Consumer Protection (Definitions ofGoods and Services) Bill

The National Party in Opposition is opposed to these amendments to the Sale of Goods Act. The principal amendment—other than the replacement of the word “things” with the word “choses”—is the addition of the words “to avoid doubt, computer software”, by which the Government seeks to say that computer software is a good for the purposes of the Sale of Goods Act. I think we will come across the same problem that we have identified with the other changes to legislation when trying to apply the characteristics of tangible goods to intangible items, such as computer software, electricity, gas, and telecommunications.

I want to alert the Minister in the chair, Judith Tizard, to the fact that I think the Government is making a major blunder in incorporating computer software as a good under the Sale of Goods Act. The reason is that although computer software is often sold with tangible items that are goods—such as instruction books and CDs from which the programme can be transferred to one’s own computer—when it comes to software, a licence is usually purchased; the software itself is not purchased. No one buys Windows 2000; one buys a licence to use it. As such, it should properly be described as the grant of a licence rather than the sale of a good or a service.

There is the potential for confusion here, because it boils down to the property rights of the purchaser. The Sale of Goods Act makes it quite clear that one actually owns what one sells. But although we might say that buying a suite of Windows 2000 programmes is a good, and therefore has to be treated as a good, we are not buying Windows 2000; we are buying a licence to use Windows 2000. Even though we are passing an amendment that includes the words “computer software”—that is, that a Microsoft program is a good, which one should be able to “enjoy quiet possession of” under section 14 of the Sale of Goods Act—it is not actually a good in any sense, because one cannot provide title to Windows 2000; one can only provide a licence to use Windows 2000.

The reason I raise this issue is that it will cause confusion in the future. Parliament is saying that computer software is a good, which means that one can give title to it, but one simply cannot give title to Bill Gates’ property. One can give a licence to use Bill Gates’ property, but that is not a good. Even though Parliament decides that it is a good, it will still not be a good, and that will lead to considerable confusion in respect of the rights of those who own the Windows 2000 program, and those who have a right to use the licence.

I have legal advice that suggests that the best way to cater for this problem is to use the warranties and representations provided by the Fair Trading Act when something is being sold. A person just cannot own Windows 2000 unless Bill Gates sells it to him or her. What one can own is a licence to use his program, so I think that the Government is creating a rod for its own back by saying that computer software is a good, because it simply is not a good.

💬 Gerry Brownlee: Where does the licence come into this?

Well, a licence is not a good; therefore, even though Parliament might say it is a good, it cannot be a good. Section 14 of the Sale of Goods Act implies that if someone is selling something as a good, then that person has title, but if one has computer software, one does not have title.

I have been listening to Tony Ryall talking about computer software. He referred to the 1908 Act, although I am sure computer software was not around then. However, he is certainly right with his description. One buys only the licence to use computer software; one does not actually buy the physical property. Computer programs are intellectual property. One never has the right to own that intellectual property; one buys the licence to use it. Under the licence to use it, we are not allowed to resell that individual licence on to anybody else, once it has been purchased from the supplier. So it cannot be a physical good, and I believe that it does not fit into this particular part of the legislation. The officials should have considered the matter when they were looking at the whole measure. I admit that we should have spotted it in the Commerce Committee. However, in summary, under the Sale of Goods Act, computer software is not a physical good, and it cannot be passed or sold on to somebody else. One does not have the right to sell it on. So how could it possibly be a good? A good is something that one physically has.

The previous two speakers have raised the very interesting issue of where the licence fits in. The Minister in the chair, Judith Tizard, can sit there and huff and puff and yawn and carry on, and act as if she is completely uninterested, and as if she has no care towards consumers in New Zealand, but I have two questions to ask her. Is this just another attack by the Labour Government on property rights in New Zealand?

💬 Government Members: Oh!

Well, that is the way it looks. Or can the Minister stand up and tell us how a licence holder is protected by this bill? Much of the question that has been raised by the Hon Tony Ryall—the country’s last decent Minister of Justice—and Mr Catchpole, the New Zealand First member who spoke just a few moments ago, would be solved if she simply explained where a licence fits in. I think this bill got drafted in this dreadful way because the officials who are required to draft such bills have been instructed to surreptitiously attack the property rights of New Zealanders wherever the opportunity presents itself. Day after day we come into this Chamber and see the Labour Government having a go at property rights in whatever way it possibly can.

For example, how would a New Zealand firm fare that developed a piece of software and went out to sell it—a firm that does not have the same clout as Microsoft or any of the great producers of software in the world, such as Oracle, or some other producer; just a small software writer selling a licence to use its programme? There appears to be no protection in this bill for either the person owning it or the person who purchases the licence. I hope I see, shortly, the officials sneaking up to the Minister with a bit of paper to explain that I am wrong.

Paragraph (c) in clause 13, “Interpretation”, states: “to avoid doubt, computer software”. It would be a good idea if the Government itself moved an amendment to add the words “and licence to use computer software”. What does the Minister think of that proposal? She simply laughs, turns her head away, and, I think, confirms that the Government has no intention of protecting the rights of the owners of computer software, or any product that is sold under licence.

The other interesting thing about this part is that the entire bill now becomes part of the principal Act, the 1908 Sale of Goods Act. I have to ask a perhaps indelicate question in this Chamber: Where does that leave the now legitimised sex industry? Where are the bounds between a good and a service?

💬 Hon Judith Tizard: You’re totally obsessed.

The Minister makes a rather silly comment. Last week the same Minister voted with Helen Clark for that new legislation, on the basis that it was something that New Zealanders needed. We know now from the polls that they were wrong and we were right. They will not make any progress as a result of it. However, if that is going to be a legitimate activity—and apparently it is, since last Monday—where does it fit into the provisions of this bill?

I understand that a matter in here deals with client satisfaction. I do not want to go any further in discussing what that may mean for the bill. However, it does show once again that the Labour Party, when it comes to legislation that deals with anything relating to commerce, the interests of the consumer, or to small business, has no idea whatsoever, no care, and no concern. It simply wants to put in place a number of regulations that make it feel happy about things and make it hard for small business in this country.

I want to deal with the issue of computer software. When I look at this legislation it seems to me that the Government is relying entirely on judicial discretion. For instance, it has not decided to define it, as the Hon Tony Ryall pointed out, as a licence for computer software. It has described the software itself as the good. It has ignored the submission of the Law Society that states that: “By defining software as goods”—and I am quoting directly from the submission on page 4—“there is a potential for confusion to arise regarding the property rights of the purchaser.” There was a possible solution that I thought the select committee would have taken the opportunity to apply—or at least the advisers to the Government, or perhaps an alert Minister such as the one perhaps not in the chair—by referring to licences for computer software. We are now left with this only resolution to the problem. We are relying entirely on the courts to get it right, and that they will interpret the words as in fact meaning a licence for software, rather than the literal wording here. In the past when the Sale of Goods Act was enacted—

💬 Hon Judith Tizard: In 1908.

People tended to allow the courts to do that sort of thing. However, today legislation is supposed to be specific. That is why thousands of law draftsmen are employed to achieve precisely that. Have they got that right? No, they have not. Why are hard-working New Zealanders paying taxes to the Crown? Because they want good services under the charge of this Government. Yet poor legislation is presented to the House that has not been properly considered and does not take into account the submissions of the Law Society. Hence we are now thrown upon the mercy of the courts to get it right.

They are the same courts that said that there was title to the seabed—and look at the chaos and confusion that has caused this nation and this Government. Ask Nanaia Mahuta. She and her colleagues know the chaos and confusion that it has caused, and we read about it in the paper on a daily basis. Yet the Government is repeating the same error in the amendment to the Sale of Goods Act.

One other point is the confusion about water. Part 3 refers to water being included as part of the Fair Trading Act. The select committee said that in the Sale of Goods Act it is understood that water includes potable water. Potable water is drinking water. I presume the term means essentially the same in both pieces of legislation. Is the Government now saying to New Zealanders that they will have rights for drinking water, or water that is fit to drink, but in respect of any other water—such as agricultural water, water flowing through the proposed Project Aqua, all of the irrigation projects throughout the South Island that may or may not be potable for humans, depending on quality—that there are no rights, other than common-law rights of course, in relation to that; and that it is only the processed water through the municipal systems that has the statutory protections.

I would have thought that in amending the Fair Trading Act to include water, one would at least have defined it as a particular category of water. The select committee—and the judges will read this—is clearly of the view that water is only potable water so far as the Sale of Goods Act is concerned. That is yet another source of confusion. We on this side of the House have been saying that New Zealanders have been paying far too much in taxes, for poor-quality government.

The bill includes water, electricity, gas, and a number of Acts, but Part 4 has a very short and simple change to the Sale of Goods Act. I am always concerned when we fiddle with the Sale of Goods Act. It is one of the finest flowerings of the 19th century English commercial lawyers. It is a wonderful example of how to draft. It is a piece of law that does what English commercial law had a genius for doing. It does not to try to tell people how they should conduct their lives, it does not try to tell people—merchants, or anyone else— what contracts they ought to enter, and it does not second-guess or prescribe in advance, but simply writes down in elegantly simple language what the best custom of merchants was.

So when I see the Sale of Goods Act being tinkered with by a bill that has some economic and legal nonsense in the other parts, I am put on guard. I am a little bit baffled, and part of it is simply the terms. There is a reference to emblements, and I am not sure how one pronounces them; I never came across them in 20 years of practice. I wish we had the advantage of Mr Worth in the Chamber. I suspect that he would be able to help the Committee considerably with a word as mysterious as that.

However, I will have to commend the Minister on a feature I like to see. The definition of goods in the Sale of Goods Act will now have restored a word that I believe the original drafter probably had. Clause 13(a) restores the old legal term “choses in action”, instead of “things in action”. We no longer have that discordant sort of mix of the vernacular and the technical.

💬 Hon Tony Ryall: I think it’s called the State school approach.

It probably is, but no longer do we have this ugliness and ignorance. We have a term that has been made elegant again, however antiquated it may be. On that one feature, I do commend the Minister and her officials for restoring a sort of symmetry that was once there in our law that has been so grossly attacked by the law drafters in so many other areas. It is a pleasure to see that there is still a consciousness of barbarism, and that the barbarians have not completely won. I thank the Minister for that.

I do come back, though: I am concerned that what was probably intended as the substantive change in this definition—that is, sticking in computer software—was something that the Law Society was so unequivocal in recommending against. However, I believe that the Sale of Goods Act is so well drafted that if we abolished consumer guarantees and fair trading, and went back to the sale of goods, we would be all happier, wealthier, and wiser. In this case, the select committee has included computer software, without recognising—or appearing not to recognise—that the sale, as it is called, is usually a sale of a licence. According to the Law Society we are putting New Zealand consumers at risk of uncertainty. Uncertainty means cost, and it means business for the courts and business for the lawyers. In that respect, it would be helpful if the Minister were able to elucidate as to why it chose, and why the select committee chose, to ignore the Law Society’s recommendation.

I cannot imagine there was anyone with an enormous passion to see computer software put into the Sale of Goods Act, particularly as the other parts of this bill had already stuck it into the Consumer Guarantees Act and into the Fair Trading Act. It would be helpful to know just why, after such an admirable change to the wording of the definition of “goods”, we then went ahead and did something without explaining, given that a body as disinterested, and presumably as expert, as the Law Society recommended against it.

I move, That the question be now put.

Members will be aware that clause 13 in Part 4 tends to widen the definition of the term “goods”. It states that, to avoid doubt, the definition of “goods” includes computer software. The Law Society’s submission challenged that ruling, on the basis that software is a licence.

I ask the Minister in the chair, the Hon Judith Tizard, to clarify the issue of CDs and DVDs. I personally do not consider computer software to be a good. I agree with the Law Society’s view that there is a licence to use software. Let us expand our minds for a moment, here in urgency, to think about the issue of CDs. When I purchase a CD—the physical good—I want it to work in my machine. So that is a good. But if I happen to be purchasing a CD that is unknown to me—and let us imagine for a moment that I purchase a CD of Eminem, I have a feeling that would offend me, especially—

💬 Hon Judith Tizard: Your kids would love it, though.

My 8-year-old absolutely loves Eminem, so I try to get him the toned-down version—the edited, censored version. Under this definition, would a CD like that be a good, and what part of a CD is a good? Under this definition, just as computer software is deemed to be a good, would the music on the CD be a good? I think I am hearing the Minister say no.

Let us think about DVDs. Once Were Warriors, The Piano, The Lion, the Witch and the Wardrobe, or Licence to Kill—there are hundreds of DVDs that we could think of. So I purchase a DVD and put it in my machine. The physical DVD is a good, but would the actual contents of the DVD be deemed to be a good under the definition used in the Sale of Goods Act, as amended by this legislation? I am not worried about the physical form of the CD, because I can check that in the shop, and there is only a limited number of things that can go wrong with it. But I am worried about what is actually on the CD or DVD. I suspect that the answer is, quite correctly, that CDs and DVDs are not covered by this bill. But it does cover computer software, so when I go to the same store and buy my CD, I am applying a different test to computer software than I am to CDs and DVDs. There is a great inconsistency here. I would not be surprised if we pushed this debate well into tomorrow in order to add this new category that I have now thrown up. This shows that the bill did not spend enough time in the Commerce Committee, and why it is an absolute outrage that we are expected to rush this bill through under urgency—

💬 Dr Wayne Mapp: Why urgency?

Exactly! Why are we having urgency, when there is a clear loophole here for CDs and DVDs?

I can think of another example. Would a franchise arrangement be deemed to be a good? The definition of “goods” includes “all chattels personal other than money”, etc. We know the reason that money is not deemed to be a good. It is because Samuelson described money as value in exchange, as the Associate Minister of Finance will know from his days in Economics 101. Money has no intrinsic value, and therefore it would be ridiculous to define it as a good. In fact, some people argue that money does no good, and does not bring happiness. But would a franchise agreement for a KFC shop in Helensville be deemed, under this definition, to be a good? That is a very challenging question, and while we are here in urgency I am glad we have a number of officials to advise the Minister on whether a franchise agreement for a KFC shop in Helensville would be a good. If computer software is to be caught under the definition of “goods” in the Sale of Goods Act, why is a KFC shop not a good?

I move, That the question be now put.

I move, That the Committee divide the bill into the Commerce Amendment Bill, the Consumer Guarantees Amendment Bill, the Fair Trading Amendment Bill, and the Sale of Goods Amendment Bill, pursuant to Supplementary Order Paper 78.