Jones v European Motor Distributors Ltd - Reference No. 099/2020 MVD [2020] NZMVDT 103 (7 July 2020)

Last Updated: 18 August 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 099/2020 [2020] NZMVDT 103 BETWEEN SARAH MARY JONES Purchaser AND EUROPEAN MOTOR DISTRIBUTORS LTD Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S D Gregory, Assessor

HEARING at Auckland on 7 July 2020

APPEARANCES

S M Jones, Purchaser

A R Lyford, for the Trader

DATE OF DECISION 16 July 2020

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DECISION OF THE TRIBUNAL

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1. Sarah Jones’ application is dismissed.

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REASONS

Introduction

[1] Sarah Jones purchased a 2010 Volkswagen Passat from Selected Autos Ltd for $19,000 in March 2015. In October 2018 its mechatronics unit was replaced by Euro City Limited, which cost Ms Jones $4,566.40. In late 2019, Ms Jones received a recall notice from European Motor Distributors Ltd (EMD) advising that an accumulator component in the vehicle’s mechatronics unit may be faulty. EMD asked Ms Jones to arrange a convenient time for the vehicle’s mechatronics unit to be inspected to determine whether the accumulator was faulty and whether repairs were required.
[2] Ms Jones has now applied to the Tribunal seeking to recover the cost of replacing the mechatronics unit in October 2018, alleging that the mechatronics unit was not sufficiently durable. Ms Jones also claims that EMD knew that the mechatronics units in such vehicles were faulty as early as 2009, so it had an obligation to advise her, and other purchasers, about this fault.
[3] Although Ms Jones’ application named Selected Autos and Euro City as respondents to her claim, she has since advised the Tribunal that she has withdrawn her claim against those companies and that she seeks to proceed against EMD only.

The issues

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

• (a) Does EMD have liability under the Consumer Guarantees Act 1993 (CGA) for the replaced mechatronics unit?
• (b) Has EMD engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA) by failing to disclose known faults with mechatronics units?

Issue 1: Does EMD have liability under the CGA?

[5] Although Ms Jones did not express her claim in these precise terms, I understood Ms Jones to allege that the mechatronics unit replaced in 2018 was not of acceptable quality because it was not as durable as a reasonable consumer would consider acceptable.
[6] The law relevant to this allegation is set out in section 6 of the CGA, which provides that goods (such as motor vehicles) supplied to a consumer must be of acceptable quality. Where the goods are not of acceptable quality, the consumer may have a remedy against the supplier or the manufacturer of the vehicle. Accordingly, to be liable under the CGA, EMD must be either a supplier or manufacturer, as those terms are defined in s 2 of the CGA.

EMD was not the supplier of the vehicle

[7] EMD is not a supplier for the purposes of this transaction as it did not supply the vehicle to Ms Jones. For the purposes of the CGA, the supplier of the vehicle was Selected Autos.

EMD was not the manufacturer of the vehicle

[8] Under s 2 of the CGA, a manufacturer is a person that carries on the business of assembling, producing, or processing goods, and includes—

• (a) any person that holds itself out to the public as the manufacturer of the goods:
• (b) any person that attaches its brand or mark or causes or permits its brand or mark to be attached, to the goods:
• (c) where goods are manufactured outside New Zealand and the foreign manufacturer of the goods does not have an ordinary place of business in New Zealand, a person that imports or distributes those goods.

[9] EMD was not the manufacturer of the vehicle. EMD did not hold itself out as the manufacturer of the vehicle and it has not attached its brand or mark or permitted its brand or mark to be attached to the vehicle. Likewise, the vehicle was manufactured outside New Zealand by Volkswagen AG, a German company with no place of business in New Zealand, and although the evidence shows that EMD has a contractual relationship with Volkswagen AG to import and distribute Volkswagen vehicles in New Zealand, EMD did not import or distribute this vehicle itself. The vehicle was imported and distributed by an unknown third party.
[10] Ms Jones submitted that EMD should nonetheless be liable because it is the New Zealand agent of the manufacturer of the vehicle. I do not agree. Although EMD is the authorised importer and distributer of Volkswagens in New Zealand and operates as “Volkswagen New Zealand”, which would lead many reasonable consumers to consider that EMD is part of the wider Volkswagen group of companies, from a legal perspective that is not the case. EMD and Volkswagen AG are different entities and appear to have no common shareholding or directors and the relationship between the companies, although close, does not mean that EMD is liable under the CGA simply because the vehicle was manufactured by Volkswagen AG.
[11] Instead, any claim that Ms Jones may wish to make against the manufacturer would need to be brought against Volkswagen AG or the company that imported the vehicle into New Zealand, not EMD.

The Tribunal’s conclusion

[12] Ms Jones’ application under the CGA is therefore dismissed because EMD can have no liability under the CGA in respect of this vehicle because it was not the supplier or manufacturer of the vehicle.

Issue 2: Has EMD engaged in conduct that breached s 9 of the FTA?

[13] Section 9 of the FTA provides;

9. 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.

[14] 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.

[15] Ms Jones says EMD knew that the mechatronics units in such vehicles were faulty as early as 2009, so it had an obligation to advise her, and other purchasers about this known fault. I understood Ms Jones to therefore allege that EMD has therefore engaged in misleading conduct by failing to advise her of that information.
[16] Ms Jones’ claim must fail for two reasons.
[17] First, EMD had no obligation to disclose the existence of any potential defects to Ms Jones. EMD had no contractual relationship with Ms Jones and, as set out above, it was not the supplier or the manufacturer of the vehicle. EMD may have been obliged to disclose material facts to Ms Jones if there had been a contractual relationship or if it had imported or distributed the vehicle, but that was not the case here.
[18] Second, even if EMD had an obligation to disclose information about the vehicle’s potential defects to Ms Jones, Ms Jones has not proven that EMD (or Volkswagen AG) knew, or ought reasonably to have known, about the fault that caused the mechatronics unit in her vehicle to fail.
[19] In alleging that this was a known fault, Ms Jones pointed to an article published on the stuff.co.nz website,[2] which stated that Volkswagen had known about gearbox problems in some Volkswagen models since 2009. EMD agrees that Volkswagen AG had previously implemented a recall campaign for a potential fault with the mechatronics units in Volkswagen vehicles with a seven speed direct shift gearbox (such as Ms Jones’ vehicle). EMD produced evidence to show that Ms Jones’ vehicle’s mechatronics unit was assessed as part of that recall campaign in Japan in 2013.
[20] However, EMD says that the potential defect identified at that time was different from that identified in the 2019 recall. It says that the 2013 recall related to a potential electrical fault within the mechatronics unit, whereas the recall issued in late 2019 related to a potential fault with the aluminium housing attached to the mechatronics unit. It therefore says that it did not know, and could not have known, about the defective mechatronics unit in Ms Jones’ vehicle at the time it failed.
[21] I agree and I am satisfied that, even if EMD owed a duty to Ms Jones to advise her about potential faults with the vehicle (which it did not), it had no obligation to do so in this case as it did not know about the potential defect that triggered the 2019 recall until late 2019 — more than one year after the mechatronics unit in Ms Jones’ vehicle had failed.

The Tribunal’s conclusion

[22] EMD has not engaged in misleading or deceptive conduct and Ms Jones’ claim under the FTA is therefore dismissed.

DATED at AUCKLAND this 16th day of July 2020

B.R. Carter
Adjudicator

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

[2] Dave Moore “VW, Skoda, Audi issue DSG recall for NZ” (13 June 2013) Stuff News <www.stuff.co.nz/motoring/8791119/VW-Skoda-Audi-issue-DSG-recall-for-NZ>