Annual Report of the Adjudicator of the Motor Vehicle Disputes Tribunal Based in Auckland: Period 1 July 2008 to 30 June 2009

August 2009

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4. Details of Cases Requiring Special Mention

Of the 132 applications I heard during the year there are several cases which I consider require special mention.

(a) Sham "competitive tender" sales- a continuing trend

In my 2008 Report to the then Minister I referred to a dispute in which a Taupo trader had attempted to avoid its responsibilities under the Consumer Guarantees Act by having the purchaser sign a "tender document" which the Tribunal found misled the purchaser as to his rights under the Consumer Guarantees Act. I gave the case as an example of dressing up a normal sale as a "competitive tender" and advised that this was not an uncommon practise.

I regret to report that the practice is still being used by other traders to deceive purchasers as to their rights under the Consumer Guarantees Act. It appears to have become a business model adopted by some South Auckland based traders.

In an application heard by the Tribunal in July 2008 (MVD 135/08) a Penrose trader sold a 1996 Subaru Legacy GT to a purchaser for $4,390 after advertising it on TradeMe for $4,900. The purchaser saw the advertisement, visited the trader's yard and offered to buy it subject to a satisfactory mechanical inspection. The trader then had him pay a small deposit and complete a form headed "Tender Form" with his personal particulars and sign at the foot of the form a clause that read:

I/We confirm that we are aware this vehicle is being sold by tender and is accepted in an "as-is, where-is" condition and as such carries no warranty. I also confirm that I have read and understand [the trader's] Rules of Auction Tender."

The trader then recommended that the purchaser obtain his mechanical inspection from an inspection firm nominated by the trader because the inspection could be done that day. The inspector's report disclosed a lengthy list of faults that indicated the vehicle was very worn and had been poorly maintained. Remarkably the purchaser still decided to purchase the vehicle and paid the trader the balance of the purchase price.

At the time he paid the trader the balance of the purchase price the trader asked him to sign a form headed "[Traders] Tenders Rules of Auction tender" which contained some 16 clauses amongst which was the following:

"Note: The consumer guarantees act 1993 (the act) does not apply to any sale by auction or competitive tender. Therefore, none of the warranties set out in the Act are implied into any sale by auction or competitive tender. All vehicles sold by [Trader] are sold by competitive tender or auction. Therefore none of the warranties set out in the act apply to any vehicle sold by [Trader]."

When the vehicle failed some 4 days after he had purchased it the purchaser telephoned the trader who told him "we are a tender centre and the Consumer Guarantees Act does not apply to cars we sell."

At the hearing the trader's Sales Manager claimed the trader had received other online offers for the vehicle but had not received any offers for it on the day it was sold to the purchaser.

The Tribunal found that the vehicle had not been sold by competitive tender because there were none of the indicia of a competitive tender present. The Tribunal found the trader's Tender Form and the Rules of Auction Tender were both sham documents intended to mislead and deceive potential purchasers into believing they had forfeited their rights under the Consumer Guarantees Act. The trader was ordered to pay the purchaser's repair costs.

(b) Sales claimed to have been made " by auction"

The Tribunal has had several applications lodged by purchasers of vehicles where the trader has claimed that the sale was made by auction but a review of the facts by the Tribunal has shown that the sale of the vehicle was clearly made some time after the vehicle failed to sell at auction.

An example is MVD 254/08 where the purchaser of a 1997 VW Golf sold by a Tauranga trader bought the vehicle by negotiation the day after it failed to sell at auction. The trader provided the purchaser with a "25 hour" warranty which purported to limit the purchaser's rights against the trader to claims made within 25 hours of the time of purchase and stipulated the vehicle must not have been driven for more than 60 kilometres. The purchaser had problems with the vehicle on the day she bought it and soon afterwards found the vehicle's radiator was blocked and required removal and cleaning. The trader was not prepared to assist the purchaser. Within 2 weeks of the date of sale it overheated and blew its head gasket. The purchaser and her father went to discuss the repairs required with the trader but once again the trader refused to accept any responsibility for the vehicle despite the purchaser having found an invoice in the vehicle's glove box that the vehicle had overheated and leaked water whilst in the ownership of the previous owner.

The Tribunal found first that the vehicle had not been sold by auction and that the Consumer Guarantees Act applied. Second that the vehicle was not of acceptable quality because it was not as durable as a reasonable purchaser of such a vehicle would regard as acceptable. The Tribunal also found the trader's conduct in attempting to exclude the purchaser's rights under the Consumer Guarantees Act with the 25 hour warranty had breached The Fair Trading Act. The trader was ordered to pay the purchaser's repair costs of $2,351.96.

(c) Internet sales and extravagant claims by traders

The Tribunal has noticed that many traders advertise their vehicles on TradeMe, and, regrettably as reported in my 2008 Annual Report, some purchasers buy vehicles from internet traders sight unseen. Some traders make extravagant claims in the text of their TradeMe advertisements that the Tribunal has found to be misleading. An example which illustrates this is MVD6/09 which involved a Palmerston North trader who sold a 1996 Nissan Silvia for $4,721 by means of an on-line auction to a young Tauranga purchaser. The trader claimed in its TradeMe advertisement that -

"car is hard to fault and only thing I see missing is a little bit of plastic between steering wheel and dash."

The trader also claimed the vehicle had just had a full service and was in very good condition and "runs smooth no problems with gearbox or clutch".

The purchaser, relying on the accuracy and truth of those statements, bought the vehicle by internet auction sight unseen. Within 2 days of receiving the vehicle the purchaser found the clutch was slipping and took it to his mechanic who also found that the vehicle had not been serviced because its oil was dirty and the oil filter was old, the brake fluid level was low, the shock absorbers were defective, and in the mechanic's opinion the vehicle should not have been issued with a warrant of fitness. The vehicle was immediately taken for a warrant of fitness which it failed due to defects in the front assembly and worn shock absorbers.

The Tribunal found that the vehicle had numerous faults and the trader had misrepresented the vehicle's quality. The trader's claim that "car is hard to fault" went beyond mere puff; it was a statement intended to convey to purchasers both astute and naïve that the car had no faults. The Tribunal ordered the trader to pay a total of $3,011 to the purchaser covering his repair costs, inspection fees, and the purchaser's costs in travelling from Tauranga to Palmerston North to attend the Tribunal's hearing.

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