Kumar v Drive N Save Cars Limted - Reference No. MVD 137/11 (Auckland) [2011] NZMVDT 107 (1 August 2011)

Last Updated: 18 September 2011

Decision No. AK 88 /2011

Reference No. MVD 137/11

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN SANJEET KUMAR

Purchaser

AND DRIVE N SAVE CARS LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S Gregory, Assessor

HEARING at AUCKLAND on 26 July 2011

APPEARANCES

Mr S Kumar, the purchaser,

Mr B A Kennet, Director representing the trader
Miss S S Dowson, witness for the trader
Mr M Yorston , IMVIA, witness for the trader

DECISION

Background

[1] On 30 January 2010 Mr Kumar (“the purchaser”) purchased a 2001 Toyota Ipsum (“the vehicle”) for $11,995 from Drive N Save Cars Limited (“the trader”). The vehicle’s odometer reading was 93,459kms at the time of sale. The Consumer Information Notice (“CIN”) displayed with the vehicle and provided to the purchaser showed the vehicle, a Japanese import, was not imported as a damaged vehicle. The purchaser subsequently discovered that the vehicle had been flagged as imported as a damaged vehicle. He says he would not have purchased the vehicle had he known it was flagged as damaged at the time he bought it and he claims to recover unspecified damages from the trader.
[2] The trader says that it admits that the vehicle was incorrectly described on the CIN as undamaged when, at the time of sale it had been flagged as damaged. However it says that the damaged flagging has since been revoked by the NZ Transport Agency (“NZTA”) and that NZTA removed the flagging as soon as they became aware of their error and the purchaser has suffered no loss as a consequence of the incorrect description of the vehicle on the CIN by the trader.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr S Gregory as expert assessor to assist in the determination of the complaint. Mr Gregory took the oath required by (2) of Schedule 1 to that Act. As an assessor Mr Gregory assisted the adjudicator but the application was determined by the adjudicator alone.

Facts

[4] The purchaser lives in Wellington. On 30 January 2010 he purchased the vehicle from the trader in Auckland for $11,995 with a collateral loan from BMW Financial Services New Zealand Limited (“the collateral loan”). The vehicle had been imported from Japan. The CIN displayed on the vehicle, a copy of which was signed by the parties and supplied to the purchaser at the time of sale, was in the form of Schedule 1 to the Consumer Information Standards (Used Motor Vehicles) Regulations 2008 (“the regulations”) which requires certain information to be provided by suppliers of imported vehicles. That information consists of the year the vehicle was first registered overseas, the country where the vehicle was last registered, and whether the vehicle was imported as a damaged vehicle or not.

[5] The text which must appear on the reverse side of the CIN is also prescribed by Schedule 1 of the regulations. It contains, according to its heading, certain “Important Information” for consumers. One of the items of information which must appear on the reverse side of a CIN according to the regulations is an explanation of what is a damaged vehicle. The following wording appears on the reverse side of the CIN:
“Imported as damaged vehicle
Land Transport New Zealand records whether or not imported used vehicles had any obvious structural damage or deterioration that was identified at the time of importation. However, the extent of the damage is not recorded. Any damage that may have occurred in New Zealand is also not recorded. You may wish to have a vehicle checked by a person with mechanical knowledge before you buy.”

[6] The Tribunal were informed by the trader’s witnesses that in October 2009 when the vehicle entered New Zealand it was flagged as damaged under a system by which the MAF acting as the agent for NZTA, made a visual inspection to check whether a vehicle imported into New Zealand was damaged at the time of entry. The reason the vehicle was flagged as damaged was because it had surface rust on its chassis.

[7] The vehicle was sent by the trader to Autoblast Ltd on 21 October 2009 who, at the trader’s expense sandblasted the chassis, painted it with a black epoxy primer and applied cavity wax using a cavity protection system. Those repairs cost $400 plus GST and they appear to have been done under the supervision of an engineer because an additional charge of $337.50 plus GST was made for an engineer’s report and repair certification. The total cost of repairing the vehicle was therefore $829.69.

[8] The vehicle was then supplied to the purchaser on 30 January 2010 without the repairer or the trader applying for the damaged vehicle flagging to be lifted by NZTA.

[9] The purchaser says that in January 2011 he decided to advertise the vehicle for sale for $12,000 after having fitted some extras to the vehicle since purchasing it. He says that a potential purchaser of the vehicle informed him that the vehicle was flagged as a damaged vehicle and that they would not be proceeding with the purchase. The purchaser says that in mid February 2011 he obtained a copy of the VIR report on the vehicle dated 13 January 2011 from the potential purchaser and says that he telephoned the trader to discuss the matter on 7 March 2011.

[10] The trader disputes that the purchaser informed it on 7 March that the vehicle was flagged as a damaged vehicle and says that the purchaser’s telephone call on 7 March was to enquire as to whether he would have to pay an early termination fee if he repaid the collateral finance agreement early. The trader says the purchaser did not raise the issue of the vehicle being damaged until the purchaser telephoned the trader on 30 April 2011. The trader, promised to investigate the matter and telephone the purchaser back the same day which it says it did. According to evidence given by the trader’s Administration Officer Miss Dowson she immediately contacted its compliance centre who advised that the vehicle had been flagged when it came in to the country and the engineer had suggested the flagging be removed as the NZTA criteria for removing damage flags on vehicles with minor surface rust had changed and there was a process for removal which had not been taken. Miss Dowson says that the damaged flag was removed by NZTA on or about 16 May 2011. A VIR Report on the vehicle dated 29 June 2011 produced to the Tribunal shows there is no longer a damaged flag on the vehicle.

[11] The Tribunal has also received and considered a copy of a letter dated 2 June 2011 from the National Manager Vehicles of the NZTA to the purchaser settling out what happened when the vehicle was imported and why the damaged flagging had been removed.

[12] The purchaser was unable to tell the Tribunal what loss he claimed to have suffered. He says he does not know what sum the purchaser who expressed interest in the vehicle in January 2011 would have paid for the vehicle. The purchaser provided a letter he had obtained from Car Valuations NZ Ltd dated 22 June 2011 in which the writer of the letter, Mr Hatch, expresses the opinion, that the value of the vehicle if there was evidence of detectable repairs would be $6,000 and if there were no obvious repairs detected would be $7,200. Mr Hatch’s letter also states that the stigma of the information that the vehicle was imported as damaged would show on “Land Safety Records” and will remain for the life of the vehicle. Mr Yorston of the IMVIA gave evidence challenging the accuracy of that statement and said that neither a member of the public nor a trader would be able to find out that the vehicle had been flagged as damaged; that information would only be discoverable by senior staff at NZTA.

[13] The Car Valuations NZ Ltd letter contained a reference to what Mr Hatch says was a case history of a similar matter; a decision of the Disputes Tribunal in CIV-2010-094-000354 in Auckland dated 15 July 2010. The Tribunal having read that decision notes that in that case the Referee made an order of damages under both the Fair Trading Act and the Consumer Guarantees Act in respect of a vehicle which was represented as being “as new”, and supplied with the remained of its factory warranty which had been sold for $24,500 to a purchaser who subsequently discovered the vehicle was neither “as new” nor had the benefit of a factory warranty but had been so badly damaged it had been bought at auction by one of the parties for $2,405 and been repaired by another company. The Tribunal does not consider that the matters at issue between the parties in that case are similar to the matters at issue in this case. In this case the minor damage to the vehicle was professionally repaired and certified as repaired for a total of $829.69 before the vehicle was supplied to the purchaser and the Tribunal is merely concerned with the representation made by the trader at the time of sale that the vehicle was not imported as a damaged vehicle which was not an issue in the other case.

The issues before the Tribunal

[14] Having considered the facts, the Tribunal concludes that the following issues require consideration:

[a] Whether the trader misrepresented the vehicle to the purchaser?
[b] If so what remedy is appropriate?
[c] Whether the vehicle complied with the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993?
[d] If not, is the purchasers entitled to damages under that Act?

Legal Principles

[15] 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 application both the Fair Trading Act and the Consumer Guarantees Act may be applicable.

Issue [a]: Whether the trader misrepresented the vehicle to the purchaser?

[16] The Fair Trading Act 1986 s 9 reads as follows:

“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.”

[17] The essence of the purchaser’s claim is that the trader misled the purchaser into purchasing the vehicle by representing on the CIN that the vehicle was not imported as damaged when in fact the vehicle had been flagged as damaged by NZTA when it was imported into New Zealand.

[18] The authorities note that an intention to mislead need not be proved, Taylor Bros Limited v Taylors Textile Services Auckland Limited (1987) 2 TCLR 415, at 447. and 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.

[19] The words “mislead” and “deceive” are not defined in the Fair Trading Act however the Concise Oxford Dictionary defines “mislead” as “cause (a person) to go wrong, in conduct, belief, etc” and “lead astray in the wrong direction”. “Deceive” is defined as “make (a person) believe what is false, mislead purposely”.

[20] Conduct cannot be categorised as misleading or deceptive, or likely to be misleading or deceptive for the purposes of s.9 unless it contains or conveys a misrepresentation: Taco Co of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177; ATPR 40-303. Generally there is no duty on a trader to disclose all information/history or faults that a vehicle has. However a trader must answer all questions put to it or its sales staff honestly and fully.

[a] Whether the conduct was capable of being misleading?

[21] The Tribunal considers that the trader’s conduct in representing on the CIN that the vehicle had not been damaged was clearly untrue because the vehicle had been flagged as damaged when it had entered NZ. The Tribunal accepts that the vehicle did not have structural damage but minor surface rust on the chassis but still considers the CIN was capable of misleading the purchaser and was thus conduct in terms of the first limb of Tipping J’s test.

[b] Was the purchaser in fact misled?
[22] The Tribunal is satisfied from listening to the purchaser and observing him when he gave evidence at the hearing, that the purchaser was in fact misled by the CIN that the vehicle was not imported damaged.

[c] Whether it was in all the circumstances, reasonable for the purchasers to have been misled?
[23] The Tribunal thinks it was reasonable for the purchasers to have been misled by the trader. The purchaser says and the Tribunal accepts the purchaser’s evidence that had he known that the vehicle was flagged as a damaged vehicle he would not have purchased it.

Issue [b]: What remedy is appropriate?

[24] The Tribunal has jurisdiction and a discretion 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.”

[25] In order for the Tribunal to consider making an order pursuant to section 43, the person in whose favour the order is contemplated must have suffered or be likely to suffer loss or damage as a result of the misleading conduct. The misleading conduct need not be the sole cause of loss- Phyllis Gale Ltd v Ellicott (1997) 8 TCLR 57. In this application the purchaser failed to show that he had suffered any loss whatsoever. He was not even able to say that but for the existence of the damaged flagging on the vehicle in January 2011 he could have sold the vehicle for $12,000 so the Tribunal was unable to find that he had lost a sale in January 2011. He is now unlikely to suffer any loss or damage since the damaged flagging has now been removed. The Tribunal concludes that the purchaser has no remedy under the Fair Trading Act 1986.

Issue [c]: Whether the vehicle complied with the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993 (“the Act”)?

[26] The purchaser claimed in his application to the Tribunal that :
“I also think that the traders have breached the Consumer Guarantees Act 1993 because the vehicle must have been of acceptable quality taking into account of its age, condition and price. Although the price reflected the condition at the time, the condition was not fully disclosed to me.”

[27] Section 6 of the Act imposes on a supplier and the manufacturer of consumer goods "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including "vehicles.”

[28] The expression "acceptable quality" is defined in s 7 of the Act as follows:
“7 Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as–

(a) fit for all the purposes for which goods of the type in question are commonly

supplied; and

(b ) acceptable in appearance and finish; and

(c) free from minor defects: and

(d) safe; and

(e ) durable, ¾

as a reasonable consumer fully acquainted with the state and condition of the

goods, including any hidden defects, would regard as acceptable, having

regard to ¾

(f) the nature of the goods:

(g ) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the

goods:

(i) any representation made about the goods by the supplier or the

manufacturer

(j) all other relevant circumstances of the supply of the goods.

(2) Where any defects in goods have been specifically drawn to the consumer’s

attention before he or she agreed to the supply, then notwithstanding that a

reasonable consumer may not have regarded the goods as acceptable with

those defects, the goods will not fail to comply with the guarantee as to

acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be treated

as having been specifically drawn to the consumer’s attention for the purposes

of subsection (2) of this section are those disclosed on a written notice

displayed with the goods.

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) The goods have been used in a manner, or to an extent which is

inconsistent with the manner or extent of use that a reasonable consumer

would expect to maintain from the goods; and

(b) The goods would have complied with the guarantee of acceptable quality if

they had not been used in that manner or to that extent.

(5) A reference in subsections (2) and (3) of this section to a defect means any

failure of the goods to comply with the guarantee of acceptable quality.”

[29] In considering whether or not goods meet the guarantee of acceptable

quality, the Tribunal must consider the quality elements as set out in section

7(1)(a) to (e) of the Act as modified by the factors set out in section 7(1)(f) to

(j) from the perspective of a “reasonable consumer”. The test is an objective

one; it is not a view of those factors from the purchasers’ subjective perspective.

[30] In Stephens v Chevron Motor Court Limited [1996] DCR1, the District Court held that the correct approach to the Act was first to consider whether the vehicle was of “acceptable quality”. If the vehicle was not of acceptable quality, the next point to consider was whether the purchasers required the trader to remedy any faults within a reasonable time in accordance with s19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchasers exercised their right to reject the vehicle within a reasonable time.
[31] The factors to be considered by the Tribunal in deciding if the vehicle was of acceptable quality are that the vehicle was at the time of sale a 9 year old Japanese imported Toyota Ipsum which had travelled 93,459kms and was sold for $11,995. The Tribunal accepts that although at the time the vehicle was imported into New Zealand it had minor surface rust on its chassis by the time the vehicle was supplied to the purchaser that surface rust had been removed and properly repaired. The vehicle, according to the purchaser, has performed very well since he purchased it. The Tribunal therefore finds that at the time of sale the vehicle complied with the guarantee of acceptable quality in the Act.

[32] The only issue which the purchaser might have raised but did not is whether the vehicle corresponded with its description in terms of the guarantee contained in s9 of the Act. The description of the vehicle may be claimed to have included the fact that the vehicle was not damaged when it was imported and in this case the vehicle did not, at the time of sale, comply with that description.

[33] As soon as the trader was made aware of the fact that the vehicle did not comply with the description by which it was sold, which the Tribunal considers was more likely than not on 30 April 2011 (rather than 7 March 2011 as claimed by the purchaser), the trader acted promptly and arranged to have the erroneous designation of the vehicle changed by NZTA. Hence the Tribunal finds that the trader did remedy the failure in the vehicle’s description as soon as it was required to do and did so within a reasonable time. Therefore there are no grounds for the purchaser to claim damages under s 18 of the Act
Costs

[34] The purchaser, who gave his occupation as an accountant, after becoming aware that the damaged flagging had been removed by NZTA in mid May 2011 and after receiving the letter he was sent by the NZTA on 2 June 2011, decided to file his application with the Tribunal on 20 June and proceeded to a defended hearing on 26 July without any proof or even evidence of damage. The Tribunal considers the purchaser’s action in filing the application and proceeding to a hearing were frivolous and probably vexatious to annoy the trader and that the purchaser’s claim should not have been brought. The Tribunal has power under clause 14 of the Schedule to the Motor Vehicle Sales Act 2003 to make an award of the reasonable hearing costs of the Tribunal. In this case it considers that the purchaser should pay the Tribunal’s reasonable hearing costs of $450.

Orders

1. The purchaser’s application is dismissed.

2. The purchaser shall pay to the Crown the reasonable costs of the Tribunal’s hearing of $450 by payment within 14 days of the date of this order to the Auckland District Court, Albert Street Auckland.

DATED at AUCKLAND this 1 August 2011

C.H Cornwell
Adjudicator