Snyder v M I K Autos - Reference No. MVD 531/2023 [2024] NZMVDT 78 (14 May 2024)

Last Updated: 19 June 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 531/2023 [2024] NZMVDT 078 BETWEEN ANDREW SNYDER Applicant AND M I K AUTOS LIMITED Respondent

HEARING at AUCKLAND on 26 March 2024 MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator S Gregory – Assessor

APPEARANCES

A Snyder, Applicant (by audio-visual link)

M Khan for the Respondent

DATE OF DECISION 14 May 2024

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DECISION OF THE TRIBUNAL

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A Within ten working days of the date of this decision M I K Autos Limited is to pay Mr Snyder $1,700.

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REASONS

Introduction

[1] On 9 April 2016 Mr Snyder purchased a 2007 Mazda MPV from M I K Autos Limited (MIK) for $12,500. The vehicle was a Japanese import first registered in New Zealand in 2016. At the time of purchase the vehicle had travelled 113,091 kms.
[2] Mr Snyder says MIK’s salesman told him the vehicle was new to the yard and was ready for sale but for replacing a leaking headlamp. Mr Snyder says he asked whether the vehicle had suffered any damage and was told it had not been damaged in any way.
[3] The Consumer Information Notice (CIN) confirmed the vehicle was not imported as damaged.
[4] However, unbeknownst to Mr Snyder or MIK, when the vehicle was imported into New Zealand, the border inspector flagged the vehicle as “imported as damaged” due to corrosion damage to the underbody of the vehicle suffered while it was in Japan. The true extent of that damage is unknown, but because it was flagged as imported as damaged, the vehicle will be permanently recorded in New Zealand Transport Agency (NZTA) records as having been damaged at the time of importation. This information is then publicly available and can be seen by any prospective purchaser of the vehicle and motor vehicle traders are required by law to then disclose that the vehicle has been classified as imported as damaged.
[5] Several years later, Mr Snyder attempted to sell the vehicle but only discovered then that it was imported as damaged due to heavy underbody rust and struggled to sell the vehicle.
[6] Mr Snyder claims $4,000 compensation from MIK being the cost of maintenance on the vehicle in order to deal with rust issues during his ownership and $2,000 for the inflated price of the vehicle on account of its true import classification. MIK disputes the claim and says it was unaware of the damage flag at the time of sale and says that, regardless, the works necessary to remove the flag were completed prior to its sale to Mr Snyder.
[7] MIK produced invoices which confirm that the underbody rust was repaired in 2016 (prior to sale to Mr Snyder) and that a repair certifier had confirmed the damage flag could be removed. MIK says that despite the works having been carried out and the vehicle made certifiable in New Zealand, the AA entry certifier had not lifted the flag from the system when issuing the vehicle’s import certification or “MR2A”.
[8] It says MIK had no knowledge that the flag remained until Mr Snyder emailed MIK on 10 October 2023.
[9] Mr Snyder says he was misled in the sale of the vehicle. He says that the problems with the vehicle’s history prevented him from selling it for a fair price and was forced to sell it for scrap (for $800).

The Issues

[10] The issues requiring the Tribunal’s consideration in this case are:

• (a) Has MIK engaged in misleading conduct in breach of s 9 of the FTA?
• (b) What remedy is Mr Snyder entitled to under the FTA?

Relevant background

[11] Mr Snyder produced a detailed chronology of the vehicle’s history (in New Zealand) and the background to this dispute as follows:

14/2/2016: Vehicle flagged as Damaged at the border. Heavy Rust underbody

1/3/2016: repair certification for rust, noted shocks leaking headlights not working

23/3/2016: Vehicle Passes Warrant of Fitness (113,091 km)

20/4/2016: Vehicle purchased from MIK Autos for $12,500. CIN states Not imported as Damaged Vehicle

24/3/2017: Vehicle passes first WoF. Mechanic notes indications of rust and repairs on underbody (119,341 km)

12/9/2018: Vehicle Fails Warrant: Mechanic again notes new rust needing preventive treatment (125,960 km) Passed WoF (125,988 km)

04/10/2019: Vehicle Failed Wof for Headlight issues and tyre wear. Also noted in border inspection notes. (131,237 km) passes 21/10/2019 (131,597 km)

12/11/2020: Vehicle failed Wof. Included notes failed for rust on sock housings and notes about rust develeoping in multiple spots. (135,202 km) Passed WoF 3/12/2020 (135,202 km

2/12/2021: Vehicle passed WoF. Mechanic noted new rust spots needing work.

1/12/2022: Vehicle failed WoF: Lower Ball joints wearing out and components too rusted to be maintained. Adjustable bolts had to be cut off and replaced due to rust seizing the components. (148,846 km) Passed WoF 19/12/2022

[12] On 2 October 2023 Mr Snyder cancelled an appraisal booking at Turner’s New Plymouth “as I was informed that vehicle was imported as damaged and as such also did not match my CIN or Insurance paperwork”. He says he contacted MIK for clarification and was told it was a minor paperwork issue, which did not prevent him from selling the vehicle.
[13] On 10 October 2023 Mr Snyder sold the vehicle as “Damaged/End of Life” at or to Turner’s Auctions for $800.
[14] Mr Snyder emailed MIK to complain on 11 October 2023 and gave it five working days to respond. Mr Khan produced emails to show that MIK asked for time to resolve the paperwork problem with NZTA noting the vehicle was purchased seven years prior to Mr Snyder’s complaint and there would be delays accessing historic paperwork.
[15] Upon being told that Mr Snyder had already sold the vehicle, MIK advised that it could not assist further as a result.
[16] Ultimately, MIK was able to obtain and file invoices from A-Z Panel Repairs Co Ltd dated 23 March 2016 and Vehicle Safety Systems dated 2 March 2016 proving both the fact of repairs being carried out to MR2A standard and repair certification (stamped on the first named invoice “DAMAGE FLAG REMOVED OK”).

Issue 1: Has MIK engaged in conduct that breached s 9 of the FTA?

[17] Mr Snyder has sold the vehicle. Accordingly, he cannot resort to the Consumer Guarantees Act 1993 for a remedy. Rather, this is a case of alleged misleading or deceptive conduct for which the FTA was enacted to respond to.
[18] 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.

[19] 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.

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

• (c) MIK failed to disclose that the vehicle was classified as imported as damaged; and
• (d) that this failure was misleading or deceptive conduct in breach of s 9 of the FTA.

Did MIK fail to disclose that the vehicle was imported as damaged?

[21] Motor vehicle traders have an obligation to disclose, on a CIN that must be displayed on the vehicle and supplied to the purchaser, that a vehicle has been classified as imported as damaged. This obligation is set out in ss 14 to 16 of the Motor Vehicle Sales Act 2003, which imposes an obligation on motor vehicle traders to display a CIN on all used vehicles and to obtain written acknowledgement from the purchaser of the vehicle that the purchaser has received a copy of the CIN.
[22] The CIN must contain all the information required by sch 2 to the Consumer Information Standards (Used Motor Vehicles) Regulations 2008 (the Regulations). The information required by sch 2 includes a requirement that the trader must indicate, by ticking the appropriate box, whether the motor vehicle is recorded on the motor vehicle register as being damaged at the time of importation. Failure to comply with these requirements is punishable by a fine of up to $10,000 for an individual, or $30,000 for a body corporate.[2]
[23] There is no dispute that the CIN displayed on the vehicle noted that it was not imported as damaged. As required, MIK obtained written acknowledgement from Mr Snyder that he received a copy of the CIN.
[24] I am satisfied that MIK did not disclose that the vehicle was imported as damaged. The parties accept that to be the case. They both plead ignorance at the time of sale. I find that MIK could have had the damage flag removed before selling the vehicle to Mr Snyder but failed to carry out what is a basic on-line check, which check would have alerted it to the error made at the point of import certification.
[25] Accordingly, I am satisfied that, despite having a legal obligation to do so, MIK failed to disclose that the vehicle was classified as imported as damaged.

Was this failure misleading or deceptive?

[26] In determining whether MIK’s failure to disclose that the vehicle was imported as damaged breaches the FTA, the Tribunal is required to consider the extent to which non-disclosure or silence can be a breach of s 9 of the FTA.
[27] 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.[3]
[28] 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. In Des Forges v Wright, Elias J (as she then was) stated:[4]

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.

[29] Since Des Forges, the Courts have developed a “reasonable expectation of disclosure” test in several other cases.[5] 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.
[30] Having regard to the “reasonable expectation of disclosure” test in light of the overall test for whether conduct is misleading and deceptive in Red Eagle, I consider that a reasonable person in Mr Snyder’s situation would have expected MIK to advise it that the vehicle was classified as imported as damaged. That is because MIK had a legal obligation to provide a copy of the CIN to any purchaser and to disclose on that CIN that the vehicle was imported as damaged. A reasonable consumer would expect MIK to comply with that obligation.
[31] By failing to disclose that the vehicle was imported as damaged, in circumstances where it had a legal obligation to do so, I consider that MIK has engaged in misleading conduct in breach of s 9 of the FTA.
[32] Mr Snyder’s complaint is that he was misled by the CIN and by the MIK salesperson to believe that the vehicle was not imported as damaged. It would appear – and is not disputed – that the vehicle was imported as damaged, which damage was identified during the importation certification process. It is also clear that the damage identified was repaired to the requisite standard but an inspector or certifier has failed to lift the damage flag in the relevant vehicle history database. Mr Snyder has enjoyed several years of use of the vehicle but has incurred maintenance or repair costs associated with the underlying damage, even if repaired to import certification standard, namely ongoing corrosion.

Issue 2: What remedy is Mr Snyder entitled to under the FTA

[33] The remedies available for a breach of the FTA are set out in s 43 of the FTA which is as follows:

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):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

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

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(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.

(4) In subsection (3)(a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3)(a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) subpart 5 of Part 2 of the Contract and Commercial Law Act 2017; or

(b) section 317 of the Accident Compensation Act 2001.

[34] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43.[6] The Tribunal must consider whether:

• (a) Mr Snyder was in fact misled or deceived;
• (b) Mr Snyder has suffered, or is likely to suffer, loss or damage; and
• (c) MIK’s conduct was the effective cause or an effective cause of their loss or damage.

Mr Snyder was misled

[35] As set out above, I am satisfied that Mr Snyder was misled by MIK’s failure to disclose that the vehicle was imported as damaged. He was not told that the vehicle had been imported as damaged, in circumstances where he had a reasonable expectation of that occurring. Rather, MIK made a positive but erroneous representation that the vehicle was not imported as damaged.

Mr Snyder has suffered loss as a result of being misled

[36] Mr Snyder paid $12,500 for the vehicle. He enjoyed several years of use of the vehicle without incident but for some maintenance associated with corrosion prevention. However, when he came to sell the vehicle, the stigma that attaches to vehicles that have been classified as imported as damaged came to bear forcing him to sell the vehicle as damaged and for a mere $800.
[37] The Tribunal commonly encounters cases involving vehicles that have been imported as damaged. Common to those cases is evidence that the vehicle is worth much less because it has been classified as imported as damaged. Here, Mr Snyder argues the vehicle ought to have been worth in the vicinity of $2,500. Mr Gregory says that for a vehicle of this make, model, age and mileage, that that is a broadly accurate valuation.
[38] MIK says that Mr Snyder suffered no loss or, in the alternative, contributed to any loss that he has suffered due to his not waiting for it to source and supply the paperwork necessary to remove the damage flag. That misses the point; the vehicle was imported as damaged, which as I have outlined means that there is a stigma associated with the vehicle irrespective of any subsequent repairs.

MIK’s conduct was an effective cause of Mr Snyder’s loss

[39] I am also satisfied that MIK’s conduct was an effective cause of Mr Snyder’s loss. I accept that Mr Snyder would not have purchased the vehicle if MIK had complied with its obligation to disclose that the vehicle was classified as imported as damaged.

The appropriate remedy

[40] 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.[7]
[41] In all the circumstances of this case, I consider that the appropriate remedy under the FTA is to order MIK to pay Mr Snyder the difference in value between $2,500 and $800, namely $1,700, under s 43(3)(f) of the FTA.
[42] I consider the order made does justice to the parties by aligning the vehicle’s value with its market value after several years use by Mr Snyder and what he might have hoped to sell it for but for its imported as damaged status. MIK failed in its legal obligation to disclose the imported as damaged classification, hence Mr Snyder was denied the opportunity to make an informed decision about purchasing the vehicle. Given the nature of the damage to the vehicle at the time of import, 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 Snyder was not given that opportunity because MIK failed in its obligation to disclose that crucial information to him. Second, as set out above, the vehicle is worth much less than Mr Snyder paid for it because of its status as an imported as damaged vehicle.
[43] In those circumstances, I consider it appropriate that Mr Snyder should be entitled to $1,700.

Conclusion

[44] MIK has engaged in misleading conduct in breach of s 9 of the FTA by failing to disclose that the vehicle was imported as damaged.
[45] Mr Snyder has suffered loss because of MIK’s misleading conduct. In the circumstances of this case, the appropriate remedy is to compensate Mr Snyder for the difference in value between what he thought he had purchased and used, against what in fact he had purchased and used – a vehicle which was imported as damaged.
[46] Within ten working days MIK is to pay Mr Snyder $1,700 under s 43(3)(f) of the FTA.

D M Jackson
Adjudicator

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

[2] Fair Trading Act 1986, s 40(1B).
[3] Smith v Hughes (1871) LR 6 QB 597; March Construction v Christchurch City Council (1995) 5 NZBLC 99,356 (HC).

[4] Des Forges v Wright [1996] NZHC 1248; [1996] 2 NZLR 758 (HC) at 764.
[5] Hieber v Barfoot & Thompson [1996] NZHC 1373; (1996) 5 NZBLC 104,179 (HC); Tuiara v Frost & Sutcliffe [2003] 2 NZLR 833 (HC) at [91]; Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 (HC) at [21] and [32].

[6] Red Eagle Corp Ltd, above n 1.

[7] Red Eagle, above n 1 at [31].