Sugrue v Washdyke Autos Limited - Reference No. MVD 227/2010 (Wellington) [2011] NZMVDT 28 (9 March 2011)

Last Updated: 16 October 2011

Decision No. WN 1 /2011

Reference No. MVD 227/2010

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN TERENCE SUGRUE

Purchaser

AND WASHDYKE AUTOS LIMITED

Trader

BEFORE THE WELLINGTON MOTOR VEHICLE DISPUTES TRIBUNAL

N J Wills - Barrister, Adjudicator
N Barrett - Assessor

HEARING at Timaru on 9 February 2011

APPEARANCES

Terence Sugrue, purchaser
Pierre Guinan, director for trader

DECISION

Background

[1] On 26 November 2009 Terence Sugrue (the purchaser) purchased a Honda Civic car (the car) for $15,495 from Washdyke Autos Limited (the trader). The purchaser alleges he was misled about the car because he was told it was a 2008 or 2009 model when in fact it was manufactured in 2004. Mr Sugrue wants to either return the car for a refund or be compensated for the difference in value.

[2] The trader’s position is that the trader’s understanding at the time of sale was that the car was a 2008 model (ie manufactured in 2008) but registered in 2009. The trader says that Mr Sugrue got a very good price for the car and consequently there is no basis for compensating Mr Sugrue.

[3] Prior to the commencement of the Tribunal’s inquiry the Tribunal appointed Mr Barrett who took the oath required of an assessor by Schedule 1, cl.10(2) of the Motor Vehicle Sales Act 2003. As an assessor appointed pursuant to the Motor Vehicle Sales Act 2003 Mr Barrett assisted the adjudicator but the application was determined by the adjudicator alone.

Facts

[4] Mr Sugrue purchased the car from the trader on 26 November 2009 for $15,495. Mr Sugrue became interested in the car because it was a 2009 vehicle and he thought that the advertised price ($16,995) was reasonable. The car had low mileage – the odometer reading at the time of sale was 24,077 kilometres.

[5] Prior to buying the car, Mr Sugrue had discussions with Mr Pierre Guinan and Mr Mark Guinan (both directors of the trader company) about the car. He said that Pierre Guinan told him that the car was a 2009 vehicle, like new and a good buy. He said that Mark Guinan later told him that the car was not the 2009 shape but was probably manufactured in 2008 and not registered until 2009. It was on the basis of these discussions that Mr Sugrue decided to buy the car. The fact that the car was virtually new was a key factor in his decision to buy the car.

[6] Mr Sugrue first became suspicious that the car was not a 2008 model when he took the car for a warrant of fitness inspection in August 2010. The mechanic who inspected the car told Mr Sugrue that in his view the car was more than a year old and advised him to check the age of the car.

[7] Mr Sugrue did so and at the hearing produced evidence from South Canterbury Honda that the car was manufactured in 2004 (information obtained by accessing the Honda records of the chassis number). That evidence was not disputed by the trader at the hearing.

[8] Mr Sugrue said that he would not have purchased the car had he known that it was a 2004 model. He was only interested in the car because it was virtually new.

[9] Once Mr Sugrue discovered the car was in fact manufactured in 2004, he approached the trader and asked for a refund. The trader was not prepared to do that. Compensation was also discussed but the parties could not reach any agreement about that. Mr Sugrue then filed his application to this tribunal. Mr Sugrue’s belief is that he paid at least $5,000 more for the car than it was worth at the time of purchase. He would like to return the car and obtain a refund or failing that be compensated in the vicinity of $5,000. In support of his request for $5,000 compensation Mr Sugrue provided the tribunal with copies of various vehicles advertised for sale on Trade Me including a number of 2009 Honda Civic vehicles with varying odometer readings ranging in price from $25,999 to $30,950 and a number of 2004/2005 Honda Civic vehicles with varying odometer readings ranging in price from $9,790 to $13,995.

[10] The import and sales documentation records some information about the car’s year of registration and manufacture. The Japanese export certificate records the “First Reg date” as May 2009. There is no record on the certificate of the year of manufacture. The vehicle offer and sale agreement (VOSA), which is filled in by the trader, records 2009 as the “vehicle year”, “year of registration” and “First Registered in NZ”.

[11] The Consumer Information Notice records the vehicle year as 2009. The reverse side of the notice notes clarifies what is meant by this. For vehicles registered after 1 January 2007 (as is the case here), “vehicle year” means the year of first registration anywhere in the world. For vehicles registered prior to that date, the reference to vehicle year could be a reference to either the year of manufacture, the model year or the year of first registration.

[12] Mr Pierre Guinan appeared for the trader. He has been in the business of selling cars for twenty years. His evidence to the tribunal was that there had been no intention to mislead Mr Sugrue. He agreed with Mr Sugrue’s evidence that he had been told the car was manufactured in 2008 and registered in 2009. Mr Guinan said that he knew the car was not a 2009 model because there had been a change of shape in the 2009 model.

[13] Mr Guinan admitted that the trader did not make any enquiries about when the car was manufactured. He said that the mistake in the year of manufacture had not been identified by either Automobile Association (which had carried out a vehicle appraisal on the car), or Vehicle Testing New Zealand (which had inspected the car when it was imported into New Zealand). Mr Guinan said that on the basis of those reports he had no reason to question the year of manufacture.

[14] A review of those documents shows that the AA vehicle appraisal does not refer to the year of manufacture of the car but does refer to the car as “2009 Honda Civic”. The field for “Year First Reg” was left blank. The document produced by Mr Guinan as a “VTNZ MR2A Issue” is a typewritten document that records the “Veh Year” as 2009. There is no specific information recorded referring to the year of manufacture.

[15] Mr Guinan submitted that the car was a good car sold for a fair price. In particular he said that a 2008 vehicle would have been worth around $30,000 at the time of sale and that effectively Mr Sugrue paid a 2004 price for the car when he purchased it. In support of that submission, he also produced a number of Trade Me listings for four 2004 or 2005 model Honda Civic vehicles with varying odometer readings ranging in price between $12,990 and $14,658.

[16] In his written response to the tribunal Mr Guinan also said that Mr Sugrue was aware at the time of purchase that if he had been buying the current model he would have been paying in excess of $25,000 for it.

[17] When asked why he had sold the vehicle for a 2004 vehicle price, Mr Guinan said that he had given Mr Sugrue a good price because he knew him and was doing him a favour. In support of this claim Mr Guinan produced a document setting out the trader’s various costs (including a vehicle offer and sale agreement recording that the trader purchased the car for $12,700) in order to show that the trader had made only $1,091 profit on the car.

[18] The tribunal referred Mr Guinan (and Mr Sugrue) to two print-outs from RedBook.co.nz (a vehicle valuation service) – one for 2004 Honda Civic vehicles (various models) and one for 2008 Honda Civic Vehicles (various models). The current retail value for a 2004 Honda Civic Ferio in “good” condition is listed as $9,900. There is no Honda Ferio listed in the 2008 list – the current retail value for various models in “good” condition range from $22,300 to $30,800.

[19] Mr Guinan’s response to the Redbook valuations was to say that the new shape Honda Civic came out in 2009 and that the trader’s approach was to sell any vehicle between 2004 and 2008 for a similar price. He said that the important factor was the shape of the vehicle and that the trader would offer vehicles of the same shape for sale at a similar price even if the manufacturing year of the vehicle varied – even if it was by as much as five years (although a higher odometer reading would mean have an impact on the price). His conclusion was that because there was a new model in 2009, for the 2004 to 2008 years, the price would not vary particularly.

The Fair Trading Act

Was the purchaser misled by the trader?

[20] Mr Sugrue alleges he was misled about the car’s year of manufacture. He says that the trader led him to believe that the car was manufactured in 2008 when in fact it was manufactured in 2004.

[21] Section 9 of the Fair Trading Act (the Act) provides:

“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.”

[22] The Tribunal notes that in order to breach s.9 there is no requirement that there be an intention to mislead or deceive. (Taylor Bros Limited v Taylors Textile Services Auckland Limited (1987) (2TCLR 415, at 447)).

[23] The appropriate approach to determining whether there has been a breach of section 9 is set out in the case of AMP Finance v Heaven (1977) 8 TCLR 144 (CA). In that case Tipping J delivering the judgement of the Court held that the question of whether there is a breach of section 9 should be addressed in three steps:

1. Ask whether the conduct was capable of being misleading;
2. Decide whether the plaintiffs were in fact misled by that conduct; and
3. Decide whether it was reasonable for the plaintiffs to have been misled by that conduct.
   

[24] The tribunal finds that the trader’s advice as to the year of manufacture of the car was conduct capable of misleading. The car was manufactured in 2004. Against that background, the trader’s advice to Mr Sugrue that the car was manufactured in 2008 and registered in 2009 is clearly conduct capable of being misleading. Other information from the trader available to Mr Sugrue prior to deciding to purchase the car was the supplier information notice. A close inspection of that document would have revealed that the year of first registration anywhere in the world was 2009 – but that would not have assisted in alerting Mr Sugrue to the car’s year of manufacture.

[25] The vehicle offer and sale agreement did not assist with clear information either. The agreement records the vehicle year as 2009. In the context of an agreement that also records the year of registration and the year the car was first registered in New Zealand, the “vehicle year” could only mean the year of manufacture. On that approach, the vehicle year recorded in the vehicle offer and sale agreement as 2009 was clearly also incorrect and in itself varied from the oral advice given by the trader to Mr Sugrue that the car was manufactured in 2008.

[26] The tribunal accepts Mr Sugrue’s evidence that the year of the car’s manufacture was pivotal in his decision to purchase the car. Once Mr Sugrue had discovered the truth, he promptly and enthusiastically engaged with the trader, asking initially for a refund and then when that was not forthcoming, compensation. Those actions are consistent with a purchaser who was very much concerned about the year of manufacture of the car he purchased. The fact that Mr Sugrue may have thought he was getting a good deal in terms of price does not derogate from that. Mr Sugrue only thought he was getting a good price because he was considering that price as a good price for a 2008 manufactured vehicle. For those reasons the tribunal is persuaded that Mr Sugrue was in fact misled and that it was reasonable for him to have been misled.

In reaching the above conclusions, the tribunal notes the following:

[27] The tribunal did not find Mr Guinan a compelling witness. Mr Guinan’s evidence about the value of the car was not consistent. Early in the hearing he said that if the car had been a 2008 model it would have been worth $30,000 (in support of his argument that the purchaser had paid a fair price), evidence that is consistent with the redBook.co.nz valuation. He said the price Mr Sugrue paid was low because he was trying to do him a favour. In itself this does not seem logical because the car was originally priced at $16,995 (ie before Mr Sugrue had approached the trader) – well below $30,000.

[28] Later in the hearing Mr Guinan argued that the value of the car would not change whether it was a 2004 or 2008 model – because it was the shape of the car that was important – and the price Mr Sugrue paid - $15,495 reflected fair value for the car.

[29] Both parties have produced Trade Me listings as evidence to support submissions about the value of the car if it had been manufactured in 2008 as opposed to 2004. Trade Me listings are of limited use in assessing the value of a particular vehicle. A listing gives an indication of what the seller considers a particular vehicle is worth but does give any indication of the market value. Listings vary considerably in detail – so it is not always apparent whether the examples given are for similar vehicles. In comparison, the redBook website provides a recognised valuation service – setting out a range of retail and wholesale values for make, model and year of vehicle.

[30] Relying on the red.Book.co.nz evidence – that a 2008 Honda Civic is worth in the vicinity of $30,000 and the fact that Mr Guinan (who has been in the car sale business for twenty years) initially put forward the same figure as the value of a 2008 Honda Civic, the tribunal finds that it is very likely Mr Guinan (and therefore the trader) knew that the car was not manufactured in 2008. It is not plausible that a trader, aware that a particular vehicle has a value of around $30,000, would list it for sale at $16,995. As set out above, this is not a relevant factor in determining whether or not Mr Sugrue was misled (there is no need to establish an intention to mislead to establish a breach of section 9 of the Fair Trading Act).

What remedies are available to the purchaser?

[31] The remedies available for a breach of the Fair Trading Act are discretionary. They are set out in section 43 of the Act:

"43 Other orders
(2) For the purposes of subsection (1) of this section, 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) of this section 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) of this section 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) of this section 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) of this section at that person's own expense, to repair, or 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) of this section at that person's own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage."

[32] 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). It is sufficient that there is a clear nexus between the misleading conduct and the purchaser's decision to proceed with the purchase of the vehicle. The tribunal is satisfied that such a nexus exists in this case – in particular that Mr Sugrue would not have purchased the car had he known that it was not a nearly new vehicle.

[33] The primary remedy sought by Mr Sugrue is an order declaring the vehicle offer and sale agreement void ab initio (ie as if the agreement was never in place). In the alternative Mr Sugrue seeks compensation.

[34] In Smith v Tuskers (Yaldhurst Road) Ltd (2002) 10 TCLR 417, Pankhurst J considered the circumstances in which it was appropriate to declare a contract void ab initio. The case concerned the sale of a commercial property. The purchasers had been misled about both the financial position of the tenant and the return on investment that could be expected from the property:

“To my mind whether avoidance of a transaction is the appropriate relief as opposed to damages will depend upon an assessment of all the circumstances of the particular case. The starting point is the causative effect of the conduct in question. If the Smiths had not been misled would they still have purchased the property? I very much doubt it. The understanding that the tenants were sound is pivotal, I accept, in their decision to buy this property”

[35] Other factors Pankhurst J went on to consider included the fact that the Smiths were prompt in bringing proceedings and the fact that there were ongoing risks in relation to the investment in the property. Bearing those factors in mind, His Honour exercised his discretion to declare the agreement void ab initio.

[36] In this case the tribunal intends to exercise the discretion available to it and declare the vehicle offer and sale agreement void ab ignition. The effect of that order will be that the car is returned to the trader and Mr Sugrue be refunded the purchase price. A key factor in that decision is that the tribunal is persuaded that had Mr Sugrue known that the car was manufactured in 2004, he would not have purchased the car. After Mr Sugrue discovered that he had been misled, he took immediate action to try and return the car for a refund. In those circumstances the most appropriate remedy is that the car go back to the trader and Mr Sugrue be refunded the purchase price.

Orders

1. The vehicle offer and sale agreement dated 26 November 2009 is declared void ab initio.
2. The trader will pay the purchaser the sum of $15,495.
   

DATED at WELLINGTON this 9th day of March 2011

___________________
N Wills
Adjudicator