O'Byrne v Oakland Wholesale Limited Reference No. MVD 249/2017 [2017] NZMVDT 215 (21 December 2017)

Last Updated: 16 January 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 215 Reference No. MVD 249/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	GEORGE O’BYRNE
		Purchaser
	AND	OAKLAND WHOLESALE LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 6 December 2017
DATE OF DECISION 21 December 2017
APPEARANCES
Mr G O’Byrne, Purchaser
Mr B M Wilson, for the Trader

ORDERS

1. Oakland Wholesale Limited shall, within 10 working days, pay $2,684 to George O’Byrne.
2. George O’Byrne shall make the vehicle available to be uplifted by Oakland Wholesale Limited.

DECISION

[1] Oakland Wholesale Limited engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (“the Act”) by failing to disclose that the vehicle had a worn clutch before Mr O’Byrne travelled from Wellington to Tuakau to purchase the vehicle, in circumstances where Mr O’Byrne had a reasonable expectation of disclosure.
[2] Mr O’Byrne has suffered loss by this misleading conduct. Oakland Wholesale only disclosed the worn clutch once Mr O’Byrne arrived in Tuakau, by which time he was committed to purchasing the vehicle. Mr O’Byrne would not have purchased the vehicle had he been advised of the worn clutch before he travelled from Wellington to Tuakau.

REASONS

Introduction

[3] On 7 June 2017, George O’Byrne purchased a 2003 Ford Mondeo, registration number BFH693 from Oakland Wholesale Limited for $2,600.
[4] Mr O’Byrne lives in Wellington, Oakland Wholesale is based in Tuakau, south of Auckland. Mr O’Byrne had seen the vehicle advertised online, and had asked several questions of Oakland Wholesale to determine whether the vehicle had any known faults. Having been assured that the only known fault was with the vehicle’s air conditioning, Mr O’Byrne agreed to purchase the vehicle.
[5] On 7 June 2017, Mr O’Byrne flew from Wellington to Auckland and then travelled to Tuakau. Upon arrival, Mr O’Byrne was told that Oakland Wholesale had been told by its mechanic that the vehicle’s clutch was also “late to engage”, but that the clutch “still had plenty of life in it”.
[6] Shortly in his return journey to Wellington, Mr O’Byrne noticed the vehicle’s clutch began to slip. Mr O’Byrne continued to use the vehicle for six weeks, during which time the clutch slippage worsened.
[7] On 20 July 2017, Mr O’Byrne took the vehicle for a warrant of fitness inspection at AutoCare Kilbirnie. The vehicle failed the warrant of fitness inspection because of a faulty park light and because the clutch was worn out. Mr O’Byrne has obtained two estimates to repair the clutch. Both repair estimates exceed $3,500.
[8] Mr O’Byrne has now applied to the Tribunal, alleging that he was misled about the vehicle’s condition. Oakland Wholesale denies that it misled Mr O’Byrne, but has offered $500 towards the cost of any repairs as a sign of good faith.

The Issues

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

• (a) Has Oakland Wholesale engaged in misleading conduct by failing to disclose that the vehicle’s clutch was worn before Mr O’Byrne travelled from Wellington to Tuakau to purchase the vehicle?
• (b) If so, is Mr O’Byrne entitled to a remedy under the Act?

[10] Mr O’Byrne also alleged that the fault with the vehicle’s clutch breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993. In light of my findings in relation to the Fair Trading Act claim, I do not need to decide whether Mr O’Byrne is entitled to a remedy under the Consumer Guarantees Act.

Has Oakland Holdings breached s 9 of the Act?

[11] Section 9 of the Act states:

“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.”

[12] 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.”

[13] To succeed in this aspect of his claim, Mr O’Byrne must show that Oakland Wholesale’s failure to disclose that the vehicle had a worn clutch amounts to a breach of s 9 of the Act. This requires the Tribunal to consider the extent to which non-disclosure or silence can be a breach of s 9 and, if so, whether s 9 was breached on the facts of the present case.
[14] Under the common law principle of caveat emptor (let the buyer beware), a claimant needed to show that the other party had made a positive representation before it could succeed in any claim. Silence, or the failure to disclose a material fact, could not give rise to a claim.[1]
[15] This principle of caveat emptor has now been displaced by the Fair Trading Act. Under the Act, silence or the failure to disclose a material fact, can constitute misleading or deceptive conduct.[2] In Des Forges v Wright, Elias J (as she then was) stated:[3]

“Silence may constitute misleading or deceptive conduct, but whether it does is to be objectively assessed in all the circumstances ... Conduct may be misleading or deceptive within the meaning of s 9 of the Fair Trading Act 1986 by an omission to provide information even if no obligation to provide such information exists as a matter of general law, outside the standards of conduct required by the Fair Trading Act.”

[16] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[4] Under that test, silence, or the failure to disclose a material fact can be misleading where, taking account of the circumstances of the particular case, a reasonable consumer would expect the information to have been disclosed.

Did Oakland Wholesale fail to disclose the worn clutch?

[17] Benjamin Wilson, who appeared for Oakland Wholesale, advised that he became aware of the worn clutch on 6 June 2017, when he uplifted the vehicle from his mechanic. He says he was told that the vehicle’s clutch was late to engage, but still had a fair bit of life in it.
[18] Mr Gregory, the Tribunal’s Assessor advises that, in the automotive repair industry, the phrase “late to engage clutch” means that the clutch is at the end of its useful life and requires replacement, if not immediately, then in the very near future.
[19] I am satisfied, based on Mr Wilson’s evidence as to what he was told by his mechanic, and on Mr Gregory’s advice, that the vehicle had a worn clutch that would soon require replacement when it was sold to Mr O’Byrne. That fact is borne out by the symptoms experienced by Mr O’Byrne once he purchased the vehicle. The clutch began slipping almost immediately.
[20] I am also satisfied that Oakland Wholesale failed to advise Mr O’Byrne that the vehicle had a worn clutch before Mr O’Byrne travelled from Wellington to Tuakau. Despite knowing of the worn clutch on 6 June 2017, Oakland Wholesale did not tell Mr O’Byrne until he arrived in Tuakau on 7 June 2017.

Did Mr O’Byrne have a reasonable expectation of disclosure?

[21] I am satisfied that Mr O’Byrne had a reasonable expectation that any known potential fault with the clutch would be disclosed to him.
[22] That is because, before agreeing to purchase the vehicle sight unseen, Mr O’Byrne asked Oakland Wholesale whether the vehicle was free of several identifiable faults. He asked whether the vehicle emitted smoke, whether it had oil leaks, significant rust or any major stains or rips in the interior upholstery. He also asked whether the air conditioning blew cold air, whether the vehicle drove well and whether it had any faults with its gears.
[23] Oakland Wholesale had assured him that the vehicle had been inspected by its mechanic and had “checked out ok” and that the “whole car is good actually”, with faulty air conditioning being the “only let down”.
[24] I consider that this correspondence with Oakland Wholesale shows that Mr O’Byrne wanted to ensure that the vehicle was free of significant identifiable faults before he agreed to purchase it sight unseen and then incur the time and cost in travelling to Tuakau to uplift the vehicle. This correspondence also shows that Oakland Wholesale knew of Mr O’Byrne’s interest in being told about all identifiable faults with the vehicle and knew that Mr O’Byrne, believing that the only known fault with the vehicle related to its air conditioning, was travelling to Tuakau on 7 June 2017 to purchase the vehicle.
[25] In those circumstances, I am satisfied that Mr O’Byrne had a reasonable expectation that Oakland Wholesale would tell him of any potential fault that it was aware of before he travelled from Wellington to Tuakau to purchase the vehicle.

Was the failure to disclose the worn clutch misleading under s 9 of the Act?

[26] I am satisfied that that Oakland Wholesale’s failure to disclose the material fact of the worn clutch, until after Mr O’Byrne had travelled from Wellington to Tuakau, is a breach of s 9 of the Act.
[27] Oakland Wholesale was aware of the worn clutch, and Mr O’Byrne had a reasonable expectation that the fault would be disclosed to him. Oakland Wholesale’s failure to do so until after Mr O’Byrne arrived in Tuakau was misleading.
[28] In reaching this conclusion, I acknowledge that Mr O’Byrne was informed that the vehicle’s clutch was late to engage before he purchased the vehicle. However, the fact that Mr O’Byrne may have come to appreciate the true position at the point of sale is irrelevant to the consideration of whether Oakland Wholesale had earlier engaged in misleading conduct.
[29] As noted by the Court of Appeal in Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd,[5] conduct that has the tendency to attract customers to the sellers’ premises can be misleading, even if the consumer may come to appreciate the true position before a transaction is concluded. That is because, once a prospective purchaser has entered the sellers’ premises he or she will often be more likely to purchase the item. The Court of Appeal considered that the misleading conduct would then have contributed to any sale.[6]
[30] Oakland Wholesale became aware that the vehicle’s clutch was worn on 6 June 2017. Oakland Wholesale was aware that Mr O’Byrne was travelling from Wellington to Tuakau the next day to purchase the vehicle. It knew that Mr O’Byrne was purchasing the vehicle sight unseen and had asked specific questions about the vehicle’s faults. It also knew that it had reassured Mr O’Byrne about the absence of faults, and that Mr O’Byrne was relying on that reassurance.
[31] I am satisfied that Oakland Wholesale has engaged in misleading conduct because Mr O’Byrne was enticed into the transaction by Oakland Wholesale’s failure to disclose the worn clutch before he travelled from Wellington to Tuakau. Its subsequent disclosure of the worn clutch does not excuse its prior misleading conduct.

Is Mr O’Byrne entitled to a remedy under s 43 of the Act?

[32] 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.

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

• (a) Mr O’Byrne was in fact misled or deceived;
• (b) Mr O’Byrne has suffered loss or damage; and
• (c) Oakland Wholesale’s conduct was the effective cause or an effective cause of Mr O’Byrne’s loss or damage?

[34] I find that Mr O’Byrne was in fact misled. Mr O’Byrne did not know about the worn clutch until he arrived in Tuakau. Oakland Wholesale’s failure to advise him of the issue before he travelled to Tuakau misled him into believing that he had been told about all the known faults with the vehicle before he travelled a substantial distance to purchase the vehicle.
[35] I am satisfied that Mr O’Byrne has suffered a loss as a result of being misled. He purchased a vehicle with a faulty clutch that will cost approximately $3,500 to repair.
[36] I am also satisfied that Oakland Wholesale’s conduct was an effective cause of Mr O’Byrne’s loss. I consider that Mr O’Byrne would not have travelled to Tuakau to purchase this vehicle if Oakland Wholesale had advised him on 6 June 2017 that the vehicle had a worn clutch. I am satisfied that Mr O’Byrne would have conducted enquiries to determine the cost of repairing a worn clutch, and on discovering that the cost of repairs would exceed the purchase price of the vehicle, he would have cancelled the deal.
[37] I acknowledge that Mr O’Byrne was notified of the potential fault before he purchased the vehicle, and that he could have backed out of the transaction once he was advised of the fault with the clutch. However, by that time he was already committed to purchasing the vehicle. Mr O’Byrne had agreed to purchase the vehicle and had obtained the funds to do so. He had travelled from Wellington to Tuakau to finalise the purchase and had no alternative arrangements for returning home other than in the vehicle. Mr O’Byrne’s decision to then complete the purchase of the vehicle may not have been a wise decision with the benefit of hindsight, but it was nonetheless understandable in the circumstances – circumstances that only came about because of Oakland Wholesale’s failure to advise him of the potential clutch fault before he travelled to Tuakau.

What remedy is Mr O’Byrne entitled to?

[38] In all the circumstances of this case, and particularly taking account of the cost of any repair relative to the value of the vehicle, 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 Oakland Wholesale refund the purchase price of the vehicle to Mr O’Byrne.
[39] I am also satisfied that Mr O’Byrne is entitled to recover $84, being the cost he incurred in flying from Wellington to Auckland to purchase the vehicle, under s 43(3)(f) of the Act.

Conclusion

[40] Oakland Wholesale has engaged in misleading conduct in breach of s 9 of the Act by failing to disclose that the vehicle had a worn clutch before Mr O’Byrne travelled from Wellington to Tuakau to purchase the vehicle.
[41] Mr O’Byrne has suffered loss by this misleading conduct. Mr O’Byrne would not have purchased the vehicle had he been advised of the worn clutch before he travelled from Wellington to Tuakau. Oakland Wholesale disclosed the fault with the clutch once Mr O’Byrne arrived in Tuakau, by which time he was committed to purchasing the vehicle.
[42] Accordingly, Oakland Wholesale shall, within 10 working days of the date of this decision, pay $2,684 to Mr O’Byrne. Mr O’Byrne should also make the vehicle available to be uplifted by Oakland Wholesale.

DATED at AUCKLAND this 21st day of December 2017

B.R. Carter
Adjudicator

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[1] Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995) 5 NZBLC 99,356.

[2] Des Forges v Wright [1996] 2 NZLR 758 (HC).

[3] Ibid, at 764.

[4] Hieber v Barfoot & Thompson (1996) 5 NZBLC 99, 384; Tuiara v Frost & Sutcliffe [2003] 2 NZLR 833 at [91]; Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 at [21] and [32].

[5] Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd [2014] NZCA 418

[6] Ibid, at [59].