Waiteata Holdings Limited v 2 Cheap Cars Limited - Reference No. MVD 031/2017 (Auckland) [2017] NZMVDT 52; [2017] NZMVDT Auckland 52 (15 May 2017)

Last Updated: 17 June 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT Auckland 52 Reference No. MVD 031/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	WAITEATA HOLDINGS LIMITED
		Purchaser
	AND	2 CHEAP CARS LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 19 April 2017
DATE OF DECISION 15 May 2017
APPEARANCES
Mr A C Hammond for the Purchaser
Ms Z Gordon for the Trader
Ms E Coulson witness for the Trader

ORDERS

1. The purchaser’s application is dismissed.

DECISION

[1] The trader has engaged in conduct that breached s 9 of the Fair Trading Act 1986 (“the FTA”). It represented that the vehicle had five doors, climate control and electric mirrors. It had none of those features. See paragraphs [13] to [17].
[2] The purchaser has suffered no loss that is recoverable under the FTA. It paid a reasonable price for the vehicle. See paragraphs [18] to [25].
[3] The purchaser has suffered losses of a kind that are recoverable under the Contractual Remedies Act 1979 (“the CRA”). However, the purchaser is not entitled to recover those losses as it has affirmed the contract. See paragraphs [26] to [36].
[4] The purchaser is not entitled to a remedy under s 9 of the Consumer Guarantees Act 1993 (“the CGA”). Although the vehicle did not correspond with the description in the Trade Me listing, the trader corrected the most significant misdescription before the vehicle was sold to the purchaser. See paragraphs [37] to [40].

REASONS

Background

[5] Mr Andrew Hammond is a director of Waiteata Holdings Limited (“the purchaser”). Mr Hammond is a Gisborne-based Electrician. Mr Hammond had been looking for a five door van to use as a work vehicle. He required a vehicle with five doors to enable access to both sides of the vehicle. He stores his tools on one side of the vehicle and electrical cabling and other accessories on the other.
[6] In January 2017 Mr Hammond saw a Trade Me listing for a five door 2011 Toyota Hiace (“the Trade Me listing”) posted by 2 Cheap Autos Limited (“the trader”). The Trade Me listing stated that the 2011 Toyota Hiace had five doors. Among other features listed on the Trade Me listing were climate control and electric mirrors.
[7] On about 29 January 2017 the purchaser paid a $500 deposit on the vehicle. Mr Hammond then flew to Auckland to purchase the vehicle. When he inspected the vehicle he noticed that the vehicle had only four doors. He asked an employee of the trader whether this was the same vehicle as advertised, and the employee said that it was. The trader confirmed that the vehicle had only four doors. Mr Hammond tried to view the Trade Me listing using his mobile phone, but the listing had been removed. He also called his wife, who was unable to obtain a copy of the Trade Me listing.
[8] Despite Mr Hammond’s reservations about the vehicle, on 29 January 2017 the purchaser purchased that vehicle - a four door 2011 Toyota Hiace Regius Diesel van (“the vehicle”) for $23,574 from the trader. The vehicle had travelled 87,188 kms at the time of sale.
[9] Mr Hammond says that although he was not “100% sure” that this was the vehicle he saw in the Trade Me listing he needed to be back in Gisborne that night. In his words, “rightly or wrongly” he bought the vehicle and drove it back to Gisborne.
[10] On his return Mr Hammond was able to locate a copy of the Trade Me listing, which confirmed that the vehicle had been advertised as having five doors. Mr Hammond also noticed that the vehicle did not have the climate control or electric mirror features that were advertised in the Trade Me listing. Mr Hammond has also noticed that the vehicle has a dent in its roof that was not mentioned before the vehicle was purchased.
[11] The purchaser has lodged a claim with the Tribunal, alleging that the trader has engaged in false advertising.

The issues

[12] The following issues arise:

• (a) Has the trader engaged in conduct that breaches s 9 of the FTA?
• (b) If so what, if any, remedy is available to the purchaser?
• (c) Is the purchaser entitled to a remedy under the CRA?
• (d) Has the vehicle failed to comply with the guarantee that goods comply with description in s 9 of the CGA?

Has the trader engaged in conduct that breaches the FTA?

[13] Section 9 of the FTA 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.”

[14] 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.[1] 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. 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.”

[15] In Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd[2] the Court of Appeal found that an advertisement will be misleading where it has:

“a tendency to entice consumers into “the marketing web” by an erroneous belief engendered by the advertiser, even if the consumer may come to appreciate the true position before a transaction is concluded. Enticing consumers into “the marketing web” includes, for example, attracting them into premises selling the advertiser’s product. Once a prospective customer has entered, he or she will often be more likely to buy. The misleading advertising would then have contributed to any sale”[3]

[16] That is precisely what has occurred here. The Trade Me listing drew the purchaser into the “marketing web” by engendering a mistaken belief that the vehicle had five doors, climate control and electric mirrors. It did not.
[17] The trader has engaged in conduct that is misleading and deceptive in breach of s 9 of the FTA. In reliance on the Trade Me listing, the purchaser paid a $500 deposit and flew from Gisborne to Auckland to buy the vehicle. As foreshadowed in Godfrey Hirst, once the purchaser had been enticed to the trader’s premises under this erroneous belief, despite becoming aware that the vehicle did not have five doors, it still purchased the vehicle. Unsurprisingly, the purchaser now regrets the decision to purchase the vehicle.

What remedy is available to the purchaser?

[18] The remedies available for a breach of the FTA are discretionary and are available only where the purchaser has suffered, or is likely to suffer loss or damage. The remedies are set out in s 43 of the FTA 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.

[19] 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?

[20] As set out above, I am satisfied that the purchaser was misled. The question in this case is what, if any loss or damage has the purchaser suffered as a result of the trader’s breach of the FTA?

The purchaser has not suffered loss or damage

[21] Under s 43 of the FTA, the normal measure of loss is the “difference between the value of what was acquired and the price paid”.[4] In this case, the purchaser will have suffered loss if it paid more than the vehicle was worth.
[22] As set out below, the price paid by the purchaser was a fair reflection of the market value of the vehicle. Consequently, although it was misled, the purchaser has not suffered loss or damage of a kind that can be recovered under s 43 of the FTA.

The purchaser paid a reasonable price for the vehicle

[23] Excluding “on road costs” of $595, the purchaser paid $22,979 for the vehicle. The trader presented four current Trade Me listings for four door Toyota Hiace Diesel vans of the same year and similar mileage as the vehicle. Those vehicles are being offered for prices between $21,900 and $24,200, excluding on road costs.
[24] The parties also provided recent Trade Me listings for several five door Toyota Hiace Diesel vans of the same year and similar mileage. The price range of those vehicles was between $23,980 (excluding on road costs) and $28,995 (including on road costs).
[25] On the basis of this evidence, the purchaser has paid a reasonable price for a four door 2011 Toyota Hiace Diesel van. It certainly has not paid a higher “five door price” for a four door van. The purchaser has not therefore suffered any loss that is recoverable under the FTA.
[26] This is because the FTA does not allow the purchaser to recover its “expectation” losses,[5] which are intended to restore the purchaser to the position it would have been in had the representations been true, or if that cannot be achieved, to compensate the purchaser for the loss that arises.
[27] Expectation losses are, however, recoverable under the CRA, which allows a person to cancel a contract and claim damages where misleading representations have induced that person to enter into the contract.

Does the purchaser have a claim under the Contractual Remedies Act?

[28] In this case I am satisfied that the purchaser has suffered expectation losses. The Tribunal’s assessor advises that it would cost approximately $1,000 to have electric mirrors installed. The assessor also advises that the misleading representations about the fifth door and climate control cannot reasonably be rectified – it is not possible to install a fifth door or climate control in the vehicle. I consider that the absence of the fifth door has caused a substantial loss of amenity, in that it does not have the convenience provided by that feature. The absence of the climate control is minor, but nonetheless a small loss of amenity arises.
[29] Having established that the purchaser is likely to have suffered losses recoverable under the CRA, I must consider whether the purchaser is entitled to cancel the contract and recover those losses.

Relevant law

[30] The remedies in the CRA are only available when the contract has been validly cancelled. The circumstances in which a contract can be cancelled are set out in s 7 of the CRA:

7 Cancellation of contract

(1) Except as otherwise expressly provided in this Act, this section shall have effect in place of the rules of the common law and of equity governing the circumstances in which a party to a contract may rescind it, or treat it as discharged, for misrepresentation or repudiation or breach.

(2) Subject to this Act, a party to a contract may cancel it if, by words or conduct, another party repudiates the contract by making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.

(3) Subject to this Act, but without prejudice to subsection (2), a party to a contract may cancel it if—

(a) he has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to that contract; or

(b) a term in the contract is broken by another party to that contract; or

(c) it is clear that a term in the contract will be broken by another party to that contract.

(4) Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c) applies, a party may exercise the right to cancel if, and only if,—

(a) the parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the term is essential to him; or

(b) the effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,—

(i) substantially to reduce the benefit of the contract to the cancelling party; or

(ii) substantially to increase the burden of the cancelling party under the contract; or

(iii) in relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.

(5) A party shall not be entitled to cancel the contract if, with full knowledge of the repudiation or misrepresentation or breach, he has affirmed the contract.

(6) A party who has substantially the same interest under the contract as the party whose act constitutes the repudiation, misrepresentation, or breach may cancel the contract only with the leave of the court.

(7) The court may, in its discretion, on application made for the purpose, grant leave under subsection (6), subject to such terms and conditions as the court thinks fit, if it is satisfied that the granting of such leave is in the interests of justice.

[31] For the purposes of s 7(3)(a) of the CRA, I am satisfied that the purchaser has been induced to purchase the vehicle.
[32] In terms of s 7(4)(b)(i) and (iii), I am also satisfied that the absence of the fifth door has both substantially reduced the benefit of the contract to the purchaser and made the benefit of the contract substantially different from that represented or contracted for.
[33] I do not consider that the other misrepresentations about climate control or electric mirrors have substantially reduced the benefit of the contract, or make the vehicle substantially different from that represented by the trader. Indeed, on the evidence I heard, I am satisfied that the purchaser would have purchased the vehicle if he had known that it did not have climate control or electric mirrors. Those were not important features to it.

The purchaser is not entitled to cancel as it has affirmed the contract

[34] Despite the misrepresentation about the number of doors in the Trade Me listing, the purchaser’s CRA claim must fail because the purchaser has, with full knowledge that the vehicle had four doors, affirmed the contract for the purposes of s 7(5) of the CRA.
[35] The purchaser knew the vehicle had four doors when it purchased the vehicle. I accept that the purchaser was uncertain at the time of purchase as to whether it was purchasing the same vehicle as advertised on Trade Me. However, the purchaser did know that the vehicle had four doors and completed the transaction. By completing the transaction and driving the vehicle back to Gisborne, I am satisfied that the purchaser has affirmed the transaction.
[36] The purchaser is therefore not entitled to a remedy under the CRA.

Does the purchaser have a claim under s 9 of the CGA?

[37] Finally, I will consider whether the purchaser can claim that the vehicle failed to comply with any description made by the trader in light of s 9 of the CGA.

Relevant law

9 Guarantee that goods comply with description

(1) Subject to section 41, where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.

(2) A supply of goods is not prevented from being a supply by description by reason only that, being exposed for sale or hire, they are selected by a consumer.

(3) If the goods are supplied by reference to a sample or demonstration model as well as by description, the guarantees in this section and in section 10 will both apply.

(4) Where the goods fail to comply with the guarantee in this section,—

(a) Part 2 gives the consumer a right of redress against the supplier; and

(b) Part 3 may give the consumer a right of redress against the manufacturer.

The vehicle complied with description

[38] To comply with this guarantee, the vehicle must correspond with its description. The Shorter Oxford English Dictionary (3rd ed, 1973), defines “corresponds” as being “similar to”. “Similar” is defined as “having a marked resemblance or likeness to”.
[39] I am not satisfied that the misdescription regarding the presence of climate control or electric mirrors amounts to a breach of this guarantee. On the evidence I have seen, the climate control function and electric mirrors are not significant features of the vehicle, and are not so material that their absence makes the vehicle dissimilar to the vehicle described by the trader.
[40] I am satisfied though that the vehicle did not correspond with the description on the Trade Me listing that it had five doors. However, this misdescription was remedied before the vehicle was supplied to the purchaser. This means that the vehicle corresponded with the description given to it when it was supplied to the purchaser. There is no doubt the purchaser knew that the vehicle had four doors when it was purchased.
[41] On that basis, I consider that the vehicle did comply with its description for the purposes of s 9 of the CGA when it was supplied to the purchaser.

Conclusion

[42] I reach the conclusion that the purchaser is entitled to no remedy under the FTA, CRA or CGA with some reluctance. The purchaser has clearly been misled, and in reliance on those misleading representations purchased a vehicle that it never really wanted.
[43] However, the purchaser has not suffered any loss that it is entitled to recover. The price paid for the vehicle was a reasonable one, so it has not suffered loss it can recover under the FTA. Further, the purchaser was also aware before it completed the purchase that the vehicle had only four doors. It is not therefore entitled to a remedy under either the CRA or the CGA.

DATED at AUCKLAND this 15th day of May 2017

B.R. Carter
Adjudicator

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[1] Red Eagle Corporation Ltd v Ellis [2010] NZLR 492.

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

[3] Ibid, at [59].
[4] Narayan v Arranmore Developments Ltd (2012) 13 BZCPR 123, [49].

[5] Cox & Coxon Ltd v Leipst [1998] NZCA 202; [1999] 2 NZLR 15