Apart from buying a house, buying a vehicle is for most people the most expensive purchase. But what do you do if you made a bad purchase? Maybe the vehicle has problems, or it broke down soon after you purchased it.
What can you do in such a situation? Most information out there only tells half the story, but in this article, we will step on a few toes and tell you the full story.
This article will focus on second-hand vehicles, but is equally appliable to new vehicles, and, under certain circumstances, other goods bought.
Before we turn to the legal side of things, take some time to watch The Devi Show, broadcasted on 28 May 2023 on e.tv:
Section 55(2) of the CPA (Consumer Protection Act 68 of 2008) provides that each consumer has the right to receive goods of good quality, durable for a reasonable time and free from defects.
If your second-hand vehicle does not conform to these standards of quality, you have recourse (we will explain against whom) in terms of the CPA.
Section 56(2) of the CPA provides that within 6 months after taking delivery of the second-hand vehicle, if the vehicle does not conform to the standard of quality provided for in Section 55, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense… and the supplier MUST, AT THE DIRECTION OF THE CONSUMER, either repair or replace the vehicle, or refund the consumer the price paid by the consumer for the vehicle. (own emphasis).
Firstly, a refund is available AT YOUR DIRECTION. You do not need to allow the supplier to repair or replace the goods, you can demand a refund as soon as you become aware of the defects. The Motor Industry Ombud does not share our view and will recommend that the vehicle be repaired if possible, even if it is contrary to the wording of the CPA.
Secondly, contrary to what the Motor Industry Ombudsman currently recommends, the vehicle is to be returned without penalty and at the supplier’s risk and expense. Recent recommendations from the Motor Industry Ombudsman includes “usage costs” for the usage of the vehicle before it was returned. There is no legal basis to be found for this anywhere in the CPA. The only time a consumer may be liable for usage costs when returning goods, is under Section 20(6)(b), but a return of goods under that Section relates to goods that are not “defective”, but rather “unwanted”.
By allowing usage costs, the Motor Industry Ombudsman is negating the effect of the “Implied Warranty of Quality” of Section 56 of the CPA.
What is a warranty? A warranty is a written guarantee, issued to the purchaser of an article by its manufacturer (or in the case of the CPA, also by the distributor and retailer), promising to repair or replace it if necessary, within a specified period of time.
The Motor Industry Ombud had the following to say in a recent recommendation:
In determining the right of a supplier to impose a charge contemplated in subsection (5), if any goods returned to the supplier in terms of this section the supplier may charge the consumer a reasonable amount for use of the goods during the time they were in the consumer’s possession.
The Motor Industry Ombud of South Africa
The Supreme Court of Appeal in Motus Corporation (Pty) Ltd t/a Zambezi Multi Franchise v Abigain Wentzel, agreed with the Ombud’s interpretation of Section 20 of the CPA, and paraphrased Section 20(5) as follows:
In terms of Section 20(5) upon the return of the goods, the supplier must refund the consumer the price paid for the goods, less any amount that may be charged in terms of subsection (6).
Motus Corporation (Pty) Ltd t/a Zambezi Multi Franchise v Abigain Wentzel at para 47.
When the actual wording of Section 20(5) is considered, the Supreme Court of Appeal, with respect, erred when it failed to consider the whole of Section 20(5). Section 20(5) reads as follows: “Upon return of any goods in terms of this section [referring to section 20], the supplier must refund the consumer…“
Defective vehicles are not returned in terms of Section 20, but in terms of Section 56.
The National Consumer Tribunal has the correct interpretation, and even after the Motus-judgment, ruled as follows in Lordwick Mogalakane Leutele v Kolev Motors CC:
[30]. In the view of the Tribunal, Section 20 of the CPA upon which the MIOSA’’s recommendation is based cannot have application in cases involving section 55 defects. Nowhere in the CPA is there reference to “wear and tear’” and there is no apparent legal basis that these items are excluded from the provisions of sections 55 and 56 of the CPA. Although the Respondent complied with the MIOSA recommendations as referred to above, the Tribunal took into account and gave weight to whether the consumer’s rights in terms of section 55(2)(c) of the CPA “to receive goods that 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 …” have been infringed or not. If one has regard to section 55(2)(c) of the CPA, the second MIOSA recommendation requiring a deduction for “wear and tear” gives rise to an injustice because there is no apparent lawful basis for requiring a consumer to pay for the use of the vehicle that was defective from the start.
We submit that the National Consumer Tribunal applied the correct interpretation of Section 20 of the CPA.
The deduction of usage costs is a controversial issue that is, at best for suppliers, open for debate.
The CPA provides for remedies against the “supplier” of the vehicle, but who is the supplier? Is it only the dealership? Let’s see…
A “Supplier” is defined as “any person who markets any goods or services”.
“Market” means “to promote or supply any goods or services“.
“Supply” means to “sell, rent, exchange and hire in the ordinary course of business for consideration”.
Most vehicles sold in South Africa are financed by a bank. Are these “financiers” in any way liable under the CPA? This is where we will be stepping on a few toes…
Take a look at your Instalment Sale Agreement, that document that you signed in a state of euphoria, waiting to get behind the wheel of your new vehicle. Who is identified as the “Seller” in terms of that Agreement? In terms of that Agreement, who sold the vehicle to you?
Some banks shy away from using the terms “seller” and “purchaser” but the substance of the agreement is one of sale and purchase between a seller and purchaser.
The basic principle is as follows: You want to buy a vehicle, but do not have enough cash. The bank, who has enough cash, is willing to allow you to pay the vehicle off over a few years, but they want security for the loan in the form of the vehicle. The simplest way to do this is to buy the vehicle from the dealer and sell it to you in terms of the Instalment Sale Agreement and reserve ownership of the vehicle until payment of the last instalment.
If they were not the seller, how did they become titleholder of the vehicle (look at your vehicle’s registration certificate), if they did not buy the vehicle from the dealership?
If they were not the seller, why is your agreement called an Instalment Sale Agreement, if nothing is sold in terms of that agreement?
So now that we established that the bank sold the vehicle to you, we know that they “sell in the ordinary course of business for consideration”.
And if they do this, it means they “Supply” for purposes of the CPA.
And if they supply, they also “Market“.
And if they market, they fall within the definition of “Supplier” for purposes of enforcing your rights in terms of the CPA.
So where does the dealership fit in?
“Distributor” is defined as a person who, in the ordinary course of business, is supplied with those goods by a producer, importer or other distributor, and in turn, supplies those goods to either another distributor or to a retailer.
A “Retailer” is defined as a person who, in the ordinary course of business, supplies those goods to a consumer.
The dealership is the “distributor” of the vehicle to the “retailer”, who is the bank.
We know that this is a lot to take in, and the banks have settled with our clients to keep this a secret and out of the press and the courts, but now the secret is out.
The implied warranty of quality contained in Section 56(1) of the CPA, is given by each of the producer or importer, the distributor and the retailer. So not only can you enforce your rights against the dealership, but you can also enforce your rights against the bank who sold the vehicle to you, and who became part of the supply chain when they did so.
You no longer have to only fight the long fight against the dealer who already received all his money, you can add the bank to the party.
The dealer is not eager to resolve the dispute, because he already received the full purchase price from the bank.
The bank throws their hands in the air and tell you that they only provided “loan finance” to enable you to purchase the vehicle.
All the while, you are paying for a vehicle that you have no or limited use of.
The secret to successful enforcement of your rights is to get the bank to admit that they sold you the vehicle, after which your rights will be enforceable against both the bank and the dealership.
Your rights in terms of the CPA when you bought a second-hand vehicle, financed by a bank, is not only enforceable against the dealer of the vehicle, but against the bank as well. It is the bank, and not the dealer, who sold the vehicle to you.
Stop wasting time by trying to enforce your rights against a dealer who has no interest in resolving the dispute. Enforce your rights against the one who expects payment from you.
If you want more than just your money back… well, then have a chat with us.