House of Assembly Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia House of Assembly published Bills Second-Hand Vehicle Dealers (Cooling-Off Rights) Amendment Bill SECOND-HAND VEHICLE DEALERS (COOLING-OFF RIGHTS) AMENDMENT BILL Second Reading Second Reading Adjourned debate on second reading. (Continued from 9 September 2009. Page 3791.) The Hon. I.F. EVANS House of Assembly Davenport The Hon. I.F. EVANS (Davenport) (17:06): I indicate I am the lead speaker on this bill, which the opposition is supporting. We have no amendments to the bill. I have a very short contribution and then I think we might all go home. This bill deals with second-hand vehicle dealers' cooling-off rights. This is a consumer affairs issue. It deals with clarifying cooling-off rights for those people purchasing a second-hand car from vehicle dealers. It introduces a cooling-off right on the sale of second-hand vehicles, and the cooling-off process has a number of features. It does not apply to private sales or auction sales, or purchases by companies or dealers. The cooling-off period begins at the signing of the contract and expires two days later—and I note that 'days' include Saturday, because the motor trade is basically a six-day trading industry. The dealer may require payment of a deposit of up to 10 per cent but no more than 10 per cent of the contract price. If the contract is rescinded, then that is refunded, except the dealer can keep up to 2 per cent or $100 (whichever is the lesser) to cover minor administrative costs, which I think is reasonable. Even though a deposit has been paid, if you like, and a contract signed, during the cooling-off period an option can be offered to a third party on the basis that, if the contract falls over, the third party then gets first option on the next purchase of that car, given the failed contract. The purchaser will be entitled to waive his or her rights to a cooling-off period. The waiver will contain a statement of the rights of the prospective purchaser and a statement warning the prospective purchaser of the legal effect if he or she waives the right to rescind. I thought I saw somewhere that you are not allowed to offer an inducement to waive your right. I am sure I saw that in the explanation of clauses, which I will find while I speak. I assume that is to prevent retailers saying, 'If you waive your cooling off period we will give you $500 off the car.' I assume it is to prevent that. I am not sure why that is an issue, but, if it is to prevent that, that is what the bill is intending. Legal title and physical possession remain with the dealer during the cooling-off period. The dealer, of course, has to allow the prospective purchaser reasonable access to test drive and have the vehicle inspected. Legal title and physical possession of a trading vehicle offered by the purchaser remains with the purchaser until the cooling-off period is completed. A contract of credit entered into to finance the sale does not take effect until the cooling-off period is completed and is void if the contract fails or the contract of purchase is rescinded. It will be an offence for the dealer to induce someone to waive their cooling-off right. I knew I saw it there somewhere, Mr Speaker. To enhance the ability to prosecute unlicensed dealers, there is a clearer definition of a 'dealer', and it is widened to include buying and exchanging second-hand vehicles and what is called a 'rebuttal presumption', that is, if a second-hand vehicle is transferred in and out of a person's name, that person has bought and sold the vehicle. The rebuttal presumption is also created that a person and a close associate are dealers if the person and close associate buy or offer to buy or offer for sale more than six second-hand vehicles in aggregate in a 12-month period. That is an interesting concept. There are families around with eight, nine and 10 members. I have four teenagers, all with vehicles and all purchased in the last 12 months. If I go out and buy a vehicle and if my wife goes out and buys a vehicle we are dealers under this provision because we are all closely associated. I might ask the minister to explain in her response to the house at the end of my contribution what is a close associate for the purposes of this bill, because I think there are large families with teenage kids who would go through more than six cars or up to six cars. I am wondering how that will be dealt with in actual fact. The bill also amends the existing rebuttal presumption that a person is a dealer if he or she sells or offers or exposes for sale four or more second-hand vehicles in a 12-month period. That is confusing. I will reread the minister's second reading explanation: A rebuttal presumption is also created that a person and a close associate are dealers if the person and the close associate buy or offer to buy sell or offer for sale more than six second-hand vehicles aggregate in a 12-month period. That is all the close associates together and the person— An honourable member House of Assembly An honourable member: Six. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: Six, okay. The bill also amends the existing rebuttal presumption that a person is a dealer if he or she sells or offers or exposes for sale four or more second-hand vehicles in 12 months. Okay. An individual can offer up to four and is not a dealer. The fifth vehicle makes them the dealer, as I understand it. However, a collective can offer up to six without becoming dealers. I suspect that a few people will get caught on that provision, and I think the industry would say, 'Quite rightly so.' The penalties in the act have been increased to at least double, and the expiation fee is increased to a maximum of $315. I understand that the minister might have an amendment in relation to some expiation notices. I make the point that a $315 expiation notice is the same as a littering fine. One would have to wonder about the gravity of the offence given that car dealers are making their livelihood out of this particular industry and that the penalty is only the equivalent of a litter fine, $315. A negative licensing scheme is introduced for salespersons employed or otherwise involved in second-hand vehicle dealerships. Obviously that is to try to weed out people who have convictions for dishonesty offences or who have previously been disqualified as second-hand vehicle dealers but who have effectively remained involved or who are running dealerships through a third person, such as a spouse or another dealer—a 'compliant third party', as it is known in the industry. Their conduct would, in many cases, be within the definition of a 'second-hand vehicle salesperson'. Under the proposed scheme it would be an offence to act or employ a person to act as a second-hand vehicle salesperson if the person has been convicted of an indictable offence of dishonesty within the past 10 years or a summary offence of dishonesty or the person has been disqualified from another regulated occupation. The scheme will allow disciplinary action to be taken against a salesperson for unlawful and improper negligent conduct and to exclude persons from being involved in the industry where they have a relevant criminal history or are suspended or disqualified from this or any other occupation. I did note that, interestingly enough, people's past behaviour will not be considered: it will be only their future behaviour. I thought I read in the transitional provisions that, under these particular provisions, it is only future behaviour which will cut them out of being a licensed salesman, which I found rather an interesting concept given that we did not do that for security people in the hotel industry, for instance. Those involved in the security industry had a police check and, if they had a criminal history, they were not to be relicensed. The way I read the transitional provisions here, there were going to be only issues from the time of the bill going through, or the provisions being enacted, about their behaviour affecting their licensing, and I could not quite work out why the government had decided to do it that way. But that is the way I read it. The bill deals with the Second-Hand Vehicles Compensation Fund. I note that some of the costs of the department have been transferred, essentially, into the compensation fund—things that I think are properly done by the department rather than paid by the compensation fund. My understanding is the Motor Trade Association and other industry bodies have been extensively consulted. There has been to-ing and fro-ing on the various positions and the Motor Trade Association is accepting of the compromise bill that is before us. The opposition will not move any amendments, given that we acknowledge there has been quite an extensive consultation period on this. It is quite a complicated area, and we think that the government has probably got it about right in relation to this particular issue. With those few words, I indicate the opposition is happy to support the bill and, other than the questions I have raised during this contribution, has no further questions of the minister. The Hon. J.M. RANKINE House of Assembly Wright Minister for Families and Communities Minister for Northern Suburbs Minister for Housing Minister for Ageing Minister for Disability The Hon. J.M. RANKINE (Wright—Minister for Families and Communities, Minister for Northern Suburbs, Minister for Housing, Minister for Ageing, Minister for Disability) (17:17): I thank the member for Davenport for his contribution. I will just make a couple of brief comments and, if the member for Davenport wants to ask more questions in the committee stage (because we have a couple of amendments that need to go through), I am happy to take those. In relation to the compensation fund, it was originally proposed to expand the uses of that fund to allow for education programs for the benefit of the public, dealers and salespeople; and also the costs of investigating compliance with the act or possible misconduct of dealers or salespeople. I assume that is the area to which the member for Davenport was referring. As a result of feedback from the industry, it was decided only to expand the use of the fund for education programs and investigating compliance, and the industry has indicated it accepts this. In relation to close associates, the detail that I have (and I can go through an outline of the definition of a close associate) is really the issue around determining whether someone is acting as a dealer. I know the industry was very keen for the government to tighten up on these provisions. It is about buying and selling privately. It is about backyard dealers. It is about clamping down on those people who are moving vehicles constantly, and I know the office for consumer affairs is always looking to see where people are doing these things. Generally, it is the public that misses out because those vehicles are purchased without any warranty, and there have been circumstances where people have bought dud cars and not been able to get any recompense once they find out the vehicles are not up to standard. The department always operates with common sense, and it really is about clamping down on those unscrupulous people in the community who take advantage. Bill read a second time. Committee Stage Committee Stage In committee. Clauses 1 to 4 passed. Clause 5. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: Clause 5 seeks to insert new section 3A into the act, which deals with the term 'close associates'. Close associates can buy six cars or sell six cars in a 12-month period before they are a dealer, and I want to make sure I understand this. Two persons are close associates if they are related bodies corporate. Solver Paints Pty Ltd has a fleet of 20 vehicles and is a body corporate. If it sells six vehicles in a year, is it a dealer? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: There need to be two related bodies corporate, and it is a rebuttable presumption. So, if they have proof that they are not operating as a dealer, that is fine, but they cannot set themselves up as a car dealer. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: No, but they become a car dealer once they sell six vehicles, if they are closely associated with another body corporate, one assumes. For instance, what about Solver Paints, which is owned by the Smith Family Trust? The Smith Family Trust has 15 members and Solver Paints has 30 staff—in fact, I think at one stage they had 200—at what point do they have to prove that they are not trading in vehicles and what proof can they possibly provide? They sold 13 vehicles in the last year. 'Yes, that's true, we did, Your Honour.' 'Did you advertise them?' 'Yes, we did.' 'Did you sell 13 last year?' 'Last year it was 12; the year before it was 16.' 'So, you always sell about 15 vehicles?' 'Yes.' So, what distinguishes them from being a second-hand vehicle trader to Mr and Mrs Jones down the street, who simply sell their four vehicles out of the backyard? How do they actually defend themselves from the accusation? It seems to me an impossible point to prove. Businesses always buy and sell cars. I guess that somehow you are going to have to argue that it does not become their sole source of income, or a main source of income, but that is nowhere in the bill as a point of measurement. I am interested now in this issue of close associate. For instance—and you are far better qualified than I, Madam Acting Chair, given your legal background—a close associate: (1)	2 persons are close associates if— (j)	1 is in a position to exercise control or significant influence over the conduct of the other. So, that means that every corporation, except those excluded, that being the ones in public—the stock exchange is excluded—every private company is now going to become open to question as to whether they are a car dealer. I do not see how they defend themselves. What is the defence? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: It would be a rebuttable defence if they are exchanging their car fleets. It is a rebuttable defence to do that. It is a normal part of a business renewing the assets of the business, but it cannot set itself up and have a business on the side trading in cars. Solver Paints cannot be a car dealer and a paint manufacturer, unless it licences itself. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: The biggest car reseller in the state is the government. The government is the biggest second-hand car retailer in the state. Are you saying that the government is not a second-hand car retailer? I think there are going to be a lot of people caught up in this issue about how you are now defined as a close associate. I think people are going to be taken to court to prove the rebuttable defence, or whatever you call it. I think a lot of people are going to be taken at least to the authority to explain themselves, because, of course, businesses off-load their cars. I think there are a few issues there. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: The focus of this is about targeting backyard dealers. We have a lot of consumer laws in South Australia and the office has always used common sense in the application of those laws, and I cannot imagine that it is going to be going out there prosecuting businesses that are conducting normal everyday business practices. This is about dealing with shonky backyard dealers. The Acting Chair House of Assembly Hon. S.W. Key The ACTING CHAIR (Hon. S.W. Key): Member for Davenport, I will take this as question 3½ on this clause. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: When the question is asked about whether they have purchased six vehicles, is it the purchasing of six vehicles or the selling of six vehicles, or is it the purchasing and selling of six vehicles? If it is the purchasing and selling of six vehicles, does that mean that it is actually the purchasing and selling of the same three vehicles? In other words, I buy three vehicles in and I sell the same three vehicles out. Does that count as my six, even though it is only three? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: It is six combined: three in, three out. The Acting Chair House of Assembly The ACTING CHAIR: Minister, can I ask whether you are prepared to take more questions from the member for Davenport on this clause? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: Do you need more clarification or do you want advice from the department? The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: I just have one more. My understanding of that answer, and please tell me if I am wrong, is that now close associates may get caught or may get questioned about their involvement as a car dealer. If they are buying three cars in and selling the same three cars in a 12 month period they could then get questioned about whether they are a car dealer, and that then must flow on to the second provision that an individual, who is restricted to four transactions, could get caught if they buy in two and sell two. Am I right in saying that if someone buys a car and a motorbike—is a trailer a vehicle under the act? No; okay. So, a car and a motorbike, or a car and a truck. So, if a truckie buys a truck and a car, or someone buys a car and a motorbike, that counts as their two; that counts as a vehicle? It is not just cars, is it, it is second-hand motorbikes as well? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: It is about when you are trading privately. You can buy your car from a dealership, and then, if you sell it privately, that is one transaction. It is when it is sold privately, not through a dealership, as I understand it. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: With due respect, minister, I do not think that your advice is right. Let me read to you your second reading contribution on the bill. It states: To enhance the ability to prosecute unlicensed dealers, the definition of 'dealer' is widened to include buying and exchanging of second-hand vehicles and a rebuttable presumption includes that if a second-hand vehicle is transferred into and out of a person's name, that person bought and sold the vehicle. Fine. It goes on: A rebuttable presumption is also created that a person and a close associate are dealers if the person and close associate buy or offer to buy or— not 'and'— sell or offer for sale more than six second-hand vehicles in aggregate in a 12 month period. Because it is 'or' and not 'and' they are separate. So, someone privately buying in is one transaction, and then selling is the second transaction. They do not add together to be one transaction. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: If you buy from a licensed dealer, that is not considered to be a transaction. That is my understanding. If you buy your vehicle legitimately from a licensed dealer and then you sell it privately that is one transaction, but if you do that six times, then you are trading. Does that not make sense? The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: That makes sense; but let's take the person who buys from a private buyer, not a dealer. When they buy is it counted as a transaction when they sell? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: Yes. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: The answer is yes. So then, if I am buying from private people, isn't there a possibility that I will get caught as a dealer, as an individual, when I am making only two transactions? I am buying a car and buying a motor bike, and then if I sell them, that is four transactions. If anybody buys a car and motorbike and sells them in the one year they are deemed a dealer. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: Yes, that would be counted as four, but it is still rebuttable if you are not acting as a dealer. Again, I stress that Consumer Affairs operates with a great deal of common sense. They would be looking at what you have been doing over a period of time. Clause passed. Clauses 6 to 16 passed. Clause 17. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: I move: Page 8, after line 30 [clause 17, inserted section 18B(7)]—After the penalty provision insert: Expiation fee: $500 The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: For the purposes of the record can you explain what the expiation notice is in relation to? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: This amendment introduces an expiation fee penalty for dealers who do not return the deposit paid by a purchaser within the required time after receiving the purchaser's cooling-off notice. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: The opposition understands that the industry has been consulted and is accepting of this, so the opposition is supporting it on that basis. Amendment carried; clause as amended passed. Clauses 18 to 30 passed. Clause 31. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: I move: That clause 31, which has been printed in erased type, be inserted. The Acting Chair House of Assembly Hon. S.W. Key The ACTING CHAIR (Hon. S.W. Key): The minister has a number of amendments to this clause which the committee can deal with together. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: I move: Page 14— Lines 12 to 14 [clause 31(1)]—Delete subclause (1) Before line 15—Insert: (1)	Schedule 3, clause 2(1)—after paragraph (a) insert: (ab)	made a payment to a dealer in respect of the purchase of a second-hand vehicle under a contract that has been rescinded in accordance with section 18B; or Lines 19 to 21 [clause31(4)]—Delete subclause (4) and substitute: (4)	Schedule 3, clause 2(1)—delete 'that person' and substitute: 'the claimant' Lines 27 to 29 [clause 31(7), inserted subclause (3) of Schedule 3, clause 2]— Delete subclause (3) Lines 33 to 37 and page 15, lines 1 to 8 [clause 31(7), inserted subclauses (5) to (7) of Schedule 3, clause 2]—Delete subclauses (5) to (7) (inclusive) Page 15— Lines 10 to 16 [clause 31(8), inserted clause 2A of Schedule 3]—Delete the clause Lines 31 to 33 [clause 31(9), inserted subclause (2)(d) to (f) of Schedule 3, clause 3]— Delete paragraphs (d) to (f) (inclusive) Page 16, lines 1 and 2 [clause 31(10)]—Delete subclause (10) The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: I have a question to the minister. For the sake of the committee, I point out that these are amendments to do with the Second-hand Vehicles Compensation Fund. The minister's amendments seek to put more areas where the fund can be expended. Can the minister explain the new areas the money can be expended on? Can she explain to the committee where the budget that funded those areas of activity previously came from and how much are they? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: I outlined at the completion of the second reading speech what areas the money was going to be used for—namely, education for dealers, traders and the general public and also some compliance issues. I am advised that, in fact, we did not have a budget previously for education and the industry has been very keen for us to ramp up the compliance area. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: Public education campaigns are now going to be paid out of the compensation fund. The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: For prescribed education programs. The Hon. I.F. EVANS House of Assembly The Hon. I.F. EVANS: Your answer just 30 seconds ago was that it would be for education and public awareness campaigns. I can understand the industry being supportive of their dealers being educated and brought up to appropriate levels through prescribed training but I am a bit curious about public education campaigns. Does this mean that the compensation fund can be used for what could have been normal government public education campaigns funded out of Consumer Affairs? What control is there for the industry to say that it does or does not want that education campaign funded out of this fund? What mechanism of control is there? Why should this fund be paying for public awareness campaigns? The land agents indemnity fund does not pay for public education campaigns. The legal indemnity fund in the law industry does not pay for public awareness campaigns. After all, this is an industry fund. What the government is proposing here—and this sets a precedent—is to start running government public education programs out of indemnity and compensation funds. I am wondering what control mechanism there is. Does the industry (whose fund it is ultimately) have a veto right over the public education fund and is it at the minister's approval or the commissioner's approval in relation to the use of the fund? The Hon. J.M. RANKINE House of Assembly The Hon. J.M. RANKINE: I am advised that it is at minister's approval in relation to the fund and the minister will be consulting with the industry in determining the education programs that will be prescribed and regulations in relation to that. In talking about that, this is to the benefit of the industry so that the public understands the benefits and pitfalls of buying and selling vehicles. Amendments carried; clause as amended inserted. Schedule 1 and title passed. Bill reported with amendment. Third Reading Third Reading Bill read a third time and passed.