Fair Trading Amendment Bill (No 3)

There are a significant number of amendments to the commencement date of this bill, and although I know, Madam Chairperson, that you are very quick to try to keep National and other Opposition members to the title, I indulge your patience so that you can see the thread of my argument about why we need to change the dates.

There are a number of amendments, but I want to talk in particular about the amendment in the name of Lindsay Tisch. It says that the bill should not come into force in toto until section 81 comes into force on a date to be appointed by Order in Council. If we look at section 81, we see that it is the section covering fines. I would like to explain to members why there needs to be a delay in the commencement date to allow for a review of the fines. These fines have not been amended since 1986, and during that time the cost of living has risen 54 percent. The Government proposes to adjust those fines by 100 percent.

Now one can make an argument that the Government wants to send a signal to the judiciary that the fines currently being applied are inadequate. The Government proposes that the mechanism for that should be a doubling of the fines. I would draw the Minister’s attention to my amendment to insert new section 40A in a new clause 8A, which would provide a principle in the bill that duplicates the principle in the Sentencing Act that says to judges that they must impose a penalty near the maximum prescribed for the offending that is near the most serious. That means that the current penalties could be sufficiently adequate, but judges would be encouraged to use the full range of the penalties.

The second argument I would make about why we need to defer implementation of the penalties is that there has not been a comprehensive review of the penalties regime applying to commercial law in this country for about 12 years. There are now several pieces of commercial legislation that have different levels of fines with no correlation to each other. So there are some bills where the maximum fine is $10,000 for quite serious commercial breaches, and now there is another bill where the maximum fine may be up to $200,000 for comparatively less serious offences.

💬 Hon Judith Tizard: It is $100,000 now.

Well, it is $200,000.

💬 Hon Judith Tizard: Yes, but it is $100,000 now.

That is right, but I am telling the member that her proposal is $200,000. I am saying that we should delay that until this Government has undertaken a full review of the various commercial legislation penalties regimes. In that way we would be saying to the commercial community that there is a consistency across the penalties regime. It is ridiculous that in some pieces of legislation quite serious criminal behaviour solicits a $10,000 maximum fine, but under this Government’s proposal, one could get a $200,000 fine for something that could be comparatively much less offensive. So we say let us defer the commencement date of this bill to provide for a review of the regime of penalties across commercial legislation. It is currently quite ad hoc, and we think that we should provide for a review. I draw the Minister’s attention to my other amendment to clause 8 that would require her, as Minister, to provide for a review of the level of financial penalties in comparison with penalties included in other commercial legislation within 6 months of the assent of this bill, so that we could do something about that.

A further reason that we have other amendments to defer the commencement date is that we believe business needs to take legal advice on how to deal with the removal of the 3-year limitation period—because, as Dr the Hon Lockwood Smith said, 10 years down the track businesses might now find that they are subject to a fair trading action in respect of something that happened 10 years ago that they have no contingent liability in their system for. We think the dates should be deferred for that reason—to allow business to get appropriate legal advice on how they can deal with the removal of the 3-year limitation period from date of action. We do not support this amendment that says that it should be 3 years from discovery.

New Zealand First agrees with the bill targeting pyramid selling, and with it broadening the target to incorporate the new forms of pyramid selling schemes that have developed since the Fair Trading Act was implemented. Such schemes include those whereby participants buy or sell an investment opportunity and use agents provided by the scheme’s operator to recruit other participants on their behalf, instead of having to recruit new participants themselves. We also welcome the updates to the penalties. New Zealand First, however, has already expressed its concern about clause 14 in earlier speeches—

The CHAIRPERSON (Ann Hartley): I draw the member’s attention to the fact that we are debating Part 1, which is fairly narrow.

Are we on Part 1?

The CHAIRPERSON (Ann Hartley): Yes, and it is the preliminary provision for the commencement.

I beg your pardon. I will take a call on the other part.

In speaking to clause 2, “Commencement”, I would like to draw the attention of the Minister in the chair to a serious matter. It has become clear in recent years—and when I say “recent years”, I mean a period covering probably the last 20 years—as we have made changes to our commercial law in this country that there have been serious issues around commencement dates and transitions. I am sure the Minister in the chair is aware of some quite serious problems that have resulted from the transition from the Commerce Act of 1975 to the Commerce Act of 1986.

It is quite clear from the commentary that the bill has not been taken very seriously by the Commerce Committee, and that worries me. I think it was my colleague from ACT who pointed out that the hearing of evidence took 30 minutes and consideration took 55 minutes. What worries me about the commencement is the issue around the change to the period during which a business may be liable—in other words, the provisions of new section 40(3) inserted by clause 8. I would like the Minister in the chair to explain to the Committee how this will work under the commencement arrangement. For example, will the new provision in new subsection (3) work if a business sells a service or an item, or does anything under the Fair Trading Act as it now is—will it apply to some action taken after the commencement? For argument’s sake, let us say that this bill goes through tonight and gets the royal assent tomorrow. After the bill receives the royal assent, will new subsection (3) apply to an action that happens from then, or could it apply to something that happened, say, 4 years ago but is not discovered until after this bill receives the royal assent? I think that is quite a serious issue in respect of transition, because there are clearly two different circumstances. I do not see how this legislation makes clear which would apply. I hope the Minister in the chair is hearing what I am saying, as the question I have is to me quite an important one. Will new subsection (3)—that is, the change to 3 years after discovery, as distinct from 3 years from the action—apply to actions that happen after the royal assent, or will it apply to discoveries that happened after the royal assent? There is a big difference there, and it could have a very significant impact on business.

The bill should make it clear what the Government intends. The Government may say that it is not sure what it intends and that the courts will sort it out. The courts could read the law, as I have read this amendment bill, as meaning that anything that is discovered after this legislation receives the royal assent would be caught up in the new provision in new subsection (3). The dilemma for those involved under the Fair Trading Act is that, without knowing it, they could face a greater liability than they did under the previous Act. That is because the action may have taken place 2 years previously when they were operating under the existing Fair Trading Act. Yet with this amendment they could be caught by this changed provision.

For people selling a service or a good, or taking action under this Fair Trading Amendment Bill (No 3) from here on, there is no problem, because they will know that it will apply to actions that take place after the bill receives the royal assent. They would know the law they were operating under. But I am not sure that this bill makes clear which way it works for events that have already taken place, and I would appreciate the Minister taking a call to clarify for the Committee the way it works. It may be that we should amend the provision to make the intention of the transition arrangements more specific on the face of the legislation.

The points that Dr Lockwood Smith and the Hon Tony Ryall have brought up concerning the commencement date are very important ones. We are trying to add value to the bill. We are supporting the bill, and we think we can improve it significantly by allowing the amendment in my name to go ahead. For the notice of the Committee, I want to make very clear what I am talking about. My amendment inserts after the word “assent”, the words “except section 8 (1) which will come into force on a date to be appointed by Order in Council.” What is significant there is that as the bill stands at the moment, the royal assent could in fact take place on Friday, because the bill will pass through all its stages today. We will have the third reading later on, and the bill will come into effect. But there is absolutely no provision that takes account of clause 8—and new subsection (3) in particular—because the point that has been made in new subsection (3) is that the provision there now is that: “proceedings under this section may be commenced at any time within 3 years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered.”

So if this provision were to come in, in its current form—and it is absolutely retrospective—we do not know the impact that that would have on business. There could well be a contingent liability, and a business would be faced with something that might have happened a couple of years, or 3 years ago, that it knows nothing about today. We are saying that that is unfair. There could be huge compliant costs associated with an action of 2 or 3 years ago, because of this clause—[Interruption] Well, the member over there says that they are taking care of business compliance costs with the ministerial panel. We have a Minister for Small Business, who, I would like to think, might take a call on this matter, because I do not know that the ministerial panel on compliance costs has considered the impact of a contingent liability under new subsection (3) inserted by clause 8. As I said, National is supporting this bill, and trying to make it user-friendly. We want a win-win situation that does not put business in a conflict situation—because this bill could well do that. We want to know whether the provision is about action or discovery. It is our view that if a contravention was discovered, it means we could be dealing with something retrospective that business does not know about today.

As the Hon Tony Ryall has mentioned, there are so many different penalty regimes in place out there at the moment, and in this case the fines are increasing from $100,00 to $200,000. That is a huge increase in fines—100 percent. The question would be: “Why have they doubled?”. If we looked at the consumer price index since December 1986, we would see that the increase on that index is only 54 percent. Yet, in this case, these fines are being doubled—from $100,000 to $200,000. There are so many penalty regimes out there at the moment, and we are asking for an account and review of what they are. We could do that if we were to make sure that when this legislation came into force, it would be on a date appointed by Order of Council, not on a date—as it says in the bill at the moment—that could be early as Friday. We say that that is unfair.

We say that from a business perspective there needs to be some transparency. There needs to be some consultancy over this. We need to know whether these businesses will have a liability because of new subsection (3). That is the real concern we have about that provision, which states: “proceedings commencing within 3 years after the matter giving rise to the contravention was discovered.” That is the issue, and we say that that needs to be reflected in the commencement date. As I have said, and I will repeat it, we are supporting this bill.

I move, That the question be now put.

I rise to support the National Party’s amendments to the commencement clause. This bill has been sitting around for more than a year, and it has been given virtually no attention at all. The Commerce Committee record is 30 minutes’ hearing of evidence, and 55 minutes’ consideration, which was probably mainly consumed in considering the spelling and typos in its report.

💬 Hon Tony Ryall: And here we are in urgency.

And here we are in urgency, trying to pass a bill that will take effect the moment it gets the royal assent, and it is a bill that takes away existing rights. It is a bill that extends the power of the State. It is a bill that has some vagueness in it, which the committee blithely told us would not matter because most people would not be affected by the odd definition of pyramid-selling schemes as most franchise schemes are not unfair to many participants. So we have a bill that will actually require franchise organisations to go out and advise their agents.

There is a principle of law that says that nobody should be convicted on the basis of law that they have not had an opportunity to know about. There is a principle, of course, that one is deemed to know the law, but how will people who are subject to this legislation know the law when it becomes effective the moment it has royal assent and when this Government has allowed the system for publishing bills to fall into such disarray that no one will be able to get this law until well after the time it has had the royal assent? Of course, they could be like us and beg. The very helpful staff of this institution give us a green assent copy so that we can know what the law is. But how many citizens out there will be able to find out exactly what the law is the moment the royal assent is given? Therefore, it is high-handed legislation. It set out mainly to be cosmetic in an attempt to attack the ACT party and others. Of course it backfired, and we are hearing silence.

There is no commentary coming from the other side during the Committee stage, despite this commencement clause, which states: “This Act will come into force on the day after the date on which it receives the Royal assent.” We do not hear anyone from the other side trying to explain this bill now. The noisiest member when the thing was introduced, the Hon John Tamihere, does not really want to talk about scams these days. He does not want to get back into the rhetoric he recorded in May last year. So the Government wants to rush this bill through and bring it into force before anyone has had much of a chance to know about it, because what was supposed to be a triumph has become an embarrassment.

The amendment proposed by the National Party is perfectly reasonable. It defers commencement by only a couple of months, but that couple of months is vital in terms of principle. No law should tell people from now on that the Commerce Commission can seek injunction proceedings against them and be totally unreasonable, and not have any sanction by way of compensating the person if the commission were wrong. No such law should come into force on the day that the royal assent is given. This is a law that purports to be tough on offenders, but in fact will quite possibly be tough on ordinary business people and ordinary franchise operators because it has been so badly drafted.

This law had only 30 minutes’ consideration of the evidence that people had laboured long and hard to bring forward. This law had a lot of technical evidence in writing, despite the cursory 30 minutes that the Commerce Committee—I think chaired by Mr Mark Peck—gave it. [Interruption] He was obviously under instructions, but he lost the role, of course. Perhaps it was some kind of judgment on not having used this bill as the opportunity it was supposed to be to drag people out and investigate pyramid selling. But we do have a very sensible deferral of some 2 months, until 1 August, brought forward by the National Party, which, for reasons I cannot fathom, says that it will, in the end, vote the bill. Nevertheless, that party has brought forward a sensible amendment, and it would be proper for all parties in this Parliament to support a change of that kind in the interests of fairness and in the interests of standing up for the principle that people should not be adversely affected by law that they can have no chance of knowing about.

Some good questions have been raised. Even though the National Party supports this bill, we do want to make sure it is being implemented properly. One does have to question why the bill has to be passed urgently right now and take effect maybe in a few days’ time. Has some news come to the attention of the Government that there are some rampant pyramid schemes or other mischievous schemes out there that need to be unravelled as soon as this bill is passed? I call for the Minister to reconsider the decision not to be receptive to the suggested amendment to the implementation date. My colleague Lindsay Tisch has made some good suggestions about having a fixed date, such as August or September, for implementation. I am quite sure that the business community particularly, or people who will be affected by this legislation, have not become aware that the legislation has come before the House, will be passed under urgency, and will take effect immediately. How are they going to learn about the impact of this legislation?

If I might just take an example, let us say clause 3 in Part 2, where we see that instead of the wording Falsely represent”, the amendment bill will substitute the words “make a false or misleading representation”. We all know what lawyers are like. They know how to interpret words that seem clear to a layperson like me. They seem to be able to read a lot more into those words. I think the business community will need time to understand the difference between the expression “falsely represent” and “make a false representation”. Sometimes it seems to us that expressions mean just the same, but in my past experience in this Parliament, what we thought were obvious, clear, precise, English words might actually mean something quite different, just through the order they present, or the context. So people who are likely to be affected by this legislation need to have a very precise time frame as to when it is going to come into effect. Then they could approach Business New Zealand or the Auckland Chamber of Commerce to conduct seminars so they can fully understand whether very minor changes, on the surface, of a particular clause will affect them.

But of course there are some major concerns that have been very capably raised by my colleague Dr the Hon Lockwood Smith about how to interpret this limitation period. When is the 3-year period going to start from? Is it after this bill has been passed, or is it on the original date the particular action was taken? These are important and serious questions. This Labour Government is well known to be hostile to the business community, and it would show a lot of grace and goodwill by accepting an amendment to have a fixed date so that the business community would have some certainty, rather than not knowing how those two changes I have just raised would impact on businesses.

Some members may not remember—or perhaps they were not in the House, because I am sure it was in the last term—when the Labour Government was caught out very badly by refusing to accept the National Party’s suggestion on the Commerce Committee of providing for a transitional period during the passage of the Commerce Amendment Bill, which led to a court case that the Government subsequently lost.

I move, That the question be now put.