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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2009-07-16 Daily Xml
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SECOND-HAND VEHICLE DEALERS (COOLING-OFF RIGHTS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 14 July 2009. Page 2843.)

The Hon. R.L. BROKENSHIRE (17:10): I rise to advise the council that Family First supports the principles of what the government is intending to do here, because one of our important legislative regulatory processes in the parliament is to ensure the protection of consumers wherever possible. We are certainly supportive of the basic principles of the bill. I will speak briefly to the bill and then make some comments in conclusion.

The bill restricts the right for people previously convicted of indictable dishonesty offences to serve as salespeople. We agree with that gesture, and I note these provisions are more generous than those provisions for second-hand dealers and pawnbrokers who cannot even have committed a summary offence of dishonesty. Our comment is to note that maybe more than just indictable offences of dishonesty (we presume a reference to part 5 of the Criminal Law Consolidation Act) could have been considered. Possibly, part 7 of that act could have also been included, being offences against public order, which, to a large extent, involve dishonesty or attempts to cover up illegal behaviour—for instance, one would be bribing a person in public office or abusing public office.

A separate question arising from the discussion on who is appropriate to be a dealer is how a person conducts their business. The conventional way, of course, is to run a car yard and customers come to the yard to inspect cars. I am concerned that, whilst these provisions are being made for licensed dealers, we seem to be seeing more and more de facto car yards set up on every other corner of a main road across the whole metropolitan area. Sadly, there is no provision to address any issues with respect to the sale of those vehicles, whereas the licensed people who are genuinely employing have warranties and a lot of other overheads and are strong contributors, through motor trades and the associated industry sector, to our economy.

I come now to the most contentious aspect of this bill, that is, the cooling off rights provisions. I will start by repeating a comment I made during my speech on the Statutes Amendment and Repeal (Fair Trading) Bill. I asked where the evidence base was for the original provisions concerning recreational liability. The minister, in her former capacity as substance abuse minister, often proclaimed that the government's approach was evidence based.

So, here we ask: what was the evidence base for the cooling off changes? Does the minister have some statistics on calls or complaints about second-hand vehicle dealers to the Office of Consumer and Business Affairs or other concerns expressed about second-hand vehicle dealer practices? If the minister does have anything, we would appreciate some information on that during the committee stage. Failing that, I presume that this is more of a uniformity measure than anything else.

The Motor Trade Association of South Australia made a submission that a deposit should be the greater of $100 or 1 per cent, rather than the lesser of 100 per cent or 2 per cent. If a person is in the market to buy a $40,000 vehicle, the deposit necessary would be $100 on the government's part and in the MTA's case it would be $400. For a $100,000 vehicle, the deposit would be $100, if the government has its way, and $1,000 under the MTA's model.

On one level, we can understand the logic that a person in the market for a $100,000 vehicle ought to be good for a $1,000 deposit, and the $100 deposit looks a bit silly in that instance. We ask the government whether it thinks that the $100 deposit is acceptable for what we could call the prestige vehicle sale situation. We have some sympathy for the MTA's position, having regard to the prestige vehicle scenario in particular.

That brings me to the other issue of the deposit of up to 10 per cent that is current industry practice. The MTA is asking to be able to retain at, say, the start of the cooling-off period an amount in addition to the non-refundable deposit and, of course, that deposit must be refunded if the consumer cools off.

Family First agrees with the Hon. Michelle Lensink that subsections (5) and (6) of new section 18B of the bill read a little confusingly with respect to whether a refundable deposit can be taken in addition to the non-refundable deposit. While subsection (5) provides that you can, subsection (6) speaks of refunding moneys paid under the contract. What moneys were contemplated under this clause?

On balance, it would seem that an additional refundable deposit cannot be sought by dealers, and that leaves us with the likelihood that dealers cannot continue their current practice of requiring a deposit of up to 10 per cent. I ask the minister to take this on notice, to be fair, and tell us during the committee stage or at an appropriate time why that policy decision has been taken and what evils were occurring with up to 10 per cent deposit required.

In relation to clause 18D, I note that there are provisions there to protect the purchaser if their trade-in vehicle is damaged, but I cannot see what would happen if a vehicle that is taken on a test drive is damaged or even lost at that time. Is the dealer entitled to claim money out of the deposit for repairs to the vehicle?

With respect to clause 25, I wonder why a prospective purchaser is required to apply for compensation from a dealer who induced a prospective purchaser into a contract. Why cannot the court simply make an order—in sentencing—for the purchaser to be compensated? The government should perhaps look at that. I share the opposition's curiosity about how 'inducement' will be interpreted. Some guidance would be useful on the record not only for the parliament but also for the courts in applying that provision.

I now want to speak briefly to the Hon. Ann Bressington's amendment and the MTA's statements about that amendment in correspondence I have seen today. It asked why inspections are not required of private sellers but only dealers, as per the Hon. Ann Bressington's amendment. The latest figures I could find from the MTA's 2006 election policy document was that 60 per cent of sales occur on the private market, which accounted then for about 70,000 sales per annum. It is a fair question, as one would think the greater risk to road users is posed by private sales rather than sales from dealers. However, I ask the minister whether the public and private inspectorate is ready, or what funding would be necessary for inspections to occur (as the Hon. Ann Bressington proposes or, indeed, as the MTA proposes). We estimate on those figures that there are over 120,000 sales per annum, and I wonder how many inspections occur at present and, therefore, how many more will be required under that measure.

Family First supports inspections of all second-hand vehicles sold, as long as the cost benefit analysis is favourable. I can give the minister some assistance on this by quoting from the MTA's 2006 policy document and noting that the ACT, Queensland and Victoria at that time had, and I assume still have, inspection regimes at change of ownership. New South Wales, interestingly, requires inspections annually. We are not advocating that but, given some of the media comment and responses from the Minister for Road Safety and other ministers in recent times about the number of unroadworthy vehicles we are seeing in South Australia, I think this is an issue that needs to be addressed. The MTA said at the time, and it is worth noting:

A Federal Office of Road Safety study concluded that the most effective means of limiting vehicle emissions is to ensure they are in good tune and repair. The most recent research on vehicle inspections and the attitude of the general public comes from McGregor Tan Research Omnibus suggesting 48 per cent were in favour of a roadworthy inspection prior to change of ownership while 24 per cent believed an annual inspection should occur and 23 per cent consider random vehicle inspections to be adequate. In consideration of road safety, the environment and consumer protection (knowledge of legal and roadworthy vehicle purchase) 64 per cent of those surveyed believe 'change of ownership' roadworthy inspections will take unsafe cars off the road, 34 per cent believe the inspections will improve their knowledge about the car being purchased whilst only 7 per cent could see no benefit.

So there are some arguments on the merits of having mandatory inspections, and that demonstrates the merits in the concept of the Hon. Ann Bressington's amendment, but it may well fall short of the mark given the significant percentage of sales that occur on the private market. However, we ask the minister to give us some further information on what that might cost and what further benefits might arise from dealers, if not all vendors, needing to refer their purchases to a vehicle inspection.

On the question relevant to the functioning of the fund, the wording of which is struck out in this bill, I ask: what recent prosecution activity has there been of errant or fraudulent dealers; and what penalties have been handed out to convicted offenders?

Before concluding, I ask that the minister state to the parliament answers to the questions raised by the MTA in its letter to her dated 13 July 2009 that have arisen in my contribution during the second reading thus far.

In closing, Family First congratulates the government again for the intention of this initiative—to protect consumers—and we also congratulate the MTA for the constructive way in which it is working on this bill; clearly, it sees merit in this as well. However, it is a balance between protecting consumers and ensuring we have a viable motor industry. For those reasons, we indicate support for the second reading. However, we also indicate that we may be looking to support amendments during the committee stage.

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) (17:23): By way of concluding remarks, I thank all those honourable members who contributed to the second reading debate. The main features of this bill are the introduction of a two-day cooling off period for the sale of second-hand vehicles by a dealer; the introduction of a negative licensing system for salespersons; and changes to the second-hand vehicles compensation fund.

The bill has been developed with a view to promoting the protection of purchasers of second-hand vehicles in a way that does not unduly burden the industry. There has been feedback from the industry about the bill, and I have listened very closely to those concerns and have attempted to accommodate those wherever possible. I take this opportunity to comment on some of those issues raised in debate and thank those individuals for their very constructive role in consideration of those matters and amendments to date.

In relation to the non-refundable deposit, the introduction of a cooling off period is intended to protect consumers. If a consumer elects to exercise their right, the dealer will be entitled to keep the deposit; this must not exceed 2 per cent of the price of the vehicle or $100, whichever is the lesser. The non-refundable deposit aims to cover any administrative or other expenses associated with the sale incurred by the dealer. The deposit is not intended to be a penalty or deterrent for the consumer to exercise his or her cooling off right and is a fair and adequate amount for both parties. The bill provides that the dealer may ask for a deposit of not more than 2 per cent of the price of the vehicle or $100, whichever is the lesser, prior to the expiration of the cooling off period. Accordingly, if the cooling off period has been waived or has expired, the dealer may seek a higher deposit.

The suggestion has been made that the dealer should be able to ask for a larger deposit at the commencement of the cooling off period and, if the purchaser decided not to go through with the purchase, the non-refundable deposit would be retained by the dealer and the rest of the deposit would be returned to the purchaser. This suggestion is not supported as it would be administratively inefficient and create a burden for the purchaser.

For instance, if the purchaser decides not to go through with the purchase, the purchaser would have to take active steps to ensure that the dealer refunds the remainder of the deposit. They would have to return to the dealership or the yard to get back their refundable part of the deposit, whereas the non-refundable part of the deposit for the cooling off period is simply forfeited if they choose not to take up the offer of the vehicle. It is a risk that the dealer may not refund the money in a timely manner, and it is also an administrative step that is not necessary given that the dealer would have to return that part of the deposit anyway.

The waiver form for the cooling off period will be prescribed in the regulations, and it is intended that the waiver be in a very simple format. I have given a commitment that the industry will be consulted in the development of that waiver form.

As to auctions, the act currently permits auctioneers to sell vehicles by negotiation immediately after conducting an auction without the requirement to be licensed. However, selling vehicles by fixed price before an auction is not covered by this exemption; therefore, auctioneers doing this would most likely be operating as unlicensed dealers. If anyone has concerns about this practice occurring, they should contact the Office of Consumer and Business Affairs to enable us to investigate those practices and stop them from occurring.

The industry has made the suggestion that a definition of auction to allow sales only at the fall of the hammer should be included in the act in order to address the issue of auctioneers selling vehicles before or after auctions. An auction is commonly defined as a public sale at which goods or property are sold to the highest bidder. There is no need to include a specific definition of a word with a commonly understood meaning.

If the act is amended to restrict unlicensed auctioneers to conduct sales only at the fall of the hammer, then auctioneers will either, first, not be able to sell vehicles other than to the highest bidder at a public auction or, secondly, be required to hold a dealer's licence for post-auction sales which will then provide the same protections and obligations as sales by dealers. Such a change would alter the whole nature of the auction process, which currently contemplates a degree of post-sale negotiation (albeit limited) between the auctioneer and purchaser, similar to that in the real estate industry. Currently, sales conducted immediately following an auction are treated as sales in the same terms as auction sales—that is, the purchaser is not entitled to a cooling off period and the dealer has no duty to repair. I have been advised by parliamentary counsel that their view is that it is not necessary to define the terms 'auction' or 'immediately after auction' as the ordinary meaning of both 'auction' and 'immediately' are widely understood, and there is no desire to change this section of the act.

In relation to what is an inducement for the purposes of inducing a consumer to sign a waiver of cooling off rights, simply informing the purchaser of his or her rights to waive would not be considered an inducement, nor is advising the purchaser that he or she may take possession of the car immediately (subject to payment) if they waive their cooling off rights. However, offering an incentive such as a discount to motivate or persuade the purchaser to waive his or her right, or engaging in conduct thought to influence the consumer, should be construed as inducement. For instance, throwing in an extra pair of tyres or floor mats would be considered an inducement. Whether or not the dealer induced the purchaser to waive his or her cooling off period is a question of fact depending on the circumstances of each transaction and would be determined by a court.

The presumption regarding a person and his or her close associate who buys or sells six or more vehicles in a 12 month period is specifically targeted at backyard dealers. This presumption is intended to assist the commissioner in prosecuting unlicensed or backyard dealers. The presumption is rebuttable and simply acts as an aid of proof. For example, when prosecuting an unlicensed dealer, the fact that a person and their associate bought or sold six or more vehicles in a 12 month period makes them a dealer; however, the defendant may rebut the presumption by providing evidence to the contrary to show that the vehicles were bought and/or sold for private use or other than in the course of the business of selling second-hand vehicles.

This presumption is not intended to catch instances such as fleet transactions or families, particularly families where there may be a number of teenagers who buy and sell more than six vehicles within a 12 month period, who can clearly demonstrate that they are not engaging in backyard dealing. The commissioner has the discretion not to prosecute and/or persons may be able to easily establish that despite the number of vehicles bought and sold they were not otherwise acting as a dealer.

The existing presumption for an individual has also been amended to include 'buy'. The presumption does not mean that a person can carry on the business of a dealer without a licence, provided they buy or sell up to only four vehicles. It creates a presumption that allows the commissioner to rely on evidence of four sales to prove that the person was a dealer. In relation to the situation where fraudulent documents are used by potential salespersons when applying for employment, I refer to section 45 of the act, which provides the following general defence:

…if the defendant proves that the offence was not committed intentionally and did not result from any failure on the part of the defendant to take reasonable care to avoid the commission of the offence.

In this circumstance, the dealer is covered by the defence provided that he or she can satisfy the court that he or she took reasonable care to ensure that the person employed had not been convicted of an indictable offence of dishonesty, or, during the period of 10 years preceding the employment, had not been convicted of a summary offence of dishonesty, and is not suspended or disqualified from practising or carrying on an occupation, trade or business under the law of this state, the commonwealth, or other state or territory of the commonwealth.

After consultation with the industry, I have decided to amend the bill in another place in relation to the second-hand vehicles compensation fund. The amendment proposes that the Magistrate's Court should still determine claims on the compensation fund. It is also proposed to expand the use of the compensation fund only to prescribed education programs and investigating compliance with the act or possible misconduct of dealers or salespeople.

The industry has indicated that it accepts these changes, and I confirm that the industry will be consulted in the development of prescribed educational programs. I thank members for their very valuable contributions and look forward to this matter being dealt with expeditiously in committee.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. J.M.A. LENSINK: In relation to backyarders, I appreciate that, in the definition of those who would need to be registered, the number of transactions is reduced from six to four. This is something I asked about in my briefing with the department as well, but I am not clear on the response. How does the government intend to detect some of these sales, because some will be between close associates and so forth?

I imagine that there needs to be some beefing up of the detection system rather than being reliant, for want of a better word, on people who dob them into the Office of Consumer and Business Affairs. Does the government have any intention of implementing some sort of additional software through the Office of Motor Registration, similar to the way the commonwealth has cracked down on Centrelink fraud, by improving the flow of information from an agency such as the Office of Motor Registration that might help detect some of these transactions, and pass them on to the Office of Business and Consumer Affairs to highlight some of these activities? I just wonder whether the government has any program that would actually improve the amount of information it is able to use in order to detect such sales.

The Hon. G.E. GAGO: I have been advised that we do not contemplate any new systems because we believe our current systems are adequate. Some of the measures that are taken to assist with monitoring compliance include the compliance team officers regularly checking advertisements in newspapers, and that also includes online advertising. For instance, they look for numberplates that might continue to reappear and also contact phone numbers that might regularly recur as well. They also liaise regularly with Motor Registration in terms of monitoring compliance.

For instance, one of the added protections comes from the fact that if a rego is transferred, it is actually presumed that the vehicle has been bought and sold, so it is monitored in that way as well. So, we believe that that is more than adequate to ensure that compliance is occurring.

The Hon. J.M.A. LENSINK: I thank the minister for those comments. This is probably more of a comment than a question, but I think that there are still some concerns in relation to two of the matters the minister raised in her second reading response. In relation to auctions and the definition as a commonly understood term, I am still getting a sense that that is a rather woolly approach to something that is quite critical to this particular piece of legislation and in relation to land sales, but land sales are not germane to the discussion we are having today.

I note that the minister said that there may be some limited post-auction negotiation immediately after an auction for vehicles which I assume may have been passed in. I still have a sense that it may well be a problem if we continue not to define that in this legislation. That allows room for bracket creep—as I think I described it—and the regulation could become looser and looser as practices change.

This may be a question for Parliamentary Counsel, but my understanding is that the industry practice at the moment is that, at the time of sale, they can currently ask for a deposit of up to some 10 per cent (I think it is usually in the order of about 5 per cent) and that is not, as I read it, in the current act nor in the bill.

If the new act is to be silent on that because there is a reference to a non-refundable deposit, which is explicitly stated as a certain percentage and has a certain limit on it, will it become illegal to request a larger deposit, which is currently industry practice? That is a question that can be taken on notice by the minister, so that she can seek advice from parliamentary counsel. They are two concerns. Because the auction issue falls into clause 4, 'Interpretation', I indicate that I would like a bit more time to discuss this with my colleagues and with industry, if the minister would provide some forbearance on that matter.

The Hon. G.E. GAGO: I have been advised that, in relation to auctions, the legal advice on this has been fairly clear; that is, the issue of concern is not about the definition of either 'auction' or 'immediate'; those definitions are well understood legally and technically. The issue is about the ability to sell post auction and whether or not that requires a dealer's licence.

The current act provides that any sale prior to an auction is illegal; however, it does allow a sale immediately after an auction, and this bill clarifies that. It maintains the status quo in terms of the sale of vehicles prior to an auction which is currently illegal and will remain illegal. However, it will continue to allow for the provision of the sale of a vehicle immediately after an auction.

My sense is that currently there are very few problems in the industry in terms of immediate post-auction activity. I am not aware of any complaints, and if I have received some they are very few. That activity currently does not appear to create any problem to the industry at all. What it seems to be doing is making sale activity sensible. You go along to an auction, particularly a group auction at which vehicles are being auctioned. A person might put in a bid, which fails, but the owner says, 'Oh, well, if they split the difference, if they are prepared to pay 50 bucks more, I'll give it to them.' So, the auction has been completed, but immediately after there is a small window of opportunity for a transaction to occur. To stop that quite sensible, I think, and reasonable activity which allows industry to operate in a reasonable way, where there does not appear to be any problem occurring currently in the industry in relation to that activity, would seem to be fairly heavy-handed when there is little to indicate that it is needed.

I am not too sure whose interests we would be protecting by requiring that there be no activity that could occur after the close of hammer. I am not too sure whose interests we are concerned about and who we think is going to benefit by being more heavy-handed when, as I said, it does not appear to be creating any significant problems that I am aware of, unless someone is not telling me something, but it does not appear to be causing any undue problems in the industry, except helping people buy vehicles and get on with it.

In relation to the deposit, the advice is that if a person chooses to opt for a cooling-off period then the dealer can only apply the $100 or 2 per cent, whichever is the lesser. It would be illegal for the dealer to include a greater deposit than that—it does not matter if it is refundable or non-refundable. So, that would become illegal.

If a person chose to forfeit their right to a cooling-off period then the dealer could apply whatever deposit they felt was reasonable—whatever was in the industry standard. If a person chose to adopt a cooling-off period and at the end of the cooling-off period chose to then proceed with the deal to purchase a vehicle, the dealer could then apply an additional deposit; again, whatever is within the industry standard. I hope that provides some clarity.

The Hon. J.M.A. LENSINK: I thank the minister for that response. In relation to the window of opportunity, as she defined it, relating to negotiations after the fall of the hammer, does the minister have a view as to what sort of time period that generally is?

The Hon. G.E. GAGO: Is the honourable member asking me what the definition of 'immediate' is?

The Hon. J.M.A. LENSINK: Yes.

The Hon. G.E. GAGO: The general understanding of 'immediate' is that which is in the dictionary, which means without time lapsing—I am advised, of course; I do not have a dictionary in front of me—straightaway, and that—

The Hon. J.S.L. Dawkins: Tomorrow, today; what?

The Hon. G.E. GAGO: I am letting you know what the dictionary definition is. The test of that, whether that would constitute five minutes, 10 minutes, a day or two days, would be something that would be determined by the courts. So, they would determine whether that period was within the reasonable definition of what is commonly known and understood as immediate or not. Obviously, I am not a lawyer, but, clearly, it would mean that it is conducted in a very timely way in relation to that auction.

The Hon. J.M.A. LENSINK: Arising from that, can the minister advise, first, whether that has actually been tested in the courts, and, secondly, whether it is something that OCBA's officers monitor in relation to auction sales in South Australia?

The Hon. G.E. GAGO: I do not have the answer in relation to the number of breaches and whether it has been tested in court. I can find out whether there are any examples. As I have already stated, to the best of my knowledge, I am not aware of complaints about post-auction activity. It has not been brought to my attention in the past. There might be something on record but, as I said, it is not something that has been identified as being problematic. However, I will attempt to find out whether there are any numbers and bring that back.

The Hon. J.M.A. LENSINK: There is also the matter of whether OCBA's officers monitor that in South Australia, and whether it is something that they actively pursue as a matter of concern or not. The minister may not have that information to hand, but if she could bring back a response I would appreciate it.

The Hon. G.E. GAGO: Currently, it is a legal activity. I have been advised that OCBA would be involved only if there was a complaint received that raised concerns about the duration being too long. To the best of my knowledge, we have not received complaints but, as I said, I will double-check that and, if there is any information, I will bring it back.

Progress reported; committee to sit again.

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