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Protection of Consumers in the Motor Trade

26 November 2012 #Dispute Resolution #Automotive


Clarkslegal, specialist Dispute Resolution lawyers in London, Reading and throughout the Thames Valley.

Introduction

One of the functions of the law is to protect consumers against businesses taking unfair advantage of them. The motor industry is no exception in this regard. There is a considerable amount of consumer legislation that is designed to give consumers a redress when they lose out due to unscrupulous business practices. Action can also be taken on the consumers’ behalf by regulatory bodies and sub-divisions of government against such businesses that use underhanded and illegal business practices.

The recent case of Motor Depot Limited v Kingston-upon-Hull City Council (2012) is a useful illustration of how local trading standards officials can use their powers under consumer legislation to prosecute unscrupulous businesses that take unfair advantage of unwary consumers.

Factual Background

Council officers at Kingston-upon-Hull City Council brought a successful prosecution against a motor trading company called Motor Depot Limited (“Motor Depot”) and personally against Motor Depot’s managing director (the “MD”) for various breaches of consumer legislation detailed below:

  1. Motor Depot was convicted of acting misleadingly by representing to a purchaser that a vehicle was under warranty when it was not.
  2. Both Motor Depot and the MD were convicted of misleadingly stating on an internet advertisement that finance available on its vehicles was interest-free. The Court held that these statements were sufficiently misleading that an average consumer would be confused about how a vehicle’s purchase price was calculated.
  3. Information required by Consumer Credit Regulations was not included on credit advertisements.
  4. The MD was also held personally to have breached a duty of care with regard to the misleading advertisements by allowing them to have been published without sufficient regard for their accuracy.

Both Motor Depot and the MD appealed the decisions and the case came before the Divisional Court on 23 October 2012.

The Appeal

On appeal, the convictions were largely upheld.

The Court decided that an advert indicating that finance was available interest-free was misleading since it could induce the average consumer into thinking that costs usually borne by the purchaser would be borne by the seller, when in reality, this was not the case. The Court also held that Motor Depot’s website had highlighted a number of favourable elements of credit information without including the unfavourable information. As such, the information was in breach of consumer credit regulations which require all such information to be kept together. It is worth noting that if the website had not included any credit information, there would not have been a breach of the regulations. However, it was illegal to only highlight the favourable pieces of information.

The Court also found that the MD had been responsible for drafting and the presentation of the misleading advertisements. The Court decided that the adverts were central to Motor Depot’s, and consequently to the MD’s, business and that under these circumstances, it was right to say that the MD owed a duty of care to ensure that the advertisements were true and accurate, which they were not. The MD’s conviction for breach of duty was therefore upheld.

The Court held that there was insufficient evidence to sustain the first Judge’s finding that the vehicle was under warranty. Motor Depot’s conviction for misleading a purchaser was quashed as a result.

Conclusions

The Court’s decision in largely upholding the convictions demonstrates the seriousness with which both the Court and the local trading standards officials treat the protection of consumers. In a consumer facing industry such as the Motor industry it is very important that businesses are aware of their obligations to treat consumers fairly. The fact that the MD of the company was also held personally liable is a reminder to all directors (and managers) of the need to ensure that adverts aimed at consumers for which they have responsibility are checked carefully before publication for compliance with consumer legislation and accuracy.

 

For further information about this or any other Dispute Resolution matter please contact Clarkslegal's dispute resolution team by email at disputeresolution@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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