Shaikh v FHP Trading Limited - Reference No. MVD 250/2022 [2022] NZMVDT 230 (17 October 2022)

Last Updated: 23 November 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 250/2022 [2022] NZMVDT 230

BETWEEN AZHAR SHAIKH

Purchaser

AND FHP TRADING LIMITED

Trader

HEARING at Christchurch on 23 September 2022

MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator

S Gregory – Assessor

APPEARANCES

A Shaikh, Purchaser

M Vankudarath, Witness for Purchaser

No Appearance for the Trader (email submissions received on 29 September 2022)

_{DATE OF DECISION 17 October 2022}

_{DECISION OF THE TRIBUNAL}

A. The agreement to purchase the vehicle dated 15 December 2021 is declared void from the date of this decision.

B. FHP Trading Limited shall within ten (10) days from the date of this decision pay Mr Shaikh $13,000;

C. FHP Trading Limited shall within ten (10) working days from the date of this decision pay Mr Shaikh $595 by way of compensation for consequential losses incurred;

D. Mr Shaikh must then make the vehicle available to be uplifted by the trader;

E. FHP Trading Limited must, within 14 days of the date of this order, pay the Tribunal's reasonable hearing costs of $650 to the Crown at the Ministry of Justice, Tribunals Unit, Level 1, Chorus House, 41 Federal Street, Auckland 1010.

_REASONS

Introduction

[1] On 15 December 2021 Azhar Shaikh purchased a 2019 Suzuki Swift from the trader for $13,000.00. The vehicle’s odometer read 22,262 kilometres at the time of sale. It now reads 29,100 kilometres or thereabouts. Mr Shaikh paid cash for the vehicle.

[2] Mr Shaikh now seeks to reject the vehicle and obtain a refund of the purchase price, together with other costs. He complains that the vehicle was sold as being in “immaculate condition” whereas it has various faults, and an undisclosed history. That is, Mr Shaikh alleges the trader failed to disclose to him that the vehicle was written off by an insurance company and de-registered with Waka Kotahi on 21

September 2021. He alleges the vehicle was re-registered on 9 December 2021 a few days prior to its sale to him.

[3] The trader did not attend the hearing. I am satisfied that the trader had due notice of the hearing, its venue and time. Further, the Registry made contact with the trader on the morning of the hearing and was informed that its director, Mr Pimental, was out of town for the morning. When the claim was called by the Court-

taker, no one appeared for the trader and I determined to proceed in the trader’s absence. After the hearing, I issued a direction that the trader explain itself and its non-attendance. My direction called for the trader to make any submissions it wished to have considered by the Tribunal in writing by 5pm 30 September 2022 (to include his reasons for non-attendance with supporting evidence), failing which I warned that the Tribunal will proceed to determine the claim on the evidence available.

[4] An explanation for the Trader’s absence was provided by email (without supporting evidence) and some brief submissions were received. The trader indicated it was available to answer any questions the Tribunal might have.

[5] This is unsatisfactory and I have resolved to determine the claim on the evidence available. The trader made no effort to apply for an adjournment or otherwise to reschedule the hearing on the allocated day. It did not send a staff member in its director’s stead to the hearing. Its subsequent contact with the Tribunal has provided me with little evidence and invites me, I infer, to adjourn the hearing part-heard to a new date so that I might hear from the trader. If that is what is being requested of the Tribunal, then I decline the application to adjourn. I have no jurisdiction to rehear the claim either, if that is what is being asked for.

The Issues

[6] Against this background, and given the way in which Mr Shaikh has presented his case, the issues requiring the Tribunal’s consideration in this case are:

(a) Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the CGA)?

(b) What remedy is Mr Shaikh entitled to under the CGA?

(c) Has the trader engaged in misleading conduct in breach of s 9 of the Fair

Trading Act 1986 (the FTA)?

(d) What remedy is Mr Shaikh entitled to under the FTA?

Issue 1: Did the vehicle fail to comply with the guarantee of acceptable quality?

[7] Section 6(1) of the CGA provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”.

[8] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) as follows:

7 Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

(2) Where any defects in goods have been specifically drawn to the consumer’s attention before he or she agreed to the supply, then notwithstanding that a reasonable consumer may not have regarded the goods as acceptable with those defects, the goods will not fail to comply with the guarantee as to acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be

treated as having been specifically drawn to the consumer’s attention for the purposes of subsection (2) are those disclosed on a written notice displayed with the goods.

...

(5) A reference in subsections (2) and (3) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.

[9] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.

[10] The date of the sale of the vehicle to Mr Shaikh was on or around 15

December 2021. There was no documentation confirming the precise date. The trader did not dispute that it sold the vehicle to Mr Shaikh but, again, there was nothing produced to the Tribunal confirming in writing that the trader was the vendor.

Deficiencies in the sales documentation for the vehicle

[11] Mr Shaikh told the Tribunal that there was no window card (Consumer Information Notice (CIN)) on the vehicle at the time of purchase.1 Likewise, there was no written acknowledgment that Mr Shaikh had received a copy of a CIN.2 I have no difficulty finding that the trader has breached its obligation to keep a copy of the CIN and the buyer's written acknowledgment.3

[12] There was no documented contract for sale of the vehicle. The contract was concluded by an exchange of messages and the payment of the purchase price. If this correspondence was intended to operate as a contract for sale, it failed to include the following information required by law:

1 Contrary to Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 6(1), which requires the CIN to be "firmly attached to the motor vehicle in a prominent position" and s 28(1) of the Fair Trading Act 1986.

2 Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 8(2)(a).

3 Motor Vehicle Sales Act 2003, s 16; Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 8(2)(b).

a. the names of all parties to the contract. In particular, it did not properly record the name of the vendor of the vehicle; and

b. the vehicle’s year of manufacture/model year or its VIN or chassis number.4

Wheel bearing problem

[13] Mr Shaikh’s evidence is that within days of his ownership of the vehicle, he noticed a noise coming from the front wheels. He raised this issue with the trader, who requested that the vehicle be driven to Christchurch (Mr Shaikh lives in Dunedin) where it was assessed by the trader’s mechanic. That mechanic identified a wheel bearing problem, which would cost $550 to repair. The correspondence suggests that the trader offered to contribute half of the repair cost but no more than that, Mr Shaikh did not accept this offer. He wanted the trader to fix the problem as he had only just purchased the vehicle.

[14] In the end, Mr Shaikh paid the mechanic $595 (he produced an invoice dated

28 February 2022) for the right front wheel bearing to be replaced and claims this amount in full from the trader. The evidence is that Mr Shaikh told the trader that he would pay for the repair and then return the vehicle to the trader for a refund, which was refused.

[15] The trader says that it offered to contribute half of the cost of repair because the issue was wear and tear and beyond the scope of the “consumer warranty”.

Poor paintwork to body and doors

[16] Mr Shaikh produced a vehicle inspection report prepared by an AA Inspection Centre in March 2022. The report is critical of the vehicle’s paintwork and body condition noting the vehicle had had a partial repaint and that otherwise the paintwork and finish was poor. It would appear that this report led to Mr Shaikh’s

_{discovery that the vehicle had been in a collision and written off by an insurer.}

4 Motor Vehicle Sales Regulations 2003, reg 4(c)(ii), (iii) and (iv).

Assessment

[17] Mr Gregory, the Assessor, considers the worn wheel bearing to be a minor and remediable defect, but is unusual in a vehicle with such low mileage. I accept his assessment and find that the vehicle was not of acceptable quality because it was not as free from minor defects as a reasonable consumer would regard as acceptable, in light of its age and low mileage. Mr Shaikh had had the use of the vehicle for two months or so before the problem was repaired. It was not wear and tear by virtue of his use of the vehicle. Rather, I find it was a defect, which was present at the time of purchase.

[18] I will address the issue of remedy shortly but pause to record that I have not gone further to resolve the issue of the faulty paintwork by reason of my findings in respect of Mr Shaikh’s claim under the FTA, which provides Mr Shaikh with the remedy sought by him. I have determined the claim in respect of the wheel bearing because Mr Shaikh was put to the expense of repairing it himself when the trader refused to attend to same (despite its own preferred mechanic identifying the problem and repair).

Issue 2: What remedy is Mr Shaikh entitled to under the CGA?

[19] The remedies available to a consumer where a vehicle does not comply with the guarantee of acceptable quality are set out in s 18 of the CGA which provides:

18 Options against suppliers where goods do not comply with guarantees

(1) Where a consumer has a right of redress against the supplier in accordance with this Part in respect of the failure of any goods to comply with a guarantee, the consumer may exercise the following remedies.

(2) Where the failure can be remedied, the consumer may—

(a) require the supplier to remedy the failure within a reasonable time in accordance with section 19:

(b) where a supplier who has been required to remedy a failure refuses or neglects to do so, or does not succeed in doing so within a reasonable time,—

(i) have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied; or

(ii) subject to section 20, reject the goods in accordance with section 22.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21, the consumer may—

(a) subject to section 20, reject the goods in accordance with section

22; or

(b) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.

(4) In addition to the remedies set out in subsection (2) and subsection (3), the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.

[20] Mr Shaikh was forced to carry out the repair himself when the trader refused to pay for it. The primary remedy available to a consumer if a vehicle fails to comply with the guarantee of acceptable quality is set out in s 18(2)(a). Under that provision, the consumer may require the supplier to remedy the failure within a reasonable time.

[21] As outlined above, I am satisfied that the Trader refused to remedy the failure in Mr Shaikh’s vehicle. Mr Shaikh proceeded with the repair and the trader cannot be heard to complain about the cost of the repair noting that it was performed by the trader’s preferred mechanic. Mr Shaikh is entitled to a refund of the $595 paid by him.

Issue 3: Has the trader engaged in conduct that breached s 9 of the FTA?

[22] Mr Shaikh also alleges that the trader has engaged in misleading conduct by failing to advise him that the vehicle had previously been de-registered and re- registered because it had been written off for insurance purposes. He identifies the lack of a Vehicle Offer and Sale Agreement and Consumer Information Notice (the CIN) from the trader as compounding the deception (as the CIN would have disclosed the re-registration of the vehicle at least). He argues that this omission gives the lie to the trader’s advertisement of the vehicle as being in “immaculate condition” and “NZ new”.

[23] 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.

[24] The test for establishing a breach of s 9 was set out by the Supreme Court in

Red Eagle Corp Ltd v Ellis:5

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 a 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.

[25] To succeed in a claim under the FTA, Mr Shaikh must show that:

(a) the vehicle was previously de-registered and re-registered because it had been written off for insurance purposes;

(b) the trader knew or ought to have known of this fact;

(c) The trader did not adequately disclose the vehicle’s history to Mr

Shaikh; and

(d) that failure to disclose was misleading.

The vehicle has previously been de-registered and re-registered because it was written off

[26] Mr Shaikh has proven that the vehicle has previously been de-registered and re-registered. Mr Shaikh presented correspondence from Waka Kotahi confirming

_{the vehicle was cancelled from the Motor Vehicle Register on 21 September 2021}

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

because it was written off by an insurer. The vehicle was re-registered on 9

December 2021. This is the best evidence possible and I find accordingly.

The trader knew, or should have known, of this fact

[27] In its email to the Tribunal the trader says that it explained to Mr Shaikh that the vehicle was a trade in and that it provided as much information as it could to Mr Shaikh at the time. The trader’s email was silent as to its knowledge of the vehicle’s history, when it purchased the vehicle, who it purchased the vehicle from, whether it was purchased damaged or undamaged at the time of purchase and so on. The trader’s silence on this issue is deafening.

[28] When I consider the messaging between the parties however, which was produced by Mr Shaikh, it is clear that the vehicle was listed by the trader as early as 11 December 2021 (which is when Mr Shaikh first responded to the vehicle’s advertisement). Further, the advertisement he responded to shows a photograph of the vehicle displaying its newly registered vehicle licence plate (re-registration occurring on 9 December 2022).

[29] The inference to be drawn from the evidence available is that the trader knew that the vehicle was previously written off for insurance purposes, was aware of or carried out the repairs, then re-registered the vehicle and listed it for sale. I make that finding based on the evidence before me.

The trader did not adequately disclose the vehicle’s history to Mr Shaikh?

[30] I find that the trader did not disclose the vehicle’s history to Mr Shaikh at all. I am satisfied that it hid the vehicle’s history from Mr Shaikh. I make this finding because the trader failed to provide Mr Shaikh with a CIN which would have disclosed the fact of re-registration to him. It otherwise advertised the vehicle as being in “immaculate condition” and “NZ new”. There is no mention of the vehicle being re-registered in the advertisement or in the trader’s messaging with Mr

Shaikh. The trader provided no evidence or submissions on this issue to the

Tribunal.

The trader’s failure to disclose was misleading

[31] Whether the trader’s failure to disclose that the vehicle had previously been written off was then misleading in breach of s 9 of the FTA 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.

[32] 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.6

[33] 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.7 In Des Forges v Wright, Elias J (as she then was) stated:8

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.

[34] Since Des Forges, the courts have developed a “reasonable expectation of disclosure” test in several other cases.9 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.

6 Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995)

5 NZBLC 103,878.

7 Des Forges v Wright [1996] 2 NZLR 758 (HC).

8 Above n 3, at 764.

9 Hieber v Barfoot & Thompson (1996) 5 NZBLC 104, 179; Tuiara v Frost & Sutcliffe [2003]

2 NZLR 833 at [91]; Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 at [21] and

[32].

[35] I am satisfied that a reasonable consumer would have expected the fact that the vehicle had previously been written off to have been disclosed. That previous history is a material fact, because a stigma attaches to vehicles that have previously been written off, and any reasonable consumer would perform careful due diligence before purchasing such a vehicle.

[36] Further, this is not a case of having to consider whether mere silence alone was misleading or deceptive conduct. Rather, the vehicle was positively advertised as being in “immaculate condition”, which was untrue all things considered. I note in this regard the heavily criticised body condition and paintwork identified in the AA inspection report. The vehicle was, therefore, not in immaculate condition. The failure to disclose the vehicle’s history gives the lie to the positive representation made that the vehicle was in “immaculate condition”.

[37] In those circumstances, I am satisfied that the trader has engaged in conduct that breached s 9 of the FTA by selling the vehicle without disclosing that the vehicle had previously been written off in circumstances where a reasonable consumer would expect that information to have been disclosed. I consider the advertising of the vehicle as being in immaculate condition and further the failure on the part of the trader to provide a CIN to Mr Shaikh combined to compound the deception.

Issue 4: What remedy is Mr Shaikh entitled to under the FTA

[38] Where a person has, or is likely to have, suffered loss as a result of conduct that breaches s 9 of the FTA, the remedies available are set out in s 43(3) of the FTA, as follows:

43 Other orders

(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.

[39] 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.10

[40] I consider that the appropriate remedy is an order under s 43(3)(a)(ii) of the FTA declaring the agreement to purchase the vehicle void as at the date of this decision and an order under s 43(3)(e) of the FTA, requiring the trader to refund money that Mr Shaikh has paid in respect of the vehicle. I am able to make this order in tandem with my award to Mr Shaikh under the CGA because the agreement

_{was not void at the date of the repairs carried out and claimed for.}

10 Red Eagle Corporation Ltd v Ellis, above n 1, at [31].

[41] I am satisfied that Mr Shaikh has suffered loss as a result of purchasing this vehicle. I consider that the vehicle was worth less at the time of purchase because of its history as a damaged statutory write off and that the resale value of the vehicle is affected.

[42] Further, given the damage to this vehicle was more than minor, in that it was sufficient for it to be written off for insurance purposes, I consider that a reasonable consumer would not have purchased this vehicle without performing extensive pre- purchase checks to satisfy itself of the structural integrity and durability of the vehicle. In this case, Mr Shaikh was not given that opportunity because the trader failed in its obligation to disclose that crucial information to him.

[43] Because of the loss suffered by Mr Shaikh, and the fact that he was not given an opportunity to make an informed decision about purchasing a vehicle that had previously been damaged and written off, in the particular circumstances of this case, I consider it appropriate that Mr Shaikh should be entitled to return the vehicle and obtain a refund of the purchase price of $13,000.

Costs

[44] 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 to have been settled before the hearing but that party fails to participate in pre-hearing settlement discussions; or

(b) after receiving notice of the hearing, fails to attend without reasonable cause.

[45] I am satisfied that this matter ought reasonably to have been settled before hearing, but the trader failed or refused, without reasonable excuse, to take part in settlement discussions. On 30 June 2022 the Tribunal directed the trader to discuss the application with Mr Shaikh and to make a written report to the Tribunal on the outcome. The direction warned the trader of potential adverse costs consequences if the trader failed to discuss the claim with Mr Shaikh. No report was received. Mr Shaikh complained that the trader never contacted him at all and his claim was

scheduled for hearing. In the course of scheduling the hearing as a back-up hearing in August, the trader emailed the Tribunal to say he was overseas until 7 September

2022 (with no further information or proof of his being overseas or response to the Tribunal’s earlier communications). Mr Shaikh has been entirely successful in his claim under the CGA and FTA. The trader ought to have discussed the claim with him and settled.

[46] Further, the trader did not appear at the hearing. After the event, it provided an explanation as to why its director did not attend the hearing. On the morning of the hearing the Registry spoke with a staff member who proffered an explanation which differed to that subsequently provided by the trader’s director. I find that the trader failed to attend the hearing without good cause. No adjournment was requested.

[47] I allowed the trader an opportunity to provide a written submission, which it did, and which I have taken into account in this decision. However, I do not consider that the trader has shown “good cause” for its failure to attend the hearing. His failure to attend seriously inconvenienced Mr Shaikh and his witness. I conclude that the trader failed to attend the hearing “without good cause”. It must therefore pay to the Crown the reasonable costs of the Tribunal hearing, which I fix at $650.

Orders

[48] Accordingly, I order as follows:

(a) The agreement to purchase the vehicle dated 15 December 2021 is declared void from the date of this decision.

(b) FHP Trading Limited shall within ten (10) days from the date of this decision pay Mr Shaikh $13,000;

(c) FHP Trading Limited shall within ten (10) working days from the date of this decision pay Mr Shaikh $595 by way of compensation for consequential losses incurred;

(d) Mr Shaikh must then make the vehicle available to be uplifted by the trader;

(e) FHP Trading Limited must, within 14 days of the date of this order, pay the Tribunal's reasonable hearing costs of $650 to the Crown at the Ministry of Justice, Tribunals Unit, Level 1, Chorus House, 41 Federal Street, Auckland 1010.

D M Jackson

Adjudicator