KENNY v MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2018] NZHC 1984 [6 August

2018]

IN THE HIGH COURT OF NEW ZEALAND

WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE WHANGANUI-Ā-TARA ROHE

CIV 2017-485-645

[2018] NZHC 1984

IN THE MATTER OF

an application pursuant to s 3 of the

Declaratory Judgments Act 1908

BETWEEN

GEOFFREY BRIAN KENNY

Plaintiff

AND

MINISTRY OF BUSINESS, INNOVATION

AND EMPLOYMENT

Defendant

Hearing:

9 July 2018

Counsel:

A O’Connor for Plaintiff

J C Catran and E J Couper for Defendant

Judgment:

6 August 2018

JUDGMENT OF MALLON J

Table of contents

Introduction [1]

The factual background [5]

The MVS Act and its predecessor [20]

The MVS Act [20]

Motor Vehicle Dealers Act 1975 [32]

Summary of the new regime [42]

Finance company legislation [46]

The Credit Contracts and Consumer Finance Act 2003 [46]

The Financial Services Providers (Registration and Dispute Resolution) Act 2008 [51]

My assessment [52]

The “finance company” definition [52]

The s 7 definition [55]

Is Mr Kenny not a motor vehicle trader because of s 9 [59]

Does Mr Kenny hold himself out as a motor vehicle trader (s 8(1)(a))? [69]

Does Mr Kenny sell motor vehicles for the primary purpose of gain (s 8(1)(b))? [88]

Result [99]

Introduction

[1] Mr Kenny is in the business of motor vehicle finance. The issue in the

proceeding is whether he is also in the business of motor vehicle trading. This question

arises because Mr Kenny sells around a hundred cars a year on TradeMe when his

business, MTF Lower Hutt, repossesses them pursuant to a default under the finance

contract. The issue is one of statutory interpretation of the relevant provisions of the

Motor Vehicle Sales Act 2003 (the MVS Act).

[2] The issue is before me by way of an application under the Declaratory

Judgments Act 1908. The defendant is the Ministry of Business, Innovation and

Employment (the Ministry). The Ministry administers the MVS Act and the

Ministry’s Chief Executive appoints and employs the Registrar of Motor Vehicle

Traders under the MVS Act. Mr Kenny and the Registrar have different views about

whether Mr Kenny is a motor vehicle trader and they had been corresponding about

that. Because Mr Kenny wishes to avoid prosecution if he is incorrect in his view, he

seeks a declaration that he is not a motor vehicle trader under the MVS Act.

[3] Mr Kenny contends the MVS Act makes a distinction between finance

companies and motor vehicle traders and that selling a repossessed vehicle under a

security is finance company business and not motor vehicle trading business. He says

that when he is selling repossessed vehicles he does not hold himself out as a registered

trader under the MVS Act. He also says his primary purpose in selling repossessed

vehicles is compliance with the Credit Contracts and Consumer Finance Act 2003 (the

CCCF Act). He can obtain a better price for the vehicle than if he sells through a

registered trader and this is to the benefit of the debtor.

[4] The Ministry contends that a finance company selling repossessed motor

vehicles may be a motor vehicle trader depending on the circumstances. The Ministry

says Mr Kenny is a motor vehicle trader because he does not sell repossessed vehicles

through a trader, he holds himself as a motor vehicle trader, and his primary purpose

in selling repossessed vehicles is for gain (by minimising his losses).

The factual background1

[5] Motor Trade Finance Limited (MTF) was formed in 1970 to enable a group of

motor vehicle dealers to offer car loans to their customers. Mr Kenny is a director of

MTF. MTF offers franchise agreements. Mr Kenny, through his company Geoff

Kenny Ltd holds an MTF franchise in Lower Hutt (MTF Lower Hutt). MTF Lower

Hutt borrows funds from MTF.

[6] MTF Lower Hutt offers motor vehicle financing to consumers. Financing is

available to assist the person to purchase a vehicle, whether from a motor vehicle

dealer or a private seller. MTF Lower Hutt also offers refinancing of motor vehicles

and financing for other assets (for example, boats). A consumer can apply for finance

if they are over 18 years of age, a New Zealand resident, hold a valid New Zealand

driver’s licence and have regular income.

[7] If a consumer’s application is accepted by MTF Lower Hutt, the parties enter

into a credit contract. Standard hire purchase credit terms of the contract include:

(a) The consumer agrees to purchase the vehicle conditionally from MTF

Lower Hutt.

(b) MTF Lower Hutt lends the funds required to purchase the vehicle and

the consumer agrees to borrow that amount. The consumer agrees to

repay the loan principal and to pay interest on it (principal and interest).

(c) The consumer takes possession of the vehicle on the condition that,

until the principal and interest are repaid, any other money owing is

paid and any other contract between the consumer and MTF Lower

Hutt that is in default has been paid, ownership of the vehicle does not

pass to the consumer.

1 The parties filed an agreed statement of facts. This was supplemented by an affidavit from

Mr Kenny and an Agreed Bundle of Documents.

(d) The consumer grants a security interest in the vehicle purchased to

secure the payment of all money owed to MTF Lower Hutt and the

performance of all obligations under the contract.

(e) The Consumer Guarantees Act 1993 applies to the contract unless the

goods are acquired for business purposes.

(f) An event of default can occur for a number of reasons including:

(i) if any term of the contract is breached;

(ii) any person lawfully claims to have a security interest in the

vehicle; or

(iii) MTF Lower Hutt reasonably believes the vehicle is at

significant risk of loss or damage.

(g) If an event of default occurs, all amounts owing or to become owing

under the contact immediately become due and payable and MTF

Lower Hutt may enforce its security interest, cancel the contract, take

possession of the vehicle, sue immediately for all money owing,

exercise rights against any guarantor or appoint a receiver of the vehicle

by repossessing the vehicle. Where MTF Lower Hutt takes possession

of the vehicle, the consumer is liable for any sum of money paid by

MTF Lower Hutt to repossess it.

(h) After repossessing a vehicle MTF Lower Hutt may sell it and use the

proceeds to repay the loan. MTF Lower Hutt does not need to notify a

consumer if it intends to sell a vehicle it has repossessed.

[8] The interest rates charged to consumers under the contract range from 9.75 per

cent to 21.95 per cent per annum and on default increases to 25 per cent per annum.

[9] As recorded in the contract, MTF Lower Hutt is the legal owner. However the

consumer is the registered person (recorded on the Motor Vehicle Register) and is

responsible for compliance with all legislation and requirements relating to possession

of the vehicle, including registrations, licences, permits, warrants, certificates,

authorisations, paying speeding and parking fines and keeping the vehicle roadworthy.

The vehicle must also be insured in the consumer’s name and MTF Lower Hutt must

be noted as an interested party.

[10] About 95 per cent of the transactions for which MTF Lower Hutt provides

finance do not go into default. The remaining five per cent represents around 100

vehicle repossessions per year. In all cases, when MTF Lower Hutt repossesses and

sells vehicles, the proceeds have been insufficient to repay the debtor’s payment

obligations. However, if they were to be sufficient, any amount received above the

consumer payment obligations would be returned to the consumer.

[11] Repossessed vehicles often do not have a warrant of fitness or a registration.

They are also often unserviced, not mechanically sound and in poor condition.

Sometimes they do not have ignition keys. Mr Kenny says that registered traders are

typically scared of repossessed vehicles because of their unknown history and poor

condition. A sizeable investment in panelling and painting is often required to make

them yard ready.

[12] MTF Lower Hutt’s primary method of selling repossessed vehicles is by listing

them on TradeMe. Mr Kenny regards TradeMe as an efficient and cost effective means

of achieving his obligations under the CCCF Act. He notes that TradeMe’s website

invites sellers to “sell in NZ’s largest car market”. As at 7 May 2018 at 11.08 am there

were 82,330 vehicles for sale on TradeMe.

[13] Mr Kenny’s description of the vehicle on TradeMe includes details such as its

make and model, the number of kilometres travelled, whether it is imported or not and

whether it has a warrant of fitness. He also lists any faults he has noticed and

encourages the purchaser to view the vehicle before they purchase it. Each listing also

states: “Finance Company Repossession. No warranty given or implied. We are not

registered traders”.

[14] The majority of feedback from purchasers on TradeMe about Mr Kenny have

been positive: overall Mr Kenny has 235 positive reviews (of which 197 are from

individuals), one neutral review and three negative reviews. The positive reviews

include many comments along the lines of “great trader”, “excellent trader”, “great to

deal with”, “great dealer”, “easy fast trade, thanks so much would happily trade again”,

and “very satisfactory trade”.

[15] The three negative comments and Mr Kenny’s response to them are as follows:

My account is not fake where is vehicles pick up

Trader responded: I have sent you 3 emails with details for payment and pick

up but no reply. Car can be picked up from 1/64 Hutt Road.

…

You should understand people always can’t afford things and can’t even give

the full details on the car. Call you so many times, you didn’t not give previous

owner details. How can I trust?

Trader responded: Absolute nonsense. If you couldn’t afford it why did you

bid? This car was being sold a rego lapsed and poor condition. If u want

previous owner do a lemon check? And owner got nothing to do with value

of this car. U are obviously a young person totally out of your depth.

…

VIR report on the car showed that the owner that Geoff claimed, did not

actually own the car until the day the auction finished, the rego expired earlier

than advertised, and the engine was smaller. Very suspicious. Tried to contact

Geoff, but will not answer emails or phone calls.

Trader responded: This is absolute rubbish this member has not replied to

several emails and no calls from her. Engine size is as advertised and if any

mistakes made re rego we would have put it right. This just a case of little girl

operating in the big world and not having the integrity to back up her bid. We

will be taking action thru the small claims court.

[16] In the past Mr Kenny has used other methods of sale, such as selling through

Turners Car Auctions (Turners), which is registered as a motor vehicle trader. As at

7 May 2018 at 11.12 am Turners had 2,310 vehicles listed on its website for sale. It

runs both mainstream and damaged vehicle auctions. Turners have at times insisted

that repossessed vehicles be sold through the damaged vehicle auctions. Unlike

TradeMe, Turners charges both the buyer and seller a fee. If MTF Lower Hutt were

to sell through another registered trader they would incorporate a profit margin. Also

registered traders must charge GST whereas MTF Lower Hutt’s sales are GST exempt.

[17] Mr Kenny therefore considers he would be doing the borrower a disservice if

he were to sell repossessed vehicles through a registered trader. He obtains a higher

recovery for the borrower by selling them directly through TradeMe. An example of

this concerns a 2002 Ford Falcon XR6 that MTF Lower Hutt repossessed in early

2018. Mr Kenny listed this for sale on TradeMe. It sold on 28 February 2018 for

$3,310. The sale could not be completed for reasons unrelated to the bidder.

Mr Kenny decided to use this vehicle as a case study for the present proceeding. He

delivered the vehicle to Turners in March 2018. Turners assessed the vehicle as having

an auction value of $1,000-$1,200 with a suggested reserve of $1300. By 23 April

2018 the vehicle was placed in three auctions without selling. In May 2018 the vehicle

sold for $1,200.

[18] The vehicles sold by Mr Kenny on TradeMe typically sell for less than

$10,000. The highest value sale was $18,000.

[19] There was no evidence at the hearing about whether other MTF franchisees

sold their vehicles through registered motor vehicle traders. It was indicated that some

MTF franchisees were registered motor vehicle traders. I sought further information

about this. The parties have not been able to put forward an agreed position about this.

In the circumstances I have decided it is appropriate to consider Mr Kenny’s position

without reference to what other MTF franchisees may or may not do.2

The MVS Act and its predecessor

The MVS Act

[20] The purpose of the MVS Act is “to promote and protect the interests of

consumers in relation to motor vehicle sales”.3 The Act requires all persons carrying

2 Leave was sought by the Ministry to file an affidavit about this. This affidavit was provided to

assist the court in response to my enquiry and I appreciate that. However the information in that

affidavit is limited and Mr Kenny takes issue with what can be inferred from it. Leave is declined

in these circumstances. 3 Section 3.

on the business of motor vehicle trading to be registered. It sets out the procedure for

registration. It imposes requirements on motor vehicle traders when selling motor

vehicles. There are also enforcement provisions.

[21] Part 1 contains the preliminary provisions. These include the definition

provisions. A finance company is defined as follows:4

finance company includes any person who carries on a business (except the

business of motor vehicle trading) and who, in the course of that person’s

ordinary business,—

(a) buys, exchanges, or takes by way of assignment any motor vehicle for

any of the following purposes:

(i) letting or hiring it to any other person under a hire purchase

agreement:

(ii) taking or enforcing a security over it:

(iii) leasing it to any other person without conferring on that

person the right to buy the motor vehicle; or

(b) sells any motor vehicle bought, exchanged, or taken by way of

assignment for any of the purposes specified in paragraph (a); or

(c) sells any motor vehicle under a right of sale conferred by a security

interest (within the meaning of section 17(1)(a) of the Personal

Property Securities Act 1999)

[22] A “motor vehicle trader” is defined as having the meaning given in s 7 of the

Act.5 Section 7 provides:

7 Meaning of motor vehicle trader

In this Act, motor vehicle trader—

(a) means any person who carries on the business of motor vehicle trading

(whether or not that person carries on any other business); and

(b) includes—

(i) [Repealed]6

(ii) an importer:

4 Section 6. 5 Section 6. 6 This referred to a “car market operator”. It was repealed because it covered, for example, those

that merely provided a venue for motor vehicle trades, such as TradeMe, rather than those engaged

in the business of trading the vehicles.

(iii) a wholesaler:

(iv) a car auctioneer:

(v) a car consultant.

[23] Section 8 provides who is treated as a motor vehicle trader:

8 Who is treated as motor vehicle trader

(1) A person is treated as carrying on the business of motor vehicle trading

for the purposes of this Act if—

(a) the person holds out that the person is carrying on the business

of motor vehicle trading; or

(b) in any specified period, the person sells more than 6 motor

vehicles, unless that person proves that those motor vehicles

were not sold for the primary purpose of gain; or

(c) in any specified period, the person imports more than 3 motor

vehicles, unless that person proves that those motor vehicles

were not imported to be sold for the primary purpose of gain.

(2) For the purposes of subsection (1)(a), a person holds out that the

person is carrying on the business of motor vehicle trading if that

person—

(a) advertises or notifies or states that the person carries on the

business of motor vehicle trading; or

(b) in any way represents that the person is ready to carry, or is

carrying, on the business of motor vehicle trading.

(3) Subsection (1)(b) does not apply to any trustee corporation (within the

meaning of section 2(1) of the Trustee Act 1956) acting in the capacity

of executor, administrator, trustee, guardian, committee, manager,

agent, attorney, or liquidator, or in any fiduciary capacity, unless the

trustee corporation is acting on behalf of the same person or estate.

[24] Section 9 provides who is not treated as a motor vehicle trader:

9 Who is not treated as motor vehicle trader

(1) A person is not treated as carrying on the business of motor vehicle

trading for the purposes of this Act only because that person is—

(a) an employee or an agent of a motor vehicle trader; or

(b) under a contract for services with a motor vehicle trader; or

(c) a solicitor who acts in that capacity as an agent for selling any

motor vehicle unless that person is remunerated by

commission in addition to, or instead of, that person’s

professional charges; or

(d) a liquidator of a company that is a motor vehicle trader

registered under this Act; or

(e) a manufacturer who sells any motor vehicle to—

(i) the Crown; or

(ii) a motor vehicle trader registered under this Act; or

(iii) any person who is or has been employed by the

manufacturer; or

(ea) a car market operator; or

(f) a licensed car wrecker; or

(g) a finance company selling any motor vehicle under a

transaction in which a motor vehicle trader acts as an

intermediary between the finance company and the buyer

(whether or not the motor vehicle trader acts as an agent of

the finance company); or

(h) a finance company, an insurance company, a rental car

company, a storage provider (within the meaning of section

2(1) of the Land Transport Act 1998), or any other person, that

sells any motor vehicle as an incidental part of the person’s

ordinary business; or

(i) carrying on any other business besides carrying on the

business of motor vehicle trading and who, in the course of

that other business,—

(i) buys any motor vehicle for use in connection with that

business, with or without the intention of reselling it

after such use; or

(ii) resells the vehicle after using it in connection with

that business.

(2) Subsection (1)(d), (h), and (i) applies only if the person sells motor

vehicles through a motor vehicle trader registered under this Act.

[25] Part 2 of the Act sets out the requirements that apply to motor vehicle traders.

These requirements include disclosure obligations when a motor vehicle trader offers

a motor vehicle for sale. These obligations are to display prominently:7

7 Sections 14 and 15.

(a) a statement that a buyer or lessee of a motor vehicle who acquires the

motor vehicle for value takes it free of any security interest in the motor

vehicle; and

(b) a consumer information notice in accordance with the requirements of

the Consumer Information Standards (Used Motor Vehicles)

Regulations 2008 (discussed further below).

[26] A motor vehicle trader must obtain written acknowledgement from the buyer

that they have received this information.8 A motor vehicle trader must also keep a

record of each contract for the sale of any motor vehicle.9

[27] Part 3 of the Act concerns registration. A motor vehicle trader must be

registered.10 Registration is made by application to the registrar.11 An application

must include specified contact details.12 The registrar may accept or refuse an

application for registration.13 The registrar must accept an application for registration

if the application is properly completed and the applicant is not disqualified from

registration.14 An individual is disqualified from registration if, for example, the

individual is under 18 years of age, is an undischarged bankrupt, or has had his or her

registration as a motor vehicle trader cancelled within in the preceding five years.15 A

company is disqualified from registration if, for example, the company is in

liquidation, or a person concerned in the management of the company is disqualified

from registration in his or her own right, or if the company’s registration as a motor

vehicle trader has been cancelled within the preceding five years.16

[28] Part 3 of the Act also provides that a register of motor vehicle traders must be

kept.17 The purpose of the register is to enable members of the public to know who is

responsible for a motor vehicle trading business, how to contact a motor vehicle trader

8 Section 16. 9 Section 21. 10 Section 10. 11 Section 31. 12 Section 32. 13 Section 33. 14 Section 34. 15 Section 24. 16 Section 25. 17 Section 52.

and how to determine whether or not a person is registered as a motor vehicle trader

under the Act.18 It is also to facilitate the Ministry or the Commerce Commission’s

enforcement of the Act or any consumer protection legislation and the Ministry’s

compliance, audit, and other supporting and administrative functions under the Act.19

[29] Part 4 of the Act sets out the enforcement provisions. These include provisions

for persons to be banned from participating in the business of motor vehicle trading.

A ban may be imposed under the Act for various reasons including, for example,

failing to pay money to a principal, entering false information into a record of contracts

for sale, or being convicted of a dishonesty offence within the preceding five years.20

A ban may be imposed by the District Court if the person is not a fit and proper person

to participate in the business of motor vehicle trading.21

[30] Part 4 also establishes motor vehicle disputes tribunals.22 A disputes tribunal

has jurisdiction over disputes if one party is a motor vehicle trader and the total sum

of the dispute does not exceed $100,000.23 If no party to the dispute is a motor vehicle

trader, a disputes tribunal will still have jurisdiction if the parties to the dispute consent

in writing to its determination by the disputes tribunal.24 The disputes tribunal has

jurisdiction to inquire into and determine any application or claim about the sale of

any motor vehicle under the Fair Trading Act 1986, the Consumer Guarantees Act

1993 and Subpart 3 of Part 2 or Part 3 of the Contract and Commercial Law Act

2017.25

[31] Part 4 of the Act also contains offence provisions. This includes an offence of

carrying on the business of motor vehicle trading without being registered.26 The

penalty on conviction for this is a fine not exceeding $50,000 in the case of an

individual or a fine not exceeding $200,000 in the case of a company.27

18 Section 53(a). 19 Section 53(b) and (c). 20 Section 68. 21 Section 69. 22 Section 82. 23 Section 90(1). 24 Section 90(2). 25 Section 89(a) and (b). 26 Section 95. 27 Section 118.

Motor Vehicle Dealers Act 1975

[32] The MVS Act replaced the Motor Vehicle Dealers Act 1975 (MVD Act). The

MVD Act referred to motor vehicle dealers rather than motor vehicle traders. Section

4 of the MVD Act was the comparable provision to ss 7-9 of the MVS Act. It

provided:28

4. Meaning of “motor vehicle dealer”-

(1) Subject to the succeeding provisions of this section, and to sections 5

and 6 of this Act, in this Act the term “motor vehicle dealer” means

any person who carries on the business of purchasing, selling,

exchanging, or leasing motor vehicles (whether as principal or agent),

whether or not that person carries on any other business; and includes

a car consultant.

(2) Without limiting the definition in subsection (1) of this section, every

person who holds himself out to the public as being ready to carry on

the business of purchasing, selling, exchanging, or leasing motor

vehicles shall be deemed to be a motor vehicle dealer for the purposes

of this Act.

(3) Every person who, in any period of 12 consecutive months

commencing after the commencement of this Act, purchases, sells,

exchanges, or leases more than 6 motor vehicles shall be presumed to

be a motor vehicle dealer for the purposes of this Act, unless he proves

that he did not purchase, sell, exchange, or lease the motor vehicles

for the primary purpose of gain.

(4) Notwithstanding the foregoing provisions of this section, no person

shall be deemed to be a motor vehicle dealer for the purposes of this

Act by reason only of the fact that-

(a) Being a solicitor, he acts, in the course of his business as a

solicitor, as agent in respect of the purchase, sale, exchange,

or lease of any motor vehicle, unless he is remunerated for so

acting by commission in addition to, or instead of, his

professional charges:

(b) Being a manufacturer or wholesaler, he sells any motor

vehicle to-

(i) The Crown; or

28 As explained in Mutual Rental Cars Ltd v Russell CA294/84, 14 August 1985, s 4(1) was directed

at persons who carried on the business of dealing in motor vehicles; s 4(2) was concerned with

those who held themselves out to the public as being ready to carry on such a business; s 4(3)

provided a simple prima facie numerical test for limiting dealing in vehicles to licensed dealers

which can be displaced by proof that the person did not deal with the vehicle for the primary

purpose of gain; and s 4(4) provided qualified protection for those who would otherwise be within

the terms of ss4(1)-(3).

(ii) Any other wholesaler, or to a licensed motor vehicle

dealer; or

(iii) Any person who is or has been employed by the

manufacturer or wholesaler:

(c) Being the holder of a secondhand dealer’s licence granted

under the Secondhand Dealers Act 1963, he purchases, in the

course of his business as a secondhand dealer, any motor

vehicle for wrecking or dismantling by him:

(d) Being a finance company, it purchases, sells, exchanges, or

leases any motor vehicle in the ordinary course of its business

as a finance company:

(e) In the course of carrying on any other business (not being the

business of a motor vehicle dealer) he-

(i) Purchases any motor vehicle for use in connection

with that business, with or without the intention of

reselling it after such use; or

(ii) Resells any such vehicle after using it as aforesaid.

[33] The definition of “finance company” in the MVD Act was the same as in the

MVS Act. Section 4(4)(d) therefore covered finance company repossession sales.29

[34] These definitions aside, the MVD Act regime was significantly different.

Motor vehicle dealers were required to be licensed and it was an offence to carry on

the business of motor vehicle dealing without a licence.30 Licencing involved an

application process and a hearing before a Motor Vehicle Dealers Board. The

application process was protracted. There was a public notification process, and

members of the public or the Motor Vehicle Dealers Institute could object to the

granting of a licence of certain grounds and had an entitlement to be heard.31 Further,

an applicant was required to be a registered salesman with at least two years’

experience in the previous three years working for a licence holder.32

29 Wilson v Interim Finance Ltd AP141/98, 23 October 1993 at p 33 per Giles J where the Judge

contrasted the business undertaken by Interim Finance with the activities of a finance company.

The Judge suggested that a company acting as a pawnbroker and selling a vehicle pursuant to its

security would likely be protected by s 4(4)(d) of the MVD Act as the sale “would have been in

the ordinary course of its business as a pawnbroker”. 30 Section 7. 31 Sections 9-13. 32 Section 14.

[35] A motor vehicle dealer’s licence specified the licensee and the place of

business and it was an offence to carry on the business in a different name or place.33

Licensees were required to display a notice at their premises.34 They were also

required to personally supervise and control their business.35

[36] The Act also provided a process for registration of motor vehicle salesmen.

There were particular eligibility requirements and a public notice and a hearing

process.36 The MVD Act provided for a Motor Vehicle Salesmen Registration

Authority which heard and determined applications for registration to be a salesman

and complaints about salesmen.37 Approved salesmen were a further class created

under the Act.38

[37] The MVD Act pre-dated the Fair Trading Act 198639 and the Consumer

Guarantees Act 2003,40 legislation aimed at contributing to a trading environment in

which the interests of consumers are protected, businesses compete effectively, and

consumers and businesses participate confidently.41 The MVD Act contained specific

warranties and guarantees for vehicles sold by licensed motor vehicle dealers.42 There

were also particular disclosure obligations for second hand vehicles. Relevantly for

present purposes, this included a requirement to state “Repossessed vehicle. No

warranty” where that was the case.43

33 Sections 19-21. 34 Sections 54-56. 35 Section 57. 36 Sections 66-72. 37 Section 64. 38 Part 6. 39 The Fair Trading Act applies to goods (which includes vehicles) supplied by a supplier in trade.

It prohibits unfair practices such as misleading and deceptive conduct, false or unsubstantiated

representations and other unfair business activities. It also provides for the promulgation of

consumer information standards. Consumers have civil remedies. Additionally the Commerce

Commission can take enforcement action. 40 The Consumer Guarantees Act provides consumers of goods (which includes vehicles for personal

use) with certain guarantees from suppliers acting in trade. The guarantees include that the

supplier has the right to sell the vehicle, the vehicle is free from any undisclosed security, the

vehicle complies with its description, the vehicle is reasonably “fit for purpose” and it is otherwise

of “acceptable quality” (terms which depend on the circumstances of the sale). The Act also

provides remedies for a consumer. 41 Section 1A of the Acts. 42 Part 7. 43 Section 90.

[38] A licensed motor vehicle dealer was required to contribute to a fidelity fund.

The fund was, amongst other things, to settle claims made by purchasers of vehicles

from licensees for defective title, defective parts or the vehicle being substantially

different to what had been represented.44 As with the MVS Act, there was a Motor

Vehicle Disputes Tribunal for the resolution of disputes.45

[39] In short, the licensing regime was complicated and burdensome and imposed

significant costs on licensees. As described in the Explanatory Note to the MVS Bill,

the MVD Act was overly prescriptive and no longer addressing the needs of industry

and consumers. The particular problems described in the Explanatory Note were:

• its coverage is limited to licensed motor vehicle dealers (other modes

of motor vehicle trading fall outside its scope):

• it is inflexible and it imposes unnecessary restrictions:

• it imposes significant compliance costs on motor vehicle dealers:

• it attracts high levels of non-compliance (which is compounded by

low levels of enforcement):

• it poses difficulties for consumers in obtaining redress:

• it duplicates a number of consumer protection provisions found in

other statutes.

[40] The Explanatory Note described the major reforms under the MVS Act as

being:46

This Bill requires all persons carrying on the business of motor vehicle trading

to be registered. These persons include car market operators, importers,

wholesalers, and car auctioneers. The Bill replaces the existing licensing

regime for motor vehicle dealers with a registration regime that has specific

minimal entry criteria aimed at ensuring that unsuitable persons are prevented

from participating in the industry. For example, persons with certain criminal

convictions are disqualified from registration.

44 Sections 30-53. 45 Sections 96-108. 46 The Explanatory Note goes on to refer to the abolition of the Motor Vehicle Dealers Licensing

Board, a significantly simplified process for registration as a motor vehicle trader, an increase in

penalties for carrying on the business of motor vehicle trading while unregistered, a regime for

banning persons from participating in the motor vehicle trading industry, amongst other things.

[41] The Explanatory Note provided further information about the public policy

objective of the MVS Act in its “regulatory impact and compliance cost statement”

which said:47

Used motor vehicle purchases entail a number of risks. Vendors generally have

an information advantage over consumers and, as relatively high-value

consumer goods, vehicles are often used as security for finance and may be

subject to prior security interests that are not always disclosed. These risks are

not unique to the purchase of used motor vehicles, but the combination of risks

is uncommon in the purchase of other consumer goods.

The current regime has high compliance costs and a restricted scope. For these

reasons, over 70% of transactions occur outside the scope of the regime. In

addition, consumer law and consumer expectations have changed significantly

since the Motor Vehicle Dealers Act 1975 was passed.

Public policy objective

The overall objective is to ensure appropriate and accessible consumer

protections through the provision of accurate information for consumers’

purchase decisions, credible and accessible redress, coverage of the full range

of sales in trade, and effective enforcement.

Summary of the new regime

[42] The MVS Act was therefore intended to broaden the motor vehicles sales

transactions caught by the regulatory regime in order to provide greater reach for the

protections offered the legislation. The MVS Act now expressly included importers,

wholesalers, auctioneers and, until it was later repealed, car market operators. In

reality the only significant change was to include auctioneers. This is because case

law had held that importers were within s 4(1),48 wholesalers were within the MVD

Act unless they fell within s 4(4) and the inclusion of car market operators was

repealed when motor vehicle sales began to be commonly conducted on TradeMe.49

In contrast auctioneers had been expressly excluded under the MVD Act.50 In addition

the MVS Act changed the scope of some of the deeming provisions.

47 The Explanatory Note is similar to the principle behind the Bill as explained in the Select

Committee Report to which I was also referred. 48 Motor Vehicle Dealers Institute Inc v Herron CA475/96, 16 June 1997; and Wilson v Interim

Finance Ltd, above n 29. 49 The Motor Vehicle Sales Amendment Bill 2009 repealed “car market operators” from the

definition of motor vehicle traders. Bill Digest 1690 comments that market operators are not

traders unless they sell vehicles. TradeMe was specifically mentioned in Hansard as the reason

for this change at (27 May 2010) 663 NZPD 11423 and (24 August 2010) 666 NZPD 13655. 50 Section 5.

[43] At the same time, the regulatory process is considerably less burdensome and

the protections the MVS Act offered were reduced because there was other consumer

protection legislation in place. The main protection, as compared with a sale by a

finance company,51 is the information traders are required to disclose to consumers.

Regulations provide the form of a consumer information notice that must be displayed

with a used vehicle advertised for sale.52 The notice must include the trader’s contact

information, sale information, information about overseas registration and whether it

had any obvious structural damage when it was imported, and a short statement of the

buyer’s rights under the Consumer Guarantees Act and the Fair Trading Act and the

buyer’s obligations about registering a change of ownership. The sales information in

the notice includes the vehicles make and model, year, engine capacity, actual distance

challenged and warrant of fitness and registration status amongst other things.53

[44] An issue arose at the hearing about whether motor vehicle traders were

required to sell a vehicle with a current warrant of fitness.54 In further submissions

received after the hearing it has been clarified that the requirements are the same for

motor vehicle traders as defined in the MVS Act and for other sellers of motor

vehicles. All persons selling vehicles must ensure the vehicle has been certified within

one month before the date of the vehicle’s delivery to the purchaser unless the

purchaser undertakes in writing that the vehicle will not be operated on the road until

it has been certified.55

[45] In addition to the consumer information notice, purchasers of vehicles from

registered motor vehicle traders can bring their disputes to the Motor Vehicle Disputes

Tribunal. This enables disputes to be determined by a specialist tribunal. Those who

purchase from other sellers have access to the, non-specialist, Disputes Tribunal for

claims up to $15,000 and the District Court.56

51 As discussed further below, a repossession sale by a finance company contains provisions intended

to ensure the purchaser takes the vehicle free of registered security interests. 52 Consumer Information Standards (Used Motor Vehicles) Regulations 2008. The regulations were

promulgated under s 27 of the Fair Trading Act. 53 Schedule 2. 54 Current warrants are ones issued within the preceding month. 55 Land Transport Rule: Vehicle Standards Compliance 2002 (35001/2002). 56 Disputes Tribunals may hear disputes of claims up to $20,000 if the parties consent.

Finance company legislation

The Credit Contracts and Consumer Finance Act 2003

[46] The issue in this case is whether a finance company selling repossessed

vehicles pursuant to the security granted over the vehicle is a motor vehicle trader.

That sale is subject to the Credit Contracts and Consumer Finance Act 2003 (the CCCF

Act) enacted six months after the MVS Act. The CCCF Act sets out rules that apply

when consumer goods, which includes vehicles covered by the MVS Act, are

repossessed.57

[47] Under these rules the creditor must offer the repossessed vehicle for sale “as

soon as is reasonably practicable” after 15 days has expired from when the debtor has

been served with a repossession notice.58 Section 83Z says:

83Z Rules relating to sale by creditor

(1) When selling repossessed consumer goods (which may be by any

method that meets the requirements of this subsection), the creditor

must—

(a) ensure that every aspect of the sale, including the manner,

time, place, and terms, is commercially reasonable; and

(b) take reasonable care to obtain the best price reasonably

obtainable for the goods as at the time of sale.

…

[48] The debtor is entitled to obtain, at the debtor’s expense, a valuation of the

vehicle at the time of repossession.59 The debtor has the right to reinstate or settle the

credit contract, introduce a buyer or force a sale where the goods have not been sold

within 30 working days.60

[49] The above provisions are protections for the debtor. There are also protections

for the purchaser. Section 83ZG provides:

57 Credit Contracts and Consumer Finance Act 2003, s 5 and MVS Act, s 6(1). 58 Section 83Y. 59 Section 83ZA. 60 Sections 83ZB-83ZF.

83ZG Disposal of consumer goods to purchaser for value and in good

faith

(1) A purchaser for value and in good faith who takes possession of

consumer goods sold by a creditor takes the consumer goods free from

the following interests:

(a) the interest of the debtor:

(b) any interest subordinate to that of the debtor:

(c) the interest of the creditor:

(d) any interest subordinate to that of the creditor.

(2) Subsection (1) applies whether or not registrations relating to any

security interests referred to in subsection (1) have been removed

from the register of personal property securities established under the

Personal Property Securities Act 1999.

[50] If the vehicle is sold by the creditor, the creditor’s security interest is

extinguished as are all other security interests that are subordinate to that security

interest.61 Within seven days after the sale, the creditor must give to the debtor a

statement of account that sets out the gross proceeds of the sale, the costs of the sale

and the amount required to settle the credit contract.62 The creditor must pay from any

surplus any other security interests in the order of their priority under the Personal

Property Securities Act 1999.63

The Financial Services Providers (Registration and Dispute Resolution) Act 2008

[51] This Act provides broadly comparable provisions about who may provide

financial services as the provisions in the MVS Act as to who may be registered as a

motor vehicle trader. Financial service providers must be registered.64 There is public

access to the register.65 A person is disqualified for registration for reasons which

include being an undischarged bankrupt, prohibited from being a director or subject to

a management ban, or convicted of a dishonesty offence.66

61 Section 83ZH. 62 Section 83ZI. 63 Section 83ZJ. 64 Financial Services Providers (Registration and Disputes Resolution) Act 2008, ss 11-12. 65 Section 25. 66 Section 14.

My assessment

The “finance company” definition

[52] A “finance company” is defined as including both the arrangement through

which security is obtained over the vehicle (paragraphs (a) and (b) of the definition)

and selling the vehicle pursuant to the security obtained (paragraph (c) of the

definition). This suggests that when a finance company is selling a vehicle pursuant

to the security, it is carrying out the business of a finance company rather than the

business of motor vehicle trading.

[53] The words “(except the business of motor vehicle trading)” reinforce this. The

business of a finance company is not the business of motor vehicle trading. However

a finance company business may be operated as part and parcel of the business of

motor vehicle trading. For example, a motor vehicle trader may sell a vehicle to a

purchaser and offer them finance for it. The definition is about a finance company

business which is not also a motor vehicle trading business. It is similar in effect to

the former definition of “finance company” in the MVD Act which referred to a person

“whose ordinary business is not that of dealing in motor vehicles”.

[54] In my view, therefore, the starting point is that a “finance company” is not

necessarily a motor vehicle trading business because it sells vehicles pursuant to its

security interest. Such sales are part of the business of a finance company. Whether

a finance company is also in the business of motor vehicle trading depends on ss 7, 8

and 9 of the Act.

The s 7 definition

[55] Under s 7 a person who “carries on the business of motor vehicle trading” is a

motor vehicle trader”. It is therefore clear that not every sale of a motor vehicle will

be motor vehicle trading for the purposes of the Act. For example, a person who

decides to sell their personal car will not be a motor vehicle trader. It is necessary that

the person carry on a business in motor vehicle trading.

[56] As set out above, the predecessor to s 7 similarly referred to a person who

“carries on the business of”. As to that wording, the Court of Appeal considered the

ordinary sense of “business” was “the exercise of an activity in an organised and

coherent way and one which is directed to an end result”. Further, the “existence of a

profit-making motive … or of an intention that the activity serve commercial

purposes” are material considerations.67

[57] The s 7 definition also makes it clear that a person can be a motor vehicle trader

even if they are carrying on another business. In principle, therefore, just because a

person is carrying on a finance company business, does not mean they cannot also be

a motor vehicle trader.

[58] The s 7 definition specifies certain activities to be motor vehicle trading. This

does not include finance companies. As Mr Kenny submits, had Parliament intended

that finance company repossession sales to be motor vehicle trading, it could have

expressly said so. The Ministry’s submission relies on ss 8 and 9.

Is Mr Kenny not a motor vehicle trader because of s 9

[59] Mr Kenny submits the purpose of s 9 is to provide a list of activities that in

themselves are insufficient to constitute motor vehicle trading. He says the important

words in s 9(1) are “only because”. The list is not a closed list. In other words, even

if none of the listed activities apply, that does not mean the person is a motor vehicle

trader. It just means they do not have the benefit of s 9.

[60] The Ministry submits s 9 provides a limited exception to those who would

otherwise be carrying on the business of motor vehicle trading. It submits that finance

companies must sell vehicles by or through motor vehicle traders in order to have the

protection of s 9. The implication of s 9 is that, if they sell repossessed vehicles

67 Mutual Rental Cars Ltd v Russell, above n 28, at 10 per Richardson J citing income tax cases

Calkin v CIR [1984] 1 NZLR 440 at 446; and Grieve v CIR [1984] 1 NZLR 101 at 106-107. An

example is Motor Vehicle Dealers Institute Inc v Herron, above n 48, which concerned defendants

who had a reputation for being able to import second hand vehicles from Japan. They were

approached by people to import vehicles on their behalf. The defendants provided a list of vehicles

with prices and arranged the importation of the selected vehicle but the purchaser sent the money

directly to Japan. The Court of Appeal restored the conviction entered in the District Court on the

basis that the transactions were part of a course of conduct with an obvious commercial purpose

and so were motor vehicle dealing under s 4(1) of the former definition.

themselves rather than through a motor vehicle trader, they are carrying on the

business of motor vehicle trading.

[61] I consider the correct approach to s 9 is to start with the opening words of

s 9(1). Mr Kenny is “not treated as carrying on the business of motor vehicle trading

… only because” he is within one of the sub-paragraphs of s 9(1). The natural and

ordinary meaning of those words is that the activities listed are not by themselves

sufficient to make a person a motor vehicle trader. If that is the person’s only

association with the business of motor vehicle trading they are not a motor vehicle

trader.

[62] The s 9 activities all have some association with motor vehicle trading. In a

number of those cases, the purchaser of the vehicle will already have the benefit of the

Act’s protections because a motor vehicle trader is already involved (subss (a), (b),

(d), (e)(i) and (iii), (ea) and (g)). In other cases the purchaser is the Crown (subs (e)(ii))

or there is no longer a purchaser involved (subs (f)). In the remaining cases the

intention appears to be to ensure that certain business activities which may incidentally

involve selling vehicles are not caught (subss (c), (h) and (i)). In all cases s 9 is about

who is not to be treated as a motor vehicle trader. It is not about who is to be treated

as motor vehicle trader.

[63] In Mutual Rental Cars Ltd v Russell the Court of Appeal considered the effect

of s 4(4) of the MVD Act, the equivalent of s 9 in the MVS Act.68 In that case Mutual

Rental Cars was convicted on a charge of being an unlicensed motor vehicle dealer.

The defendant carried on a rental car business. It replaced its rental fleet every three

years. Under a separate sales division of the defendant’s business, the ex-rentals were

sold in car yards which it operated under its name. It did so on behalf of itself as well

as others in the group. The cars were advertised for sale under its name. It offered to

arrange finance for purchasers and it assisted prospective purchasers to sell their

vehicles by putting them in touch with licenced motor vehicle dealers.

[64] The Court of Appeal described the function of s 4(4) as being:69

68 Mutual Rentals Cars Ltd v Russell, above n 28. 69 At p 11-12.

… to provide qualified protection for those whose vehicle transactions are

within its terms. The protected transaction in each case is one carried out in

the course of a different primary activity and in some cases of a specifically

limited kind. The subsection takes out of the category of motor vehicle dealer

those persons who have engaged in nominated dealing transactions in those

special and limited circumstances. That is subject to the further qualification

expressed in the formula that no such person is deemed a motor vehicle dealer

by reason only of the fact that he [or she] comes within one of the paragraphs

that follow. Thus subs (4) is not a shield if there are circumstances not covered

by the protective umbrella of the particular paragraph which considered on

their own still bring that person within the earlier definitions.

[65] The focus in that case was on s 4(4)(e) of the MVD Act, of which s 9(1)(i) of

the MVS Act, is the comparable provision. The Court of Appeal considered that the

words “[i]n the course of carrying on any other business (not being the business of

motor vehicle dealer)” was to exclude from s 4(4)(e) where the primary business was

motor vehicle dealing. The Court of Appeal said:70

The object of para (e) is readily perceivable. It is to obviate the need for

licensing where vehicles used in the business are sold in the ordinary course.

The orderly disposal of assets which have served their purpose in the business

is a common and necessary business practice. Even where the selling

arrangements involve substantial volumes and considerable organisation they

may properly be characterised as the realisation of the assets of that business

in an enterprising way rather than the venturing of them in another business

of dealing. It is a question of fact and degree where and how the line is to be

drawn. Clearly some advertising and displaying of such vehicles should be

expected as incidental to selling and so as contemplated by the expression

“resell” in the context of para (e). In such a case the person is not regarded by

reason only of those reselling arrangements as being a motor vehicle dealer.

But the selling may be conducted in such a way that notwithstanding the

qualified protection afforded by the paragraph he is still regarded as carrying

on the business of dealing in motor vehicles for the purposes of the section.

[66] On the facts, the Court of Appeal considered there was a different reason for

why the defendant was unable to rely on s 4(4)(e). The defendant could not rely on

the qualified protection provided by that provision because some of the cars it was

selling belonged to other companies in the group. Those cars had not been purchased

for use in the defendant’s business. As discussed further below, the defendant was

convicted under s 4(2) (holding out that it was a motor vehicle dealer).

[67] The MVS Act has narrowed the qualified protection from that provided by s

4(4)(e). Because of s 9(2), section 9(1)(i) (the equivalent provision to s 4(4)(e))

70 At p 13-14.

applies only if the sales are made through a motor vehicle trader. Section 9(2)

similarly narrows the qualified protection for finance companies in s 9(1)(h). At the

same time, that now also expressly covers an insurance company, a rental car

company, a storage provider or any other person, as well as a finance company.71

These additions appear intended to make it clear that sales by these businesses are

potentially protected but only if they make the sales through a motor vehicle trader. If

they do not use a motor vehicle trader they may be caught by s 8(1)(b) depending on

the extent and purpose of the sale. This is consistent with Parliament’s intent to

broaden the reach of the Act in order to promote and protect the interests of consumers

in relation to motor vehicle sales.

[68] In other words, if Mr Kenny sold repossessed vehicles through a motor vehicle

trader, he is not to be treated as a motor vehicle trader only because of this. As

Mr Kenny does not sell motor vehicles through a registered trader, s 9(1)(h) does not

apply to him. This means that s 9(1)(h) does not tell us whether Mr Kenny is a motor

vehicle trader. For that question, s 8 must be considered.

Does Mr Kenny hold himself out as a motor vehicle trader (s 8(1)(a))?

[69] The Act treats Mr Kenny as carrying on the business of motor vehicle trading

if he “holds out” that he is carrying on that business. Mr Kenny contends that he does

not suggest he is in the business of motor vehicle trading. Instead his TradeMe listings

explicitly state that “we are not registered traders” and the vehicle is a “finance

company repossession”. Potential buyers who wish to inspect the car are advised they

can do so at the “MTF office”.

[70] The Ministry submits that Mr Kenny’s statements do not assist because a

person cannot contract out of the MVS Act. The consumer protection purpose would

71 The qualified protection for a finance company also more clearly addresses the different ways that

a finance company may sell a vehicle. Section 9(1)(g) appears to be directed specifically to where

a buyer wishes to buy a vehicle from a motor vehicle trader but requires finance from a finance

company. The finance company may take ownership from the trader and sell the vehicle to the

buyer through a hire purchase agreement as is the case with MTF Lower Hutt. Section 9(1)(g) is

therefore saying that, if a finance company sells to a buyer in this way, that does not make MTF

Lower Hutt a motor vehicle dealer. Section 9(1)(h) appears to be directed to where a finance

company sells a vehicle pursuant to its security. That sale can be described as an incidental part

of the ordinary business of a finance company but only has the protection conferred by s 9 if the

sale is through a registered motor vehicle trader.

be thwarted if a person could avoid the regulatory system under the Act by saying

publicly that the Act does not apply to them. In support of this submission, the

Ministry relies on Interim Finance Ltd.72 In that case purchasers were provided with

documentation which stated that Interim Finance was a finance company and not a

motor vehicle dealer. The High Court said:73

I do not consider the fact that Interim Finance repeatedly said it was not a

motor vehicle dealer to be very relevant, if at all. Protestations (written or

oral) that you are not what the law says you are, do not prevail. If, on the

facts, Interim Finance was conducting a motor vehicle dealing business then

it matters not that it protests an incorrect view in its documentation.

[71] The Ministry submits the focus of s 8(1)(a) is on the impression a consumer

would form when dealing with the business. The Ministry refers to Mutual Rental

Cars where the Court of Appeal considered s 4(2) of the MVD Act, the equivalent of

s 8(1)(a) of the MVS Act.74 The relevant inquiry is the impression made on “the man

in the street”.75 The Ministry submits the man [or woman] in the street would perceive

MTF Lower Hutt as holding itself out as a motor vehicle trader because:

(a) From MTF Lower Hutt’s statements, the public would understand that

the business was not registered, rather than that it was not in the

business of motor vehicle trading.

(b) Potential purchasers who take up the invitation to inspect the vehicles

would turn up to MTF Lower Hutt which is set up as a professional

business (in contrast to, for example, a private residence) and MTF

stands for “Motor Trade Finance” (emphasis added).

(c) Potential purchasers may see the number of vehicles listed by MTF

Lower Hutt on TradeMe and infer it to be in the business of motor

vehicle trading.

72 Wilson v Interim Finance Ltd, above n 29. 73 At [9] per Giles J. 74 Mutual Rental Cars Ltd v Russell, above n 28. 75 At p 15 per Richardson J.

(d) Potential purchasers may also see the TradeMe feedback which refer to

Mr Kenny as a “trader” or “dealer”. This suggests some customers

have assumed that MTF Lower Hutt is a motor vehicle trader. This is

a reasonable assumption in the circumstances.

(e) Potential purchasers may also visit the MTF franchise website. The

website makes a number of references to “dealer”. For example, under

the tab “About MTF” the website states: “MTF was formed in 1970 to

enable a group of motor vehicle dealers to offer car loans to their

customers”. On that same page, under the heading “Become an MTF

dealer”, the website states: “As an MTF dealer you belong to a network

of quality dealers who offer superior finance options and service

throughout New Zealand”. Under the “Buying a car” tab, one of the

headings is: “Buying from a dealer”. Under that heading there is a sub-

heading: “A nationwide network of dealers” and the statement: “That

means we’re well placed to help find the wheels that are right for you”.

[72] As set out earlier, the Act sets out two ways that a person may hold out they

are carrying on the business of motor vehicle trading. The first is where the person

advertises, notifies or states that they are carrying on that business (s 8(2)(a)). The

second is where the person “in any way represents that the person is ready to, or is

carrying on” that business (s 8(2)(b)). In my view Mr Kenny is not advertising,

notifying or stating that he is carrying on the business of motor vehicle trading. Instead

he is advertising the sale of vehicles as a finance company repossession. The question

is whether he is in any way representing that he is carrying on the business of motor

vehicle trading.

[73] In my view the passage from Interim Finance does not particularly assist. That

case was quite different to the present case. It involved motor vehicle trading (through

the business of importing vehicles for customers) under the guise of a finance

arrangement. That finance arrangement was in reality an upfront deposit at the time

of ordering the car and a balance payment with a commission for the trader when the

car was delivered.

[74] As explained in Mutual Rental Cars in relation to the predecessor of s 8(1)(a),

this provision is useful where, perhaps because of limited records or the absence of

specific witnesses, the prosecution may be unable to prove that the person charged

was carrying on a motor vehicle trading business but the external indications may

nevertheless demonstrate that they were holding themselves out as being ready to do

so. The Court of Appeal considered that it was a matter of fact and degree what

constituted a holding out. However it involved “an inquiry into the impression made

upon the public as to the manner in which the undertaking was conducted”.76

[75] In that case the Court of Appeal was not called upon to reconsider the High

Court’s conclusion about this. The High Court considered there had been a holding

out. This was because:77

The sale of the cars was conducted from several different car yards. These

were operated under such names as “Avis Car Sales”, “Avis Young Ex

Rentals”, “Avis Used Cars”, … and the like. There was nothing in these names

or in the nature of the car yards themselves (containing, as they did, cars

displayed for sale) which could have distinguished them in the minds of the

public from any other car sales yard or used car business. Moreover, the

defendant advertised its cars for sale in the same way as any other business

seeking to sell cars. I do not consider that there is any other reasonable

hypothesis open than that the defendant was holding itself out to the public as

carrying on the business of selling used cars. It was plainly competing for the

public’s custom with other firms seeking to sell cars. The member of the

public who was minded to buy a car and who saw the defendant’s

advertisement or its car yards could have gained no other impression. The fact

that there may in some cases have been a reference to the fact that the cars

were ‘ex rental’ would not have affected or diminished that impression.

[76] That case is therefore quite different from the present. Mr Kenny is using

TradeMe to sell repossessed vehicles. That of itself makes no representation about

this business. Members of the public also use TradeMe to sell vehicles. The manner

in which the cars are sold, in contrast with the car sale yards in Mutual Rental Cars,

make no representation about the nature of Mr Kenny’s business.

[77] The natural and ordinary meaning of “representation” is to convey something

by words or conduct or both. For example, Black’s Law Dictionary defines

“representation” as “a presentation of fact – either by words or conduct – made to

76 Mutual Rental Cars Ltd v Russell, above n 2867, at p 15 per Richardson J. 77 At p 8 citing the decision of Quilliam J in the High Court..

induce someone to act…”.78 In the Fair Trading Act context, a representation involves

“a representor … saying something to the representee either by words (whether spoken

or written) or other means…” and the “representor must be communicating a statement

of fact to the representee either directly or by clear and necessary implication”.79

[78] This is consistent with the view that has been taken to the meaning of “holds

out” under the MVD Act. For example, in the District Court it was said that holding

out meant to represent to the public and the representation as to being ready to carry

on the business “… may be made verbally, in written form, or by conduct. It may be

made either expressly or impliedly but there must be no ambiguity as to what is meant

…”.80 Similarly, in the High Court it was said that “[h]olding out in this context is

simply to represent by words or conduct a state of affairs”.81

[79] In my view Mr Kenny was not representing by words that he was carrying on

the business of a motor vehicle trader. He said he was not a registered trader and that

the vehicle was a finance company repossession. These descriptions may not have

been particularly clear to the general public. For example members of the public may

not understand that those carrying on the business of motor vehicle trading are required

to be registered. Further, the vehicle may have been obtained by a motor vehicle

trading business from a finance company repossession. While these words may have

been somewhat unclear to members of the public, they certainly were not

unambiguously conveying that Mr Kenny was in the business of motor vehicle trading.

[80] I consider that Mr Kenny’s business premises also did not represent he was in

the business of motor vehicle trading. The Ministry’s submission relies on a

photograph of the exterior of the business. As the Ministry submits, this photograph

indicates a commercial operation. However that operation is not obviously a motor

trading business. The signage is predominantly about vehicle finance: “Vehicle

finance approved. Today” and the “MTF” logo comprise the signage. The Ministry

does not suggest there are vehicles on display at the business. Counsel for Mr Kenny

78 AB Garner (ed) Black’s Law Dictionary (10th ed, Thomson Reuters, Minnesota, 2014) at 1493. 79 Marcol Manufacturers Ltd v Commerce Commission [1991] 2 NZLR 502 (HC) at 506 per

Tipping J. 80 Motor Vehicle Dealers Institute Inc v Dunn [1996] DCR 848 per Judge JR Callander at [20]. 81 Kerry Stone Ltd v Knowles HC Napier CIV-2006-441-564, 25 October 2006 at [49] per Venning J.

advises they are not displayed at the business – they are stored at an unmanned

warehouse. This is consistent with carrying on a finance company business and the

selling of repossessed vehicles as an incidental part of that business.

[81] In my view there is no significance in the fact that “MTF” stands for “Motor

Trade Finance” (emphasis added). That does not convey that the business is one of

motor vehicle trading. It conveys that finance is available for motor vehicles.

[82] Nor is there significance in the fact that potential purchasers looking at

Mr Kenny’s TradeMe reviews may see that he is often referred to as a

good/great/excellent “trader”. Counsel for the Ministry accepts that this is a term

which refers to anyone selling on the TradeMe website. Sales are often referred to as

“trades” and the seller is often referred to as a “trader”. Consistent with this

terminology, a number of reviews say “good trade”, “easy fast trade”, “great trade”

and so on.

[83] A stronger point for the Ministry is that potential purchasers looking at

Mr Kenny’s TradeMe reviews will see that he has sold a large number of repossessed

vehicles. However the question is whether by that conduct Mr Kenny is representing

that he is motor vehicle trader. The significance of making such a representation is

that purchasers may wrongly believe they are purchasing from a registered motor

vehicle trader and therefore have the protections of the MVS Act. The concern in

Mutual Rental Cars was that the defendant was conducting its business in the same

way as a licensed dealer, competing with licensed dealers and thereby misleading

potential purchasers.

[84] In this case the number of sales made by Mr Kenny is a representation that he

sells a number of vehicles through TradeMe. However, this is not of itself a

representation that he is in the business of motor vehicle trading and that therefore the

sales will be protected by the MVS Act. It is a representation only that he sells a lot

of motor vehicles. Although this is relevant to whether Mr Kenny is holding himself

out as a motor vehicle trader, also relevant is any representation about the nature of

those sales and the protection conferred on purchasers in the listing for the particular

vehicle being considered by a purchaser. Mr Kenny makes it clear he is not a

registered trader, the vehicle is a finance company repossession and no warranty is

given.

[85] I agree with the Ministry that the MTF website is confusing. It is not

immediately obvious to someone visiting the website that not all MTF franchisees sell

vehicles (whether or not a purchaser requires finance) and that some simply finance

vehicles purchased through a motor vehicle trader. However, in relation to MTF

Lower Hutt in particular it becomes more apparent that MTF Lower Hutt is not a

“vehicle dealer”. The website enables a user to click the area of interest under the

“buying a car” and “selling a car” tabs. When Lower Hutt is selected, two boxes are

displayed:

(a) One box says “1 vehicle dealers in your area” and there is a “view

dealers” tab. When that tab is clicked, the page has a heading “For

vehicles and finance” and the business contact details and location of

“Wellington Vehicle Wholesalers” are provided. There is another

heading “For finance” under which MTF Lower Hutt’s contact details

and location are provided.

(b) The other box says “1 office in your area” and it sets out the contact

details for MTF Lower Hutt. When this box is clicked and the tab

“buying a car” is selected, the website page says “MTF Lower Hutt.

Whether you are buying from a dealer, privately, online or want cash to

negotiate, we provide an immediate answer”.

[86] In summary, once the Lower Hutt area is selected and the various tabs are

followed, it becomes apparent that MTF Lower Hutt is involved in the business of

motor vehicle finance not motor vehicle dealing.

[87] In these circumstances I am not persuaded that Mr Kenny is representing that

he is carrying on the business of motor vehicle trading. The “impression made upon

the public as to the manner in which the undertaking [is] conducted” when looked at

as a whole is not that he is a registered motor vehicle trader. The impression is that

Mr Kenny operates a finance company business and in that capacity he sells

repossessed vehicles. I consider the issue of whether a person is to be deemed to be

motor vehicle trading because of the number of vehicles they sell is more appropriately

determined by s 8(1)(b).

Does Mr Kenny sell motor vehicles for the primary purpose of gain (s 8(1)(b))?

[88] The Act treats Mr Kenny as carrying on the business of motor vehicle trading

if in the preceding 12 month period he sold more than six motor vehicles, unless he

proves that they “were not sold for the primary purpose of gain”. It is accepted that

Mr Kenny has sold more than six motor vehicles in the last 12 months. The issue is

whether he does so for the primary purpose of gain.

[89] The Ministry submits that the proper focus is on the object of the sale, that is

why a person is selling the vehicle. The Ministry submits that when MTF Lower Hutt

takes possession of the vehicle that is an election to take enforcement action for a

default by exercising its security under the finance agreement. It submits the main

object of this election is to maximise, as far as possible, the original benefit it expected

to derive from the finance agreement. When a repossessed vehicle is sold, this

minimises MTF Lower Hutt’s losses under the finance agreement. In other words

Mr Kenny derives a commercial benefit from the sale of repossessed vehicles and this

is a “gain” under s 8(1)(b).

[90] The Ministry relies on Motor Vehicle Dealers Institute v Ball as to the meaning

of “gain”.82 In that case Mr Ball faced two charges of carrying on the business of

motor vehicle trading under the Act. The District Court said:83

I do not agree with the defence submission that the term “gain” should be

narrowly construed so as to be equivalent to profit. I agree with the

prosecution view that it should be given a wider definition. I am not required

to determine the outer limits of the term “gain”. For present purposes it is

sufficient to say that, given the expansive interpretation required by the

purposes of the Act, “gain” can include more than mere profit. I am inclined

to read gain as a commercial benefit, which would encompass not just profit,

but minimising losses, avoiding costs, and divesting encumbering assets.

82 Motor Vehicle Dealers Institute v Ball [2014] DCR 294. 83 At [26] per Chief Judge Doogue.

[91] The plain or dictionary meaning of the word includes “[i]ncrease of

possessions, resources, or advantages; and instance of this; profit, improvement; spec.

the acquisition of wealth. (Opp, loss) … Sums acquired by trade etc,; emoluments,

winnings…”.84 Similarly, the definitions of “gain” in dictionaries of legal words and

phrases include: “‘Gain’ is not restricted to pecuniary or commercial profits; it

includes other considerations of value obtained from business transactions or

dealings…”;85 “…a gain is something obtained, not necessarily a pecuniary gain…”;86

and “’gain’ includes a gain by keeping what one has, as well as a gain by getting what

one has not…”.87

[92] I accept that “gain” is a wider term than “profit”. It encompasses some

commercial advantage or improvement to the seller’s position which may be

something other than receiving in monetary terms more than the costs involved in the

sale.88 This must be the primary purpose of the motor vehicle sale. As explained in

Mutual Rental Cars, the Court of Appeal regarded s 4(3) of the MVD Act, the

equivalent of s 8(1)(b) in the MVS Act, to be a simple prima facie numerical test for

limiting dealing in vehicles to licenced dealers. The number of trades was a simple

way of determining whether a person was carrying on “the business of dealing in

motor vehicles”. If the primary purpose was not “gain” that was evidence that the sale

was not part of a business activity of selling motor vehicles.

[93] Mr Kenny does not propose any different meaning of “gain”. He accepts there

is a commercial benefit in MTF Lower Hutt dealing with the repossessed vehicle.

However he says the primary purpose of selling a repossessed vehicle is not to receive

a commercial benefit. He says the primary purpose is to comply with the obligations

under the CCCF Act. He says that he is able to obtain a better price for a repossessed

84 Shorter Oxford English Dictionary (6th ed, 2007) vol 1 (A-M) Gain at [1006]. 85 D Greenberg Stroud’s Judicial Dictionary of Words and Phrases Vol 2: F-O (8th ed, Sweet and

Maxwell, 2012) at 1185. 86 D Greenberg Jowitt’s Dictionary of English Law Vol 1: A-I (4th ed, Sweet and Maxwell, 2015) at

1055 citing Re Arthur Average Association for British, Foreign and Colonial Ships Ex p. Hargrove

& Co (1875) L.R. 10 Ch. App. 545n at [546]-[547n] per Jessel MR. 87 D Hay (ed) Words and Phrases Legally Defined Vol 1: A-K (4th ed, LexisNexis NZ, Wellington,

2007) at 1014. 88 Registrar of Motor Vehicle Traders v Daniels [2017] NZDC 10155 is a decision in the District

Court which determines that a number of sales made by Mr Daniels were not for “gain”.

vehicle than if he is required to sell the vehicle through a registered motor vehicle

trader. This is to the debtor’s benefit because his debt to MTF Lower Hutt is reduced.

[94] I do not accept Mr Kenny’s submission. I consider it conflates the purpose or

object of selling the vehicles with the manner in which he must sell them. Mr Kenny

makes a decision to sell the vehicle when he elects to enforce his enforce his security.

He does so because he considers that is commercially advantageous to him to do so in

order to recoup all or (more usually) some of the outstanding loan. The sale of the

vehicle is for the primary purpose of “gain” (or a commercial benefit) to him.

[95] Mr Kenny contends the gain was to the debtor because the debt was reduced.

This is because, regardless of how much is achieved in the sale, the debtor remains

liable to MTF Lower Hutt for the balance of the debt owing. However, MTF Lower

Hutt must regard repossession and sale as a commercially advantageous way to obtain

repayment. It is not required under the hire purchase agreement to use this method of

enforcement yet it is the method of enforcement it uses. That the debtor also benefits

from the sale in the sense that their debt is reduced, does not alter the fact that MTF

Lower Hutt also benefits.

[96] Once MTF Lower Hutt decides to gain this commercial improvement to its

position from the sale of the motor vehicle, it must carry out the sale in accordance

with the CCCF Act. The requirement to take reasonable care to obtain the best price

reasonably obtainable for the vehicle is not inconsistent with and does not override

MTF Lower Hutt’s obligations under the MVS Act to either register as a motor vehicle

trader or to sell through another registered motor vehicle trader.

[97] I have given this issue careful consideration. If Mr Kenny is correct that he

can obtain a higher price for the vehicle if he is not subject to the MVS Act, then it is

unclear to me why the perceived benefits for a buyer of a sale by a registered motor

vehicle trader should outweigh a debtor’s interest in a sale method that gives him or

her the opportunity of achieving the highest price for the vehicle (and therefore the

greatest reduction of their debt achievable). This is especially unclear to me when

buyers are informed that they are buying the vehicle without the advantages provided

by the MVS Act (namely the consumer information notice and access to the Motor

Vehicle Disputes Tribunal) and buyers are nevertheless happy to “trade” with the

finance company on TradeMe on this basis. In such circumstances it is difficult to see

what purpose the MVS Act is serving.

[98] The extent to which consumer goods, including vehicles, are traded on

TradeMe and the New Zealand public’s comfort with that was probably not foreseen

when the MVS Act was enacted.89 However any changes because of this are for

Parliament. On the words of s 8(1)(b), in light of the narrowing of the protection for

finance companies in s 9(1)(h), and the Act’s stated purpose, I am unable to conclude

that Mr Kenny’s sales are not within its terms.

Result

[99] Mr Kenny sought a declaration that a finance company selling repossessed

motor vehicles is not selling motor vehicles for the primary purpose of gain and

reward. For the above reasons I decline to grant that declaration. If there is any issue

about costs, the parties have leave to make brief submissions (no longer than five

pages) about this within two weeks of the date of this judgment. However my

preliminary view is that costs should lie where they fall. The issue is a difficult one

and Mr Kenny has acted responsibly in bringing this proceeding in order to have the

matter determined.

Mallon J

89 As is indicated by the need to remove “car market operator” from the scope of the MVS Act.