Recommended Amendments to the Motor Vehicle Sales Act 2003: Discussion Paper

March 2007

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3. Motor Vehicle Traders Registration

A large part of the MVSA concerns the registration of motor vehicle traders, requirements of registration and the conduct of those registered. In brief, the aim of the registration regime is to provide protection to consumers purchasing motor vehicles from registered motor vehicle traders through ensuring that -

• all those who carry on the business of motor vehicle trading are subject to the regulatory regime;
• consumers can have confidence that when they are dealing with a registered motor vehicle trader that the person has met the requisite criteria for conducting that business;
• consumers and enforcement agencies can locate the trader in the event of a dispute or breach; and
• unsuitable persons are prevented from participating in motor vehicle trading.

Section 52 of the MVSA provides for a Motor Vehicle Traders Register (MVTR). The MVTR is a register that contains information about whether a motor vehicle trader is registered, and information about the trader's business, including its physical address. The MVTR is a service administered by the Ministry of Economic Development's Business Services Branch.

The MVSA introduced new requirements for registered motor vehicle traders, including widening the definition of a trader. It introduced what is called a "negative licensing" process where an applicant is entitled to become registered provided the person does not fall into a category of person prohibited from being registered. The list includes persons banned from participating in the business of motor vehicle trading, those with a history of bankruptcy, those with certain convictions and past revocation of a motor vehicle dealer's licence or registration.

The Review of the Operation of the Motor Vehicle Sales Act 2003 identified some areas of the registration provisions that could be improved, in particular improvements to the annual renewal of registration, clarity regarding the banning provisions and changes to the definition of motor vehicle (with respect to motor cycles). As a result of further consideration of these recommendations, it is proposed that amendments be made to the MVSA in the following areas:

Renewal of Registration of Motor Vehicle Traders

To ensure the continuing integrity of the motor vehicle trader registration system and information on the MVTR, motor vehicle traders must renew their registration every 12 months (section 39, MVSA). The same process for renewal of registration is required as for an original application (sections 31 to 38). Currently, this includes a requirement for a statutory declaration from each person concerned in the management of the company to be submitted each year. The review of the MVSA identified this requirement as unnecessarily onerous and, in particular, problematic for those companies that have directors residing outside of New Zealand.

The requirements for a statutory declaration are that it must be signed by the applicants, and witnessed by a solicitor, a Justice of the Peace or other person authorised to take a statutory declaration and must be submitted by the specified date to complete the renewal process. All persons concerned in the management of a company who is registered as a motor vehicle trader must sign and return a statutory declaration.

For companies with directors or other management based overseas, the signing of the statutory declaration can be challenging. The requirements are as follows:

1. A declaration made in a Commonwealth country other than New Zealand must be made before a Judge, a Commissioner of Oaths, a notary public, a Justice of the Peace, or any person authorised by the law of that country to administer an oath there for the purpose of a judicial proceeding, or before a Commonwealth representative, or before a solicitor of the High Court of New Zealand.
2. A declaration made in a country other than a Commonwealth country must be made before a Commonwealth representative, or before a Judge, or before a notary public, or before a solicitor of the High Court of New Zealand.
3. Any document purporting to have affixed, impressed, or subscribed thereon or thereto the seal or signature of any person authorised as outlined in (1) and (2) above to take a declaration must be admitted in evidence with proof of the seal or signature being the seal or signature of that person or of the official or other character of that person.

Overseas company directors must be certain that the witness to the statutory declaration is actually authorised to do so - otherwise, the application to register the company as a motor vehicle trader will be rejected.

By way of comparison, under section 214 of the Companies Act 1993, companies are required to complete and file an annual return every year. This annual return contains certain details about a company and is signed by a director or authorised person, but it is not a statutory declaration.

The importance of the statutory declaration for new motor vehicle trader applications is not at question. The Select Committee report and discussion in Parliament with respect to the MVSA identified a strong view held that there should be proof of authenticity of the information provided by those wanting to register as motor vehicle traders.

There is a question about the need for annual statutory declarations, however, when there is no change in circumstances. As noted, this requirement is imposing a considerable compliance burden on some parties, particularly overseas-based directors.

Under section 40 of the MVSA, changes in circumstances are required to be notified within 10 working days of the change. At present, there is no requirement for such advice to be accompanied by a statutory declaration. The need for some of this information to be robust, especially with regard to new directors, is more in alignment with the statutory declaration requirement of an initial application for registration and with the sentiments of Parliament, noted above. This is discussed further below.

It is concluded that the statutory declaration requirement with a registration renewal application is an unnecessary regulatory burden, particularly affecting companies with overseas directors. However, there is a need to confirm that the trader has not in the past 12 months become disqualified from being registered as a motor vehicle trader (e.g. become bankrupt or having criminal convictions). This is to maintain the integrity of the information.

To remove the need for an annual statutory declaration with motor vehicle trader registration renewal, it is proposed that section 39 of the MVSA provides for a specific renewal process, including a prescribed renewal application form and accompanying fee. It is proposed that this form would be signed by either each person concerned in the management of the company, or the company secretary, or a director, or another authorised person to act on behalf of each person concerned in the management of the company. This renewal application will include the required information from sections 33 to 38 of the MVSA[2] and a new requirement for the applicants to confirm that they have not become disqualified from being a motor vehicle trader in the past 12 months.

Public Policy Objectives Summary

• The proposed changes will result in declarations to the MVTR that improve the integrity of the registration system.
• The proposed change to remove annual statutory declarations will reduce business compliance costs and unnecessary red tape.
• Consumers will benefit from improved annual renewal statements.
• After the initial cost of incorporating changes to the Motor Vehicle Register, there will be reduced on-going costs to government.

Amendment to Section 40, Notification of Change in Circumstances

As noted above, under section 40 of the MVSA, changes in circumstances are required to be notified within 10 working days of the change. Such changes, however, are not required to be accompanied by a statutory declaration.

The appointment of a new company director or other person concerned in the management of the company is a major change to a company. The way a company behaves will be significantly influenced by its directors and those concerned in the management of the company. Accordingly, the registration process needs to ensure that any new director or other person concerned in the management of the company is not disqualified. Currently, a new director or other person concerned in the management of the company could be appointed who is a disqualified person and this would usually not be identified until the registration is next renewed.

It is proposed to amend section 40 to provide that when a new company director or other person concerned in the management of the company is appointed, a statutory declaration must accompany the written notification to the Registrar. It is noted that providing a statutory declaration within 10 working days would be unreasonable. Therefore it is also proposed that notification of the appointment of a new company director or other person concerned in the management of the company is to be provided within 10 working days with the statutory declaration provided within 20 working days of their appointment. This maintains the integrity and timeliness of the Register without imposing unreasonable timeframes.

To assist with the proposed changes to sections 39 and 40, prescribed forms for the renewal notification and change notification will be developed based on the required information for each application/notification.

The Review of the Operation of the Motor Vehicle Sales Act 2003 noted that some in the industry had advised that there has been some difficulty in meeting the section 40 requirement for directors who reside overseas to provide that written notice be given to the Registrar within 10 working days of any changes. This requirement was seen as too onerous.

The Review concluded that the need for accurate and current director details outweighed the inconvenience to overseas dealers of the 10 working day period. The Ministry of Consumer Affairs still holds this view. With the proposed changes to section 40, the 10 day written notification period will remain, but as any statutory declaration is not required for 20 working days this initial notification time is not considered to be onerous.

Public Policy Objectives Summary

• The proposed changes will result in declarations to the MVTR that improve the integrity of the registration system.
• Consumers will benefit from provisions that reduce the chance of disqualified persons becoming traders.
• Overall, there will be decreased compliance costs for industry as the recommendation replaces the need to provide an annual statutory declaration.

Amendment to Banning Provisions

A person can be banned from trading in motor vehicles if they breach section 68 of the MVSA. A ban is 5 years starting on and from the date of the conviction, failure or other matter that has invoked the ban.

Section 68(1)(a) provides that a person is banned from being a motor vehicle trader if they have 2 or more convictions in a 10 year period for such matters as motor vehicle trading when not registered, and providing false information or declarations in relation to motor vehicle trader registration. Section 68(1)(b) provides that a person is banned from being a motor vehicle trader if in the previous 10 years they have done such things as failed to comply with a Disputes Tribunal order and have been concerned in the management of a motor vehicle trading company that has been banned or gone into liquidation due to unpaid debts. Section 68(1)(d) bans any person from being a motor vehicle trader who is convicted of tampering odometers.

On the other hand, section 68(1)(c) applies only to a person who while a registered motor vehicle trader is convicted of a crime involving dishonesty, or an offence against sections 17 to 22 or 24 to 26 of the Fair Trading Act 1986, is disqualified from registration or managing a company under the Companies Act 1993 or has more than once in a 10 year period been adjudged bankrupt.

The Review of the Motor Vehicle Sales Act 2003 noted the case of Tim Whittle had highlighted a loophole in section 68(1)(c), which provides for the banning of a trader who may have only been convicted of one serious offence but not all persons, including if they have been convicted multiple times of such offences. At the time of Whittle's conviction (he was convicted on 73 counts of fraud in 2005), Whittle's registration had lapsed. This meant the automatic banning provisions under section 68(1)(c) could not be applied as he was no longer a registered motor vehicle trader.

It is not known why the section 68(1)(c) banning provisions are conditional on the status of the person convicted (i.e. the person must be a registered motor vehicle trader). The offences in section 68(1)(c) are serious matters and if a person, registered or not, has been disqualified or convicted of these offences then they should be banned from motor vehicle trader registration.

In Whittle's case, a successful application was made to the District Court under section 69 of the MVSA and Whittle was subsequently banned indefinitely. However, taking a claim to court can be a resource consuming process. The policy objective behind the section 68(1)(c) banning provisions was to avoid the need for a Court case for identified wrongdoings.

Accordingly, it is recommended that section 68(1)(c) of the MVSA be amended to apply to any person who has been convicted or disqualified regarding the matters outlined in this clause or adjudged bankrupt.

Public Policy Objectives Summary

• Consumers and industry will benefit from provisions that reduce the chance of a less scrupulous person becoming a motor vehicle trader.

Other Amendments to Registration Provisions Considered

Definition of Motor Vehicle - CC Rating of Motor Cycles Classed as Motor Vehicles

The MVSA requires every person who carries on the business of motor vehicle trading to be registered as a motor vehicle trader, including those trading in motor cycles 60cc and above. The definition of motor vehicle under section 6 of the MVSA specifically excludes motor cycles which have a cylinder capacity which does not exceed 60 cubic centimetres (60cc). This definition is consistent with the legislation that preceded the MVSA, the Motor Vehicle Dealers Act 1975.

The Review of the Operation of the Motor Vehicle Sales Act 2003 noted that the MVSA reference to 60cc motor cycles does not align with the Land Transport Rules or with the Customs codes in the Tariff of New Zealand. The Land Transport Rules categorise a motor cycle as a two wheeled vehicle exceeding 50 ml (equivalent to 50cc) and with a maximum speed exceeding 50 km/hour. The tariff categories under which Customs operates identify motor vehicles in bands: under 50cc; from 50cc but not exceeding 250cc; from 250cc but not exceeding 500cc; from 500cc but not exceeding 800cc; and exceeding 800cc.

The Review recommended changing the MVSA to include in the definition of motor vehicles motor cycles 50cc and above to reflect the ratings used in this other legislation. The recommendation noted, in particular, that this would improve the operability of sections 120 to 123 of the MVSA. These sections provide for information sharing arrangements between Customs and the MVTR Registrar, and between the Ministry of Transport and the Registrar. The purpose of these information sharing arrangements are respectively to assist the Registrar in determining any person who imports more than 3 motor vehicles or any person who sells more than 6 motor vehicles in a year who may not be a registered motor vehicle trader. The discrepancy between the MVSA and the definition of motor cycle used in other legislation and with the Customs tariff codes has been identified by the enforcement agencies and industry representatives as unhelpful to information sharing.

Land Transport New Zealand (LTNZ) has advised that there are about 1000 motor cycles registered in the range of 50cc to 60cc which could be affected by a change in the definition of motor vehicle to capture such motorcycles.

Further analysis of this issue has identified that 60cc is used as a "cut-off" line in other legislation. In particular, the Transport (Vehicle Registration and Licensing) Regulations 1994 provide for motorcycle registration and licensing fees based on above and below 60cc bands. Similarly, the Injury Prevention, Rehabilitation and Compensation (Motor Vehicle Levies) Regulations provide for the Accident Compensation Corporation (ACC) levy classifications based on cc bands. Classification 3 is mopeds and motorcycles up to and including 60cc, while Classification 4 is motorcycles from 61cc. The levies for these classes are significantly different; the 2006-2007 levy for Class 3 is $38.86 and the levy for Class 4 is $166.50, a four-fold difference.

The reason given for changing the MVSA definition of motor trader to include a lower cc range of motorcycles is to help identify traders dealing in motorcycles between 50 and 60cc. It is unlikely, however, that there would be many traders who exclusively deal with motorcycles between 50 to 60cc. Either traders would also deal in higher cc motorbikes, and therefore be defined as traders regardless of any change, or they would deal with only mopeds of less than 50cc and therefore would be not be classified as a trader of motor vehicles. Given 60cc is a recognised division between motorcycles and mopeds or step-throughs in other transport legislation and no significant advantages can be seen from changing the MVSA, no change is recommended

Definition of Motor Vehicle - List of Vehicle Classes

The Review of the Operation of the Motor Vehicle Sales Act 2003 considered whether the definition of motor vehicle in section 6 of the MVSA should be changed to a prescribed list of vehicle classes. Submissions from industry to the Review suggested that the definition of motor vehicle which refers to a road vehicle ordinarily acquired by consumers for personal, domestic, or household use is confusing and that a definite list would help resolve this.

The MVSA definition is closely related to the Consumer Guarantees Act 1993 definition of consumer, with case law being developed from this Act. Customs data is also arranged on domestic/commercial lines. Similar vehicles may be purchased for different purposes (e.g. a four-wheel drive vehicle may be purchased for commercial work and not be covered by the Act or for domestic purposes and be covered by the Act), therefore a list of vehicles may lead to more confusion. Accordingly, no changes to the definition of motor vehicle are recommended.

Definition of a Motor Vehicle Trader - Deeming Provisions

Under the MVSA, a person who sells more than six motor vehicles or who imports more than 3 vehicles, in a consecutive 12 month period is deemed to be a motor vehicle trader. There is some concern that traders, by various means, are importing more vehicles than this limit allows, and that reducing the number of vehicle sales to three and imports to one, will mitigate this practice. The Review of the Operation of the Motor Vehicle Sales Act 2003 did not support any change, and concluded that this behaviour can be dealt with through the information sharing arrangement with Customs.

Provision of IRD Number as Part of the Details Required on Registration Application

The Review of the Operation of the Motor Vehicle Sales Act 2003 noted that the Motor Vehicle Disputes Tribunal has indicated that some traders will change their name in a small way to evade customers who have raised a claim against them. The Review suggested that requiring applicants for registration as a motor vehicle trader to provide details also of their IRD number might address the problem. Further analysis does not support this suggestion.

Matching company details with an IRD number may help to verify the company's trading status. However, there is limited evidence that this would help to assist enforcement. While it may provide all trading names under which a trader is operating, any new company can gain a new IRD number. Therefore, matching trading names with IRD numbers will not achieve the desired result. Additionally, by including this field in the Register, this will incur some cost to Government. This cost is not justified if there is no evidence of facilitating enforcement.

It is noted that section 32 of the MVSA and the proposed changes to sections 39 and 40 of the MVSA discussed above should be able to address the problem. Section 32(a)(i) and (b)(iii) require that a trader, either as an individual or as a company, must provide a full name on the application for registration. Under the MVSA, full name is defined to also include any aliases or alternative trading name under which the individual or company may operate.

Requirement to Define Place of Business

The MVSA has removed the requirement to operate from a physical car yard, thereby acknowledging that car sales can occur by internet based sales, car fairs and roadside displays. This provides a lower cost approach, but also means traders are less visible. There has been some concern raised by the Motor Trade Association regarding registered traders operating from these alternative premises. Their concern is that by being less visible, this type of trading encourages fly-by-nighters. Additionally, by trading in this manner, such traders are in competition with car yard traders who have made significant investment in their yards.

The Review of the Operation of the Motor Vehicle Sales Act 2003 concluded that since registration still requires a physical address for the trader (but not necessarily the actual place of business), this establishes a point of contact with the trader. Local bodies have the power to restrict places of businesses and therefore have the means to address any physical or local problems that arise with less formal sales approaches. This also reflects the way business is occurring and there is a need for legislation to reflect the market. Therefore, there is no conclusive evidence that a change to this provision is necessary.

Requirement for Dual Registration

Some second hand dealers have indicated they have to pay fees under both the MVSA and the Secondhand Dealers and Pawnbrokers Act 2004 as a result of quad and farm bikes being classified as motor vehicles under the MVSA. There is widespread anecdotal evidence that quad and farm bikes are targeted for theft from farms and are subsequently illegally traded. The Secondhand Dealers and Pawnbrokers Act aims to hinder such activity.

Quad and farm bikes are not classified as motor vehicles under the MVSA, as they are not road vehicles of a kind ordinarily acquired by consumers for personal, domestic or household use. If a secondhand dealer is also registered as a motor vehicle trader (due to the trading of motor vehicles), the registration fees are separate issues. Based on the information available, the Ministry of Consumer Affairs has concluded that as the Acts provide different consumer and market protection functions and create different obligations it may be necessary for a dealer/trader to pay compliance fees under both Acts. The fees assist with the administration of the Acts and provision of different services such as the Secondhand Dealers and Pawnbrokers Act's requirement of record keeping pre-sale to help recover stolen vehicles.

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