Water damaged phone – not upheld

Jurisdiction decision

Based on the submissions from the parties involved this complaint was found within TDR jurisdiction. The TDR Scheme Adjudicator identified:

“This dispute centres around a mobile phone that has been assessed as damaged from liquid ingress. There is a dispute between the parties as to whether the good (the handset) would comply with the guarantees under the Consumer Guarantees Act (CGA), and how it would sit within the warrantee. This is a complaint that TDR can consider.”

Final Decision

1. The Telecommunications Dispute Resolution Service (TDR) has received a complaint filed by [Customer] (the Customer) against [Scheme Member].  The dispute relates to a water damaged cell phone, and particularly whether the Customer has any remedies against [Scheme Member] as it relates to the handset damage.

Background

2. On 2 December 2020 the Customer purchased a Samsung Galaxy A71.  The purchase price was $799.00, and there was a contract for payment of the device over a 36-month period.  The handset was purchased from [Scheme Member]’ Sylvia Park store.
3. The Customer reports that on 5 January 2022 the handset stopped charging.
4. That same day, the Customer took the handset to the Sylvia Park store, which attempted to undertake diagnostic testing.  However, given the device would not power up, testing could not be completed, so the handset was couriered for specialist testing.
5. On 11 January 2022 an engineer was assigned to test the handset.  The engineer determined that the handset had “liquid damage verified”.  Photographs were taken which have been provided to TDR.  The repair agent provided a quotation of $435.52 to repair the device.
6. [Scheme Member] forwarded the quotation to the Customer, following which the quotation was declined.  The Customer’s position was that [Scheme Member] would be liable for any refund or replacement / repair, and I will set out the Customer’s case more fully below in this decision.
7. The Customer raised a complaint with TDR.
8. I spoke with both parties in relation to the complaint.  While each party made a settlement offer, ultimately the parties could not agree on a resolution to the dispute, hence the matter has proceeded to be adjudicated.

 

Customers Position

9. The Customer has provided a fulsome explanation of the position he takes in the complaint to TDR, which was also confirmed at the time I spoke with him.  I summarise the Customer’s case as follows:
   
   a. The Customer rejected the good on the basis of the Consumer Guarantees Act (CGA) on account of a serious breach of the acceptable quality guarantee.  Reference was made to section 18 of the CGA, which relates to options held by customers when goods do not comply with the statutory guarantees.
   
   b. There is likely to have been an inherent defect with the handset that would have allowed water to enter the internals of the device.
   
   c. Given the price of the handset, $799, there was a reasonable expectation that the handset would last longer than it did.
   
   d. The Customer disputes that the handset came into contact with water while in his possession, but he accepted that he could not prove this to be the case.
   
   e. At no time when the handset was purchased, did the sales agent advise the handset was not moisture or dust protected, and if it had been advised, then a more expensive handset would have been selected that did have that protection.
   
   f. [Scheme Member] should not be able to avoid its obligations under the CGA by simply concluding the product is out of warranty.
10. The Customer seeks a refund of the full purchase price.

 

Scheme Member position

11. [Scheme Member] also provided a written response to the complaint, which was again confirmed at the time I spoke with the [Scheme Member] representative.  I summarise [Scheme Member] position as follows:
    
    a. ​​​​​​​The handset was damaged from water, and corrosion was found at the time of the assessment.
    
    b. ​​​​​​​Given the nature of the damage, it fell outside the warranty from Samsung.
    
    c. ​​​​​​​The damage could have occurred from emersion in liquid or exposure to water vapour, such as in a bathroom or exposed to steam.
    
    d. ​​​​​​​While [Scheme Member] cannot know the precise exposure to liquid, it has nevertheless been confirmed there was liquid contact.
    
    e. ​​​​​​​[Scheme Member] agree that a device such as this should last more than 2 years – if used in a way consistent with the Samsung instructions.
    
    f. ​​​​​​​The onus is on the Customer to confirm that any particular product meets their needs before purchase.  That would include any requirements around moisture protections.
    
    g. ​​​​​​​There is no suggestion that a [Scheme Member] staff member was asked to provide advice around the handset’s features or specifications.
    
    h. ​​​​​​​The device was fit for purpose at the time it was purchased.
    
    i. ​​​​​​​Samsung have not made any assertions of this product having an IP rating, and to that extent there is no breach of the CGA guarantee as to the description of the product.
    
    j. ​​​​​​​Given the damage was caused by misuse of the product, there is no obligation on [Scheme Member] to refund the purchase price.

 

Analysis

12. There is no dispute between the parties that the handset is water damaged.  The question though is whether a remedy is available from [Scheme Member] as it relates to that damage.
13. While I will discuss the legal considerations below, there are firstly two matters that I need to determine, which relate to findings of fact.
14. Firstly, there is the question of whether the handset was represented or described as having any moisture proof qualities.  On the evidence available to TDR, I find that no such representation has been established.  To be fair [Customer] has acknowledged that the sales agent did not make any such representation, and that is one of the matters raised (that they should have).
15. [Scheme Member] have provided in their response a link to the Samsung website for the A71 handset.   I can see no indication on that page that this handset is or is not moisture proof.  However, at the bottom of the page is a button to go to user manuals.  Under the user manuals page (https://www.samsung.com/nz/support/model/SM-A715FZKDNZC/) is a ‘Safety Manual’.  That does indicate that the handset is not moisture proof, where it holds:

 

16. To that extent I find that there is no evidence that [Scheme Member] (or Samsung) have represented the handset as being moisture proof.
17. The second finding I must make relates to the cause of the moisture ingress.  While there is evidence to support that the handset came into contact with moisture, that must be the case if moisture had damaged the internals, there is no evidence to show that is arose from a defect in the handset.  For example, a crack in the body of the phone that would have allowed moisture in etc.

Warranty

18. As I indicated to [Customer] when we spoke, when there is damage to a consumer good, often the best place to start is to consider if it falls under the warranty.  In this case I accept that the warranty excludes water damage.  To that extent I accept that this falls outside of the warranty.
19. The question then becomes whether the Fair Trading Act 1986 (FTA) or Consumer Guarantees Act 1993 (CGA) will apply.  Because the protection in those statutes is entirely independent of protections under the warranty.

 

Fair Trading Act 1986

20. Broadly speaking, the FTA is the law that governs the activities of sellers prior to the sale taking place, and the CGA is the law that applies to the good itself and what happens after the sale.
21. The FTA prohibits misleading or deceptive conduct.  Section 10 confirms that:

Misleading conduct in relation to goods

No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods.

22. For the reasons as set out above, I cannot see that there is any evidence that [Scheme Member], or Samsung for that matter, have misled the Customer as to the situation with moisture protections and the handset. 
23. I would accept that this is a situation where the Customer has not asked for specifications around how moisture proof the handset was, and therefore no information was imparted around that, but that of itself is not misleading or deceptive conduct.
24. I accept that if the Customer had asked about how moisture proof the handset was, that [Scheme Member] probably could have provided an answer for this question.  But I do not consider that [Scheme Member] was under any duty or obligation to proactively impart that information.
25. I find there is no evidence of misleading conduct in this case.
26. I cannot see that any other provision of the FTA would be relevant, and therefore I cannot find any breach of the FTA in this case.

 

Consumer Guarantees Act 1993

27. The CGA provides a range of protections to customers generally, those protections are expressed as being guarantees.
28. Section 6 confirms that there is a guarantee that goods are of acceptable quality.  The term ‘acceptable quality’ is defined in section 7 as follows (in part):

Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

 

(2) …

 

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and

(b) the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.

 

(5) …

 

29. As can be seen in the above definition, in determining whether the good is of an acceptable quality, requires the evaluation and balancing of a range of consideration as set out in subsection 1, and my conclusions in this case are as follows:
    
    a. I consider that the handset was fit for all the purposes goods of that nature (handsets generally) are commonly supplied.  There is no suggestion that the handset did not work as intended other than following the moisture ingress issue.  I do not consider that handsets are in general sold on the basis that they are moisture proof.  Some handsets are, but not all handsets[i].
    
    b. ​​​​​​​The requirement that the product be free from minor defects and safe would not seem relevant.  There is no suggestion of defects with the handset being responsible for moisture ingress.  The handset not being designed or manufactured to be moisture resistant would not be a ‘defect’ with the handset.
    
    c. ​​​​​​​The question of whether the handset was durable is relevant.  This consideration requires consideration of what a reasonable consumer fully acquainted with the state and condition of the good would conclude.  The “reasonable consumer” test requires an independent assessment, and is not based on the perception of the Customer. I note the High Court decision of Hewitt v Window World Franchise Ltd HC Whangarei CIV-2009-488-488, 4 March 2011 being an appeal in relation to a claim around the appearance and finish of window joinery.  The High Court confirmed that “the reality is that the joinery installed by Window World would have been acceptable to any ordinary reasonable consumer, although not to Mr Hewitt”.
    
    The durability expectation requires that the goods continue to be fit purpose for a reasonable time.  It is accepted that the durability element is flexible and will depend on the facts of each case.
    
    In my view, a consumer fully acquainted with the Samsung A71 handset would be aware that it was not designed to be moisture resistant.  To that extent if the handset came into contact with moisture, that consumer would not view moisture damage as representing the handset as not being durable.
    
    I note also that durability would sit well with a case of the handset simply wearing out.  That is not the case here, the damage is the result of external factors – exposure to moisture.
    
    d. ​​​​​​​As it relates to price, this was a significant submission for the Customer.  The Customer submits that given the price of the handset was $799, that it should have been anticipated the handset would be more water resistant that it turned out to be.  The price consideration again is a flexible standard.  In Contact Energy Ltd v Jones [2009] 2 NZLR 830, (2009) 12 TCLR 405  (HC) at [92], the High Court held that:
    
    The legislation does not impose minimum quality standard. Rather, the reasonable consumer standard is to be applied having regard to the price and nature of the goods as supplied. By linking quality expectations to price, the Act contemplates that autonomous consumers may choose to buy bad goods cheaply.
    
    I take [Customer]’s point, that where a consumer pays a higher price in general for a good, it would be expected to be of a higher quality with more features.  The problem I see with this argument, is that there is no evidence before me that the water entered the handset from a defect with the quality of the good.  It appears that, simply put, the phone was not manufactured or sold as a moisture resistant phone.
    
    However, I do not consider that a reasonable consumer would anticipate that the handset would be water resistant only on the basis it was of a higher price.
    
    e. ​​​​​​​There is no evidence that there were any representations or suggestions that this handset was water resistant.

 

30. There is a further factor that must be considered, being unreasonable use (s6(4)).  That provision is a protection to sellers and manufactures where the customer has used the goods in an unreasonable manner, or unusual intensity.  I consider that this exclusion must be interpreted in light of what the manufacture had designed and manufactured the handset to do.  Given that this handset was not manufactured to be moisture resistant, if the handset came into contact with moisture (which it is likely to have done), then the subsection 4 exclusion would argue in favour of [Scheme Member].
31. When I consider those factors, I have been unable to conclude that the good was not of an acceptable quality, nor that there has been a breach of the CGA.

 

Proposed decision

32. The proposed decision of TDR is that the complaint is not upheld.
33. However before I issue a final decision on this complaint, I invite the parties to provide any final comment. [Redacted]

 

Final decision

34. Both parties were provided a copy of the proposed decision as above, and invited to provide any final comments.  No further comments were provided.  That being the case, the final decision of TDR is that this complaint is not upheld.