Loveland v Motor 1 Limited T/A City Motor Group Reference No. MVD 297/2017 [2017] NZMVDT 209 (11 December 2017)

Last Updated: 16 January 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 209 Reference No. MVD 297/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	MICHAEL ANDREW LOVELAND
		Purchaser
	AND	MOTOR 1 LIMITED T/A CITY MOTOR GROUP
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 23 November 2017
DATE OF DECISION 11 December 2017
APPEARANCES
Mr M Loveland, Purchaser Mrs L Loveland, Witness for the Purchaser
Mr G Shaw, for the Trader

ORDERS

1. Motor 1 Limited, trading as City Motor Group shall, within 10 working days of the date of this decision, pay $13,180 to Michael Loveland.
2. Mr Loveland must then make the vehicle available to be uplifted by the trader.

DECISION

[1] City Motor Group made representations to the effect that the vehicle’s battery capacity and health exceeded 85% of the maximum of a new battery. Those representations were misleading in breach of s 9 of the Fair Trading Act 1986 (“the Act”) because the vehicle’s battery capacity and health was less than 85%. The vehicle has a fault that causes the battery capacity indicator to give a false reading as to the vehicle’s battery capacity and health
[2] Mr Loveland has suffered loss by being misled as to the vehicle’s battery capacity and health. The vehicle is now worth substantially less than what Mr Loveland paid for it because of the fault that causes the battery capacity indicator to give a false reading as to the vehicle’s battery capacity and health. Further, Mr Loveland would not have purchased the vehicle had he known of the discrepancy between the battery capacity indicator and the true state of the battery’s capacity and health.

REASONS

Introduction

[3] On 30 July 2017, Michael Loveland purchased a 2011 Nissan Leaf for $12,480 from Motor 1 Limited, trading as City Motor Group. The vehicle had an odometer reading of 40,840 kms at the time of sale. Mr Loveland also paid transport costs of $300 and purchased a towbar for $595 and a reversing camera for $400.
[4] The vehicle is an electric vehicle. The batteries in electric vehicles degrade over time, due to a range of factors including environmental conditions, the charging behaviour of the owners and the manner in which the vehicle has been used.
[5] The vehicle has a battery capacity indicator, which is designed to give an indication of battery capacity and health. The battery capacity indicator in this vehicle has 12 bars, with all 12 bars being illuminated indicating that the battery capacity exceeds 85% of a new battery’s capacity. As the battery ages, its capacity (i.e. its ability to hold charge) diminishes, meaning each full charge results in a slightly reduced range compared to when the car was new. With time, the battery capacity indicator slowly drops, representing that reduction in capacity.
[6] Mr Loveland was attracted to this vehicle because of the state of its battery capacity and health. Mr Loveland lives in Katikati, and was looking for an electric vehicle with sufficient range to enable him to travel between Katikati, Tauranga and Auckland. Mr Loveland saw a photograph on Trade Me that showed that the vehicle’s battery charge capacity indicator was at 12 bars. Further, when Mr Loveland inspected the vehicle, all 12 bars on the visual display were illuminated. Mr Loveland understood this to mean that the vehicle’ battery capacity exceeded 85% of a new battery’s capacity.
[7] Shortly after he purchased the vehicle, Mr Loveland noticed that the vehicle’s range was inconsistent with the battery capacity indicator. Mr Loveland has now applied to the Tribunal seeking to reject the vehicle and obtain a refund of amounts paid in respect of the vehicle. He says that he was misled into purchasing the vehicle. Mr Loveland says that the vehicle has a fault that causes the battery capacity indicator to give a false reading as to the battery’s true capacity and health. Mr Loveland says that the vehicle’s range is much less than indicated by the battery capacity indicator.
[8] City Motor Group denies that the vehicle has any fault. It says that the vehicle’s performance is consistent with a Nissan Leaf of this age and mileage.

The Issues

[9] The issues requiring consideration in this case are:

• (a) Does the vehicle have a fault with its battery capacity indicator?
• (b) Did City Motor Group make any representation about the vehicle’s battery capacity or health?
• (c) Were those representations misleading in breach of s 9 of the Act?
• (d) If so, what remedy is Mr Loveland entitled to under the Act?
  

Does the vehicle have a fault with its battery capacity indicator?

[10] Shortly after purchasing the vehicle, Mr Loveland drove from Katikati to Matata, stopping in Tauranga to charge the vehicle. When he arrived in Matata he discovered that the vehicle’s battery was nearly drained. The distance from Tauranga to Matata is approximately 60 kilometres, and the battery had 22 kilometres of range remaining. Mr Loveland says that, because the battery charge capacity indicator was at 12 bars, he expected the vehicle to have a minimum range of 108 kilometres.
[11] There is no electric vehicle charging station in Matata. The vehicle was towed to Whakatane, where it was fully charged. Mr Loveland then returned to Katikati, stopping in Maketu and Tauranga to recharge the battery.
[12] Mr Loveland says that this experience demonstrates that the vehicle’s battery capacity is much lower than he was led to believe.
[13] On 22 August 2017, Mr Loveland had the vehicle assessed by Farmer Motor Group Limited, trading as Farmer Autovillage. Farmer Autovillage is a Nissan Franchise repairer based in Mt Maunganui. Farmer Autovillage found that although the vehicle’s battery capacity indicator showed that the battery’s capacity was between 85% and 90%, the vehicle’s actual battery capacity level was 74.9%.
[14] City Motor Group has also advised that the vehicle was assessed for a prospective purchaser some time before Mr Loveland purchased it. That assessment showed that the vehicle’s battery capacity at that time was 82%.
[15] When Farmer Autovillage assessed the vehicle on 22 August 2017, the vehicle’s computer recorded that the vehicle had been charged on only 13 occasions, which is impossible given the age and mileage of the vehicle. One would expect the vehicle to have been charged on hundreds of occasions. The vehicle has a maximum range of a little more than 100 kilometres. It had travelled more than 40,000 kms when it was assessed by Farmer Autovillage.
[16] Mr Loveland alleges that the vehicle’s computer has been tampered with, and its charge history deleted. Mr Loveland says that the deleted charge history causes the vehicle’s computer to behave as if a new battery has been installed, which induces the battery capacity indicator to display that the battery has full capacity.

The vehicle has a fault with its battery capacity indicator

[17] I am satisfied that the vehicle has a fault that causes the battery capacity indicator to give a false reading as to the vehicle’s battery capacity and health.
[18] The evidence provided by Mr Loveland, Farmer Autovillage and City Motor Group shows that the vehicle’s battery capacity is less than is represented on the battery capacity indicator.
[19] Mr Gregory, the Tribunal’s Assessor, advises that the vehicles engine control unit (“ECU”) is not measuring the battery’s true capacity accurately and is then giving an incorrect reading to the battery capacity indicator. Mr Gregory advises that, as alleged by Mr Loveland, the fault could have been caused when the vehicle’s charging history was erased. However, Mr Gregory notes that if the fault was caused by the erased charge history, the vehicle’s ECU and battery capacity should have synced to within reasonable accuracy by now, which has not happened. On that basis, Mr Gregory considers that the discrepancy between the battery capacity indicator and the vehicle’s true battery capacity may be caused by an undiagnosed fault, or an inherent problem with the vehicle’s software.

Did City Motor Group make any representation about the vehicle’s battery capacity or health?

[20] During the hearing, City Motor Group suggested that it did not make any representation as to the vehicle’s battery capacity or health.
[21] I do not accept this submission. I consider that the photograph on the Trade Me listing, which shows that all 12 bars of the vehicle’s battery capacity indicator illuminated, is a representation as to the vehicle’s battery capacity and health.
[22] Likewise, when Mr Loveland inspected the vehicle, all 12 bars of the battery capacity indicator were illuminated. I consider that this also amounts to a representation as to the battery’s capacity and health.
[23] In Given v C V Holland (Holdings) Pty Ltd,[1] the Federal Court of Australia held, in circumstances where there was no suggestion that any officer of the company had drawn the attention of any customer to the odometer reading, that by placing a vehicle on display for sale with a mileage shown on its odometer, the seller has made a representation that the vehicle has travelled the number of miles shown on the odometer.
[24] The Federal Court’s reasoning applies in this case. I consider that, even though no officer of City Motor Group made a direct representation to Mr Loveland about the vehicle’s battery capacity, by placing the vehicle on display for sale, with its battery capacity and health shown on the battery capacity indicator, City Motor Group has made a representation that the battery’s capacity is as shown on the battery capacity indicator.

Were those representations misleading?

[25] The question I must then answer is whether, in making those representations about the vehicle’s battery capacity and health, City Motor Group has engaged in conduct that breaches s 9 of the Act, which 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.”

[26] 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 judgment 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. ... 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.”

The representations were misleading

[27] Mr Gregory advises that the battery capacity indicator on a 2011 Nissan Leaf provides a guide as to the state of the battery’s capacity and health. Mr Gregory advises that a reading of 12 bars on the battery capacity indicator is intended to show that the battery capacity is at least 85% of a new battery’s capacity.
[28] I am therefore satisfied that City Motor Group represented, through the Trade Me photograph, and by placing the vehicle on display for sale, with its battery capacity and health shown on the battery capacity indicator, that the vehicle’s battery capacity was at least 85% of a new battery’s capacity.
[29] As shown by the information provided by City Motor Group as to the testing performed before it sold the vehicle, the testing conducted by Farmer Autovillage shortly after Mr Loveland purchased the vehicle, and by the range Mr Loveland has achieved while driving this vehicle, the battery’s capacity is likely to have been less than 85%. Indeed, the testing performed by Farmer Autovillage shows the battery’s capacity at 74.9% shortly after purchase.
[30] I am therefore satisfied that a reasonable person, who relied upon the accuracy of the battery capacity indicator, would have been misled as to the vehicle’s battery capacity and health. That is because the vehicle has a significant fault, which causes its battery capacity indicator to give a false reading as to the true state of the vehicle’s battery capacity.

What remedy is available to Mr Loveland?

[31] The remedies available for a breach of the Act are discretionary. They are set out in s 43 of the Act which is as follows:

“43 Other orders

(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(3) The orders are as follows:

(a) an order declaring all or part of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) to be void; and

(ii) if the court or the Disputes Tribunal thinks fit, to have been void at all times on and after a date specified in the order, which may be before the date on which the order is made:

(b) if an order described in paragraph (a) is made in respect of a contract that is associated with a collateral credit agreement, an order vesting in person B all or any of the rights and obligations of person A under the collateral credit agreement:

(c) an order in respect of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) varying the contract or the arrangement in the manner specified in the order; and

(ii) if the court or the Disputes Tribunal thinks fit, declaring the varied contract or arrangement to have had effect on and after a date specified in the order, which may be before the date on which the order is made:

(d) if an order described in paragraph (c) is made in respect of a contract that is associated with a collateral credit agreement, and if that order results in person A no longer having property in the goods that are the subject of the contract, an order vesting in person B the rights and obligations of person A under the collateral credit agreement:

(e) an order directing person B to refund money or return property to person A:

(f) an order directing person B to pay to person A the amount of the loss or damage:

(g) an order directing person B, at person B’s own expense, to repair, or to provide parts for, goods that have been supplied by person B to person A:

(h) an order directing person B, at person B’s own expense, to supply specified goods or services to person A.

(4) In subsection (3) (a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3) (a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) the Illegal Contracts Act 1970; or

(b) section 317 of the Accident Compensation Act 2001.”

[32] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43. The Tribunal must consider whether:

• (a) Mr Loveland was in fact misled or deceived;
• (b) Mr Loveland has suffered loss or damage; and
• (c) City Motor Group’s conduct was the effective cause or an effective cause of Mr Loveland’s loss or damage?

[33] As set out above, I find that Mr Loveland was in fact misled.
[34] I am also satisfied that Mr Loveland has suffered loss as a result of being misled. Mr Loveland paid $12,480 for the vehicle. The vehicle has a discrepancy between its battery capacity indicator and the true state of its battery capacity. It is not known whether that discrepancy will ever resolve itself, and it certainly has not resolved itself during the period of Mr Loveland’s ownership, in which time he has driven 1,600 kms and recharged the battery at least 13 times.
[35] I consider that the fault is likely to significantly reduce the resale value of the vehicle. The range of an electric vehicle is an important consideration for any prospective owner of such a vehicle. Owners of electric vehicles are reliant on the accuracy of the in-vehicle displays to enable them to determine the vehicle’s range – in much the same way as owners of vehicles with internal combustion engines are reliant on the vehicle’s fuel gauge. I am satisfied that any reasonable prospective purchaser would be cautious in purchasing a vehicle with an inaccurate battery capacity indicator, and any purchaser prepared to purchase such a vehicle would seek a discount to reflect the significance of the fault.
[36] Finally, I am also satisfied that City Motor Group’s conduct was an effective cause of Mr Loveland’s loss. I am satisfied that Mr Loveland purchased the vehicle because of the representations as to the vehicle’s battery capacity and health.
[37] Mr Loveland had particular needs. He needed a vehicle with sufficient range to travel between Katikati, Auckland and Tauranga. A vehicle that had the battery capacity represented by City Motor Group would have been suitable for his needs, at least until the battery’s capacity degraded with the passage of time. However, this vehicle did not have the battery capacity represented, and was not suitable for Mr Loveland’s needs. I am therefore satisfied that Mr Loveland would not have purchased the vehicle if he had not been misled about the true state of the battery’s capacity and health.

Conclusion

[38] The vehicle has a fault that causes the battery capacity indicator to give a false reading as to the vehicle’s battery capacity and health.
[39] City Motor Group made representations to the effect that the vehicle’s battery capacity and health exceeds 85% of a new battery’s capacity. Those representations were misleading in breach of s 9 of the Act because the vehicle’s battery capacity and health was less than 85%.
[40] Mr Loveland has suffered loss as a result of being misled as to the vehicle’s battery capacity and health. I am satisfied that the vehicle is now worth substantially less than what Mr Loveland paid for it because of the fault. I also consider that Mr Loveland would not have purchased the vehicle had he known of the discrepancy between the battery capacity indicator and the true state of the battery’s capacity and health.
[41] I am therefore satisfied that Mr Loveland is entitled to recover the amount he paid for the vehicle, together with the losses he has suffered as a result of purchasing the vehicle.
[42] In all the circumstances of this case, I consider that the appropriate remedy is to declare the contract between the parties to purchase the vehicle to be void as at the date of this decision under s 43(3)(a)(ii) of the Act and to order, under s 43(3)(e) of the Act that City Motor Group refund the purchase price of the vehicle to Mr Loveland. I am also satisfied that Mr Loveland is entitled to recover other loss he suffered in relation to the vehicle under s 43(3)(f) of the Act. In that regard, he is entitled to recover the transport costs of $300 and the cost of the reversing camera being $400. Mr Loveland does not seek to recover the cost of the towbar as he intends to keep that to use on his next vehicle.
[43] The Tribunal therefore orders that Motor 1 Limited, trading as City Motor Group shall, within 10 working days of the date of this decision, pay $13,180 to Mr Loveland.
[44] Mr Loveland must then make the vehicle available to be uplifted by the trader.

DATED at AUCKLAND this 11th day of December 2017

B.R. Carter
Adjudicator

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[1] Given v C V Holland (Holdings) Pty Ltd [1909] ArgusLawRp 86; (1977) 29 FLR 212; 15 ALR 439; ATPR 40-029.