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Are you a Motor Vehicle Trader?

You may not realise it, but you may be an unlicensed motor vehicle trader

A recent Court of Appeal decision[1] makes it clear that a person or company will need to register as a motor vehicle trader under the Motor Vehicle Sales Act 2003 if that person or company sells more than six motor vehicles in any 12 month period, unless it can prove that those motor vehicles were not sold for the primary purpose of “gain”.

The High Court had earlier decided that “gain” involved a wider concept than “profit”. The Court of Appeal agreed considering that 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 cost involved in the sale”.

The seller was a financier who repossessed and sold up to 100 vehicles per year on TradeMe. These repossessed vehicles were frequently in poor condition and unattractive to motor vehicle traders, who would offer very little for them. The seller thought that he was required by both statute and contract to obtain the best price for the purchaser after repossession, and that this business model best achieved that object. He claimed that he was not making a profit on these sales and indeed in most, if not all, cases was making a loss.

The Court of Appeal, however, found that the seller still made a “gain” by getting a commercial advantage, or benefit, from the sale of the vehicles. On that basis the court decided the seller was required to register as a trader under the Motor Vehicles Sales Act 2003.

This decision illustrates the need for anyone who sells more than six motor vehicles in any 12 month period (other than via a registered motor vehicle trader) to assess whether they should register as a trader under the Motor Sales Act 2003.

Examples where this could occur unwittingly are where there is:

A sale by a company of more than 6 motor vehicles to its staff, in any 12 month period (for example where the vehicles need to be replaced and the business concerned decides to offer those to its staff); or
A transfer of motor vehicles within companies in a group.

The Ministry of Business, Innovation and Employment take the view that “gain” is defined widely (as noted above). This may include where there is modernisation of the seller’s vehicle fleet (even if the vehicles are sold at a financial loss by the seller). Accordingly, the seller must sell the vehicles through a registered motor vehicle trader, or register as a trader itself.

If you think this case may have some application to your business, we encourage you to seek legal advice.

[1] Kenny v MBIE [2019] NZCA 435

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

Published: 01 November 2019

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Paul Middlemiss - Harkness Henry Consultant

Paul Middlemiss

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