Rush v CMST Ltd t/a Moom Group Automotive - Reference No. MVD 212/2019 [2019] NZMVDT 172 (7 August 2019)

Last Updated: 17 September 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 212/2019 [2019] NZMVDT 172 BETWEEN MATHEW JOHN RUSH & AMY JANE KING Purchasers AND CMST LTD T/A MOOM GROUP AUTOMOTIVE Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Haynes, Assessor

HEARING at Auckland on 1 August 2019

APPEARANCES

M Rush and A King, Purchasers G King, Witness for the Purchaser

R Luo, for the Trader

DATE OF DECISION 7 August 2019

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DECISION OF THE TRIBUNAL

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1. CMST Ltd shall, within 10 working days of the date of this decision, pay $1,000 to Mathew Rush and Amy King.

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REASONS

Introduction

[1] On 5 June 2019, Mathew Rush and Amy King entered into a vehicle offer and sale agreement (the agreement) to purchase a 2006 Nissan Cube for $4,980 from CMST Ltd, trading as Moom Group Automotive (CMST Ltd). Mr Rush and Ms King paid a deposit of $1,000 on signing the agreement. The agreement was conditional upon Mr Rush and Ms King being satisfied with a pre-purchase inspection performed by West Auckland Nissan (the pre-purchase inspection).
[2] The pre-purchase inspection identified several faults, which Mr Rush and Ms King were told would cost more than $2,000 to rectify. Relying on that inspection, Mr Rush and Ms King decided not to purchase the vehicle and sought to recover the $1,000 deposit.
[3] CMST Ltd refused to refund the deposit. CMST Ltd says that the vehicle was in acceptable condition and that the faults identified in the pre-purchase inspection either did not exist or would not become a problem for some time.
[4] Mr Rush and Ms King have now applied to the Tribunal, seeking orders that CMST Ltd return the deposit and pay other costs.

The Issues

[5] Against this background, the issues requiring consideration are:

• (a) Were Mr Rush and Ms King entitled to cancel the agreement under s 37 of the Contract and Commercial Law Act 2017 (the CCLA)?
• (b) Is CMST Ltd entitled to retain the deposit under the CCLA?
• (c) Are Mr Rush and Ms King entitled to recover other costs?

Were Mr Rush and Ms King entitled to cancel the agreement?

[6] Mr Rush and Ms King have cancelled the agreement and seek to recover the deposit.
[7] Mr Rush submitted that I should consider this application under the Consumer Guarantees Act 1993, because he says the faults identified in the pre-purchase inspection show that the vehicle was not of acceptable quality. I do not agree and consider instead that the facts of this case are best considered under the CCLA, which deals with the right to cancel a contract where one party has misrepresented the rights that the other party has under the contract.
[8] Relevant to this case, under s 37(1)(a) of the CCLA, a party to a contract may cancel the contract if they were induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to the contract.
[9] In the agreement, beside the heading “Special Conditions”, is a clause that states that the deposit was refundable subject to a pre-purchase inspection performed by West Auckland Nissan. In my view, this clause was inserted for Mr Rush and Ms King’s benefit and amounts to a representation by CMST Ltd that the deposit would be refunded if Mr Rush and Ms King were not, on reasonable grounds, satisfied with the results of the pre-purchase inspection.
[10] This representation was misleading because CMST Ltd did not intend to refund the deposit on those terms. Instead, CMST Ltd considered that the deposit was only refundable if CMST Ltd was also satisfied with the pre-purchase inspection. I base this conclusion on the evidence of Roger Luo, the Finance Manager at CMST Ltd, who says that CMST Ltd declined to refund the deposit because it considered that the pre-purchase inspection was incorrect, and that the vehicle does not have the faults claimed by West Auckland Nissan.
[11] Mr Luo may well be right on that point, but even if he is, on the terms of the agreement between the parties, Mr Rush and Ms King were entitled to recover the deposit because the pre-purchase inspection identified several faults, which in West Auckland Nissan’s opinion, would cost more than $2,000 to rectify. I consider that it was reasonable for Mr Rush and Ms King to then rely on the pre-purchase inspection in forming the view that the vehicle was not suitable for their purposes and seeking to recover the deposit.
[12] The fact that CMST Ltd then performed further enquiries that bring into question the reliability of the pre-purchase inspection is not relevant in determining whether or not Mr Rush and Ms King were entitled to a return of the deposit. That is because the agreement was conditional upon their satisfaction with the pre-purchase inspection alone. Being unsatisfied by the results of the pre-purchase inspection, Mr Rush and Ms King were entitled to have the deposit refunded.
[13] Accordingly, I am satisfied that, by representing that the deposit was refundable subject to Mr Rush and Ms King’s satisfaction with the pre-purchase inspection, without advising Mr Rush and Ms King that it would decline to refund the deposit if it was not satisfied with the pre-purchase inspection, I am satisfied that CMST Ltd has made a misrepresentation as to Mr Rush and Ms King’s right to have the deposit refunded.
[14] I am also satisfied that Mr Rush and Ms King were induced to enter into the agreement by this misrepresentation. I accept Mr Rush and Ms King’s evidence that they only agreed to pay the deposit and sign the agreement because they were led to believe that the deposit would be returned if they were dissatisfied with the pre-purchase inspection.
[15] I am therefore satisfied that Mr Rush and Ms King were entitled to cancel the contract under s 37(1)(a) of the CCLA.
[16] In the future, if CMST Ltd wants to make such terms conditional upon its satisfaction with any pre-purchase inspection, it needs to make that fact explicit in the contracts it enters into with its customers, which it did not do in this case.

Are Mr Rush and Ms King entitled to recover the deposit under the CCLA?

[17] Under s 43(1) of the CCLA, where a contract has been cancelled, the Tribunal can grant relief where it is just and practicable to do so. That relief can include an order under s 43(3)(a) of the CCLA directing a party to pay a sum that the Tribunal thinks just.
[18] In the circumstances of this case, I consider that CMST Ltd should refund the $1,000 deposit to Mr Rush and Ms King. In my view there is no other fair outcome in this case. Mr Rush and Ms King were dissatisfied, on reasonable grounds, with the condition of the vehicle following the pre-purchase inspection performed by West Auckland Nissan. On the clear terms of the agreement, they were entitled to recover the deposit, which they promptly sought to do.
[19] Accordingly, under s 43(1) of the CCLA the Tribunal orders that CMST Ltd shall, within 10 working days of the date of this decision, pay $1,000 to Mr Rush and Ms King.

Other costs

[20] Mr Rush and Ms King also seek to recover the cost of the pre-purchase inspection and the filing fee for this application.
[21] I am not satisfied that Mr Rush and Ms King are entitled to recover the cost of the pre-purchase inspection. They chose to perform a pre-purchase inspection to determine whether the vehicle was suitable for their needs. They have received real benefit from the pre-purchase inspection, in that they declined to purchase the vehicle in reliance on the findings of that inspection. In those circumstances, I do not consider it appropriate to now order that CMST Ltd should pay the cost of that inspection.
[22] In respect of the filing fee for this application, under cl 14(1)(a)(ii) and (b) of sch 1 to the Motor Vehicle Sales Act 2003, the Tribunal may award this as a cost against a party where:

• (a) the matter ought to have been settled before the hearing but that party fails to participate in pre-hearing settlement discussions; or
• (b) after receiving notice of the hearing, fails to attend without reasonable cause.

[23] CMST Ltd appeared at the hearing, so Mr Rush and Ms King are not entitled to recover the filing fee on that basis. Further, I am not satisfied that this matter ought reasonably to have been settled before hearing. There was some merit to the arguments raised by CMST Ltd, in that it genuinely believed that the defects identified by West Auckland Nissan either did not exist or were not sufficient to enable Mr Rush and Ms King to recover the deposit. Although I have ultimately found that Mr Rush and Ms King were entitled to recover that deposit, and I do not consider it appropriate to award costs against CMST Ltd.

DATED at AUCKLAND this 7th day of August 2019

B.R. Carter
Adjudicator