Martin Swim School Limited v The International Trading Company Limited - Reference No. MVD 280/2016 (Auckland) [2017] NZMVDT 7; [2017] NZMVT Auckland 7 (18 January 2017)

Last Updated: 28 February 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2017] NZMVDT Auckland 7

Reference No. MVD 280/2016

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN MARTIN SWIM SCHOOL LIMITED

Purchaser

AND THE INTERNATIONAL TRADING COMPANY LIMITED

Trader

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

HEARING at Tauranga on 16 January 2017

DATE OF DECISION 18 January 2017

APPEARANCES

Mr G R Martin, Director of the purchaser

Mr J R Martin. Witness for the purchaser
Mr N G Coughlan, Director of the trader

DECISION

The purchaser’s application to reject the vehicle or for damages, is dismissed.

REASONS

Background

[1] On 16 August 2013, Martin Swim School Limited (“the purchaser”) bought a 2010 Audi Q5 TDi vehicle registration HAA767 (“the vehicle”) for $64,220 from The International Trading Company Limited (“the trader”). The vehicle, an Australian import, had 17,762kms on its odometer at the time of sale.

[2] The purchaser’s director Mr Martin was aware when he bought the vehicle for the purchaser that it had been damaged in Australia, imported as a damaged vehicle and repaired in New Zealand. Mr Martin says, however, that he was not told by the trader when he agreed to buy the vehicle that it had been a statutory write-off in Australia. The purchaser has purported to reject the vehicle claiming its supply by the trader breached ss 6 and 9 of the Consumer Guarantees Act 1993 (“the CGA”).

[3] The trader says that it told Mr Martin that the vehicle was an insurance write off in Australia and that Mr Martin agreed to buy it after having it inspected by his son. The trader says that it supplied Mr Martin with photographs of the vehicle before it was repaired and Mr Martin bought the vehicle because it was cheaper than any comparable New Zealand new Audi Q5 available for sale at that time. The trader denies that its supply of the vehicle breaches either ss 6 or 9 of the CGA.

[4] Pursuant to cl 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr Gregory as expert assessor to assist in the determination of the complaint. Mr Gregory took the oath required by cl 10(2) of Schedule 1 to that Act. As an assessor Mr Gregory assisted the adjudicator but the application was determined by the adjudicator alone.

The issues

[5] The issues raised by this application are:

(a) Whether the supply of the vehicle breaches either or both of ss6 or 9 of the CGA?
(b) Whether the trader misrepresented the vehicle to the purchaser by failing to disclose the vehicle was a statutory write-off in Australia, in breach of the Fair Trading Act 1986 (“the FTA”)?
(c) If either issue (a) or (b) are answered in the affirmative, what remedy is available to the purchaser or is appropriate?

Issue [a]: Whether the supply of the vehicle breached either or both of ss 6 or 9 of the CGA?

Relevant law
[6] 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.”

[7] The expression "acceptable quality" is defined in s 7 of the CGA 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.

[8] 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)-(e) of the CGA as modified by the factors set out in s 7(1)(f)-(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.

[9] Section 9 of the CGA provides as follows:

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.

Application of law to facts

[10] The purchaser did not provide any evidence to show that the vehicle was, at the time of sale, or had subsequently been found to be unfit for the purposes for which vehicles are commonly supplied, or that it was unacceptable in appearance or finish, or that it had any mechanical or other defect, or that it was unsafe or lacked durability. Mr Martin told the Tribunal that the vehicle had performed satisfactorily since he took delivery of it.

[11] The purchaser did not provide any evidence to show that the vehicle which it had purchased failed to comply with the description by which it had been advertised and supplied; namely as a 2010 Audi Q5 with 17,762kms on its odometer at the time of sale which, as the Consumer Information Notice signed by the purchaser records, was last registered in Australia and was imported as a damaged vehicle.

[12] Accordingly, I do not consider that the vehicle supplied to the purchaser failed to comply with either of s 6 or s 9 of the CGA. I must therefore dismiss the purchaser’s application to reject the vehicle under the CGA.

Conclusion on issue [a]

[13] The supply of the vehicle did not breach either ss 6 or 9 of the CGA and the purchaser’s application to reject the vehicle on the grounds of a breach of either of those sections must be dismissed.

[14] The purchaser’s legal advisers did not raise, either in correspondence with the trader’s solicitors, or in submissions they assisted the purchaser to prepare for the hearing, a claim that the trader’s conduct breached the provisions of s 9 of the FTA. Parties appearing before the Tribunal are unable to be legally represented and so I have considered, as a separate issue, whether the trader misrepresented the vehicle to the purchaser in breach of the provisions of the FTA.

Issue [b]: Whether the trader misrepresented the vehicle to the purchaser by failing to disclose the vehicle was a statutory write-off in Australia in breach of the FTA

Legal Principles

[15] 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.”

[16] 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 ... ”

[17] 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. 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.”

[18] 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.

[19] As a general rule silence does not amount to misrepresentation. However 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:

(a) 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);
(b) 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;
(c) 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

[20] Mr Martin says he saw the vehicle advertised on TradeMe in July 2013. He did not produce a copy of the TradeMe advertisement for the vehicle but a copy produced by the trader contains the following statement:

“Our company imported this car with light damage to front left guard. Car has been repaired with factory new genuine parts and is now as good as new. Please call or txt for more details.”

[21] Mr Martin who lives in Gisborne telephoned the trader’s salesman Mr Armstrong and spoke to him about the vehicle. Mr Armstrong told Mr Martin the vehicle had been imported damaged from Australia and sent Mr Martin copies of photographs showing the damage the vehicle had sustained. Mr Martin told Mr Armstrong that if he wanted to take the matter any further he would ask his son, Mr J R Martin, who was living at Papamoa to arrange to inspect the vehicle, which was in Tauranga.

[22] Mr Armstrong did not, unfortunately, attend the hearing to give evidence but signed a statement before a Justice of the Peace in Australia on 15 January 2017 which the trader submitted to the Tribunal. In his statement Mr Armstrong says that he told Mr Martin in a telephone call on 9 August 2013 that the vehicle had very slight damage to the front left side and how insurance companies in Australia write cars off often under a customer’s “Right of a new Replacement” policy. He says in his statement that he explained to Mr Martin that it was his opinion that is what most likely happened to the vehicle. Mr Martin denies that Mr Armstrong told him the vehicle was a statutory write off and says he would not have bought the vehicle if he had been told it had been written off.

[22] Mr Martin arranged for his son, Mr J R Martin, to inspect the vehicle at a Mitre 10 carpark in Tauranga. Mr J R Martin gave evidence that he was a mechanic by trade and had inspected and test driven the vehicle and had reported to Mr Martin that in his view the vehicle was in good condition. Mr J R Martin says he cannot recall the name of the person who showed him the vehicle but says that person did not tell him the vehicle had been a statutory write off and if he had been told the vehicle had been a statutory write off he would not have recommended it to his father.

[23] Mr Martin says that one of the things that attracted him to the vehicle was its price which he told the Assessor, in answer to a question, was $5,000 to $10,000 less than a comparable New Zealand new Audi Q5.

[24] Mr Martin says that in June 2016 he arranged to trade the vehicle through a Wellington car dealer, Armstrong Prestige. He says that he was orally offered $40,000 for the vehicle by Armstrong Prestige but when the dealer obtained a Vehicle Information Report (“VIR”) it found that the vehicle had been flagged by NZTA as previously written off. Armstrong Prestige then informed Mr Martin that it would not be prepared to trade the vehicle with a view to retailing it on its used car yard, but could obtain $17,000 for the vehicle from a vehicle wholesaler.

[25] Mr Martin produced a copy of the VIR and also a copy of a Car Jam Report which shows the vehicle was declared as a statutory write off on 22 October 2013 two months after the purchaser bought the vehicle. This was probably done by New Zealand Transport Agency. Mr Martin says he was not aware consumers could obtain a VIR or Car Jam reports on a vehicle.

[26] The trader, represented by its sole director and shareholder, Mr Coughlan, says Mr Armstrong listed the vehicle for sale on 3 July 2013 and Mr Armstrong was listed in the advertisement as the contact person. Mr Coughlan says he did not talk to Mr Martin until 16 August 2013 when he supplied Mr Martin with the vehicle and the CIN, and says at that time he drew Mr Martin’s attention to the fact that the vehicle had been imported damaged.

[27] In a written statement submitted to the Tribunal which Mr Coughlan read to the Tribunal he states:

“Prior to the 16th August I met with Mr Martins son (?) who inspected the vehicle and test drove it. At this time I told him that the vehicle was imported as an Insurance Write Off and that was why it was cheap in comparison to other like vehicle on Trademe.”

..........

Although this conversation that took place over 3 years ago I can state clearly that I did tell Mr Martins son that the vehicle was purchased as an “insurance write off” when explaining the damaged vehicle clause and this is why the vehicles are often 20% cheaper than other similar vehicles on Trademe. I explain this to every single purchaser of vehicles that I deal with.”

[28] The purchaser maintains that its loss is the difference between the current value of the vehicle, if it had not been written off, which according to the Car Jam report is $49,800, less the sum of $17,000 for which the purchaser is able to sell it to a wholesaler, or $32,800.

[29] In determining whether the trader misrepresented the vehicle to the purchaser by failing to disclose to the purchaser that the vehicle was a statutory write-off, I have had regard to the following matters. First, Mr Coughlan gave sworn evidence that he told Mr Martin’s son that the vehicle was an “insurance write off” in the course of the pre-purchase inspection at the Mitre 10 carpark. Second, if Mr Armstrong’s sworn declaration is an accurate and true account of the telephone conversation which he claims he had with Mr Martin on 9 August 2013, and which his statement says he remembers vividly, then I accept that Mr Martin would have also become aware the vehicle was an “insurance write off” before he agreed to buy the vehicle. Third, I am in no doubt that the purchaser was aware from the TradeMe advertisement and his conversation with Mr Armstrong that the vehicle had been imported from Australia and that it had been damaged and repaired by the trader. Mr Martin signed the CIN acknowledging that he was aware that the vehicle had been “imported damaged”. Fourth, that Mr Martin knew that he was buying the vehicle probably as much as $15,000 cheaper than he could buy a three year old New Zealand new Audi Q5 with only 17,762kms on its odometer and thus could have reasonably expected that the vehicle had probably been written off in Australia. Fifth, that a reasonable person, in the purchaser’s position and with his knowledge gained, as he told the Tribunal, from buying and selling other vehicles in the past, would know that used motor vehicles in New Zealand are cheaper than in Australia and so a vehicle imported from Australia has more than likely been imported because it was bought cheaply at a statutory write-off auction, and thus, even if the trader did not use the words “statutory write off” to describe the vehicle Mr Martin would not have been misled or deceived by the trader’s failure to disclose that the vehicle was designated as a “statutory write-off”.

[30] The conclusion I have reached is that I am not satisfied, on a balance of probabilities that Mr Martin, as the purchaser’s agent, was misled by the trader.

Conclusion on issue [b]

[31] Having found the purchaser was not misled by the trader’s conduct I find it is not entitled to any remedy under the Fair Trading Act and I dismiss the purchaser’s application.

DATED at AUCKLAND this 18th day of January 2017

C. H. Cornwell
Adjudicator