Jacobsen v Urban Imports Limited Reference No. MVD 307/2023 [2023] NZMVDT 242 (17 November 2023)

Last Updated: 19 January 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 307/2023
[2023] NZMVDT 242

BETWEEN SAMANTHA KIM JACOBSEN

Purchaser

AND URBAN IMPORTS LIMITED

Trader

HEARING on 5 October 2023, further submissions received on 5 and 10 October 2023
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
S Haynes – Assessor

APPEARANCES (via Microsoft Teams)

S K Jacobsen, Purchaser
J Guo, Salesperson for Trader

DATE OF DECISION 17 November 2023

___________________________________________________________________

INTERIM DECISION OF THE TRIBUNAL

___________________________________________________________________

1. Urban Imports Ltd must pay Samantha Jacobsen $5,000 no later than 1 December 2023.
2. The parties must confer and make arrangements for any LVV certification that may be required in respect of the vehicle’s transmission modifications. The certification, and any repairs that are required to achieve it, will be at Urban Imports’ expense.

100. Either party may contact the case manager prior to Christmas 2023 if there are any difficulties regarding implementing order B above and the Tribunal may make further orders if necessary.

___________________________________________________________________

REASONS

Introduction

[1] In December 2021, Samantha Jacobsen purchased a 1997 R33 Nissan Skyline GTS-25t with a manual transmission from Urban Imports Ltd for $35,995 plus an additional $695 transportation costs and $550 for an immobiliser/alarm.
[2] Ms Jacobsen and her husband had been looking for a genuine Nissan Skyline with limited modifications that they could purchase as an investment. They understood, from Urban Imports’ advertising of the vehicle, that it had not been modified.
[3] Recently, contrary to their understanding that the vehicle had not been modified, they have discovered that their vehicle’s transmission has been converted from automatic to manual. Upon learning this fact, Ms Jacobsen contacted Urban Imports and asked to return the vehicle and to be refunded an agreed price.
[4] From this background, the following issues arise for the tribunal to determine:

• (a) Did Urban Imports breach the Fair Trading Act 1986 (FTA) when it sold the vehicle to Ms Jacobsen?
• (b) If so, what is the appropriate remedy?

Issue one: Did Urban Imports breach the Fair Trading Act 1986?

[5] Section 9 of the Fair Trading Act 1986 (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.

[6] 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.

[7] The vehicle’s listing on Trade Me described it as a “Factory GTST” with a “Factory RB25DET”. The first of these descriptions appears to relate to the vehicle’s model: it is a GTS model with a turbocharger. The second of the descriptions in the listing relates to the engine itself and signifies a straight six cylinder double overhead camshaft electronically fuel injected engine with a factory installed turbocharger. The listing described the vehicle as having a five-speed manual transmission.
[8] Urban Imports’ listing of the vehicle on Facebook repeated the reference to “Factory RB25DET” and five-speed manual transmission.
[9] In a text exchange with Ms Jacobsen, an Urban Imports salesperson, Shaz Munthree, described the vehicle as a “stock R33 the only mod it has is the exhaust.” The salesperson also described the vehicle as “an appreciating asset so you will make money on it if you ever decide to sell.”
[10] At the end of 2021, Ms Jacobsen had some trouble shifting the vehicle’s transmission into second gear and contacted Urban Imports about this. It responded that it would arrange for a gearbox flush. At this point, Ms Jacobsen asked whether Urban Imports knew if the vehicle was originally an automatic and had been converted to a manual transmission. From the evidence supplied to the Tribunal, Urban Imports does not appear to have responded to this question.
[11] In February 2022, GearTech in Palmerston North changed the vehicle’s transmission oil. I understand that Urban Imports reimbursed Ms Jacobsen for the cost of this work. Ms Jacobsen said she was also advised that some sprockets needed to be replaced in second and third gear, but no details of this recommendation were included in the GearTech receipt.
[12] In July 2022, Ms Jacobsen contacted Urban Imports again to say that she was thinking of selling the vehicle as it was not being used. She asked whether Urban Imports would consider buying the vehicle back from her.
[13] Ms Jacobsen’s husband spoke to a contact who asked whether the vehicle was an original manual. This query prompted Mr and Ms Jacobsen to obtain a Car Jam search, which confirmed that the vehicle had been built with an automatic transmission. Further, the Japanese auction sheet provided with the Car Jam report indicates that the vehicle had a factory automatic transmission at the time it was sold by auction in Japan. This suggests that its conversion to a manual vehicle occurred after the vehicle was imported into New Zealand. However, Urban Imports did not provide any further details relating to the history of the conversion from automatic to manual.
[14] Ms Jacobsen is also concerned that the vehicle does not have a Low Volume Vehicle (LVV) certification. She did not present a report from an LVV certifier to the effect that the vehicle now requires certification. However, after the hearing, Ms Jacobsen indicated that she had been advised by Vehicle Testing New Zealand that LVV certification would be required. Urban Imports indicated both at, and subsequent to, the hearing that it is prepared to pay for any LVV certification required in relation to the transmission conversion (and to pay for the reasonable costs of further mechanical modifications that may be required to achieve LVV certification).
[15] In a written submission on behalf of Urban Imports, its director Johny Chhy stated that the vehicle had belonged to Auto Haven Ltd but was advertised by Urban Imports and sold on its behalf using the information it provided. Before coming into Urban Imports’ stock, the vehicle had a warrant of fitness from VTNZ, dated 21 October 2021. Then, before selling the vehicle, Urban Imports obtained a further warrant of fitness through VTNZ on 22 November 2021. Mr Chhy pointed out that since Ms Jacobsen purchased the vehicle, it has passed three further warrant of fitness inspections without any failure points being noted.
[16] Mr Chhy submitted that these successful warrant of fitness inspections show that the vehicle is fit for its intended purpose.
[17] Mr Chhy said that the vehicle was imported and registered in April 2020 and that the modifications to the vehicle were not made by Urban Imports. Rather, that is how the vehicle was presented to it. Mr Chhy denied any suggestions that the vehicle’s dashboard had been replaced or that its odometer reading had been misrepresented. Mr Chhy said that the vehicle has been certified that its odometer reading is accurate. Mr Chhy denied that Urban Imports replaced the vehicle’s seats.
[18] Mr Chhy said that Urban Imports had only listed the vehicle as a factory GTST. He submitted that Urban Imports did not state the vehicle was a “factory manual”. He said GTST refers to the submodel of the vehicle, indicating it is a factory turbo with a RB25DET engine. It does not imply that it is a factory manual. He said that in Urban Imports’ listing, it was mentioned that the vehicle was an “five-speed manual”. Urban Imports’ intention was not to convey that it was originally a factory five-speed manual.

Tribunal’s assessment

[19] Mr Chhy’s submission does not address the text from his colleague Shaz Munthree to Ms Jacobsen representing that the vehicle had no modifications apart from to its exhaust. In my view, that representation combined with the references to the word “factory” and “stock” in vehicle listings together give an impression to a reasonable consumer that the vehicle had no modifications other than to its exhaust. That representation is incorrect, given that the vehicle’s transmission has also been modified, from automatic to manual.

Conclusion

[20] In my view, a reasonable consumer would have been misled by Urban Imports’ representations in respect of the vehicle. It follows that I find Urban Imports has breached s 9 of the FTA.

Issue two: What is the appropriate remedy?

[21] The remedies available for a breach of the FTA are set out in s 43 of the FTA which relevantly provides:

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):

...

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

...

(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:

...

(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:

...

(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.

[22] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43. The Tribunal must consider whether:

• (a) Ms Jacobsen was in fact misled or deceived;
• (b) Ms Jacobsen has suffered, or is likely to suffer, loss or damage; and

(c) Urban Imports’ conduct was the effective cause or an effective cause of her loss or damage.
[23] I have found that Ms Jacobsen was misled by Urban Imports’ representations that the vehicle had no modifications other than to its exhaust.
[24] In relation to whether Ms Jacobsen has suffered, or is likely to suffer, loss or damage as a result of Urban Imports’ misleading conduct, I asked the parties to supply valuation evidence showing the difference in value between a non-modified manual GT and a converted automatic Nissan Skyline.
[25] Each party supplied a valuation indicating the relevant difference in value between a factory manual and a modified manual such as that purchased by Ms Jacobsen is approximately $5,000.
[26] I consider that this is an appropriate measure of the compensation payable to reflect Ms Jacobsen’s loss caused by Urban Imports’ misleading conduct.
[27] Although Ms Jacobsen had initially sought to return the vehicle and to be re-funded an agreed price, I consider that a damages award of $5,000 is more appropriate in light of the fact that since purchasing the vehicle, Ms Jacobsen and her husband have carried out various modifications to it, including having the paintwork redone, and replacing the wheels and the intercooler.
[28] 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 protecting 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.[2]
[29] An award of $5,000 in my view would do justice to the parties in the particular circumstances of this case.
[30] In addition, Urban Imports will be responsible for paying any reasonable costs associated with obtaining any LVV certification that is required for the vehicle in relation to its transmission modification. I encourage the parties to sort this aspect of the decision out between themselves. However, I will give each party the opportunity to return to the Tribunal to seek further orders in relation to the LVV certification if that proves to be necessary. Accordingly, this decision is an interim decision only and the parties have leave to return to the Tribunal until the end of 2023 to seek further orders if necessary.

J S McHerron
Adjudicator

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

[2] Red Eagle Corp Ltd v Ellis above n 1 at [31].