Case Studies - Faults (network & hardware issues)

TDR Case Note T012481 (2013)


Faulty mobile handsets


The customer entered into a mobile phone contract on a monthly plan with the Scheme Member Provider (Provider) in May 2012, which came with a smart phone handset. In November 2012 a small yellow discolouration appeared on the handset screen, and the Customer returned it to the Provider's store, and requested it be checked. The provider subsequently gave the Customer a refurbished handset, not the Customers original product. The Customer was unhappy, and complained that the provider failed to communicate that the original handset would not be returned. The Customer said that had she known the handset would not be returned, she would have had all her confidential work related information removed prior. The Customer requested her own original hanset back, or if this was not possible, that a new handset be provided.

The Provider believed it had met its obligations under the Consumer Guarantees Act (CGA) because its staff had received training from the handsets manufacturer, and the issue was something they deal with on a daily basis. The provider also responded that the Customer would have been aware that the handset would be replaced by a refurbished phone when she agreed to it being sent away for assessment. The original handset had been recycled, and therefore the Provider could not return it to the Customer. The Provider stated it was unable to replace the original handset with a brand new one. However, the provider offered a goodwill gesture of one month's plan charges ($120) for the Customer's experience.

Adjudicator's decision

The CGA applies to all goods and services 'sold' in trade, including mobile handsets. Consumers' rights under the CGA are expressed as a range of guarantees, such as the item being fit for all purposes the product is normally supplied for, and free from minor defects. With reference to sections 18 and 19 of the CGA, if a product has failed to meet a guarantee, the Customer may "require the supplier to remedy the failure within a reasonable time" or if the failure cannot be remedied the consumer may either "reject the goods" or "obtain from the supplier damages in compensation for an reduction in value of the goods below the price paid or payable by the consumer for the goods". If the Customer requires the supplier to remedy the problem, the provider may compy with the requirement by "repairing the goods", replacing the goods with goods of identical type" or where the supplier cannot reasonably be expected to repair the goods, "by providing a refund of any money paid or other consideration provided by the consumer in respect of the goods".

The Adjudicator found that the fault on the Customer's handset did not fall within the definition of a 'substantial defect' so as to provide the customer with the ability to reject the handset. However, the Customer could require the Provider to remedy the failure on the basis of section 18(2)(a) of the CGA. The provider had elected to replace the faulty handset with a refurbished product. The question then became whether a refurbished handset is a product of an "identical type" as required in the CGA.

In this case the Adjudicator considered that providing a refurbished handset would not meet the requirement for the provider to provide a replacement product of an "idential type"

Regarding the Provider's position, that the agreement it holds with the manufacturer is that any replacement products are re-conditioned products, the Adjudicator held that the agreement did not affect the Provider's statutory obligations to its customer - that is the Customers protections under the CGA. For the above reasons, the Adjudicator considered that providing a re-conditional handset would not comply with the provider's obligation to provide a replacement handset of identical type, as required under section 19(1)(b).

With regard to the confidential information stored on the handset, the Adjudicator found that the 'handset repair form', which had been signed by the Customer, put the Customer on notice that any information should be backed up, as the repair agent could not guarantee it would not be corrupted or lost. If would have been reasonable to expect that the handset may not be returned, or alternately the phone would be catastropically affected in the repair process. On balance, the Adjudicator considered that this aspect of the customer's compaint had not been established.

Final outcome

The Adjudicator upheld the Customer's complaint in part, and concluded that providing a refurbished handset did not comply with the provider's obligation to provide a replacement handset of an identical type, and the provider therefore had to either (1) supply the Customer with a replacement new handset of the same model; or (2) refund all money paid for the handset and void the remaining contract for services that applied within the context of that purchase.