Johnson v Resplendent Autos Limited Reference No. MVD 150/14 (Auckland) [2014] NZMVDT 138 (15 December 2014)

Last Updated: 22 January 2015

Decision No:122 /2014 Reference No. MVD 150/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN GARY RAYMOND JOHNSON

Purchaser

AND RESPLENDENT AUTOS LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S D Gregory and Mr N Barrett, Assessors

HEARINGS at Christchurch on 6 October and 10 December 2014.

APPEARANCES

Mr G R Johnson, the purchaser
Mrs L Johnson, purchaser’s wife and witness
Mr J H Hobcraft, director representing the trader

DECISION

Background

[1] On 8 June 2014 Mr Johnson (“the purchaser”) bought an uncomplied, unregistered 1999 Chevrolet Corvette C5 (“the vehicle”) by auction for $23,350 from Resplendent Autos Limited (“the trader”). The purchaser claims that the trader’s TradeMe advertisement misrepresented the cost of obtaining compliance certification for the vehicle as $2,000. The purchaser seeks to recover from the purchaser $12,719.88 which he calculates is the additional cost, with legal fees, that he has incurred in getting the vehicle to compliance certification condition.

[2] The trader says, first, that the estimated cost of getting the vehicle to compliance standard was indicative only. Second, that the purchaser knew that the vehicle had been repaired following an accident and that the left front guard and the front of the vehicle had been replaced. Third, the trader also says that the purchaser made a highly risky purchase for less than market value and, finally, it denies that it represented the vehicle as “road ready”.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal appointed Mr Gregory and Mr Barrett as expert assessors to assist in the determination of the complaint. Mr Gregory and Mr Barrett both took the oath required by cl10 (2) of Schedule 1 to that Act. As assessors Mr Gregory and Mr Barrett assisted the adjudicator but the application was determined by the adjudicator alone.

The issues

[4] The issues raised by this application are:
[a] Whether the trader misrepresented the cost of getting the vehicle to compliance standard?
[b] If so what remedy is appropriate?

Issue [a]: Whether the trader misrepresented the cost of getting the vehicle to compliance standard

[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 in that case 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.”

[7] The trader advertised the vehicle on TradeMe on or about 25 May 2014 as a one owner imported 1999 Chevrolet Corvette C5 with an eight cylinder 5700cc engine, an automatic transmission and an odometer reading of 99,000kms. It advertised the vehicle’s features as follows:
ABS brakes
Air conditioning
Alarm
Alloy Wheels
Central locking
Driver airbag
Passenger airbag
Powers steering
Sunroof.
The trader then described the vehicle in the following terms:
“Awesome Corvette!
Looks mean in black with great paint work, very eye catching.
Performance is excellent; you’ll wear a grin from ear to ear in this machine.
Targa top, head up display, Bose sounds well featured.
The LS1 V8 is outstanding...old corvettes I’ve had have been banging old clunkers and thirsty to boot! This car is not! Unbelievably economical to drive.
Round town sits at 12-13 L per 100k...You can actually drive this car as a daily driver, it is modern, convenient, nimble and economical whilst looking outstanding.
Large exhaust with great American throaty sound!
I bought this in 18 months ago and have enjoyed her. Always garaged.
A tidy example although not absolutely 100% perfect, but for a 15 year old machine it’s pretty damn awesome.
I have had the car inspected for compliance and the following must be done...
1. Brake disc machining or replacements
2. Brake pads replacements
3. New or 2nd hand tires, the ones on her are a little perished although there’s plenty of tread on them.
4. Ordinary headlight bulbs fitted rather than the current xenon HID units.
Done yourself for 1K easily or send it to a workshop to do everything and you’ll easily be all done and on the road for 2K or less. I was going to keep this car and put it on the road but family obligations mean it has to go! It needs a special interest permit process completed and LHD permit done together. This is basically an additional charge of around $307 on top of the compliance fee of around $450, the VINZ guys will handle everything for you and all corvettes get these permits with no fuss. There are only a few permits left this year so you may or may not be able to put it on the road this year depending on how quick you are! If you’re too slow then you’ll need to wait until Jan 15.
All in all a small amount of work as VINZ will do the rest for you.
May look at trades but I need to get some cash out of this deal quick so can’t do same value trade in. But will look at your proposals with cash difference my way”

[8] The purchaser says he read the trader’s advertisement on TradeMe and arranged to go to the trader’s premises to view the vehicle on 6 June. He says he had not previously purchased an uncomplied vehicle. The vehicle he inspected at the trader’s premises was not complied and was not road legal. The purchaser says that Mr Hobcraft told him that he had imported the vehicle and driven it on dealer plates for 18 months without the vehicle being warranted or registered. The trader put dealer plates on the vehicle and took the purchaser for a test drive. The vehicle ran very well. The purchaser says that Mr Hobcraft told him the vehicle had a new guard on its right hand side. The purchaser says that he understood from the trader’s advertisement on TradeMe that it would cost about $2,000 to have the four items of work described in the trader’s advertisement done in order to obtain compliance certification for the vehicle. The purchaser says he also gained the impression from Mr Hobcraft that he was an experienced importer of rare vehicles. The purchaser says that a telephone call he made to the trader on 3 June and his visit and discussion with Mr Hobcraft of the trader on 6 June was the only time, before he bought the vehicle, that he discussed it with the trader.

[9] The purchaser says he bid for the vehicle on the Trade Me internet auction and when the auction closed on 8 June 2014 his was the highest bid at $23,350. Mr Hobcraft delivered the vehicle to the purchaser on 10 June 2014 and signed a receipt on a copy of the Trade Me advertisement on behalf of the trader company. The purchaser paid the trader $23,250 in cash; the difference of $100 between the bid price and the amount he paid the trader was because when Mr Hobcraft delivered the vehicle to the purchaser its engine was making a screeching sound which Mr Hobcraft said was due to the fan belt. The trader allowed the purchaser a $100 credit off the agreed price to get that fixed. The purchaser says it was not the fan belt that was causing the engine to screech but a harmonic balancer which cost him $1,106.50 to fix.

[10] When he delivered the vehicle to the purchaser Mr Hobcraft supplied the purchaser with documents he told the purchaser that he would need to supply to VINZ for compliance including a chassis alignment certificate issued in May 2014 by Hammonds Collision Centre, a fuel economy certificate and an export certificate. The trader did not display or provide the purchaser with a Consumer Information Notice at the time of sale nor supply him with importation documents showing when the vehicle had been imported into New Zealand although the trader subsequently supplied the purchaser with an a copy of a CIN signed by the trader.

[11] On 11 June 2014 the purchaser says he contacted the trader for the frontal safety compliance certificate and Mr Hobcraft promised to supply it but has not done so. The purchaser’s company, Expandatrack Ltd paid L Routhan vehicle broker $520 for this on 27 June 2014.

[12] On 13 June 2014 Expandatrack Ltd paid Tyres 2 Go Ltd $1,000 for four new tyres which the purchaser says were fitted to the vehicle. The purchaser also gave evidence that he had spent the following sums on the vehicle since purchasing it:

Date Supplier Item Cost
23/6/14 Kaiapoi Vehicle Front and rear brake
Maintenance rotors and brake pads,
belts idlers and idler
bearings $1,911.80.

24/6/14 Rangiora Exhaust welding exhaust $78.20

10/7/14 Independent Verification
Services part check $144.33

2/7/14 Kaiapoi Vehicle replace harmonic pulley
Maintenance front main crank seal and
Top up power steering fluid
Adjust hand brakes $1,106.50

8/7/14 VINZ Vehicle compliance
Inspection $475.00

[13] On 7 July the purchaser sent the trader an email telling it he was disappointed with the purchase and had spent $4,692.50 on the vehicle (not including compliance and registration fees) and that if any other unknown costs occurred he would be seeking reparation for extra costs from the trader. The purchaser claimed that accurate and “knowledgeable information” was not given to him at the time of purchase. He asked the trader for a response. The trader replied on 8 July saying it had never undertaken any repairs on the vehicle and claimed it had told the purchaser the front left guard and nose had been replaced and that those repairs must have been done in Japan. The trader also claimed it had told the purchaser that because of those replacement panels the compliance process would require a full chassis measure certificate which it had completed prior to sale including a wheel alignment. The trader said that the safety standards documentation had “caught it by surprise”. With regard to the cost of repairs the trader said it had identified the need for new rotors and pads in the advertisement as a compliance requirement and it sent the purchaser a copy of an advertisement for slotted and vented disc and metal pads at $NZ342 including express shipping. On the cost of the new harmonic pulley the trader apologised but included a copy of an advertisement for a harmonic pulley at $NZ172 including express delivery. The trader said that new tyres had been stated as a compliance requirement and compliable tyres could have been bought for $500. The trader said it did not know the exhaust was damaged but that the cost of $78 to repair the exhaust seemed reasonable given the age of the vehicle. The trader said that it had the vehicle “casually inspected by a VTNZ friend” as to the obvious jobs required for compliance which resulted in the advertised list and its obtaining the chassis measurement report. The trader went on to say “this was not a guarantee as to the absolute work required” and that it was merely intended to provide “an idea to prospective purchasers”. The trader concluded by saying that it had stated clearly that the vehicle required repairs and permits to complete the process and stated estimates on costs and it denied that it had represented the vehicle as usable on NZ roads or as being in a condition suitable for compliance for use on NZ roads. The trader’s email ended by saying that Mr Hobcraft thought the purchaser had been overcharged for repairs.

[14] The purchaser replied by email to the trader on 8 July saying he believed he had been misled and that the compliance inspection that had been carried out required the following work:
1 TV to be removed,
2. the chassis to be straightened because the right front was bent,
3. the de-tinting of the windows and
4. new headlight units.
The purchaser asked the trader to either contribute to the extra costs incurred and future costs to make the vehicle driveable on New Zealand roads saying he would not have bought the vehicle if he knew about the extra costs and major structural issues. In the alternative the purchaser asked the trader to refund the purchase price and the repair cost incurred and take the vehicle back.

[15] On 10 July the purchaser sent the trader a further email saying the vehicle was at an approved VINZ workshop being assessed and a quote prepared for the extensive repairs required. The purchaser said he would forward a copy of the quote to the trader and ask it to pay for repairs exceeding the $2000 on road costs or have the trader choose a VINZ qualified workshop of its choice to carry out the repairs.

[16] On 25 July Hesson & Bowry Collision Centre Ltd (“Hesson”) gave the purchaser an estimate of $11,853.28 to repair and align the vehicle’s chassis, replace the left front top suspension arm and the headlamps of which $7,669.20 plus GST or $8,819.58 related to the cost of parts. The purchaser decided to import the parts himself which he did from the United States at a cost, with freight, of $3,395.95 all of which was paid by Expandatrack Ltd. On 26 September 2014 Hesson gave the purchaser a second estimate of $3,525.90 to repair the vehicle’s chassis, de-tint the glass, fit the head lamps and remove the TV with the purchaser supplying all parts.

[17] The trader produced a time line of events from which it confirms the purchaser’s evidence that apart from a telephone conversation on the evening of 3 June 2014 in which the meeting on 6 June was arranged, and the meeting on 6 June, there was no other pre-contractual discussions or meetings between the parties.

[18] Mr Hobcraft for the trader says that he considers the purchaser paid too much for some of the work he had done on the vehicle and the cost of parts for the brake components and harmonic balancer. In particular Mr Hobcraft says that the purchaser was overcharged by Hesson.

[19] Mr Hobcraft also says that the reason he did not supply a consumer information notice on the vehicle is because he did not believe he had to do so. He says that in his mind he thought he was selling a “parts car”. When he realised he had to supply a CIN he did so but of course it was not supplied to the purchaser at the time of supply and signed by the purchaser as required by the relevant regulations.

[20] The purchaser told the Tribunal that he had long held desire to own a Chevrolet Corvette car. He says he has had no experience of getting an imported vehicle complied and he has little mechanical knowledge. The purchaser naively thought that instead of buying a fully complied and registered Corvette for about $30,000, that he could buy an uncomplied unregistered vehicle for $23,250 from an experienced importer and trader of American vehicles and, by spending $2,000, get a vehicle which he imagined would then be worth $30,000. The Tribunal has no doubt that the purchaser was deceived by both the content and the tone of the trader’s advertisement and in particular the following statements in the advertisement:
(a) that the trader had the vehicle pre-inspected for compliance and that it required [only] four items of work done to obtain compliance certification, namely:
(i) the brake discs machined or replaced,
(ii) the brake pads replaced,
(iii) new or 2nd hand tires,
(iv) ordinary headlight bulbs fitted;
and
(b) That the compliance of the vehicle could be done “for 1k easily” or sent to a workshop to do everything and the vehicle could be “on the road for 2k or less”

[21] When the trader was challenged by the purchaser in an email on 7 July regarding the cost of getting the vehicle complied, Mr Hobcraft claimed the vehicle had only been “casually inspected by a VTNZ friend” and that his stipulation of the four items of work necessary for compliance was “not a guarantee as to the absolute work required.”

[22] The Tribunal has no hesitation in finding that the trader’s advertisement was misleading as to the cost of obtaining compliance for and getting the vehicle on the road and that the trader’s specific claim that this could be done for $2,000 or less was egregiously misleading because the vehicle had been damaged as the trader knew and it required considerably more than $2,000 to get it on the road. The Tribunal has no doubt that a reasonable person in the purchaser’s position would have been misled by the trader’s advertisement. The Tribunal does not accept the trader’s defence that the price quoted of $1000 or $2,000 to get the vehicle repaired was indicative only as has been claimed by the trader. This is because the purchaser, having met Mr Hobcraft and been taken to the trader’s premises on 6 June before the auction closed and viewed other vehicles which had been imported by the trader clearly regarded Mr Hobcraft as a person with expert knowledge regarding the importation and compliance of vehicles and placed reliance on him and the veracity of the trader’s advertisement. The advertisement was quite specific in saying the vehicle could be on the road for $2,000 or less. Nor does the Tribunal accept the trader’s claim that the purchaser could have obtained the parts cheaper if he had imported them from the United States. In fact the purchaser did import $3,395 of parts from the USA. The Tribunal believes that the tone of the trader’s advertisement made the task of getting the necessary approvals sound easy. For example the trader’s advertisement in describing the obtaining of a special interest permit said that “the VINZ guys will handle everything for you” in obtaining a special interest permit and that “all corvettes get these permits with no fuss”.

Conclusion
[23] The Tribunal finds that the trader’s conduct was misleading and that the purchaser was in fact misled by the contents of the trader’s advertisement.

Issue [b]: What remedy is appropriate?

[24] The remedies available for a breach of the Fair Trading Act are discretionary. They are set out in s43 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."

[25] 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?

[26] The Tribunal is satisfied that the purchaser was misled and that the trader’s advertising was the effective cause of the purchaser’s loss or damage.

[27] 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 has cost the purchaser significantly more than the $2,000 referred to in the trader’s advertisement to get to compliance standard. The Tribunal was given a schedule and copies of invoices which show that the purchaser’s cost to get the vehicle on the road was $13,606.13 or $11,606.13 more than the trader had represented the vehicle would cost to get on the road. The purchaser might have elected to place good quality second hand tyres on the vehicle and saved a further $500 so that the purchaser’s cost of getting the vehicle on the road was probably $11,100 more than the trader represented. The purchaser claimed the reimbursement of legal costs of $1,113.75 but these appear to have been charged to Expandatrack Ltd as do a number of other charges for the compliance of the vehicle. The Tribunal understands from a letter dated 26 November 2014 it was sent by Expandatrack Ltd’s accountant that the transactions which were paid by Expandatrack Ltd will be coded as shareholder drawings because they are all personal to the purchaser with the company providing the funds. On that basis the Tribunal accepts that the measure of the purchaser’s loss is $11,100 and will order the trader to pay that sum to the purchaser immediately.

Order

Resplendent Autos Limited shall pay Gary Johnson $11,100 immediately.

DATED at AUCKLAND this 15th day of December 2014

C.H Cornwell
Adjudicator