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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 19 April 2019
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IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
BETWEEN AKSHAN ENTERPRISES LTD
Purchaser
AND SELL YOUR CAR LTD
Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S D Gregory, Assessor
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HEARING at Auckland on 12 February 2019 and 5 March 2019
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APPEARANCES
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G Gulati for the Purchaser
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A Tkachenko for the Trader
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DATE OF DECISION 11 March 2019
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] On 13 December 2016, Akshan Enterprises Ltd purchased a 2008 Nissan Caravan for $12,000, including on-road costs, from Sell Your Car Ltd. The vehicle had an odometer reading of approximately 64,400 km at the time of sale.
[2] The vehicle was imported from Japan, where it had damage to several of its panels. The vehicle was identified as being “imported as damaged” at the New Zealand border, and repairs were required before the vehicle was certified for use in New Zealand.
[3] Akshan Enterprises says that it was not told that the vehicle had previously been damaged in Japan or that it was classified as imported as damaged. Akshan Enterprises has applied to the Tribunal seeking to reject the vehicle and obtain a refund of the purchase price.
[4] Sell Your Car says that Akshan Enterprises is not entitled to the remedy it seeks. It says that it told Akshan Enterprises that the vehicle had previously been damaged and repaired. It also says that Akshan Enterprises has suffered no loss, as it paid a fair price for the vehicle and the alleged existing defects have been overstated.
The Issues
[5] Against this background, the issues requiring consideration are:
- (a) Has Sell Your Car engaged in conduct that breaches s 9 of the Fair Trading Act 1986 (the FTA) by failing to disclose that the vehicle had been imported as damaged?
- (b) If so, what remedy, if any, is Akshan Enterprises entitled to under the FTA?
Has Sell Your Car engaged in conduct that breaches s 9 of the FTA?
[6] Akshan Enterprises alleges that Sell Your Car did not advise it that the vehicle had been imported as damaged. Although it did not express its claim as such, I understood Akshan Enterprises to allege that this conduct was misleading, in breach of the FTA.
[7] Section 9 of the FTA provides:
- 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.
[8] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corporation 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.
[9] To succeed in a claim under the FTA, Akshan Enterprises must show that Sell Your Car’s failure to disclose that the vehicle was imported as damaged 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.
[10] 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]
[11] 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.
[12] 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.
[13] The evidence shows that Sell Your Car supplied Akshan Enterprises with a vehicle that had suffered panel damage in Japan. The vehicle was then classified as imported as damaged when inspected at the New Zealand border, meaning that the vehicle would be recorded on the motor vehicle register as having been imported as damaged.
[14] Having regard to the “reasonable expectation of disclosure” test in light of the overall test for whether conduct is misleading and deceptive in Red Eagle, I consider that a reasonable person in Akshan Enterprises’ situation would have expected Sell Your Car to advise it that the vehicle had been imported as damaged.
[15] Sell Your Car should have disclosed this information because it had a legal obligation to do so. Sections 14 to 16 of the Motor Vehicle Sales Act 2003 (the MVSA) impose an obligation on motor vehicle traders to display a Consumer Information Notice (CIN) on all used vehicles, which 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 or not 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”. Failure to comply with these requirements is punishable by a fine of up to $10,000 for an individual or $30,000 for a body corporate.[6]
[16] Although Gulshan Gulati, a director of Akshan Enterprises, found an incomplete CIN in the vehicle’s glovebox in November 2018, which stated that the vehicle was not imported as damaged, there is no evidence to show that Sell Your Car ever provided a completed CIN to Akshan Enterprises at the time of purchase, or at any time since. Andrey Tkachenko, a Manager at Sell Your Car, accepted that Sell Your Car did not provide a completed CIN to Akshan Enterprises. Mr Tkachenko said that it did not provide a CIN because this was a business to business transaction and because Akshan Enterprises was based in Christchurch, so all of the dealings between the parties were completed online.
[17] Sell Your Car had an obligation to provide a completed CIN to Akshan Enterprises advising it that the vehicle had been imported as damaged. The fact that this was a business to business transaction or that the transaction was arranged online does not affect that obligation. Sell Your Car failed to comply with its legal obligation to disclose that the vehicle was imported as damaged. Consequently, I consider that Sell Your Car has engaged in misleading conduct in breach of s 9 of the FTA.
[18] In its defence, Sell Your Car advised that, although it did not provide a CIN that disclosed that the vehicle had been imported as damaged, it did tell Mr Gulati that the vehicle had previously been damaged and repaired. Mr Gulati denied this.
[19] Given the importance of the information regarding the vehicle’s history as a damaged vehicle, one would expect Sell Your Car to keep thorough records proving that it had disclosed that information to Akshan Enterprises. No such records exist in this case. In the absence of any documents proving that Sell Your Car disclosed that the vehicle was previously damaged and repaired, I prefer the evidence of Mr Gulati that the information was not disclosed to him.
What remedy, if any, is Akshan Enterprises entitled to under the FTA?
[20] The remedies available for a breach of the FTA are discretionary. They 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.
[21] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43 of the FTA.[7] The Tribunal must consider whether:
- (a) Akshan Enterprises was in fact misled or deceived;
- (b) Akshan Enterprises has suffered loss or damage; and
- (c) Sell Your Car’s conduct was the effective cause or an effective cause of their loss or damage.
[22] For the reasons set out above, I find that Akshan Enterprises was misled by Sell Your Car’s failure to disclose that the vehicle was imported as damaged. Given Akshan Enterprises had a legitimate expectation that it would have been that the vehicle was imported as damaged, Sell Your Car’s failure to do so was misleading.
[23] I am not, however, satisfied that Akshan Enterprises has proven that it has suffered any loss or damage as a result of being misled.
[24] Under s 43 of the FTA, the normal measure of loss or damage is “the difference between the value of what was acquired and the price paid”.[8] In essence, this test means that Akshan Enterprises will have suffered loss if it paid more for the vehicle than it was worth.
[25] In this case, I am not satisfied that Akshan Enterprises has proven that it paid more for the vehicle than it was worth. Although I am satisfied that a stigma attaches to vehicles that have been classified as imported as damaged, and that this stigma can affect the vehicle’s value, in this case Akshan Enterprises provided no evidence to show that the vehicle was worth less than it paid for it, or that it will suffer any significant loss if it now sells the vehicle. Indeed, the evidence presented suggests that Akshan Enterprises paid a fair price for the vehicle. Mr Gulati accepted that one of the reasons he purchased the vehicle was because it was less expensive than other comparable vehicles and Sell Your Car provided (albeit unscientific) information from Trade Me to show that similar vehicles commonly sell for a much higher price than that paid by Akshan Enterprises.
[26] Accordingly, I am not satisfied that Akshan Enterprises has proven that it suffered loss due to there being any difference between the value of the vehicle and the price it paid.
[27] I have also considered whether Akshan Enterprises has suffered, or is likely to suffer, loss as a result of any repairs that are now required to rectify any pre-existing accident damage to the vehicle. In this regard, Akshan Enterprises alleges that the vehicle now has corrosion beneath its passenger-side sliding door window and that the previous repairs performed on the vehicle were substandard and now require expensive rectification.
[28] In support of this submission, Akshan Enterprises provided the following evidence:
- (a) photographs showing low level corrosion beneath the passenger-side sliding door window and cracked paintwork on previously damaged panels;
- (b) an estimate from Holland Collision Centre Ltd, dated 22 January 2019; and
- (c) a letter from CMR Panel & Paint Ltd stating that it had inspected the vehicle and considered that previous damage repairs were substandard. It considered that the panels should be replaced and not repaired.
[29] This evidence is insufficient to prove that the vehicle had existing damage that now requires expensive repair because:
- (a) the photographs do not show unacceptable defects that now require repair. Instead they show low level corrosion and paint cracking consistent with the condition of a commercial vehicle of this age and mileage. There is no other physical evidence to show that the vehicle has unacceptable defects because of the pre-existing accident damage;
- (b) the estimate from Holland Collision Centre contains no information as to the nature of any existing damage and does not assist in determining the extent of any existing damage and whether the damage is attributable to the previous accident damage. Instead, the estimate simply states the cost of replacing and repairing various panels on the vehicle. Mr Tkachenko submitted that I should be slow to conclude that an estimate for repairs is evidence that those repairs are actually required. I agree. In the absence of any evidence from Holland Collision Centre as to the nature of the damage to the vehicle and the necessity of the proposed repairs, I am not satisfied that the estimate shows that the vehicle has unacceptable defects attributable to the pre-existing damage or that the proposed repairs are necessary; and
- (c) the letter from CMR Panel & Paint does state that the vehicle has substandard prior repairs, but the letter is too vague to rely on. For example, in describing the existing damage, CMR Panel & Paint says that “the area that was repaired is starting to let go. Possibly rust or bad key being the cause” and that the “damaged panels should be replaced no (sic) repaired”. Quite aside from being difficult to understand, these statements do not identify which previous repairs are “starting to let go” or which panels now require repair or replacement. In other similar cases, the Tribunal has seen reports from a panelbeater describing each affected area, supported by photographs of the affected area and details of the repairs required. The letter from CMR Panel & Paint does not contain this level of detail, and I simply do not feel able to rely on it in concluding that the vehicle has unacceptable existing defects attributable to the previous accident damage, which now require repair.
[30] As the Applicant, it is for Akshan Enterprises to prove each aspect of its claim on the balance of probabilities. In that regard, Akshan Enterprises must provide sufficient information to enable the Tribunal to be satisfied that it is more likely than not that it has suffered, or is likely to suffer, loss as a result of being misled by Sell Your Car. On the basis of the evidence presented by Akshan Enterprises, I am not satisfied that it has proven that it has suffered, or that it is likely to suffer, loss as a result of being misled. The evidence that Akshan Enterprises has suffered, or is likely to suffer, loss because the vehicle now requires repair is insufficient and too vague.
[31] Accordingly, its application is dismissed.
Referral to the Commerce Commission
[32] Sell Your Car did not provide a completed CIN to Akshan Enterprises, as required by s 28(1) of the FTA, and it did not advise Akshan Enterprises that the vehicle had been imported as damaged. Accordingly, I will refer this decision to the Commerce Commission, which has jurisdiction to investigate conduct that breaches the misleading and deceptive conduct and consumer information standards provisions of the FTA.
DATED at AUCKLAND this 11th day of March 2019
B.R. Carter
Adjudicator
[1] Red Eagle Corporation 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 99,356.
[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] Fair Trading Act 1986, s 40(1B).
[7] Red Eagle Corporation Ltd v Ellis, above n 1, at [29].
[8] Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2012) 13 NZCPR 123 at [49].
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