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Nur v 1stopcars.co.nz Limited - Reference No. MVD 015/2019 [2019] NZMVDT 37 (1 March 2019)

Last Updated: 19 April 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 015/2019
[2019] NZMVDT 37

BETWEEN FARINA FAZIA NUR

Purchaser

AND 1STOPCARS.CO.NZ LTD
Trader





MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor

HEARING at Auckland on 26 February 2019



APPEARANCES
F F Nur, Purchaser
M A Rafiq, Witness for the Purchaser
M Nazif, for the Trader
DATE OF DECISION 1 March 2019

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

  1. Farina Nur’s application is upheld and the contract between Farina Nur and 1stopcars.co.nz Ltd to purchase the vehicle is cancelled.
  2. Farina Nur shall immediately return the vehicle to 1stopcars.co.nz Ltd.
  1. Within 10 working days of receiving the vehicle, 1stopcars.co.nz Ltd shall pay $12,500 to Farina Nur.

REASONS

Introduction

[1] On 23 November 2016, Farina Nur purchased a 2012 Holden Captiva for $18,000 from 1stopcars.co.nz Ltd (1stopcars). The vehicle had an odometer reading of 40,030 km of the time of sale.
[2] Mrs Nur alleges that she was misled by 1stopcars’ failure to disclose that the vehicle had been imported from Australia, where it was a statutory write-off because of accident damage. Mrs Nur was also concerned that the vehicle’s odometer had been tampered with. She has applied to the Tribunal seeking to return the vehicle to 1stopcars and obtain a refund of the purchase price.
[3] 1stopcars says that it told Mrs Nur’s brother in law, Mohammed Rafiq, that the vehicle had been imported as damaged and that it was a statutory write off in Australia. It also says that Mr Rafiq signed a Consumer Information Notice (CIN), which states that the vehicle was imported as damaged. Finally, it says that the vehicle’s odometer has not been tampered with, and the discrepancy complained of by Mrs Nur was caused by an error when the vehicle was imported.

The Issues

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

Has 1stopcars engaged in conduct that breaches s 9 of the FTA?

[5] Section 9 of the FTA provides:
  1. 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.

[6] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd 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.

Did 1stopcars make any misleading representation about the odometer reading?

[7] Mrs Nur provided a report from carjam.co.nz, which shows that the vehicle’s odometer reading when it was imported into New Zealand in August 2016 was recorded as 124,313 km. That report then states that the odometer reading in October 2017 was recorded as 40,030 km. Mrs Nur was, quite rightly, concerned that the vehicle’s odometer may have been tampered with, and that the vehicle’s odometer reading is not a true reflection of the distance it has travelled.
[8] The odometer has not been tampered with. I heard evidence from Walliallah Nazif, a sales manager from 1stopcars, regarding the odometer reading discrepancy. Mr Nazif says that 1stopcars has not tampered with the odometer and that the odometer discrepancy was most likely caused by an error in recording the odometer reading when the vehicle was imported into New Zealand.
[9] Mr Nazif provided evidence to support this submission. That evidence — a receipt from Manheim Pty Ltd for the purchase of the vehicle in May 2016 and a checksheet from when the vehicle was inspected for compliance purposes in July 2016 — shows that the vehicle’s odometer reading was 39,958 km in May 2016 and 40,028 km in July 2016. I am therefore satisfied that the odometer reading when Mrs Nur purchased a vehicle was correct, and that it is most likely that a mistake was made when the vehicle’s odometer reading was recorded during the border inspection in August 2016.

Did 1stopcars engage in misleading conduct by failing to disclose the vehicle’s history?

[10] The vehicle was written off for insurance purposes in Australia because it had suffered accident damage. Information from the Australian Personal Property Securities Register supplied by Mrs Nur and compliance documents provided by 1stopcars shows that the vehicle was written off in Australia because of “heavy structural” damage to the front of the vehicle and other structural damage to the passenger and driver side of the vehicle and structural chassis rails. The vehicle was then classified as imported as damaged when inspected at the New Zealand border, meaning the vehicle would be recorded on the motor vehicle register as having been imported as damaged.
[11] Mrs Nur says that 1stopcars engaged in misleading conduct by failing to advise her that vehicle had been imported as damaged and that it was a statutory write-off from Australia because of extensive structural damage. She says she would not have purchased the vehicle if she had been aware of these facts.
[12] To succeed in her claim that 1stopcars has engaged in misleading conduct, Mrs Nur must show that 1stopcars failed to disclose that the vehicle was imported as damaged and a statutory write off due to accident damage, and that this failure was misleading or deceptive conduct in breach of s 9 of the FTA. This requires the Tribunal to consider the extent to which non-disclosure or silence can be a breach of s 9 and, if so, whether s 9 was breached on the facts of the present case.
[13] 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.[2]
[14] 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.[3] 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.

[15] 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.
[16] Having regard to the “reasonable expectation of disclosure” test in light of the general test for whether conduct is misleading and deceptive in Red Eagle, for the reasons that follow, I consider that a reasonable person in Mrs Nur’s situation would expect 1stopcars to advise it that the vehicle was classified as imported as damaged and had previously been written off in Australia.

Did 1stopcars disclose that the vehicle was imported as damaged?

[17] 1stopcars has a legal obligation to disclose on the CIN that the vehicle was imported as damaged. Sections 14 to 16 of the Motor Vehicle Sales Act 2003 impose an obligation on motor vehicle traders to display a CIN on all used vehicles and the CIN must contain all the information required by sch 2 to the Consumer Information Standards (Used Motor Vehicles) Regulations 2008. The information required by sch 2 includes a requirement that the trader must indicate, by ticking the appropriate box, whether the motor vehicle is recorded on the motor vehicle register as being damaged at the time of importation. The CIN has two boxes that can be ticked when disclosing whether a vehicle was imported as damaged, one box for “yes”, another for “no”.
[18] In this case, 1stopcars complied with its obligation to disclose that the vehicle was imported as damaged. Mr Nazif provided the Tribunal with a CIN bearing Mr Rafiq’s signature, which disclosed that the vehicle had been imported as damaged. Mrs Nur denied receiving this CIN from 1stopcars and Mr Rafiq denied signing this document. Mrs Nur alleged that the CIN was a forgery.
[19] Although I found Mrs Nur and Mr Rafiq to be honest and credible witnesses, I am not satisfied that the CIN provided to the Tribunal by Mr Nazif was a forgery. Mr Nazif, who I also found to be honest and credible, denied that the document had been forged and said that it was a true record of the CIN signed by Mr Rafiq. In the absence of compelling evidence showing otherwise, I accept Mr Nazif’s evidence and conclude that 1stopcars did provide a CIN that disclosed that the vehicle had been imported as damaged.
[20] Accordingly, I am not satisfied that 1stopcars has engaged in misleading conduct in breach of s 9 of the FTA by failing to comply with its legal obligation to disclose that the vehicle was imported as damaged.

Did 1stopcars disclose that the vehicle was a statutory write off because of structural damage?

[21] 1stopcars had a separate obligation to disclose that the vehicle had been written off in Australia due to structural damage. As recognised by the High Court in McBride Street Cars Ltd v District Court (Dunedin Registry), such information is material to any reasonable consumers purchasing decision.[6] It is material information because it enables a consumer to make an informed decision about the purchase — which includes the consumer then being able to make its own enquiries as to the future consequences of the vehicle being a statutory write-off. Those future consequences are important because a stigma attaches to vehicle’s that have been written off. This stigma significantly affects the resale value of those vehicles — irrespective of the nature of the damage that caused the vehicle to be written off. It is the fact that the vehicle has been written off that creates the stigma.
[22] In this case, 1stopcars knew that the vehicle was a statutory write-off, but I am not satisfied that it complied with its obligation to disclose that information to Mrs Nur.
[23] Although Mrs Nur did not deal directly with 1stopcars, I heard evidence from Mr Rafiq, who purchased the vehicle on behalf of Mrs Nur. Mr Rafiq alleges that at no time was he told the vehicle that the vehicle was a statutory write-off from Australia. Mr Rafiq says he would not have purchased the vehicle for Mrs Nur if he had known of its true history.
[24] Mr Nazif says that he sold the vehicle to Mr Rafiq. He says Mr Rafiq attended 1stopcars on several occasions with Mrs Nur’s partner to inspect and assess the vehicle. Although he could not recall the precise details of his discussions with Mr Rafiq, Mr Nazif says that he would have disclosed that the vehicle had been written off in Australia and that the damage had been repaired. Mr Nazif says that it is his standard practice to disclose this information at the outset with any prospective customer, as he does not want to waste his, or the customer’s, time by waiting until later in the process to disclose such important information. In this regard, Mr Nazif says 1stopcars did not try to hide the fact that the vehicle had previously been damaged. He says that the fact that it was imported as damaged was disclosed on the CIN and on the Trade Me listing for the vehicle also disclosed that it was a statutory write-off in Australia.
[25] Although I accept that 1stopcars provided a CIN that disclosed the vehicle was imported as damaged, and that the Trade Me listing stated that the vehicle had been written off in Australia, I am not satisfied that 1stopcars disclosed that information to Mrs Nur or to Mr Rafiq. The CIN made no mention of the vehicle having been written off in Australia — indeed despite being required to do so, 1stopcars failed to disclose on the CIN that the vehicle had been imported from Australia. Further, I accept Mrs Nur and Mr Rafiq’s evidence that they never saw any listing on Trade Me, so any information published on that website was never disclosed to them.
[26] Given the importance of the information regarding the vehicle’s history as a statutory write-off, one would expect a trader to keep thorough records proving that it disclosed that information to a prospective purchaser. No such records exist in this case. Mr Nazif says that the company now keeps far more thorough records proving that it discloses the statutory write off history to prospective customers, but it did not keep such records at the time this vehicle was sold.
[27] In the absence of any documents proving that 1stopcars disclosed that the vehicle was a statutory write-off to Mrs Nur or Mr Rafiq, I prefer the evidence of Mrs Nur and Mr Rafiq that the information was not disclosed to them. Accordingly, I am satisfied that 1stopcars failed to advise Mrs Nur that the vehicle was a statutory write-off from Australia due to structural damage. I consider that 1stopcars’s failure to advise Mrs Nur that the vehicle was a statutory write-off is misleading conduct that breached s 9 of the FTA. 1stopcars had an obligation to inform Mrs Nur that the vehicle was a statutory write-off. It did not do so.

What remedy is available to Mrs Nur under the FTA

[28] The remedies available for a breach of the FTA are set out in s 43 of the FTA which is as follows:

43 Other orders

(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(3) The orders are as follows:

(a) an order declaring all or part of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) to be void; and

(ii) if the court or the Disputes Tribunal thinks fit, to have been void at all times on and after a date specified in the order, which may be before the date on which the order is made:

(b) if an order described in paragraph (a) is made in respect of a contract that is associated with a collateral credit agreement, an order vesting in person B all or any of the rights and obligations of person A under the collateral credit agreement:

(c) an order in respect of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) varying the contract or the arrangement in the manner specified in the order; and

(ii) if the court or the Disputes Tribunal thinks fit, declaring the varied contract or arrangement to have had effect on and after a date specified in the order, which may be before the date on which the order is made:

(d) if an order described in paragraph (c) is made in respect of a contract that is associated with a collateral credit agreement, and if that order results in person A no longer having property in the goods that are the subject of the contract, an order vesting in person B the rights and obligations of person A under the collateral credit agreement:

(e) an order directing person B to refund money or return property to person A:

(f) an order directing person B to pay to person A the amount of the loss or damage:

(g) an order directing person B, at person B’s own expense, to repair, or to provide parts for, goods that have been supplied by person B to person A:

(h) an order directing person B, at person B’s own expense, to supply specified goods or services to person A.

(4) In subsection (3) (a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3) (a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) subpart 5 of Part 2 of the Contract and Commercial Law Act 2017; or

(b) section 317 of the Accident Compensation Act 2001.

[29] The remedies in s 43(3) of the FTA are discretionary and the discretion is to be exercised so as to give effect to the policy of the FTA, which includes protecting the interests of consumers. The object of the remedies in s 43(3) of the FTA is to do justice to the parties in the particular circumstances of the case.[7]
[30] In all the circumstances of this case, I consider that the appropriate remedy under the FTA is to declare the contract between the parties to purchase the vehicle void as at the date of this decision under s 43(3)(a)(ii) of the FTA, for Mrs Nur to return the vehicle and for 1stopcars to refund the purchase price under s 43(3)(e) of the FTA. In reaching this conclusion, I am particularly persuaded by two factors — the fact that the vehicle is worth less because of the undisclosed damage and the significance of the damage to the vehicle that caused it to be written off.
[31] The Tribunal commonly encounters cases involving vehicles that have been written off for insurance purposes. Common to those cases is evidence that, although there is a market for such vehicles, those vehicles are worth less because of their history as a statutory write-off. In this case, the reduction in this vehicle’s value is evident in the difficulty that Mrs Nur has had in attempting to sell the vehicle.
[32] Further, the damage that caused the vehicle to be written off was extensive. The information supplied by Mrs Nur and Mr Nazif shows the vehicle suffered extensive structural damage to its front, to its driver and passenger side panels and its chassis rails.
[33] Given the extent of the damage and repairs to this vehicle, I consider that a reasonable consumer would not have purchased this vehicle without performing extensive pre-purchase checks to satisfy itself of the structural integrity and durability of the vehicle. In this case, Mrs Nur was not given that opportunity because 1stopcars failed in its obligation to disclose that crucial information to him.
[34] Because Mrs Nur was not given an opportunity to make an informed decision about purchasing a vehicle that had previously been significantly damaged, and that is likely to be worth much less than the price she paid, I consider it appropriate that Mrs Nur should be entitled to return the vehicle and obtain a refund.

Reduction of amount to be refunded

[35] Although Mrs Nur is entitled to obtain a refund of the purchase price, I consider a reduction of the amount to be paid to Mrs Nur to be appropriate. Mrs Nur has owned the vehicle for more than two years and has driven more than 15,500 km in that time. Mrs Nur has obtained real value from the use of the vehicle in that time and the vehicle has depreciated in value because of that use. I would not be doing justice by the parties if I failed to take account of the value of that use. Accordingly, I intend to reduce the amount payable to Mrs Nur by $5,500 to reflect the benefit Mrs Nur has received from his use of the vehicle.
[36] Mr Nazif also submitted that any amount payable to Mrs Nur should be reduced to reflect that the $18,000 purchase price also included the cost of on road costs and a 12 month mechanical breakdown insurance policy. Although that may be the way that 1stopcars views the transaction, the vehicle offer and sale agreement says otherwise. The agreement states that the purchase price was $18,000, with the on road costs and mechanical breakdown insurance included for free. I am therefore satisfied that Mrs Nur paid $18,000 for the vehicle.

Conclusion

[37] 1stopcars has engaged in misleading conduct in breach of s 9 of the FTA by failing to disclose that the vehicle had been written off in Australia due to structural damage.
[38] Mrs Nur has suffered loss because of 1stopcars’s misleading conduct. In the circumstances of this case, the appropriate remedy under s 43(3)(e) of the FTA is to declare the contract void and order that 1stopcars refund the purchase price of the vehicle to Mrs Nur, less an allowance to reflect the benefit Mrs Nur has obtained from using the vehicle since purchase.
[39] Accordingly, the Tribunal declares that the contract to purchase the vehicle between Mrs Nur and 1stopcars is void as at the date of this decision and that 1stopcars shall, within 10 working days of the date of this decision, pay $12,500 to Mrs Nur.

DATED at AUCKLAND this 1st day of March 2019

B.R. Carter
Adjudicator



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

[2] Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995) 5 NZBLC 103,878 (HC).

[3] Des Forges v Wright [1996] 2 NZLR 758 (HC).

[4] 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].

[6] McBride Street Cars Limited Ltd v District Court (Dunedin Registry) [2018] NZHC 111, [2018] NZAR 289.

[7] Red Eagle Corp Ltd v Ellis, above n 1, at [31].


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