Schwarz v First Automotive Ltd Reference No. 094/2020 MVD [2020] NZMVDT 120 (4 August 2020)

Last Updated: 17 September 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 094/2020 [2020] NZMVDT 120 BETWEEN JUSTIN SCHWARZ Purchaser AND FIRST AUTOMOTIVE LTD Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Haynes, Assessor

HEARING at Auckland on 11 June 2020

APPEARANCES

J Schwarz, Purchaser

A Praskesh, for the Trader

DATE OF DECISION 4 August 2020

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DECISION OF THE TRIBUNAL

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1. First Automotive Ltd shall, within 10 working days of the date of this decision, pay $400 to Justin Schwarz.

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REASONS

Introduction

[1] Justin Schwarz wants to recover the $1,000 deposit he paid to First Automotive Ltd to purchase a 2009 Nissan Wingroad in September 2019. After paying the deposit, Mr Schwarz changed his mind about purchasing the vehicle and now believes that he is entitled to recover the deposit, which he says was never described by First Automotive as being non-refundable.

The issues

[2] Mr Schwarz alleged that First Automotive engaged in misleading conduct in breach of the Fair Trading Act 1986 (the FTA) by failing to advise him that the deposit was non-refundable. I also consider that the evidence presented shows that this is a matter involving the repudiation and cancellation of a contract, to which the Contract and Commercial Law Act 2017 (the CCLA) applies. Accordingly, I consider the issues requiring consideration are:

• (a) Was there a contract between the parties?
• (b) Has First Automotive engaged in misleading conduct by failing to disclose that the deposit was non-refundable?
• (c) If not, is Mr Schwarz nonetheless entitled to a remedy under the CCLA?

Issue 1: Was there a contract between the parties?

[3] On 13 September 2019, Mr Schwarz visited First Automotive’s premises looking to purchase a 2009 Nissan Wingroad. Mr Schwarz was particularly interested in the 2009 model because of its large LCD radio display, which was not present in earlier models.
[4] First Automotive had no suitable vehicles in stock, but Anil Prakesh, a director of First Automotive, identified a 2009 Nissan Wingroad that was being offered for sale by auction in Japan. Mr Prakesh offered to purchase that vehicle, import it into New Zealand and sell it to Mr Schwarz for $6,000. Mr Schwarz agreed and paid a deposit of $1,000. No paperwork was signed.
[5] Although there was no written contract, the evidence shows that an oral agreement existed between the parties under which First Automotive agreed to purchase a 2009 Nissan Wingroad from Japan and sell it to Mr Schwarz for $6,000, with Mr Schwarz paying a deposit of $1,000 to enable First Automotive to bid on the identified vehicle at an upcoming auction.

Issue 2: Has First Automotive engaged in misleading conduct by failing to disclose that the deposit was non-refundable?

[6] 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.

[7] 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.

[8] In reliance on the oral agreement to purchase the vehicle, First Automotive instructed its agent in Japan to bid on the 2009 Nissan Wingroad at auction. That bid was successful, but Mr Schwarz then changed his mind and sought to recover the deposit. By that stage, First Automotive had already purchased the vehicle for Mr Schwarz, so it declined to refund the deposit on the basis that it had already spent the deposit.
[9] Against this background, I am not satisfied that First Automotive engaged in misleading conduct by failing to tell Mr Schwarz that the deposit was non-refundable. At the time Mr Schwarz paid the deposit it would have been clear to any reasonable consumer that First Automotive was about to spend that deposit (and more) purchasing the vehicle on Mr Schwarz’s instructions. I am not satisfied that a reasonable consumer would then have a realistic expectation that it could change its mind and recover the full deposit after the vehicle had been purchased.
[10] Accordingly, although First Automotive did not positively disclose that the deposit was non-refundable, the circumstances of this case are such that a reasonable consumer could not have expected to recover the full deposit if he or she changed their mind after the vehicle was purchased. Mr Schwarz’s claim under the FTA is therefore dismissed.

Issue 3: Is Mr Schwarz entitled to a remedy under the CCLA?

[11] The CCLA provides remedies where a contract has been cancelled. Under s 36(1) of the CCLA, a person may cancel a contract when the other party repudiates the contract by making it clear to the other that they do not intend to perform their obligations under the relevant agreement.
[12] Although First Automotive did not express its case as such, I understood it to be saying that Mr Schwarz had repudiated the agreement to purchase the vehicle after it had already incurred significant cost, meaning that it was entitled to retain the deposit. In that regard, First Automotive says that it has now spent about $5,600 purchasing and importing the vehicle into New Zealand.
[13] Section 36(1) of the CCLA applies in this case as the contract between Mr Schwarz and First Automotive has been repudiated and cancelled. Mr Schwarz’s conduct in refusing to purchase the vehicle despite having an agreement to do so amounts to a repudiation. The contract has since been cancelled. First Automotive has tried to convince Mr Schwarz to purchase the vehicle or to allow it to sell it on his behalf – without success – and the contract is now at an end.
[14] Under s 43(1) of the CCLA, where a contract has been repudiated and cancelled, the Tribunal can grant relief where it is just and practicable to do so. That relief can include an order under s 43(3)(a) of the CCLA directing a party to pay a sum that the Tribunal thinks just.
[15] In the circumstances of this case, I consider it just that First Automotive is entitled to retain most of the deposit to reflect the time and cost it has incurred in purchasing this vehicle for Mr Schwarz and the effort and cost it will incur in securing an alternative purchaser. However, I am not satisfied that First Automotive is entitled to retain all of the deposit, as it still owns the vehicle and will have the opportunity to recover at least some of those costs when it resells the vehicle.
[16] Accordingly, under s 43(1) of the CCLA, I consider it just and practicable that First Automotive is entitled to retain $600, but it must refund the remaining $400 to Mr Schwarz.

DATED at AUCKLAND this 4th day of August 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].