Reseller News

The customer is not always right

Even now, Holden and Ford fans still gripe about the travesty at Bathurst in 1991 and 1992 when the venerable V8 sedan cars got out-paced by new twin-turbo, 4WD Godzilla Nissan Skylines. The entry rules were changed after that to block out the Godzilla, because the V8s couldn’t keep up.

I am not normally one for motorsport, but I was inspired by a Godzilla Skyline that appeared in a recent High Court case, which clarified some grey areas in the Consumer Guarantees Act (CGA). The case confirmed that if a defect in a product can be remedied pretty easily, then the consumer can’t run off to another repairer and have it fixed without telling anybody – and then sting the dealer after the fact.

A consumer bought a deregistered Nissan Skyline GTR, ready to race, from a licensed motor vehicle dealer for $15,000. Some time later, it appears there were problems with the engine gauges and the car’s computer, but they were fixable and at the time when the defects became apparent there was no suggestion that the defects were substantial.

Normally a buyer in this scenario would take the car back to the yard and ask the dealer to fix it. Instead, the buyer took the vehicle to his own place of repair without telling the dealer. Four thousand dollars worth of repairs later, the car owner decided to send the bill to the dealer. To make matters worse, the purchaser had not paid the balance of the purchase price, leaving $6500 owing.

So the dealer sued the buyer in the district court for the balance of the price, as you do. Surprise! The buyer counterclaimed by arguing that he had already spent $4000 on repairs because the car didn’t comply with CGA guarantees – and he won in the district court, even though he had never told the dealer about the problem and never asked him to fix the defects.

So the case went to the High Court for a definitive answer to the vital question: does the consumer have to go back to the retailer to ask for a remedy? The answer, you’ll be pleased to know, was a resounding “yes”. The High Court confirmed that the process in the CGA must be followed: the act required the consumer to take the car back and ask the dealer for a remedy. As he hadn’t, he couldn’t claim the cost of repairs later on.

This must be correct because under the CGA, if a consumer takes a product with fixable defects back to the supplier, the supplier has the right to choose a remedy: repair, replace or refund. If the supplier fails to fix the problem, there is a defined process where the consumer can get the problem fixed elsewhere and then claim the cost of repairs from the original supplier.

This ruling only limits consumers’ ability to claim repair costs. Consumers have an extra right, the right to recover their reasonably foreseeable consequential loss that arises as a result of the defect (eg cost of rebuilding a house after a fire sparked by a defective electric blanket). But that doesn’t include repairing the defect itself.

For anybody who sells to consumers, this ruling is cause for a big sigh of relief. It makes sense: you the trader are in the best position to fix problems in the goods you sell. Also, traders always have to check out returned items to make sure there is a fault in the goods at all, rather than just ‘pinkware’ error. But remember that if a consumer does return a product under the CGA, make sure you give them what they are entitled to. Otherwise a small problem could end up being Godzilla later on.

Richard Anstice is a staff solicitor working with Rae Nield, the regular author of this column. This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at raenield@marketinglaw.co.nz.