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Grayson v Swift - Reference No. MVD 215/2019 [2019] NZMVDT 263 (4 December 2019)

Last Updated: 17 January 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 215/2019
[2019] NZMVDT 263

BETWEEN LUKE GRAYSON

Purchaser

AND JONATHAN SWIFT

Respondent

HEARING at Auckland on 15 October 2019, additional submissions received on various dates in November 2019
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

S D Gregory – Assessor
APPEARANCES

L Grayson, Purchaser
M Hatch, Support person for purchaser
J Swift, Respondent (by telephone)

DATE OF DECISION 4 December 2019

___________________________________________________________________

DECISION OF THE TRIBUNAL

___________________________________________________________________

The Tribunal upholds Mr Grayson’s rejection of his Toyota Hilux. Mr Grayson may choose between the two remedies outlined at [69] and following. Mr Grayson is to advise the case manager which remedy he prefers, no later than 11 December 2019, following which the Tribunal will make a final order against Jonathan Swift. ___________________________________________________________________

REASONS

Introduction

[1] Luke Grayson purchased a 2004 Toyota Hilux from Jonathan Swift on 25 January 2019 for $19,050. Mr Grayson arranged for the AA to inspect the vehicle before he paid for it. The inspection did not identify any significant rust, however the vehicle has since been diagnosed as having major corrosion. Mr Grayson has rejected the vehicle and seeks a full refund of the purchase price. He also seeks to recover various other costs associated with the vehicle.
[2] In substance, Mr Grayson’s claim raises the question whether the vehicle failed to comply with the guarantee of acceptable quality. However, a significant preliminary issue has arisen. Mr Swift denies he is a motor vehicle trader. If he is correct, then this Tribunal has no jurisdiction to determine Mr Grayson’s claim, as the Tribunal does not have jurisdiction in respect of private motor vehicle sales.[1]

Issue one: was Jonathan Swift a motor vehicle trader when he sold the Toyota Hilux to Mr Grayson?

[3] Whether someone is a motor vehicle trader is governed by ss 7‒9 of the Motor Vehicle Sales Act 2003 (MVSA), which provide:
  1. Meaning of motor vehicle trader

In this Act, motor vehicle trader—

(a) means any person who carries on the business of motor vehicle trading (whether or not that person carries on any other business); and

(b) includes—

(i) [Repealed]

(ii) an importer:

(iii) a wholesaler:

(iv) a car auctioneer:

(v) a car consultant.

  1. Who is treated as motor vehicle trader

(1) A person is treated as carrying on the business of motor vehicle trading for the purposes of this Act if—

(a) the person holds out that the person is carrying on the business of motor vehicle trading; or

(b) in any specified period, the person sells more than 6 motor vehicles, unless that person proves that those motor vehicles were not sold for the primary purpose of gain; or

(c) in any specified period, the person imports more than 3 motor vehicles, unless that person proves that those motor vehicles were not imported to be sold for the primary purpose of gain.

(2) For the purposes of subsection (1)(a), a person holds out that the person is carrying on the business of motor vehicle trading if that person—

(a) advertises or notifies or states that the person carries on the business of motor vehicle trading; or

(b) in any way represents that the person is ready to carry, or is carrying, on the business of motor vehicle trading.

(3) Subsection (1)(b) does not apply to any trustee corporation (within the meaning of section 2(1) of the Trustee Act 1956) acting in the capacity of executor, administrator, trustee, guardian, committee, manager, agent, attorney, or liquidator, or in any fiduciary capacity, unless the trustee corporation is acting on behalf of the same person or estate.

  1. Who is not treated as motor vehicle trader

(1) A person is not treated as carrying on the business of motor vehicle trading for the purposes of this Act only because that person is—

(a) an employee or an agent of a motor vehicle trader; or

(b) under a contract for services with a motor vehicle trader; or

(c) a solicitor who acts in that capacity as an agent for selling any motor vehicle unless that person is remunerated by commission in addition to, or instead of, that person’s professional charges; or

(d) a liquidator of a company that is a motor vehicle trader registered under this Act; or

(e) a manufacturer who sells any motor vehicle to—

(i) the Crown; or

(ii) a motor vehicle trader registered under this Act; or

(iii) any person who is or has been employed by the manufacturer; or

(ea) a car market operator; or

(f) a licensed car wrecker; or

(g) a finance company selling any motor vehicle under a transaction in which a motor vehicle trader acts as an intermediary between the finance company and the buyer (whether or not the motor vehicle trader acts as an agent of the finance company); or

(h) a finance company, an insurance company, a rental car company, a storage provider (within the meaning of section 2(1) of the Land Transport Act 1998), or any other person, that sells any motor vehicle as an incidental part of the person’s ordinary business; or

(i) carrying on any other business besides carrying on the business of motor vehicle trading and who, in the course of that other business,—

(i) buys any motor vehicle for use in connection with that business, with or without the intention of reselling it after such use; or
(ii) resells the vehicle after using it in connection with that business.

(2) Subsection (1)(d), (h), and (i) applies only if the person sells motor vehicles through a motor vehicle trader registered under this Act.

[4] The Court of Appeal recently considered these “somewhat tortuous” provisions in Kenny v Ministry of Business, Innovation and Employment.[2] The Court recognised that the three sections work together, with the definition in s 7 being extended by s 8 and then narrowed by s 9.
[5] In Kenny, s 8(1)(a) and (b) were most relevant. In the present case, it is s 8(1)(b) that is most relevant. That is because Mr Grayson accepts that Mr Swift did not hold himself out as carrying on the business of motor vehicle trading when he sold him the Hilux. Indeed, Mr Grayson conceded that, when he purchased the vehicle, he did not think that Mr Swift was a motor vehicle trader. In other words, Mr Grayson initially thought he was buying the vehicle privately. It was only later that Mr Grayson began to question whether Mr Swift ought properly to have been regarded as a motor vehicle trader at the time he sold the Hilux.
[6] Mr Swift has previously been registered under the MVSA as a motor vehicle trader, between February 2004 and 2006, when he traded as Westport Cars and Commercials. However, since then, Mr Swift has not been registered as a motor vehicle trader. He is a panelbeater and operates a business trading under the name G & A Panelcraft, which is an unincorporated entity.
[7] Mr Grayson identified a company named J N F Holdings Ltd, of which Mr Swift and Fiona Jean Swift are directors. But there was no evidence before the Tribunal as to the relevance of that company to the issues in dispute, or to the connection between that company and G & A Panelcraft. Accordingly, as G & A Panelcraft is not a legal person but a trading name, and it was agreed at the hearing that the seller of the Hilux to Mr Grayson was Mr Swift personally, the relevant enquiry for the Tribunal is whether, at the time of sale of the vehicle to Mr Grayson, Mr Swift was a motor vehicle trader.
[8] In terms of the definitions in ss 7‒9 of the MVSA, the first specific enquiry for the Tribunal is, in terms of s 8(1)(b), whether Mr Swift sold more than six motor vehicles “in any specified period”.
[9] “Specified period” is defined in s 6 of the MVSA as meaning “any period of 12 consecutive months that commences after the commencement of [the MVSA]”. The relevant twelve-month period is that immediately preceding the date on which the vehicle was sold, 25 January 2019. Accordingly, it is necessary to ascertain how many motor vehicles Mr Swift sold between 25 January 2018 and 25 January 2019.
[10] The Hilux was sold by Mr Swift to Mr Grayson over Trade Me. The account that Mr Swift used for the vehicle sale was named “GAPC1”. The name associated with this account is “Jon”.
[11] The Tribunal directed Mr Swift to advise the Tribunal, with any supporting evidence, how many vehicles he:
[12] The Tribunal also requested Mr Grayson to ask Trade Me to supply information on all vehicles Jonathan Swift listed for sale on Trade Me in the twelve month period leading up to 25 January 2019, including (but not limited to) under the user name GAPC1 and including the results of all the Trade Me auctions.
[13] Mr Grayson sought to extend the enquiry to include all vehicles bought and sold by Mr Swift. But, according to s 8(1)(b) and (c), the relevant question is only whether Mr Swift sold more than six, or imported more than three, motor vehicles in the specified period.
[14] Mr Grayson also wanted the Tribunal to enquire into whether the number of motor vehicles bought or sold by G & A Panelcraft, J N F Holdings Ltd or Fiona Jean Swift. However, G & A Panelcraft is not a legal person, just a trading name, so technically it cannot buy or sell anything. Furthermore, J N F Holdings Ltd and Fiona Swift did not sell the Hilux to Mr Grayson, so enquiring as to the number of vehicles they sold is not relevant, as it will not add to the number of vehicles sold by Mr Swift.
[15] Trade Me supplied the requested information, which Mr Grayson forwarded to the Tribunal. The following vehicles were listed by Mr Swift under the account name GAPC1 in the twelve months to 25 January 2019:
[16] Mr Swift did not provide the information requested by the Tribunal within the timeframe indicated. Through his lawyer he did, however, comment on the information obtained by Mr Grayson from Trade Me. At the hearing, Mr Swift added that, in addition to the above seven vehicles listed under his account on Trade Me, he sold a Nissan Primera in the specified period. After the hearing, however, Mr Swift advised that “it appears that [the Nissan Primera] was sold prior to the 25 January 2018”. After I asked for documentation relating to the sale, to confirm the date on which the Primera was sold, Mr Swift’s explanation changed again. He confirmed that the vehicle was sold within the specified period, on 20 July 2018, but that it was sold via someone else’s Trade Me account, on behalf of Mr Swift. As such, Mr Swift submitted he should not be accountable for the sale of that vehicle as it was in fact “sold” by someone else. No copy of the Trade Me listing was supplied to verify this explanation, however Mr Swift provided a letter from the seller of the vehicle stating that the vehicle was sold on a different Trade Me account. The evidence is incomplete and does not permit a definite finding in respect to this vehicle, and so I will exclude the Nissan Primera from Mr Swift’s sales total.
[17] Mr Swift pointed out that the first vehicle on the above Trade Me list, the Volvo XC90, did not actually sell. Mr Swift also produced an email from Natasha Perry stating that Mr Swift had done some work on the Volvo XC90, which was her vehicle, in preparation for it to be sold. Mr Swift then suggested to Ms Perry that she advertise the vehicle on Trade Me. She told him that she did not have a Trade Me account and so Mr Swift allowed her to list the Volvo on his own Trade Me account, but that it was done in her name and using her contact details. (No copy of the actual listing was produced to verify this claim). Ms Perry also stated that Mr Swift was helping her as a favour and was not selling the Volvo for his own interests or financial gain.
[18] Mr Swift also submitted that three of the vehicles in the Trade Me list were deregistered vehicles sold for parts. Those were the Mitsubishi Airtrex, the Mitsubishi Legnum and the second of the two BMW 320i vehicles.
[19] There are two possible objections to the inclusion of the Volvo XC90 in the list of motor vehicles sold by Mr Swift. The first is whether indeed he was a seller of the vehicle or whether it was actually Ms Perry. The second possible objection is that, given Ms Perry’s evidence that Mr Swift was not selling the vehicle for his own interests or financial gain, that this sale would not satisfy the “primary purpose of gain” proviso of s 8(1)(b). In respect of this proviso, a reverse onus of proof applies. It is up to Mr Swift to produce evidence to show that the Volvo was not sold for the primary purpose of gain.
[20] In respect of the first objection, I note that “sale” is defined broadly in s 6(1) of the MVSA as follows:

sale, in relation to any motor vehicle,—

(a) means the sale or lease or exchange or any other disposition of that motor vehicle or of any interest in that motor vehicle (for example, under a hire purchase agreement); and

(b) includes the display for sale or offer for sale or offer for lease or offer for exchange of that motor vehicle; but

(c) does not include a lease or offer for lease of a motor vehicle for a term not exceeding 4 months

[21] As can be seen from this definition, selling a motor vehicle encompasses a broad range of conduct. It not only includes the sale of a motor vehicle in a narrow, legal sense, but also includes the broader concepts of “display for sale” or “offer for sale”. This broad definition corresponds with the broad definition of who is a motor vehicle trader under the MVSA. The link between sales of motor vehicles and motor vehicle trading is established by the definition of “motor vehicle trading” in s 6(1). Motor vehicle trading is defined as “the sale of motor vehicles by a person (whether or not the person is a principal or agent)”. That captures those involved in the sale of motor vehicles, even if they are doing so merely as an agent for someone else, for example selling a vehicle on behalf of someone else. Accordingly, the fact (admitted by Mr Swift) that the Volvo was listed for sale on Mr Swift’s Trade Me account is enough for inclusion of the Volvo XC90 as one of his sales for the purposes of s 8(1)(b) of the MVSA.
[22] In respect of the second objection, according to the Court of Appeal, “gain” involves a wider concept than mere “profit”. It “encompasses some commercial advantage or improvement to the seller’s position which may be something other than receiving in monetary terms more than the costs involved in the sale”.[3] In Motor Vehicle Dealers Institute v Ball, Chief Judge Doogue (as she then was) was inclined to read “gain as a commercial benefit, which would encompass not just profit, but minimising losses, avoiding costs and divesting encumbering assets.”[4] Her Honour also thought it would be artificial to hold that an intermediary does not sell a motor vehicle for the primary purpose of gain simply because that gain is for another person.[5] Applied to the Volvo XC90, this means that just because the sale may have been intended for Ms Perry’s gain, rather than Mr Swift’s, does not take the sale outside the scope of s 8(1)(b) of the MVSA. Accordingly, I find that Mr Swift has not produced evidence satisfying me that the sale of the Volvo XC90 was not for the primary purpose of gain.
[23] The further objection raised by Mr Swift was that the Volvo XC90 did not, in fact, sell. However, Mr Grayson countered that submission by referring to the definition of “sale” in the MVSA, as already described, which “includes the display for sale or offer for sale ...” of a motor vehicle. Mr Grayson is therefore correct that it is not necessary that the vehicle is actually sold, for it to be a “sale” for the purposes of the MVSA.
[24] I conclude that the Volvo XC90 is appropriately included in the list of vehicles sold by Mr Swift within the specified period.

Are deregistered vehicles “motor vehicles”?

[25] The objection raised by Mr Swift in respect of the three deregistered vehicles, the Mitsubishi Airtrex, Mitsubishi Legnum, and one of the BMW 320i vehicles, raises the question whether those vehicles, as deregistered “parts cars”, are properly to be regarded as “motor vehicles” for the purposes of the calculation of how many motor vehicles were sold by Mr Swift in the specified period. The definition of “motor vehicle” is set out in s 6 of the MVSA as follows:

motor vehicle—
(a) means any of the following:

(i) a road vehicle that is drawn or propelled by mechanical power and is of a kind ordinarily acquired by consumers for personal, domestic, or household use:

(ii) a vehicle of any other class or description declared by the Governor-General, by Order in Council, to be a motor vehicle for the purposes of this Act; but
(b) does not include any of the following:

(i) [Repealed]

(ii) a moped:

(iii) a motor cycle, the total cylinder capacity of which does not exceed 60 cubic centimeters:

(iv) a tractor or farm machinery:

(v) a trailer:

(vi) a vehicle of any other class or description declared by the Governor-General, by Order in Council, not to be a motor vehicle for the purposes of this Act:

(vii) a vehicle that the Director has declared is not a motor vehicle under section 168A of the Land Transport Act 1998:

(viii) a mobility device

[26] It is arguable that the reference to “road vehicle” in para (a)(i) of the definition implies that a vehicle that is not capable of being lawfully driven on a road, such as a deregistered vehicle, is not to be regarded as a motor vehicle for the purposes of the MVSA. A further, related, argument might be made that such a vehicle is not “of a kind ordinarily acquired by consumers for personal, domestic, or household use”. Indeed, I took that to be the thrust of Mr Swift’s submission, namely that these three deregistered vehicles were being sold for parts, rather than as road vehicles of the kind that would ordinarily be acquired by a consumer.
[27] There is no definition of “road vehicle” in the MVSA. A contextual and purpose-based interpretation is required.[6] The purpose of the MVSA is set out in s 3: “to promote and protect the interests of consumers in relation to motor vehicle sales”. That purpose statement is relevant to the following scenario, which could easily arise if Mr Swift’s interpretation of “motor vehicle” is correct. Under his interpretation, a deregistered vehicle could be sold in circumstances where the purchaser is misled into thinking that the vehicle is currently registered, roadworthy, and capable of being lawfully driven on the road. It would seem to be contrary to the purpose of the MVSA if such a purchaser was prevented from bringing a claim against the trader of that vehicle in the Tribunal because the vehicle was not a “motor vehicle”. But that would be the inevitable consequence of Mr Swift’s definition of “motor vehicle”, as the Tribunal only has jurisdiction to determine claims in relation to “motor vehicles”.
[28] Mr Grayson described a similar scenario in which unregistered traders could avoid obligations under the MVSA by importing numerous deregistered vehicles, putting them through the compliance process, but leaving the purchaser to register them after the sale had taken place.
[29] Both of these scenarios make Mr Swift’s interpretation unattractive, in light of the consumer protection purpose of the MVSA.
[30] Other relevant contextual indications are to be found in the definition of “used motor vehicle”, which means “a motor vehicle that has, at any time before being offered or displayed for sale,— been registered [...]”. That suggests that previous, but not current, registration nevertheless qualifies a vehicle to be a “used motor vehicle”.
[31] Furthermore, it is interesting to consider the vehicles to which the Consumer Information Standards (Used Motor Vehicles) Regulations 2008 apply.[7] That is governed by reg 4 of those Regulations, which provides:
  1. Goods to which these regulations apply

(1) These regulations apply to a used motor vehicle that is offered or displayed for sale by a motor vehicle trader, whether or not the motor vehicle trader is acting—

(a) as an agent for another person; or

(b) through a car market operator.

(2) Despite subclause (1), these regulations do not apply to a used motor vehicle that is offered or displayed for sale by a motor vehicle trader if it is offered or displayed for sale exclusively to other motor vehicle traders registered under the Act or to licensed car wreckers.

[32] These Regulations govern the vehicles on which a consumer information notice is to be displayed on or in relation to. It can be seen from reg 4(2) that an exemption to the requirement to provide a consumer information notice is given for vehicles sold exclusively to other motor vehicle traders, or to “licensed car wreckers”. The expression “licensed car wreckers” is defined in MVSA as:

... A person who is a licensed secondhand dealer (under the Secondhand Dealers and Pawnbrokers Act 2004) who buys, in the course of that person’s business as a secondhand dealer, any motor vehicle for wrecking or dismantling by that person.

[33] In respect of that definition, there is no evidence that Mr Swift is a licensed secondhand dealer under the legislation. Nor were the three vehicles Mr Swift has described as deregistered purchased by Mr Swift for wrecking or dismantling. To the contrary, the fact that he listed those vehicles for sale on Trade Me is clear evidence of an intention to sell the vehicles rather than wreck or dismantle them himself. That is supported by the fact that in the listing for each of the deregistered vehicles they are described as “still drives”, “drives” and “runs drives good” respectively.
[34] That then brings into focus s 9(1)(f) of the MVSA, which provides that a person is not treated as carrying on the business of motor vehicle trading only because that person is a “licensed car wrecker”. Based on the foregoing analysis of the facts, that exemption does not apply to Mr Swift as he is not a licensed car wrecker. Moreover, he was not selling the three deregistered vehicles in a manner that would qualify as the activity of a licensed car wrecker, even if he was so registered under the Secondhand Dealers and Pawnbrokers Act 2004.
[35] Accordingly, to return to the definition of “motor vehicle”, I consider that the expression “road vehicle” is not limited to a vehicle that is currently registered. In other words, the definition does not limit “motor vehicles” to those vehicles that are lawfully able to be driven on the road. Otherwise, the potential for loopholes is too great and the purpose of the MVSA would be too easily thwarted. It would be open to traders to argue that vehicles sold without current warrants of fitness or registration were outside the MVSA. That would create obvious gaps in the coverage of the legislative scheme that would clearly be inconsistent with its consumer protection purpose.
[36] Rather, I consider the expression “road vehicle” can cover vehicles that are designed to be used on public roads, whether those vehicles are currently registered or not. The inclusion of deregistered vehicles within the scope of “motor vehicle” is also consistent with previous decisions of the Tribunal, as pointed out by Mr Grayson.[8] I therefore accept Mr Grayson’s submission that the three deregistered vehicles recorded as having been listed for sale on Trade Me, should be included in the tally of vehicles sold (as that term is defined in the MVSA) by Mr Swift in the twelve month period before the date he sold the Hilux to Mr Grayson.
[37] That means that, excluding the Nissan Primera, Mr Swift is to be taken as having sold seven motor vehicles in the relevant specified period. That, in turn, means that he qualifies to be treated as carrying on the business of motor vehicle trading for the purposes of the MVSA as, in the relevant specified period, Mr Swift sold more than six motor vehicles. In respect of the seven motor vehicles that he sold in that period, Mr Swift has not satisfied his onus to prove that those motor vehicles were not sold for the primary purpose of gain.
[38] That is enough to conclude that the Tribunal has jurisdiction to consider Mr Grayson’s claim against Mr Swift in respect of the Hilux. But I have two more observations in respect of further submissions made by Mr Grayson.

Imported vehicles

[39] Mr Grayson produced evidence of three vehicles shipped from Australia to New Zealand between January 2018 and January 2019 under an Autohub NZ Ltd account in the name of G & A Panelcraft. Mr Grayson contrasted this information with Mr Swift’s sworn evidence in the hearing that he had not imported any vehicles in the relevant period. In response to the new information provided by Mr Grayson, Mr Swift maintained his denial, stating that the three imported vehicles were purchased by two independent parties using a shared Autohub account. Mr Swift also produced an email from Autohub’s CEO Frank Willett stating that some Autohub account holders share access with others, albeit that this form of sharing accounts is not condoned.
[40] In my view, the use of a G & A Panelcraft account in relation to the importation of these three vehicles could certainly support an inference that Mr Swift was the importer of those vehicles, or at least that he was involved in the importation of these vehicles. However, I do not propose to make any formal finding in that regard as s 8(1)(c) is only triggered if a person imports more than three motor vehicles in the specified period, and Mr Grayson has only produced evidence relating to the importation of three vehicles.

Other vehicles

[41] Mr Grayson also referred to nine vehicles purchased by Mr Swift from Manheim Ltd in the specified period, only four of which vehicles overlapped with the vehicles on the list of vehicles supplied by Trade Me. In Mr Grayson’s submission, this supports an inference that the seven vehicles listed on Trade Me are merely the tip of the iceberg of vehicles sold by Mr Swift. Mr Grayson may well be right. But I am not prepared to make findings in respect of any other vehicles without clear evidence that they were sold by Mr Swift.

Conclusion

[42] I conclude that the Tribunal has jurisdiction to determine this dispute, on the basis that Mr Swift has sold more than 6 motor vehicles in the specified period, being the 12 months prior to the sale of the Hilux to Mr Grayson. I will now go on to consider whether Mr Grayson is entitled to a remedy under the Consumer Guarantees Act 1993 (the CGA). To do so, I will consider whether the Hilux failed to comply with the guarantee of acceptable quality.

Issue two: did the Hilux fail to comply with the guarantee of acceptable quality?

[43] Section 6(1) of the CGA provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”. According to s 2 of the CGA, “goods” includes vehicles.
[44] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) as follows:
  1. 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.

...

(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.

[45] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[46] The Hilux was advertised by Mr Swift on Trade Me as follows:

Very tidy Hilux with a few imperfections (as per pixs) good tyres new WOF rgo and serviced would be hard to fault 88 kms from new interior like new apart from driver’s arm rest. Factory CD player.

[47] Mr Grayson also referred to a phone call that he made to Mr Swift on 25 January 2019 in which Mr Swift told him that he was selling the vehicle because it was too nice to be used as a four-wheel drive, that it was “mint and I’ll just ruin it”. In addition, Mr Grayson said that Mr Swift told him the vehicle had never been driven on the beach or had any salt water damage and that it had never been submerged in fresh water or had any water damage. Mr Grayson also claimed that Mr Swift told him that the vehicle had absolutely nothing wrong with it and had “no issues”.
[48] As a condition of purchase, Mr Grayson secured Mr Swift’s agreement to an AA inspection before he was required to pay the purchase price for the vehicle. The AA report identified three matters of concern:
[49] The AA Inspector also mentioned that there was fresh underseal on the vehicle but said that this was normal and that whoever had done it had done a good job.
[50] Based on this information, but without inspecting the vehicle himself (as Mr Grayson is based in Auckland and Mr Swift is in Westport), Mr Grayson paid the purchase price of $19,050 by online banking on 28 January 2019 and received the vehicle on 22 February 2019.
[51] On receiving the vehicle, Mr Grayson took it to Peninsula Motors in Whangaparaoa to have the cambelt and water pump replaced and the items of concern identified in the AA report investigated.
[52] Once the radiator was removed, the mechanic discovered that the top plate of the front chassis cross member was completely rusted through, rendering the vehicle unable to obtain a warrant of fitness (although as sold it did have a current warrant of fitness that was issued on 28 December 2018 by Richards Motors 2007 Ltd). Peninsula Motors also advised Mr Grayson that the vehicle had substantial corrosion on its undercarriage, which was covered up by underseal.
[53] Mr Grayson paid Peninsula Motors $2,134.76 to replace the cambelt and water pump.
[54] Peninsula Motors later advised Mr Grayson that the vehicle’s rear differential was badly damaged and needed to be completely replaced.
[55] Mr Grayson inspected the vehicle himself and discovered large quantities of rock, sand and rust damage inside various parts of the chassis. The steering assembly and other components appeared to be almost, if not completely, rusted through. Photos produced by Mr Grayson to the Tribunal confirmed this. The Tribunal’s Assessor, Mr Gregory, viewed these photos and agreed with Mr Grayson’s submission that the vehicle was in a severely compromised state structurally.
[56] Mr Grayson contacted Mr Swift, who maintained that there was nothing wrong with the vehicle, that the rust was surface rust only, and that the underseal he had applied to the vehicle was designed to stop the rust from developing any further.
[57] Mr Grayson researched the history of the vehicle. He obtained a copy of the catalogue published by Manheim Ltd in which the vehicle was advertised prior to its sale to Mr Swift, in or around March 2018. The Manheim listing stated the vehicle had “damage codes engine damage, saltwater damage, underbody damage”. Mr Swift claimed not to have seen this catalogue prior to purchasing the vehicle. Indeed, the Manheim invoice for the vehicle only describes it as having “mechanical damage” and does not refer to the other matters described in the listing. That invoice records that Mr Swift purchased the vehicle for $6,869.57 plus a buyer administration fee of approximately $686. The odometer reading at the time Mr Swift purchased the vehicle was 80,602 km, indicating that Mr Swift himself drove the vehicle for approximately 8,000 km before selling it to Mr Grayson nine months later for nearly three times the price he had paid for it.
[58] Mr Grayson also produced an assessment by FMG Insurance dated 15 March 2018. This is described as a “authorised assessment sheet”. It describes repairs required to the chassis, deck, engine and transmission, suspension, running board brackets and other body waxing and corrosion protection estimated in the sum of $17,783.60. Mr Swift took issue with this assessment, stating that it was insufficiently supported by evidence that these repairs were required.
[59] Research undertaken by Mr Grayson, with the assistance of Mr Hatch, revealed that the vehicle had been flood damaged after a cyclone on the West Coast in February 2018, during which it sustained saltwater damage.
[60] Mr Grayson obtained a further report by Donavan Edwards, an Auckland mobile vehicle inspector for the AA, who defended the initial AA pre-purchase inspection report’s failing to identify problematic corrosion due to the underseal that was covering it. However, Mr Edwards said that the underseal that had been applied to the vehicle by Mr Swift had trapped the corrosion and hidden it for a while but had not stopped it from spreading. Now, the corrosion was visibly exposing itself as it pushed through the underseal and ate away at the metal. Mr Edwards noted that masking corrosion with a layer of underseal will never stop it from spreading and the corrosion will eventually expose itself. Mr Edwards concluded that a good repair to the vehicle would require significant parts replacement and that, in his view, it would be uneconomic to repair this saltwater-affected vehicle to a safe standard. Mr Edwards added:

As the vehicle was not de-registered from use on NZ roads it hasn’t required a recertification and repair, as per the regulatory NZTA requirements for water damaged vehicles, thus allowing a substandard and economical repair to take place and ultimately exposing any future owners to the lasting effects of the saltwater damage.

[61] Again, Mr Swift took issue with this report and asserted that Mr Edwards was unqualified to reach these conclusions.
[62] Mr Grayson also produced a repair quote which assumed that the vehicle would need a completely new secondhand rolling gear, which could be obtained from Patiki 4WD Ltd for the sum of $9,142.50. In addition, Mr Grayson produced a quote from Albany Toyota for the labour costs of replacing the vehicle’s chassis, plus associated fluids etc, in the sum of $7,641.75. In total therefore, the estimated costs of repairing this vehicle amount to $16,784.25. As a comparison, Mr Grayson also produced an estimate from Manheim that the salvage value of the vehicle in its current state is between $4,500 and $5,500.

Tribunal’s assessment

[63] In light of Mr Gregory’s and my assessment of the evidence, including the reports from Mr Edwards, the evidence of the insurance assessment by FMG and the evidence of the state in which the vehicle was sold to Mr Swift by Manheim, as well as the photographic evidence produced by Mr Grayson showing extensive corrosion to the structural elements of the vehicle, I have no hesitation in concluding that this vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act. I do not consider that this vehicle is as fit for purpose, acceptable in appearance and finish, safe or durable as a reasonable consumer who had spent $19,050 would regard as acceptable.

Issue three: Is the failure of a substantial character?

[64] A failure to comply with the guarantee in the CGA will be considered to be of a “substantial character” in the circumstances set out in s 21 of the CGA, which provides:
  1. 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.

[65] Again, based on the evidence, and Mr Gregory’s advice, I have no hesitation in concluding that this vehicle would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the corrosion, and the expense involved in repairing the vehicle to a satisfactory standard. The extent of repairs required makes repair arguably uneconomic. Any reasonable consumer acquainted with the work required to the vehicle would sensibly avoid purchasing it in the first place. The reason Mr Grayson ended up purchasing the vehicle, even after having it inspected by the AA, was because Mr Swift had used his panelbeating skills to cover up the extent of underlying damage caused by corrosion to the vehicle’s structure.

Conclusion

[66] Accordingly, I conclude that the vehicle’s failure to comply with the guarantee of acceptable quality is of a substantial character.

Issue four: What remedy is Mr Grayson entitled to?

[67] The remedies available for a breach of a guarantee in the CGA are set in s 18, which provides:
  1. 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.

[68] Having established a failure of a substantial character, Mr Grayson is entitled to reject the vehicle in accordance with s 18(3)(a) (above). Mr Grayson rejected the vehicle by email dated 7 June 2019. His rejection qualifies as valid in accordance with s 22 of the CGA. Moreover, I do not consider that he has lost his right to reject the vehicle for any of the reasons outlined in s 20.
[69] According to s 23(1)(a) of the CGA, Mr Grayson is entitled to a refund of the money he paid in respect of the rejected vehicle, $19,050. In addition to that, Mr Grayson also claims the following costs:
[70] The only one of these additional costs that I consider that Mr Grayson is entitled to claim is the $135.70 cost of the assessment by Albany Toyota. This is the only cost that I consider qualifies as a reasonably foreseeable loss liable to result from the vehicle’s failure. All of the other costs claimed by Mr Grayson amount to the ordinary costs associated with moving a vehicle from one place to another, or operating a vehicle (insurance and registration). Mr Grayson is not entitled to recover the costs of the repairs that he had carried out on the vehicle because he did not give Mr Swift an opportunity to remedy those other failures within a reasonable time as he is required to do under s 18(2)(a) of the CGA. Nor do I consider he is entitled to recover the costs he has incurred with Mr Hatch or his Tribunal application fee as these are costs associated with the preparation of his claim, which he would only be entitled to recover in the limited circumstances set out in cl 14 of sch 1 of the MVSA, which do not apply in the present case as:
[71] Finally, Mr Grayson is not entitled to recover any interest costs. The Tribunal does not have the power to award interest under the Interest on Money Claims Act 2016.
[72] As this leaves Mr Grayson with a considerable shortfall, approaching $5,000, I am going to refrain from making final orders on the relief to which he is entitled. That is because, under s 18(3)(b) Mr Grayson is entitled to claim as an alternative remedy “damages in compensation for any reduction in value of the goods below the price paid or payable”. On this assessment Mr Grayson would be entitled to claim $14,050 plus $135.70, being the difference between the current salvage value assessed by Manheim, subtracted from the purchase price of $19,050. The difference between a remedy under s 18(3)(b) versus (a) is that in respect of the remedy under s 18(3)(b), Mr Grayson would be entitled to keep the vehicle, whereas under s 18(3)(a) he would be required to allow Mr Swift to collect the vehicle once Mr Swift had refunded the purchase price.

Conclusion

[73] Accordingly, Mr Grayson may choose between the two remedies described at [69]-[71] and [72] respectively. He is to inform the case manager of his choice of remedy within seven days, following which I will make the requisite order.
[74] A copy of this decision is to be forwarded to the Registrar of Motor Vehicle Traders, for consideration of Mr Swift’s trading activities.

J S McHerron
Adjudicator

[1] Motor Vehicle Sales Act 2003, s 90(1)(a) provides that the Tribunal only has jurisdiction if “one party, but not both parties, to the application or claim is a motor vehicle trader”.

[2] Kenny v Ministry of Business, Innovation and Employment [2019] NZCA 435.

[3] Kenny, above n 2 at [37].

[4] Motor Vehicle Dealers Institute v Ball [2014] DCR 294 at [26].

[5] At [27].

[6] Interpretation Act 1999, s 5(1).

[7] I note that it is appropriate to consider regulations when interpreting primary legislation when they assist at gaining a better understanding of the wider context, and according to what Parliament was driving at in the legislation. But regulations should not be used to alter the meaning of the statute: Off Road New Zealand (1992) Ltd v The Machinery Inspector [2019] NZHC 1996 at [60], citing Campbell v Accident Compensation Corporation CA 138/03, 29 March 2004 at [52].

[8] See Leef v Vortex Motors Ltd MVD 96/14, 19 June 2014; Alimatafitafi v Bling Bling Motor Company Ltd MVD 196/11, 5 December 2011; MVD 95/09, 22 July 2009.

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