Pelorus Mail Boat Limited v Harbour Wholesale Limited - Reference No. MVD 27/15 (Auckland) [2015] NZMVDT 35 (27 March 2015)

Last Updated: 18 April 2015

Decision No: AK 35/2015
Reference No. MVD 27/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN PELORUS MAIL BOAT LIMITED

Purchaser

AND HARBOUR 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 March 2015

APPEARANCES

Mr J Baillie, Director, representing the purchaser

Mr R T Stratford, Sales Manager for the trader
Mr A B Christie, Director for the trader

DECISION

Background

[1] On 6 December 2014 Pelorus Mail Boat Limited (“the purchaser”) agreed to buy a 2000 Toyota Hiace van registration EDU120 (“the vehicle”) sight unseen from Harbour Wholesale Limited (“the trader”) for $15,000. The purchaser says that the trader advertised the vehicle as being in “very clean original condition and hard to fault.” When the purchaser received it the vehicle had a number of faults which meant that the vehicle was not suitable for use in the purchaser’s business. The purchaser seeks damages of $8,625 from the trader equivalent to the cost it has been quoted to repair the vehicle’s bodywork and treat the rust.

[2] The trader’s defence is that the trader recommended that the purchaser obtain a pre-purchase condition report on the vehicle but the purchaser failed to do so. It says the purchaser also had the opportunity when the vehicle was at North Shore Toyota having its cam belt replaced before it was driven to Havelock to have an inspection of the bodywork undertaken by a mechanic but the purchaser did not do that either. Finally the trader says that the trader delivered the vehicle to Auckland Airport to the purchaser’s representative who was to drive it to Havelock and that person had another opportunity to inspect the vehicle before it left Auckland.

[3] 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 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.

The 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 under the FTA?

Issue [a]: Whether the trader misrepresented the vehicle to the purchaser?

Legal Principles

[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.”

[7] In order to breach s9 there is no requirement that there be an intention to mislead or deceive see Taylor Bros Limited v Taylors Textile Services Auckland Limited (1987) 2 TCLR 415 at 447.

Application of law to facts

[8] The purchaser agreed to buy the vehicle from the trader on 6 December 2014 after viewing an advertisement containing details of it on TradeMe. The trader’s advertisement described the vehicle as a Toyota Hiace LWB 13 seat 2000 and contained details of the number plate, distance travelled, (133,039kms) colour, fuel type, engine size and features. Included in the description of the vehicle the trader claimed that the vehicle was:
“13 Seater all rear seats certified and fitted by van extras” and the trader described the vehicle’s condition as:
“Very clean original condition and hard to fault.”

[9] The purchaser says that he relied on the trader’s description of the vehicle because the seller was a motor vehicle trader and not a private seller. Mr Baillie says that he would not have bought the vehicle if it had been offered for sale by a private seller. He says that the trader’s Sales Manager, Mr Stratford, told him in a pre-purchase conversation when he asked if a shadow on the driver’s side was a repaint shadow, that the vehicle had not been repainted “just touched up in places where there had been a company logo or stickers removed and a small rust repair on the rear door.” Mr Stratford told Mr Baillie that the vehicle had a “3 litre turbo engine” whereas it has a naturally aspirated (non turbo) engine.

[10] Mr Baillie says he specifically asked Mr Stratford before he agreed to buy the vehicle if there was anything at all wrong with the vehicle that he should be aware of. He says Mr Stratford had replied that the vehicle was “really clean and in original condition” and that Mr Baillie would be very happy with it.

[11] Relying on these assurances the purchaser bought the vehicle from the trader for $15,000 which it paid on 9 December 2014. It arranged for the trader to take the vehicle to North Shore Toyota on 11 December to replace the timing belt and tensioner sub-assembly and serviced the vehicle. The trader then delivered it to Auckland Airport for collection by a representative of the purchaser who drove it to Havelock, near Picton.

[12] When the vehicle arrived in Havelock the purchaser sent photographs and a video of the vehicle’s faults to the trader. Mr Baillie says the faults he found were:
a) rust in the driver’s footwell and a small hole in the floor
b) rust in several places painted over in the back door
c) the vehicle’s roof was dented and scraped
d) the driver’s door panel had broken and was hanging loose
e) the base of the seat was broken
f) body filler and rust around the window
g) rust inside the back door
h) the roof headlining was hanging down
i) rust under the floor lining at rear wheel arch.

[13] Mr Baillie says he spoke to Mr Stratford who said that whatever was wrong the trader would get fixed and said he was unaware of the faults found by the purchaser. On 23 December 2014 the purchaser sent an email to the trader claiming it had breached the Fair Trading Act by misleading him as to the state of the vehicle in both verbal communications and in the advertisement on TradeMe. He sent a pdf document containing pictures of the faults which he says showed the vehicle was not in the “very clean original condition hard to fault” state advertised by the trader. The purchaser in that email informed the trader it required a refund of $3,000 within seven working days and said he believed the repairs necessary to bring the vehicle up to the described standard would far exceed that sum. The trader responded on 6 January 2015 by offering the purchaser $1,000 as an ex gratia payment.

[14] The purchaser obtained a written quotation from Harris Best Panelbeaters Ltd dated 4 February 2015 for a total of $8,625 to repair the various faults with the vehicle’s bodywork which included a sum of $1,200 plus GST to “check van for additional corrosion”. Mr Baillie was unsure what that was for. It also contained an amount of $180 for “repair to RH chassis damage” which Mr Baillie was unable to explain and $300 plus GST for “rust prevention treatment –chassis” which Mr Baillie was unable to explain.

[15] Mr Baillie says the trader has refused to take the vehicle back and give the purchaser a refund and when he asked Mr Christie, the trader’s director to do so Mr Christie swore at him. The trader made no attempt to engage in mediation after the purchaser filed its application.

[16] Mr Stratford for the trader says that he wrote the advertisement which appeared in TradeMe. He says that apart from re-spraying the wheels to clean them up the trader did not do any work on the vehicle before it sold it to the purchaser. Mr Stratford says he was not aware of the dented and scraped condition of the vehicle’s roof. The photographs sent by the purchaser showing that damage were a surprise to him as was the drooping headlining which he admits he should have noticed. He claims the door panel was not damaged when the vehicle was supplied to the purchaser’s representative at Auckland Airport and says he was unaware of the rust in the floorwell.

[17] Mr Christie the trader’s director says he considers the purchaser’s repair claim is “over-exaggerated” and the purchaser should have had the vehicle inspected before it agreed to buy it and had ample opportunity to do so.

[18] The Tribunal is satisfied, after listening to the evidence of the parties that the vehicle had a number of obvious faults which the trader’s sales manager failed to refer to in his description of the vehicle or deliberately misled the purchaser regarding and which made the trader’s advertised description of the vehicle as being “Very clean original condition and hard to fault” totally false and misleading. The Tribunal considers that the trader deliberately set out to mislead the purchaser by either not describing the faults accurately or ignoring them. The Tribunal thinks that a reasonable purchaser would probably have been misled by the trader’s description of the vehicle.
.
Conclusion on issue [a]

[19] The Tribunal finds that the trader misled the purchaser regarding the vehicle’s condition.

Issue [b]: What remedy is appropriate?

Legal Principles

[20] The remedies available for a breach of the FTA are discretionary. They are set out in s43 of the FTA:

"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."

[21] 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?

[22] The Tribunal is satisfied that the purchaser was misled and that the trader’s conduct in representing the vehicle as being in very clean original condition was the effective cause of the purchaser’s loss or damage.

[23] 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.

[24] The purchaser submitted a quotation for the cost of repairs totalling $8,625 from a panelbeater in Renwick. The Tribunal, assisted by its Assessor, has carefully considered each item on the Harris Best Panelbeaters Ltd quotation and considers that a fair and reasonable amount to bring the vehicle to a good condition is $3,500 to cover the cost of repairs to the footwell, rust repairs to the back door, repairing and repainting the roof, repairing rust in the footwell area, refitting the door panel and the headlining and repairing the broken seat base.

Costs
[25] 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.”

[25] The trader received the purchaser’s application and a written advice from the Tribunal to contact the purchaser and attempt mediation in terms of clause 5(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003. The trader chose not to try and mediate the dispute. The Tribunal considers that had the trader attempted mediation in good faith the matter ought reasonably to have been settled.

[26] Mr Baillie claimed $406 for his return airfare from Blenheim to Auckland to attend the hearing and $76 for shuttle bus fares to and from Auckland Airport. The Tribunal will order the trader to pay these costs.

Order

Harbour Wholesale Limited shall pay Pelorus Mail Boat Limited $3,982 immediately.

DATED at AUCKLAND this 27th day of March 2015

C.H Cornwell
Adjudicator