Consumer Protection (Definitions ofGoods and Services) Bill

The National Party in Opposition will be strongly opposing Part 3. It deals with the Fair Trading Act, an amendment to which we debated in Committee prior to going into Committee on this bill. Part 3 of the Consumer Protection (Definitions of Goods and Services) Bill proposes to include gas, electricity, water, and computer software as goods for the purposes of the Fair Trading Act.

Just as my colleague the Hon Dr Smith was able to ridicule the inclusion of gas, water, and electricity in the Consumer Guarantees Act through reference to the fact that there would be guarantees of “spare parts” for water and “title” for water and electricity, similarly we should raise concerns about what is being proposed in this bill. This bill proposes that the provisions of the Fair Trading Act, which refer to the safety of goods, simply cannot be sustained in respect of electricity and gas. Electricity and gas are inherently unsafe substances or matters, and it is only through an appropriate use of the equipment delivering electricity or gas that these goods can be rendered safe. So for the Fair Trading Act to have to cover gas and electricity, and the requirement therein relating to level of safety, is quite ridiculous. I agree with the concerns raised with the select committee by the New Zealand Law Society with regard to this. The society raised concerns only in respect of electricity, but I think it is just as relevant to gas.

What is foolish about this bill also, is the requirement relating to the quality of supply, etc. We simply cannot provide the perfect electricity or the perfect gas on a continuous basis. With continuous supply, as one would understand, there are no interruptions and no difficulties with the voltage. But the fact is that these will be issues with electricity from time to time, and to have any guarantees or warranties provided is foolish.

The National Party in Opposition also says to the Government that the Government does not know the cost of what it is proposing to do, because this bill was presented to Parliament without a regulatory impact statement or a compliance cost statement, both of which are required under Cabinet guidelines and neither of which was provided to the Commerce Committee. We raised the matter of costs on business and consumers as legitimate issues, because we have been able to reveal to the Committee tonight that Local Government New Zealand says that councils are planning to spend $400 million over the next 5 years to get water quality up to a standard that is acceptable to be covered by the Consumer Guarantees Act. Earlier today, we tabled a report that shows that it would cost $750 million for all councils to upgrade their water supplies. The point is that the Government did not even know. The Minister told us to prove the figures, and we tabled them. The Minister did not even know.

The previous bill, the Fair Trading Amendment Bill (No 3), sat around in the select committee for years and took less than an hour of consideration. This bill, which did not take much longer for consideration, sat on the agenda for months and months and months. It is now being passed under urgency, and the Minister in the chair, Judith Tizard, cannot even tell us the cost to consumers of those decisions. I alert the Labour members opposite. They should understand that the Hastings City Council is putting $16 million aside to upgrade its water. Palmerston North is putting aside a similar amount, and consumers will pay for all of that.

I am a little surprised that the member is saying that Opposition members have tabled information about the figures quoted in the Chamber, because having looked at the two documents, I cannot see any reference to the figure they mention. However, I do have information from the officials that the $400 million mentioned is the cost, over time, to all local authorities to provide infrastructure to meet the proposed Health (Drinking Water) Amendment Bill over the 5-year lead-in period. So the cost of this legislation could be nothing—because it could be that local authorities are all moving towards their legal responsibility to provide residents with good quality water—or it could be quite large. But we cannot say, because this is about trying to make sure that the responsibility for the standard and service provision falls where it is most sensible for it to fall—with the authority, with the organisation, or with the trader who can actually made a difference to the quality and can make sure that the quality of the service or good is of an appropriate standard.

Anyone can make any legislation sound mad if one chooses to read it in a completely disjointed way, as though members know no more about amendment bills than to read them entirely separately from the substantive Act. The Commerce Committee has looked at this legislation in a great deal of detail. Its members have had excellent advice from the very good public servants who provide it with support, the submissions have been heard, and we need to get on with this legislation. As many Opposition members have noticed, it has been sitting around for a while. It is a wonderful opportunity to give better protection to consumers.

I am sorry that I did not speak earlier, although it would have been out of turn because we have had the benefit of one of the rare contributions from the Minister in the chair, Judith Tizard, and she might have been able to enlighten me as to exactly what is intended by Part 3. It seems to me that it might be one of the only parts of the bill I could favour. Part 3 of the Consumer Protection (Definitions of Goods and Services) Bill merely adds a reference to “personal property of every kind (whether tangible or intangible);” plus an avoidance of doubt provision about water and computer software, to the Fair Trading Act. I am not quite sure exactly what mischief is intended to be dealt with by the reference to “personal property of every kind (whether tangible or intangible);”. Previously the definition of “goods” drew on the very long-tested usage of that term in the Sale of Goods Act. This bill amends section 2(1) of the Fair Trading Act by repealing the definition of the term “goods” and specifically including under paragraph (b) of the new definition: “(i) ships, aircraft, and vehicles: (ii) animals, including fish: (iii) minerals, trees, and crops, whether on, under, or attached to land or not:” I have to assume that each one of those additions represented some case that cast doubt on whether they would have otherwise been included in the definition of “goods”. But to then include paragraph (a), which just about covers everything that is movable and transferable: “personal property of every kind (whether tangible or intangible);”—

💬 Sandra Goudie: Intangible? Wāhi tapu?

It could include intellectual property. The definition includes: “(vi) to avoid doubt ... computer software”. Plainly, they are intending to capture some forms of intellectual property, but what is not clear is just what it is intended to act on and what the mischief is. I do not recall having seen that in the first reading copy of this bill, either. The Minister still retains her three officials, and she has made only two relatively mundane or straightforward contributions during the whole evening. I think it would be helpful to the Committee if she were to explain just why Part 3 is in the bill and what it adds to the Fair Trading Act. I have gone through to try to work out what we are getting by putting in the words: “personal property of every kind (whether tangible or intangible);”. There is case law that already states that shares are goods for the purposes of that Act, so that “choses in action” are specifically dealt with in an earlier part of that Act. They were specifically excluded from the Consumer Guarantees Act for good sound reason, but here it is obvious that they are expected to stay in. I really am at a loss to understand it. I am sure there is a simple reason, but by including intangibles, it does make it very hard to see how some of the assurances of the Fair Trading Act would apply.

I take the simple example of the prohibition on being misleading or deceptive. It is very, very hard not to be misleading, by the test under this Act, when one is selling something as complicated and as puzzling to most people as computer software. The test, of course, is not the reasonably expert user. The test under this Act, at least for some purposes, is actually a kind of fool. The Fair Trading Act does not require that it be deliberately misleading. It is quite sufficient, for found liability, that it be innocently misleading or unintentionally misleading. How, then, will a software manufacturer avoid misleading, for the purposes of the Fair Trading Act, when we who have had much to do with the industry know that it is almost impossible for the promise that they seem to hold out ever to be fulfilled? How many Government information technology contracts have ever been delivered in accordance with the representations made by the software manufacturer? In those circumstances, a sort of disappointed common sense usually prevails, and the purchaser realises that was what was to be expected.

In looking at Part 3, I would like to refer to the intention of the Fair Trading Act, which is to prohibit certain conduct and practices in trade, to provide for the disclosure of consumer information relating to the supply of goods and services, and to promote product safety, and so on and so forth. It is largely related to the contractual arrangements that are entered into.

Section 9 of the current Fair Trading Act sets out the basic concepts that underpin the Act, and it states: “No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” The Act specifically intends to apply to local authorities in the general provision of goods and services in trade. The bill, in clause 11, proposes to amend the Fair Trading Act by substituting a new definition of “goods”, and by inserting a new subparagraph into the definition of “services” so that it will include water and the removal of waste water. Under paragraph (a), in subclause (1), goods are defined as “personal property of every kind (whether tangible or intangible);” and I really wonder what the term “intangible” actually means, because that is a pretty broad term to be used in legislation. One could start considering things like wāhi tapu, religious connotations, and matters of that sort, as the word “intangible” certainly covers that type of subject matter. Clause 11 also inserts subparagraph (vi): “to avoid doubt, water and computer software”.

The questions that are raised with regard to the definition of water, and the proposed amendments to the Consumer Guarantees Act, are applicable here, and we refer members back to those comments. Section 2(1) of the Fair Trading Act will be amended by the addition of new subparagraph (iv) to paragraph (a) in the definition of services. Although the supply of water and waste-water services may be contained in the general definition of “service”, it is curious that water and waste-water services have been specifically included in relation to a contract. That is one of the matters that I have raised consistently as I have spoken here tonight.

💬 Steve Chadwick: Repeatedly.

Absolutely, because the matters around contracts are actually quite substantial. As with the Consumer Guarantees Act, we note the general unsuitability of many of the enforcement provisions and remedies available under the Fair Trading Act, which are set out in Part 5 of the Act. They include the granting of injunctions restraining certain conduct, ordering the disclosure of information or the publishing of correcting statements, declaring that a contract is void, varying a contract, the refund or return of property, damages, repair, and supply of specified services. In that regard, I refer members back to section 31 of the Consumer Guarantees Act, “Guarantee as to price”. I will read out subsection (1) because I think it is very important for local authorities. Subsection (1) states: “Subject to section 41 of this Act, where services are supplied to a consumer there is a guarantee that the consumer is not liable to pay to the supplier more than a reasonable price for the service in any case where the price for the service is not—(a) Determined by the contract;” There is no direct contract between a local authority and consumers. Also, one has to remember that if they do not deem the price to be reasonable, they can refuse to pay, or pay what they consider to be reasonable. When we start having the majority of local authorities charging something like $1.10 to $1.53, as in the case of Waitakere—and I would suggest that $1.53 is a hugely exorbitant price to be paying for a cubic metre of water—and when Watercare Services is charging something like 55c for a cubic metre of water, what is a consumer going to say to a local authority about what is reasonable? Consumers who are getting water supplied by a local authority will be saying: “Hang on a minute.”

I move, That the question be now put.

I rise on behalf of the National Party to address the bill’s definition of goods and services—

💬 David Benson-Pope: The National Party is in Opposition.

The National Party is in Opposition at this point, but that is OK. I rise on behalf of the National Party, in whatever position one wants to put it, to discuss this bill’s definition of goods and services—particularly Part 3, which relates to the Fair Trading Act. Students of the Fair Trading Act will know that it deals with representations made about particular goods and services, as defined by the Act. In particular, it looks at different definitions, but it includes product safety, and it deals with false representations made about a particular product. Members will know that if this legislation is passed into law, it will add to the definition of goods and services, as interpreted by the Fair Trading Act, gas, electricity, water, and computer software.

I want to spend a moment talking about computer software, because not many members have discussed that tonight. As we look at computer software in relation to the Fair Trading Act, let us think about product safety. What aspects of product safety do members think a consumer would be looking for under the new definition of computer software? For instance, if a consumer buys a software package, puts that into his or her hard drive, runs a system for Internet-based trading, and loses money, or if that package does not give the consumer the best and most information available, would he or she have a claim under the Fair Trading Act? That is the international trend in financial services—people are buying financial services online through computer software packages. They are buying stocks, shares, bonds, unit trusts, and funds. They are investing worldwide with computer software packages that will now be covered under the Fair Trading Act, and they will be relying on its definition. I simply put it to the Committee that that will create a great deal of ambiguity, because they will be looking through to the test of reasonableness.

Secondly, I want to look at what might lead to an action of false representation under the Fair Trading Act in respect of gas and electricity. Let us take water as a good example. As water is supplied out of the consumer’s tap, it may fit nicely within a reasonable definition of good usable water. It may be drinkable, fine for the swimming pool or watering the garden, and it might fit all the general criteria, but if a consumer uses that water to irrigate high-quality tomatoes and those tomatoes do not come up to the quality standards, would that be a false representation under the definition provided in the Fair Trading Act?

💬 John Carter: It would.

It would.

💬 Dr Wayne Mapp: There would be only one standard.

That is exactly the point—there would be only one standard of definition. So what might be deemed to be reasonable for one consumer might not be deemed to be reasonable for another consumer. My personal opinion is that there will be a great deal of litigation over the definitions of gas and electricity. Who will bear that litigation? I can see councils being brought into such litigation.

💬 John Carter: Who pays for that?

Consumers pay that through their rates.

💬 John Carter: So they will pay themselves?

They will be charging themselves. Thirdly, I want to look at safety as it relates to electricity. What happens in the example where the 3-year-old goes and puts his or her fingers in a socket and gets an electric shock?

💬 John Carter: The 3-year-old won’t care much about it.

The 3-year-old might not care about it, but the parents will. What is the issue as it relates to product safety for electricity under the Fair Trading Act?

💬 John Carter: The 3-year-old will have a stiff finger.

The 3-year-old will have a very sore finger. The obligation of safety is clearly covered under the Fair Trading Act.

I move, That the question be now put.

I want to carry on with the issue of litigation. When we look at Part 3 in relation to the Fair Trading Act, and the part where it brings in the Consumer Guarantees Act, there are a number of things that that Act supposedly guarantees. There are, for example, “Guarantees as to title”. The other day a constituent up in Northland brought me a case in which, somehow or other, a title had someone else’s name on it. My constituent does not know how it happened, the council does not know, and the deeds people do not know, but it happened. What happens if something is wrong? Who will guarantee that, but, more important, who pays?

Guarantees of acceptable quality, reasonable care, and skilled employment? That is a good, so yes, there is a guarantee under the Act. Is it a service? Yes, it is guaranteed under the Act, but what happens if that service is not provided? Who pays? More important, who pays if there is a dispute, and there will be disputes because of these sorts of definitions? Perhaps the Minister in the chair, the Hon Mark Burton, who will be absolutely familiar with this bill, will want to take a call to explain these very searching questions. There is also the issue of litigation to see whether there is a dispute. Who pays? That is the issue. The real worry with this legislation is the cost that this Government is putting on to consumers—the people it thinks it is protecting. The Government will end up causing the people of this nation huge cost.

“Guarantees as to fitness for particular purpose”—what does that mean? Apparently, it covers a good and a service. That is fine, but how will the Government guarantee fitness for purpose? What if it does not comply? Who pays? If we go back to the supply authority, or the local authority, and they are found not to have come up to the mark and are fined, who pays? It is the consumer who pays. The same people end up paying again. What are we trying to achieve here? We are trying to achieve something for the benefit of the people, but all we are actually doing is loading a lot of costs on to them. I say to the Government that we have to stop this silly nonsense. We have already seen where the Government has taxed, taxed, and taxed. It has got into the habit now, and I suppose it cannot get out of it.

Let us look at the next thing: “Guarantee that goods comply with sample”—what does that mean? Who will guarantee that this Act does what it supposedly does? I ask Damien O’Connor what will happen when someone says: “Hang on, no it doesn’t.” He or she gets into a dispute, goes to a lawyer, and ends up in a court case. Finally, the authority gets fined, but who pays? Not the authority! Of course, in the first place it does, but Damien O’Connor pays through his rates, or through his water supply charges. The same consumer that this bill is supposedly protecting ends up paying the bill. Where is the advantage in that? It is just a silly nonsense. Why would one do it? One goes round in that ever-diminishing circle until one ends up in that place that people should not be in. Maybe that is where this Government is trying to get everybody to end up. It is the old ostrich, head-in-the-sand thing, but in this case the position is different. Nevertheless, that is a real worry.

There is a “ Guarantee as to price” in the Act, so apparently the goods or service we get are meant to be a particular price. [Interruption] It might be a reasonable price, as well, but that is another issue. But then we find that there is a dispute, and here we go again—into litigation. There is an argument, the authority says something is the case, and no it is not. The authority goes to court, loses, and gets fined, and the same people pay.

What really worries me is the principle here. Why are we litigating to put people into cotton wool? There is a real world out there, and people have to live and survive in it. We are constantly trying to stop people getting on with their lives. This is just another example of a Government that somehow or other thinks that people cannot stand up for themselves. I say to this Government, and to the people who may be listening at home on their crystal sets, that they should ask themselves this question: at the end of the day what do we actually get out of this bill? It is not a lot.

I move, That the question be now put.