Dong Construction Limited v Tamaki Limited t/a Grange Motor Company - Reference No. MVD 125/2017 (Auckland) [2017] NZMVDT 97 (26 July 2017)

Last Updated: 16 August 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 97 Reference No. MVD 125/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	DONG CONSTRUCTION LIMITED
		Purchaser
	AND	TAMAKI LIMITED TRADING AS GRANGE MOTOR COMPANY
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 6 July 2017
DATE OF DECISION 26 July 2017
APPEARANCES
Mr H Su, for the Purchaser
Mrs D Wang, Witness for the Purchaser
Mr E Houlihan, for the Trader
Mr V Cook, Witness for the Trader

ORDERS

A. Dong Construction Limited’s application is dismissed.

DECISION

[1] The vehicle has dents and scratches. However, those dents and scratches do not breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the CGA”).
[2] Further, Grange Motor Company did not disguise the dents and scratches or otherwise engage in conduct that breached s 9 of the Fair Trading Act 1986 (“the FTA”).

REASONS

Introduction

[3] On 2 April 2017, Dong Construction purchased a 2011 Toyota Hiace from Grange Motor Company for $19,139. The vehicle had an odometer reading of 48,072 kms at the time of sale.
[4] Mr Su and Mrs Wang are both directors of Dong Construction. They were looking for a commercial vehicle to use in their construction business. They had seen the vehicle advertised on a Trade Me listing. Liking the look of the vehicle, they twice inspected it at Grange Motor Company’s premises before deciding to purchase it.
[5] Shortly after purchasing the vehicle, Mr Su noticed a dent at the rear of the vehicle. The next day Mr Su noticed scratches on the vehicle. Mr Su contacted the Grange Motor Company and asked Grange Motor Company to repair the dents and scratches on the vehicle.
[6] Grange Motor Company refused to do so, and advised Dong Construction that the condition of the vehicle was clear in the photographs on the Trade Me listing and would have been clear to Mr Su and Mrs Wang when they twice inspected the vehicle.
[7] On 6 April 2017, Dong Construction rejected the vehicle claiming that dents and scratches on the vehicle are unacceptable and that Grange Motor Company misled it as to the appearance and finish of the vehicle.
[8] Grange Motor Company refused to accept this rejection, so Dong Construction has applied to the Tribunal for orders upholding its rejection of the vehicle.

The Issue

[9] There are two issues in this case:

• (a) Was the vehicle acceptable in appearance and finish sufficient to comply with the guarantee of acceptable quality in s 6 of the CGA?
• (b) Did Grange Motor Company mislead Dong Construction about the appearance and finish of the vehicle?

Was the vehicle acceptable in appearance and finish for the purposes of s 6 of the CGA?

[10] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods “a guarantee that the goods are of acceptable quality.” Section 2 of the CGA defines “goods” as including vehicles.
[11] The expression “acceptable quality” is defined in s 7 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.”

[12] 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 Dong Construction’s subjective perspective.
[13] The issue in this case is whether the vehicle was acceptable in appearance and finish. Dong Construction complains that the vehicle was unacceptable in that respect.

The vehicle was acceptable in appearance and finish

[14] Mr Gregory, the Tribunal’s Assessor, and I inspected the vehicle after the hearing. I was also shown a number of photographs of the vehicle taken before it was sold to Dong Construction, including the photographs displayed on the Trade Me listing.
[15] The vehicle clearly has dents and scratches. There are a number of small scratches on the driver’s side panels, a long scratch on the bottom of the passenger side sliding door and a dent at the bottom right of the rear door and top of the rear bumper.
[16] I am not satisfied that the dents and scratches breach the acceptable quality guarantee. Dong Construction purchased a six year old light commercial van to be used in its construction business. The vehicle is not free of blemishes; but I do not think that a reasonable consumer would expect a six year old light commercial vehicle to be free of blemishes. That is particularly the case where the trader made no representations about the appearance or finish of the vehicle, other than publishing photographs that showed dents and scratches. The dents and scratches on this vehicle are simply evidence of the vehicle’s working life and do not amount to unacceptable blemishes that breach the acceptable quality guarantee in s 6 of the CGA.
[17] It may be that Dong Construction has unrealistic expectations about the appearance and finish of a six year old used light commercial van. As an example of these potentially unrealistic expectations, Mr Hu also claimed at the hearing that the vehicle had now developed rust that Grange Motor Company should be required to repair. I inspected the alleged rust. It was no more than a paint chip with light surface rust over an area of perhaps 5 millimetres. That small area of light surface rust could not possibly be a defect that is covered by s 6 of the CGA.

Did Grange Motor Company mislead Dong Construction about the vehicle’s appearance and finish?

[18] Dong Construction alleges that it was misled about the vehicle’s appearance and finish in two ways:

• (a) The dents and scratches were disguised by Grange Motor Company when Mr Su and Mrs Wang inspected the vehicle; and
• (b) The dents and scratches were not disclosed to Dong Construction before it purchased the vehicle in circumstances where Grange Motor Company had an obligation to make that disclosure.

[19] The question I must then consider is whether Grange Motor Company has engaged in misleading conduct that breached 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.”

[20] 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.”

The vehicle’s condition was not disguised

[21] Dong Construction alleges that the dents and scratches were concealed by Grange Motor Company when Mr Su and Mrs Wang inspected the vehicle.
[22] Dong Construction suggests that Grange Motor Company applied a polish or coat to the vehicle that washed off after purchase to reveal the vehicle’s scratches. Grange Motor Company says that although it polished the vehicle, as it does with all vehicles it sells, it did not attempt to disguise the vehicle’s blemishes.
[23] I accept Grange Motor Company’s evidence. I do not consider that Grange Motor Company sought to disguise or hide the vehicle’s blemishes. The photographs on Trade Me show a long scratch at the bottom of the passenger sliding door and a dent in the bottom right corner of the rear door. If Grange Motor Company had been seeking to disguise the vehicle’s blemishes it would not have published those photographs.
[24] Further, I consider that all of the dents and scratches would all have been visible when the vehicle was inspected by Mr Su and Mrs Wang. Mr Gregory advises that the dents and scratches are such that Grange Motor Company would not have been able to disguise them with polish or any other product.
[25] Dong Construction also says that Grange Motor Company concealed the dent in the rear door by leaving the rear door open when the vehicle was inspected. I am not satisfied that Grange Motor Company left the rear door open as a way of hiding the dent at the bottom of the door. I am satisfied that the rear door was open to enable Dong Construction to inspect the interior of the vehicle. I do not consider that Grange Motor Company should be liable for Dong Construction overlooking to then inspect the exterior of the rear door.

Grange Motor Company has not misled Dong Construction by failing to disclose the dents and scratches

[26] Dong Construction also alleges that it was misled by Grange Motor Company’s silence in failing to tell it about the dents and scratches. Dong Construction says that the dents and scratches were not mentioned in the Trade Me listing or by the salesperson they dealt with.
[27] This aspect of Dong Construction’s claim 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.
[28] 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]
[29] 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.”

[30] 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.
[31] Dong Construction’s claim on this ground must fail for two reasons. The first is that the dents and scratches are not so significant or material that a reasonable consumer would expect to have been specifically told about them. As noted above in the discussion about whether the dents and scratches breach s 6 of the CGA, these are the types of blemishes that one would expect to see in a six year old light commercial van. I do not consider that Grange Motor Company had an obligation under the FTA to separately disclose those blemishes, particularly where it has otherwise made no representation about the appearance or finish of the vehicle.
[32] The second reason is that the dents and scratches to the bottom of the passenger’s door were in fact disclosed in photographs in the Trade Me listing and all of the dents and scratches would have been visible when the vehicle was inspected by Mr Hu and Mrs Wang.

Conclusion

[33] The vehicle’s dents and scratches do not breach the acceptable quality guarantee in s 6 of the CGA. They are the type of blemishes that one would expect to see in a six year old light commercial van.
[34] Further, Grange Motor Company did not attempt to disguise the scratches or dents or otherwise engage in conduct that has breached s 9 of the FTA.
[35] As a result, Dong Construction’s application is dismissed.

DATED at AUCKLAND this 26th 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].