Millstock Cars (Pty) Ltd v National Consumer Commission and Another (NCT/371633/2025/101(1)) [2025] ZANCT 27 (6 April 2025)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case number: NCT/371633/2025/101(1)

In the matter between: MILLSTOCK CARS (PTY) LTD APPLICANT and NATIONAL CONSUMER COMMISSION FIRST RESPONDENT MYCHAJLO JEVON GAMBALE SECOND RESPONDENT

Coram:

Mr S Hockey

- Presiding Tribunal Member

Adv C Sassman

- Tribunal Member

Mr CJ Ntsoane

- Tribunal Member

Date of Hearing

- 2 April 2025

Date of Judgment - 6 April 2025

JUDGMENT AND REASONS

INTRODUCTION

1. The applicant in this matter is Millstock Cars (Pty) Ltd (Millstock), a company incorporated under the company laws of South Africa and a supplier in terms of section 1 of the Consumer Protection Act, 68 of 2008 (the CPA). At the hearing, Millstock was represented by Adv Paul Tredoux of the Cape Bar, instructed by Neville Cohen & Associates.

2. The first respondent is the National Consumer Commission (the NCC), an organ of the state and a juristic person established under section 85 of the CPA. The NCC did not file any answering papers to the application, but Mr Jabulani Mbeje, the head of legal services of the NCC, represented it at the hearing.

3. The second respondent is Mychaljo Jevon Gambale (the second respondent), a consumer in terms of section 1 of the CPA. At the hearing, the second respondent was represented by Mr Schalk Bezuidenhout, an attorney from Botha Bezuidenhout Incorporated Attorneys from Pretoria.

4. This matter concerns a compliance notice (the notice) that the NCC issued against the applicant on 19 December 2024. The applicant seeks to have it reviewed and cancelled in terms of section 101(1) and (2) of the CPA.

TERMINOLOGY

5. Unless otherwise stated, A reference to a section in this judgment refers to a section of the CPA.

BACKGROUND

6. On 16 April 2021, the second respondent purchased a used 2013 Ferrari 458 Italia Spider (the vehicle) through a finance agreement with a credit provider, with Millstock as the supplier, for R3 653 950.00.

7. On 25 September 2021, the vehicle displayed a warning light, which the second respondent reported to Millstock the following day.

8. Thereafter, the vehicle was taken to the local Ferrari dealership in Cape Town (Ferrari Cape Town), which diagnosed the issue as a defective temperature sensor which needed replacement at a quoted cost of R53 098.84.

9. Millstock initially denied liability for replacing the sensor on the basis that the vehicle was sold voetstoots. However, after further interaction,[1] Millstock agreed to pay for the sensor replacement. To this end, it paid 50% of its costs as a deposit to Ferrari Cape Town, which was going to source a new sensor to replace the defective one.

10. According to the second respondent, after Millstock confirmed that it would pay for the replacement of the sensor on 8 October 2021, the manufacturer (Ferrari Italy) identified an underlying issue with the clutch control plane (CCP), which the second respondent describes as the “system that manages and coordinates the operation of the clutches in the Dual Clutch Transmission (“DTC”).”[2] Ferrari Italy recommended that the entire CCP be replaced after they conducted a remote diagnostic test on the vehicle.

11. The second respondent demanded that Millstock pay for the replacement of the CCP, which was quoted at R269 242.93. Millstock refused to pay. Consequently, the second respondent referred his complaint to the NCC, which issued the notice on 19 December 2021.

12. After the matter was referred to the NCC, the applicant appointed an expert to examine the CCP and prepare a report (more about this later). The expert’s report became available before the NCC issued the notice.

THE NOTICE

13. In the notice, it is stated that Millstock did not comply with sections 51(1)(a)(i) and section 56(2)(a) read with section 55(2)(b) and (c).

14. In the first enumerated paragraph of the notice, Millstock is advised as follows (quoted verbatim):

“1.1. On or about the 16th day of April 2021, You sold to Mr Mychaijlo Jevon Gambale, (i.e. the consumer) a used Ferrari 458 Italia Spider motor vehicle, 2013 model, for the sum of three million, six hundred and fifty three thousand and nine hundred and fifty rands (R3 653 950).

1.2. The said motor vehicle broke-down on the 25 September 2021, which was within six months from the date of delivery.

1.3. The consumer informed you about said break-down and you refused to repair the vehicle on the basis that the vehicle was sold as it is (i.e. voetstoots).

1.4. The vehicle broke down due to a clutch failure.

1.5. You refused and or failed to repair the vehicle which necessitated the consumer to pay a sum of R269 242.93 for the repair of such defects.”

15. Under the second enumerated paragraph, which deals with the steps that must be taken, Millstock was required to refund the second respondent R269 242.93, which the latter paid to replace the CCP, within 15 days from the date of receipt of the notice.

THE HEARING

16. At the hearing, Millstock called an expert witness, Mr Patric Swan (Mr Swan), and the second respondent Mr Vito Viglietti (Mr Viglietti), the service manager at Ferrari Cape Town, as a witness. Both gave detailed evidence. However, the Tribunal is of the view that it is not necessary to repeat the details. Below are summaries of what the Tribunal considers the important aspect of the two witnesses.

The evidence of Mr Swan

17. Mr Swan is a consulting engineer and tribologist. His academic qualifications include a higher national diploma (T4) in mechanical engineering, and he is a certificated engineer.[3] He has over 55 years of experience in these fields, is a member of various professional bodies, and has held leadership positions in such bodies. His expertise and qualification as an expert have not been disputed.

18. On 13 August 2022, Mr Swan examined the CCP[4] which was replaced in the vehicle at Ferrari Cape Town. He reported his findings in a report which forms part of the record. During his oral testimony, he confirmed the correctness of his report.

19. Mr Swan explained that the vehicle has a dual-clutch transmission (DCT) with two multiple-input clutches that operate in oil. The outer clutch actuates the even- numbered gears, and the inner clutch actuates the odd-numbered gears. The clutches are termed wet clutches as they continually operate in oil and are thus constantly lubricated.

20. Mr Swan testified that torque can only be transferred when the clutch plates of the vehicle are locked together. The clutchplates are locked together by hydraulic pressure. If the hydraulic pressure is insufficient, the clutch plates will not lock together, and each clutch will slip against each other under conditions of high- power generation. The heat generated will cause the 8 litres of oil in the clutch compartment to start boiling and would result in a massive failure of the clutches. This would result in the oxidation of the oil, which is a hydrocarbon. Oxidation of a hydrocarbon results in the formation of sludges and acid. The sludges

are polar and will adhere to metal surfaces, forming a yellow to tan-coloured varnish on the metal surfaces. No such evidence of a varnish colour was found on the metal surfaces of the clutch compartment or any parts of the CCP.

21. In his oral testimony, referring to photograph 4 in his report, Mr Swan explained that a bar is situated on top of the DCT unit with two sensor points, one measuring the temperature of the even clutch and the other of the odd clutch.

22. Mr Swan was referred to documents subpoenaed from Ferrari Cape Town. Three of these documents, marked “A” to “C” by Mr Tredoux, were referred to. Mr Swan pointed out that these documents recorded that the sensor reflected the temperature of the even clutch at 61°C and the odd clutch at 180°C. He explained that the different readings do not make sense, and one would not expect such a vast difference in the readings as the sensor points cannot touch the clutches. Instead, they are placed next to each other on the same panel, and they detect the ambient temperature of the metal around the clutches. The readings, therefore, should be the same. Mr Swan explained that the difference only indicated that the sensor was defective.

23. Mr Swan confirmed his finding that his examination of the CCP found that all parts, including the clutches, were in “an approximately as new condition”.

24. In his report, Mr Swan reported as follows:

“The transmission clutch warning light is activated by excessive clutch temperature, or by a faulty clutch temperature sensor. Excessive

clutch temperature is caused by the heat that is generated during clutch slippage. A faulty clutch temperature sensor can cause the warning light to illuminate despite the clutches operating at normal temperature with no slippage.”

25. Mr Swan concluded:

“In conclusion no mechanical damage, fault or wear was noted in the clutch assembly, or the dual clutches, which are a part of the clutch assembly. It is therefore clear that the original diagnosis formed by Ferrari Cape Town, that the clutch temperature sensor was faulty, was correct.

It must be noted that a fault in an electronic component, such as a temperature sensor, can occur at any time. That the vehicle had been serviced 1877 km before this fault developed shows that the sensor was not faulty at the time of the service.”

The evidence of Mr Viglietti

26. Mr Viglietti testified that the initial diagnostics by Ferrari Cape Town showed an error code indicating that the sensor was malfunctioning.

27. When the vehicle was returned to Ferrari Cape Town, it was connected to Ferrari Italy’s system, and they confirmed that the sensor was indeed defective. In his email to Millstock that same day, Mr Viglietti advised that Ferrari Italy confirmed this. However, they determined that there was an underlying issue with the CCP and that “[replacing] the sensor in itself will remedy the immediate issue, but there would be no guarantee that a further issue with the clutch control would arise.”

28. Mr Viglietti also informed that Ferrari Italy would not honour any warranty extension on the vehicle if the CCP were not replaced. He also testified that if the vehicle were under warranty, Ferrari Italy would have replaced only the defective sensor, but for a vehicle not under warranty, the whole CCP needed to be replaced, otherwise, Ferrari Italy would not sell a warranty on the vehicle.

29. Mr Viglietti confirmed that Ferrari Italy never advised what the “underlying issue” was that caused the sensor to malfunction, but they told Ferrari Cape Town to proceed to replace the CCP. He also testified that Ferrari Cape Town never physically examined the CCP and could not confirm whether it was defective or not.

The applicant’s submissions

30. In short, Millstock relies on three primary grounds on which the notice should be reviewed and cancelled, namely (a) material factual errors underpinning the notice, (b) procedural unfairness in its issuance, and (c) a misinterpretation of Millstock’s obligations under the CPA.

31. As for the alleged factual errors, Millstock argues that the notice is premised on the NCC's erroneous finding that the vehicle suffered a mechanical breakdown and that Millstock refused to repair a defect that it was legally obliged to address. It is further argued that Mr Swan’s forensic examination revealed no mechanical defect in the CCP and no overheating or oil-related damage. Instead, there was only a faulty sensor.

32. As for procedural unfairness, the applicant complains that the NCC failed to adequately consider Mr Swan’s report, which was submitted to them before the notice was issued.

33. Millstock’s argument regarding the misapplication of the CPA provisions is largely based on the allegation that the NCC did not take into account that the vehicle was an 8-year-old used vehicle.

The second respondent’s submissions

34. The second respondent argues that the grounds on which Millstock relies for the review and cancellation of the notice lack merit.

35. In reply to the alleged factual errors on which the notice is premised, the second respondent relies on the provisions of section 55 and argues that, amongst others, it was entitled to a vehicle that was usable and durable for a reasonable period of time. It is not material whether a defect or failure results in a full mechanical breakdown or not, a consumer is entitled to the protection of the CPA if a vehicle, or a component thereof, becomes defective, fails, malfunctions or proves not to be durable. It is argued that whether the complete CCP was defective and needed replacement, or only the sensor, does not detract from the second respondent's right to have received the vehicle, complying with the requirements and standards set out in section 55.

36. The second respondent relies on the fact that Ferrari identified an underlying issue that caused the sensor to malfunction and, therefore, required the CCP to be replaced. Otherwise, it would not extend any warranty on the vehicle in future. Mr Viglietti confirmed that Ferrari Italy was prepared to extend warranties on any Ferrari for fifteen years after the sale, which the customer had to pay for after the initial factory warranty expired. The second respondent argues that unless the CCP were replaced, they would not be able to purchase a warranty on the vehicle, which would adversely affect its resale value.

The first respondent’s submissions

37. The first respondent made no meaningful submissions, save to argue that the malfunctioning sensor constituted a defect and submitting that in the event of the Tribunal finding in favour of the applicant, it should modify the notice to the effect that the applicant must pay the costs of replacing the sensor instead of cancelling it.

LEGAL CONSIDERATIONS

38. Administrative action, such as that of the NCC in issuing the notice, must comply with the requirements of section 3(2) of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). However, section 3(5) of PAJA states that where an administrator is empowered by any empowering provision to follow a procedure which is fair but different from the provisions of subsection (2), the administrator

may act in accordance with that different procedure.[5]

39. Section 100 empowers the NCC to issue a compliance notice in the prescribed form to a person or association of persons whom the NCC, on reasonable grounds, believes has engaged in prohibited conduct.

40. Section 100(1) allows any person issued with a compliance notice to apply to the Tribunal in the prescribed manner and form to review that notice and subsection (2) states that after considering any representations by the applicant and any other relevant information, the Tribunal may confirm, modify or cancel all or part of a notice.

DISCUSSION

41. It is not certain to what extent the NCC considered Mr Swan’s report before issuing the notice. In the Tribunal’s view, if it had been properly considered, the notice would not have stated that the vehicle had broken down due to a clutch failure. The evidence that was in front of the NCC suggested that the issue with the vehicle was due to a malfunctioning sensor. There was and remains no evidence to the contrary. At most, there was a suggestion that an underlying issue caused the sensor to malfunction, but such an underlying issue was not identified. Furthermore, the presence of an “underlying issue” was suggested following a remote diagnostic test as opposed to the actual physical inspection of the CCP by an expert who concluded that “all parts [of the clutch assembly or CCP] were in an approximate as new condition”.

42. Mr Swan’s report, which was available to the NCC, concluded no noting of “mechanical damage, fault or wear . . . in the clutch assembly, or dual clutches which are part of the clutch assembly” and that the original diagnosis of Ferrari Cape Town, that the clutch temperature sensor was faulty, was correct.

43. Having considered the evidence of record, including the oral testimonies of Mr Swan and Mr Viglietti, the Tribunal is of the view that it cannot be concluded that the CCP was defective or that it was necessary to replace it. In these circumstances, the notice should be cancelled.

44. The Tribunal considered the NCC’s request that the notice be modified to require Millstock to pay the costs of replacing the sensor instead of being cancelled. However, Millstock did not refuse to pay for the sensor replacement, and the notice itself is premised on factual errors. For these reasons, the Tribunal is not prepared to adhere to the NCC’s request.

THE ORDER

45. In the result, the following order is made:

45.1. The compliance notice issued by the NCC on 19 December 2024 under reference number 2005/019833/07 is hereby cancelled.

45.2. There is no order as to costs.

[signed]

Mr S Hockey

(Presiding Tribunal member)

Tribunal members Adv C Sassman and Mr CJ Ntsoane concur.

[1] The matter was also referred to the Motor Industry Ombudsman of South Africa who made a recommendation which was not fulfilled. It is not necessary for the present matter to deal with the Ombudsman’s process and recommendation.

[2] Answering affidavit para 2.1.1. at page 401 of the record.

[3] Mr Swan explained that tribology is the study of the interaction between moving objects and the resultant friction caused by the movements.

[4] Mr Swan refers to the CCP as the clutch assembly and testifies that they are the same thing and can be used interchangeably.

[5] In this regard, see National Consumer Commission v Scoop Clothing and Another ZAGPPHC 447 (15 June 2023) at para [10].