How Trade Descriptions Law Has Changed

I am going to tell you a story, only the names have been changed so as to protect the foolhardy.

I have written extensively in this blog about one side of my consultancy business, Marketing Strategy. I think that it is time that I added an entry on the second part of the consultancy, Consumer Protection due diligence.

For over 25 years I worked as a trading standards professional dealing with consumer complaints and advising businesses on their legal responsibilities. The tale which follows is typical of the types of complaint I dealt with on a daily basis during my career. However, it also shows how the law relating to the description of goods and the rights which consumers hold has changed with the implementation of:

  1. The Consumer Rights Act 2015
  2. The Consumer Protection from Unfair Trading Regulations 2007.

Are you sitting comfortably, so we’ll begin.

One day Jane told her mother that she needed a new car. He old vehicle was fifteen years old and on its last legs. It was due a service and the cost of that service was going to significantly exceed the cars second hand value. However, Jane didn’t have the money to buy a new car. The option was no vehicle or to continue to pay large servicing fees.

Generously, Jane’s parents said they would help Jane get a replacement vehicle.

One day, Jane’s mum was passing her local garage and on the forecourt saw a smart little runabout. It was a bright metallic red and it had the word Turbo written on the back. The car had a personalised number plate.

Jane’s Mum asked the salesman in the garage about the car. She was told that the car wasn’t yet ready to be sold. the garage still had to do the safety checks to ensure it was roadworthy and they needed to remove the number plate and revert the car back to its old registration. Due to staff shortages it would be a week or so before the car was ready.

Jane’s mum was told the car was a “1.4 engine” and that the car had “around 17,000 miles” on the odometer. She was also told that the car was a 2016 model.

Excitedly, Jane’s mum called her daughter about the car. Jane agreed that the car seemed to be a good option but that she was aware there were two versions of the model of car a 1.4 litre engine and a one litre engine. Worse there were two versions of the one litre engine.

Jane told her mum that she would prefer a 1.4 litre version and told her mum to avoid the one litre version.

Jane then did lots of research on the car and what would be an appropriate price to pay. A 2016 model with 17,000 was a low mileage vehicle and the low mileage increased the vehicle’s value. However, the price being asked by the dealer was, as one price comparison site said, “a bit pricey”. Jane hadn’t been able to check the exact details of the car through a site like HPI due to the personalised number plate.

A few days later, Jane’s mum was passing the garage and saw the car was still on the forecourt. She spoke to the salesman who said the car was still not ready for a test drive. Jane’s mum saw a similar car on the forecourt in a metallic grey. The salesperson told her that the grey car had a one litre engine, so it wasn’t as good as the red car.

A few days later, Jane’s mum got a phone call from the garage about the red car. Another branch of the motor dealer had a customer interested and had asked that the car be moved to their location. Would Jane’s mum put down a deposit of £99 to secure the car. Jane’s mum agreed and paid the deposit to hold the car. Following payment of the deposit Jane’s mum received no paperwork such as a receipt which would have described the vehicle.

A week or so after paying the deposit, Jane’s mum got another telephone call from the garage. The car needed to have its brakes replaced and it needed a new catalytic convertor on the exhaust. The garage was dong that work but they had been let down by their parts supplier who couldn’t source the catalytic convertor. Apparently there was a shortage of ‘cats’ and it would be a couple of weeks before the replacement part would arrive.

After waiting six weeks from first seeing the car, Jane’s mum finally got the opportunity to take it for a test drive. On arriving at the garage, the salesperson apologised. The car hadn’t travelled 17,000 miles: It had travelled 27,000 miles. This would have been the average mileage for a four year old car. This removed the low mileage price premium. Jane and her mum agreed to carry on their interest in the car.

After a test drive, Jane’s mum paid the full asking price for the car in cash. She was handed a vehicle order form in lieu of a receipt. It was arranged that the car would be delivered to Jane’s address.

Excitedly, Jane contacted her car insurer to switch her car insurance over to the new vehicle. She gave the details of the car to her insurer who then told her that the car had a one litre turbo engine, not a 1.4 litre engine.

Jane phoned her mum who then inspected the vehicle order form. In small print next to the description of the car was written “1.0T115”. Jane’s mum inferred from this that the car was indeed a 1.0 litre engine size and that the engine had three cylinders; unlike the 1.4 litre version, which was a four cylinder engine.

Written at the bottom of the invoice was a statement that the car’s odometer reading was 17,000 miles.

Jane phoned one of the directors of the motor dealership to complain that:

  1. Her mum had paid about 10% too much for the car, and,
  2. The car had been wrongly described to her parents in terms of the engine capacity.

The director replied that the modern one litre turbo engine was a better engine than the old 1.4 litre version and was its replacement. Therefore, in terms of the engine capacity, there was no consumer detriment. He also stated that the incorrect mileage on the vehicle order form was the fault of a former employee who had now left the company.

So at the end of this lengthy tale where do Jane’s parents stand. Are there potential offences under the Consumer Protection regulations? What are Jane’s parent’s consumer rights? Can the garage rely on a due diligence defence?

Under the Consumer Protection Regulations, there are three potential offences in the way the car had been marketed to Jane’s mum.

  1. A false or misleading description has been applied to the car
  2. The car has been misleadingly described through the sales person omitting critical information
  3. That the salesperson had acted outside what the average consumer would see as appropriate professional diligence.

There had been a verbal description of the car as having travelled 17,000 miles. This statement was incorrect. There had been a verbal apology that the correct mileage was 27,000 miles. However, further to that verbal statement a document; upon the sale of the car; the vehicle order form had been proffered included the incorrect mileage of 17,000 miles.

The mileage statement on the vehicle order form is a prima facie offence under the regulations. The vehicle order form incorrectly describes the vehicle.

Worse, the garage knows that the 17,000 mile figure is wrong. They have known that mileage is incorrect for a number of weeks but nothing has been done to alter the statement of the mileage on their database.

The fact that the mileage error has not been corrected means that the garage cannot rely on the ‘reasonable precautions and due diligence’ existing within regulations. This is a two part defence. Reasonable precautions is having a system of checks in place to ensure false or misleading descriptions do not take place. Due diligence is ensuring that the system is operating as intended and that it is being followed. In this case it is clear that a system of checks did exist but that the system was not followed.

The motor dealer tried to blame the mileage error on ‘an ex-employee’. Case precedent is clear on this matter. A business can blame an employee for the commission of an offence BUT to do so they must show that their due diligence system was operating as intended and that the former employee deliberately or negligently deviated from that system. In any case, since becoming aware of the ‘ex-employees’ negligence, and knowing the true mileage of the vehicle, the dealership had done nothing to alter their records as to the car’s mileage.

Ah, you say, but Jane’s mum was verbally told that the mileage was incorrect. Unfortunately for the dealership, there is lengthy case precedent, referred to as ‘disclaimer doctrine’, which covers disclaimers and amending statements applied to trade descriptions.

The doctrine states that disclaimers must be as “bold, precise and compelling” as the original description. They must be placed in close proximity to the original description AND they must negate the impact of the false or misleading description. So a verbal statement two weeks before the issue of a document containing a false description is NOT a valid disclaimer to the offence.

When Jane’s mum eventually received and amended vehicle order form for the car, the 17,000 miles statement had been scored through and the correct mileage written next to it. This was also an improper disclaimer as the original false description could still be read.

It is no surprise that much of disclaimer case law relates to the motor trade and the mileage statements on second hand vehicles!

Now we move to the issue of the engine capacity and this brings in the other two offences described above.

It is clear that Jane and her mum had been given a false impression as to the engine capacity of the car. the garage had several weeks to correct this impression by giving necessary detail. Remember Jane had stated a preference for the 1.4 litre version of the engine. It was only after the sale had been made and title for the car having changed did the true engine capacity come to light. Indeed this information did not come from the garage but from Jane’s insurers.

It is clear that by omitting to appropriately inform Jane and her mother of the true engine an offence under the Consumer Protection Regulations had occurred. An offence of misleading omission. Clearly, in the weeks between Jane’s mum first seeing the car and the purchase of it, the garage had plenty of opportunity to correct the false impression in the minds of Jane and her mother. They did not do so.

The offence of misleading omission did not exist in the Trade Descriptions Act 1968. It was specifically added to the Consumer Protection Regulations to allow for such circumstances as that of Jane’s mother’s situation. For years there were issues of motor traders not giving consumers appropriate information.

The old ‘only one female owner’ description was a common tactic amongst some dodgy motor dealers. The ‘one lady owner’ may have been true but what the dealer did not tell the consumer was that the lady in question was a rally driver and that the car’s suspension was on its last legs.

It is clear in my mind that by not giving correct details of the engine capacity, preferably in document form, to Jane’s mum before the purchase, and by leaving a false impression in the minds of Jane and her mother, a misleading omission offence had occurred.

Finally, the Consumer Protection Regulations include the new professional diligence offence. This offence occurs when a trader, or their staff, act out with levels of professional diligence expected by ‘the average consumer’.

The term average consumer is new and replaces the case precedent set by Lord Denning of ‘the man on the Clapham omnibus’. In most cases, average consumer means a reasonable person with appropriate mental acuity. However, in certain cases, the average consumer may need to have specialist knowledge. For example, if your business is selling rock climbing equipment to amateur climbing clubs, the average consumer would be expected to have some knowledge of what climbing equipment is for and what tolerances it should have for their intended ascent.

In the case of our motor trader, who in this case had a brand dealership, reasonable professional diligence would include having appropriate documentation and signage in place to avoid misleading consumers.

Under the consumer protection regulations, there does not have to be consumer detriment for offences to occur. The old detriment test has been abolished. The offences in the regulations state that the legal test is whether the false or misleading statement or omission materially affected the purchasing decision of the consumer. In any case, even under the old test, a mileage discrepancy of 10,000 miles clearly does affect the value of the vehicle and thus provides financial detriment.

What this also means is that descriptions given can be true but through their manner of presentation they can be as misleading as to alter the consumer’s transactional decision. This is also a massive change from the old Trade Descriptions Act offences.

So it is clear that the motor dealer in this case has fallen foul of all three offences under the regulations. The car has knowingly had a false description applied to it; the 17,000 miles statement. No appropriate disclaimer has been applied. Through omitting the correct details as to the engine capacity, a misleading description through omission offence has taken place and finally, by not correcting these errors, the sales person and the dealership has acted outside expected levels of professional diligence.

When told of the above offences, the motor dealership tried to void the contract. This they could not do. Title of the goods had passed and the monetary payment for the car had spent several days residing in their bank account. The old ‘possession is nine tenths of the law’ statement is a long superseded myth. The car, despite it sitting on the dealer’s land awaiting collection’, was clearly Jane’s mother’s property irrespective of its registration with the DVLA. The garage had no claim to the car.

The Consumer Rights Act 2015 makes several changes to the statutory rights of consumers. Most prominent is the time limit of 30 days within which the consumer can reject goods. This replaced the ‘reasonable time’ clause of the old Sale of Goods Act 1974 which parliament felt was legally ambiguous. The Trading Standards Institute and I believe parliament was wrong to place such a short time limit on rejection, particularly when it comes to complex goods like cars. The time limit partly negates the ‘reasonable durability’ clause of satisfactory quality and thus limits consumer’s rights. However, we are stuck with what parliament legislated.

However, a consumer’s core statutory rights remain unchanged:

  1. Goods must be of satisfactory quality
  2. They must be fit for their intended purpose
  3. The must be as described
  4. Consumers must be able to have good title to the goods.

Clause 4 is particularly the case with motor vehicles where there might be outstanding finance on the vehicle. Under English law, only the first purchaser of second hand goods is protected i.e. the motor dealer, not the consumer. So if there is outstanding finance on the vehicle, the credit company can recover the vehicle from the consumer and the consumer is out of pocket. Suffice to say, the law in Scotland is different!

In our case, it is clear that the car sold to Jane’s mum is ‘not as described’ in terms of both engine capacity and mileage. She would therefore have a right to a claim under the Consumer Rights Act 2015.

In this case the garage tried to act as if Jane’s mum wished to reject the car outright. However, this is only one of the civil remedy routes open to Jane’s mother.

  1. She could reject the car and accept a full refund.
  2. She could ask for a replacement (this is probably the most likely remedy where a car bought on finance is found to be faulty. The owner of the car, the finance company or the lease provider will ask for a replacement car to be provided).
  3. She could seek a repair (if the car was faulty).
  4. She could seek damages.

In our case, the last of these options is likely to be appropriate and the level of damages which would appropriately be sought is the difference in value between that of a car with 17,000 miles on the odometer and one with 28,000 miles on the odometer. This could amount to several hundred pounds.

As you can see, traders need to not only know the effect of consumer law, they need to design due diligence procedures which take account of case precedent. And they need appropriate check and balances in place to ensure their systems operate as intended. Particularly at times of stress and in unusual circumstances such as during a pandemic.