iPhone 3G top and bottom of screen not responding

I got an iPhone 3G 16GB second hand online, which was out of warranty when I got it. About a month ago I decided to downgrade and sold it to a mate, but now the bottom of the touch screen isn't working. Had a similiar problem with a 3GS a while ago, and just ended up selling it as faulty, but after it happening again and doing some research, it looks like it is quite a big problem for iPhones. Is there I can do through Apple, as clearly this is an incompetence on their behalf, for a product that should last a lot longer than it has? They have said I can pay NZ$ 250 to get it replaced, but it's too much for something that isn't my fault. Am considering the Disputes Tribunal here in New Zealand.

Anyone else had the problem or can recommend another solution?