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Legal Page - Singapore law on automotive emissions standards and automobile product liability

Source: Asia Insurance Review | Dec 2015

With the continuing development of the Volkswagen scandal, Mr Ian Roberts (Clyde & Co Clasis Singapore) and Mr Marcus Yip (Clasis LLC) explain the country’s law with which motor vehicles’ purchasers can bring action against motor manufacturers and trade dealers. 
 
 
On 18 September this year, US regulators announced that Volkswagen (“VW”) had installed a so-called “defeat device” in many VW diesel vehicles sold in America. The device is a software that was designed to detect when the vehicle was undergoing official pollution testing, and to limit the production of harmful levels of nitrogen oxide during such testing.
 
   In Singapore, in a statement released by VW Singapore on 12 October 2015, VW confirmed that there were 662 VW diesel vehicles registered in Singapore that have “software that could cause discrepancies in nitrogen oxide values during dynamometer runs”. 
 
   Given the relatively small number of vehicles involved, the impact of the crisis in Singapore would appear to be fairly limited. In this article, we consider some of the legal issues under Singapore law relating to automotive emissions standards and product liability laws applicable to vehicle manufacturers and dealers in general.
 
Regulatory issues
Emissions standards for vehicles are prescribed by the National Environment Agency of Singapore (the “NEA”) in the Environment Protection and Management (Vehicular Emissions) Regulations (the “VER”). 
 
   The VER presently prescribes minimum emissions standards for vehicles in Singapore by reference to certain standards that have been issued in the European Community and Japan. In order for a motor vehicle to be imported and registered in Singapore by the Land Transport Authority, the vehicle must comply with NEA’s emissions standards requirements.
 
   A person or entity that imports a vehicle in Singapore in contravention of applicable emission standards by falsely representing to the authorities that it complies with such standards is potentially liable for a criminal offence. 
 
   The VER also gives the Director-General of Environmental Protection (appointed under the Environmental Protection and Management Act) the power, with the approval of the Minister of the Environment and Water Resources, to prohibit or restrict the use of motor vehicles of any specified class or description on any roads in Singapore if the Director-General is satisfied that the prohibition or restriction is necessary to safeguard public health from excessive levels of air pollution.
 
   In addition, a vehicle manufacturer or dealer may be liable for an offence under the Consumer Protection (Trade Descriptions and Safety Requirements) Act (the “CPA(TDSA)”) for applying a false trade description to a vehicle or for supplying a vehicle to which a false trade description is applied. 
 
   Under the CPA(TDSA), the definition of “trade description” includes any description, statement or indication which relates to “testing of any goods by any person and the results thereof” and “approval of any goods by any person or their conformity with a type approved by any person”.
 
Product liability
The two primary pieces of legislation from a consumer liability perspective would be the Sale of Goods Act (Cap 393) (the “SGA”) and the Consumer Protection (Fair Trading) Act (Cap 52A) (the “CPA(FT)”). 
 
   For example, under the SGA, motor manufacturers and trade dealers may be exposed to actions for breach of contract brought by purchasers:
(i) Under section 13 of the SGA, it is an implied condition in the sale contract that the vehicle being sold corresponds with the description. It will be a matter of construction of the contract whether a statement by the seller to the buyer that the vehicle complies with applicable emission standards forms part of the contractual description of the vehicle.
 
(ii) Further, under Section 14(2) of the SGA, when the seller sells the vehicle in the course of business, there is an implied condition that the vehicle supplied under that contract is of satisfactory quality, with goods being of “satisfactory quality” if they meet the standard that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price (if relevant) and all other relevant circumstances; 
 
(iii) Where there has been a breach of the implied condition of correspondence with description or satisfactory quality, the purchaser of the vehicle may either reject the vehicle and terminate the contract (unless the purchaser has in law been deemed to have accepted the vehicle) or sue the trader for damages for breach of warranty. Under Section 53 of the SGA, such damages would prima facie be the difference between the value of the vehicle at the time of delivery to the buyer and the value it would have had if the seller had fulfilled the warranty.
 
   Motor manufacturers and trade dealers may also be exposed to actions brought by purchasers under the CPA(FT):
   (i) Under Section 4 of the CPA(FT), it is unfair practice for a supplier, in relation to a consumer transaction, to, amongst other things, do or say anything if as a result a consumer might be reasonably misled, or to make a false claim. 
 
   (ii) The Second Schedule of the CPA(FT) also specifies certain practices which constitute unfair practice under Section 4. These include representing that goods have performance characteristics, qualities or benefits that they do not have or that goods are of a particular standard, origin or method of manufacture if they are not.
 
   (iii) Section 6 of the CPA(FT) gives a consumer who has entered a consumer transaction involving an unfair practice the right to commence an action in a court against the supplier. This right is, however, subject to the amount of the claim not exceeding the prescribed limit or, where there is no claim for money, the value of the vehicle not exceeding the prescribed limit. Currently, the prescribed limit for the bringing of a claim under Section 6 of the CPA(FT) is S$30,000.
 
   (iv) In addition to the “unfair practice” provisions of the CPA(FT), Part III of the CPA(FT) provides additional consumer rights in relation to non-conforming goods (otherwise known as a “lemon law”). Under Part III, if a motor vehicle does not conform to the sale contract at the time of delivery and if the contract was entered into on or after 1 September 2012, a consumer has, subject to the conditions in Part III, the right to:
   (a) require the transferor to repair or replace the vehicle; or
   (b) require the seller to reduce the price to be paid by an appropriate amount; or
   (c) to rescind the contract.
 
   Tortious claims could also be brought pursuant to ordinary common law principles such as for fraudulent misrepresentation (ie deceit) or negligent mis-statement. 
 
   For a tortious claim, the likely measure of damages would be the diminution in value of the vehicle or the cost of taking the necessary measures to ensure that the vehicle complies with the relevant emissions standards. If deceit can be proven, then all loss flowing directly from the claimant’s reliance on the fraudulent misrepresentation is recoverable, even if the loss is not foreseeable.
 
Representative actions
Procedurally, although there is no mechanism for US-style class action lawsuits, the Singapore Courts do permit a “representative action” under Order 15 Rule 12 of the Rules of Court. 
 
   There are two requirements to be satisfied. First, the representative claimant must demonstrate that the persons he is representing have the “same interest” in the proceedings. Second, the Court must be persuaded that it is appropriate for the case to proceed as a representative action given all the circumstances.
 
   Order 15 Rule 12 was recently considered by the Singapore Court of Appeal in Koh Chong Chiah and others v Treasure Resort Pte Ltd [2013] 4 SLR 1204. Whilst the Singapore Court of Appeal underlined that Order 15 Rule 12 is to be applied in a broad and flexible manner in the administration of justice (at [32]), the representative claimant must still satisfy certain established criteria. One of them is the “same interest” requirement, which requires, amongst other things, that there “must be significant issues of fact or law common to all the claimants in a representative action” (Koh Chong Chiah at [78(c)]). 
 
   Whether there are significant issues of fact or law common to all claimants would depend on the facts and circumstances of each representative action coming before the courts. The full impact of “representative actions” after Koh Chong Chiah remains to be seen in Singapore.
 
Mr Ian Roberts is a Partner at Clyde & Co Clasis Singapore. Mr Marcus Yip is a Senior Associate at Clasis LLC (associated with Clyde & Co LLP).
 
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