R18m consumer test case against Builders Warehouse
Two consumers who say they sustained injuries caused by defective ladders bought from Builders Warehouse are on the warpath.
Under the Consumer Protection Act (CPA) they are claiming a combined R18m in loss of future earnings from the Massmart subsidiary in a lawsuit that could set an ominous precedent for retailers. “Consumers can sue any party in the product supply chain but retailers are the most likely to be first in the line of fire,” says Simon Colman, underwriting executive at Santam’s SHA Specialist Underwriters, SA’s largest liability underwriting management agency.
“The claim is a test case,” says Rosalind Lake, a Norton Rose Fulbright director. “They are in for a big fight but if they succeed with their claim it could see the flood gates open for similar claims.”
Claims may not be limited to individuals. There is “huge potential” for class action product liability claims, says Lake. This could also result in an increase of third-party funders that are prepared to bankroll claims in exchange for a cut of any damages awarded, she says.
However, Lake is not convinced the Builders Warehouse claim will succeed. It could, she says, be dismissed by the court on the basis of jurisdiction. “The case is a radical departure from the norm,” says Lake.
The norm that was bypassed in the Builders Warehouse case requires a claimant to approach other bodies first.
These include the Consumer Goods & Services Ombud, the National Consumer Commission (NCC) and the highest body in the CPA line-up, the National Consumer Tribunal (NCT).
Section 69 of the CPA appears to confirm Lake’s reservations. It notes that a consumer may approach a court for relief “if all other remedies available to that person in terms of national legislation have been exhausted”.
To take a case to court an approval certificate must be issued by the NCT, says Lake.
Whatever the outcome, the lawsuit against Builders Warehouse is symptomatic of far greater consumer awareness of their rights under the CPA. “We have seen a massive increase in damage claims related to the CPA,” says Colman.
Few claims are ever publicised. “Most businesses settle claims outside the official CPA bodies,” says Colman. And for good reason.
Even a claim lodged before the NCC or NCT can cost big money. “Businesses can be compelled to pay damages to a claimant,” says Colman. “They also face a possible fine equal to 10% of annual sales with the minimum set at R1m.”
A factor at work in the consumer environment is the capping of claims by the Road Accident Fund in 2008. This prompted former RAF-specialist lawyers to migrate first to medical malpractice claims and more recently to CPA-related claims, says Colman.
Look no further than trip-and-slip injury claims against retailers, says Colman. “There has been a big rise in these claims and, where they used to be for about R60 000, some are now almost R1m,” he says.
“It is clear that people are speaking to lawyers,” says Colman. “It is a warning sign of the direction things are going in.”