Shiraz Holiday Ltd v Auckland City BMW Ltd - Reference No. MVD 225/2018 [2018] NZMVDT 206 (11 September 2018)

Last Updated: 15 October 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 206 Reference No. MVD 225/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	SHIRAZ HOLIDAY LTD
		Purchaser
	AND	AUCKLAND CITY BMW LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 23 August 2018
DATE OF DECISION 11 September 2018
APPEARANCES
M Bassamtabar for the Purchaser F Bassamtabar, Witness for the Purchaser
M Sanders, for the Trader

ORDERS

1. Shiraz Holiday Ltd’s application is dismissed.

DECISION

[1] Auckland City BMW Ltd has not engaged in conduct that breached s 9 of the Fair Trading Act 1986 (the FTA). Although Auckland City BMW did not formally notify Shiraz Holiday Ltd that the agreement was at an end, Shiraz Holiday Ltd knew that the vehicle was being offered to other purchasers because of its failure to satisfy the finance condition.
[2] Accordingly, Shiraz Holiday Ltd is not entitled to any remedy under the FTA and its application is dismissed.

REASONS

Introduction

[3] On 8 July 2017, Shiraz Holiday Ltd agreed to purchase a new BMW 740 LE Centenary Edition for $195,000. The purchase was conditional upon Shiraz Holiday Ltd obtaining finance to purchase the vehicle. The agreement contained no provision for how and when that finance condition was to be satisfied, although the parties agree that Auckland City BMW was to make the application for finance on behalf of the purchaser.
[4] Shiraz Holiday Ltd says that Auckland City BMW applied for finance on its behalf, and in late October 2017, was successful in obtaining finance to purchase the vehicle. Shiraz Holiday Ltd says that BMW Finance informed it that the agreement was therefore unconditional. Shiraz Holiday Ltd says that it then found out that Auckland City BMW had allowed the vehicle to be sold to another purchaser.
[5] Shiraz Holiday Ltd now seeks to recover the loss it says it suffered as a result of Auckland City BMW’s engagement in misleading conduct. In its application, Shiraz Holiday Ltd sought to recover the $1,000 deposit it paid, $20,000 for loss it says it suffered as a result of Auckland City BMW’s conduct, and its legal costs incurred in relation to this matter. After the hearing, Shiraz Holiday Ltd increased its compensation claim and now seeks $35,000 in compensation.
[6] Auckland City BMW says that Shiraz Holiday Ltd is not entitled to a remedy. It says that it never obtained unconditional finance for the purchase of the vehicle and that Shiraz Holiday Ltd failed to satisfy the finance condition, despite being given more than sufficient time to do so.
[7] Masoud Bassamtabar appeared on behalf of Shiraz Holiday Ltd. Mr Bassamtabar has no formal relationship with the company – he is neither a director, shareholder or employee of the company. However, Mr Bassamtabar holds a Power of Attorney, dated 15 April 2015, under which he is authorised to act on behalf of his wife, Badrolsadat Bassamtabar, who is the sole shareholder of Shiraz Holiday Ltd. On that basis, I am satisfied that Mr Bassamtabar has standing to appear for the company.

The Issues

[8] Against this background, the issues requiring consideration in this case are:

• (a) Has Auckland City BMW engaged in misleading conduct that breached s 9 of the FTA?
• (b) If so, what remedy is Shiraz Holiday Ltd entitled to under the FTA?

[9] Shiraz Holiday Ltd also sought compensation for alleged breaches of its privacy. The Tribunal does not have jurisdiction to consider alleged privacy breaches. Shiraz Holiday Ltd will have to pursue that aspect of its claim elsewhere.

Has Auckland City BMW engaged in conduct that breached s 9 of the FTA?

[10] Shiraz Holiday Ltd alleges that Auckland City BMW engaged in misleading conduct by representing that it would supply the vehicle to it after a successful credit application. Shiraz Holiday Ltd says that Auckland City BMW conducted a successful credit application in late October 2017, but then failed to supply the vehicle.
[11] 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.

[12] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corporation v Ellis:[1]

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 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.

[13] Auckland City BMW says that the contract with Shiraz Holiday Ltd was at an end because Shiraz Holiday Ltd had failed to satisfy the finance condition and that it was entitled to put the vehicle back on the market.
[14] Shiraz Holiday Ltd’s submissions placed significant weight on the fact that Auckland City BMW had failed to notify it that the contract was cancelled because of the failure to satisfy the finance condition. Shiraz Holiday Ltd submits that Auckland City BMW had an obligation to notify it that time was of the essence for fulfilment of the finance condition, and as a result of not doing so, Auckland City BMW has acted inappropriately by cancelling the contract and allowing the vehicle to be sold to a third party.
[15] I consider that Auckland City BMW did not advise Shiraz Holiday Ltd that time was of the essence for the satisfaction of the finance condition and it did not formally notify Shiraz Holiday Ltd that the contract was terminated. However, despite Auckland City BMW’s failure to formally notify it that the contract was at an end, I am satisfied that Shiraz Holiday Ltd knew that the vehicle was being offered to other prospective purchasers because of Shiraz Holiday Ltd’s failure to satisfy the finance condition.
[16] In this regard, I accept the evidence of Margaret Sanders, the Business Manager at Auckland City BMW. Ms Sanders says that Mr Bassamtabar initially instructed Auckland City BMW to apply for finance in the name of Fine Foods Ltd. That application was declined because of Mr Bassamtabar’s previous involvement in a liquidated company. Mr Bassamtabar then instructed Auckland City BMW to hold off making any further application until he authorised it to do so because Shiraz Holiday Ltd was in the process of borrowing money from ASB Bank and wanted that transaction confirmed before it made any further applications for credit.
[17] In early October 2017, Mr Bassamtabar asked for a further two-week extension to the finance condition, but acknowledged in an email dated 2 October 2017, that if Shiraz Holiday Ltd failed to obtain finance within that time, “there is no option just to put it back to the market”. I interpret that email as saying that Shiraz Holiday Ltd acknowledged that the vehicle would be offered for sale to other potential buyers if the finance condition was not satisfied within two weeks.
[18] Shiraz Holiday Ltd did not satisfy the finance condition within two weeks and Ms Sanders advises that, by mid-October 2017, BMW New Zealand was putting pressure on Auckland City BMW to put the vehicle back on the market. Indeed, by mid-October 2017, it appears that BMW New Zealand had found another prospective purchaser for the vehicle.
[19] Ms Sanders then telephoned Shiraz Holiday Ltd. Ms Sanders left a message and then received a call from Fatemah Bassamtabar, Mr Bassamtabar’s daughter, who was acting as his agent while he was overseas. Ms Sanders advised Ms Bassamtabar that BMW New Zealand had found another prospective buyer, but that Auckland City BMW still wanted to try to sell the vehicle to Shiraz Holiday Ltd and wanted to give it one last opportunity to apply for finance before the vehicle was sold to another buyer.
[20] After speaking to Mr Bassamtabar, Ms Bassamtabar advised Auckland City BMW to seek finance on behalf of Shiraz Holiday Ltd. Auckland City BMW then sought finance for Shiraz Holiday Ltd from Branded Finance. Branded Finance was prepared to consider lending money to Shiraz Holiday Ltd, but required a larger deposit. Ms Sanders says she advised Ms Bassamtabar of this, but the vehicle was then sold by BMW New Zealand to another purchaser before the finance could be confirmed.
[21] Ms Bassamtabar disputes this version of events. She says that Ms Sanders told her that the finance had been approved and that the agreement was unconditional. Although I found Ms Bassamtabar to be an honest and credible witness, I prefer Ms Sanders’ evidence and consider that Ms Bassamtabar is likely to have misunderstood what Ms Sanders told her in relation to the application for finance. I consider it likely that Ms Bassamtabar incorrectly concluded that finance had been approved, when it had not.
[22] Against this background, I am not satisfied that Auckland City BMW misled Shiraz Holiday Ltd by failing to supply the vehicle to it after a successful finance application because I am not satisfied that Auckland City BMW ever successfully obtained unconditional finance for Shiraz Holiday Ltd. Further, I am not satisfied that Auckland City BMW misled Shiraz Holiday Ltd by allowing the vehicle to be sold to another purchaser. I consider that, by mid-October 2017, Shiraz Holiday Ltd knew that the vehicle was being offered to other prospective purchasers because of its delay in satisfying the finance condition.
[23] Accordingly, Auckland City BMW has not engaged in conduct that breached s 9 of the FTA.
[24] In reaching this conclusion, I make no finding as to whether Auckland City BMW has breached its contract with Shiraz Holiday Ltd by failing to formally notify Shiraz Holiday Ltd that the agreement had been cancelled. The Tribunal has no jurisdiction to determine claims involving an alleged breach of contract and Shiraz Holiday Ltd will need to pursue that claim elsewhere if it chooses to do so.

What remedy is available to Shiraz Holiday Ltd under the FTA?

[25] Because Auckland City BMW has not engaged in any misleading conduct, Shiraz Holiday Ltd is not entitled to any remedy under the FTA.
[26] For completeness, I note that even if Auckland City BMW had engaged in misleading conduct, Shiraz Holiday Ltd has not proven that it suffered any loss as a result of Auckland City BMW’s conduct.
[27] Shiraz Holiday Ltd alleged it has suffered loss by paying more for a replacement Mercedes-Benz vehicle. It says that it paid $225,000 for that replacement Mercedes-Benz and it seeks the difference between the purchase price of the BMW 740 LE and the Mercedes-Benz.
[28] Although there was a difference between the two purchase prices, Shiraz Holiday Ltd did not produce any evidence to show that it suffered loss as a result of purchasing the higher priced Mercedes-Benz. The two vehicles are completely different, with different specifications and features, meaning that the price difference could well be explained by those different specifications and features. I am not satisfied that the price difference can necessarily be characterised as a loss to Shiraz Holiday Ltd, and in the absence of any other evidence proving loss, Shiraz Holiday Ltd failed to prove that it would have been entitled to any remedy under the FTA.
[29] Mr Bassamtabar also claimed that the vehicle was special to him and that he suffered personal embarrassment when the vehicle was sold to another purchaser. Mr Bassamtabar was not the purchaser of the vehicle, so I must put his personal feelings to one side in determining what loss, if any, would have been suffered by Shiraz Holiday Ltd, which is an entirely separate entity to Mr Bassamtabar. I am not satisfied that Shiraz Holiday Ltd could suffer any loss because of injury to Mr Bassamtabar’s feelings.

Costs

[30] Shiraz Holiday Ltd also seeks to recover its legal costs. Under cl 14(1)(a)(ii) and (b) of sch 1 to the Motor Vehicle Sales Act 2003 (the MVSA), the Tribunal may only award costs against Auckland City BMW if it either failed to participate in pre-hearing settlement discussions or, after receiving notice of the hearing, failed to attend without reasonable cause. Auckland City BMW participated appropriately in settlement discussions and attended the hearing. Accordingly, I cannot award legal costs against Auckland City BMW.

Conclusion

[31] Auckland City BMW has not engaged in conduct that breached s 9 of the FTA. Although Auckland City BMW did not formally notify Shiraz Holiday Ltd that the agreement was at an end, Shiraz Holiday Ltd knew that the vehicle was being offered to other purchasers because of its failure to satisfy the finance condition.
[32] Accordingly, Shiraz Holiday Ltd is not entitled to any remedy under the FTA and its application is dismissed.

DATED at AUCKLAND this 11th day of September 2018

B.R. Carter
Adjudicator

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