Shepherd v Coogo Auto Ltd - Reference No. MVD 174/2020 [2020] NZMVDT 160 (2 October 2020)

Last Updated: 23 November 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 174/2020 [2020] NZMVDT 160 BETWEEN EDWIN SHEPPARD Purchaser AND COOGO AUTO LTD Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Haynes, Assessor

HEARING at Auckland on 10 September 2020

APPEARANCES

E Sheppard, Purchaser

G Qian, for the Trader

DATE OF DECISION 2 October 2020

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

1. Coogo Auto Ltd shall, within 10 working days of the date of this decision, pay $1,000 to Edwin Sheppard.

_________________________________________________________________

REASONS

Introduction

[1] Edwin Sheppard wants to recover the $1,000 deposit he paid to Coogo Auto Ltd for the potential purchase of a 2011 Nissan Serena. Mr Sheppard says that the parties agreed that the deposit of $1,000 deposit was fully refundable if he was dissatisfied with the vehicle’s condition following inspection. Despite Mr Sheppard declining to purchase the vehicle because he was dissatisfied with its condition, Coogo Auto has retained the deposit saying that it incurred costs in preparing the vehicle for potential sale.

The issues

[2] Against this background, the issues requiring the Tribunal’s consideration are:

• (a) What was the nature of the contract between the parties?
• (b) Was Mr Sheppard entitled to seek a refund of the purchase price?
• (c) Can the Tribunal determine this matter?
• (d) What remedy is Mr Sheppard entitled to?

Issue 1: What was the nature of the contract between the parties?

[3] There is no written agreement for the sale and purchase of this vehicle, which one would normally expect to see where a consumer has agreed to purchase a motor vehicle from a registered motor vehicle trader. Instead, the terms of the arrangement between the parties are set out in a series of text messages, which relevantly state:

[4] On the basis of those text messages, I am satisfied that the parties agreed that Mr Sheppard would purchase the vehicle for $9,390 if he was satisfied with its condition following a visual and mechanical inspection. The parties also agreed that Mr Sheppard would pay a deposit of $1,000, which Coogo Auto would refund in full if Mr Sheppard was dissatisfied with the condition of the vehicle.
[5] Mr Sheppard submitted that the agreement gave him the unconstrained right to recover his deposit once he believed, on subjective grounds, that the vehicle was unsatisfactory. I disagree. I consider that there were constraints on Mr Sheppard’s right to recover the deposit. In particular, I consider that there was an implied term in the agreement between the parties that Mr Sheppard’s right to recover the deposit was contingent on him being satisfied, on reasonable grounds, that the vehicle was in unsatisfactory condition.
[6] That is because, for an agreement to have contractual force, its terms must define, with a degree of certainty, the obligations which the parties are to undertake. Given the vague terms upon which the parties had agreed that the deposit was refundable (“I assume this will be returned in full if the mechanical check etc is unsatisfactory”), such an implied term is necessary to provide the certainty necessary for a contract to be formed. Without this implied term, Mr Sheppard would have had an unconstrained right to withdraw from the agreement on subjective grounds, and such a term would have lacked the certainty necessary to create a binding contract.

Issue 2: Was Mr Sheppard entitled to seek a refund of the deposit?

[7] Mr Sheppard inspected the vehicle on 8 June 2020 and was dissatisfied with its condition. Mr Sheppard says the vehicle had “a significant quantity of rust” on the body of the vehicle behind the rear door on the left-hand side and that rubber around the sliding tracks of the rear seats was “significantly torn”. Mr Sheppard was concerned about the corrosion because he says that he was advised by a mechanic that the existence of the corrosion suggested that the vehicle was “made of inferior metal”. He was also dissatisfied with the condition of the sliding track, because it made the rear seats difficult to move, a defect that would have to be repaired because he wanted to use the vehicle as a small camper van.
[8] The evidence presented at the hearing shows that the vehicle’s defects are not serious — the rust was minor and easily rectified by simply cleaning the small affected area and Mr Haynes, the Tribunal’s Assessor, advises that the sliding track can be replaced at a cost of approximately $300. However, although those defects were minor, consistent with the vehicle’s price, age and mileage and easily fixed, they were sufficient for a reasonable consumer to find the condition of the vehicle to be unsatisfactory. I therefore consider that Mr Sheppard had reasonable grounds to decline to purchase the vehicle and recover the $1,000 deposit.

Issue 3: Can the Tribunal determine this matter?

[9] The Tribunal’s jurisdiction is set out in s 89(1)(a) of the Motor Vehicle Sales Act 2003. Under that section, the Tribunal has jurisdiction to enquire into and determine claims in respect of the sale of any motor vehicle under the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and subpart 3 of Part 2 or Part 3 of the Contract and Commercial Law Act 2017.
[10] The Fair Trading Act and the Consumer Guarantees Act do not apply to this claim. Mr Sheppard initially alleged that he is entitled to recover the deposit because Coogo Auto Ltd has breached the contract between the parties by failing to return the deposit. Neither the Fair Trading Act or the Consumer Guarantees Act applies to such claims. After the hearing, Mr Sheppard also submitted that he was induced to enter into the contract by a misrepresentation by Coogo Auto about the condition of the vehicle, which would fall within the bounds of the Fair Trading Act. However, there was no misrepresentation in this case. At best, Coogo Auto’s alleged description of the vehicle was no more than an expression of its opinion as to the vehicle’s general condition, which was not misleading because the defects found by Mr Sheppard, although sufficient for him to withdraw from the agreement given its loose terms, were not serious and were consistent with the vehicle’s age and mileage.
[11] Instead, I consider this to be a contractual claim and the extent of the Tribunal’s jurisdiction to consider such contractual claims is limited to the provisions in subpart 3 of Part 2 of the Contract and Commercial Law Act 2017. Relevant to this case, the Tribunal can consider such contractual claims where the contract has been cancelled in accordance with s 33 of that Act. Under that section a contract may be cancelled if a party repudiates the contract.[1]

Coogo Auto has repudiated the contract

[12] Coogo Auto has repudiated the contract between the parties. Repudiation occurs where a party makes it clear that it does not intend to perform or complete performance of the obligations under the contract. Coogo Auto had an obligation under the contract to refund the deposit in full if Mr Sheppard was dissatisfied with its condition. By refusing Mr Sheppard’s demand that it refund the deposit, Coogo Auto made it clear that it did not intend to perform its obligations under the contract.

Mr Sheppard has cancelled the contract

[13] Mr Sheppard’s subsequent filing of a claim with the Tribunal seeking damages for Coogo Auto’s breach of contract amounts to a cancellation of the contract for the purposes of s 33 of the Contract and Commercial Law Act 2017. Accordingly, because the contract between the parties was repudiated and cancelled, the Tribunal has jurisdiction to consider this claim.

Issue 4: What remedy is Mr Sheppard entitled to?

[14] Under s 43(1) of the the Contract and Commercial Law Act 2017, where a contract has been cancelled, the Tribunal can grant relief where it is just and practicable to do so. Section 43(3) of the Contract and Commercial Law Act 2017 sets out a number of different types of orders that may be made under that section. The only one that is potentially relevant in the present case is that described in s 43(3)(a), to “direct a party to pay another party the sum that the Court thinks just (subject to s 35)”.[2]
[15] In making an order under s 43, the Tribunal must have regard to the matters set out in s 45, which provides:

45. Matters court must have regard to

(a) the terms of the contract; and

(b) the extent to which any party to the contract was or would have been able to perform it in whole or in part; and

(c) any expenditure incurred by a party in, or for the purpose of, performing the contract; and

(d) the value, in the court’s opinion, of any work or services performed by a party in, or for the purpose of, performing the contract; and

(e) any benefit or advantage obtained by a party because of anything done by another party in, or for the purpose of, performing the contract; and

(f) any other matters that the court thinks proper.

[16] Section 45(c) is relevant in this case. Coogo Auto says that it incurred costs in preparing the vehicle for sale to Mr Sheppard, specifically:

• (a) $805 paid to NZ Cars and Automotive Ltd to replace the front passenger seat and to service the vehicle;
• (b) $290 paid to repair and paint the front bumper; and
• (c) $150 to groom the vehicle.

[17] I understood Coogo Auto to submit that it should therefore be entitled to retain the entire deposit, as the costs it incurred in performing its obligations exceeded the deposit paid.
[18] I do not agree for two reasons. First, the cost incurred in replacing the front passenger seat and servicing the vehicle had nothing to do with Mr Sheppard’s agreement to purchase the vehicle. The evidence shows that Coogo Auto had already sent the vehicle to NZ Cars and Automotive Ltd for that work to be performed before the parties entered into the agreement to purchase the vehicle. Second, the costs incurred in repairing and repainting the front bumper and grooming the vehicle are costs Coogo Auto would have incurred in making the vehicle fit for sale, regardless of whether Mr Sheppard had agreed to purchase the vehicle. In those circumstances, I am not satisfied that Coogo Auto is entitled to retain the $1,000 on the basis of those costs.
[19] Instead, I consider that Mr Sheppard is entitled to recover the entire deposit. The Tribunal therefore orders that, under s 43(3)(a) of the Contract and Commercial Law Act 2017, Coogo Auto must, within 10 working days of the date of this decision, pay $1,000 to Mr Sheppard.

Costs

[20] Mr Sheppard seeks to recover the $50 fee he paid to bring this application. Under cl 14(1)(a)(ii) and (b) of Sch 1 to the Motor Vehicle Sales Act 2003 the Tribunal may award costs against a party where:

• (a) the matter ought reasonably to have been settled before the hearing but that party either fails to participate in pre-hearing settlement discussions; or
• (b) after receiving notice of the hearing, that party fails to attend without reasonable cause.

[21] I am not satisfied that this matter ought reasonably to have been settled before the hearing. Coogo Auto’s liability to refund the deposit was not nearly as clear cut as Mr Sheppard alleged and it was entitled to have the matter heard to determine its liability. Further, Coogo Auto attended the hearing, so Mr Sheppard is not entitled to recover the cost of bringing this claim on that basis.

DATED at AUCKLAND this 2nd day of October 2020

B.R. Carter
Adjudicator

---

[1] Contract and Commercial Law Act 2017, s 36.

[2] Section 35 relates to damages for misrepresentation and is not relevant in the present case.