Bussey v Ajays Ford V8 Parts Limited - Reference No. MVD 245/15 (Auckland) [2016] NZMVDT 12; [2016] NZMVT Auckland 12 (9 February 2016)

Last Updated: 15 March 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2016] NZMVT Auckland 12

Reference No. MVD 245/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN DAVID CHARLES BUSSEY

Purchaser

AND AJAYS FORD V8 PARTS LIMITED

Trader

MEMBERS OF TRIBUNAL
Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S D Gregory, Assessor

HEARING at Hamilton on 5 February 2016

DATE OF DECISION 9 February 2016

APPEARANCES

Mr D C Bussey, the purchaser

Ms K Potter, purchaser’s partner and witness
Mr B E Smith, Director, for the trader
Mrs E J Smith, Office Manager for the trader

DECISION

The purchaser’s application to reject the vehicle is dismissed.

REASONS

Background

[1] On 5 April 2015, Mr Bussey (“the purchaser”) agreed to buy an unregistered, unwarranted 1938 Ford Deluxe (“the vehicle”) from Ajay’ Ford V8 Parts Limited (“the trader”) for $7,500. The purchaser claims the vehicle supplied to him by the trader was not of acceptable quality in breach of s6 of the Consumer Guarantees Act 1993 (“the CGA”), that the vehicle was not reasonably fit for the purpose for which the trader represented it would be fit in breach of s8 of the CGA and that the trader misrepresented the vehicle to him in breach of s13 of the Fair Trading Act 1986 (“the FTA”). The purchaser seeks to reject the vehicle and obtain a refund of his purchase price and also seeks consequential losses of $11,879.32.
[2] The trader denies it breached ss6 or 8 of the CGA or s 13 of the FTA. It says it sold the vehicle to the purchaser for restoration without any warranty and that the purchaser relied on his own knowledge and experience in buying the vehicle. The trader says the vehicle was 77 years old and it had no way of knowing the condition of the chassis and other panels in the vehicle.
[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 (“MVSA”), the Tribunal has appointed Mr Gregory as expert assessor to assist in the determination of the complaint. Mr Gregory took the oath required by clause 10(2) of Schedule 1 to that Act. As an assessor, Mr Gregory assisted the adjudicator but the Tribunal’s decision was made by the adjudicator.

The issues

[4] The issues requiring consideration are:

• (a) Whether the vehicle complied with the guarantee as to fitness for particular purpose in s8 of the CGA?
• (b) Whether the vehicle complied with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993?
• (c) Whether the trader misrepresented the vehicle to the purchaser in breach of the FTA?
• (d) If there has been a breach of the CGA or FTA what remedy is appropriate?

Issue [a]: Whether the vehicle complied with the guarantee as to fitness for particular purpose in s8 of the CGA?

Relevant law

[5] Section 8 of the CGA provides as follows:

8. Guarantees as to fitness for particular purpose

(1) Subject to section 41, the following guarantees apply where goods are supplied to a consumer:

(a) that the goods are reasonably fit for any particular purpose that the consumer makes known, expressly or by implication, to the supplier as the purpose for which the goods are being acquired by the consumer; and

(b) that the goods are reasonably fit for any particular purpose for which the supplier represents that they are or will be fit.

(2) Those guarantees do not apply where the circumstances show that—

(a) the consumer does not rely on the supplier's skill or judgment; or

(b) it is unreasonable for the consumer to rely on the supplier's skill or judgment.

(3) This section applies whether or not the purpose is a purpose for which the goods are commonly supplied.

(4) Part 2 gives the consumer a right of redress against the supplier where the goods fail to comply with any guarantee in this section.

Application of law to facts

[6] The purchaser, a dairy farmer, decided, without any previous experience of having done so, to restore a 1938 Ford Deluxe sedan which he had seen advertised for sale by the trader. The purchaser contacted the trader’s director, Mr Smith and went to see him at his premises. The purchaser says Mr Smith showed him the vehicle and told him it had been stored in a barn and was in good restorable condition. The purchaser says that Mr Smith told him that the repairs needed would include rocker panels, one or all four of the door bottoms, and a partial front floor replacement. The purchaser claims that Mr Smith also told him the expenditure of $10,000 would get the vehicle on the road.

[7] The purchaser says that after talking to his partner they decided that with the minimal repairs the vehicle required, that it would be a “cost effective” vehicle to restore and sent an offer on 5 April 2015 to the trader to buy the vehicle for $7,500, which the trader accepted. The trader delivered the vehicle to the purchaser on 7 April 2015.

[8] Ms Potter, the purchaser’s partner gave evidence that when Mr Smith delivered the vehicle to the purchaser’s home on 7 April she asked Mr Smith what repairs were needed to the vehicle and Mr Smith repeated that the rocker panels, door bottoms and front floor replacement would need replacement. Ms Potter did not ask what the cost of that work would be. The Agreement for Sale dated 7 April 2015 included the following term:

“iv The vehicle is sold as is, voetstoots”

[9] After purchasing the vehicle, the purchaser bought parts from the trader for $4,585.16 in April 2015 and on 13 May 2015 had the vehicle’s chassis and panels sand blasted to remove rust. The purchaser’s panel beater, Versatile Panelbeating Services Ltd (“Versatile”) inspected the chassis and panels after they had been sand blasted and advised the purchaser that the chassis was irreparable and that the mudguards, bonnet and running boards were uneconomic to repair. In a written quote dated 20 June 2015 Versatile quoted $900 to repair each door and $600 to repair the boot lid. Versatile’s total quote to repair the vehicle was $14,000 and $2,500 for a replacement chassis. In June 2015 the purchaser imported parts from the United States for $3,180.48 which he had air freighted to New Zealand at an additional cost of $599.18.

[10] In September 2015 the purchaser went to see the trader. The purchaser claims the trader told him that the vehicle was not restorable due to the cost of repairs outweighing the value of the vehicle. He says the trader also told him the vehicle was not his problem and he was not willing to help the purchaser. However, on 21 September the trader offered to buy back the parts which the purchaser had bought from the trader but was not prepared to buy the vehicle back or the other parts the purchaser had bought from the United States. That offer was rejected by the purchaser.

[11] On 3 October the purchaser sent the trader a letter rejecting the vehicle under the CGA because it was not fit for purpose due to the extent of rust in the chassis and body panels. The purchaser claimed a refund of the purchase price and consequential costs of an additional $10,579.32 for parts he had bought from the trader and a supplier in the USA and for sand blasting and panel repairs.

[12] In determining whether the trader’s sale of the vehicle breached s8 of the CGA I have had regard to the fact that the purchaser says he had no experience in restoring vehicles and that the trader is a supplier of old vehicles and car parts used for restoring old vehicles. I accept that the purchaser told the trader that he intended to restore the vehicle. However in order to have breached s8 the purchaser needed to show that he relied on the trader’s skill or judgement and that it was reasonable for him to do so. I am not convinced that he did or that it was reasonable for him to have relied on the trader. The purchaser in this case gave evidence that he decided, after discussing the matter with his partner, to buy the vehicle. I am not satisfied, on a balance of probabilities that the purchaser relied on the supplier’s skill or judgment but rather that he relied on his own intuition and judgement and assumed that he could restore this 77 year old vehicle. I find the purchaser agreed to buy the vehicle, without obtaining any reliable, independent or sufficient information about its condition, by, for example, having a panel beater inspect it to determine if the rust and condition of the panels was so serious as to prevent the chassis and panels being restored. I find the purchaser bought the vehicle in reliance on his own assessment.

Conclusion on issue [a]

[13] The purchaser did not rely on the supplier’s skill or judgment and hence the guarantee as to fitness for purpose in s8 of the Act does not, in terms of s8(2) of the CGA, apply.

Issue [b]: Whether the vehicle complied with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993?

Relevant law

[14] Section 6 of the CGA imposes on a supplier and the manufacturer of consumer goods "a guarantee that the goods are of acceptable quality." Section 2 of the CGA defines "goods" as including "vehicles.”
[15] The expression "acceptable quality" is defined in s 7 as follows:

7 Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

(2) Where any defects in goods have been specifically drawn to the consumer's attention before he or she agreed to the supply, then notwithstanding that a reasonable consumer may not have regarded the goods as acceptable with those defects, the goods will not fail to comply with the guarantee as to acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be treated as having been specifically drawn to the consumer's attention for the purposes of subsection (2) are those disclosed on a written notice displayed with the goods.

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and

(b) the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.

(5) A reference in subsections (2) and (3) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.

[16] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in s 7(1)(a) to (e) of the Act as modified by the factors set out in s 7(1)(f) to (j) from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view of those factors from the purchaser’s subjective perspective.

[17] In Stephens v Chevron Motor Court Limited [1996] DCR1, the District Court held that the correct approach to the Act was first to consider whether the vehicle was of “acceptable quality”. If the vehicle was not of acceptable quality, the next point to consider was whether the purchaser required the trader to remedy any faults within a reasonable time in accordance with s 19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s 21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser exercised his right to reject the vehicle within a reasonable time.

Application of law to facts

[18] In determining whether the vehicle supplied by the trader complied with the guarantee of acceptable quality, I have had regard first, to the nature of the goods, in this case a 77 year old Ford which was not in a road worthy condition, required expensive restoration to bring it to a road worthy condition, and had been stored in a barn for some time. Second, to the price for which it was sold of only $7,500. Third, to the purchaser’s claim, not denied by the trader, that the trader’s director Mr Smith said that the vehicle could be restored and that it needed rocker panels, door bottoms and a partial floor replacement however I accept the evidence given by Mr Smith that he did not tell the purchaser that the cost of these items was $10,000. Fourth, I have also taken into account, as I am required to do by s7(1)(ha) of the CGA, that the supplier (the trader) in this application is in the business of selling old cars and selling car parts for them. Finally, I have not taken in account the trader’s unlawful attempt to exclude its statutory liability under the CGA by purporting to sell the vehicle “as is, voetstoots,” - whatever that may mean. The Commerce Commission is the body responsible for enforcing s43 of the CGA which makes it an offence against s13(i) of the FTA for any supplier to purport to contract out of the CGA other than in accordance with s43(2) or s 43A of the CGA, neither of which apply in this case. The trader’s attempt to exclude the CGA in this manner was, in my opinion, unlawful.

[19] I am required by s7 of the CGA to consider whether a reasonable consumer fully acquainted with the state and condition of the vehicle, including any hidden defects would regard the vehicle as acceptable. I believe that a reasonable consumer buying such a vehicle would have very limited expectations of it. A reasonable consumer would probably recognise that their purchase was risky because the vehicle’s engine was not operating, the vehicle had been stored for some time, it was unlikely to have much original equipment on it after 77 years, and might prove to be too rusty to be economically repaired.

Conclusion on issue [b]

[20] Accordingly, I find that the vehicle did not fail to comply with the guarantee of acceptable quality because it was in no worse condition than a reasonable consumer would regard as acceptable having regard to the nature of the vehicle and its price. Accordingly I must dismiss the purchaser’s application to reject the vehicle on the grounds of a breach of s6 of the CGA.

Issue [c]: Whether the trader misrepresented the vehicle to the purchaser in breach of the FTA?
[21] The FTA 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.”

[22] 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.”

[23] In order to breach s 9 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.

[24] Section 13(a) of the FTA provides as follows:
“13 False or misleading representations

No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,—

(a) make a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use; or”...

[25] There are certain cases where one party may be under a duty of disclosure to the other of any relevant information in his or her possession. See Mills v United Building Society [1988] 2 NZLR 392. There are three circumstances where there will be a duty of disclosure, and silence may amount to misleading or deceptive conduct:
1) Where there is a fiduciary element in the relationship between the parties see Stevens v Premium Real Estate [2009] 2 NZLR384, (2009) 9 NZBLC 102,532; [2009] NZSC 15 (agent to principal);
2) Where a statement is made which is literally true, but which omits mention of other matters which make what was said inaccurate see Gloken Holdings Ltd v The CDE Co Ltd [1997] NZHC 457; (1997) 6 NZBLC 102,272;
3)Where one party makes a statement that is true, but subsequently fails to disclose the occurrence of a material change in circumstances see Gregory v Rangitikei District Council [1995] 2 NZLR 208. Some cases may involve half-truths and a failure to disclose see Hieber v Barfoot & Thompson Ltd (1996) 5 NZBLC 104,179. Some cases are founded on whether there is something in the circumstances of the transaction which gives rise to a reasonable expectation that one party would volunteer information as to matters of importance to the other see Tuiara v Frost & Sutcliffe [2003] 2 NZLR 833. However, the courts will be slow to find that a party to an arm’s-length commercial transaction has misled the other party by silence. The key question is whether in all the circumstances the failure to speak is misleading see Guthrie v Taylor Parris Group Cossey Ltd (2002)10 TCR 367.

Application of law to facts

[26] The purchaser claimed that the trader misled him by not disclosing that the vehicle’s engine was not fully rebuilt, that many of the parts were not original, that parts such as the dipstick and housing, front fan assembly, voltage regulator and solenoid were missing and that the engine was later found to be seized. The purchaser also says the trader misled him by not giving him information about the vehicle prior to his agreeing to buy it. I think, applying the principal in the decision of Tuiara v Frost (above), that the trader in this arms lengths commercial transaction probably had no duty to point out to the purchaser the faults with the vehicle.

[27] I also doubt whether a reasonable person in the purchaser’s situation would have been misled or deceived by the trader’s statement that the restoration work on the vehicle would be limited to the rocker panels, the door bottoms and the replacement of the front floor because a reasonable person would expect the restoration of an old vehicle like this to involve tens of thousands of dollars and many hours of work by skilled trades people. The Tribunal considers the purchaser was naïve in expecting to get the vehicle on the road for much less than $60,000 and careless in buying the vehicle from the trader without getting expert advice from a panel beater, a mechanic, and someone who had restored a 1938 Ford before he took the first step in buying the vehicle.

Conclusion on issue [c]

[28] The purchaser’s claim that he was misled by the trader was not proved and the purchaser’s claim must be dismissed.

DATED at AUCKLAND this 9th day of February 2016

C. H. Cornwell
Adjudicator