Burke v 465 Motors Ltd - Reference No. MVD 459/2022 [2023] NZMVDT 78 (4 May 2023)

Last Updated: 23 June 2023

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD459/2022 [2023] NZMVDT 078 BETWEEN EMMA BURKE Applicant AND 465 MOTORS LTD Respondent

HEARING at AUCKLAND on 31 January, 7 March and 11 April 2023 (by audio-visual link) MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator S Gregory – Assessor

APPEARANCES

E Burke, Applicant

Y Kong for the Respondent

DATE OF DECISION 4 May 2023

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DECISION OF THE TRIBUNAL

_________________________________________________________________

1. The agreement to purchase the vehicle between Emma Burke and 465 Motors Ltd is declared void from the date of this decision.
2. 465 Motors Ltd shall, within 10 working days of the date of this decision, pay $16,486.11 to Emma Burke.

_________________________________________________________________

REASONS

Introduction

[1] Emma Burke wants to reject the 2012 Volkswagen Beetle[1] she purchased for $12,995 from 465 Motors Ltd in May 2022. When she first filed this claim, she sought only to recover the cost of various repairs performed since purchase. Ms Burke has since discovered that the vehicle’s odometer has been tampered with, and that its true odometer reading is much higher than the 45,600 km represented by 465 Motors at the time of sale. As a result, Ms Burke now wants to reject the vehicle, recover the purchase price, all repair and diagnosis costs and other costs she incurred as a result of purchasing the vehicle.
[2] 465 Motors says that, to the best of its knowledge, the vehicle’s odometer reading is accurate. It agrees that the vehicle had faults that most likely required repair, but it says that Ms Burke did not give it an opportunity to perform those repairs, so she cannot recover the repair cost. It also says that it offered to refund the purchase price as soon as Ms Burke started experiencing problems with the vehicle. it remains prepared to refund the purchase price but says she should not now be entitled to recover the other costs sought, because she would have avoided those costs if she had accepted its refund offer.

Relevant background

The odometer reading

[3] The vehicle was imported into New Zealand from Singapore in about January 2022, when its odometer reading was recorded as 45,399 km.[2] The Consumer Information Notice supplied by 465 Motors and the Vehicle Offer and Sale Agreement signed by the parties both state that the vehicle’s odometer reading was 45,600 km at the time of sale.
[4] As set out below, the vehicle developed faults shortly after purchase. Ms Burke was concerned that those faults were inconsistent with the vehicle having such low mileage. In an email dated 3 August 2022, Ms Burke asked 465 Motors “has the speedometer been wound back”. She says that she received no response.
[5] Ms Burke has remained concerned about the accuracy of the vehicle’s odometer reading, so following a hearing on 7 March 2023, Ms Burke contacted Volkswagen Group Singapore Pte Ltd (Volkswagen Singapore) and obtained the service and repair history for the vehicle while it was in Singapore. The information from Volkswagen Singapore shows that various repairs were performed to the vehicle in Singapore. Most recently, the gear lever bushes were replaced on 22 June 2021, when the vehicle’s odometer reading was recorded at 129,905 km.
[6] Ms Burke says that this information shows that the odometer has been tampered with, and the vehicle’s true odometer reading is much higher than the 45,600 km represented by 465 Motors.
[7] 465 Motors provided evidence from Singapore after the hearing on 11 April 2023, including information about the vehicle’s specifications from Volkswagen Singapore (none of which stated the vehicle’s odometer reading) and an invoice from Be Forward Co., Ltd, which shipped the vehicle to New Zealand. That invoice states that the vehicle’s mileage is 46,000 km. I understood 465 Motors to submit that this information shows that Volkswagen Singapore does not have any information about the vehicle’s odometer reading while in Singapore and that the only evidence available shows that its odometer reading was about 46,000 km.

The vehicle’s faults

The passenger seat rail

[8] The day after purchasing the vehicle, Ms Burke noticed that the front passenger seat would only lock into place when the seat was pushed as far back as it would go, meaning no one could sit in the rear passenger seat directly behind it. After speaking with 465 Motors, she had the vehicle assessed by Continental Cars in Newmarket. Ms Burke says that Continental Cars considered that there was a fault, but no repairs were performed. 465 Motors say that Continental Cars found no fault, but to satisfy Ms Burke, it offered to refund the purchase price. Ms Burke did not want to return the vehicle.
[9] Ms Burke then had the vehicle assessed by Euro City in Napier, which considered that the passenger seat rail was faulty and required replacement. Euro City also found that the auxiliary belt and tensioner required replacement. By that time, Ms Burke says that she had noticed a rattling noise under acceleration from the engine bay shortly after purchase.
[10] Ms Burke emailed 465 Motors, providing it with a copy of the diagnosis from Euro City. 465 Motors asked for an opportunity to assess the vehicle and return it to Auckland for repairs or to refund the purchase price. Ms Burke replied, saying “and again ... I do not trust you”. Ms Burke then had the vehicle repaired by Euro City. Ms Burke paid $782 to have the seat rail replaced and $268.86 to replace the auxiliary belt and tensioner.
[11] 465 Motors queries whether the vehicle had a faulty seat rail. It says that Ms Burke alleged that the seat’s “mechanical memory” function was faulty, but this vehicle has no mechanical memory seat function. That may be the case, but the evidence nonetheless shows that the passenger seat (whether it had the mechanical memory function or not) was faulty, could not be properly adjusted and required repair.

The timing chain

[12] A few days after returning to her home in the Hawkes Bay, the engine oil pressure warning message appeared on the vehicle’s dashboard display. The vehicle was then transported to DBO Automotive Ltd in Hastings, which assessed the vehicle on 31 May 2022. It found that the timing chain was loose, a tensioner had worn, and the top timing chain cover had previously been removed, which it considered to be an indication that someone had checked the timing chain on an earlier occasion.
[13] Ms Burke contacted 465 Motors on 1 June 2022 and advised it of this diagnosis. 465 Motors Ltd replied later that day:

[14] Despite its offer to collect the vehicle for assessment and repair, or alternatively to refund the purchase price, Ms Burke did not want to give 465 Motors that opportunity. Instead, she replied stating:

[15] 465 Motors again insisted that Ms Burke allow it to assess and repair the vehicle:

[16] Ms Burke then proceeded to have the vehicle repaired by DBO Automotive on 24 June 2022 at a cost of $2,366.75.

The coolant leak

[17] Ms Burke says she noticed a coolant leak in about October 2022. When the leak returned in December 2022, she had the vehicle assessed again by DBO Automotive, which traced the leak to an air cooler.
[18] Ms Burke did not initially raise the coolant leak in her application. However, during the first hearing on 31 January 2023, she advised the Tribunal that the vehicle had an ongoing coolant leak, and she would like to include that in the claim. The Tribunal adjourned the hearing, in part to allow Ms Burke to provide all diagnostic and repair invoices for the coolant leak. Ms Burke then instructed DBO Automotive to repair the leak, which it did on 4 February 2023 by replacing the air cooler at a cost of $593.40. The leak has not returned.

The EPC warning light

[19] Towards the end of November 2022, the vehicle’s EPC (Electronic Power Control) warning light began to intermittently illuminate on the dashboard display. Ms Burke has had the vehicle assessed by DBO Automotive, which performed a diagnostic scan and cleared the fault codes. Ms Burke was charged $228 for that assessment.
[20] About two weeks later, the EPC warning light returned. The vehicle has been assessed again by DBO Automotive, which has provided an estimate of $2,392 to replace the throttle valve body.

The issues

[21] Against this background, the issues requiring the Tribunal’s consideration in this case are:

• (a) Has 465 Motors engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
• (b) If so, what remedy is Ms Burke entitled to under the FTA?

[22] I have not considered any issues that may arise under the Consumer Guarantees Act 1993 (the CGA) in this decision because Ms Burke would have been entitled to no additional remedies under that Act and any defence 465 Motors may have had under the CGA does not affect Ms Burke’s right to the remedies ordered under the FTA.

Issue 1: Has 465 Motors engaged in misleading conduct?

[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 Corporation Ltd v Ellis:[3]

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.

[25] 465 Motors is in trade. It is a registered motor vehicle trader.
[26] 465 Motors has engaged in misleading conduct. 465 Motors represented on the Consumer Information Notice and the Vehicle Offer and Sale Agreement that the vehicle’s odometer reading was 45,600 km. The vehicle’s odometer also showed that it had travelled approximately that distance.[4]
[27] The vehicle’s true odometer was much higher. In that regard, I accept the information about the vehicle’s service history from Volkswagen Singapore which shows that the vehicle’s odometer reading was more than 129,905 km in June 2021 – much higher than its current odometer reading. I understood 465 Motors to query whether that information came from Volkswagen Singapore or whether Volkswagen Singapore possessed evidence to show that the odometer reading was lower than represented by 465 Motors. Ms Burke has provided a copy of the email from Volkswagen Singapore with the service and warranty history attached, and I accept that email as reliable evidence of the vehicle’s odometer history in Singapore.
[28] That higher odometer reading is also consistent with the vehicle’s condition. Mr Gregory, the Tribunal’s Assessor, advises that the condition of the vehicle and the repairs performed on this vehicle since it was purchased by Ms Burke are entirely inconsistent with a vehicle that has travelled about 45,600 km. Mr Gregory advises that the wear and tear evident in this vehicle is more consistent with a vehicle that has travelled more than 100,000 km.
[29] I acknowledge that 465 Motors thought that the vehicle’s odometer reading was about 46,000 km, as stated on the invoice from Be Forward., Ltd. The only conclusion I can therefore reach is that someone in Singapore has tampered with the vehicle’s odometer before it was sold to 465 Motors. 465 Motors says that it had no knowledge of any odometer tampering. However, absence of knowledge provides no defence. The FTA is a strict liability statute, in that the representor can have liability under the FTA even if it believes the representation to be true.
[30] Consequently, by representing that the vehicle’s odometer reading was 45,600 km when the vehicle has travelled much further, 465 Motors has engaged in misleading conduct in breach of s 9 of the FTA.

Issue 2: What remedy is Ms Burke entitled to under the FTA

[31] The remedies available for a breach of the FTA 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.

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

• (a) Ms Burke was misled or deceived
• (b) Ms Burke suffered loss or damage; and
• (c) 465 Motors’ conduct was the effective cause or an effective cause of Ms Burke’s loss or damage.

Ms Burke was misled

[33] Ms Burke was misled. She purchased the vehicle believing that its odometer reading was 45,600 km. The vehicle’s true odometer reading was much higher.

Ms Burke has suffered loss

The purchase price

[34] I find that Ms Burke has suffered loss by paying more for the vehicle than it was worth. The vehicle’s odometer has been tampered with and that fact means the vehicle is now likely to be worth much less than the $12,995 she paid for it. A stigma attaches to vehicles with adjusted odometers and a purchaser of this vehicle can never know what its true odometer reading is because the odometer has been tampered with. That factor, in my view, means the vehicle is likely to be worth much less than the price paid by Ms Burke.

Diagnostic and repair costs

[35] Ms Burke also incurred the following repair costs that a reasonable consumer would not expect to have incurred in a vehicle of such low represented mileage:

• (a) $212.75 to diagnose the faulty timing chain
• (b) $2,336.75 to replace the faulty timing chain
• (c) $144.90 to diagnose the faulty seat rail and auxiliary belt and tensioner
• (d) $782 to replace the seat railing
• (e) $516.34 to replace the auxiliary belt and tensioners
• (f) $594.30 to rectify the coolant leak from the air cooler; and
• (g) $228 to diagnose the cause of the EPC warning light.

[36] 465 Motors says that Ms Burke should not be entitled to recover these costs as she was required to give it an opportunity to rectify those faults before having the repairs performed herself. It therefore says that she should not be entitled to recover the cost of repairs performed on the vehicle.
[37] If this was a claim under the CGA, then 465 Motors’ argument would be correct. Under s 18(2)(b)(i) of the CGA, a consumer must first give the supplier a reasonable opportunity to remedy a failure before having it rectified elsewhere and recovering the cost of repairs from the supplier.[5] However, this is a claim under the FTA, not the CGA, so those rules do not apply. Instead, Ms Burke may recover those costs if she proves that the repair costs amount to loss or damage incurred as a result of 465 Motors’ misleading conduct.
[38] In my view, she has done that, as a reasonable consumer would not have expected those faults to be present in a vehicle of this represented mileage. I therefore find that those unexpected diagnostic and repair costs were a reasonably foreseeable consequence of 465 Motors’ misleading conduct and Ms Burke is entitled to recover those costs.
[39] In then determining what is fair and reasonable, I must consider that 465 Motors was willing to assist and that it could have performed the repairs for significantly less than the cost incurred by Ms Burke. Mr Gregory advises that the $585.65 in diagnostic costs incurred by Ms Burke ($212.75 for the timing chain, $144.90 for the seat railing and auxiliary belt fault and the $228 for the throttle body diagnosis) were reasonable. I intend to award those costs to Ms Burke, as she was entitled to have the faults assessed before contacting 465 Motors and asking it to remedy any defect found.
[40] However, I reduce the amount awarded to Ms Burke for the repairs performed by 15 per cent to recognise the fact that she did not give 465 Motors a reasonable chance to repair the vehicle. If she had done so, 465 Motors could have had the vehicle repaired at the trade rates available, which would have been less than the amount paid by Ms Burke.
[41] Consequently, I award a total of $3,594.98 to Ms Burke for the repairs performed since purchase. That amount is lower than claimed by Ms Burke but reflects the fact that Ms Burke could have easily mitigated the loss she has suffered by allowing 465 Motors to repair the vehicle.

The AA pre-purchase inspection report

[42] Ms Burke paid $189 for an AA pre-purchase inspection report. That cost was reasonably incurred. It was also wasted expenditure and I am satisfied that Ms Burke would not have incurred this cost if she had known that the vehicle’s odometer had been tampered with. She is therefore entitled to recover this cost.

Flight, accommodation and petrol costs

[43] Ms Burke also seeks to recover the cost of flying from Hawke’s Bay to Auckland to purchase the vehicle ($115.80), two nights’ accommodation in Auckland ($205.83) and $70 for the cost of petrol to drive the vehicle back to the Hawkes Bay after purchase.
[44] I consider that Ms Burke is entitled to recover the cost of the flight and accommodation. She has proven that she incurred those costs, and they were reasonably incurred to travel to Auckland to purchase the vehicle. In concluding that Ms Burke is entitled to recover two nights’ accommodation, I note that the vehicle had pre-existing defects (the seat rail) and Ms Burke stayed in Auckland for those defects to be assessed.
[45] Ms Burke is not entitled to recover the cost of petrol to return to the Hawke’s Bay as she provided no evidence of the cost actually incurred.

The tyres

[46] Ms Burke also says that she has suffered loss by purchasing four new tyres for $400, but I am not satisfied that Ms Burke has suffered any loss in purchasing those. First, there is no evidence to show that the tyres required replacement. Second, she purchased those tyres in May 2022 and has used the vehicle for at least 10 months since then, meaning she has obtained benefit from purchasing and using the tyres.

465 Motors’ conduct caused Ms Burke’s loss

[47] 465 Motors’ conduct in representing that the odometer reading was 45,600 km was the effective cause of the loss suffered by Ms Burke, because I am satisfied that Ms Burke would not have purchased the vehicle if she had known that the odometer reading was much higher than represented.

What remedy is Ms Burke entitled to?

[48] 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.[6]
[49] 465 Motors says that, at the most, Ms Burke should be entitled to recover the purchase price. It says that it offered to refund the purchase price almost immediately after sale when Ms Burke began to complain about the defects she had identified. I understood 465 Motors to say that most of the other costs claimed by Ms Burke would have been avoided if she had accepted its early offer to refund the purchase price.
[50] Ms Burke was entitled to initially decline to return the vehicle for a refund of the purchase price. At that time, she thought the vehicle simply had defects that required repair. Under s 18 of the CGA, Ms Burke was entitled to ask 465 Motors to remedy those defects rather than to reject the vehicle. However, things changed in March 2023 once Ms Burke discovered that the odometer had been tampered with, at which time she amended her claim and sought to recover the purchase price and other costs incurred.
[51] Given the nature of the misleading conduct and the losses and costs incurred by Ms Burke, I consider that the appropriate remedy is:

• (a) a declaration under s 43(2) and 43(3)(a)(ii) of the FTA that the contract to purchase the vehicle is void from the date of this decision; and
• (b) an order under s 43(3)(f) of the FTA that 465 Motors pay the following amounts to Ms Burke:
  • (i) $12,995 – the purchase price of the vehicle
  • (ii) $189 – the cost of the AA pre-purchase inspection report
  • (iii) $321.63 – the cost of airfares and accommodation when purchasing the vehicle.
  • (iv) $585.65 – the cost of diagnosing the vehicle’s defects; and
  • (v) $3,594.21 – the cost of repairs performed on the vehicle.

[52] In determining a fair compensation amount, I must also consider the fact that Ms Burke has owned this vehicle for more than 10 months, travelling about 6,000 km in that time. Ms Burke has obtained value from the use of the vehicle in that time, and I would not be doing justice by the parties if I failed to take account of the value of that use. Accordingly, I intend to reduce the amount payable to Ms Burke by $1,200, which is appropriate to reflect the benefit Ms Burke has obtained in using the vehicle. I therefore order that 465 Motors pay a total of $16,486.11 in compensation to Ms Burke.

Costs

[53] Ms Burke also seeks to recover the $50 cost of filing this claim. The Tribunal may only award costs against 465 Motors where:

• (a) the matter ought reasonably to have been settled before a hearing, but 465 Motors refused, without reasonable excuse, to participate in pre-hearing settlement discussions ordered by the Tribunal or acted in a contemptuous or improper manner during those discussions;[7] or
• (b) 465 Motors failed to attend the hearing without reasonable cause.[8]

[54] 465 Motors attended the hearings, so Ms Burke is not entitled to costs on that basis. Further, I am not satisfied that 465 Motors ought reasonably to have settled this claim before the hearing. Ms Burke’s claim was initially brought under the CGA, and 465 Motors had a valid defence to a significant part of that claim as Ms Burke had not given it a reasonable opportunity to rectify the vehicle’s defects before she incurred the repair costs. Ms Burke then amended her claim once she became aware that the odometer had been tampered with, but by then two hearings had been held and it was reasonable for 465 Motors to allow this matter to run its course through the Tribunal. Ms Burke’s claim to recover the cost of bringing this claim is therefore dismissed.

Outcome

[55] The Tribunal orders that:

• (a) the agreement to purchase the vehicle between Emma Burke and 465 Motors Ltd is declared void from the date of this decision; and
• (b) 465 Motors Ltd shall, within 10 working days of the date of this decision, pay $16,486.11 to Emma Burke.

[56] Ms Burke must then make the vehicle available to be collected by 465 Motors, at its expense.

B R Carter
Adjudicator

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[1] Registration plate BUGIN (previously PFH559).

[2] See https://www.carjam.co.nz/car/?plate=BUGiN.

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

[4] Records from Carjam.co.nz (which extracts data from Waka Kotahi NZ Transport Agency records) show that the vehicle’s odometer reading was recorded as 45,476 km when the vehicle passed a warrant of fitness inspection on 19 May 2022 – see https://www.carjam.co.nz/car/?plate=BUGiN.

[5] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC).

[6] Red Eagle Corporation Ltd v Ellis, above n 3, at [31].

[7] Motor Vehicle Sales Act 2003, Sch 1, cl 14(1)(a)(ii).

[8] Sch 1, cl 14(1)(b).