Quin v Muir

[2024] NZHC 2475

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2023-419-351 [2024] NZHC 2475

BETWEEN

KARL THOMAS QUIN

Appellant

AND

BEVIN JOHN MUIR

Respondent

Hearing:

30 July 2024

Appearances:

N S Tabb for Appellant

R M J Hakaria for Respondent

Judgment:

30 August 2024

JUDGMENT OF O’GORMAN J

This judgment was delivered by me on 30 August 2024 at 1 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

Solicitors/Counsel:

Natalie Tabb, Barrister, Auckland Sharp Tudhope, Tauranga

QUIN v MUIR [2024] NZHC 2475 [30 August 2024]

[1]                 This is an appeal against the decision of Judge P R Spiller on 12 December 20231 which set aside  a  default  judgment  entered  by  Judge  R  G  Marshall  on  30 November 2022.2 Judge Marshall granted judgment for $99,402.31 in favour of Mr Quin against Mr Muir.

[2]                 Judge Spiller set aside the default judgment on the grounds that it constituted a miscarriage of justice because of an error on the part of Mr Muir’s solicitor in failing to file a statement of defence. Mr Quin appeals on the grounds that no miscarriage of justice occurred because there is no defence to the plaintiff’s claims and therefore the judgment should not have been set aside.

Factual background

[3]                 In early June 2021, the respondent listed a 1956 Chevrolet Belair for sale on Trade Me. The listing described the car as “exceptionally tidy”, “ready to hop in and go cruising in comfort” and “just been through full certification…”.

[4]                 Mr Quin first made contact with the seller through the “Ask A Question” facility on the Trade Me website, to which the seller replied with his telephone number.

[5]                 A telephone conversation took place between Mr Quin and Mr Muir a day or two later. Mr Quin was told that the vehicle had a current warrant of fitness and had been certified by the low volume vehicle technical association. There was a discussion about the condition of the vehicle. Mr Quin alleges that he was told the vehicle was in “good condition”, whereas Mr Muir says that the answer was that everyone’s opinion on condition is different. Nothing in the advertisement or the conversation indicated that the vehicle had any defects or material issues of concern.

[6]                 Mr Quin was the highest bidder and purchased the vehicle for $80,600. He paid the purchase price and took possession in person in Thames (he declined the opportunity of a test drive). He transported the vehicle to Kerikeri on a vehicle trailer.

1      Quin v Muir [2023] NZDC 27547.

2      Quin v Muir DC Thames CIV-2022-075-63, 30 November 2022.

[7]                 Within the first few days Mr Quin and Mr  Muir exchanged texts in which  Mr Quin said, “love the car, awesome”, and “Been taking it to work every day removed plates on exhaust sounds good … just love it led bulbs in it now”.

[8]                 However, by 29 June 2021, the appellant experienced problems with the vehicle overheating. The appellant repaired a crack in the chassis but, within a few months of this repair, it became evident there were a significant number of other problems with the vehicle.

[9]On 29 October 2021, Mr Quin texted Mr Muir to say:

… it appears that the car you sold me has a few issues regarding the certification and whether it should’ve had a warrant of fitness an independent certifier and investigator are checking into it if it appears that this is the case then will need to discuss refund or this matter will need to be taken further

[10]             On 1 November 2021, Mr Clearwater, a mechanic at Northern South NZ Performance Engineering, told Mr Quin that the car had defects that meant it should have failed its warrant of fitness (WOF) and Low Volume Vehicle Technical Association Incorporated (LVVTA) certification, and it was not roadworthy.

[11]             On 22 November 2021, Waka Kotahi (NZTA) inspected the vehicle and issued to Mr Quin a written notice of revocation of vehicle inspection, with a system flag that a warrant could not be issued until identified defects were repaired, namely:

·Damage to the vehicle structure, deformation and repairs of both left and right hand chassis rails, holes drilled in chassis rails to fit aftermarket gearbox crossmember, corrosion in boot floor within 150 mm of fuel tank mount, left hand rear top shock absorber mount torn out of boot floor area and repair to right hand rear top shock absorber mount, corrosion in rear parcel shelf left hand side.

·Steering and suspension faults, rear leaf spring shackle bushes worn, both left and right hand front lower ball joints have excess play, steering idler arm has excess play.

·Fuel system faults, fuel tank insecure, mounting straps loose, correct sealing fuel cap missing.

·Braking system faults, park brake cable damaged, solid brake line to rear rubbing on chassis bracket and corroded.

·Exhaust leak left hand pipe underbody.

·Left rear tyre sidewall damage due to rubbing on rear guard.

·Windscreen damage outside of the CVA larger than allowable limit.

·Modified front seat mounts.

[12]On 26 November 2021, Mr Quin lodged a complaint with the LVVTA.

[13]             On 22 February 2022, Mr Quin was advised that NZTA had completed their investigation and that a copy of their written report could be requested under the provisions of the Official Information Act 1982. Mr Quin made such a request and received a detailed report about the defects underlying the WOF revocation. NZTA’s inspector formed the view that the WOF should not have been issued because these faults must have existed at the time of the previous WOF inspection and did not meet the necessary standards.

[14]             During June 2022, Mr Quin asked for advice from a solicitor. This resulted in a letter dated 20 June 2022 sent from his lawyer, Ms Tabb, to Mr Muir as vendor advising that he was “cancelling the agreement to purchase the vehicle and rejecting the vehicle”. Mr Quin sought a full refund of the purchase price, together with costs.

[15]             On 1 July 2022, when no response had been received to that letter, the appellant commenced proceedings in the Thames District Court. The notice of proceeding and statement of claim were served on the respondent on 10 August 2022.

[16]             When no defence was filed within 25 working days, judgment was entered on a formal proof basis on 30 November 2022. Judgment was sealed on 13 December 2022. It was served on Mr Muir with a letter delivered on 22 December 2022.

[17]             On 3 April 2023, the respondent applied to set aside the judgment on the grounds that he had instructed a lawyer to file a defence but, unbeknownst to him, those instructions had not been followed.

Legal principles

Approach on appeal

[18]             General appeals from the District Court are by way of rehearing.3 On appeal, the High Court may “make any decision it thinks should have been made”,4 coming to its own conclusion on the merits of the case and, if appropriate, substituting its decision for that of the District Court.5 It can also direct the District Court to rehear the proceedings, to consider or determine any matter that the High Court directs or to enter judgment for any party that the High Court directs.6

Applications to set aside default judgments

[19]Rule 15.10 of the District Court Rules 2014 provides:

15.10   Judgment may be set aside or varied

Any judgment obtained by default under rule 15.7, 15.8, or 15.9 may be set aside or varied by the court on such terms as it thinks just, if it appears to the court that there has been, or may have been, a miscarriage of justice.

[20]             In considering an application to set aside a judgment obtained in accordance with the District Court Rules, relevant considerations as to whether there was a possible miscarriage of justice include:7

(a)whether the failure to appear was excusable;

(b)whether there was a substantial ground of defence; and

(c)whether there would be irreparable injury to the party that had obtained the judgment if the judgment was set aside.

3      District Court Act 2014, ss 124 and 127.

4      Section 128(1)(a).

5      Austin, Nichols & Co Ltd v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].

6      District Court Act, s 128(1)(b).

7      Russell v Cox [1983] NZLR 654 (CA) at 659, approved in Xiao v Department of Internal Affairs

[2019] NZCA 326, [2019] 3 NZLR 622 at [27].

Pleadings

[21]             In the statement of claim filed in the District Court, three causes of action were pleaded against Mr Muir:

(a)Breach of Contract, namely that it was a condition of the contract that the vehicle  was  safe,  roadworthy,  could  be  legally  driven  on  New Zealand roads and did not have any material defects.

(b)Misrepresentation, including:

(i)representations that Mr  Muir  advertised  the  vehicle  on Trade Me as having been recently certified and having a recently obtained WOF and LVTTA certification; and

(ii)representations during a telephone discussion between the parties in June 2021, in which Mr Muir advised Mr Quin that the vehicle was in good condition.

(c)Mistake, in that Mr Quin believed that the vehicle was in good condition, safe, roadworthy, and met the NZTA safety standards to be legally driven on New Zealand roads.

Sale of goods provisions

[22]             Although it was not pleaded or referred to by the parties in their submissions, at the outset of the hearing I questioned the relevance and impact of the sale of goods provisions in the Contract and Commercial Law Act 2017 (CCLA).

[23]Section 120 of the CCLA defines a contract for the sale of goods as:

a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration (the price).

[24]             “Goods” are defined in s 119 as including (among other things) all kinds of movable personal property but excluding money or things in action. A motor vehicle

is movable personal property; therefore, this dispute concerns a contract for the sale of goods.

[25]             For contracts for the sale of goods, the cancellation provisions in pt 2, subpt 3 (ss  33–57)  of  the  CCLA do not apply.8  Instead,  pt 3 (ss  119–206)  applies,9  and  s 201(2) preserves the rules of the common law (to the extent they are not inconsistent), which continue to govern in matters of discharge for both breach and misrepresentation.10

[26]             The law governing the sale of goods as set out in pt 3 divides the terms of the contract into conditions and warranties:

(a)If a condition is broken, the buyer may “treat the contract as repudiated”11 and reject the goods; this right of rejection is lost if the goods are accepted. This occurs when:12

(i)the buyer indicates to the seller that the buyer has accepted the goods; or

(ii)the goods have been delivered to the buyer and the buyer does any act in relation to the goods that is inconsistent with the ownership of the seller; or

(iii)after a reasonable time has elapsed, the buyer retains the goods without indicating to the seller that the buyer has rejected the goods.

(b)If a warranty is broken, the remedy is damages.13

8      Contract and Commercial Law Act 2017, s 59(e); and Moodie v Agricultural Ventures Ltd [1998] 3 NZLR 129 (CA) at 135.

9      Stephen Todd and Matthew Barber  Burrows,  Finn  and  Todd  on  the  Law  of  Contract  in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [18.5.2(a)].

10     At [18.5.2(a)], referencing Moodie v Agricultural Ventures Ltd, above n 8, at 135.

11     Contract and Commercial Law Act, s 132(1).

12     Section 170.

13     Section 195.

[27]             The sale of goods concepts of “acceptance” in pt 3 are not necessarily the same as affirmation in pt 2.

[28]Under the CCLA sale of goods provisions:

(a)s 137 provides that there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as set out in ss 138–141;

(b)s 138 contains an implied condition that goods are reasonably fit for purpose;

(c)s 139 contains an implied condition that goods are of a merchantable quality; and

(d)s 140 incorporates any warranty or condition as to quality or fitness for a particular purpose by the usage of trade.

[29]             In Finch Motors Ltd v Quin (No 2),14 a car bought for towing a boat was found to be unfit for purpose, under what is now s 138 of the CCLA. The only remedies available were those provided for under the Sale of Goods Act itself, now pt 3 of the CCLA. The other statutory provisions on cancellation were inapplicable.

Analysis

Breach of contract — express or implied term

[30]             Mr Quin pleaded that it was a condition of the contract/agreement that the vehicle was safe, roadworthy, could be legally driven on New Zealand roads, and did not have material defects. No implied term was pleaded in the claim, but submissions on behalf of Mr Quin suggested that the alleged terms were either express or implied.

[31]             Mr Muir accepts that the wording of the Trade Me listing constitutes an express term of a contract to the extent that it said that the vehicle:

14     Finch Motors Ltd v Quin (No 2) [1980] 2 NZLR 519 (HC).

(a)“[is] exceptionally tidy”;

(b)“[is a] beautiful old girl, ready to hop in and go cruising in comfort”; and

(c)“has just been through a full certification”.

[32]             In dispute is whether any other terms about condition were expressed (the content of the telephone conversation is disputed), and what can reasonably be implied based on the factual matrix.

[33]             The Supreme Court has clarified the general approach to implied contractual terms in Bathurst Resource Ltd v L&M Coal Holdings Ltd.15 However, the parties did not turn their minds to or address the District Court on the effect of s 137 of the CCLA.16 Nor were the issues assessed in the light of s 170 and the sale of goods common law framework of repudiation.

[34]             In any event, counsel for the respondent takes the position that an assessment of express or implied terms as to quality is not straightforward, given that the vehicle was over 60 years old and vehicles of this type are purchased for a variety of reasons, including as a collector item and for restoration.

[35]             My assessment is that these are not matters that can be determined conclusively in the context of this present appeal, given the disputed issues involved.

Misrepresentation

[36]             Apart from the representation that the vehicle had a WOF and LVVTA certification (which were both literally true), the misrepresentation allegation rests on the disputed issue of whether “good condition” was discussed in the telephone call, which Mr Muir disputes.

15     Bathurst Resource Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696.

16 See [28](a) above.

[37]             Otherwise, there is no undisputed evidence  that  Mr  Muir  represented  to Mr Quin that the vehicle was safe, roadworthy, and met NZTA safety standards.

(a)In TC v F Ltd, the Disputes Tribunal found that having a WOF is merely a legal requirement for the sale of a vehicle, and not necessarily a guarantee or representation that the vehicle was roadworthy.17

(b)Similarly, in Parkinson v Waipukurau Motors (2006) Ltd,18 the vendor of a vehicle listed it for sale on Trade Me with a description “…in very tidy condition. New vehicle warrant will be supplied before pick up”.19 The District Court Judge nevertheless found that the buyer still took the vehicle as he found it (caveat emptor).

[38]             The success of the misrepresentation cause of action therefore depends on disputed representations which cannot be determined in the context of this appeal. Also, these issues were not assessed in the light of ss 137–140 and 170 of the CCLA, and the sale of goods common law framework of repudiation.

Right of cancellation or repudiation

[39]             The appellant takes the position that he has not done anything that could be treated as affirming the contract. He says a three-month delay after receiving the full NZTA report should not be treated as affirmation of the contract. Even if the appellant had affirmed the contract (which he strongly denies), that only means that cancellation is unavailable, but he would be entitled to damages. The appellant submits that the appropriate remedy would be compensation of the full amount paid in the sum of

$80,600 anyway.

[40]             I do not accept that the issues for the defence of affirmation are so clear. Furthermore, the District Court was not asked to consider whether the correct test is instead “acceptance” under s 170 of the CCLA.

17     TC v F Ltd and LM [2021] NZDT 1590 at [8].

18     Parkinson v Waipukurau Motors (2006) Ltd DC Palmerston North CIV-2011-054-176, 6 August 2012.

19 At [3].

[41]             The respondent relies on the following in respect of the question of whether the purchaser lost the right to repudiate or cancel:

(a)Within two weeks of purchasing the vehicle, Mr Quin began to notice issues with the vehicle.

(b)Mr Quin was advised that there was a crack in the chassis and elected to repair that crack. Mr Quin was advised that there may be other issues affecting the vehicle, and that further inspection would likely be required. Mr Quin did not attempt to elect to cancel the contract.

(c)Mr Quin had a further inspection done by NZTA in November 2021, at which point he was advised that there were several material defects affecting the vehicle and a “notice of revocation of vehicle inspection” was issued and sent to Mr Quin by email. The appellant did not attempt to elect to cancel the contract.

(d)Only in June 2022, seven months after receiving the NZTA WOF revocation, and almost a year after purchasing the vehicle, Mr Quin (by his solicitors) wrote to Mr Muir and purported to cancel the contract. Mr Quin’s reasons for cancelling the contract were the presence of defects that were the same advised to Mr Quin seven months earlier.

[42]             Accordingly, the respondent alleges that more than a reasonable time elapsed with the buyer retaining the goods without rejection. Mr Quin had knowledge of the defects by November 2021 at the latest, even if he did not have access to the full NZTA report until some time in early 2022. The respondent’s position will be that Mr Quin had sufficient time to consider his position on a vehicle that he knew had failed its WOF and required significant repairs, and the delay of seven months arguably constitutes acceptance or affirmation precluding cancellation.

[43]             The respondent argues that damages are not available once a contract is affirmed.20 Even assuming damages are available, there would need to be sufficient

20     Relying on Hughes v Huppert [1991] 1 NZLR 474 (HC).

evidence to determine that the vehicle has no value in its current condition and therefore that the full price of the vehicle is appropriately awarded as compensatory damages. These are disputed issues that cannot be determined in the context of this appeal.

Mistake

[44]             The appellant alleges that its cause of action for mistake is available, whether or not the respondent knew of the true condition of the vehicle, as either a unilateral or a common mistake:

(a)If the respondent was aware of the true condition of the vehicle, then unilateral mistake would be available for sharp practice.

(b)If the respondent did not know of any of the defects, then the appellant alleges that the mistake constitutes a “common mistake” as to the condition of the vehicle, with both parties influenced in their decisions to enter into the contract by that same mistake, and the mistake resulting in substantially unequal exchanges of values. On that basis, the appellant alleges the Court has a discretion under s 28 of the CCLA to provide a remedy of cancellation.21

[45]             As the respondent points out, Mr Quin pleaded his own belief that the vehicle was in good condition, safe, roadworthy, and met NZTA safety standards to be legally driven on New Zealand roads. Mr Quin did not plead what Mr Muir believed to be the condition of the vehicle.

[46]             I accept the respondent’s submissions that the other party must have actual knowledge of the mistake for unilateral mistake to apply.22 Accordingly, unilateral mistake is not established on the undisputed evidence.

21     Contract and Commercial Law Act, s 28(2)(b).

22     McKee v McMorran (1992) 5 TCLR 221 (HC); and Tri-Star Customs & Forwarding Ltd v Denning [1999] 1 NZLR 33 (CA).

[47]             In order for common mistake to apply, it is well-established that both parties have to have been influenced to enter into the contract by the same mistake.23 As with unilateral mistake, there is no pleading that Mr Muir had the same belief about the condition of the vehicle and entered into the contract influenced  by  that  mistake. Mr Muir says he had no knowledge of any problems or material defects with the vehicle, but that is not necessarily the same as a specific belief that the vehicle was in “good condition” or “safe, roadworthy, and met NZTA safety standards” so as to influence Mr Muir. Again, the success or otherwise of this cause of action depends on disputed facts.

Total failure of consideration

[48]             The appellant has raised a new cause of action not previously pleaded, namely “total failure of consideration”. The appellant relies on the authorities discussed in Icepack Group Ltd v QBE Insurance (International) Ltd,24 to argue that a party who does not receive the benefit bargained for may succeed in recovering the price paid. I do not give any weight to this argument, not only because it was not pleaded, but also because total failure of consideration may not apply when material benefits were received and there is no evidence to establish the current value of the car.

Other

[49]             Mr Muir also seeks to raise further affirmative defence arguments of contributory negligence and/or an assumption of risk by Mr Quin, and he would wish to pursue cross-claims against the other defendants in the proceeding.

Excuse for failing to appear

[50]             In terms of whether the respondent’s failure to appear is excusable, the evidence addressing these issues from Mr Muir and his friend Mr Richard on the one hand, and Mr Smith (the lawyer Mr Muir says he instructed to file his statement of defence) on the  other,  is  starkly conflicting.  I am  satisfied that  Mr  Smith  and  Mr Richard have set out a proper basis for their belief that Mr Smith was dealing with

23     Phillips v Phillips [1993] 3 NZLR 159 (CA); and Weine v Tadd Management Ltd [2024] NZCA 323.

24     Icepack Group Ltd v QBE Insurance (International) Ltd [2014] NZHC 1832 at [22]–[30].

the claim on behalf of Mr Muir, even if that belief was mistaken. He sent numerous emails and text messages asking for an update, which support these arguments.

Prejudice

[51]             In terms of prejudice, I accept that the issue from Mr Quin’s perspective is a financial one. This can be addressed with an award of interest and costs. On the other hand, if the appeal is allowed, Mr Muir would be deprived of the opportunity to have his defences and cross-claims heard by the Court.

Conclusion

[52]             Overall, I agree with the three grounds for Judge Spiller setting aside the default judgment:

(a)there are arguable grounds of defence which turn on disputed factual issues that were not addressed in the evidence or legal argument before the District Court when it granted a default judgment;

(b)the delay in Mr Muir presenting his case is reasonably explained (even if there was a misunderstanding between Mr Muir and his solicitor); and

(c)Mr Quin will not suffer irreparable injury if the default judgment is set aside and the disputed issues are determined on the merits, given that any financial compensation ultimately awarded may include awards of cost and interest.

Result

[53]I dismiss the appeal.

O’Gorman J