Hooker v Warren t/a Zoom Zoom, and Ezy 7000 - Reference No. MVD 57/13 (Auckland) [2013] NZMVDT 61 (12 June 2013)

Last Updated: 16 July 2013

Decision No 54/2013
Reference No. MVD 57/13

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN RYAN THOMAS HOOKER

Purchaser

AND LANCE WARREN T/A ZOOM ZOOM, AND EZY 7000

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 10 June 2013

APPEARANCES

Mr R T Hooker, the purchaser

Miss K S Howard, witness for the purchaser
There was no appearance by Mr Warren, the trader

DECISION

Background

[1] On 13 February 2013 Mr Hooker agreed to buy sight unseen at an internet auction, a 2004 Mitsubishi L300 van from Lance Warren trading as Zoom Zoom, and Ezy 7000 for $5,310.

[2] Mr Hooker has brought this claim against Mr Warren because he says the vehicle was represented in Mr Warren’s online advertisement as being reliable. However shortly after he bought the vehicle Mr Hooker found that its cylinder head was cracked and the head gasket damaged. Mr Hooker says that the vehicle requires a replacement cylinder head and other work estimated to cost $2,986.55.

[3] Mr Hooker says that Mr Warren’s conduct in advertising the vehicle on TradeMe as having a reliable motor was misleading and deceptive and that he would not have bought the vehicle if he had known that the vehicle’s engine was so badly damaged. Mr Hooker wants to return the vehicle supplied by Mr Warren and have a refund of his purchase price or have the vehicle’s cylinder head replaced at Mr Warren’s cost.

[4] Mr Warren did not attend the first hearing of this matter on 13 May 2013 but instead sent an unapproved representative to the hearing without first giving the Tribunal any explanation as to why he could not be personally present. The Tribunal adjourned the hearing on that occasion and requested Mr Warren to attend the second hearing in person. Mr Warren did not do so but sent the Tribunal an email saying that he had to go to Australia.

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

The issues

[6] The issues raised by this application are:
[a] Whether Mr Warren misrepresented the vehicle as having a reliable motor?
[b] If so what remedy is appropriate?

Issue [a]: Whether Mr Warren misrepresented the vehicle as having a reliable motor?

Legal Principles

[7] 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.”

[8] 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

[9] Mr Warren advertised the vehicle on TradeMe for sale by auction. The advertisement stated:
Mitsubishi L300 2004
Features: ABS brakes
Air conditioning
Driver airbag
Passenger airbag
Power steering
Towbar
Thanks for your interest! For viewing/test drive either contact listed number or leave yours here! Viewing only available during business hours! Monday to Friday.
“2004 Mitsubishi L300 travelled 241kms. In the shiny red. Tidy and reliable motor. A prefer choice of trade vehicle with the kiwis.
Features
***Recent New WOF
***NZ New
***Diesel
***Has had a service
***CD player
***Spare tyre and jack all ready to go
***SWB
***2500cc
***Air Condition works, but not ice cold
Imperfections:
As this vehicle is not brand new out of the box! There may be some scratches,
But, overall very clean and presentable vehicle start first time.
Warranty
***1 year Mechanical Warranty with IAG NZ $490 Covers any mechanical issues NZ wide!
***Shipping
Shipping to your door! North Island $290 South Island $590! Best rates due to bulk discount! Cheaper than any other alternatives if you live out of town.
Terms
A must look, if you are after a reliable vehicle.
No reserve for fun and fast turn over of stock!
Please only bid if you are going to make contact and follow through with the purchase not to view! You simply pay and drive away!
Just look at the photos you will simply love this van!. Being a Mitsubishi Work horse you are guaranteed a reliable service with the strong 2500cc engine.”

[10] Mr Hooker was the successful bidder for the vehicle on 11 February 2013 with a bid of $5,310. Mr Hooker did not inspect the vehicle before bidding for it, he says he relied on the photographs of the vehicle and Mr Warren’s description of it in the TradeMe advertisement reproduced in the previous paragraph.

[11] Mr Hooker says he bought the vehicle to transport a go-kart which is one of his hobbies. Mr Hooker travelled from his home in Hamilton to Mr Warren’s business in Otahuhu on 13 February 2013 and inspected the vehicle. He says that when he looked at the vehicle’s radiator he noticed brown rusty water around the radiator cap and the radiator shroud and when he looked in the radiator he found it was empty of coolant. The overflow bottle was also dirty and empty. He says he pointed this out to Mr Warren who had one of his workers fill the radiator with water. The oil cap had a residue of black oil on it and it did not look as if the vehicle had been serviced for some time. He did not test drive the vehicle.

[12] After paying for the vehicle by bank cheque Mr Hooker was handed a copy of a Vehicle Offer and Sale Agreement which recorded the odometer as 241,000kms. Mr Hooker says that Mr Warren did not supply him with a signed and dated copy of a Consumer Information Notice as he is required to do by the Consumer Information Standards (Used Motor Vehicles) Regulations 2008.

[13] After completing the purchase of the vehicle Mr Hooker and a friend drove it to a service station to put fuel in it and started to drive back to Hamilton. After crossing the Bombay Hills the vehicle’s engine started to show signs of over-heating and Mr Hooker pulled over and let the engine cool. When he removed the radiator cap he found there was no water in the radiator. He filled the radiator with water and drove on to Gordonton where he found one of the vehicle’s headlights did not work. When he arrived in Hamilton he and a friend tested the vehicle’s other lights and found the brake lights did not work.

[14] On the 16 February Mr Hooker replaced the vehicle’s light bulbs, changed the engine oil and filter and drained and refilled the coolant. The vehicle’s air conditioning was not operating and Mr Hooker bought and replaced the air conditioning belt which for some reason was removed to get the air conditioning to function.

[15] On the weekend of 23 February 2013 Mr Hooker says he loaded his go-kart into the vehicle and drove it from Hamilton to Te Aroha for a go-kart race meeting. When he stopped the vehicle at Morrinsville he noticed coolant coming from the overflow bottle but thought this was normal but when he reached Te Aroha the coolant was still leaking from the overflow bottle. On the return trip to Hamilton the vehicle overheated at Morrinsville and he found the radiator was empty of all coolant. He says he put about four litres of water in the radiator before driving the vehicle back to Hamilton.

[16] On 26 February Mr Hooker sent an email to Mr Warren informing him of the overheating problems he had experienced with the vehicle since buying it and travelling only 200kms in the vehicle. His email informed Mr Warren that the engine was “completely stuffed” but that in the auction he had been assured that the engine was in a good and reliable condition. Mr Hooker asked for a refund of his purchase price. Mr Warren replied by email the same day saying the vehicle “did drove fine never overheated” and asked Mr Hooker to get three quotes because he had been scammed before. Mr Hooker replied by email on 27 February saying he was not a scammer, that the vehicle appeared to have a cracked head since he had purchased it, and that would explain why the vehicle had no coolant in its radiator when he first inspected it in Mr Warren’s yard. He concluded by saying that the vehicle could not be started but that he would get a qualified mechanic to give him a professional opinion and a quote to fix the vehicle. Mr Warren sent Mr Hooker an email in reply the same day asking if Mr Hooker had got the vehicle serviced, apparently forgetting that his advertisement had promised the vehicle had been serviced.

[17] On 18 March Mr Hooker had the vehicle assessed by Gribben Automotive Limited who removed the vehicle’s cylinder head and took photographs of the head and head gasket which Mr Hooker produced together with a quotation prepared by Gribben of $2,986.55 inclusive of GST to replace the cylinder head and head gasket as well as the radiator, timing belt, water pump and tensioner. Mr Hooker sent Mr Warren a copy of the quotation the same day but cannot recall if he sent Mr Warren a copy of the photographs of the cylinder head and gasket.

[18] Mr Warren sent Mr Hooker an email on 21 March offering to pay $800 for the cylinder head or supply one but this offer was rejected by Mr Hooker in an email on the same day. On 22 March Mr Warren sent Mr Hooker an email claiming a cambelt shop in Onehunga would repair the engine for $2,875 of which Mr Warren offered to contribute $1,875 if Mr Hooker agreed to pay the $1,000 balance. Mr Hooker rejected that offer by email on 22 March but in another email sent to Mr Warren the same day Mr Hooker said that he was willing to pay some costs if Mr Warren agreed to pay $2,500 towards the cost of repairs. Mr Warren did not accept that offer.

[19] On the morning of the second hearing (10 June 2013) the Tribunal received a one page statement from Mr Warren which made the following points:
1. The vehicle was a trade in from Taupo and had been driven to his yard. It had been for a WOF and service. Mr Warren found the vehicle to be in good condition for its age and mileage and put it up for a $1 auction as he did with all trade ins.
2. Mr Hooker was the top bidder and collected the vehicle on 13 February 2013.
3. Approximately 2 weeks (26/2/13) later Mr Hooker emailed complaining of an overheating issue. Mr Warren asked him to get three quotes and after two weeks Mr Hooker emailed saying the vehicle had a blown head gasket due to a blocked radiator.
4. Mr Warren offered to pay for the overheating only and also offered to buy the vehicle provided it was reassembled, but those offers were declined as was an offer to repair at his workshop.
5. Mr Warren says it was Mr Hooker’s responsibility to ensure the vehicle was serviced after purchase and to get the vehicle checked by three suppliers as he had requested. Mr Hooker had one supplier pull the engine apart making it difficult to get other opinions and return it in the state it was sold. Mr Warren withdrew all previous offers and offered to pay for a new head and associated labour only.

[20] The Tribunal, on the advice of its Assessor Mr Middleton who carefully examined the photographs (Exhibit 4) taken of the cylinder head, the engine block, valves, and head gasket is satisfied first, that the vehicle’s head gasket has been leaking combustion gasses from number one cylinder close to the exhaust valve number 1. Second, that the vehicle has a large crack in the cylinder head visible on the photograph of No 2 cylinder between the exhaust valve and injector port. The size of this crack indicates the vehicle’s cylinder head has been faulty for some time. Third, the engine block has water ingress evidenced by rusty witness marks around the inlet valve of number two cylinder. Fourth, the cylinder heads combustion chamber of number two cylinder is noticeably cleaner (less carbon deposits) than cylinders one, three and four caused by long term water ingress which has the effect of steaming cleaning the chamber. The Tribunal therefore concludes that it is almost certain that the vehicle’s cylinder head was cracked and highly likely that the head gasket was also leaking at the time of sale to Mr Hooker.

[21] The Tribunal also concludes that Mr Warren’s claim in the advertisement of the vehicle on TradeMe that the vehicle had a “reliable motor” and that the vehicle was a “must look if you are after a reliable vehicle” and also his claim that “Being a Mitsubishi Work horse you are guaranteed a reliable service” were each statements which were false and misleading and those statements would have misled a reasonable purchaser. The Tribunal is also satisfied that the statements misled Mr Hooker regarding the reliability of the motor.

Conclusion on issue [a]

[22] Mr Warren misrepresented the condition of the vehicle he agreed to sell Mr Hooker in breach of s9 of the Fair Trading Act 1986.

Issue [b]: What remedy is appropriate?

Legal Principles

[23] 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."

[24] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43. The Tribunal must consider whether:
[a] the purchaser was in fact misled or deceived; and
[b] If so, was the trader’s conduct the effective cause or an effective cause of the purchaser’s loss or damage?

[25] The Tribunal is satisfied that Mr Hooker was misled and that Mr Warren’s conduct was the effective cause of Mr Hooker’s loss or damage. Instead of receiving a reliable vehicle as Mr Warren promised the vehicle was in three statements in the advertisement, Mr Hooker received a vehicle which had a blown head gasket and a cracked cylinder head.

[26] In order for the Tribunal to consider making an order pursuant to s 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 Mr Hooker’s decision to proceed with the purchase of the vehicle. The Tribunal is satisfied that such a nexus exists in this case because Mr Hooker’s decision to purchase the vehicle has resulted in his receiving a vehicle which the Tribunal finds requires expensive repairs to its engine.

[27] Mr Hooker wishes to reject the vehicle and receive a refund of his purchase price or to have Mr Warren pay to have the vehicle repaired. The Tribunal thinks, bearing in mind the cost and inefficiency of reassembling a damaged engine to return it to Auckland which will only have to be disassembled again to be repaired, and the fact that the disassembled engine and vehicle are in Hamilton and will need to be transported back to Auckland that the most appropriate order for the Tribunal to make is one that requires Mr Warren to pay the reasonable costs of repairing the stripped damaged engine to a good working condition by Gribben Automotive Ltd in Hamilton. The Tribunal notes that the quotation supplied by Gribben Automotive Ltd to repair the engine of $2,986.55 includes the cost of replacing the radiator of $400, the timing belt of $150, a water pump of $133 and a tensioner of $33. It makes good sense to replace those four items in a vehicle of this age and mileage when the engine is being repaired but their replacement is not a consequence of the overheating. Accordingly, the Tribunal will deduct the cost (with GST) of $823.40 of those four items from the amount it orders Mr Warren to pay Mr Hooker. Therefore Mr Warren will be ordered to pay the cost of repairing the engine of $2,163.15.

Costs

[28] Mr Hooker had to make two trips from Hamilton to Auckland to attend the hearings. He has had to use his own vehicle for one of those return trips a distance of 250kms. The Tribunal has limited power to make an award of costs to or against a party to any proceedings under clause 14(1) of Schedule 1 to the Motor Vehicle Sales Act 2003. The relevant provision is as follows:

“14 Disputes Tribunal may award costs in certain circumstances
(1)The Disputes Tribunal may award costs to or against a party to any proceedings before it only if,-
(a) in the opinion of the Disputes Tribunal,-
(i) the proceedings are frivolous or vexatious or ought not to have been brought:
(ii) the matter ought reasonably to have been settled before proceeding to a hearing but that the party against whom an award of costs is to be made refused, without reasonable excuse, to take part in the discussions referred to in clause 5(1)(b) or acted in a contemptuous or improper manner during those discussions; or
(b) any party after receiving notice of a hearing, fails to attend the hearing without good cause.

(2) In any case to which subclause (1) applies, the Disputes Tribunal may order a party to pay---
(a) to the Crown all, or any part of either or both of the following:

(i) the reasonable costs of the Disputes Tribunal hearing:
(ii) the fees and expenses of any witness that have been paid or are payable by the Crown; or

(b) to another party all, or any part of the reasonable costs of that other party in connection with the proceedings.”

[29] The Tribunal considers that the matter ought reasonably to have been settled before proceeding to a hearing but the trader refused without reasonable excuse to take part in the discussions referred to in clause 5 (1)(b) of Schedule 1 of the Motor Vehicle Sales Act 2003 after Mr Hooker filed his application with the Tribunal on 10 April 2013. The Tribunal will therefore order Mr Warren to pay to Mr Hooker the reasonable costs of his return travel from Hamilton to Auckland and his parking costs in Auckland City amounting to attend the hearing totalling $226.

Order

Lance Warren shall pay Ryan Hooker $2,389.15 immediately

DATED at AUCKLAND this 12 June 2013

C.H Cornwell
Adjudicator