Linderboom v Crystal Car Wholesalers Limited - Reference No. MVD 148/13 (Auckland) [2013] NZMVDT 117 (24 October 2013)

Last Updated: 18 November 2013

Decision No. AK 99/2013

Reference No. MVD 148/13

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN CANDICE LEIGH LINDERBOOM

Purchaser

AND CRYSTAL CAR WHOLESALERS LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr G Middleton, Assessor

HEARING at Auckland on 21 October 2013

APPEARANCES

Miss C L Linderboom, the purchaser,

Mr P Wordsworth, witness for the purchaser
Mr F M Syed, director representing the trader
Mr M Yorston, IMVDA, witness for the trader

DECISION

Background

[1] On 26 April 2013 Miss Linderboom (“the purchaser”) bought a 2006 Suzuki Swift registration GUZ196 (“the vehicle”) for $13,000 from Crystal Car wholesalers Limited (“the trader”). 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 because it was imported as a damaged vehicle. She says that she would not have bought the vehicle if she had known it was imported damaged. The purchaser would like the Tribunal to declare the contract for the purchase of the vehicle void under the Fair Trading Act 1986.

[2] The trader admits that the vehicle was incorrectly described on the CIN as imported undamaged. It says that the vehicle had been flagged as damaged in Japan in November 2012 before being shipped to New Zealand. The damage to the vehicle was minor and when the vehicle was delivered to the trader in New Zealand it was repaired, inspected and certified on 19 March 2013. The trader says it thought the flagging as a damaged import had been removed by New Zealand Transport Agency (“NZTA”) before it sold the vehicle to the purchaser on 26 April 2013. As soon as the trader became aware that the flagging had not been removed by the NZTA, it arranged for NZTA to remove the flag. The trader says 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 G Middleton as expert assessor to assist in the determination of the complaint. Mr Middleton took the oath required by cl 10(2) of Schedule 1 to that Act. As an assessor Mr Middleton assisted the adjudicator but the application was determined by the adjudicator alone.

Issues
[4] The issues raised by this application are:
[a] Whether the trader misrepresented the vehicle to the purchaser?
[b] If so what remedy is appropriate?

Relevant law

[5] 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.”

[6] The appropriate approach to determining whether conduct is misleading and deceptive has been considered by the Supreme Court in Red Eagle Corporation Ltd v Ellis [2010] NZLR 492. The judgement of the Court was delivered by Blanchard J:
“It is, to begin with, necessary to decide whether the claimant has proved a breach of s 9. That section is directed to promoting fair dealing in trade by proscribing conduct which, examined objectively, is deceptive or misleading in the particular circumstances. Naturally that will depend upon the context, including the characteristics of the person or persons likely to be affected. Conduct towards a sophisticated businessman may, for instance be less likely to be objectively regarded as capable of misleading or deceiving such a person than similar conduct directed towards a consumer or, to take an extreme case, towards an individual known by the defendant to have intellectual difficulties ... 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.”

Application of law to facts

[7] The trader was aware from a photograph that the vehicle was damaged when it bought it in Japan. Prior to the vehicle being shipped to New Zealand from Japan it was inspected by JEVIC NZ Ltd on 28 November 2012. JEVIC, acting as an agent for the NZTA, flagged the vehicle as damaged. The reason JEVIC flagged it as damaged was because the vehicle had minor damage to its left front door, sill/rocker panel and dogleg.

[8] In a report dated 8 October 2013 Mr Duncan Morrison, Repair Certifier, states the damage to the vehicle was minor and within NZTA’s accepted guidelines for removal of the “flag”. Mr Morrison states that he oversaw the repairs which were done by OM Panel & Paint on 7 March 2013 at a cost of $700. Mr Morrison then issued a repair certificate number 199784 on 19 March 2013 and because the repairs were, according to Mr Morrison’s report, minor and complied with flag lifting criteria, he approved removal of the flag by marking the appropriate box on the repair certification document. However through an oversight the flag was not removed at that time.

[9] When the vehicle was sold to the purchaser on 26 April 2013 for $13,000 it was displayed and supplied with a Consumer Information Notice (“CIN”) which showed the vehicle had not been imported as a damaged vehicle. The text which must appear on the reverse side of the CIN is 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 a damaged vehicle is. 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.”

[10] It is not disputed that at the time of sale by the trader the vehicle was still flagged in the NZTA system as having been imported damaged because although the damage had been repaired and the repairs certified by Mr Morrison before the vehicle was sold, the damaged “flag” had not been removed in the NZTA system due to an oversight.

[11] On 2 September 2013 the purchaser decided to trade the vehicle in on another car. She says she took the vehicle to a trader named Enterprise Motors and offered it to them as a trade in. She was surprised and distressed to be told by Enterprise Cars that the vehicle was flagged as having been imported as a damaged vehicle. She immediately contacted the trader and demanded it take the vehicle back and refund her with the purchase price.

[12] The trader contacted Mr Morrison who discovered the flag had not been removed and arranged for that to be done immediately. The flag was promptly removed and the vehicle is no longer flagged as imported as damaged in the NZTA system.

[13] The purchaser says that it is irrelevant to her that the damage has been inspected and repaired by the trader and the imported damaged flag has been removed because she is concerned that the vehicle may have other faults as a consequence of the damage which will become manifest in the future. She says she would not have bought the vehicle if she had known it was imported damaged. The purchaser says that the vehicle’s air conditioning compressor needs to be replaced at a cost of $786.88 for which she produces a quotation dated 25 September 2013 from Autostation and Mr Wordsworth gave evidence that there is rust evident in the lower door hinge of the left front door. The purchaser did not have any photographs or reports on the rust and the Tribunal notes that the vehicle was sold with a new warrant of fitness by the trader and has, in the purchaser’s ownership, passed a warrant of fitness inspection on 25 September 2013.

[14] The Tribunal is satisfied, on the evidence that the purchaser was misled by the CIN into thinking the vehicle had not been imported damaged. In fact the vehicle was damaged when it was imported into New Zealand even though the damage appears to the Tribunal to have been minor and was properly repaired by the trader at relatively little cost before the vehicle was supplied to the purchaser.

Issue [b]: What remedy is appropriate?

Relevant law

[15] The Tribunal has jurisdiction and 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.”

[16] 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.

Application of law to facts

[17] The purchaser produced as evidence of her loss a valuation report from Car Valuations NZ Ltd which values the vehicle “imported damaged flaged” as at 26 April 2013 (the date of sale) with an odometer reading of 108,754kms as $8,750 or $4,250 less than the $13,000 the purchaser paid for the vehicle. Unfortunately the valuer, Mr Hatch, did not provide a value for the vehicle with the damaged flag removed. The purchaser did however obtain two written valuations on 23 September 2013 which although she did not produce them at the hearing, were both produced by the trader. One of the reports from Wheels on Wairau Sales Ltd values the vehicle “undamaged with 108,000km” as $13,000. The other report from Autostation, records the vehicle’s odometer as 114,102km and its market price “in good conditions” (sic) as $13,000. Hence whilst the vehicle, subject to the imported damage flag, was only worth 67% of its sale price according to the Car Valuations NZ Ltd, two other valuations obtained by the purchaser show that with the damaged flag removed the purchaser has suffered no loss because the current value of the vehicle with 114,102kms on its odometer is the same as the price the purchaser paid for the vehicle on 26 April 2013 when its odometer was 5,288kms less that it is now.

Conclusion

[18] In this application the purchaser failed to show that she had suffered any loss whatsoever or is likely to suffer any loss since the damaged flagging has now been removed. The Tribunal concludes that the purchaser has no remedy under the Fair Trading Act 1986 and her application for an order declaring the sale contract void must be dismissed.

Order

The purchaser’s application is dismissed.

DATED at AUCKLAND this 24 October 2013

C.H Cornwell
Adjudicator