Easygoing International Ltd v Giltrap Motor Group Ltd Reference No. MVD 325/2018 [2018] NZMVDT 235 (15 October 2018)

Last Updated: 15 November 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 235 Reference No. MVD 325/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	EASYGOING INTERNATIONAL LTD
		Purchaser
	AND	GILTRAP MOTOR GROUP LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 9 October 2018
DATE OF DECISION 15 October 2018
APPEARANCES
S Zheng, Purchaser
A Norfolk, Sales Manager for the Trader S Mason, Service Advisor for the Trader

ORDERS

1. Easygoing International Ltd’s application is dismissed.

DECISION

[1] The vehicle’s worn brake pads and brake discs do not breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (CGA). They have been as durable as a reasonable consumer would consider acceptable.
[2] Giltrap Motor Group Ltd has not engaged in misleading or deceptive conduct in breach of the Fair Trading Act 1986 (FTA) by failing to advise Easygoing International Ltd about the durability of the vehicle’s brake pads and brake discs.

REASONS

Introduction

[3] On 5 June 2017, Easygoing International Ltd purchased a new Volkswagen Touareg TDI V6 from Giltrap Motor Group for $77,000. The vehicle had an odometer reading of 20 km at the time of sale. In June 2018, after a little more than 27,500 km of driving, the vehicle’s front brake pads and discs required replacement.
[4] Easygoing International Ltd asked Giltrap Motor Group to replace the brake pads and discs, but Giltrap Motor Group declined to do so, advising Easygoing International Ltd that the vehicle’s brake pads and discs are consumable items and had been as durable as a reasonable consumer would consider acceptable. However, Giltrap Motor Group did offer to contribute towards the cost of the repair.
[5] Easygoing International Ltd has now applied to the Tribunal alleging that the vehicle’s brake pads and brake discs have not been as durable as a reasonable consumer would consider acceptable. It also alleges that Giltrap Motor Group should have advised it that the brake pads and discs required frequent replacement. It seeks a free set of brake pads as compensation for its loss.

The Issues

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

• (a) Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the CGA?
• (b) Has Giltrap Motor Group engaged in misleading or deceptive conduct in breach of s 9 of the FTA by failing to advise Easygoing International Ltd that the vehicle’s brake pads required frequent replacement?

Does the vehicle have a fault that breaches the acceptable quality guarantee?

[7] 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.
[8] 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.

[9] 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 Easygoing International Ltd’s subjective perspective.
[10] On 26 June 2018, the vehicle’s brake pad warning lights illuminated. The vehicle’s odometer reading was 27,548 km. Easygoing International Ltd then had the vehicle assessed by Giltrap Motor Group, which advised that the vehicle’s front brake pads were low and its front brake pads and discs required replacement.
[11] This evidence satisfies me that the vehicle’s front brake pads and discs required replacement after 27,548 km of driving. Although Easygoing International Ltd also replaced the rear brake pads and discs at the same time, I am not satisfied that those components required immediate replacement. Steve Mason, a Service Advisor at Giltrap Motor Group, advised that the rear brake pads and discs still had life in them, and on his best estimate, would have lasted another 4,000 km or so before requiring replacement.
[12] Easygoing International Ltd considers that the brake pads and discs were not as durable as a reasonable consumer would consider acceptable. In support of its claim, it makes the following points:

• (a) the vehicle cost $77,000, and a reasonable consumer would have high expectations about the durability of the components in a new vehicle of this price;
• (b) it has not driven the vehicle in a manner that would cause premature wear to the brake pads and discs. It says that it has mostly driven the vehicle around Auckland, outside of peak traffic times, and has not used the vehicle for towing or in any other manner that would cause premature wear to the brake pads or discs;
• (c) the vehicle’s brake pads and discs have not been as durable as the brake pads and discs in other vehicles. Steve Zheng, a director of Easygoing International Ltd, advises that he has twice purchased new vehicles, a 2007 Honda CRV and 2011 Mazda CX7. He says he drove about 50,000 km in the Honda CRV and about 89,000 km in the Mazda CX7 without having to replace the brake pads or discs. He also provided anecdotal evidence of other vehicles that have brake pads and discs that have last for longer than 27,548 km; and
• (d) the vehicle is not the type of performance vehicle that can be expected to quickly consume brake pads and discs.

[13] Giltrap Motor Group advises that the brake pads and discs on this vehicle have been as durable as one reasonably can expect from a 2017 Volkswagen Touareg. Mr Mason, who has many years’ experience dealing with Volkswagen vehicles, advises that the longevity of this vehicle’s brake pads and discs are consistent with other 2017 Volkswagen Touaregs.
[14] In explaining the lifespan of this vehicle’s brake pads and discs, Paul Norfolk, a Sales Manager at Giltrap Motor Group, advises that Volkswagen Touaregs are designed to be used in extreme environments, such as alpine areas and deserts, and its components are designed to perform in those environments. Mr Norfolk advises that the brakes are made of a soft compound to ensure that the brakes function properly in those extreme environments. He advises that given the soft compound, the brake pads and discs will wear more quickly than other vehicles that are not designed to function in these environments and have brake pads made of a harder compound (such as the Honda CRV and Mazda CX7 mentioned by Mr Zheng).
[15] Mr Haynes, the Tribunal’s Assessor, advises that the brake pads and discs in large European SUVs (such as this vehicle) wear much more quickly than the brake pads and discs in many other SUVs, such as those manufactured in Japan or Korea. Mr Haynes advises that the brake pads and discs wear more quickly because of the weight of the vehicle (2,860 kg) and the soft compound used in the brake pads, which are designed to allow the vehicle to be used in extreme environments. Mr Haynes advises that the durability of the brake pads and discs in this vehicle are in line with what one should expect from a 2017 Volkswagen Touareg, or similar European vehicle.
[16] Accordingly, I am satisfied that the vehicle’s brake pads and discs have been as durable as a reasonable consumer would consider acceptable and Easygoing International Ltd is not entitled to any remedy under the CGA.
[17] In reaching this conclusion, I note that Mr Zheng referred the Tribunal to an earlier Tribunal decision, which he claimed supported Easygoing International Ltd’s allegation that the brake pads and discs breached the acceptable quality guarantee. [1] Mr Zheng submitted that the Tribunal had previously found that worn brake pads on a new Mercedes-Benz vehicle that had travelled about 33,000 km breached the acceptable quality guarantee.
[18] The earlier decision does not assist Easygoing International Ltd’s claim. It seems that Mr Zheng has misread the earlier decision because the decision does not conclude that the vehicle’s brake pads breached the acceptable quality guarantee. Instead, on my reading of the decision, the Tribunal found that the vehicle breached the acceptable quality guarantee because of issues with its cooling system, rather than any issue with the vehicle’s brake pads.

Has Giltrap Motor Group engaged in conduct that breached s 9 of the FTA?

[19] Easygoing International Ltd also alleged that Giltrap Motor Group should have told it that the vehicle’s brake pads and discs would require frequent replacement. Easygoing International Ltd says that, given the distance it drives in the vehicle and the rate at which the brake pads and discs wear, it may have to replace those items three times within the three-year warranty period for a new vehicle. It says that Giltrap Motor Group should have advised it of those facts.
[20] Giltrap Motor Group accepts that it did not advise Easygoing International Ltd about the durability of the vehicle’s brake pads and discs. However, it says that it had no obligation to do so and that it would not be appropriate for a salesperson to attempt to predict how long brake pads and discs may last, as much depends upon the manner in which the vehicle is used.
[21] Although Easygoing International Ltd’s application did not specifically allege a breach of the FTA, given the nature of its pleading on the evidence presented, I feel obliged to consider its claim under s 9 of the FTA.
[22] 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.

[23] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corporation v Ellis:[2]

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.

[24] In determining whether Giltrap Motor Group’s failure to advise Easygoing International Ltd as to the durability of the vehicle’s brake pads and discs breaches the FTA, the Tribunal is required to consider the extent to which non-disclosure or silence can be a breach of s 9 of the FTA.
[25] 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.[3]
[26] This principle of caveat emptor has now been displaced by the FTA. Under the FTA, silence or the failure to disclose a material fact can constitute misleading or deceptive conduct. 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.

[27] 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.
[28] Having regard to the “reasonable expectation of disclosure” test in light of the general test for whether conduct is misleading or deceptive in Red Eagle, I consider that a reasonable person in Easygoing International Ltd’s situation would not have expected Giltrap Motor Group to advise it about the durability of the vehicle’s brake pads and discs. Information about the durability of the vehicle’s brake pads and discs is not the type of information that a salesperson would ordinarily disclose to a prospective purchaser of a motor vehicle, and is not information so important that the salesperson should have a legal obligation to disclose without being prompted to do so.
[29] Certainly, if Easygoing International Ltd had enquired about the durability of the vehicle’s brake pads and discs, Giltrap Motor Group would have been obliged to provide an honest response. However, there is no evidence to suggest that Easygoing International Ltd ever enquired about the durability of the vehicle’s brake pads and discs, and accordingly I am not satisfied that Giltrap Motor Group has engaged in any misleading conduct by failing to advise Easygoing International Ltd about the durability of those components.
[30] Accordingly, Easygoing International Ltd’s application is dismissed.

DATED at AUCKLAND this 15th day of October 2018

B.R. Carter
Adjudicator

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[1] Chang v Ingham Motor Holdings Ltd t/a Coutts Newmarket [2014] NZMVDT 64.

[2] Red Eagle Corporation v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
[3] Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995) 5 NZBLC 103,878.

[4] Des Forges v Wright [1996] 2 NZLR 758 (HC) at 764.
[5] Hieber v Barfoot & Thompson (1996) 5 NZBLC 104,179 (HC); Tuiara v Frost & Sutcliffe [2003] 2 NZLR 833 (HC) at [91]; Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 (HC) at [21] and [32].