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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 29 September 2023
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BETWEEN JO-ANNA AMY SIRETT PETTICREW
Applicant
AND GRANDE MOTORS LIMITED
Respondent
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HEARING at CHRISTCHURCH on 22 June 2023
MEMBERS OF TRIBUNAL
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D M Jackson, Barrister – Adjudicator
S Cousins – Assessor
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APPEARANCES
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J Petticrew, Applicant
A Kitov, Salesperson for the Respondent (by audio-visual link)
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DATE OF DECISION 16 August 2023
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] On 18 January 2023 Jo-Anna Petticrew purchased a 2016 Nissan Leaf from Grande Motors Limited (Grande) for $18,900. The vehicle’s odometer was 84,760 kms at the time of sale. Ms Petticrew purchased a mechanical breakdown insurance policy for $1,000 on top of the purchase price (arranged by Grande), traded in her own vehicle for $4,800 and paid the full balance payable of $15,100 via vehicle finance.
[2] Ms Petticrew says that when she inspected the vehicle, she was told by a salesman that its battery state of health or “SoH” was 74.8%, which she was happy with. However, Grande deny making this representation and point to the vehicle’s advertisement and fuel economy label, which record the SoH as being 66%. It appears the reference to 74.8% is to the “state of charge”, which is not indicative of battery health at all. The parties did not dispute that that 66% was the vehicle’s recorded SoH at the time of sale. Ms Petticrew claims she was misled however by Grande.
[3] Ms Petticrew says the vehicle has had, unexpectedly, rapid battery degradation since she purchased it. At the time of sale, the battery state of health or “SoH” was advertised as being 66%. She says that by 24 April 2023 the SoH was 58.9%. This rapid loss of SoH is unacceptable to Ms Petticrew and she seeks a refund of the purchase price and the cancellation of her vehicle finance agreement. She also seeks to recover the $1,000 cost of a third party mechanical breakdown insurance policy (MBI) sold with the vehicle.
[4] Grande opposes Ms Petticrew’s application to reject the vehicle. It says Ms Petticrew got what she paid for. It says the vehicle was sold with a MBI policy, which covers a replacement battery, if required. Ms Petticrew has confirmed that since purchase she applied for and received the clean car rebate in the amount of $3,450. Grande says that the vehicle has lost value therefore.
Relevant Background
[5] The vehicle is an electric vehicle. The batteries in electric vehicles degrade over time due to a range of factors including environmental conditions, the charging behaviour of the owners and the manner in which the vehicle has been used.
[6] Nissan Leaf vehicles have a dashboard battery capacity indicator, which is designed to give an indication of battery capacity and health. The battery capacity indicator in a 2016 Nissan Leaf will show up to 12 bars. If all 12 bars are illuminated on the indicator that is designed to show that the battery capacity exceeds 85% of a new battery’s capacity. As the battery ages, its capacity diminishes. This means that each full charge of the vehicle’s battery will result in a slightly reduced range compared to when the car was new. Over time, the battery capacity indicator slowly drops, representing that reduction in capacity.
[7] The battery capacity indicator does not provide a precise reading of the battery’s actual capacity or SoH. Consequently, owners and users of Nissan electric vehicles commonly use the “Leafspy” application to obtain a more precise reading of the battery capacity and health. That reading is known as the SoH.
[8] Putting aside the alleged misrepresentation as to SoH, the parties agreed before the Tribunal that the vehicle was advertised as having a SoH of 66%. This is an estimation of how much charge the battery can hold compared to when it was first manufactured. SoH is related to how far the car can go between charges.
[9] Ms Petticrew says she relied on the represented SoH in making her decision to purchase the vehicle. Grande says it used the SoH of 66% as that was the information supplied to it during its importation of the vehicle from Japan.
[10] Ms Petticrew provided a report from an independent electric vehicle specialist dated 24 April 2023, which confirmed the SoH was 58.9% at 86,232 kms (after only 1,472 kms travelled since sale).
The issues
[11] The issues requiring the Tribunal’s consideration in this case are:
- (a) Has Grande engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
- (b) If so, what remedy is Ms Petticrew entitled to under the FTA?
- (c) Did the vehicle comply with its description for the purposes of s 9 of the Consumer Guarantees Act 1993 (the CGA)?
- (d) If not, what remedy is Ms Petticrew entitled to under the CGA?
Issue 1: Has Grande engaged in conduct that breached s 9 of the FTA?
[12] 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.
[13] 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. 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.
[14] Ms Petticrew says that she would never have purchased the vehicle had she known its SoH was 66% as opposed to the 74.8% represented to her by a Grande salesman.
[15] Grande denies the representation was made at all and whilst the salesman did not give evidence, Grande produced a letter from him, which denies making such representation.
[16] Ms Petticrew produced a contemporaneous text message with a friend, which refers to the SoH as being 74.8%. She says that is consistent with what she was told by the salesman. Grande produced evidence to show that the only reference to 74.8% in materials available to it at the time, were to the vehicle’s state of charge and not SoH.
[17] The problem for Ms Petticrew is that the vehicle’s advertisement and associated literature (the fuel economy label) refer to the SoH as being 66%. It would appear that that was the recorded SoH at the time whereas any reference to 74.8% was a reference to the battery state of charge.
[18] Ms Petticrew argues she was misled in her expectations of the vehicle’s battery life and range because she was operating under the belief that her SoH was 74.8% but experienced a significant drop in the vehicle’s SoH over a short period of time.
[19] Grande denies the misrepresentation and produced its own report from the very same independent third party but dated 8 November 2022 at which the time the vehicle’s odometer was 84,771 kms. This records the SoH as being 65.45%. It relied on that report to verify the SoH and advertised the vehicle for sale accordingly. It says there are multiple factors affecting a vehicle’s battery health including frequency of use and charging habits. It says there are no issues or problems with the vehicle otherwise.
[20] It submits that the battery health of the vehicle is consistent with a vehicle of its age and mileage.
Tribunal’s assessment
[21] I am not persuaded that the representation was made. Whilst I did not hear from the salesman confirmed I have read his letter which denies the representation, the vehicle’s advertisement and the fuel economy label which all clearly record the SoH as being 66%. Further, Grande has produced a report from an independent third party which confirms a SoH at the time of 66%. I find that the vehicle’s SoH was there to be seen by Ms Petticrew and I am not satisfied to the requisite standard that the representation was made or otherwise that it influenced her to the extent she says, if it was made at all, noting the documentary evidence available to her at the time as to the SoH.
Conclusion
[22] Accordingly, I find that Ms Petticrew has not established a breach of s 9 of the FTA by Grande.
Issue 2: What remedy is Ms Petticrew entitled to under the FTA?
[23] In light of my finding that Grande has not breached s9 of the FTA I need not consider remedies under that legislation.
Issue 3: Did the vehicle comply with its description for the purposes of s 9 of the Consumer Guarantees Act 1993 (the CGA)?
[24] I must consider Ms Petticrew’s argument, under the CGA, that the vehicle failed to comply with the description provided by Grande because its SoH was not 66%. The relevant provision of the CGA reads as follows:
9 Guarantee that goods comply with description
(1) Subject to section 41, where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.
(2) A supply of goods is not prevented from being a supply by description by reason only that, being exposed for sale or hire, they are selected by a consumer.
(3) If the goods are supplied by reference to a sample or demonstration model as well as by description, the guarantees in this section and in section 10 will both apply.
(4) Where the goods fail to comply with the guarantee in this section,—
(a) Part 2 gives the consumer a right of redress against the supplier; and
(b) Part 3 may give the consumer a right of redress against the manufacturer.
[25] There is no dispute that within a short period, the vehicle’s SoH decreased from 66% to 58.9%, a fall of approximately 7%.
[26] Mr Cousins, the Tribunal’s Assessor, advises me that there is considerable variation as to the speed at which Nissan Leaf batteries can degrade, and that this can depend on environmental factors, as well as the way in which the vehicle is used. He also notes that environmental conditions in Japan differ to those in New Zealand and that a SoH reading in Japan may differ once a vehicle arrives and is used in New Zealand. There are multiple environmental factors at play including the way in which the vehicle is charged, the frequency of charging and the quality of the charging connection itself.
[27] Mr Cousins has identified from the independent specialist reports provided by both parties that the vehicle was fast charged in Japan a total of 278 times. Mr Cousins notes that frequent fast charging of a battery can reduce long-term battery health. Mr Cousins believes a drop of 7% SoH is inconsistent with the thousand or so kilometres travelled by Ms Petticrew and is, in fact, more consistent with a year or more’s use of the vehicle. Mr Cousins considers a drop of this nature is inconsistent with the sort of drop one might expect by operation of the environmental factors referred to above, which might see a fluctuation of 1% or 2% between Japan and New Zealand, for example.
[28] A reasonable consumer would not expect the vehicle’s SoH at the time of sale to remain at the same level over the long term. Batteries degrade over time.
[29] However, I accept, based on the advice of Mr Cousins, that the vehicle’s SoH has degraded faster than a reasonable consumer would expect to occur, particularly in the first month or two after purchase. This strongly suggests to me that the original SoH figure of 66% did not accurately represent the battery’s true state of health. I note that the latest report from the independent specialist suggests that further (expensive) testing is carried out to ascertain the true condition of the cells and their battery capacity. That fortifies my conclusion that there is something amiss with this vehicle’s battery, which Ms Petticrew did not bargain for or assume the risk of. There is no evidence that Grande did anything to manipulate the SoH but the rapid degradation of the battery in the first month or two after purchase speaks for itself, is beyond the environmental variables referred to above and suggests that either the SoH at purchase ought to have been lower (than 66%) or the battery cell condition is compromised.
[30] The vehicle was supplied by description. It was advertised online and expressly sold as having a SoH of 66%. That is the SoH which Ms Petticrew contracted for, but which she did not receive. I am satisfied the vehicle did not comply with its description, in breach of the guarantee in s 9 of the CGA, because its SoH was, in truth, significantly lower than 66% when it was supplied to Ms Petticrew or otherwise that there is a problem with the battery cells. It is not for Ms Petticrew to expend further monies to prove the exact fault or problem because her claim is based on the unacceptable drop in SoH.
Issue 4: What remedy is Ms Petticrew entitled to under the CGA
[31] Section 18 sets out the remedies available under the CGA and provides as follows:
- 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.
[32] Ms Petticrew wants to reject the vehicle. She may only do so if the failure to comply with its description is a failure of a substantial character, as defined in s 21 of the CGA. Relevantly, the failure to comply with description will be a failure of a substantial character if the vehicle departs “in 1 or more significant respects” from the description by which it was supplied.[2]
[33] Battery SoH is a measure of the range (how far the vehicle can travel between charges) of an electric vehicle and the expected lifespan of the batteries. The SoH reduces as the battery ages and as the vehicle is used. The lower the SoH, the more frequently the battery will need to be charged and the shorter the expected lifespan of the battery.
[34] The vehicle’s range and expected battery lifespan is important information for a prospective purchaser of an electric vehicle. In this case, the difference between the represented and contracted for SoH of 66% and the actual SoH found by Ms Petticrew (about 58.9%) is material and represents a significant reduction in the vehicle’s range and expected lifespan. Mr Cousins advises that the difference between the represented and actual SoH is the equivalent of at least one or two-year’s usual use of the vehicle.
[35] Consequently, I find that the failure to comply with the guarantee that goods will comply with description is a failure of a substantial character because the vehicle departs in a significant respect from the description by which it was sold.
[36] Ms Petticrew is entitled to reject the vehicle under s 18(3)(a) of the CGA, because the vehicle’s failure to comply with description is a failure of a substantial character. Under s 23(1)(a), she is entitled to a refund of all amounts paid in respect of the vehicle, which in this case is the purchase price (less the $3,450 rebate she has already received for the vehicle).
[37] Moreover, I consider that she exercised her right to reject the vehicle within a reasonable time in accordance with s 20 of the CGA and that she notified the trader in the proper manner as required by s 22 of the CGA.
[38] Pursuant to s 23(2) of the CGA, Ms Petticrew is entitled to "a refund in cash of the money paid or the value of any other consideration provided, or both, as the case may require". That includes the cost of the mechanical breakdown insurance policy, which was included in the invoice total on the Vehicle Offer and Sale Agreement.
The Tribunal can vest Ms Petticrew’s loan in the Trader
[39] Ms Petticrew financed the purchase of her vehicle through a loan by Oxford Finance Now. This is a “collateral credit agreement” for the purposes of s 89 of the Motor Vehicle Sales Act 2003. Under that provision, the Tribunal has jurisdiction to order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader, if the collateral credit agreement is associated with the contract for the sale of that motor vehicle, that the trader is a party to that contract for sale of the motor vehicle and the Tribunal upholds a rejection of the vehicle and orders the trader to refund the purchase price.
[40] As all of these conditions are met in the present case, the Tribunal has jurisdiction to vest the loan between Ms Petticrew and Oxford Finance in the Trader. The operative date for the vesting of the collateral credit agreement in the Trader is the date of rejection, 24 April 2023.
[41] Ms Petticrew traded in a vehicle for $4,800. Whilst I would ordinarily order that sum be refunded to her, I must account for the $3,450 she received from the New Zealand Government’s clean car rebate scheme. I will offset the rebate against the trade-in. Ms Petticrew will be refunded the balance of $1,350. I do not see that she should receive a windfall despite being successful. The balance of the purchase price (including the mechanical breakdown insurance policy) was funded by vehicle finance and are dealt with in the vesting orders made.
Conclusion
[42] For the above reasons, I make the following orders:
- Ms Petticrew’s rejection of her Nissan Leaf is upheld as from 24 April 2023.
- The collateral credit agreement between Ms Petticrew and Oxford Finance Now dated 17 January 2023 is vested in Grande Motors Limited as from 24 April 2023. Ms Petticrew has no further obligation to make any payments under that agreement.
- Grande Motors Limited must pay Ms Petticrew the monthly payments made by Ms Petticrew to Oxford Finance since 24 April 2023. Ms Petticrew is directed to obtain this information from the lender and supply it to the case manager. The Tribunal will make a further order based on the information supplied.
- Grande Motors Limited must also pay Ms Petticrew the principal component of her payments prior to 24 April 2023 under the Collateral Credit Agreement. Ms Petticrew is directed to obtain this information from the lender and supply it to the case manager. The Tribunal will make a further order based on the information supplied.
- Within ten working days Grande Motors Limited must pay Ms Petticrew $1,350 being the difference between the value of her trade in ($4,800) and the clean car rebate received by her ($3,450).
D M Jackson
Adjudicator
[1] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
[2] Consumer Guarantees Act 1993, s 21(b).
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2023/172.html