This is essentially a dispute about interpretation of the scheme member’s obligations to repair or replace a phone purchased from them under the Consumer Guarantees Act guidelines, and whether the fault concerning the phone is of a “substantial character”.
The customer claims to have been given conflicting information from the scheme member about a replacement or repair process. TDR does not consider that this case fits within the exclusions of the Terms of reference (the scheme member has also not referred to any exclusions), and that it relates to a customer service complaint. TDR considers that the dispute is amenable to mediation or adjudication.
This dispute is within jurisdiction for TDR.
- The dispute between the customer and the scheme member relates to the customer’s defective mobile phone.
- This complaint is upheld.
- In making this determination TDR has considered the information provided by the customer and the scheme member. TDR will also consider the following:
- Fairness in all the circumstances
- Any relevant legal requirements
- The Code and its service standards, including position statements; and
- Any other relevant telecommunications code.
- Having discussed this matter with the customer and the scheme member TDR is satisfied that there is no settlement of the dispute. Therefore, TDR makes the following determination.
- The dispute in this instance arose after the customer purchased a Samsung Galaxy S23 Ultra mobile phone (“the Mobile”) from the scheme member’s online store.
- Key developments have been summarised below.
- The customer has submitted that when they initially received the Mobile, the touch screen was not receptive to their touches (“the Defect”).
- The customer contacted the scheme member via email to follow up on previous correspondence regarding the Defect. It is evident from the email threads submitted by the customer that the scheme member declined to provide the customer with their desired outcome of a replacement device, instead requesting that the customer allow the scheme member the opportunity to repair the Mobile.
- The customer contacted TDR for assistance and advised TDR that they wished to pursue a refund rather than a replacement device.
Positions of the respective parties
The customer’s position
- The customer considers that the scheme member should be required to refund them for the purchase price of the Mobile as the Defect constitutes a failure of substantial character to comply with a guarantee in accordance with the Consumer Guarantees Act 1993 (“the Act”).
The scheme member’s position
- The scheme member considers that it should not be required to refund the customer for the purchase price of the Mobile as the Defect does not constitute a failure of substantial character to comply with a guarantee in accordance with the Act.
Reasons for the decision
- Prior to issuing this determination, TDR attempted to assist with the resolution of this matter through a mutually satisfactory, negotiated settlement. Due to the nature of the dispute, attempts to facilitate a mutually satisfactory, negotiated settlement were unsuccessful.
- For the customers complaint to be upheld, TDR must determine the following:
- That the Defect constitutes a failure of substantial character to comply with a guarantee in accordance with the Act; and
- That the customer is entitled to a refund of the purchase price of the Mobile.
Does the Defect constitute a failure of substantial character?
- Part 1 of the Act provides guarantees in respect of the supply of goods. The relevant guarantee as it relates the customer’s complaint is contained at section 6, which is copied below:
6 Guarantee as to acceptable quality
(1) Subject to section 41, where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality.
(2) Where the goods fail to comply with the guarantee in this section,-
(a) Part 2 may give the consumer a right of redress against the supplier; and
(b) Part 3 may give the consumer a right of redress against the manufacturer.
- Further to (14) above, the Act also distinguishes between a failure to comply with a guarantee provided at Part 1 of the Act and a failure of substantial character to comply with a guarantee provided at Part 1 of the Act. Section 21 governs whether the goods substantially fail to comply with a guarantee provided at Part 1 of the Act, which I have copied below:
21 Failure of substantial character
For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where-
- the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
- the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or
- the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or
- the goods are not of acceptable quality within the meaning of section 7 because they are unsafe.
- Having reviewed the submissions of all parties, it does not appear to be disputed that the Mobile purchased by the customer is defective. Throughout the course of the complaint, the scheme member has consistently acknowledged the Defect and offered to repair the Mobile. The dispute in this instance appears to be regarding the severity of the Defect and if the Defect satisfies the provisions of section 21 above.
- In its formal submission, the scheme member suggested that the Defect is analogous to occasional freezing or intermittent failure of the home button which, per the scheme members internal Consumer Guarantees Act 1993 Guidelines document, does not constitute a failure of substantial character to comply with a guarantee in accordance with the Act.
- The customer has submitted a video of the Mobile. In the video, the customer demonstrates the nature of the Defect by attempting to function the Mobile’s touch screen. The touch screen only responds very slightly to the touches and not in any capacity where the Mobile could be easily operated for its intended purpose, if at all.
- When considering the customers statements and the video TDR does not consider that a reasonable consumer, having reviewed the same evidence, would choose to acquire the Mobile. Therefore, the Defect satisfies subsection 21(a) of the Act and constitutes a failure of substantial character to comply with the guarantee as to acceptable quality provided at section 6 of the Act. For completeness, TDR also considers that the Defect satisfies subsection 21(c) of the Act.
Is the customer entitled to a refund of the purchase price of Mobile?
- The Act provides different remedies to the consumer depending on whether the failure to comply with a guarantee provided at Part 1 is of substantial character. It has been determined that the Defect constitutes a failure of substantial character to comply with a guarantee, namely the guarantee as to acceptable quality provided at section 6 of the Act.
- Given the determination above, the remedies available to the customer as it relates to the Mobile are provided at subsection 18(3) of the Act, which is copied below:
18 Options against suppliers where goods do not comply with guarantees
(1) Where a consumer has a right of redress against the supplier in accordance with this Part in respect of the failure of any goods to comply with a guarantee, the consumer may exercise the following remedies.
(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21, the consumer may-
(a) subject to section 20, reject the goods in accordance with section 22; or
(b) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.
- The customer made it clear to the scheme member directly and through their TDR complaint that they rejected the Mobile in accordance with subsection 18(3)(a). TDR has reviewed section 20 of the Act and does not consider that any of the restrictions apply. Therefore, there is no reason why the customers decision to reject the Mobile should be invalid.
- Section 23 of the Act outlines the remedies for a consumer who opts to reject goods pursuant to subsection 18(3)(a), which I have copied below:
23 Consumers’ options of refund or replacement
(1) Where the consumer exercises the right to reject goods, the consumer may choose to have either-
(a) a refund of any money paid or other consideration provided by the consumer in respect of the rejected goods; or
(b) goods of the same type and of similar value to replace the rejected goods, where such goods are reasonably available to the supplier as part of the stock of the supplier,-
and the supplier shall make provision accordingly.
(2) A refund referred to in subsection (1)(a) means a refund in cash of the money paid or the value of any other consideration provided, or both, as the case may require.
(3) The obligation to refund cannot be satisfied by permitting the consumer to acquire goods from the supplier.
(4) Where a consumer obtains goods to replace rejected goods pursuant to subsection (1)(b), the replacement goods shall, for the purposes of this Act, be deemed to be supplied by the supplier, and the guarantees and obligations arising under this Act consequent upon a supply of goods to a consumer shall apply to the replacement goods.
- The customer advised TDR that they wished to pursue a refund pursuant to subsection 23(1)(a) of the Act., The Act has provided this as a legitimate option for the customer to choose given the failure of substantive character for the Mobile to comply with the guarantee as to acceptable quality per section 6 of the Act.
- The scheme member considers that it is reasonable to be provided with an opportunity to repair the Mobile given the nature of the Defect. However, the fact that the Defect may be repairable does not mean that the Defect does not satisfy the provisions of section 21 of the Act.
- Further to (25) above, the wording of the Act is clear, and TDR determines that section 21 of the Act has been satisfied. The Act therefore clearly provides the customer with the option to proceed in accordance with subsection 18(3)(a) and 23(1)(a), which they have opted to do. TDR appreciates that the scheme member’s preferred outcome is to repair the Defect, and while TDR does not find the scheme member’s proposal unreasonable, TDR does consider that it is at odds with the Act. TDR must consider fairness in all circumstances; TDR considers that it would be unfair if the clear wording of the Act was overlooked. TDR hereby determine that the customer is entitled to a refund inclusive of GST.
- Section 22 of the Act outlines the approach the consumer must take in rejection of goods, which is copied below:
22 Manner of rejecting goods
(1) The consumer shall exercise the right to reject goods under this Act by notifying the supplier of the decision to reject the goods and of the ground or grounds for rejection.
(2) Where the consumer exercises the right to reject goods, the consumer shall return the rejected goods to the supplier-
(i) because of the nature of the failure to comply with the guarantee in respect of which the consumer has the right to reject the goods; or
(ii) because of the size or height or method of attachment,-
the goods cannot be returned or removed or transported without significant cost to the consumer, in which case the supplier shall collect the goods at the expense of the supplier; or
(b) unless the goods have already been returned to, or retrieved by, the supplier.
(3) Where the ownership in the goods has passed to the consumer before the consumer exercises the right of rejection, the ownership in the goods revests in the supplier upon notification of rejection.
- TDR does not consider that subsection 2(a)(i) or 2(a)(ii) applies to the customers complaint and therefore the customer is hereby required to arrange the Mobile to be returned to the scheme members preferred address.
- TDR has determined that the complaint is upheld and that the scheme member is required to refund the customer.
- TDR hereby determines that the customer is entitled to a refund inclusive of GST, following the receipt of which the customer is required to return the Mobile to the scheme member.