Liang v Mr Motors North Shore Limited t/a Mr Motors Group - Reference No. MVD 376/2017 [2018] NZMVDT 18 (8 February 2018)

Last Updated: 16 March 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 018 Reference No. MVD 376/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	YONGPING LIANG
		Purchaser
	AND	MR MOTORS NORTH SHORE LIMITED T/A MR MOTORS GROUP
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 22 January 2018
DATE OF DECISION 8 February 2018
APPEARANCES
Ms Y Liang, Purchaser
Mr Z Wang, for the Trader

ORDERS

1. Mr Motors North Shore Limited shall, within five working days of the date of this decision, pay $1,000 to Yongping Liang.

DECISION

[1] Mr Motors North Shore Limited’s failed to disclose that the $1,000 deposit paid by Yongping Liang was non-refundable is conduct that breaches s 9 of the Fair Trading Act 1986 (“the Act”).
[2] Yongping Liang is entitled to recover the deposit paid to Mr Motors North Shore Limited.

REASONS

Introduction

[3] Yongping Liang was interested in purchasing a 2011 Mazda Axela from Mr Motors North Shore Limited.
[4] Without signing a Vehicle Offer and Sale Agreement, Ms Liang paid a $1,000 deposit on the vehicle. The vehicle required minor repairs, and Ms Liang understood that the deposit was payable so as Mr Motors would not sell the vehicle to another purchaser while minor repairs were performed.
[5] The following day, Ms Liang decided not to purchase the vehicle. Mr Motors declined to refund the deposit, claiming it was non-refundable.
[6] Ms Liang has now applied to the Tribunal, claiming that she was not advised that the deposit was non-refundable. She seeks to recover that deposit.
[7] Mr Motors accepts that Ms Liang was not told that the deposit was non-refundable, but it points to a Vehicle Offer & Sales Write Up Sheet, which says that the deposit is non-refundable.

The Issues

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

• (a) Has Mr Motors engaged in conduct that breaches s 9 of the Act?
• (b) If so, what remedy is Ms Liang entitled to under the Act?

Has Mr Motors engaged in conduct that breached section 9 of the Act?

[9] Section 9 of the Act 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.”

[10] 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. ... 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.

[11] The question I must answer in this case is whether Mr Motors had an obligation to disclose that the deposit paid by Ms Liang was non-refundable, and if so, whether it failed to do so.

Did Mr Motors have an obligation to disclose that the deposit was non-refundable?

[12] Ms Liang says that Mr Motors has engaged in misleading conduct by failing to disclose that the deposit was non-refundable.
[13] To succeed in her claim, Ms Liang must show that Mr Motors’ failure to disclose that the deposit was non-refundable amounts to a 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.
[14] 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.[1]
[15] This principle of caveat emptor has now been displaced by the Fair Trading Act. Under the Act, silence or the failure to disclose a material fact, can constitute misleading or deceptive conduct.[2] In Des Forges v Wright, Elias J (as she then was) stated:[3]

“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.”

[16] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[4] 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.
[17] In this case, I am satisfied that a consumer would have a reasonable expectation that Mr Motors would disclose that the deposit was non-refundable. Ms Liang paid a deposit of $1,000 – a significant sum for any potential purchaser of a $14,700 vehicle. I consider that any consumer would expect to be told that this amount was non-refundable.

Did Mr Motors fail to adequately disclose that the deposit was non-refundable?

[18] Ms Liang alleges that she was not told that the deposit was non-refundable.
[19] Zhineng Wang, a Stock Manager at Mr Motors, dealt with Ms Liang. Mr Wang did not tell Ms Liang that the deposit was non-refundable. Mr Wang did, however, have Ms Liang sign a Vehicle Offer and Sales Write Up Sheet. The Write Up Sheet is a preliminary document intended to capture the terms of the agreement between the parties, terms that are then finalised in the Vehicle Offer and Sale Agreement that Mr Motors has its customers sign.
[20] The Write Up Sheet states that the total price for the vehicle includes a non-refundable deposit of $1,000.
[21] Ms Liang claims that she did not see the Write Up Sheet before she paid the deposit. Further, she says that the Write Up Sheet was not explained to her and that she has difficulty understanding English, so she did not realise that the Write Up Sheet contained a statement that the price of the vehicle included a non-refundable deposit of $1,000.
[22] I accept Ms Liang’s evidence. I found her to be a reliable witness, with a clear recollection of events. I accept that she was not told that the deposit was non-refundable, and neither was her attention drawn to the reference in the Write Up Sheet to the non-refundable deposit.

Mr Motors engaged in misleading conduct

[23] In those circumstances, I am satisfied that Mr Motors failed to adequately disclose that the deposit was non-refundable, and in doing so has engaged in conduct that breaches s 9 of the Act.
[24] It had an obligation to disclose that the deposit was non-refundable. It failed to do so and now claims a right to retain that deposit. It has no such right.

What remedy is available to Ms Liang?

[25] The remedies available for a breach 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 sets out the approach to be taken in applying s 43. The Tribunal must consider whether:

• (a) Ms Liang was in fact misled or deceived.
• (b) Whether Ms Liang has suffered loss or damage as a result of being misled.
• (c) If so, was Mr Motors’ conduct the effective cause or an effective cause of Ms Liang’s loss or damage?

[27] As set out above, I find that Ms Liang was in fact misled. I am also satisfied that Ms Liang has suffered loss as a result of being misled. She paid $1,000 under the mistaken understanding that the deposit was refundable if she decided not to purchase the vehicle. That $1,000 has not been returned to her.
[28] Mr Motors’ conduct was an effective cause of Ms Liang’s loss. I am satisfied that Ms Liang would not have paid the deposit if Mr Motors had disclosed that it was non-refundable.
[29] In the circumstances of this case, I consider the appropriate remedy to be an order under s 43(3)(e) of the Act, that Mr Motors refund the $1,000 paid by Ms Liang.
[30] Accordingly, the Tribunal orders that Mr Motors shall, within five working days of the date of this decision, pay $1,000 to Ms Liang.

DATED at AUCKLAND this 8th day of February 2018

B.R. Carter
Adjudicator

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

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

[3] Ibid, at 764.

[4] 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].