Malaysia: Aargh! It's A Lemon!

Kelly Chung considers the need for greater consumer protection in Malaysia

The National Consumers Complaints Centre ("NCCC") has recently been advocating for the introduction of lemon laws into our legal system (see Star Metro of 18 December 2014 and 10 January 2015).

To support its cause, the NCCC stated that consumer complaints on general consumer products in 2013 involved RM12.6 million worth of products. The categories of products under which most complaints were lodged were electrical and electronic appliances and furniture.

The NCCC also reported that consumer complaints in the auto-sector involved more than RM135 million worth of products from 2010 to 2013. They added that cases of defective consumer products often left consumers with the short end of the stick – suffering financial losses as well as mental stress.

In this article, we shall first examine how lemon laws have been incorporated into the laws of the UK, Singapore, New Zealand and Australia. We shall then consider the position in Malaysia with regard to such laws.

THE ORIGINS OF LEMON LAWS

The origins of lemon laws – as we know them today – can be traced back to the USA. In 1975, in an attempt to offer better consumer protection and to promote fairer and more ethical domestic trading practices, the US Congress enacted the Magnuson-Moss Warranty Act – commonly known today as the Federal Lemon Law.

Essentially, such laws provide relief to aggrieved consumers who bought products that are defective (i.e. those goods that repeatedly fail to meet standards of quality and performance). In other words, they afford protection to consumers who have, to their misfortune, received a "lemon". Lemon laws in the USA were first intended to cover purchases of cars, but were thereafter extended to cover most other general consumer products.

The Magnuson-Moss Warranty Act has been the impetus for the introduction of lemon laws in various other jurisdictions.

THE UNITED KINGDOM

Lemon laws in the UK are generally found in Part 5A of the Sale of Goods Act 1979 ("UK Act"). Part 5A came into effect on 31 March 2003 after a much delayed implementation of EU Directive No. 44 of 1999, and sets out the additional remedies available to consumers in certain circumstances.

Under the UK Act, a product "does not conform to the contract of sale" if at the time of delivery, there is a breach of an express term of the contract or an implied term under Sections 13, 14 or 15 of the UK Act e.g. where the product does not correspond with its description, or is not of a satisfactory quality.

Under Part 5A, where goods fail to conform to the contract of sale at the time of delivery, the buyer has the right to require the seller to repair or replace the goods within a reasonable time and without causing significant inconvenience to the buyer.

Alternatively, where repair or replacement is not possible or disproportionate as compared to the other available remedies, or where the seller fails to repair or replace the goods within a reasonable time or without significant inconvenience to the buyer, the buyer may require the seller to reduce the purchase price of the goods by an appropriate amount, or rescind the contract to obtain a refund.

Crucially, Part 5A makes it easier for aggrieved consumers to have their day in court without being given the runaround. If the defect is discovered within six months of delivery of the goods to the consumer, a presumption arises that the defect existed at the time of delivery unless the seller can prove otherwise. Beyond this initial six months, the consumer can still seek redress but will have to prove that the defect existed at the time of delivery.

SINGAPORE

Almost a decade after the introduction of lemon laws in the UK, our neighbours down south followed suit. On 1 September 2012, lemon laws were added to Part III of the Consumer Protection (Fair Trading) Act (2003)("Singapore Act").

The provisions introduced to the Singapore Act mirror largely the provisions in Part 5A of the UK Act, and as such, will not be repeated here. Lemon laws in Singapore cover all consumer goods, except real property and rented or leased goods. Perishables and consumables are also covered but the time frame of the presumption that the defects existed at the time of delivery is reduced to the normal shelf-life of the perishable or consumable item, if the shelf-life of such item is less than six months.

Lemon laws in Singapore (as they do, too, in the UK) extend to cover second-hand goods. In determining the reasonableness of a claim, the court will take into account the age and price paid for a second-hand good. For example, a buyer of a 10-year-old car cannot reasonably expect it to function like a new car, but he can expect it to perform in a manner that may be reasonably expected of a car of that mileage and model.

A retailer will not be liable for defects or limitations of the goods which have been disclosed to the consumer before the sale. However, the consumer may still require the retailer to take remedial action if the latter failed to disclose the full extent of the defects.

NEW ZEALAND AND AUSTRALIA

The New Zealand equivalent of lemon laws can be found in the Consumer Guarantees Act 1993 ("CGA"). These laws apply to most goods and services, including second-hand goods, except those bought at a private sale.

The CGA creates a basic set of guarantees for consumers who acquire goods from suppliers or manufacturers. Sections 6, 8 and 9 of the CGA provide guarantees that goods must be of 'acceptable quality', be 'reasonably fit for any disclosed purpose' and goods sold by description must correspond to their description.

Where a failure cannot be remedied or is of a "substantial character", the consumer may reject the goods or seek compensation from the supplier for the reduction in the value of the goods below the price paid for the goods pursuant to Section 18(3) of the CGA.

According to Section 21 of the CGA, a failure to comply with a guarantee is of a "substantial character" if the failure is one where, inter alia, a reasonable consumer would not have acquired the goods if they had been acquainted with the nature and extent of the failure, or where the goods are substantially unfit for the disclosed purpose, or are unsafe.

Where the failure can be remedied, the consumer has the right under Section 18(2) to require the supplier to remedy the failure. In such event, the supplier has the option under Section 19(1) of the CGA to remedy the failure by repairing or replacing the goods or refunding the money paid by the consumer. However, if the supplier refuses or neglects to remedy the failure within a reasonable time, the consumer may reject the goods or have them remedied elsewhere and recover all reasonable costs thereby incurred.

The CGA also allows the consumer to recover damages for reasonably foreseeable losses that arise from the failure, regardless of whether the failure is of a substantial character or not.

The lemon laws in New Zealand are largely mirrored in Australia. These can be found in the Australian Consumer Law ("ACL") which came into force on 1 January 2011 and applies throughout the country.

Unlike the UK Act and the Singapore Act, the CGA and ACL do not contain a provision which reverses the burden of proof if the failure occurs within a prescribed time period from delivery.

MALAYSIA

In Malaysia, remedies for defective goods are found primarily in the Sale of Goods Act 1957 ("SGA") and the Consumer Protection Act 1999 ("CPA").

While the SGA provides for the implied conditions as to fitness for purpose, merchantability and conformity with description, a buyer who ends up with a lemon can only seek redress in court. Further, the burden lies on the purchaser to prove that the goods were defective.

Parts V and VI (Sections 30 to 49) of the CPA contain provisions that confer certain implied guarantees in respect of consumer goods and set out the remedies available to a consumer where such goods fail to comply with any of the implied guarantees.

Sections 32, 33 and 34 of the CPA are substantially similar to Sections 6, 8 and 9 respectively of the CGA and provide implied guarantees that the goods must be of acceptable quality, reasonably fit for specified purposes and where the goods are sold by description, correspond with their description.

The remedies conferred upon a consumer in the case of non-conformity with implied guarantees as set out in Sections 41 and 42 of the CPA are largely similar to those conferred under Section 18 and 19 of the CGA.

As in the case of the CGA and the ACL, the CPA contains provisions in Parts VIII and IX (Sections 53 to 65) that confer certain implied guarantees and set out the remedies available to a consumer where services fail to comply with any of the implied guarantees.

In Matang Plastik & Metal Work Industries Sdn Bhd v Daimler Chrysler Malaysia Sdn Bhd & Ors [2014] MLJU 674, the Court of Appeal held that the implied guarantees in the CPA apply to a used car, thereby establishing that the CPA applies to second-hand goods.

The CPA suffers a similar drawback as the CGA and ACL in that it lacks a provision which reverses the burden of proof in relation to defects discovered within a prescribed time period after the delivery of the goods.

A Tribunal for Consumer Claims ("Tribunal") has been established under the CPA to provide an alternative and less costly avenue, apart from the courts, to dispose of claims that fall within the ambit of the CPA. Unless otherwise agreed by the parties, the Tribunal has a jurisdictional limit of RM25,000.

Some noteworthy features pertaining to the Tribunal are as follows:

• The procedures are simpler than those governing court proceedings
• The parties may not be represented by counsel
• An award made or a settlement recorded by the Tribunal is deemed to be an order of the Magistrate's court and enforceable accordingly
• The Tribunal is required to make its award without delay and, where practicable, within 60 days from the first day of hearing.

CONCLUSION

It is clear from the above discussion that lemon laws already exist in Malaysia under the CPA, albeit in the form adopted in New Zealand and Australia. The CPA also provides a cost-effective framework within which consumer claims may be prosecuted expeditiously.

To enhance consumer protection, the Malaysian Parliament should introduce a provision into the CPA which reverses the burden of proof in respect of defects discovered within a prescribed time period after the delivery of the goods. This would align Malaysia's lemon laws more closely with those in the UK and Singapore.

Lastly, in the days of fast rising prices of consumer goods, the time may have come to increase the jurisdictional limit of the Tribunal beyond the present limit of RM25,000.

Originally appeared in Skrine's Legal Insights Newsletter, Issue 1/2015, March 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.