Somerville-Ryan v RMS Sales Ltd - Reference No. MVD 295/2019 [2019] NZMVDT 267 (6 December 2019)

Last Updated: 17 January 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 295/2019 [2019] NZMVDT 267 BETWEEN ROBERT SOMERVILLE-RYAN Purchaser AND RMS SALES LTD Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S D Gregory, Assessor

HEARING at Whangarei on 29 November 2019

APPEARANCES

R J Somerville-Ryan, Purchaser

R Simard and R Pilkington, for the Trader

DATE OF DECISION 6 December 2019

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DECISION OF THE TRIBUNAL

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1. Robert Somerville-Ryan’s application to reject the vehicle is dismissed.
2. RMS Sales Ltd shall, within 15 working days of the date of this decision:
   • (a) repair or replace the vehicle’s hybrid battery; and
   • (b) pay $157.24 to Robert Somerville-Ryan.

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REASONS

Introduction

[1] RMS Sales Ltd (RMS Sales), operates a “park and sell” business in Kamo, from which it sells vehicles on behalf of third parties. On 25 June 2019, Robert Somerville-Ryan purchased a 2006 Toyota Prius hybrid vehicle for $6,770 from RMS Sales’ premises.
[2] Mr Somerville-Ryan has now brought a claim against RMS Sales seeking to reject the vehicle under the Consumer Guarantees Act 1993 (the CGA). Mr Somerville-Ryan alleges that the vehicle’s hybrid battery was defective at the time of sale and requires replacement at a cost exceeding $3,000.
[3] RMS Sales denies liability. It says that it is a car market operator, as that term is defined in the Motor Vehicle Sales Act 2003 (the MVSA), meaning that the Tribunal has no jurisdiction to consider this claim. Further, it says that the CGA does not apply because the transaction was a private sale, meaning it was not the supplier of the vehicle.

The Issues

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

• (a) Issue 1: Does the Tribunal have jurisdiction to consider this claim?
• (b) Issue 2: If so, is RMS Sales a supplier for the purposes of the CGA?
• (c) Issue 3: Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the CGA?
• (d) Issue 4: Is the fault a failure of a substantial character?
• (e) Issue 5: What remedy is Mr Somerville-Ryan entitled to under the CGA?

Issue 1: Does the Tribunal have jurisdiction to consider this claim?

[5] The Tribunal’s jurisdiction is set out in s 89 of the MVSA. Under that section the Tribunal has jurisdiction to hear any application or claim relating to the sale of any motor vehicle under the CGA, the Fair Trading Act 1986 and certain provisions of the Contract and Commercial Law Act 2017. There are limits to that jurisdiction. Relevantly, under s 90(1) of the MVSA, the Tribunal has jurisdiction only where one of the parties to a claim is a motor vehicle trader.
[6] RMS Sales says that, although it is a registered motor vehicle trader, in relation to this transaction it was not a motor vehicle trader because it acted as a car market operator. RMS Sales’ submission that it is a car market operator is significant because, under s 9(1)(ea) of the MVSA, a car market operator is not a motor vehicle trader for the purposes of that Act, meaning the Tribunal has no jurisdiction to hear this claim if RMS Sales acted as a car market operator.

RMS Sales is not a car market operator

[7] RMS Sales says that it is a car market operator because, as well as selling vehicles that it owns, it operates a “park and sell” service, where it rents space at its premises to third parties to sell vehicles they own, as it did for Bruce O’Brien, the previous owner of this vehicle. RMS Sales says that when offering its park and sell service it provides administrative services to both the purchaser and seller but does not act as a motor vehicle trader. Instead, it says that it is acting as a car market operator.
[8] I am not satisfied that RMS Sales is a car market operator as that term is defined in the MVSA. I consider that the definition of car market operator applies only to a person who provides the premises or facility for the sale of a vehicle by a third party but is otherwise uninvolved in the remainder of the transaction, leaving the details of the transaction to be managed by the seller or an agent of the seller.
[9] In this case, RMS Sales did much more than provide premises for the sale of the vehicle by Mr O’Brien. It provided a vehicle information report (VIR) to Mr Somerville-Ryan, it facilitated price negotiations between Mr Somerville-Ryan and Mr O’Brien, offered extended warranties, completed the required paper work and received payment from Mr Somerville-Ryan. In my view, RMS Sales’ conduct goes beyond being a mere car market operator and is consistent with it being a motor vehicle trader, which sold the vehicle on behalf of Mr O’Brien. The Tribunal therefore has jurisdiction to hear this claim.

Even if RMS Sales is a car market operator, it is nonetheless a motor vehicle trader

[10] Even if I am wrong, and RMS Sales did operate as a car market operator, I am nonetheless satisfied that the Tribunal has jurisdiction to consider this application. That is because RMS Sales is also a registered motor vehicle trader, and carries on the business of motor vehicle trading, meaning that it is a motor vehicle trader for the purposes of s 7(a) of the MVSA.
[11] Accordingly, even if RMS Sales is also a car market operator, it is also a registered motor vehicle trader for the purposes of the MVSA, meaning the Tribunal has jurisdiction to hear this claim.

Issue 2: Does RMS Sales have any liability under the CGA?

[12] The CGA will only apply to this transaction if RMS Sales is a supplier, which is defined in s 2 of the CGA:

supplier—

(a) means a person who, in trade,—

(i) supplies goods to a consumer by—

(A) transferring the ownership or the possession of the goods under a contract of sale, exchange, lease, hire, or hire purchase to which that person is a party; or

(B) transferring the ownership of the goods as the result of a gift from that person; or

(C) transferring the ownership or possession of the goods as directed by an insurer; or

(ii) supplies services to an individual consumer or a group of consumers (whether or not the consumer is a party, or the consumers are parties, to a contract with the person); and
(b) includes,—

(i) where the rights of the supplier have been transferred by assignment or by operation of law, the person for the time being entitled to those rights:

(ii) a creditor within the meaning of the Credit Contracts and Consumer Finance Act 2003 who has lent money on the security of goods supplied to a consumer, if the whole or part of the price of the goods is to be paid out of the proceeds of the loan and if the loan was arranged by a person who, in trade, supplied the goods:

(iii) a person who, in trade, assigns or procures the assignment of goods to a creditor within the meaning of the Credit Contracts and Consumer Finance Act 2003 to enable the creditor to supply those goods, or goods of that kind, to the consumer:

(iv) a person (other than an auctioneer) who, in trade, is acting as an agent for another, whether or not that other is supplying in trade
(c) [Repealed]

[13] RMS Sales says that it is not a supplier, in the sense that it was not the owner of the vehicle, so it was therefore unable to transfer ownership to Mr Somerville-Ryan. Its evidence was that Mr O’Brien was the vendor and that it made it clear to Mr Somerville-Ryan that the vehicle was being sold on behalf of a third party. In that sense, it says that it was a “mere scribe”, so not a party to the contract to sell the vehicle to Mr Somerville-Ryan. RMS Sales says that any conclusion that it was a supplier for the purposes of the CGA would amount to a “substantial over-reach”.
[14] RMS Sales’ submission that it is not a supplier because it was not a party to the contract and did not transfer ownership to Mr Somerville-Ryan is important to consideration of whether RMS Sales meets the criteria in subs (a)(i)(A) of the definition of supplier, and it is certainly arguable that RMS Sales does not meet that criteria. However, the definition of supplier in s 2 of the CGA is much broader than that, and under subs(b)(iv), includes any person who, in trade, is acting as an agent for another, whether or not that other is supplying in trade.
[15] When I take account of the role RMS Sales performed in this transaction, I am satisfied that RMS Sales was a supplier because it acted as an agent for Mr O’Brien. In reaching that conclusion I rely on the following evidence:

• (a) the vehicle was displayed at, and purchased from, RMS Sales’ premises;
• (b) RMS Sales facilitated price negotiations between Mr Somerville-Ryan and Mr O’Brien;
• (c) Raymond Pilkington, a sales representative of RMS Sales, signed the tax invoice (which doubled as the sale agreement) on behalf of Mr O’Brien; and
• (d) RMS Sales received the purchase price on behalf of Mr O’Brien.

[16] That is all evidence consistent with RMS Sales being an agent for Mr O’Brien. It was actively involved in the pre-purchase negotiations and the completion of the sale on behalf of Mr O’Brien.
[17] The conclusion that RMS Sales is a supplier is also consistent with the High Court’s finding in Walters v Taylor Marine Ltd,[1] where Taylor Marine Ltd, a boat broking firm, was found to be liable as a supplier under the CGA even though it was not a party to the relevant transaction (so therefore not a supplier for the purposes of subs (a)(i)(A)). The High Court found that a legislative decision had been made that professional agents such as Taylor Marine (and RMS Sales in this case), who act as an agent on behalf of individuals who are not in trade, assume the obligations under the CGA and should meet claims such as this.
[18] In submitting that it was not a supplier for the purposes of the CGA, RMS Sales placed weight on the fact that it received no commission when the vehicle was sold. It says that Mr O’Brien paid a monthly fee to rent a space at its premises, but it obtained no financial gain from the sale.
[19] This fact does not change my conclusion that RMS was in trade and acting as an agent of Mr O’Brien in respect of this transaction. Under the CGA, a person can be in trade, and therefore liable under the Act, even where no profit is made or commission is received. This is evident in the definition of “business” in s 2 of the CGA. A person is in trade if it engages in any business. The definition of business states:

Business means—

(a) Any undertaking whether carried on for gain or reward or not; or
(b)  Any undertaking in the course of which—
(i)   Goods or services are acquired or supplied; or
(ii)   Any interest in land is acquired or disposed of—
whether free of charge or not:
(emphasis added)

[20] This definition makes it clear that whether a person is in trade or not is determined by the conduct they engage in, rather than the financial rewards earned. In this case, RMS Sales facilitated the sale of a motor vehicle on behalf of Mr O’Brien. The fact it received no commission from this transaction does not mean that it was not in trade or provide any defence to Mr Somerville-Ryan’s claim.
[21] Likewise, the fact that RMS Sales told Mr Somerville-Ryan that this was a private sale does not provide any defence. Although the vehicle was sold on behalf of Mr O’Brien, the CGA nonetheless applies because RMS Sales, which is in trade, acted as Mr O’Brien’s agent. Indeed, given my conclusion that the CGA applies to this transaction, it is arguable that RMS Sales’ attempt to avoid liability under the CGA could amount to misleading conduct in breach of s 13(i) of the Fair Trading Act 1986, which prohibits misleading representations about a consumer’s rights.
[22] I am conscious that this interpretation of the definition of supplier means that park and sell operators and other motor vehicle traders who sell a vehicle on behalf of another are subject to the guarantees in the CGA. They effectively stand in the shoes of the owner of the vehicle by providing a guarantee that the vehicle is unencumbered, will be delivered within a reasonable time, will be of acceptable quality and be reasonably fit for a particular purpose. As recognised in Walters v Taylor Marine Ltd,[2] this conclusion accords with the consumer protection purpose of the CGA and means that traders who decide to sell on behalf of others must take such steps as are necessary to comply with their obligations under the CGA.

Issue 3: Does the vehicle have a fault that breaches the acceptable quality guarantee?

[23] 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.
[24] The expression "acceptable quality" is defined in s 7(1) 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.

[25] 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 Mr Somerville-Ryan’s subjective perspective.
[26] Mr Somerville-Ryan took his first long drive in the vehicle on 27 June 2019, two days after purchase. Approximately 60 to 70 km into the journey, the vehicle broke down. The vehicle was then transported to Northland Toyota in Whangarei, which performed a diagnostic scan and found several fault codes relating to the vehicle’s hybrid battery. It then performed a further diagnosis and found that the voltage from the hybrid battery was unstable. Northland Toyota concluded that the hybrid battery required replacement, at an estimated cost of $3,216.24.
[27] I accept Northland Toyota’s diagnosis of the fault, and Mr Gregory, the Tribunal’s Assessor, advises that this is the type of fault that can commonly arise in a hybrid vehicle of this age as its hybrid battery degrades.
[28] RMS Sales agrees that the vehicle’s hybrid battery is faulty and appears to require refurbishment or replacement. I agree, and I am satisfied that the vehicle has not been of acceptable quality for the purposes of s 6 of the CGA. A reasonable consumer purchasing a hybrid vehicle of this price, age and mileage would not expect its hybrid battery to require refurbishment or replacement so shortly after purchase.

Issue 4: Is the fault a failure of a substantial character?

[29] Under s 18(3) of the CGA, Mr Somerville-Ryan may reject the vehicle if it has a fault that amounts to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the CGA:

21. 21 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.

[30] I am not satisfied that the fault amounts to a failure of a substantial character.
[31] The estimate from Northland Toyota is high — and involves installing a new hybrid battery, when other, less expensive repair options would be perfectly acceptable in a vehicle of this price, age and mileage. For example, Mr Gregory advises that an aftermarket battery or a refurbished secondhand battery, which in my mind are reasonable repair options for a vehicle of this price and age, could be installed in the vehicle quickly and at a much lower cost. Mr Gregory advises that such a repair could be completed within a day and cost approximately $1,300 for a secondhand battery or approximately $2,300 for a new aftermarket battery.
[32] I also consider that purchasers of hybrid vehicles of this price and age should understand that the hybrid battery is not new and that it will degrade and will require replacement as the vehicle ages. Certainly, a reasonable consumer would expect the trader to provide a remedy if the battery required replacement so soon after purchase, but I am not satisfied that a reasonable purchaser of a 13-year old, $6,770 hybrid vehicle, with an odometer reading exceeding 120,000 km would decline to purchase the vehicle because of a fault of this nature.

Issue 5: What remedy is Mr Somerville-Ryan now entitled to under the CGA?

[33] The remedies relevant to this claim are set out in s 18 of the CGA, which provides:

18. 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.

[34] Because the defective hybrid battery is not a failure of a substantial character, Mr Somerville-Ryan is not entitled to reject the vehicle. Instead, under s 18(2)(a) of the CGA, Mr Somerville-Ryan is entitled to have the hybrid battery replaced or repaired within a reasonable time. Further, under s 18(4) of the CGA, Mr Somerville-Ryan is also entitled to recover the cost of having the fault diagnosed by Northland Toyota, being $157.24.
[35] Accordingly, the Tribunal orders that RMS Sales shall, within 15 working days of the date of this decision:

• (a) replace or repair the vehicle’s hybrid battery; and
• (b) pay $157.24 to Mr Somerville-Ryan.

DATED at AUCKLAND this 6th day of December 2019

B.R. Carter
Adjudicator

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[1] Walters v Taylor Marine Ltd [2009] NZHC 2617; [2010] 2 NZLR 656.

[2] Walters v Taylor Marine Ltd, above n 1.