The rights and wrongs of seeking a refund for rejected goods - Steven Smart

Nobody had heard of a diesel particulate filter (DPF) 15 years ago. Now, after a worldwide emissions testing scandal and potential class action regarding the allegedly defective parts later, these three words might strike fear in the hearts of car owners. That was the case for one pursuer, whose case ended up in the Court of Session.

Mr King bought a vehicle from a dealer, funded by a hire purchase agreement. He had repeated difficulties with the DPF and intimated that he intended to reject the car under his contract. He raised an action seeking to recover the sums he had paid and common law damages. His action was dismissed at first instance and by the Sheriff Appeal Court on the basis that his continued use of the vehicle and payment of sums due by him after intimating rejection of the vehicle “personally barred” him from litigating. His actions in performing his side of the contract outweighed his words seeking to reject the vehicle and exit its terms.

The case was appealed to the Inner House of the Court of Session. In the interim, the pursuer had paid off the balance of the vehicle and sold it to a third party. The appellate court noted that given the change of factual circumstances, a determination of the outcome of the action based upon court pleadings which no longer reflected the true position could not be made.

However, the matter was considered of such importance to consumers and traders alike that the central issues should be addressed. The point in dispute regarding the legal concept of whether the Pursuer’s actions personally barred him from seeking a remedy was considered a narrow one: if this was to be advanced, it was necessary to consider the full facts and circumstances.

Steven Smart is a Partner, Horwich Farrelly

The relationship between consumers and traders involves a great deal of power resting with the trader. This was a relevant starting-point before considering the practicalities of a consumer seeking to invoke their rights.

The Consumer Rights Act 2015 is intended to provide a high level of consumer protection. The right to reject goods contained within this legislation, which went beyond the powers set down in the European Directive from which it was derived, showed Parliament’s clear intention to strengthen the rights of consumers beyond the minimum standards proposed.

To a substantial degree, the Act inverts the power imbalance between consumers and traders. Once a consumer has intimated rejection of the goods, subject to specific rules applicable depending upon whether the trader accepts the rejection, the trader is obligated to provide a refund and the consumer must return the goods. Continued use until these steps are arranged does not constitute a pursuer waiving their statutory rights.

The legislation provides that a consumer is entitled to get back the same amount of money as they paid. The court considered the implications of payment having been made in full or under a hire purchase agreement and noted that in either scenario, the statute did not prevent post-rejection use of the goods until each party fulfilled its obligations. The express acknowledgment of reasonable timescales for paying the refund pointed to an acknowledgement the goods could be used beyond the date of intimating rejection of them. The argument to the contrary placed an illogical and unintended restriction upon the protections provided. Unless and until the payment was made, the pursuer retained the right to use the goods.

The clarity of the Court’s assessment of the legislation provides a clear framework to apply when a customer does seek to reject goods.

Steven Smart is a Partner, Horwich Farrelly