Passmore v Ez Import Limited t/a Ez Motors Reference No. MVD 123/2018 [2018] NZMVDT 134 (18 June 2018)

Last Updated: 16 July 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 134 Reference No. MVD 123/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	GEORGE PASSMORE
		Purchaser
	AND	EZ IMPORT LIMITED T/A EZ MOTORS
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 30 May 2018
DATE OF DECISION 18 June 2018
APPEARANCES
G Passmore, Purchaser
E Zhu, for the Trader

ORDERS

1. George Passmore’s application is dismissed.

DECISION

[1] The vehicle failed to correspond with its description, in that it was a two-wheel drive (2WD) vehicle rather than the represented all-wheel drive (AWD), in breach of s 9 of the Consumer Guarantees Act 1993 (the CGA).
[2] This failure to correspond with its description is a failure of substantial character for the purposes of s 21(b) of the CGA. However, Mr Passmore is not entitled to reject the vehicle because he has lost the right of rejection through delay. He has also suffered no loss as a result of the vehicle’s failure to comply with its description. Accordingly, Mr Passmore is entitled to no remedy under the CGA.
[3] EZ Import Limited, trading as EZ Motors, also engaged in conduct that breached s 9 of the Fair Trading Act 1986 (the FTA) by representing that the vehicle was an AWD vehicle, when it was not. Despite being misled, Mr Passmore is not entitled to a remedy under the FTA as he has not suffered any loss as a result of being misled.

Introduction

[4] In August 2017, Mr Passmore purchased a 2012 Mazda CX5 from EZ Motors for $24,700. The vehicle had an odometer reading of 49,200 km at the time of sale.
[5] Mr Passmore had been reassured by EZ Motors that the vehicle was an AWD vehicle. This was important to Mr Passmore, as he was about to move to Queenstown and required a vehicle suitable for use during the Queenstown winter. Shortly after purchasing the vehicle, Mr Passmore discovered that the vehicle was not AWD, but was instead a 2WD vehicle.
[6] Mr Passmore has now applied to the Tribunal claiming that the vehicle failed to comply with its description and that he was misled by EZ Motor’s claim that the vehicle was AWD. EZ Motors denies representing that the vehicle was AWD. It says that Mr Passmore simply assumed that to be the case.

The Issues

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

• (a) Did the vehicle fail to correspond with its description under s 9 of the CGA?
• (b) If so, is the failure of a substantial character?
• (c) Has Mr Passmore lost the right to reject the vehicle?
• (d) What remedy is Mr Passmore entitled to under the CGA?
• (e) Has EZ Motors engaged in conduct in breach of s 9 of the FTA?
• (f) If so, what remedy is Mr Passmore entitled to under the FTA?

Did the vehicle fail to correspond with its description under s 9 of the CGA?

[8] Section 9 of the CGA states that all goods (and a vehicle is a good) which are supplied by description, must comply with that description:

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.

[9] Mr Passmore claims that the vehicle failed to comply with the description provided by EZ Motors, in that EZ Motors said the vehicle was AWD when it was 2WD.
[10] Mr Passmore acknowledged that the Trade Me listing advertising the vehicle, the Vehicle Offer and Sale Agreement and the Consumer Information Notice did not mention that the vehicle was AWD. However, Mr Passmore claimed that he spoke with Mr Zhu, a Director of EZ Motors, who advised him that the vehicle was AWD. He also says that he spoke at length with the salesperson who sold him the vehicle, and that salesperson confirmed that the vehicle was AWD. Mr Passmore also says that the warranty documents he signed at the time of purchase state that the vehicle was AWD.
[11] Mr Zhu denied advising Mr Passmore that the vehicle was AWD. He says that EZ Motors did not advertise the vehicle as AWD and that no representative from the company told Mr Passmore that the vehicle was AWD. Mr Zhu says that the warranty documents only state that the vehicle is AWD because of a problem with the insurer’s computer system, which meant that the AWD model of the Mazda CX5 was the only model that it could choose when completing the warranty documents. Mr Zhu considers that Mr Passmore has simply assumed that the vehicle was AWD because it appeared in Trade Me search results where one of Mr Passmore’s search criteria was that the vehicle was 4WD or AWD.
[12] I accept Mr Passmore’s evidence that he was told by EZ Motors that the vehicle was AWD. I accept that Mr Passmore was only interested in buying an AWD vehicle because he was about to move to Queenstown and required a vehicle suitable for driving in the Queenstown winter, including on icy and snow-covered roads. I consider it highly likely that Mr Passmore communicated these needs to EZ Motors, and that it confirmed to Mr Passmore that the vehicle was AWD.
[13] I am therefore satisfied that EZ Motors described the vehicle as being AWD when it was supplied to Mr Passmore. The vehicle is not AWD. Accordingly, the vehicle does not comply with that description, in breach of s 9 of the CGA.

Is the failure to correspond with description of a substantial character?

[14] The remedies relevant to Mr Passmore’s claim under the CGA are set out in s 18 of that Act, which provides:

18. Options against suppliers where goods do not comply with guarantees

(1) Where a consumer has a right of redress against the supplier in accordance with this Part in respect of the failure of any goods to comply with a guarantee, the consumer may exercise the following remedies.

(2) Where the failure can be remedied, the consumer may—

(a) require the supplier to remedy the failure within a reasonable time in accordance with section 19:

(b) where a supplier who has been required to remedy a failure refuses or neglects to do so, or does not succeed in doing so within a reasonable time,—

(i) have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied; or

(ii) subject to section 20, reject the goods in accordance with section 22.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21, the consumer may—

(a) subject to section 20, reject the goods in accordance with section 22; or

(b) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.

(4) In addition to the remedies set out in subsection (2) and subsection (3), the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.

[15] Under s 18(3)(a) of the Act, Mr Passmore may reject the vehicle if the failure to comply with one of the guarantees is of a substantial character. A failure of a substantial character is defined in s 21 of the Act:

“21 Failure of substantial character

For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where—

(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b) the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or

(c) the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or

(d) the goods are not of acceptable quality within the meaning of section 7 because they are unsafe.”

[16] Section 21(b) of the Act applies to this case. The question I must answer is whether the vehicle departs in a significant respect from the descriptions by which it was supplied.
[17] The vehicle does depart in a significant respect from the description by which it was supplied. The vehicle was described as AWD. The AWD function is significant because it enables vehicles to be safely used in environments in which a 2WD vehicle cannot safely be used. The vehicle departed in a significant respect from that description because it was not AWD. I am therefore satisfied that the failure to comply with the guarantee that the vehicle will correspond with its description is of a substantial character and that Mr Passmore is entitled to reject the vehicle under s 18(3)(a) of the CGA.

Has Mr Passmore lost the right to reject the vehicle?

[18] Section 20 of the CGA sets out the circumstances in which a purchaser loses the right to reject a vehicle. Relevant to this case are s 20(1)(a) and s 20(2) of the CGA, which state:

20 Loss of right to reject goods

(1) The right to reject goods conferred by this Act shall not apply if—

(a) the right is not exercised within a reasonable time within the meaning of subsection (2);

...

(2) In subsection (1)(a), the term reasonable time means a period from the time of supply of the goods in which it would be reasonable to expect the defect to become apparent having regard to—

(a) the type of goods:

(b) the use to which a consumer is likely to put them:

(c) the length of time for which it is reasonable for them to be used:

(d) the amount of use to which it is reasonable for them to be put before the defect becomes apparent.

[19] Under s 20(1)(a) of the CGA, Mr Passmore will lose the right to reject the vehicle if he does not exercise that right within a reasonable time. For the purposes of s 20(1)(a), "reasonable time" is a period from the time of supply of the goods in which it would be reasonable for the defect to become apparent, having regard to the factors in s 20(2)(a)–(d) of the CGA.
[20] In Nesbit v Porter the Court of Appeal shed some light on the statutory words in s 20(2) of the Act.[1] The Court observed that:[2]

A reasonable time under s 20 must accordingly be one which suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of breakage or malfunction is not apparent, the consumer can be expected to do so by taking the goods to someone, usually and preferably the supplier, for inspection.

[21] In this case, Mr Passmore knew that the vehicle was not AWD on about 21 August 2017. Although Mr Passmore claims to have rejected the vehicle and asked for a refund almost immediately, the evidence presented at the hearing does not show that Mr Passmore communicated his rejection of the vehicle to EZ Motors at that time. Mr Zhu denies that Mr Passmore rejected the vehicle and the text message correspondence between the parties contains no mention of Mr Passmore rejecting the vehicle.
[22] Further, Mr Passmore’s application to the Tribunal, filed on 16 March 2018, does not clearly state that he would like to reject the vehicle. Therefore, on the evidence I have seen and heard, I consider that Mr Passmore did not advise EZ Motors of his intention to reject the vehicle until after 16 March 2018, more than six months after becoming aware that the vehicle was AWD.
[23] Mr Passmore advises that he was slow in bringing proceedings before the Tribunal because he telephoned an organisation, which in his application he referred to as the Disputes Tribunal, but in evidence thought might have been the Motor Trade Association, shortly after discovering that the vehicle was AWD. He says that the organisation advised him that as the evidence was “conversational”, he had no chance at a hearing, so Mr Passmore decided to pursue the matter no further. It was not until he discovered that the warranty documents included reference to the vehicle being AWD that he decided to pursue his claim in the Tribunal.
[24] Applying s 20(1)(a) of the CGA, I consider that Mr Passmore has failed to exercise his right to reject the vehicle within a reasonable time. This conclusion may seem harsh on Mr Passmore, particularly given his evidence that he was dissuaded from bringing proceedings by third party advice as to his prospects of success. However, in Nesbit v Porter, the Court of Appeal considered that there are good policy grounds for requiring the right to reject to be exercised within a reasonable time. The Court of Appeal noted:[3]

the Court should not lose sight of the burden which may be imposed upon a supplier by a lengthy delay in rejecting the goods, during a time when their value is likely to depreciate, particularly where depreciation is increased by further usage, as it is for motor vehicles.

[25] Those policy grounds apply here. After becoming aware that the vehicle was not AWD, Mr Passmore continued to use the vehicle and has driven more than 13,000 km in the 10 months of his ownership. The vehicle will have depreciated significantly in that time. Accordingly, I consider that Mr Passmore has lost his right to reject the vehicle because he did not use that right within a reasonable time of becoming aware that the vehicle was not AWD.

What remedy is Mr Passmore now entitled to under the CGA?

[26] Under s 18(3)(b) of the CGA, Mr Passmore may be entitled to recover damages in compensation for any reduction in value of the vehicle below the price paid for the vehicle.
[27] To assist me in determining whether Mr Passmore has suffered any loss or damage due to any reduction in value of the vehicle below the price paid for it, I asked the parties to provide a current valuation of the vehicle. Mr Passmore obtained a valuation from Central Otago Motor Group, who advised Mr Passmore that the average retail price for a 2WD 2012 Mazda CX5 diesel was $21,000.
[28] This is the only evidence presented by either party as to the current value of the vehicle. Mr Passmore provided printouts of Trade Me listings for several AWD models of the Mazda CX5, which showed retail prices between $23,990 and $26,950, but the Central Otago Motor Group advice is the only evidence as to the current retail value of a 2WD model.
[29] Taking account of the fact that Mr Passmore paid $24,700 for the vehicle, that he has now owned it for more than 10 months and has driven the vehicle more than 13,000 km in that time, I do not consider that Mr Passmore has suffered any loss or damage as a result of the vehicle failing to comply with its description. The difference between the price paid by Mr Passmore and the current value indicated by Central Otago Motor Group is reflective of the normal depreciation of the value of the vehicle, taking account of the length of time since purchase and the distance Mr Passmore has driven it.
[30] Mr Passmore also submitted that I should take account of the difficulty he will have selling this vehicle in Queenstown. In his view, 2WD vehicles are difficult to sell in that part of the country given their unsuitability for use in icy or snowy terrain. Mr Passmore presented no corroborative evidence to support this submission and I note that the valuation from Central Otago Motor Group makes no mention of the vehicle being worth less in Queenstown than any other part of the country. As a result, I must proceed on the basis that the valuation from Central Otago Motor Group applies to vehicles sold in Queenstown.
[31] In those circumstances, I do not consider that Mr Passmore has proven that he has suffered loss as a result of purchasing the vehicle and I decline to make any award of damages under the CGA to Mr Passmore.

Has EZ Motors engaged in conduct that breached s 9 of the FTA?

[32] EZ Motors’ description of the vehicle as being AWD also raises issues under s 9 of the FTA, which prohibits misleading and deceptive conduct in trade. Section 9 of the FTA provides:

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.

[33] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corporation v Ellis:[4]

The question to be answered in relation to s 9 ... is ... 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 a 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.

[34] I am satisfied that EZ Motors has engaged in misleading conduct in breach of s 9 of the FTA. As set out above, in the discussion as to whether the vehicle failed to correspond with its description, I consider that EZ Motors advised Mr Passmore that the vehicle was AWD. That representation was misleading in breach of s 9 of the FTA, as the vehicle is not AWD.

What remedy is available to Mr Passmore under the FTA?

[35] The remedies available for a breach of the FTA 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 the 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.

[36] The remedies in s 43(3) of the FTA are discretionary, and the discretion is to be exercised so as to give effect to the policy of the FTA, which includes to protect the interests of consumers. The object of the remedies in s 43(3) of the FTA is to do justice to the parties in the particular circumstances of the case.[5]
[37] In this case, for the reasons set out above, in my assessment as to whether Mr Passmore has suffered loss under s 18(3)(b) of the CGA, I am not satisfied that Mr Passmore has suffered any loss as a result of being misled about the vehicle. The current retail value of the vehicle is approximately $21,000 and the difference between that value and the purchase price of the vehicle is reflective of the normal depreciation of the vehicle. Accordingly, I also decline to award damages to Mr Passmore under the FTA.

Conclusion

[38] The vehicle failed to correspond with its description, in that it was a 2WD vehicle rather than the represented AWD, in breach of s 9 of the CGA.
[39] This failure to correspond with its description is a failure of substantial character for the purposes of s 21(b) of the CGA. However, Mr Passmore is not entitled to reject the vehicle. He has lost the right of rejection through delay. He has also suffered no loss as a result of the vehicle’s failure to correspond with its description. Accordingly, Mr Passmore is entitled to no remedy under the CGA.
[40] EZ Motors also engaged in conduct that breached s 9 of the FTA by representing that the vehicle was an AWD vehicle, when it was not. Despite being misled, Mr Passmore is not entitled to a remedy under the FTA as he has not suffered any loss as a result of being misled.
[41] Accordingly, Mr Passmore’s application is dismissed.
[42] After the hearing, Mr Passmore provided evidence as to new alleged faults with the vehicle and asked me to take account of that evidence in this decision. I cannot do that, as it would not be appropriate to consider new evidence after the hearing as to matters not covered during the hearing. If Mr Passmore wishes to pursue those matters further, he will need to file a fresh claim with the Tribunal.

DATED at AUCKLAND this 18th day of June 2018

B.R. Carter
Adjudicator

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[1] Nesbit v Porter [2000] NZCA 288; (2000) 9 TCLR 395 (CA).

[2] At [39].

[3] At [42].

[4] Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

[5] Red Eagle Corporation Ltd v Ellis, above n 7, at [31].