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Kramer v Claremont Holdings (Pty) Ltd t/a Audi Centre Claremont (NCT/158069/2020/75(1)(b)) [2021] ZANCT 41 (30 August 2021)

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IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

                                                                                              Case number: NCT/158069/2020/75(1)(b)

In the matter between:

BRETT KRAMER                                                                                                          APPLICANT

And

CLAREMONT HOLDINGS (PTY) LTD T/A AUDI CENTRE CLAREMONT    RESPONDENT

Coram:

Mr F Sibanda                –          Presiding Tribunal Member

Dr L Best                      –          Tribunal Member

Prof T Woker                 –          Tribunal Member

Date of hearing              –          17 August 2021

Date of judgment           –          30 August 2021

JUDGEMENT AND REASONS 

PARTIES

1       The Applicant in this matter is Brett Kramer, an adult male residing in Cape Town (the "Applicant"), who lodged a complaint with the National Consumer Commission (the NCC” or “the Commission”), against the Respondent. The Applicant was represented by Mr Jason van Dyk at the hearing.

2       The Respondent is Claremont Holdings (Pty) Ltd, trading as Audi Centre Claremont, a private company duly registered in terms of the company laws of the Republic of South Africa, with its registered address at 143 Imam Haron Road, Claremont, (the "Respondent"). At the hearing, the Respondent was represented by Shawn Peach, the Dealer Principal of the Respondent

TYPE OF APPLICATION AND JURISDICTION

3       This application is brought in terms of section 75 (1)(b) of the Consumer Protection Act, No. 68 of 2008 ("the Act"), which states that – 

   "If the Commission issues a notice of non-referral in response to a complaint, other than on the grounds      contemplated in section 116, the complainant concerned may refer the matter directly to –

(a)  

(b)   the Tribunal, with the leave of the Tribunal."

4       The application for leave to refer the matter directly to the Tribunal was heard on 30 March 2021. The Tribunal granted the application on 3 April 2021. Therefore, this hearing is about the merits of the matter.

5       The Tribunal has jurisdiction to hear this matter, in accordance with section 75 (1)(b) of the Act.

ISSUES TO BE DECIDED

6       The Tribunal must decide whether the Respondent engaged in prohibited conduct, by failing to disclose the condition of the vehicle, misrepresenting the condition of the vehicle to the Applicant at the time of sale, or both, in contravention of sections 25, 29 and 41 of the Act. The Tribunal must also decide whether it can grant the relief sought, should it find in favour of the Applicant.

BACKGROUND

The Applicant’s submissions

7       In or about March 2017[1], the Applicant purchased an Audi Q5 2.0 TFSi from the Respondent. At the time of sale, the Applicant was advised by the Respondent that the vehicle –

7.1.   was accident free;

7.2.   had not undergone any major work; and

7.3.   had undergone the stringent ‘Audi 80-Point Check’.

8       In May 2018, the Applicant booked the vehicle for a routine service at an Audi dealership in Cape Town (Audi Cape Town), which was the most closely located service centre to the Applicant.

9       The Applicant was advised by Audi Cape Town that the vehicle’s sump was leaking, and that a further booking would be required to deal with the identified problem.

10    In July 2018, the Applicant booked the vehicle with Audi Cape Town. Upon removing the sump, Audi Cape Town established that there were metal shavings in the sump. The engine needed to be stripped down to assess the cause.

11    The Applicant notified the Respondent that metal shavings were discovered in the vehicle sump. The Respondent advised the Applicant that it would arrange to collect the vehicle and carry out the repairs at the Respondent’s premises.

12    The Applicant established independently that there had been a mechanical failure with the vehicle in January 2016 and that the Respondent had done work to remedy the failure. However, Audi Cape Town could not determine the extent of the work done in 2016, through the available records.

13    On 30 July 2018, the Respondent advised the Applicant that the work pertaining to the sump was complete and that the vehicle was ready for collection. The sump had been removed, cleaned, replaced and sealed. An invoice of R3 772.52 was payable by the Applicant for the work done. The Respondent later issued a credit note for the work done and indicated that the Applicant was erroneously charged.

14    According to the Applicant, the engine was not stripped or inspected, to determine the cause of the metal filings found in the sump, as the Applicant was advised by Audi Cape Town.

15    Upon enquiring about the prior work done on the vehicle in January 2016, the Applicant was only told that the metal filings were as a result of the prior work carried out, but nothing was said about the extent of the work that was done.

16    The Applicant then met with the dealer principal of the Respondent who advised the Applicant that the vehicle’s workshop history reflected the following work had been done with respect to the mechanical failure in 2016:

16.1.                Piston kit;

16.2.                Camshaft tensioner; and

16.3.                Timing chain housing.

17    The Applicant considers the work done in 2016 as reconditioning of the engine. The Applicant was told that there is no requirement on the part of the Respondent to disclose the work that was done prior to or at the time of sale.

18    On 22 August 2018, the Applicant lodged a complaint with the Motor Industry Ombudsman of South Africa (“MIOSA”). After assessing the complaint, MIOSA concluded that it could “not support Mr Kramer’s expectations, due to the fact that his complaint resorted outside the six months implied warranty period”[2] as stipulated in section 56 of the Act.

19    The Applicant contends that section 56 of the Act is neither the relevant section that pertains to the Respondent’s conduct nor the basis of his complaint to MIOSA.

20    Subsequently, on 1 August 2019, the Applicant lodged a complaint with the Commission. On 17 December 2019 the Commission issued the Applicant a letter of non-referral, as envisaged by section 75 of the Act, stating that "The Commission has assessed your complaint, as well as the MIOSA report and determined that the redress sought could not be provided for in terms of the CPA. We noted that the six (6) month implied warranty had lapsed, in terms of the CPA”[3].

21    On 30 March 2020, the Applicant applied to the Tribunal, in terms of section 75 (1)(b) of the Act, for leave to refer the matter directly to the Tribunal. The Tribunal granted the leave as sought.

22    The Applicant contends that his complaint is based on the Respondent’s failure to disclose the defect and resultant reconditioning work done prior to him purchasing the vehicle as well as misrepresentation of the condition of the vehicle. The Applicant alleges that the Respondent’s failure to make him aware of the risks associated with these material facts amounts to fraudulent non-disclosure of material facts, which constitute prohibited conduct in terms of the Act.

23    Given the above, the Applicant alleges the following against the Respondent:

23.1.                Marketing goods in a misleading, fraudulent or deceptive manner, in particular, pertaining to ‘the nature’, and ‘properties’ of the goods, and other ‘material aspects’ of the goods, in contravention of section 29 of the Act;

23.2.                Marketing goods in a false, misleading or deceptive manner concerning a material fact pertaining to the goods, which led the Applicant to believe that the goods were of a particular standard, quality and grade, when they were not, in contravention of section 41 of the Act; and

23.3.                Failing to apply a conspicuous notice to indicate that the goods have been reconditioned or rebuilt, in contravention of section 25(2)[4] of Act.

24    The Applicant seeks the following relief –

24.1.                The Respondent be found to have engaged in prohibited conduct;

24.2.                The Respondent be ordered to pay a penalty of 10% of its annual turnover for contravening sections 25(1), 29 and 41 of the Act;

24.3.                The Respondent be ordered to take back the vehicle and refund the Applicant the full purchase price of the vehicle;

24.4.                The Respondent be ordered to pay for the costs of the matter before the Tribunal, including the Applicant’s advisory costs, time, inconvenience, travel and accommodation costs; and

24.5.                The Respondent be ordered to provide training to all current and future staff of the Respondent on their disclosure and advertising obligations.

The expert witness’ testimony

25    The Applicant called in Mr Gary Wilson (Mr Wilson) as an expert witness. Mr Wilson is a Technical Specialist and Assessor at Wilassess, a sole proprietorship involved in automotive technical investigations and claims. Among his qualifications Mr Wilson is a Certified Licenced Technical Specialist, a Certified Master in Automotive Technical and a Registered Automotive Vehicle Assessor. The following is Mr Wilson’s testimony:

25.1.                  Ordinarily, there should not be metal filings in an engine. Once metallic filings are detected in an engine it is a cause for concern. The correct procedure to remedy the problem would be to disassemble the engine to determine the cause. This entails going beyond just cleaning the sump or doing a compression test which will only give results of the combustion level of the vehicle at that point in time. Metal shavings could be coming from any part of the engine that may not affect the combustion. Therefore, it is crucial that the engine is stripped down to determine the source of the metal shavings;

25.2.                  Mr Wilson testified further that an engine is not just one part. Thus, to get to the bottom of the problem, each component of the engine needs to be analysed to determine wear or friction, because there could be components touching where they should not or friction components not getting enough lubrication, resulting in metal build-up. Therefore a complete engine strip down is required;

25.3.                  The work done by the Respondent fell short of this procedure, according to Mr Wilson. It is possible that the Respondent simply assumed that metal filings were left over from previous work but that would not be a conclusive way of diagnosis. Cleaning the sump and doing a compression test would not provide enough information on the source of the problem;

25.4.                  On the question of the magnitude of work that was done in January 2016, Mr Wilson testified that the prior work carried out was integral repair work to the engine and constituted major mechanical repair to the engine. Disassembling an engine and replacing its integral parts constitutes reconditioning of the engine for re-use. It is not the same as a simple service, or carrying out a minor repair. Instead, the prior work done is analogous to open-heart surgery;

25.5.                  According to Mr Wilson, this kind of remedial work is not unique to the Audi Q5 model, but every manufacturer has these kind of issues. Manufacturers would conduct sample ratings of problems to determine whether there is cause for concern and a need for product recall. This type of engine has been used in a range of vehicles and it is a problem engine insofar as oil consumption is concerned, in addition to other inherent problems that all manufacturers, and in particular Audi dealer networks, would be aware of. Mr Wilson indicated that he has handled a number of claims relating to this type of engine and there is a repair procedure in place;

25.6.                  The level of work done on this particular vehicle’s engine was no less significant than work done to remedy an accident damage. The former is a mechanical repair and the latter is structural, but both are significant and ought to be disclosed to potential buyers. Disassembling an engine involves a lot of components and many things can go wrong especially if the assembling is not done properly. This may manifest in oil leaks, seals that are not fitted properly or overheating problems;

25.7.                  In the end, the seller in this case ought to have disclosed the history of the vehicle, in order to afford a potential buyer the opportunity to make an informed decision;

25.8.                  Upon cross-examination by the Respondent, on how non-disclosure is an issue when the information is readily available from any Audi dealer, Mr Wilson acknowledged that the vehicle history might be available, however, it is the responsibility of the seller to disclose any major work carried out in a vehicle; and

25.9.                  The Respondent further questioned Mr Wilson on how the Applicant managed to travel about 97 000km since purchase, if the work done in 2016 was not up to standard. Mr Wilson responded that the vehicle has not been without issues ever since. The Tribunal clarified that the issues referred to do not form part of the complaint before the Tribunal.

The Respondent’s submissions

26    The Respondent’s opposing affidavit was deposed to by Mr Shawn Peach, the dealer principal of the Respondent. In essence, the Respondent denies the fact that the mechanical failure with the vehicle in January 2016 can be described as a defect, although work was done to repair the failure.

27    Specifically, according to the Respondent, the work done in January 2016 did not constitute reconditioning of the engine, but was done under the Audi SA Freeway Motor Plan and the necessary warranty issued. Reconditioning work, the Respondent argues, is usually considered to be cosmetic and would include refer work such as the repair of paintwork or a windscreen.

28    Furthermore, the Respondent argues that it was not necessary to strip and inspect the engine in order to remedy the sump problem, when the vehicle was brought in by the Applicant. Instead, the sump was removed, cleaned, replaced and sealed.

29    The Respondent avers that its position at the time was that the work done in 2016 did not require disclosure to the Applicant prior to making the purchase as it did not constitute ‘major work’.

30    The Respondent further submits that the Applicant has had the vehicle in his possession since April 2017, except for the metal filing in July 2018, no further issues have been brought to the Respondent’s attention. As such, the Respondent denies that there were ever any undisclosed historical defects and reconditioning work.

31    Consequently, the Respondent requests that the Applicant’s complaint be dismissed.

THE LAW APPLICABLE TO THE APPLICATION

32    The Applicant based his complaint on alleged non-disclosure and false, misleading or deceptive representations of the vehicle at the time of sale, in contravention of sections 25, 29 and 41 of the Act. Below, we outline these sections of the Act.

33    Section 25(1) of the Act states as follows –

1)     A person who offers or agrees to supply, or supplies, any goods that –

(a)   have been reconditioned, rebuilt or remade; and

(b)   that bear the trade mark of the original producer or supplier,

must apply a conspicuous notice to those goods stating clearly that they have been reconditioned, rebuilt or remade, as the case may be.”

34    Section 29 of the Act provides that –

   “A producer, importer, distributor, retailer or service provider must not market any goods or services –

(a)   in a manner that is reasonably likely to imply a false or misleading representation concerning those goods or services, as contemplated in section 41; or

(b)   in a manner that is misleading, fraudulent or deceptive in any way, including in respect of –

(i)     the nature, properties, advantages or uses of the goods or services;

(ii)    the manner in or conditions on which those goods or services may be supplied;

(iii)   the price at which the goods may be supplied, or the existence of, or relationship of the price to, any previous price or competitor’s price for comparable or similar goods or services;

(iv)  the sponsoring of any event; or

(v)    any other material aspect of the goods or services.”

35    Section 41 of the Act deals with false, misleading or deceptive representations and states that –

(1)   In relation to the marketing of any goods or services, the supplier must not, by words or conduct –

(a)   directly or indirectly express or imply a false, misleading or deceptive representation concerning a material fact to a consumer;

(b)   use exaggeration, innuendo or ambiguity as to a material fact, or fail to disclose a material fact if that failure amounts to a deception; or

(c)   fail to correct an apparent misapprehension on the part of a consumer, amounting to a false, misleading or deceptive representation, or permit or require any other person to do so on behalf of the supplier.

(2)  

(3)   Without limiting the generality of subsections (1) and (2), it is a false, misleading or deceptive representation to falsely state or imply, or fail to correct an apparent misapprehension on the part of a consumer to the effect, that –

(a)   the supplier of any goods or services has any particular status, affiliation, connection, sponsorship or approval that they do not have;

(b)   any goods or services –

(i)      have ingredients, performance characteristics, accessories, uses, benefits,            qualities, sponsorship or approval that they do not have;

(ii)        are of a particular standard, quality, grade, style or model;

(iii)       are new or unused, if they are not or if they are reconditioned or reclaimed,            subject to subsection (4);

(iv)       have been used for a period to an extent or in a manner that is materially   different from the facts;

(v)        have been supplied in accordance with a previous representation; or

(vi)       are available or can be delivered or performed within a specified time; …”

ANALYSIS OF THE EVIDENCE

36    The Applicant’s case is premised on alleged non-disclosure and misrepresentation by the Respondent. The Applicant submitted that prior to purchase, he was advised that the vehicle was accident free, had not undergone any major work and had undergone the stringent Audi ‘80-Point-Check’[5]. Both parties indicated that the work carried out on the vehicle in January 2016 related to the piston kit, camshaft tensioner and timing chain housing. The parties differ on whether this work can be considered as major

37    Mr Wilson testified that the work done in January 2016 was major work because it entailed stripping down the engine and replacing its components. Mr Wilson equated this to structural repair to remedy accident damage. He also likened the extent of the work done to open-heart surgery and emphasised that the work ought to have been disclosed to a potential buyer. It would appear that the Respondent misrepresented the condition of the vehicle, by denying that any major work was done in 2016.

38    According to the Respondent, the work done in 2016 did not constitute major work. Instead, it was work done under the Audi SA Warranty Freeway Motor Plan and is considered as ‘warranty work’, for which a normal warranty invoice was issued.

39    The Respondent emphasised that he is not in the business of selling re-conditioned or grey-market goods nor does he have a certificate to sell re-conditioned goods and that section 25 of the Act is not applicable.

40    Despite his averments, the Respondent did not provide any evidence to counter Mr Wilson’s testimony.

CONCLUSION

41    It is common cause that the vehicle suffered a mechanical failure in 2016, which required the removal of the engine to replace certain components, including the piston, camshaft tensioner and timing chain housing.  The expert witness testified that this work is major. The Respondent told the Applicant that no major work was effected on the vehicle prior to purchase by the Applicant. The Respondent did not provide evidence to support his position that the 2016 work was not major. The Tribunal has no reason to doubt the expert witness’ testimony.

42    Consequently, having considered all the evidence submitted, the Tribunal finds that the Respondent misrepresented the condition of the vehicle by stating that no major work was carried out on the vehicle prior to being purchased by the Applicant. This is a breach of section 29(a) and (b)(v) read with section 41 (1)(a) of the Act and constitutes prohibited conduct.

43    The Applicant prayed for the imposition of an administrative fine on the Respondent should the Tribunal find that prohibited conduct was committed. However, the Applicant did not provide enough information to assist the Tribunal in arriving at a well-considered decision with respect to the imposition of an administrative fine. In the absence of information such as the loss or damage suffered, the market circumstances in which the contravention took place and the Respondent’s financial record to determine the appropriate level of penalty, the Tribunal is unable to impose an administrative fine on the Respondent.

44    The Applicant also requested the Tribunal to award damages suffered and indicated that the Tribunal can be fairly creative in the rulings and orders it can make. However, according to Barnard (2020)[6]

Though s 152 of the NCA provides that an order by the Tribunal has the same status as a high court order, the reach of the NCT is limited not only with regard to its ability to make a determination on the fairness of terms and conditions (s 52 and Part H of the Act) but also in awarding damages… The only situation…where a Tribunal could award damages is where, in terms of s 70(4), the NCT confirms a consent order that already includes an award for damage.”

45    From the above, it is clear that the Tribunal is limited in terms of awarding damages.

46    When it comes to ordering the return of the vehicle to the Respondent and ordering a refund, the Act provides for the possibility of such an outcome in instances of a breach of section 56 of the Act. The Applicant’s case is not based on an allegation of a defective product. Thus, the Tribunal is unable to make such an order.

47    Despite the afore-going, section 115(2) of the CPA provides that –

(2) A person who has suffered loss or damage as a result of prohibited conduct, or dereliction of required   conduct –

(a) may not institute a claim in a civil court for the assessment of the amount or awarding of damages if       that person has consented to an award of damages in a consent order; or

(b) if entitled to commence an action referred to in paragraph (a), when instituting proceedings, must file with the registrar or clerk of the court a notice from the Chairperson of the Tribunal in the prescribed form –

(i) certifying whether the conduct constituting the basis for the action has been found to be a prohibited or required conduct in terms of this Act;

(ii) stating the date of the Tribunal’s finding, if any; and

(iii) setting out the section of this Act in terms of which the Tribunal made its finding, if any.”

48    Thus, given the above, the Applicant is entitled to pursue the matter in the High Court for the award of damages arising out of the prohibited conduct, as contemplated in section 115(2) of the CPA.

ORDER

49    Accordingly, for the reasons set out above, the Tribunal makes the following order:-

49.1.    The Applicant’s application is upheld;

49.2.    The Applicant may approach the Chairperson of the Tribunal for a certificate to claim damages in the High Court; and

49.3.    No order is made as to costs.

Thus done and signed on 30 August 2021.

[signed]

Mr F Sibanda

Presiding Tribunal Member

Dr L Best (Member) and Prof T Woker (Member) concurring

[1] The Respondent in para 15 and 29 of his answering affidavit puts this date as April 2017

[2] MIOSA letter to Mr Kramer, dated 2 July 2019. Page 52 of the bundle.

[3] Annexure D, page 58 of the bundle

[4] While the Applicant cited this as section 25(2) the section that requires the conspicuous display of a notice for reconditioned goods is 25(1)

[5] Para 4 of the Applicant’s founding affidavit and para 6 of the Respondent’s heads of argument

[6] Barnard, J. (2020). Suppliers, consumers and redress for defective vehicles – The reach of the National Consumer Tribunal: Tshehla v Aucamp Eiendoms Beleggings. The South African Law Journal. Volume 137/Part 2: 229-245