicott (1997) 8 TCLR 57,65.

³¹ Demagogue Pty Limited v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at [40].

³² Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at [88].

he question before the District Court was whether in the particular circumstances there was misleading or deceptive conduct by McBride. The Court did not, in its judgment, declare a duty of general application. It made the more modest pronouncement that in the circumstances Mr Cottle’s silence regarding the vehicle’s statutory write-off history was in breach of s 9.

ubmissions on this judicial review centre on the non-disclosure of the write- off. That was the basis on which the Tribunal found in favour of the Loaches. However, on my reading of its judgment, the District Court went a step further and found there was a breach of s 9 in McBride’s failure to specifically bring the ‘imported as damaged’ information to the Loaches’ attention. The Court then went on to say that in the circumstances of McBride’s disclose only that the vehicle had been ‘imported as damaged’ that would itself be misleading.

hether the Court erred in finding a breach of s 9, then, will be addressed in the following questions.

Question (a): Was it open to the Court to find McBride breached s 9 by not bringing the ‘imported as damaged’ status of the car to the Loaches’ attention?

am satisfied that it was open to the District Court Judge to uphold the finding of breach on this ground. McBride failed to fulfil its regulatory obligations of disclosure. Those regulatory obligations are not merely administrative in nature, but are there to ensure that consumers are well informed when entering into agreements to purchase used vehicles. The fact that the Regulations place a positive obligation on the vendor to disclose the damaged status of the vehicle strongly suggests that it is the kind of information purchasers think will be brought to their attention if relevant. In terms of the ‘reasonable expectation of disclosure’ test purchasers can reasonably expect, as an absolute minimum, that vendors will properly disclose information which they are required to at law.

ere the Court found that not only had McBride failed to appropriately provide and obtain an acknowledgement from the purchasers of their receipt of the CIN, but it deliberately obfuscated the damaged status of the vehicle by diverting

attention away from that document. The Tribunal found it had not been read by the Loaches and the VOSA reference to the SIN was not just wrong, as there was no SIN, but it was diversionary, leading away from the CIN. The submission that the Loaches were at fault for not reading the CIN is unpersuasive given such a finding: McBride stacked the deck against the Loaches finding out important information which it had a regulatory obligation to disclose.

he question then is whether a reasonable person, with the characteristics of the Loaches known to McBride, or of which McBride ought to have been aware, would likely have been misled or deceived. McBride could not have assumed that the Loaches were experienced purchasers. It also knew or ought to have known that the Loaches had not read or at least absorbed the CIN, not least because McBride itself diverted attention away from it. It knew that the vehicle did not present with any signs of having been significantly damaged. There were no obvious signs of damage, no warning bells.

n my view it was reasonable for the Loaches, given the way the vehicle presented and the price for which it was being sold, to assume that without evidence to the contrary the vehicle had not been imported as damaged. McBride’s silence, and its obfuscation of the disclosure on the CIN, in the context of a regulatory regime that required that it be brought to the Loaches’ attention, had the effect of misleading the Loaches into thinking the vehicle had not been imported as damaged. There was nothing sufficient in the actions of McBride to tell them otherwise. Thus, in this respect McBride’s conduct was misleading and deceptive.

Question (b): Was it open to the Court to find that disclosing the vehicle had been “imported as damaged”, and not the extent of that damage, was a breach of s 9 in all the circumstances?

his question assumes the Loaches knew the Amarok was imported as damaged. It invokes an important issue of principle, but the answer turns on its application to the particular facts.

Imported as damaged’, as Mr Cottle acknowledged, may mean a wide range of things. A vehicle statutorily written-off because of significant water damage suggests it is at the higher end of the scale of ‘damage’. Damage may be very minor, or require substantial rebuild or repair. Purchasing a seriously damaged vehicle is risky, and few fully informed people would be willing to do so on terms, and at a price, set without such background being taken into account.

ome levels or kinds of damage may be such that it is enough for a vendor to say that a vehicle was ‘imported as damaged’. At that point the doctrine of caveat emptor comes into play and it is for the purchaser to inquire further. But along the spectrum of damage, at a certain point to merely say that it was imported as damaged becomes such an understatement of the true state of affairs as to become misleading. Then it becomes incumbent on the vendor to provide the purchaser with a realistic idea of the history of the vehicle. In my view, a vehicle that had been damaged by water to the point where it can no longer be re-registered in an Australian state is such a state of affairs. An accurate description of what is known by the vendor must be provided so the purchaser may follow it up or not as it chooses.

he core facts must be borne in mind in any discussion about misleading or deceptive conduct. In this case, the core facts are that a well-presented Amarok was offered for sale without apparent defect, or its accurate history. The Loaches at no stage were aware that the vehicle had been damaged, let alone that it had been subject to statutory write-off. The vendor McBride knew the vehicle had been imported damaged, subject to statutory write-off, with some indication why.

here are essentially two approaches in deciding whether McBride keeping such information close to its chest (as it did) constituted a breach of s 9. The first is that disclosure of the vehicle as imported “damaged”, put the purchaser on sufficient notice so that it was up to it to make enquiries, to whatever extent it wished, as Mr Anderson submits. The purchaser was entitled to honest and complete answers to any questions put to the vendor. A vendor may know nothing more than that the vehicle had been damaged, so could say no more.

he second approach is that such disclosure may not constitute sufficient notice, and in some circumstances that the vendor has an obligation to give the purchaser a truthful account of the history of the vehicle regardless of whether it asks questions. The issue in this case crystallises in the circumstances that McBride did know more about the Amarok. Mr Cottle either made accurate and sufficient disclosure of the vehicle being damaged, as Mr Anderson puts it, or that was incomplete and therefore a misleading disclosure of damage. The answer must be based on a principle which can apply across different factual settings.

n searching for such a principle, the myriad factual circumstances must be recognised. If the vendor is aware that the vehicle for example had suffered minor damage to a door in a supermarket carpark then unless asked about any damage it would not in my view be bound to offer information. If on the other hand the vendor was aware that the vehicle had been in a major nose-to-tail collision, involving multiple vehicles, so that it suffered severe damage by ricochet impacts, then that it is the sort of information a purchaser would like, indeed need, to know, and the principle which emerges for application whether there is reasonable expectation of that information being provided.

n my judgment, there will be a reasonable expectation of disclosure in respect of material, but not immaterial information. I recognise a challenge to such a test is that in some cases it may be entirely obvious, as there is either very severe damage known to the vendor, or damage that is minimal and of little consequence, and in many other cases it will be somewhere in between. The answer to this challenge is that the vendor should simply disclose all it knows, and then it is up to the purchaser, armed with this information, to be on guard, perhaps to abandon the purchase, or to make enquiries, including having the vehicle further tested and priced. The rationale for this principle is that the purchaser can make an informed judgement having regard to the price sought, and the wisdom of the purchase, of that vehicle with its particular characteristics.

r Anderson refutes the sufficiency or materiality test and says that disclosure that the vehicle was imported damaged was accurate and that is an end to it, unless or until the prospective purchaser asks for further information at which

time disclosure must be comprehensive and accurate. If Mr Anderson is right then disclosure of ‘damage’, but not what the damage is known to be, is always enough, and not unfair as misleading or deceptive, because the purchaser is free to push on or not with the possible purchase, making further enquiries or choosing not to.

n my view, this is an instance where any reasonable person would have recognised that disclosure of the vehicle having been damaged was simply not enough, given what was known about it. McBride’s stance is to assume a degree of understanding and appreciation on the part of a prospective purchaser, to pick up the cue given by reference to ‘damage’ and pursue an enquiry for more information. I have reached the view that the answer cannot simply rest on the comprehension, experience, and sophistication of a prospective purchaser alert to risk, but it must be of more general application. Nevertheless, there will be cases where the lack of such comprehension may require a greater level of disclosure, more carefully explained.

n this case I consider the information known to McBride was such that it had to be disclosed. Simple disclosure of the vehicle being damaged leaves too much to chance. This is consumer driven legislation, and it is but a small thing to ask of a vendor in these circumstances to advise the prospective purchaser of what it knows, where it is obviously, as here, likely to be of consequence to the purchaser and thus material. The test I have articulated is not complex nor is it onerous on vendors. It merely requires them to be open, to act in good faith, in respect of the information to which they are privy. I conclude that the failure to disclose the statutory write-off was misleading and deceptive. Reference to “imported as damaged” was so open-ended, that while it comprehended any damage, and thus not false, it did not even hint at the vehicle’s history which was clearly material to the Loaches, and McBride would have known that. I thus do not regard this conclusion as onerous to McBride. It simply had to advise what it knew. It was clearly consequential, and material to the purchaser. If what it knew is minor, inconsequential, then it falls outside the catchment of required disclosure.

ONCLUSION

hile Mr Anderson mounted a determined and principled challenge on review, the District Court did not err in law in finding McBride in breach of s 9 FTA, as it failed to sufficiently disclose the fact the Amarok was damaged, and it failed to disclose the statutory write-off.

he judicial review is dismissed.

osts are reserved. Counsel may file contemporaneous memoranda and replies and I will convene a telephone conference if required, or if I wish to hear further submissions.

...........................................

Nicholas Davidson J

Solicitors:

Craig Paddon Lawyer, Dunedin Gallaway Cook Allan, Dunedin Copy to counsel:

L A Andersen, Barrister, Dunedin
CTWCIIMIITTTS‘TITHIWSTMAIScbtTNAHHTMEWWMTISHIBAITTMTTTTTTMJTICJHFTMOATIACTTTMBMT“OTTTFTMTAI