Thursday, 3 October 2013

Changing consumer's claims in case of non-conformity should be facilitated - CJEU in Duarte Hueros (C-32/12)

3 October 2013: CJEU judgment in case Duarte Hueros (C-32/12)

Two years ago we have discussed an interesting case of Weber & Putz (Replacement of non-conform goods?...) that brought to light interesting issues related with the hierarchy of remedies in the Consumer Sales Directive in case of non-conforming goods (first tier - bringing the goods back into conformity through: replacement or repair; second tier: price reduction or contract's termination). The Court then insisted that consumers should in principle be awarded a remedy from the first tier in case of goods' non-conformity, which meant that if only one of these remedies was possible and it was an expensive one, the costs of making use of that remedy should be placed on the sellers. In order to not encumber sellers unduly, courts could oblige consumers to pay a certain, proportional amount of that cost. Consumer protection would be ensured by allowing consumers for whom this cost would be burdensome to demand one of the second tier remedies instead. Today the CJEU issued another judgment on what the proper use of the remedies for non-conforming goods should be, this time focusing on the second tier remedies and the guarantees that the Member States should keep in force in their procedural laws for consumers´ benefit.

Ms Duarte Hueros had some bad luck when purchasing her new car in 2004. She opted for a fancy model with a sliding roof, allowing her to enjoy an open-topped car when the weather was nice (it's Spain, so probably most of the time). Unfortunately, the car she received was not quite waterproof. When it rained, the water leaked in through the roof (and while it may not rain much in Spain, once could be one time too many). After numerous repairs in the workshop it appeared that the defect could not be repaired. Since repair was impossible, Ms Duarte asked for replacement of her car, which request was denied her. In the end in 2011 Ms Duarte brought an action for contract's termination and repayment of the purchase price. It was not the matter of the dispute that she has exhausted her claims for first tier remedies and was entitled to claim a remedy from a second tier. Out of possible two remedies, price reduction or contract's rescission, she opted for the latter one.

Here is where it gets interesting. Article 3(6) Directive states that contract's rescission can be denied to consumers if non-conformity of the purchased goods is minor. Spanish law (and many other Member States) adopted this provision. The curious matter is that apparently Spanish courts consider a leaking roof of a car a minor defect! As the AG Kokott points out in Par. 57 of her opinion there is no uniform interpretation of what should be understood as a 'minor' defect in European consumer law. He mentions, however, that other European courts have ruled in comparable cases that a lack of waterproofing could not be perceived as a minor defect. Apparently while the Spanish courts focus on the fact that the car can still be driven when it's leaking water inside (maybe that's due to that little amount of rain falling in Spain and it not being seen as something undesirable), other national courts take a broader picture into account. The AG mentions that the Spanish court should have referred also the question of what should be understood as a minor nature of a defect for a preliminary ruling.

Instead, the Spanish courts took their prerogative to determine based on the facts of the case that the defect was not minor and to refuse contract's rescission to Ms Duarte. The question referred to the CJEU inquired whether if the consumer´s claim for one second tier remedy was rejected, the national court was obliged to grant her the other second tier remedy - price reduction, even if the consumer did not apply for it.

Spanish procedural law has very strict rules on res judicata and the claims submitted in the proceedings. On the one hand, a consumer may make alternative claims aside the main one but the Spanish court will consider only the claim specifically submitted. On the other hand, Spanish law has  a broad interpretation of extension of res judicata - all claims that consumer could have brought are covered and excluded from a new action. (Par. 34 AG Opinion) Since Ms Duarte made only a claim for contract's rescission and recovery of contract's price, the Spanish court did not see itself being able to grant her price reduction of its own motion in these proceedings, and at the same time she would have been prohibited from making a new claim for price reduction in new proceedings.

Both the AG (Par. 41) and the CJEU (Par. 29) state that there is no ex officio duty for the national courts to grant appropriate price reduction to consumers of their own motion when the consumer did not ask for price reduction. As the AG points out the Directive enables consumers to raise certain claims, under specific conditions but contrary to Directive on Unfair Contract Terms it does not require intervention of a third party, that is:

 "Firstly, action as a deterrent taken by a national court of its own motion is irrelevant to the implementation of a contract. In most cases, unsatisfactory performance is not, in fact, dependent on the will of the parties, in particular where the contracting partner is not the manufacturer of the product and normally has no influence over its quality or, in the case of non-obvious defects, knows nothing about it. Moreover, the consumer is not in a comparably weak position with regard to the implementation of the contract. Unlike the position with regard to the unfairness of a term, the consumer can easily detect whether the product is of the agreed quality. This is also demonstrated by the present case, where it is precisely the consumer who is asserting her claims before the national court. In the judgments which have been delivered on the Unfair Terms Directive, on the other hand, it was generally the undertakings which relied on their claim on the basis of an unfair term. Therefore, action by a national court of its own motion would not strengthen consumer protection, but would rather provide the consumer with an additional means of attack. " (Par. 47-48 AG's opinion)

What the Directive requires of the Member States, however, is to ensure that consumers may effectively claim appropriate remedies in practice and that these procedural rules comply with the principles of effectiveness and equivalence. (Par. 30-31) Spanish law, as mentioned above, obliges the Spanish courts to only examine claims specifically raised by consumers, does not allow consumers to change the claim in the course of the proceedings and also prevents them from starting new actions due to broad interpretation of res judicata. (Par. 35-36) This effectively takes away consumer's possibility to claim price reduction when he first demanded only contract's rescission which in the proceedings was denied due to the minor nature of the defect. (Par. 37) Theoretically, the consumer could raise an alternative claim of price reduction from the beginning, but the CJEU assesses the likelihood of such a scenario as extremely low. (Par. 38) These elements combined suggest that the Spanish procedural rules make consumer protection provided for in the Directive if not impossible than at least excessively difficult - on the one hand consumers are prevented from making a claim for a new remedy themselves, on the other hand courts are not authorised to find it themselves. (Par. 39)

"The Spanish system essentially obliges the consumer to anticipate the outcome of the competent court’s analysis of the legal characterisation regarding the lack of conformity in the goods, which is final, making the protection provided for the consumer under Article 3(5) of Directive 1999/44 completely uncertain in nature, and thereby rendering that protection inadequate." (Par. 40)

The CJEU makes it clear that the national court has to solve this issue to the consumer's favour, guaranteeing his protection provided for in the Directive that is a possibility to ask for another remedy if one is denied by court. How this will be achieved in practice is for the Spanish courts to determine.

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