Are illegal vehicle emissions a sale of goods problem?

This post has been contributed by Mr Rick Canavan, Module Convenor for Commercial law.

vehicle emission

 

In the last couple of years the serious consequences to the environment and human health of vehicle exhaust fumes has seldom been out of the news.

In Europe, an increase in the sale of diesel cars over the last decade, a trend often encouraged by governments, has resulted in illegal levels of nitrous oxides and air borne micro-particles, despite increasingly rigorous emissions standards.  One cause of these excessive emissions are engine management systems secretly designed by auto manufacturer to cheat – to produce lower emissions when under official test conditions than could be achieved in the real world.  Researchers at West Virginia University discovered such software in cars manufactured Volkswagen Audi Group (VAG).  It is estimated at up to 11m cars made by VAG may have received the ‘cheating’ software.  The problem can easily be fixed, a software update brings the car emissions within legal limits and VAG are now in process of rolling out these updates.

 

However, millions of aggrieved consumers remain.  Unbeknown to them, their vehicles have consumed more fuel and created more emissions than they believed that they would and the fixes provided often compromise performance to achieve previously stated fuel economy.

 

In Canada and the US multi-billion dollar class actions have begun, an application for a similar action was brought before the UK High Court in January 2018.  If successful, drivers of effected vehicles will be compensated for at least some of their losses, even if they no longer own the vehicle and notwithstanding that the majority of them almost certainly had no contractual relationship with VAG.

 

But is compensation enough?  What about drivers who feel so strongly about the defects in their vehicle that they no longer want it?  All drivers have a contractual relationship of some kind with the supplier of the vehicle, whether it is leased, acquired on hire purchase terms of purchased outright (i.e. a sale).  Of course there are different provisions applicable to those different contracts and the position is further complicated by Consumer Rights Act 2015, which would apply to more recent sales/supplies.  Nonetheless, the same implied terms can be found at the heart of the all the relevant legislation and the Sale of Goods Act 1979 is the source of them, and all legislative provisions ultimately provide a means by which the ‘buyer’ of the vehicle can reject it – a remedy far more potent than damages.  But does and should sales law provide that remedy in relation to a defect such a this?

 

As so often, it would be tempting to see this an aspect of ‘description’ of the goods but as so often that would be unlikely to lead to a remedy.  Description of course is defined in extremely narrow terms, little more than the commercially identifying characteristics of the goods (see Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441).  A car is no more or less a car because its emission or fuel economy are different to those stated.  Moreover, given that emissions testing is carried out under a test regime that may differ wildly from real world driving conditions, and driver habits, could such figures really be relied up on in any case?  As such, s.13 and its equivalents seem to be of little help.

 

We turn then to ‘satisfactory quality’, s.14 in the Sale of Goods Act, reproduced almost verbatim in the related legislation.  Here the prospect of success might be better.  S.14 requires that all goods sold “in the course of a business” must be of satisfactory quality, that is to say they meet the standard that an ordinary person would regard as satisfactory taking into account any description of the goods, the price and all other relevant circumstances, including their fitness for all common purposes for which goods of that type are usually supplied.  The function of s.14(3) is then to deal with the quality of the goods when they are supplied for the buyer’s specific, stated purpose.  Public statements as to emissions and fuel economy, even if not at quite the levels found under test conditions must surely be an aspect of this?

 

Under s.14(2) there seems no reason why either the tampering with engine software or the resultant failure to meet emissions standards (which could in itself be a breach of the law) and higher fuel bills could not be argued to render the goods unsatisfactory.  Both would appear to be ‘minor defects’.  One aspect of satisfactory quality of course is that goods should be free of such defects.  But it could be argued, as in Millars of Falkirk v Turpie that such a small defect, and one remedied quickly and at almost no cost, falls below the threshold for what is ‘minor’?  In Millars a defect to a power steering system which would have cost £25 to rectify was held to be so trivial that it did not amount to a breach of s.14, therefore preventing any rejection of the goods.  Of course, the Consumer Rights Act has done away with any such margin for trivial breaches, but in surely this is more serious anyway?

 

Certainly, an argument could be run that this is more the stuff of ‘any other relevant circumstances’.  Environmentally aware buyers, if not all buyers, surely have a right not to be entirely misled by statements made by the manufacturers and then repeated by the sellers of goods?   It would seem a convincing argument could be made out.  Given the tax (in the UK), financial and environmental consequences that flow from a mis-sold vehicle, few buyers could be said to be indifferent.

 

The case law is sparse but it seems that standards designed to at least advertise, if not regulate, energy/fuel efficiency may not regarded as being of great importance.  Perhaps the best example is Jewson v Boyhan where arguments are made under both s.14(2) and s.14(3).  Jewson concerns the sale of boilers sold to heat a development of apartments.  In this particular application, the boilers performed very poorly leading to high bills (and by extension presumably additional emissions somewhere).  The respondent in this case argued that the resulting poor energy performance certificates issued for the flats made them at best unattractive to buyers, at worse, unsellable, as lender would refuse to provide mortgage finance for such inefficient dwellings (the latter point was not accepted by the court).  At first instance, the judge ruled that the boilers were not of satisfactory quality (under s.14(2) as a result.  However, on appeal, Clarke LJ was unable to agree that “a reasonable man would regard the boilers as of unsatisfactory quality if their installation in the flats led to SAP [energy efficiency] ratings which were so low that a proposed purchaser might delay purchasing the flats or pulling out of a purchase,” (at Para.68) implicitly suggesting that such standards were of no great moment for buyers of apartments and therefore also perhaps of vehicles, where the financial consequences are, in anything, less serious.

 

The judgement was handed down 15 years ago.  Times may have changed but Clarke LJ leaves little latitude to treat standards in relation to vehicles differently, unless of course we look at standard not from the point of view of a diminution in value but from a wider sense of the consequences of a breach of those standards.  Britvic v Messer is a case concerning the sale of food grade carbon dioxide contaminated with traces of benzene.  Clarke LJ, however was critical of the trial judge’s likening of the facts in this case to those in Britvic v Messer (dismissing them as ‘a far cry’).  While extremely toxic, the benzene present posed no risk to health at the levels present in the soft drinks to which it was added and yet still there was held to be a breach of s.14(2) and rejection and damages followed – after all, the public have a right to expect the food and drink they buy to be safe.  The direct consequences of a single vehicle emitting more pollutants than is legally permitted may be similarly negligible but the combined effect of millions of vehicles is not but do the car buying public not have a right to be given proper information about the environmental damage a vehicle they purchase may cause?  Could it therefore be argued that if it is “axiomatic that one particular description of the goods to which the reasonable person must have regard”  is the the relevant legal standard for a food additive, and a breach of that standard would amount to a breach of s.14(2) and allow rejection, that standards designed to protect air quality and human health could be regarded as bearing on the judgement of a reasonable car or van buyer in the same way?

 

Almost every s.14(2) case is one on its own facts, which makes almost all decisions little more than illustrative of the approach of the courts but it is difficult not to feel that the reasonable buyer would be rightly concerned at having been misled by a seller, whether inadvertently or not – the defence that seller could not be aware of a breach of standards was held to be no defence in Britvic after all.  Perhaps the reasonable person can and should be seen as more socially, or at least environmentally concerned, than in the eyes of Clarke LJ.

 

But if the argument can be won by a buyer, it is probably only on s.14(2).  In Jewson, the s.14(3) point failed.  The retailer (appellant) was in no position to undertake the sort of technical analysis needed to determine how efficient the boilers would be and was provided with insufficient evidence to do so in any case.  This it seems would be the case in most vehicle sales.  A re-seller of either now or used case has neither the knowledge, nor equipment nor insight into the buyer to warrant that for their purposes, the goods will be as efficient as expected.  It would not be fair to hold them to a higher standard.

 

As noted above, every s.14(2) case, whether real, or in the exam room, must be considered on its own facts, looked at with fresh eyes.  Jewson is probably correct on its facts, the standards applicable there in reality had little bearing on the saleability of the apartments and the developer had sought to rely on their advice in order to avoid the cost of more appropriate professional advice.  Moreover, neither, the health and wellbeing of the buyer of the boilers or the occupants of the apartments was jeopardised by them.  But where it is, and excessive and illegal emissions is emphatically one such example, it may allow vehicle buyers to bring a successful claim against a seller and reject the goods, rather than waiting in line for a settlement from a group action.  The question that leaves of course is just how long would a buyer have to discover such a defect and would rejection still then be available?

 

 

 

 

 

 

 

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