Legislative Council Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia Legislative Council published Bills Second-Hand Vehicle Dealers (Cooling-Off Rights) Amendment Bill SECOND-HAND VEHICLE DEALERS (COOLING-OFF RIGHTS) AMENDMENT BILL Introduction and First Reading Introduction and First Reading The Hon. G.E. GAGO Legislative Council Minister for State/Local Government Relations Minister for the Status of Women Minister for Consumer Affairs Minister for Government Enterprises Minister Assisting the Minister for Transport The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister Assisting the Minister for Transport, Infrastructure and Energy) (11:06): Obtained leave and introduced a bill for an act to amend the Second-hand Vehicle Dealers Act 1995 and to make a consequential amendment to the Magistrates Court Act 1991. Read a first time. Second Reading Second Reading The Hon. G.E. GAGO Legislative Council Minister for State/Local Government Relations Minister for the Status of Women Minister for Consumer Affairs Minister for Government Enterprises Minister Assisting the Minister for Transport The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister Assisting the Minister for Transport, Infrastructure and Energy) (11:07): I move: That this bill be now read a second time. This bill amends the Second-hand Vehicle Dealers Act 1995 by introducing a cooling-off right on the sale of second-hand vehicles, with the following features: The cooling-off right does not apply to private sales, auction sales and purchases by companies or dealers. The cooling-off period will begin at the signing of the contract and expire at the end of two business days (defined to include Saturdays). The dealer is entitled to a non-refundable deposit from the purchaser of 2 per cent of the value of the vehicle up to a maximum of $100. The dealer is entitled to offer a third party an option on a vehicle that is subject to a cooling-off period. The purchaser will be entitled to waive his or her rights to a cooling-off period (the mechanism for waiver will be set out in the regulations but is intended to involve the purchaser signing a waiver form that includes a warning notice). Legal title and physical possession of the vehicle remain with the dealer during the cooling-off period (although the dealer is required to allow the purchaser reasonable access to test drive or have the vehicle inspected). Legal title and physical possession of a trade-in vehicle offered by the purchaser remain with the purchaser until the completion of the cooling-off period. A credit contract entered into to finance the sale cannot take effect until the expiration of the cooling-off period and will be void if the contract for the purchase of the vehicle is rescinded. It will be an offence for the dealer to induce someone to waive their cooling-off right. Secondly, 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 included that, if a second-hand vehicle is transferred into and out of a person's name, that person bought and sold the vehicle. 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 sell or offer for sale more than six second-hand vehicles, in aggregate, in a 12 month period. The bill also amends the existing rebuttable 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 by extending the presumption to the purchase as well as the sale of the second-hand vehicles. Penalties in the act have been increased to at least double, and expiation fees increased to the maximum of $315. A negative licensing scheme is also introduced for salespersons employed or otherwise involved in second-hand vehicle dealerships. The objective is to address recent cases of which the Office of Consumer and Business Affairs is aware where people with convictions for dishonesty offences or who have been previously disqualified as second-hand vehicle dealers have effectively remained involved or run dealerships through a third person licensee, such as a spouse or another dealer—a 'compliant third party'. Their conduct (negotiating sales, etc.) would in many cases be within the definition of 'second-hand vehicle salesperson'. Under this scheme it would be an offence to act, or employ a person to act, as a second-hand vehicle sales person if the person has been convicted of an indictable offence of dishonesty or, within the past 10 years, 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 salespersons for unlawful, improper or 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 regulated occupation. The responsibility for determining claims on the second-hand vehicles compensation fund (the fund) is transferred from the Magistrates Court to the Commissioner for Consumer Affairs. The fund is created under the act and administered by the Commissioner for Consumer Affairs. Dealers pay an annual contribution to the fund of an amount prescribed by regulation. Payments are made out of the fund to compensate consumers who suffer losses arising from the purchase of second-hand vehicles in circumstances where the loss cannot be recovered from the dealer because, for example, the dealer has died, disappeared or become insolvent. The types of loss covered by the fund include costs of repairing vehicles under the dealer's statutory duty to repair and failure by the dealer to pay out a prior loan over the vehicle. Currently, consumers may apply to the Magistrates Court for determination of a claim on the fund. Transferring responsibility for determining fund claims to the commissioner would have the following advantages: it would be faster and cheaper for consumers. Government fund administration costs are paid from the fund in any event, and may reduce given that the commissioner is currently represented by the Crown Solicitor in Magistrates Court fund claim actions; it would free up the Magistrates Court for other matters; and it brings the claim process into line with claims on the agents indemnity fund under the Land Agents Act, which are determined by the commissioner. The bill will allow the Second-hand Vehicles Compensation Fund to be used to fund: prescribed education programs for the benefit of consumers or dealers; investigating compliance with the act; the costs of disciplinary proceedings and prosecuting offences under the act; and conciliation of disputes between purchasers and dealers relating to the dealer's duty to repair. I commend the bill to members, and I seek leave to have the explanation of clauses inserted in Hansard without my reading it. Leave granted. Explanation of Clauses Explanation of Clauses Part 1—Preliminary 1—Short title This clause is formal. 2—Commencement The date for commencement of the measure is to be fixed by proclamation. 3—Amendment provisions This clause is formal. Part 2—Amendment of Second-hand Vehicle Dealers Act 1995 4—Amendment of section 3—Interpretation This clause inserts some new definitions. Close associate is defined by reference to section 3A. The cooling-off period in relation to a contract for the sale of a second-hand vehicle is the period commencing when the contract is made and ending at the conclusion of the second clear business day following the day on which the contract is made. Offer for sale includes exposure for sale, an invitation to treat (ie, an invitation to another to make an offer) and the publishing, or authorising the publication, of an advertisement. A salesperson is a person who does any of the following for or on behalf of a dealer: buys or sells second-hand vehicles; induces or attempts to induce, or negotiates with a view to inducing, a person to buy or sell a second-hand vehicle; performs a function of a kind prescribed by regulation. The definition of dealer is amended so that it refers to buying second-hand vehicles, and the definition of sell is amended to make it clear that 'sell' includes exchange. 5—Insertion of section 3A This clause inserts section 3A, which provides that two persons are close associates if any of the following circumstances apply: one is a spouse, domestic partner, parent, brother, sister or child of the other; they are members of the same household; they are in partnership; they are joint venturers; they are related bodies corporate; one is a body corporate and the other is a director, manager, secretary or public officer of the body corporate; one is a body corporate (other than a public company whose shares are quoted on a prescribed financial market) and the other is a shareholder in the body corporate; one is a body corporate whose shares are quoted on a prescribed financial market and the other is a substantial shareholder (within the meaning of the Corporations Act 2001 of the Commonwealth) in the body corporate; one has a right to participate (otherwise than as a shareholder in a body corporate) in income or profits derived from a business conducted by the other; one is in a position to exercise control or significant influence over the conduct of the other. 6—Amendment of section 4—Application of Act As a consequence of this amendment, Part 3 Division 1 Subdivision 3 of the Act, which sets out the cooling-off rights of a purchaser, does not apply to a sale of a second-hand vehicle by a dealer to a credit provider on the understanding that the vehicle will be sold or let on hire to a third person. 7—Amendment of section 7—Dealers to be licensed The maximum penalty for carrying on business as a dealer without a licence is increased from $20,000 to $100,000. 8—Amendment of section 13—Incorporated dealer's business to be properly managed and supervised The maximum penalty for failing to ensure that a business is properly managed and supervised by a licensed dealer who is a natural person is increased by this clause from $20,000 to $100,000. 9—Insertion of section 13A Proposed section 13A provides that it is an offence for a dealer to employ a person as a salesperson unless the person has not been convicted of an indictable offence of dishonesty and has not, during the period of ten years preceding the employment, been convicted of a summary offence of dishonesty. Also, a dealer must not employ a person who is suspended from practising or carrying on an occupation, trade or business. The maximum penalty is a fine of $100,000. The proposed section also prohibits a person from acting as a salesperson unless the person— has not— been convicted of an indictable offence of dishonesty; or during the period of 10 years preceding the employment, been convicted of a summary offence of dishonesty; and is not suspended or disqualified from practising or carrying on an occupation, trade or business. If a person is employed or acting as a salesperson immediately before the commencement of the new section, the prohibition against employing the person as a salesperson, or acting as a salesperson, if the person is convicted, disqualified or suspended will only apply in relation to a conviction, disqualification or suspension that occurs after the commencement. 10—Amendment of section 14—Registration of dealer's business premises This clause increases the penalty for carrying on business as a dealer at premises that are not registered from $2,500 to $5,000. The expiation fee is increased from $105 to $315. A similar amendment is made in respect of the offence of failing to notify the Commissioner within 14 days of ceasing to carry on business at registered premises. 11—Insertion of heading to Part 3 Division 1 Subdivision 1 Part 3 Division 1 is to be divided into three Subdivisions. This clause inserts a heading to Subdivision 1. 12—Amendment of section 15—Application of Division Section 15 provides that Division 1 of Part 3 does not apply to the sale of a second-hand vehicle by auction or the sale of a second-hand vehicle to a dealer. An exception is made for section 17. This clause makes a consequential amendment to section 15. The effect of the amendment is that section 18E, which is a new section, will apply to sales to which Division 1 does not otherwise apply. Section 18E deals with the options for the purchase of vehicles subject to a contract of sale. 13—Insertion of heading to Part 3 Division 1 Subdivision 2 This clause inserts a heading to Subdivision 2 of Part 1. 14—Amendment of section 16—Notices to be displayed This clause increases a number of penalties relating to notices dealers are required to display. References to 'exposure of sale' are also deleted by this clause because the definition of offer for sale, inserted by clause 4, makes it clear that an offer for sale includes exposure for sale. 15—Amendment of section 17—Form of contract Section 17(1) lists certain requirements in relation to contracts for the sale of second-hand vehicles. As a consequence of the first amendment made by this clause, such a contract will, if subject to a cooling-off period, be required to set out when the cooling-off period will expire in addition to other prescribed information. Other amendments to section 17 increase penalties and expiation fees relating to requirements in respect of contracts for sale. 16—Amendment of section 18—Notices to be provided to purchasers of second-hand vehicles This clause increases the maximum penalty for failing to provide certain notices to the purchaser of a second-hand vehicle. The penalty is increased from $2,500 to $5,000. 17—Insertion of Part 3 Division 1 Subdivision 3 This clause inserts a new Subdivision in Part 3 Division 1. Subdivision 3—Cooling-off 18A—Interpretation Section 18A provides a definition of the term approved form, which appears only in Subdivision 3 and means a form approved by the Commissioner. 18B—Cooling-off Section 18B deals with the cooling-off rights of purchasers. The section applies to contracts for the sale of second-hand vehicles entered into following the commencement of the section, other than contracts for the sale of a vehicle of a prescribed class or in prescribed circumstances. A purchaser under a contract to which the section applies may rescind the contract by giving the dealer written notice of his or her intention not to be bound by the contract before the end of the cooling-off period. The purchaser cannot be required to make a payment in respect of the sale before the expiration of the cooling-off period, other than payment of a deposit towards the contract price of the vehicle that does not exceed 2% of that price or $100, whichever is the lesser. If a contract is rescinded, the purchaser is entitled to the return of money paid under the contract. However, the dealer may retain money paid by way of deposit. If the purchaser enters into a credit contract (that is, a contract for the provision of credit) in connection with the purchase— if the contract for the purchase of the vehicle is rescinded—the credit contract is void and any associated mortgage or other security taken by the credit provider is discharged; and if the contract for the purchase of the vehicle is not rescinded—the credit contract does not take effect until— the purchaser waives his or her right to a cooling-off period in relation to the contract for the purchase of the vehicle (this can be done under section 33); or if the right to a cooling-off period is not waived—the expiration of the cooling-off period. 18C—Legal title to vehicle remains with dealer during cooling-off period Legal title to a vehicle under a contract to which section 18B applies does not pass from the dealer to the purchaser until the cooling-off period has expired. The dealer is entitled to retain possession of the vehicle during the cooling-off period but must allow the purchaser reasonable access to the vehicle for the purpose of test driving or inspecting it. The vehicle may not be driven by a party more than 100 kilometres during the cooling-off period. The dealer is required to ensure during the cooling-off period that the vehicle is roadworthy, insured against loss or damage and is registered. 18D—Trade-in vehicles The purchaser is to retain possession of any trade-in vehicle during the cooling-off period. Details of the condition of the trade-in vehicle at the commencement of the cooling-off period are to be recorded. Legal title to the trade-in vehicle does not pass to the dealer until the expiration of the cooling-off period. If the vehicle is damaged during the cooling-off period, the dealer may rescind the contract for the sale of the vehicle (and any associated contract). If the contract for the sale of the vehicle is rescinded, any associated contract entered into by the purchaser for the provision of credit is void ,and any associated mortgage or other security taken by the credit provider is discharged. 18E—Option to purchase vehicle subject to contract for sale Section 18E prohibits a dealer from, during the cooling-off period in relation to a contract for the sale of a second-hand vehicle, selling or offering for sale the vehicle or an interest in the vehicle. However, the dealer may sell or offer for sale an option to purchase the vehicle in the event that the contract for the sale of the vehicle is rescinded. The dealer cannot offer for sale more than one option. The maximum penalty for a contravention of, or failure to comply with, this provision is a fine of $20,000. If a dealer proposes to grant an option to a person to purchase a second-hand vehicle during the cooling-off period in relation to a contract for the sale of the vehicle, the dealer— may require the person to pay a deposit towards the proposed contract price of the vehicle that does not exceed 2% of that price or $100, whichever is the lesser; and must provide the person with a notice in the approved form— advising that the vehicle is subject to a contract for sale and the person will only be entitled to purchase the vehicle if the contract is rescinded; and containing other prescribed information. The maximum penalty for a contravention of, or failure to comply with, this provision is a fine of $5,000. 18—Amendment of section 20—Notices to be displayed in case of auction 19—Amendment of section 21—Notices to be provided to purchasers of second-hand vehicles 20—Amendment of section 22—Trade auctions These clauses increase the maximum penalties that apply in respect of various offences. Where an expiation fee is included in a provision, the fee is also increased. 21—Amendment of section 26—Interpretation In Part 5, a reference to a salesperson includes a reference to a former salesperson. 22—Amendment of section 27—Cause for disciplinary action This clause amends section 27 so that there is proper cause for disciplinary action against a salesperson if the salesperson has acted unlawfully, improperly, negligently or unfairly in the course of acting as a salesperson. 23—Amendment of section 31—Disciplinary action The maximum fine that can currently be imposed by the District Court where there is proper cause for disciplinary action is $20,000. This amendment increases the maximum to $100,000. 24—Amendment of section 32—Contravention of orders This clause increases the maximum penalty for contravening or failing to comply with a condition imposed by the District Court. The maximum penalty is increased from $35,000 or imprisonment for six months to $175,000 or imprisonment for 1 year. 25—Amendment of section 33—No waiver of rights Section 33(2) provides that a person of or above the age of 18 years may waive a right conferred by the Act in connection with the purchase of a second-hand vehicle. Under the section as amended by this clause, it will be an offence for a dealer to induce or attempt to induce a person to waive his or her right to rescind a contract for the sale of a vehicle during the cooling-off period. If a dealer is found guilty of this offence, a person who has suffered loss or damage as a result of the offence may apply to the Magistrates Court for an order that the dealer compensate the person. The regulations may require a prescribed person or body to report to the Minister on the extent to which rights conferred by the Act have been waived under section 33. 26—Amendment of section 34—Interference with odometers prohibited 27—Amendment of section 41—False or misleading information 28—Amendment of section 42—Name in which dealer may carry on business These clauses increase various penalties and expiation fees. 29—Amendment of section 50—Evidence This clause amends the presumption set out in section 50(1) of the Act that a person who has sold, or offered or exposed for sale, four or more second-hand vehicles during a 12 month period will be presumed (in the absence of proof to the contrary) to have been a dealer during that period. The section as amended extends the presumption to the purchase, as well as the sale, of second-hand vehicles. The presumption is also extended to the purchase and sale of second-hand vehicles by close associates of a person. If a person and another person who is a close associate of the person buy or offer to buy, or sell or offer for sale, an aggregate of at least six second-hand vehicles during a 12 month period, the person and the close associate will both be presumed to have been dealers during that period (in the absence of proof to the contrary). A further presumption is added to section 50(1). If the registration of a second-hand vehicle is transferred from one person to another, the transferor will be presumed to have sold the vehicle to the transferee, and the transferee will be presumed to have bought the vehicle from the transferor. 30—Amendment of section 53—Regulations This clause amends the regulation making power so that regulations can be made requiring salespersons to comply with a code of conduct. The maximum penalty that can be imposed for contravention of, or non-compliance with, a regulation is increased from $2,500 to $5,000. The maximum expiation fee is increased from $210 to $315. 31—Amendment of Schedule 3—Second-Hand Vehicles Compensation Fund Schedule 3 deals with the Second-hand Vehicles Compensation Fund. The Schedule is amended so that the Commissioner for Consumer Affairs, rather than the Magistrates Court, will be responsible for authorising payments from the Fund. A number of new provisions are also added to the Schedule. These provisions provide for the following: a claim for compensation is to be made to the Commissioner in a manner and form determined by the Commissioner; the personal representative of a claimant (including a deceased claimant) is entitled to make the claim on behalf of the claimant or the claimant's estate; the Commissioner may require a person making a claim to furnish further information or to verify, by statutory declaration, information furnished for the purposes of making or establishing a claim; the Commissioner must, on receipt of a claim for compensation— give the claimant and the dealer concerned written notice of the claim; and allow the claimant and the dealer a reasonable opportunity to appear before the Commissioner personally or by representative to make submissions as to the claim; the Commissioner must on making a determination on a claim, give the claimant and the dealer written notice of the determination. A new appeal provision is also inserted. Clause 2A provides that the claimant or dealer may appeal to the District Court within three months after receiving notice of the Commissioner's determination. New clause 2B provides that, in determining a claim for compensation, any possible reduction to which the claimant's entitlement may be subject because of insufficiency of the Fund is to be disregarded. Clause 3(2) of the Schedule lists the amounts that are to be paid out of the Fund. The list as expanded by this clause will include the following: amounts authorised under the Schedule; expenses incurred in administering the Fund; the costs of investigating compliance with the Act or possible misconduct of dealers or salespersons; the costs of conciliating disputes; the costs of disciplinary proceedings; the costs of prosecutions for offences; amounts, approved by the Minister, to be paid towards the cost of prescribed educational programs conducted for the benefit of dealers, salespersons or members of the public; amounts required to be paid into the Consolidated Account in accordance with clause 3. Schedule 1—Related amendment Part 1—Amendment of Magistrates Court Act 1991 1—Amendment of section 3—Interpretation This clause makes a related amendment to the definition of minor statutory proceeding in section 3(1) of the Magistrates Court Act 1991. This is to ensure that proceedings under section 33(5b) of the Second-hand Vehicle Dealers Act 1995 are minor statutory proceedings for the purposes of the Magistrates Court Act 1991. Under section 33(5b), which is new, a person who has suffered loss or damage as a consequence of being induced by a dealer to waive his or her right to rescind the contract may, if the dealer has been found guilty of the offence set out in subsection (5a), apply to the Magistrates Court for an order that the dealer provide compensation for the loss or damage. Debate adjourned on motion of Hon. J.M.A. Lensink.