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9 September 2014

Court rules on carpet warranty case

Commerce Commission hails decision a win for consumers.

A Court of Appeal decision has sent a warning to companies that they can’t use fine print to hide important terms and conditions. The court found claims made in a Cavalier Bremworth ad were misleading and breached the Fair Trading Act because they were significantly qualified by fine print.

The decision stems from a case taken by Godfrey Hirst over rival Cavalier Bremworth’s warranty claims for a new carpet range. Godfrey Hirst won part of its case in the High Court but went to the Court of Appeal on points the judge declined to uphold.

Godfrey Hirst argued Cavalier’s claims would mislead consumers into believing the carpet warranties provided substantial value. In fact, they were heavily qualified by conditions in the warranty booklet. The advertised “lifetime” stain and soil resistance warranty also began to diminish after 15 years and the “25-year” fade resistance warranty after seven years.

In the High Court, Justice Murray Gilbert considered that prospective purchasers would have "looked beyond" the words used to describe the warranties and "would understand that they would need to review the warranty booklet to determine the extent of the cover provided".

But the Court of Appeal set aside this decision, finding that claims in the Cavalier ad erroneously implied the carpet was supported by “superb” warranties. Even if a consumer had reviewed the warranty booklet, the court found it was “too detailed and complex” for a consumer to easily determine what was covered. The “lifetime” stain warranty alone had 51 exclusions.

The decision is a win for consumers and puts companies on notice: they can’t bury significant terms and conditions in fine print. Any trader that does is likely to fall foul of the Fair Trading Act and face a fine of up to $600,000.

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