Reference No. MVD 45/08 (AK) [2008] NZMVDT 41 (27 March 2008)

Last Updated: 22 April 2008

Decision No. AK 36 /2008

Reference No. MVD 45/08

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN XXXX

Purchaser

AND YYYY

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr J W Farnsworth, Assessor

HEARING at AUCKLAND on 25 March 2008

APPEARANCES

Miss B Y XXXX, the purchaser

Mr K AAAA, support person for the purchaser
Mr J BBBB, Branch Manager, for the trader

DECISION

Introduction

[1] On 24 September 2005 Miss XXXX (“the purchaser”) agreed to purchase a 2001 Audi A4 registration number RRRR (“the vehicle”) from YYYY (“the trader”) for $33,000. The vehicle’s odometer reading was 43,443 kilometres at the date of sale according to the Supplier Information Notice and the Vehicle Offer and Sale Agreement signed by the parties. The purchaser claims that the vehicle’s odometer had been wound back or “clocked” in breach of the provisions of the Fair Trading Act 1986. The purchaser wishes to reject the vehicle and obtain a full refund of her purchase price. The trader acknowledges that the odometer reading was not genuine at the time of sale but claims that after 2 years and 5 months use over some 50,674 kilometres the fair an appropriate remedy would be a payment of between $2,000 and $3,000 compensation to the purchaser.

[2] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr J W Farnsworth, as expert assessor to assist in the determination of the complaint. Prior to the hearing Mr Farnsworth took the oath required by clause 10(2) of Schedule 1 to that Act.

The Facts

[3] Within about a month of purchasing the vehicle the purchaser experienced problems with it’s engine running rough and being hard to start. She returned the vehicle to the trader who replaced the spark plugs. In July 2006, after the vehicle had travelled 19,078 kilometres, the purchaser had further problems with the engine misfiring and being difficult to start. She again returned the vehicle to the trader who sent it to CCCC on 25 July 2006 who replaced one of the four ignition coil packs on the vehicle, and the air flow meter which had broken. The trader persuaded the purchaser to pay $75.38 being the labour costs and the trader paid $73.13 for the ignition coil pack and the cost of the air flow meter.

[4] The purchaser claims that she had sent the vehicle to be serviced by the GGGG during each of 2006 and 2007 although she did not have any record of having done so. The GGGG charged her, she thought, about $300 to $400 in 2006 for a service and $200 in 2007. Apart from the cost of replacing the other three ignition coils in June 2007 of $371.36 and an intake hose at $148.88 in December 2007 she has not spent any other money on servicing the vehicle.

[5] About six months after purchasing the vehicle the purchaser says she found the vehicle’s service record in the vehicle and, on reading it, she discovered that the vehicle’s last service in Singapore had occurred on 14 January 2005 when the odometer was 57,876 kilometres. She says she realised that this meant that the odometer reading on 24 September 2005 (the date of purchase) of 43,443 kilometres, some 8 months after the last service date in Singapore had to be incorrect. The purchaser says she did not realise that under New Zealand law she could have recourse against the trader until some friends told her so.

[6] In January 2008 the purchaser contacted the trader and told it of her findings but, despite promises to investigate her claim, the trader appears to have done nothing. On 28 February 2008 when she had not received any response from the trader she lodged a claim with the MVDT and the following day arranged for DDDD (“DDDD”) to carry out a forensic inspection of the vehicle’s odometer. The purchaser produces a copy of the DDDD “failed vehicle report” (Exhibit 5) dated 29 February 2008 which records that the odometer had been tampered with and contains photographs of the tampered re-soldered circuit board chips indicating that the odometer had been electronically accessed.

[7] The trader’s representative Mr BBBB says that he telephoned the Audi dealer in Singapore who serviced the vehicle and was able to confirm that the last service had been done at 57,876 kilometres on 14 January 2005 and thus the trader acknowledges that the odometer had been tampered with.

[8] The trader produced copies of advertisements on EEEE for four 2002 Audi A4 vehicles currently for sale details of which are as follows:
Kilometres Asking Price
55,268 $26,995
62,693 $24,990
57,000 $22,990
74,772 $21,999
Mr BBBB says that based on the difference in price between the most expensive and the cheapest car of $11,000 at today’s prices, and that allowing for the fact that the vehicle is now 7 years old a fair sum to represent the difference in value between the vehicle sold and that represented would be $2000 to $3000 which amount he has offered the purchaser as compensation.

Legal Principles

[9] In terms of s.89 of the Motor Vehicle Sales Act 2003 the Tribunal has jurisdiction to inquire into and determine applications or claims between a Motor Vehicle Trader and the purchaser of a motor vehicle. In doing so, it may apply the provisions of the Sale of Goods Act 1908, the Fair Trading Act 1986 or the Consumer Guarantees Act 1993, as applicable to the circumstances of the case. In this case the purchaser claims that the trader has breached the provisions of the Fair Trading Act.

The Fair Trading Act
[10] Section 9 of the Fair Trading Act 1986 reads:

“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] Section 13(a) of the Fair Trading Act 1986 reads:

“13 False or misleading representations
No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,--
(a) make a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use; or..”

[12] The authorities note that an intention to mislead need not be proved, a useful test for determining whether conduct falls within the section being that adopted by Tipping J in the Court of Appeal in AMP Finance Ltd v Heaven (1997) 8 TCLR 144; (1988) 6 NZBLC 102, 414 (Court of Appeal) when he said that it was necessary to ask:

[a] Whether the conduct was capable of being misleading;
[b] Whether the people concerned were in fact misled by the relevant conduct; and
[c] Whether it was in all the circumstances, reasonable for them to have been misled.

Was the trader’s conduct capable of being misleading?

[13] The Tribunal has no hesitation in finding that the trader’s conduct in representing a vehicle as having only travelled 43,443 kilometres when in fact it had travelled a great deal more than that, was misleading.

Was the purchaser in fact misled?

[14] The Tribunal is satisfied that the purchaser was misled into believing that the vehicle she was purchasing had only travelled 43,443 kilometres at the date she purchased it. She said in response to a question from the trader that “of course” the distance the vehicle had travelled was important to her in deciding to buy the vehicle and in her decision to pay $33,000 for it.

Whether in all the circumstances it was reasonable for the purchaser to have been misled?

[15] The Tribunal considers that a reasonable person in the position of the purchaser, dealing with the trader, would very likely be misled into believing that the correct odometer reading of the vehicle was 43,443 kilometres at the date of purchase. The purchaser had no reason whatsoever to doubt the accuracy of the vehicle’s odometer at the date of purchase.

[16] The Tribunal is therefore satisfied that the trader breached section 9 and 13(a) of the Fair Trading Act by misleading and deceiving the purchaser into believing that she was buying a vehicle which had only travelled 43,443 kilometres when in fact it had travelled considerably more than that distance.

Remedies for breach of Fair Trading Act

[17] The Tribunal has jurisdiction to make orders pursuant to section 43(2) of the Fair Trading Act 1986. Section 43(2) provides:

“(2) For the purposes of subsection (1), the Court may make the following orders-

(a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct referred to in subsection (1) or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date, before the date on which the order is made, as is specified in the order”
(b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date, before the date on which the order is made, as is so specified:
(c) an order directing the person who engaged in the conduct, referred to in subsection (1) to refund money or return property to the person who suffered the loss or damage:
(d) an order directing the person who engaged in the conduct, referred to in subsection (1) to pay to the person who suffered the loss or damage the amount of the loss or damage:
(e) an order directing the person who engaged in the conduct, referred to in subsection (1) at that person’s own expense to repair, or to provide parts for, goods that had been supplied by the person who engaged in the conduct to the person who suffered, or is likely to suffer, the loss or damage:
(f) an order directing the person who engaged in the conduct, referred to in subsection (1) at that person’s own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage.”

[18] In this case the Tribunal considers that the appropriate remedy is to make an order under section 43(2) (d) of the Fair Trading Act 1986 that the trader is to pay to the purchaser the amount of the loss or damage suffered. The Tribunal thinks it would be harsh and unreasonable to require the trader to take the vehicle back and refund the purchaser her full purchase price after she has used the vehicle for 2 years and 7 months and travelled some 50,674 kilometres in it.

What loss has the purchaser suffered?

[19] The Tribunal has, by analysing the service record of the vehicle calculated that the previous owner(s) of the vehicle used it to travel an average of 1616 kilometres each month. The Tribunal does not know when the vehicle was shipped from Singapore to Auckland but the trader said in response to questions from the Tribunal that he believed the vehicle went through compliance checking on entry into New Zealand and was sold soon after it arrived in New Zealand and, on the basis that it was sold to the purchaser on 24 September 2005, the Tribunal estimates it probably left Singapore sometime in August 2005. On the further assumption that the vehicle was driven by its previous owner from 14 January 2005 until mid August 2005; a period of 7 months the Tribunal estimates that the vehicle had probably travelled a further (1616 X 7) 11,312 kilometres or a total of 69,188 kilometres at the date of sale being the recorded odometer of 57,876 kilometres as at 14 January 2005 plus a further 11,312 kilometres in the seven months the vehicle was used before being shipped to New Zealand.

[20] The comparative sales information submitted by the trader for 2002 model Audis, (not 2001 models which is what the vehicle is) - upon which the Tribunal has placed some reliance in the absence of any other reliable information shows that the difference in value between the asking price for the vehicle with the highest odometer of $21,999 for 74,772 kilometres and that for the lowest odometer vehicle of $26,995 for 55,268 kilometres represents a difference of $5000 for a 19,504 kilometres difference in distance travelled equivalent to 25.64 cents per kilometre. If, as the Tribunal considers, the vehicle had travelled 69,188 kilometres before it’s odometer was wound back the distance the vehicle was wound back was (69,188 - 43,443) or 25,745 kilometres, and applying the figure of 25.64 cents per kilometre to this distance the indicated difference in value would be $6,600. This, in the Tribunal’s view is the sum which fairly represents the difference in value between a 2001 Audi which had travelled 69,188 and one which had travelled 43,443 kilometres and is the amount which the Tribunal will order the trader to pay the purchaser as damages. The purchaser also incurred a charge of $129.99 for the DDDD report which sum shall be reimbursed by the trader.

Order

The trader shall within seven (7) days of the date of this order pay to the purchaser the sum of $6,729.99 by Bank Cheque

DATED at Auckland this 27th day of March 2008

C.H.Cornwell
Adjudicator

DIRECTION TO THE CHIEF EXECUTIVE, MINISTRY OF JUSTICE.

Section 94 of the Motor Vehicle Sales Act 2003 provides that if an application is made to this Tribunal which falls within its jurisdiction and that in determining the application the Tribunal decides against a motor vehicle trader, the Tribunal must direct the Chief Executive of the Department for Courts (now Ministry of Justice) to publish a notice in the Gazette containing the particulars set out in subsection (2). The notice is only to be published once the circumstances described in subsection (3) have occurred. The Chief Executive is directed accordingly.