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IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case number: NCT/109750/2018/75(1)

In the matter between:

PATRICK MDLULI                                                                                            APPLICANT

and

JERMANIE INVESTMENTS AND PROJECTS (PTY) LTD                          RESPONDENT

Coram

Ms. M Nkomo                -           Presiding Tribunal Member

Adv F Manamela           -           Tribunal Member

Mr A Potwana                -           Tribunal Member

Date of Hearing             -           01 February 2019

Date of Judgment          -           24 February 2019

JUDGMENT AND REASONS

PARTIES

1. The Applicant in this matter is Patrick Mdluli, a major male who resides in Menlo Park, Pretoria, Gauteng province (hereinafter referred to as “the Applicant”). At the hearing, the Applicant was represented by Mr Kyle Kietzmann.

2. The Respondent is Jermanie Investments and Projects (Pty) Ltd, a company duly registered and incorporated in terms of the company laws of the Republic of South Africa (“the Respondent”). The Respondent did not oppose the application, and was not represented at the hearing.

 

TYPE OF APPLICATION

3. This application is brought in terms of Section 75(1)(b) of the Consumer Protection Act, Act 68 of 2008 (hereinafter referred to as “the CPA”) regarding a matter that was non-referred by the National Consumer Commission (hereinafter referred to as “the NCC”).

4. Section 75(1) of the CPA states the following:

“If the Commission issues a notice of notice-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 leave of the Tribunal.”

 

JURISDICTION

5. Section 75(5) of the CPA states that:

“The Chairperson of the Tribunal may assign any of following matters arising in terms of this Act to be heard by single member of the Tribunal, in accordance with section 31(1)(a) of the National Credit Act:

(a)….

(b) an application for leave as contemplated in subsection (1) (b)”

6. The application for leave to refer the matter directly to the National Consumer Tribunal (hereinafter referred to as “the Tribunal”) was heard by a single member of the Tribunal in accordance with section 75(5)(b) of the CPA, and leave was duly granted.

7. This judgement follows a hearing of the matter on the main merits.

 

BACKGROUND

8. On 17 January 2018, the Applicant purchased two motor vehicles from the Respondent. The Applicant purchased a 2017 Hyundai i10 motor vehicle with registration number FY16GDGP, for the purchase price of R131 500.00 (one hundred and thirty one thousand five hundred rand). The Applicant also purchased a 2013 model Volkswagen Polo, with registration number HG10DZGP also for the amount of R131 500. The total purchase price paid for the two vehicles was the sum of R263 000.00 (two hundred and sixty three rand).

9. According to the Applicant, the specific terms of the agreement of sale are that:

9.1 neither vehicle must be involved in an accident;

9.2 neither vehicle must have any structural damage, nor be rebuilt or reconditioned in any way; and

9.3 the Respondent would provide the Applicant with the service record of the previous owners of the vehicles.

10. After taking possession of the vehicles, and when the Respondent failed to provide the Applicant with the service record of the previous owners, the Applicant decided to take both vehicles to Saturn Auto Body and Repairs (hereinafter referred to as “Saturn”) for an assessment.

11. According to the Applicant, the assessment report from Saturn indicated that both vehicles were severely damaged before being re-conditioned and sold to the Applicant.  Based on this report, the Applicant felt there had been a material misrepresentation by the Respondent regarding the condition of the vehicles.  The Applicant then returned both vehicles to the Respondent within seven days of taking delivery, and requested a refund of the full purchase price of R263 000.00.

12. When the Respondent failed to refund the Applicant the full purchase price, the Applicant approached Legal Wise for assistance. The Respondent ignored the letter of demand[1] from Legal Wise. In March 2018, the Applicant approached the Motor Industry Ombudsman of South Africa (hereinafter referred to as “MIOSA”).

13. MIOSA closed its file and referred the Applicant to the NCC based on the following  conclusion[2]:

13.1 That the offer-to-purchase did not state that the vehicles should be accident-free, have a spare key, service history and a warranty as a condition of sale;

13.2 That there was another agreement entered into by the Applicant and the Respondent, in which the Respondent was to re-sell the vehicles;

13.3 That section 56 of the CPA has no application in the matter; and

13.4 That MIOSA does not assist consumers who require a refund or compensation.

14. The Applicant then filed an application with the NCC. The NCC issued a notice of non-referral on the basis that there was a dispute of facts[3].

15. The Applicant then filed an application for leave to refer the complaint directly to the Tribunal on or about 26 June 2018. The Tribunal heard the matter on an unopposed basis on 9 October 2018, and  issued judgment[4] granting the Applicant leave to refer the matter to the Tribunal in terms of section 75 (1) (b) of the CPA.

16. At the time of the hearing of this matter, the vehicles were at the Respondent’s premises and the Applicant was still not refunded the purchase price.

 

THE HEARING

17. Following the judgement granting the Applicant leave to refer the matter directly to the Tribunal, a hearing was scheduled for 1 February 2019, the current proceedings.

 

The Applicant

18. The Applicant submitted that –

18.1 In January 2017, he concluded an oral agreement for the purchase of two vehicles from the Respondent, namely, a 2017 model Hyundai i110 motor vehicle with registration number FY16GDGP, and a 2013 model Volkswagen Polo, with registration number HG10DZGP for a purchase price of R131 500.00 for each vehicle. The total paid for the two vehicles was therefore R263 000.00, which the Applicant paid in cash to the Respondent. The Applicant took out a bank loan to finance this transaction. As at the date of the hearing, the Applicant was still paying off the bank loan.

18.2 In terms of the oral agreement, the vehicles would be in no prior accidents, there should be no structural damages whatsoever, and the vehicles should not be rebuild or reconditioned in any way. Furthermore, the Respondent would provide the Applicant with a service record of the two vehicles.

18.3 Within seven days of taking delivery of the vehicles, the Applicant noted that the Respondent had failed to provide the Applicant with the service record of the vehicles as agreed. The Applicant then approached Saturn Auto Body Repairs ((hereinafter referred to as “Saturn”) to find out if there was any damage to these vehicles.

18.4 Saturn confirmed latent damages to the structure of the vehicles, and provided quotations[5] of R49 105.50 and R56 019.69 to repair the Volkswagen Polo and the Hyundai respectively.

18.5 The Applicant then immediately notified the Respondent about the costs of repairs, and took the vehicles back to the Respondent. The Respondent refused to refund the purchase price of R263 000.00 to the Applicant.

18.6 The Applicant feels there was either negligent or fraudulent misrepresentation regarding the condition of the vehicles, and a breach of material terms of the agreement as the Applicant specifically stated that the vehicles should not be in prior collisions, have no structural damages, and required a service record.  As these requirements were a material term of the oral agreement, the Applicant submits that the Respondent was fully aware of the status of the vehicles, and had no intention to provide the Applicant with the service record. The Applicant avers that he “would not have purchased the respective vehicles had he known the true representation of the vehicles upon purchase”.[6]

18.7 The Applicant further places reliance[7] on the following sections of the CPA:

18.7.1 Section 55(2)(b), which guarantees the consumer’s rights to safe and good quality goods;

18.7.2 Section 56(1) that provides that the seller warrants that he will comply with section 55;

18.7.3 Section 56(2) which provides that within six months of delivery of any goods, a consumer has the right to return the goods to a supplier if the goods fail to satisfy the requirements of section 55. In addition[8], the goods would need to be repaired or replaced, or alternatively refunded if they are not replaced or repaired; and

18.7.4 Section 25 of the CPA provides that “a person who offers or agrees to supply, or supplies, any goods that have been reconditioned, rebuilt or remade; and 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”.

18.8 As the vehicles have structural damages, contrary to the initial oral terms, the Applicant is of the view that repairing the vehicles would not be of any assistance. The Applicant request the Tribunal for the following relief:

18.8.1 An order that the Respondent refunds the sum of R263 000.00 to the Applicant;

18.8.2 Interest at the rate of 23.15% per annum on the sum of R263 000.00 calculated from 15 February 2018 until the amount is recovered from the Respondent. This prayer is based on the interest rate the Applicant is paying on the bank loan taken to finance the purchase of the vehicles; and

18.8.3 Costs on a party to party scale.

 

The Respondent

19. The Respondent did not file any opposing papers, did not appear and was not represented at the hearing.  

 

ISSUES TO BE DECIDED

20. The Tribunal is required to decide whether, in terms of the provisions of the CPA, the Applicant is entitled to be refunded the following:

20.1 the full purchase price of R263 000.00;

20.2 interest on the full purchase price at a rate 23.15% per annum; and

20.3 the legal fees and expenses the Applicant incurred in the legal process.

 

Hearing of the application on a default basis

21. On or about 26 June 2018, the Applicant filed the application with the Tribunal. The judgement granting an order for the Applicant to refer the matter directly to the Tribunal was issued on 8 November 2018.

22. In terms of Rule 13 of the Rules of the Tribunal[9], the Respondent had to respond within 15 days by serving an answering affidavit on the Applicant. The Respondent however failed to do so.

23. The Applicant did not file an application for a default order in terms of Rule 25(2).

24. The Registrar however set the matter down for hearing on a default basis due to the pleadings being closed. The Registrar issued a notice of set down on 10 December 2018.

25. Rule 13(5) provides as follows:

“Any fact or allegation in the application or referral not specifically denied or admitted in the answering affidavit, will be deemed to have been admitted”

26. Therefore, in the absence of any answering affidavit filed by the Respondent, the Applicant’s application and all of the allegations contained therein are deemed to be admitted.

27. The Tribunal is satisfied that the requirements for the hearing to be held on a default basis have been fulfilled.

 

The Provisions of the CPA 

28. A consumer’s right to fair value, good quality and safety is set out in Part H of the CPA. Section 53(1) of the CPA states the following - 

“In this Part, when used with respect to any goods, component of any goods, or services—

(a) ‘‘defect’’ means—

(i) any material imperfection in the manufacture of the goods or components, or in performance of the services, that renders the goods or results of the service less acceptable than persons generally would be reasonably entitled to expect in the circumstances; or

(ii) any characteristic of the goods or components that renders the goods or components less useful, practicable or safe than persons generally would be reasonably entitled to expect in the circumstances;

(b) ‘‘failure’’ means the inability of the goods to perform in the intended manner or to the intended effect;

(c) …

(d) …

29. Section 55 of the CPA sets out the consumer’s rights to goods which are reasonably suitable for the purpose intended and are free of any defects. Section 55 (2) ,states-

(1) ….

“Except to the extent contemplated in subsection (6), every consumer has a right to receive goods that—

(a) are reasonably suitable for the purposes for which they are generally intended;

(b) are of good quality, in good working order and free of any defects;

(c) will be useable and durable for a reasonable period of time, having regard to the use to which they would normally be put and to all the surrounding circumstances of their supply; and

(d) comply with any applicable standards set under the Standards Act, 1993 (Act No. 29 of 1993), or any other public regulation.”

30. Based on the Applicant’s submissions, the Applicant and the Respondent entered into an agreement for the purchase of the vehicles. The Respondent provided the vehicles and the Applicant paid for them. The Respondent supplied defective goods to the Applicant. In terms of Section 56 of the CPA, the Applicant was entitled to return the goods to the Respondent. 

31. Section 56 of the CPA provides for a six month time period within which defective goods can be repaired, replaced or returned for a refund. Section 56 states-

(1) “In any transaction or agreement pertaining to the supply of goods to a consumer there is an implied provision that the producer or importer, the distributor and the retailer each warrant that the goods comply with the requirements and standards contemplated in section 55, except to the extent that those goods have been altered contrary to the instructions, or after leaving the control, of the producer or importer, a distributor or the retailer, as the case may be.

(2) Within six months after the delivery of any goods to a consumer, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense, if the goods fail to satisfy the requirements and standards contemplated in section 55, and the supplier must, at the direction of the consumer, either—

(a) repair or replace the failed, unsafe or defective goods; or

(b) refund to the consumer the price paid by the consumer, for the goods.

(3) If a supplier repairs any particular goods or any component of any such goods, and within three months after that repair, the failure, defect or unsafe feature has not been remedied, or a further failure, defect or unsafe feature is discovered, the supplier must—

(a) replace the goods; or

(b) refund to the consumer the price paid by the consumer for the goods.

(4) The implied warranty imposed by subsection (1), and the right to return goods set out in subsection (2), are each in addition to—

(a) any other implied warranty or condition imposed by the common law, this Act or any other public regulation; and

(b) any express warranty or condition stipulated by the producer or importer, distributor or retailer, as the case may be.”

 

Consideration of the merits

32. It is trite law in contracts that there should be performance by both parties of their respective obligations.  The Applicant timeously paid the purchase price.

33. Although the delivery of the vehicle occurred at the same time as the payment of the purchase price, there were several material terms of the agreement which were not met. The Respondent was expected to provide “accident-free” vehicles, accompanied by service records, as argued by the Applicant.  The quality of the vehicles should have been in terms of the oral agreement. However, the condition of the vehicles the Applicant took possession of did not meet the material terms of the oral agreement. And, the service records were also not received.

34. A key question to answer is whether the Applicant’s cancellation of the contract was justified. In Strachan v Prinsloo[10], the court held that:

34.1 To determine if the cancellation was justified, the test to apply was whether the plaintiff had failed to perform a vital term, express or implied, of the agreement;

34.2 An important factor in deciding whether such term was vital was the question whether the defendant would have entered into the agreement in the absence of such term;

34.3 The plaintiff had in fact failed to perform a vital term; and

34.4 The defendant was therefore justified in terminating the agreement.

35. It is the Tribunal’s view that the Respondent failed to perform a vital term of the agreement, namely, to provide, inter alia, vehicles which were “accident-free”. The Applicant would not have entered into the agreement in the absence of this requirement, and since the Respondent failed to perform this material term, the Applicant was justified in terminating the contract. The material violation of duty by the Respondent justifies the Applicant’s action in terminating the agreement.

36. In this matter, the vehicles purchased by the Applicant had latent defects which were only identified by a company specialising in repairs (Saturn). Any consumer with minimal experience and without mechanical knowledge of vehicles would reasonably not have seen the defective parts which Saturn identified during its assessment.

37. In the absence of the expected service records which the Respondent was supposed to forward to the Applicant, the Applicant was not unreasonable in taking the vehicles to Saturn for an assessment. The assessment report from Saturn indicated some latent defects on the vehicles.

38. It is the Tribunal’s view that the assessment on the vehicles shows that the vehicles did not meet the terms of the oral agreement between the Applicant and the Respondent. Therefore, the Tribunal’s conclusion is that the vehicles were defective.

39. When the Applicant elected to cancel the contract, the Respondent was notified of the decision. By returning the vehicles to the Respondent, the Applicant made the cancellation clear and explicit. In addition, the return of the vehicles and the cancellation was made within 7 days of taking delivery of the vehicles.

40. When applying the provisions of the CPA to the facts accepted by the Tribunal, it is clear that the vehicles supplied by the Respondent were defective. The quotations from Saturn imply that both vehicles were defective within the meaning of Section 53(a) of the CPA, and in various respects, namely, the radiator and pressure air-con pipes had to be replaced, and repairs were required on the bonnet, bumpers, doors and dome posts. According to the Applicant, these are material latent defects which were not visible during the inspection, and rendered the vehicles less acceptable and not in conformity with the terms of the oral agreement. The defects became apparent within six months of purchase, and to be specific, within 7 days. The Applicant therefore has recourse under Section 56 of the CPA.

Appropriate Relief

41. In accordance with Section 56 of the CPA the Applicant has a choice to elect a repair, a replacement or a refund of the purchase price for the defective goods supplied by the Respondent.

42. The Applicant asked the Tribunal to order the Respondent to refund the full purchase price. Replacing the vehicles with similar ones which meet the material term of the agreement is highly improbable, and could result in other disputes. The vehicles purchased by the Applicant are not ordinary items that could be easily replaced.  The Tribunal therefore finds that a refund of the price paid for the vehicles is warranted.

43. The Applicant further asked the Tribunal to order the Respondent to refund the interest and legal costs. The Applicant did not provide any legal arguments to support this prayer.

44. Section 147 of the NCA specifically provides for a cost order to be made under these circumstances as follows –

“(1) Subject to subsection (2), each party participating in a hearing must bear its own costs.

(2) If the Tribunal—

(a) has not made a finding against a respondent, the member of the Tribunal presiding at a hearing may award costs to the respondent and against a complainant who referred the complaint in terms of section 141 (1) or section 75 (1) (b) of the Consumer Protection Act, 2008,  as the case may be; or

(b) has made a finding against a respondent, the member of the Tribunal presiding at a hearing may award costs against the respondent and to a complainant who referred the complaint in terms of section 141 (1) or section 75 (1) (b) of the Consumer Protection Act, 2008, as the case may be.”

45. Rule 25(7) of the Rules of the Tribunal further allows the Tribunal to “……award punitive costs against any party who is found to have made a frivolous or vexatious application to the Tribunal.”

46. According to the South African Concise Oxford dictionary[11] “frivolous” means “not having any serious purpose or value” and “vexatious” means “causing annoyance or worry”. In relation to vexatious proceedings, in Beinash v Ernst and Young, the Constitutional Court[12] alluded to legal proceedings that have been instituted persistently and without reasonable grounds. In essence, this means that entertaining these complaints would result in a waste of resources. Therefore, a vexatious litigant is one who manipulates the functioning of the courts so as to achieve a purpose other than that for which the courts are designed.

47. In this matter, the Respondent has not participated in these proceedings, and cannot be found to be manipulating the process and purpose for which the Tribunal was designed. Regarding interest, the Applicant requested that the Respondent be ordered to pay the interest on the bank loan the Applicant took. However, there is no evidence that the Respondent required the Applicant to fund the purchase of the vehicles through a bank. Therefore, there is no basis, in fact and in law, for ordering the Respondent to refund the interest the Applicant paid on the bank loan.  The Applicant was not able to provide any basis for an order for costs.

 

CONCLUSION

48. Having had regard to all the issues raised in this matter, the Tribunal finds, on a balance of probabilities, that the Respondent breached a material term of the agreement when it supplied defective vehicles to the Applicant. The Applicant returned the vehicles within 7 days, and is entitled to a refund of the full purchase price that he paid for the vehicles.

49. The Applicant did not make out a case for the refund of the interest amount, and to be awarded legal costs.  

 

ORDER

50. Accordingly, the Tribunal makes the following order –

50.1 The application to order the Respondent to refund the Applicant the full purchase price of R263 000.00 paid by the Applicant to the Respondent is granted;

50.2 the Respondent is ordered to refund the Applicant the full purchase price of the vehicles, in the amount of R263 000.00 within 20 business days of the date of this order;

50.3 the application to order the Respondent to repay the Applicant interest on the full purchase price  as well as the legal fees and expenses incurred by the Applicant in the legal process, is refused; and

50.4 there is no order made as costs.

 

THUS DONE AND SIGNED AT CENTURION ON THIS 24^th DAY OF FEBRUARY 2019

 

 

[duly signed]

 

Ms. M Nkomo

Presiding Member

Adv F Manamela (Tribunal Member) and Mr A Potwana (Tribunal Member) concurring

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