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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 23 October 2020
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IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
BETWEEN UPDESH KUMAR
Purchaser
AND TURNERS GROUP NZ LTD
Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Haynes, Assessor
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HEARING at Auckland on 30 July and 3 September 2020
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APPEARANCES
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U Kumar, Purchaser (by audio-visual link)
L Banger, Witness for the Purchaser (by audio-visual link)
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S Prince, for the Trader
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DATE OF DECISION 15 September 2020
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
The issues
[2] The issues requiring the Tribunal’s consideration in this case are:
- (a) Has Turners engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
- (b) If so, what remedy is Mr Kumar entitled to under the FTA?
Issue 1: Has Turners engaged in conduct that breached s 9 of the FTA?
[3] 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.
[4] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[2]
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.
Mr Kumar’s evidence
[5] Lovneesh Banger purchased the vehicle on behalf of Mr Kumar. Mr Banger had seen the vehicle advertised as part of a “damaged vehicles auction” on Turners’ website. Relevant to this claim, that website listing stated:
THIS IS A DAMAGED VEHICLE! Please ensure you have read the Terms & Conditions & all of the vehicle comments prior to bidding.
Turners are not liable for forklift damage. Engine does not start. No mechanical inspection has been done on this vehicle. Oil in engine. Vehicle holds water. Interior is in average condition. Key available. Flat battery.
[6] Mr Banger says that the statements on the website listing led him to believe that it was likely that the vehicle did not start because of a flat battery and, because the vehicle had oil in the engine and held water, any mechanical issues were likely to be minor and easy to rectify.
[7] Mr Kumar alleges that those website representations were misleading because:
- (a) the vehicle’s cooling system does not hold water;
- (b) there was no oil in the engine and the oil filter and housing have been removed; and
- (c) the battery was not flat and was not the cause of the vehicle’s starting issues. Instead, the vehicle would not start because it has suffered serious engine damage that will require expensive repair
[8] Mr Kumar says that the vehicle’s engine is damaged and requires replacement, at a cost of about $5,000.
Turner’s response
[9] Turners denies misleading Mr Kumar. Shane Prince, on behalf of Turners, says that it disclosed that the vehicle was damaged, that the vehicle did not start and that no mechanical inspection had been performed. In respect of the representations that the vehicle had oil in its engine, held water and had a flat battery, Mr Prince advised that the vehicle was assessed by a staff member, who would have inspected the oil and coolant levels and battery and recorded their observations. Mr Prince accepted that Turners could not be sure that these observations were correct but submitted that Turners had followed its usual process for assessing the condition of the vehicle.
[10] Mr Prince also emphasised that Turners disclosed, in various places on its website and during the auction process, that the vehicle may have damage and other defects. Mr Prince also noted that Mr Banger has purchased approximately seven damaged vehicles from Turners and is therefore an experienced buyer of such vehicles. Mr Princes says that Mr Banger made a conscious decision to purchase the vehicle for Mr Kumar, taking the risk that the vehicle was not seriously damaged.
The Tribunal’s assessment
[11] Despite Turners’ website representations to the contrary, I am satisfied that the vehicle had no oil in the engine when it was delivered to Mr Kumar and that the vehicle was not holding coolant. In that regard I accept the evidence of Mr Banger and Mr Kumar and note that Mr Banger reported those problems to Turners immediately upon taking delivery of the vehicle.
[12] I am also satisfied that Turners has engaged in misleading conduct in breach of s 9 of the FTA because it made inaccurate representations about the condition of the vehicle. Although Mr Banger has experience purchasing damaged vehicles and although Mr Kumar (through Mr Banger) bought the vehicle knowing that there was a risk that it was damaged and would require expensive repair, I consider that Mr Kumar was only prepared to take that risk and pay $8,500 for the vehicle because he was reassured that the engine had oil in it and the vehicle was holding water in its cooling system. The vehicle did not have oil in the engine (which is a sign of engine damage) and that it did not hold water (which is a sign of damage to the cooling system).
[13] Turners did adequately disclose that the vehicle may be damaged and that no mechanical inspection had been performed, but that generic disclosure does not correct or excuse the misleading nature of the explicit statements it made about the vehicle’s condition.
Issue 2: What remedy is Mr Kumar entitled to under the FTA
[14] 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.
[15] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43. The Tribunal must consider whether:
- (a) Mr Kumar was in fact misled or deceived;
- (b) Mr Kumar suffered loss or damage; and
- (c) Turners’ conduct was the effective cause or an effective cause of their loss or damage.
[16] As set out above, I find that Mr Kumar (through his agent Mr Banger) was misled by the representations that the vehicle had oil in its engine and that it held water. Those representations were important to Mr Banger’s decision to purchase the vehicle for Mr Kumar because they led him to believe that, notwithstanding that the vehicle was being sold through a damaged vehicle auction, any damage to the vehicle was likely to be minor and easily fixed. The representations were also material to Mr Kumar’s decision to pay $8,500 for the vehicle, which is a significant amount of money for a damaged 2008 Chrysler 300C.
[17] I also find that Mr Kumar has suffered loss and that Turners’ conduct was an effective cause of that loss.
[18] In this case, Mr Kumar paid $8,500 for a vehicle that requires at least $5,000 worth of repairs. Shane Prince, who appeared for Turners, noted during the hearing, considered that an undamaged 2008 Chrysler 300C would sell for about $12,000 and Mr Haynes, the Tribunal’s Assessor, agrees with this valuation.
[19] Given the value of an undamaged equivalent vehicle, if Turners had accurately represented that the vehicle did not have oil in the engine and that it did not hold water, I consider that a reasonable consumer would not have paid nearly $8,500 for this vehicle. Instead, given the cost of replacing the vehicle’s engine (about $5,000), a reasonable consumer would have paid no more than $6,000 for this vehicle at auction had Turners accurately represented its condition.
What remedy is Mr Kumar entitled to under s 43(3) of the FTA?
[20] 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 to protect 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.[3]
[21] Mr Kumar purchased this vehicle knowing that there was a risk that it could be damaged, so I do not consider it appropriate in the circumstances of this case to order a refund of the purchase price because the damage was more than Mr Kumar suspected. Instead, I consider that the remedy that best does justice to the parties is an order under s 43(3)(f) of the FTA, requiring Turners to compensate Mr Kumar for the loss he has suffered in purchasing the vehicle.
[22] As set out above, I consider that a reasonable consumer would have paid no more than $6,000 for this vehicle if Turners had not made the misleading representations about the vehicle’s condition. I therefore consider it appropriate to award compensation of $2,500 to Mr Kumar to reflect the fact that the misleading statements made by Turners led him to pay more for the vehicle than it was worth.
[23] The Tribunal therefore orders that Turners shall, within 10 working days of the date of this decision, pay $2,500 to Mr Kumar.
DATED at AUCKLAND this 15th day of September 2020
B.R. Carter
Adjudicator
[2] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
[3] Red Eagle Corp Ltd v Ellis [2010] NZSC 20; [2010] 2 NZLR 492, [31].
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2020/146.html