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TradeTax Accounting Servies Ltd v Auckland Motor Vehicles Ltd t/a Renault Auckland - Reference No. MVD 018/2019 [2019] NZMVDT 43 (5 March 2019)

Last Updated: 19 April 2019

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

MVD 018/2019
[2019] NZMVDT 043

BETWEEN TRADETAX ACCOUNTING SERVICES LTD

Purchaser

AND AUCKLAND MOTOR VEHICLES LTD T/A RENAULT AUCKLAND
Trader





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

HEARING at Auckland on 26 February 2019



APPEARANCES
M Solanki, Purchaser
F Bawa, Witness for the Purchaser
S Moses, for the Trader
C Chakiath, Witness for the Trader

DATE OF DECISION 5 March 2019

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

  1. TradeTax Accounting Services Ltd’s application is dismissed.

_________________________________________________________________

REASONS

Introduction

[1] On 29 September 2018, TradeTax Accounting Services Ltd (TradeTax Accounting) purchased a 2017 Infiniti QX70 for $53,000 from Auckland Motor Vehicles Ltd, trading as Renault Auckland (Renault Auckland). The vehicle had an odometer reading of 18,800 km at the time of sale.
[2] TradeTax Accounting alleges that the functionality of the vehicle’s satellite navigation system is substandard and makes the vehicle unsafe. It also says that Renault Auckland failed to tell it about the substandard functionality of the satellite navigation system. TradeTax Accounting has applied to the Tribunal seeking to reject the vehicle, obtain a refund of the purchase price and finance costs and damages of $5,000 for mental harassment.
[3] Renault Auckland says that TradeTax Accounting is not entitled to the remedy it seeks. It says that the vehicle has no fault and that the satellite navigation system performs as it was designed to. Further, after the hearing, Renault Auckland filed a submission alleging that TradeTax Accounting had agreed to contract out of the Consumer Guarantees Act 1993 (the CGA).

The Issues

[4] Against this background, the issues requiring consideration are:
[5] In this decision, I do not consider Renault Auckland’s submission that TradeTax Accounting agreed to contract out of the CGA. That is because Renault Auckland had an opportunity to advance that argument at the hearing, but it did not do so, meaning TradeTax Accounting has not had an opportunity to respond to the submission and I have not had an opportunity to question the parties on the nature of any agreement to contract out that may have been reached. I do not consider fair, or in the interest of justice to therefore take account of that submission.

Does the vehicle’s satellite navigation system breach the acceptable quality guarantee?

The parties’ positions

[6] TradeTax Accounting’s concerns about the functionality and safety of the vehicle’s satellite navigation system can be summarised as follows:
[7] TradeTax Accounting provided a video of the satellite navigation functionality in the vehicle. That video confirmed that the satellite navigation system has the functionality alleged by TradeTax Accounting. The buttons beneath the touchscreen activate Australian maps, not New Zealand maps, and a button on the steering wheel must be pressed to revert the display to New Zealand maps. TradeTax Accounting submits that this is a luxury vehicle and its satellite navigation functionality is substandard for such a vehicle.
[8] Renault Auckland agrees with TradeTax Accounting’s description of the satellite navigation system functionality. However, it says that the vehicle has no fault. It accepts that the buttons beneath the touchscreen display only work for Australian maps but says that the New Zealand maps can be accessed and operated using the touchscreen display, rather than the buttons beneath the touchscreen. Further, it says that New Zealand maps automatically load onto the satellite navigation system when the vehicle is started, and Australian maps will only be accessed if an occupant inadvertently pushes one of the buttons beneath the touchscreen. It says that if Australian maps are inadvertently loaded, the driver simply needs to push the source button on the steering wheel, which will revert the satellite navigation system to New Zealand maps.
[9] The parties therefore agree on the functionality of the satellite navigation system but disagree on whether or not that functionality is acceptable.

The relevant law

[10] The test for determining whether a vehicle (and its functions) are of acceptable quality is set out in ss 6 and 7 of the CGA.
[11] 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.
[12] The expression "acceptable quality" is defined in s 7 as follows:

7 Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

(2) Where any defects in goods have been specifically drawn to the consumer's attention before he or she agreed to the supply, then notwithstanding that a reasonable consumer may not have regarded the goods as acceptable with those defects, the goods will not fail to comply with the guarantee as to acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be treated as having been specifically drawn to the consumer's attention for the purposes of subsection (2) are those disclosed on a written notice displayed with the goods.

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and

(b) the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.

(5) A reference in subsections (2) and (3) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.

[13] 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 TradeTax Accounting’s subjective perspective.

The satellite navigation functionality does not breach the acceptable quality guarantee

[14] On the basis of the evidence presented by the parties, it is clear that the satellite navigation system in this vehicle is not perfect. The buttons beneath the display screen which purport to operate the satellite navigation system do not operate that system for New Zealand maps. Also, the system does not have some of the functionality that other satellite navigation systems may have. For example, Mahesh Solanki, a director of TradeTax Accounting, provided a video of the satellite navigation functionality in his wife’s new Mercedes-Benz, which he said was of the standard that one would expect of a luxury vehicle.
[15] Although the vehicle’s satellite navigation system is not perfect, I am not satisfied that its imperfections mean the satellite navigation system is not of an acceptable quality for the purposes of the CGA. Although a reasonable purchaser of a $53,000, one-year old vehicle that had travelled less than 20,000 km would have high expectations as to the quality and functionality of such a vehicle, the CGA does not require that such vehicles must be perfect. Instead, the CGA simply requires that the goods must be of a quality that is acceptable to a reasonable consumer, taking account of the various factors listed in s 7(1)(f)–(j) of the CGA (above).
[16] In this case, I consider that the satellite navigation system is of acceptable quality because:
[17] Accordingly, I am satisfied that the vehicle’s satellite navigation system is of acceptable quality for a vehicle of this price, age and mileage and does not breach the acceptable quality guarantee in s 6 of the CGA.

Has Renault Auckland engaged in conduct that breaches s 9 of the FTA?

[18] TradeTax Accounting also submitted that Auckland Renault should have informed it of the functionality of the vehicle’s satellite navigation system before purchase. In this regard, I understood TradeTax Accounting to allege that Renault Auckland engaged in misleading conduct, in breach of s 9 of the FTA, by failing to disclose the limitations of the satellite navigation functionality.
[19] 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.

[20] 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.

[21] To succeed in its claim that Renault Auckland has engaged in misleading conduct, TradeTax Accounting must show that Renault Auckland failed to disclose the functional limitations of the satellite navigation system, 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.
[22] 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]
[23] The 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.

[24] 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.
[25] I am satisfied that Renault Auckland did not disclose the functional limitations of the vehicle’s satellite navigation system to TradeTax Accounting before purchase. However, 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, I am not satisfied that Renault Auckland had an obligation to disclose those limitations.
[26] As mentioned above, the satellite navigation system is easily operated and functions well when the touchscreen is used, and if the buttons below the touchscreen are inadvertently pressed, it is easy to revert to the New Zealand maps by pressing the source button on the steering wheel. Accordingly, because the satellite navigation system functions well and is easily operated, I am not satisfied that its imperfections are the type of issue that a motor vehicle trader would be legally obliged to disclose to prospective purchasers.
[27] Consequently, I am not satisfied that Renault Auckland has engaged in misleading and deceptive conduct, and TradeTax Accounting’s application is therefore dismissed.

DATED at AUCKLAND this 5th 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 Ltd 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].

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