The Court of Appeal in 's-Hertogenbosch recently had to rule on whether a purchase agreement for a second-hand Porsche Macan should be annulled on the grounds of error or dissolved on the grounds of non-conformity because the Porsche Macan appeared to have defects. In assessing the buyer's claims, his capacity as a buyer played an important role: could the buyer be classified as a consumer and invoke the associated protection?

The facts

This case concerned the purchase of a second-hand car. A seller trading in exclusive second-hand passenger cars, mainly German brands, offered a Porsche Macan for sale on Marktplaats in 2020 at some point, with a mileage of 41,850 km, built in 2016, with a valid MOT until 11 November 2020. The advertisement stated, among other things:

‘This Porsche Macan Turbo is truly in new condition! The Porsche has been demonstrably maintained by a dealer, so you can get in and drive without any worries. All cars are delivered with a delivery and cleaning service, at least one year's MOT, accompanying warranties and a tailor-made delivery package.’

The seller's website listed the selling price as €69,890 and Marktplaats listed it as €63,890.

On 7 November 2020, the buyer test drove the Porsche three times. During the test drive, the buyer indicated that he heard certain noises while driving. The seller then indicated that the buyer had the option of purchasing an additional warranty for €2,000, which would cover any damage. The buyer did not take advantage of this option. The seller also pointed out the possibility of having a purchase inspection carried out by an authorised dealer or the ANWB. The buyer did not take advantage of this option either.

A purchase agreement was concluded on the same day. The Porsche was delivered by the seller to the buyer for a purchase price of €60,000.00, including VAT. In payment of this purchase price, the buyer traded in a Volvo XC 90 worth €35,000.00 and the remaining amount of €25,000.00 was paid. The purchase agreement stated “no guarantees” under the description of the car. Under the heading “Further agreements”, it stated “No guarantees on the Porsche Macan sold”.

The buyer then had the Porsche MOT tested on 11 November 2020 and the MOT was granted until 11 November 2022. One day later, in a letter dated 12 November 2020, the buyer reported defects in the car to the seller. On 17 November 2020, the buyer took the car to a Porsche dealer for inspection. The inspection report revealed a long list of defects.

The parties then agreed to have the Porsche inspected by an independent third party. This inspection also revealed the necessary defects, some of which were normal wear and tear, while others were not. In addition, it was found that the vehicle had been damaged in the past and that this damage had been poorly repaired. The car would not function normally due to the various defects, but in its current condition it did not pose a threat to road safety. It was advisable to first investigate and repair the noise defect on the left front side. This noise was possibly caused by a defective wheel bearing, which was a reason for rejection by the MOT inspection.

According to the buyer, the defects were such that he could annul the purchase agreement on the grounds of error or rescind it. The seller did not agree. According to the seller, the car had no defects at the time of sale and, if it did, these would be at the buyer's risk. The buyer initiated legal proceedings.

The proceedings before the court

In the first instance, the buyer was upheld.
The court appointed an expert who, in short, concluded that there was a defective wheel bearing and that the damage had been repaired very poorly, to such an extent that it could endanger road safety.

The court ruled that this was a consumer purchase within the meaning of Section 7:5 of the Dutch Civil Code, which meant that the buyer was entitled to consumer protection. The burden of proof that the car was in good working order at the time of delivery lay with the seller, who failed to provide such proof.

The court further ruled that these defects did not justify complete termination of the purchase agreement because the repair costs were too low in relation to the value of the Porsche. The purchase agreement was partially dissolved and the seller was ordered to pay, among other things, the costs of repair, the purchase inspection and the costs of (replacement) transport and storage.

 The appeal procedure

However, the Court of Appeal reached a different conclusion.

Duty of truth and completeness

According to the Court of Appeal, the buyer had breached the duty of truth and completeness under Article 21 of the Dutch Code of Civil Procedure. Article 21 of the Dutch Code of Civil Procedure stipulates that the parties are obliged to present the facts that are relevant to the decision completely and truthfully.

In assessing the buyer's claims, the Court of Appeal considered that his capacity as a buyer was relevant.

The buyer argued that he qualified as a consumer because he had purchased the Porsche Macan so that his wife could use it for the benefit of their family. This was disputed by the seller during the proceedings before the court. According to the seller, during the purchase process, when asked why the address on the purchase agreement differed from the address that had to be stated on the invoice, the buyer replied that he had his own sewerage/plumbing company and that he needed the car for that purpose. The minutes of the oral hearing at the court stated the following in this regard:

"The purchase agreement and the invoice are both dated 7 November 2020, but both show a different address because I live at both addresses. I have a business that rents out real estate and that business is located at (address A) at (address B). My company is a sole proprietorship trading under the name “(X)”. The Chamber of Commerce number and VAT number have been crossed out on the purchase agreement, which indicates that this is not a business purchase but a private purchase of the car."

The seller submitted a Chamber of Commerce extract on appeal, which showed that at the time of the purchase agreement, a company with the trade name (Z) was registered at address B. According to the extract, the activities of this company were ‘Preparatory activities for the start of a garage business’. It also appeared that the buyer had lived at that address himself in the past, but that he had sublet the property at some point.An extract from the Chamber of Commerce register was also submitted for a sole proprietorship that the buyer had been operating since 2015. The buyer had concealed this fact, even after the court had asked him why there were two different addresses on the purchase agreement and invoice.

This company was engaged in the wholesale and retail trade in used passenger cars and delivery vans, maintenance and repair of passenger cars and delivery vans, and MOT testing of cars. The buyer was not present during the oral hearing on appeal. The court asked the buyer's lawyer if he had anything to say about the fact that the buyer had been running a car company for many years, trading, repairing and MOT testing cars. The lawyer replied that the buyer had been trading in cars for the past two years and that he was not a mechanic at the time of purchasing the Porsche. The buyer's advisor explained on behalf of the buyer that the buyer's father was a car mechanic and MOT inspector and that the buyer had started the sole proprietorship in 2015 to “start something together”. The buyer had gradually grown into the business and had also been an MOT inspector for a year and a half.

The court found that the buyer had not fulfilled the duty of truth and completeness set out in Article 21 of the Rules of Civil Procedure. The buyer had not answered the court's questions completely and truthfully. Instead of stating that he had been running a business in the trade, repair and inspection of cars together with his father since 2015, he had made it appear as if he only had a real estate company. Furthermore, contrary to his statement, he did not live at address B. A company was located at that address that was preparing to start a garage business at address A, where the buyer's company had also been located.

The court held this against the buyer. The information that the buyer had withheld concerned his expertise in the field of second-hand cars and was important for determining whether the buyer should be classified as a consumer and entitled to consumer protection. According to the court, it appeared that the buyer had withheld the information in order to optimise his chances in the proceedings.

The court therefore examined the buyer's factual assertions with particular scrutiny and, in addition, concluded from the buyer's conduct in the proceedings that he should not be allowed to provide evidence in support of his assertion that he qualified as a consumer.

The court recognised that this was a far-reaching sanction. However, in the court's opinion, this sanction was proportionate. Procedural negligence, such as that committed by the buyer, must be severely sanctioned. If this were not the case, it could be perceived by the parties to the proceedings as a licence to attempt to mislead the other party and the court by means of untruths and/or omissions, in the hope of getting away with a light sanction if the untruths and/or omissions were to come to light.

 Misrepresentation

According to the buyer, the purchase agreement was voidable on the grounds of misrepresentation, because the seller knew or should have known that the Porsche was a damaged car and was not suitable for normal use, and he had not informed the buyer of this or had done so incorrectly. The court did not agree with the buyer on this point.

The seller disputed that the Porsche had been damaged at the time of the purchase agreement. The tests carried out by the buyer did not show that the car had been damaged in the past. In addition, in the period between the purchase and the inspection by the Porsche dealer on 17 November 2020, the buyer had driven the car for 1,883 kilometres and the car had been approved during the MOT test (carried out by the buyer's own company) on 11 November 2020, without any MOT repair points being reported. The seller pointed out that the expert's report showed that the wheel bearing defect and the faulty damage repair were safety issues that should have been identified during the MOT test and repaired before the car was allowed back on the road. It was therefore possible that the defects in the car had arisen in the period between 11 and 13 November 2020 and had been repaired, whether or not by the buyer's company.

It was up to the buyer to prove that, despite this, at the time of concluding the purchase agreement, and therefore before the car was MOT tested, there were defects that prevented normal use of the car. The buyer failed to do so.

Termination due to non-conformity

Finally, the buyer's appeal for termination of the purchase agreement due to non-conformity was also unsuccessful.

The buyer had to prove that at the time of entering into the purchase agreement, there were defects in the Porsche Macan within the meaning of Section 7:17 of the Dutch Civil Code.

It follows from Section 7:17(2) of the Dutch Civil Code that an item does not comply with the agreement if, taking into account the nature of the item and the statements made by the seller about the item, it does not possess the characteristics that the buyer could expect on the basis of the agreement. Furthermore, Section 7:17(2) of the Dutch Civil Code stipulates that the buyer may expect the item to possess the characteristics necessary for normal use.

In a case such as this, it must be assumed as a rule that the car does not comply with the agreement if, as a result of a defect that cannot be easily detected and repaired, use of the car would pose a risk to road safety. It cannot be ruled out that this rule may be subject to exceptions, for example if the buyer had accepted the risk of such a defect. However, it must be borne in mind that statements made by the seller about that condition, depending on their content, may preclude the assumption of such acceptance of the risk of defects. It is therefore a question of what the buyer could expect from the car, based on all the circumstances of the case. However, the above rule may not be reversed in the sense that other defects could not constitute non-conformity within the meaning of Section 7:17 of the Dutch Civil Code (Hoge Raad 8 juli 2005, ECLI:NL:HR:2005:AT3097).

The expert's report showed that the defect in the wheel bearing and the faulty repair were defects that prevented the safe use of the Porsche. This was not disputed between the parties. In that sense, there was therefore a defect within the meaning of Section 7:17(1) and (2) of the Civil Code.

However, the seller disputed that these defects were already present at the time of purchase on 7 November 2020. Here too, the buyer had failed to substantiate that these defects were present at the time of the purchase agreement and the buyer was not allowed to provide evidence.

The buyer pointed to the other defects that had been identified during the inspection. Although these did not affect road safety, the buyer argued that they meant that the car did not comply with the agreement. Based on the seller's statements in the advertisement, he did not have to take this into account and was entitled to expect a car without these defects.

The court did not agree with the buyer on this point either. The buyer was aware that the car was second-hand and had also been imported from abroad. This meant that he had to take into account the presence of certain defects. In addition, the buyer had taken three test drives, discussed with the seller the noises he had noticed while driving, and nevertheless stuck to the agreement that the seller would pay a higher trade-in price for the Volvo, but would only provide a warranty on the mileage and nothing else. In the court's opinion, this state of affairs meant that the buyer could not expect the Porsche to be free of defects. It was important to note that the buyer had been involved in the trade, repair and inspection of second-hand cars since 2015 and was now also an MOT inspector himself. Given the circumstances surrounding the purchase and the buyer's expertise, the seller's statements in the advertisement were insufficient to reach a different conclusion.

The court of appeal therefore overturned the district court's judgment and ordered the buyer to repay the amount he had already received on the basis of the district court's judgment.

Conclusion

The buyer's dishonesty was punished by the court. If the duty of truth and completeness is not complied with, the court may draw the conclusions it deems appropriate. In this case, the buyer's arguments were examined with particular scrutiny and he was not allowed to prove that he had purchased the car as a consumer. Because the buyer was considered a “professional” buyer, he had to prove that the defects were already present at the time of delivery, which he failed to do.

Do you have any questions about non-conformity or would you like advice on defects found and the resulting damage or your position in terms of evidence? Please feel free to contact one of our lawyers. We will be happy to assist you.