Ruakere v Robert Allen Wholesale Limited - Reference No. MVD 142/2014 (Auckland) [2014] NZMVDT 106 (29 September 2014)

Last Updated: 19 October 2014

Decision No. 90/2014

Reference No. MVD 142/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN PAUL RUAKERE

Purchaser

AND ROBERT ALLEN WHOLESALE LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 23 September 2014

APPEARANCES
Mr P Ruakere, the purchaser
There was no appearance by the trader

DECISION

Background

[1] On 9 July 2013 Mr Ruakere (“the purchaser”) bought, sight unseen by internet auction, a 1998 Toyota Hiace van registration EAG343 (“the vehicle”) from Robert Allen Wholesale Limited (“the trader”) for $6,200. The purchaser alleges he was misled about the condition of the vehicle and he wants to return the vehicle and obtain a refund of the purchase price.

[2] The trader’s position is that the purchaser was not misled about the vehicle and because it was purchased via auction the Consumer Guarantees Act 1993 (“CGA”) does not apply to the sales transaction.

[3] Prior to the commencement of the Tribunal’s inquiry the Tribunal appointed Mr Middleton as the Assessor and he 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 Middleton assisted the Adjudicator but the application was determined by the Adjudicator alone.

Facts
[4] The purchaser bought the vehicle by internet auction. It was advertised as having an odometer reading of 246,000kms and as driving well and having “straight & tidy bodywork”. The trader also stated in the advertisement the vehicle had “minor imperfections keeping in tune with age/miles but generally very tidy for a commercial of this age.” The purchaser was the highest bidder for the vehicle at $6,200 when the internet auction closed on 9 July 2013.

[5] The purchaser travelled from New Plymouth to St Johns, Auckland to collect the vehicle from the trader. The trader did not provide a new warrant of fitness for the vehicle as it is required to do when selling a vehicle. The last warrant of fitness that the vehicle had been issued with was in May 2013. The vehicle’s certificate of registration records the transfer to the purchaser on 13 July 2013 with an odometer reading of 234,947kms whereas in fact the vehicle’s odometer recorded in the Vehicle Offer and Sale Agreement was 246,000kms. The purchaser paid a deposit of $1200 and financed the balance of the purchase price of $5,000 by a collateral loan from Central Finance Limited over 24 months at 18% fixed for the term of the loan.

[6] The purchaser says that when he collected the vehicle its fan belt was noisy and its headlamp lens contained condensation and a tail lamp was broken. The purchaser used the vehicle from July 2013 until January 2014 although its warrant of fitness had expired in November 2013. On 4 January 2014 the purchaser took the vehicle to Spotswood Automotive Ltd for a WOF inspection. Its odometer was then 249,496km showing it had been driven 3,496kms in the seven months the purchaser had owned the vehicle. The vehicle failed the WOF inspection for the following reasons:
“R stop to go
L Lamp lens cracked
Water in L H’lamp
Water in R F Parking lamp
R no plate lamp to go
L F door catch loose
Rust L ‘A’ pillar lower
Rust R ‘A’pillar upper
L F seatbelt to buckle
Centre seat belt to be checked
All brake hoses damaged
P steer belt loose
Roof rusted
F X member rusted
Secure battery
Water pump leaking and noisy
Front brake hoses chaffing and damaged”

[7] The Tribunal understands that the purchaser did not have the money to have the vehicle repaired and left it at Spotswood Automotive Ltd for five months. Spotswood Automotive Ltd prepared what they described as a “rough estimate” of the cost of repairs to bring the vehicle up to warrant of fitness standard of $1,131.10. It includes an item of $200 to “treat” rust in the ‘A’ pillars and which did not include the cost of repainting after body repairs were done to treat the rust in the pillars or the cost of a qualified panel beaters certificate. In addition to the warrant of fitness faults the vehicle also requires maintenance work. Spotswood have quoted for a new cambelt kit, camshaft oil seals and a water pump and a second hand fan blade. The cost of those maintenance repairs is estimated by Spotswood Automotive Ltd as $1,304.39.

[8] On 26 August 2014 the purchaser obtained an estimate from Rio Motor Body Works of the cost of repairs to the vehicle’s rust around the windscreen, rust on the roof, rust in the LR guard and rust in the front member. The total cost of repairs is estimated as $2,236.18 to include paint refinishing and GST.

The Issues
[9] The issues raised by this application are :

(a) Whether the implied condition of merchantability in the Sale of Goods Act apply?
(b) If so, what remedy is the purchaser entitled to?
(c) Whether the trader’s conduct was misleading or deceptive in breach of the Fair Trading Act?
(d) If so, what remedy is the purchaser entitled to under the Fair Trading Act

[10] The sale of the vehicle in this case was a sale by way of auction. It occurred before the changes to the CGA became law on 17 June 2014 and accordingly the CGA does not apply to this sale.

[11] In circumstances where the CGA does not apply, the SOGA may apply to the sales transaction (see section 48 of the CGA and section 56A of the SOGA). The purchaser has presented his case in terms of the SOGA but because the Tribunal has an inquisitorial function and because parties are unable to be legally represented at any Tribunal hearing, the Tribunal must consider any possible causes of action within its jurisdiction.

The Sale of Goods Act 1908

[12] The sale of the vehicle by the trader to the purchaser has conditions as to quality implied by the SOGA. Section 16 provides as follows:

“16.Implied conditions as to quality or fitness

Subject to the provisions of this Act and any statue in that behalf, there is no implied

warranty or condition as to the quality or fitness for any particular purpose of

goods supplied under a contract of sale, except as follows:

(a)Where the buyer, expressly or by implication, makes known to the seller the

particular purpose for which the goods are required, so as to show that the buyer

relies on the sellers skill or judgement, and the goods are of a description which it is

in the course of the seller’s business to supply (whether he is a manufacturer or not),

there is an implied condition that the goods shall be reasonably fit for such purpose:

Provided that in the case of a contract for the sale of a specified article under its

patent or other trade name, there is no implied condition as to its fitness for any

particular purpose:

(b)Where goods are bought by description from a seller who deals in goods of that

description(whether he is the manufacturer or not), there is an implied condition that

the goods shall be of merchantable quality:

Provided that if the buyer has examined the goods, there shall be no implied

condition as regards defects which such examination ought to have revealed: ...”

Section 16(a) – fit for purpose
[13] Section 16(a) provides that goods sold must be fit for purpose but there are four qualifications to that general statement:

[a]The buyer must make known to the seller the specific purpose they intend for the

goods;

[b]This must be done in a way that shows that the buyer is relying on the seller’s skill

and judgment;

[c]The goods sold must be goods that the seller is in the business of selling; and

[d]Section 16(a) won’t apply if goods are sold under a patent or trade name.

[14] The courts have interpreted the reference to “specific purpose” as including a general purpose (for example milk purchased for the purpose of drinking it has been held to be goods purchased for a specific purpose - see Frost v Aylesbury Dairy Co [1905] 1 KB 608). In this case there was no particular or special purpose. The general purpose for a Toyota Hiace is transport. In those circumstances the requirement for the buyer to make that purpose known to the seller may be implied from the circumstances – in other words the purpose is so obvious that it is known to the seller.

[15] At least partial reliance on the seller’s skill and judgement is sufficient to invoke section 16(a). In this case the purchaser relied on the trader’s skill and judgement –which was clearly exercised in setting out the vehicle’s details in the Trade Me listing.

[16] The effect of the application of section 16(a) is to imply into the contract of sale, a condition that goods will be reasonably fit for purpose. In assessing whether the vehicle was reasonably fit for purpose, the Tribunal accepts that the expectations of purchasers of second-hand vehicles will be different to that of purchasers of new vehicles – in other words the circumstances surrounding the sale are relevant. The purpose for the goods in this case was transport. Notwithstanding that the vehicle was a second-hand vehicle with considerable mileage and was sold for a relatively modest purchase price, the Tribunal thinks the vehicle was probably fit for purpose because the purchaser obtained six months use of the vehicle and travelled 3,500kms in it during that period.

Section 16(b) – merchantable quality
[17] Section 16(b) provides that goods sold must be of merchantable quality but the following qualifications apply:

[a]The goods must be bought by description from a seller who deals in goods of that

description;

[b]Section 16(b) does not apply to any defect that examination ought to have

revealed – if the buyer has examined the goods.

[18] The vehicle in this case has been sold by description. In Taylor v Combined Buyers [1924] NZLR 627 (SC), Salmond J held that “even specific articles are sold by description in some sense. They are being sold as being of some specified and disclosed nature. ...A motor car is sold as a Calthorpe car, or as being a Ford car.”

[19] Salmond J went on to consider the appropriate question to be considered in deciding whether goods are of merchantable quality:

“Are the goods of such a quality and in such a state and condition as to be saleable

In the market, as being goods of that description, to buyers who are fully aware of

their quality, state, condition, and who are buying them for the ordinary purposes for

which goods so described are bought in that market?”

[20] As with the guarantee of acceptable quality under the CGA, an assessment of merchantable quality takes into account the description given to goods, the price and any other relevant circumstances. An assessment of merchantable quality also includes consideration of the durability of goods – it has been held that goods must remain of merchantable quality for a reasonable period of time after delivery (see Mash & Murrell Ltd v Joseph I Emanuel [1961] 1 All ER 485.)

[21] In this case the vehicle is a second-hand vehicle with considerable mileage (approximately 246,000 kilometres) sold for the relatively modest price of $6,200. The purchaser accepted it in July and drove the vehicle until January 2014. In reply to a question from the Tribunal the purchaser said that the vehicle, apart from the fan belt, did not have any issues until December 2013 when it began to overheat. Under those circumstances the Tribunal considers the vehicle probably complied with the implied condition as to merchantability and the purchaser is unable to obtain a remedy under the SOGA.

The Fair Trading Act 1986

[22] 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.”

[23] 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.”

[24] The trader advertised one of the features of the vehicle as “straight & tidy bodywork”. The Tribunal believes those words would convey to a reasonable person that the vehicle had not been involved in an accident and that the body work was otherwise in good condition. Yet within seven months and 3,496kms of use after the date of sale the vehicle was found on a warrant of fitness inspection to have rust in its left and right ‘A’ pillars which resulted in the vehicle failing its warrant of fitness on 4 January 2014. The Tribunal, on the advice of its Assessor thinks that in January 2014 the corrosion would have been well established in the vehicle’s bodywork. The present cost of repairing the rust in the vehicle, as quoted by Rio Motor Body Works is now $2,236.18 .

[25] 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."

[26] 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?

[27] The Tribunal is satisfied that the purchaser was misled regarding the vehicle’s

bodywork and that the trader’s advertising was an effective cause of the purchaser’s

loss or damage.

[28] 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 the

purchaser’s decision to proceed with the purchase of the vehicle. The Tribunal is

satisfied that such a nexus exists in this case because the purchaser’s decision to

purchase the vehicle has resulted in his receiving a vehicle which the Tribunal finds

is now badly damaged by rust.

[29] The Tribunal considers that the most appropriate remedy is to make an order for

the trader to pay the purchaser a sum equivalent to the estimate cost of remedying

the rust of $2,236.00.

Order

The trader will pay the purchaser the sum of $2,236 immediately.

DATED at Auckland this 29th day of September 2014.

___________________
C H Cornwell
Adjudicator