Holliday v Sport Wholesale Cars Limited - Reference No. MVD 119/2017 (Auckland) [2017] NZMVDT 86 (12 July 2017)

Last Updated: 16 August 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 86 Reference No. MVD 119/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	KENNETH HOLLIDAY
		Purchaser
	AND	SPORT WHOLESALE CARS LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Hamilton on 21 June 2017
DATE OF DECISION 12 July 2017
APPEARANCES
Mr K Holliday, Purchaser
Mr S Black, for the Trader Mr R Haine, witness for the Trader

ORDERS

1. Sport Wholesale Cars Limited shall, within 10 working days of the date of this decision, pay $12,995 to Mr Holliday.
2. Mr Holliday must return the vehicle to Sport Wholesale Cars Limited upon receiving the amount payable in Order A.

DECISION

[1] Sport Wholesale Cars Limited (“Sport Wholesale”) breached s 9 of the Fair Trading Act 1986 (“the Act”) by failing to disclose that the vehicle was a statutory write off in Australia. See paragraphs [9] to [24].
[2] Mr Holliday has suffered loss as a result of being misled. Mr Holliday would not have purchased the vehicle if he had known it was a statutory write off in Australia. The Tribunal declares the contract between Mr Holliday and Sport Wholesale void. Mr Holliday is entitled to recover all amounts he paid to purchase the vehicle, less $12,000 to reflect the benefit Mr Holliday has received from his use of the vehicle. See paragraphs [25] to [32].

REASONS

[3] On 25 September 2014, Kenneth Holliday purchased a 2012 Opel Astra GTC Turbo registration number HRD184, from Sport Wholesale Cars Limited for $24,995. The vehicle had travelled 212 kms at the date of purchase.
[4] Mr Holliday says that, in late 2016 or early 2017, he discovered that the vehicle had been written off for insurance purposes in Australia before it was sold to him. Mr Holliday says that he tried to trade the vehicle in to purchase a new vehicle, but three motor vehicle dealers have refused to accept the vehicle as a trade in because of its history as a statutory write off.
[5] Mr Holliday says he did not know that the vehicle had been written off for insurance purposes in Australia and now wants his money back from Sport Wholesale. Mr Holliday claims that he has been misled about the vehicle’s history and that he would never have purchased the vehicle if he had known that it had been written off for insurance purposes in Australia.
[6] Sport Wholesale does not accept that Mr Holliday has suffered any loss. It says Mr Holliday paid a fair price for the vehicle. Sport Wholesale also says that it told Mr Holliday that the vehicle was a statutory write off before he purchased it.
[7] The Act prohibits misleading and deceptive conduct in trade. Under the Act, those who have been misled can recover the losses they suffer as a result of being misled, from the wrongdoer.

The Issues

[8] The following issues arise:

• (a) Did Sport Wholesale tell Mr Holliday that the vehicle was a statutory write off?
• (b) Did Sport Wholesale mislead Mr Holliday in breach of s 9 of the Act?
• (c) Was Sport Wholesale’s misleading conduct an effective cause of any loss suffered by Mr Holliday?
• (d) If so, what remedy is Mr Holliday entitled to?

Did Sport Wholesale Limited tell Mr Holliday that the vehicle was a statutory write off?

[9] Mr Holliday was adamant that he was not told that the vehicle had been written off for insurance purposes in Australia. He says he was told that the vehicle came from Australia, where it had been “standing around” in Brisbane.
[10] Mr Holliday says that he would not have purchased the vehicle if he had known that it had been written off in Australia. He says that the purchase price was a lot of money for him, and he would not have spent that money if he had known of the vehicle’s history.
[11] Ryan Haine gave evidence by telephone on behalf of Sport Wholesale. Mr Haine was the salesman who dealt with Mr Holliday.
[12] Mr Haine initially said that he vaguely remembered the transaction. When prompted, Mr Haine said he remembered dealing with Mr Holliday. Mr Haine also said he remembered the vehicle. He said the vehicle was memorable because it had been written off with potential smoke damage, but subsequent assessment showed that the vehicle had suffered no damage at all.
[13] Mr Haine says he told Mr Holliday that the vehicle had been written off in Australia. Mr Haine said he commonly sold vehicles that were statutory write offs from Australia. He says his usual protocol is to tell customers that vehicle’s imported from Australia were statutory write offs and he says that was what happened in this case.
[14] Although I consider it likely that Mr Haine’s usual practice was to tell customers that vehicles had previously been written off, I accept Mr Holliday’s evidence that this did not occur here.
[15] I think it most likely that Sport Wholesale did not tell Mr Holliday that the vehicle was a statutory write off in Australia. Mr Holliday was clear and consistent in his evidence that he was not told of the vehicle’s history and I prefer his evidence to Mr Haine’s, who initially said his recollection of this transaction was vague. Mr Holliday’s evidence is also supported by the two pieces of contemporaneous documentation shown to me. The Consumer Information Notice and the Vehicle Offer and Sale Agreement were both signed when the vehicle was purchased by Mr Holliday. Neither records that the vehicle was a statutory write off.

Did Sport Wholesale mislead Mr Holliday?

[16] The question I must then consider is whether Sport Wholesale’s failure to advise Mr Holliday that the vehicle was a statutory write off breaches s 9 of the Act, which 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.”

[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.[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.”

[18] To succeed in a claim under the Act, Mr Holliday must show that Sport Wholesale’s failure to disclose that the vehicle was a statutory write off was misleading or deceptive conduct in 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.
[19] 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.[2]
[20] This principle of caveat emptor has now been displaced by the Act. Under the Act, silence or the failure to disclose a material fact, can constitute misleading or deceptive conduct.[3] In Des Forges v Wright, Elias J (as she then was) stated:[4]

“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.”

[21] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[5] 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.
[22] Sport Wholesale supplied Mr Holliday with a vehicle that had been written off in Australia. It did not tell him this. Having regard to the “reasonable expectation of disclosure” test in light of the overall test for whether conduct is misleading and deceptive in Red Eagle, I consider that a reasonable person in Mr Holliday’s situation would have expected Sport Wholesale to advise it that the vehicle had previously been written off in Australia.
[23] The fact that a vehicle has previously been written off is an important and material fact that is relevant to any reasonable consumer’s purchasing decision. A stigma attaches to vehicles that have been written off. This stigma significantly affects the resale value of those vehicles – irrespective of the nature of the damage that caused the vehicle to be written off. It is the fact that the vehicle has been written off that creates the stigma. This can be seen in the refusal of three car dealers to accept this vehicle as a trade in, despite the vehicle having suffered no damage and being in good condition.
[24] By failing to disclose this material fact, in circumstances where a reasonable consumer would expect it to be disclosed, I consider that Sport Wholesale has misled Mr Holliday in breach of s 9 of the Act.

What remedy is available to Mr Holliday?

[25] The remedies available for a breach of s 9 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.”

[26] The Supreme Court in Red Eagle held that the exercise of the power to make an order for payment under s 43 of the Act is, in the end, a matter of doing justice to the parties in the circumstances of the particular case and in terms of the policy of the Act. The essential question is to ascertain whether the purchaser was in fact misled or deceived and, if so, was the trader’s conduct the effective cause or an effective cause of the purchaser’s loss or damage?[6]
[27] Mr Holliday was misled. He bought a vehicle that had previously been written off and was not told of that fact.
[28] Mr Holliday has suffered loss. As accepted by Sport Wholesale, the vehicle is worth less because it has previously been written off, irrespective of the fact that the vehicle suffered no actual damage before it was written off. Further, Mr Holliday is now finding the vehicle difficult to trade in because of its history, so his options for disposing with the vehicle are limited.
[29] Sport Wholesale’s misleading conduct was an effective cause of Mr Holliday’s loss. I am satisfied that Mr Holliday would not have purchased the vehicle if he had known that the vehicle had previously been written off.
[30] In all the circumstances of this case, I consider the appropriate remedy under the Act is to declare the contract between the parties to purchase the vehicle void as at the date of this decision under s 43(3)(a)(ii) of the Act, for Mr Holliday to return the vehicle and for Sport Wholesale to refund the full purchase price under s 43(3)(e) of the Act.
[31] I consider a reduction of the amount to be paid to Mr Holliday to be appropriate. Mr Holliday has owned the vehicle for over two and a half years. He has driven in excess of 50,000 kms in that time. Mr Holliday has obtained real value from the use of the vehicle in that time, and I would not be doing justice by the parties if I failed to take account of the value of that use. Accordingly, I intend to reduce the damages award by $12,000 to reflect the benefit Mr Holliday has received from his use of the vehicle.
[32] Accordingly, the Tribunal declares the contract between the parties to be void as at the date of this decision. The Tribunal also orders that Sport Wholesale must, within 10 working days of this decision, pay Mr Holliday $12,995. Mr Holliday must then return the vehicle to Sport Wholesale.

DATED at AUCKLAND this 12th day of July 2017

B.R. Carter
Adjudicator

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

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

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

[4] Ibid, at 764.

[5] 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].

[6] Red Eagle Corporation v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [29].