5. Motor Vehicle Disputes Resolution | Recommended Amendments to the Motor Vehicle Sales Act 2003: Discussion Paper | Review of the Operation of the Motor Vehicle Sales Act 2003

Motor vehicle disputes between traders (registered and unregistered) and consumers can be heard by the Motor Vehicle Disputes Tribunal (MVDT). The purpose of establishing a separate disputes tribunal for motor vehicles lies with the recognition that motor vehicle purchases entail a combination of risks that are uncommon in the purchase of other consumer goods. These risks include traders having an information advantage over the consumer, purchases being of relatively high value, purchases being made often on credit, and vehicles often being used as security for other finance and also often being subject to prior security interests. It is also due to the level of technical knowledge that is required and therefore the MVDT has a level of expertise in motor vehicle disputes.

Private motor vehicle sale disputes cannot be heard by the Tribunal, but can be heard by the Disputes Tribunal if the claim is under $7,500 (or $12,000 on agreement between both parties).

Matters related to the Motor Vehicle Disputes Tribunal are addressed in Part 4, subpart 2 of the MVSA and in Schedule 1. The Review of the Operation of the Motor Vehicle Sales Act 2003 made several suggestions to improve the administration of the MVDT and also suggested its jurisdiction be extended to cover the Credit Contracts and Consumer Finance Act 2003.

Ability to Award Costs to Any Party for Non Attendance at Motor Vehicle Disputes Tribunal Hearings

Schedule 1 of the MVSA sets out the procedure of the MVDT. Clause 14(1)(b) of Schedule 1 provides that the adjudicator may award costs to or against any party if the applicant to the MVDT, after receiving notice of the hearing, fails to attend a hearing without good cause. Therefore, if a consumer does not attend a hearing without an explanation, costs can be awarded against them. On the other hand, if a trader fails to attend a hearing without any explanation, no costs can be awarded against them.

The MVDT adjudicators have advised that it is more likely that a trader will not turn up to a hearing than the consumer (who is generally the applicant). In the 2006 annual report of adjudicator Mr David Knight, he said "The Tribunal has taken that provision [clause] 14(1)(b) as meaning that it can only award costs against an applicant who does attend a hearing, whereas the practice has been, particularly in the Auckland area, that it is the trader who fails to attend. This Tribunal recommends that it should be provided with the jurisdiction to award costs against either party, especially if they should fail to attend a hearing without good cause".

Having considered this matter further, the Ministry of Consumer Affairs concurs with the adjudicator's suggestion and also notes that there may be a perverse incentive for the trader not to attend a hearing given the current legislative provisions.

To encourage all parties to attend a hearing, it is recommended that it be possible to award costs against either the applicant or motor vehicle trader for failure to attend a hearing. This may provide some additional incentive to adhere to the proper process.

Public Policy Objectives Summary

Submission of Adjudicators' Annual Reports

Recommendation

11. Amend section 87 to provide a timeframe within which the adjudicators' annual reports are to be submitted and to deal appropriately with the receipt of multiple reports. Also replace the phrase "available to the news media" to read "publicly available".

At present adjudicators are required by section 87 of the MVSA to submit annual reports. These reports are required by the Act to contain summaries of claims dealt with, mention any special cases and make any recommendations for amendments to the MVSA. Currently, the MVSA does not specify the timeframe in which the reports are to be submitted.

The first two years reports from adjudicators were received sporadically. As a result there was some difficulty with co-ordinating the release of the reports to the media and in being able to provide any commentary on the findings of the adjudicators.

As the statistical analysis of MVDT cases is compiled each July, it is proposed that annual reports be required to be forwarded to the Minister by 31 October each year.

These dates are acceptable to the Tribunal and this better allows for co-ordinated reports being released.

The phrase "available to the news media" is an unusual one in legislation and it is recommended that it be updated to "publicly available" to allow for a variety of mechanisms to be used to disseminate this information to interested parties in a timely manner.

Public Policy Objectives Summary

Extension of the Jurisdiction of the Motor Vehicle Disputes Tribunal

Section 89(1) of the MVSA sets out that the MVDT may inquire into and determine any application or claim in respect of the sale of any motor vehicle under the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and the Sale of Goods Act 1908. However, it cannot hear complaints under the Credit Contract and Consumer Finance Act (CCCFA). At present, any dispute involving the financing of a motor vehicle can be taken to the ordinary Disputes Tribunal. The only constraint on this is the $7,500 limit (or $12,000 limit with the agreement of the parties). Disputes above this must be taken to the District Court.

The Review of the Operation of the Motor Vehicle Sales Act 2003 noted that various groups have suggested there is a need for the jurisdiction of the MVDT to be extended in section 89 to include any application or claim under the CCCFA in respect of motor vehicle financing. This is because motor vehicle sales and finance arrangements are often intertwined and in many instances a motor vehicle trader assists or acts as an agent to another in providing finance for the motor vehicle purchase. Moreover, in many instances the likelihood of a sale is dependent on the availability of finance and there is a strong incentive for the motor vehicle trader to facilitate arranging that finance.

Currently the only thing the MVSA has to say about finance arrangements is in section 89(2) under which the adjudicator may pass back to the motor vehicle dealer any repayment commitments that a consumer may have to a creditor where the consumer's right to reject the motor vehicle under the Consumer Guarantees Act has been upheld or the consumer is deemed to have suffered loss due to conduct of the trader under the Fair Trading Act.

For a consumer, if something goes wrong with a motor vehicle purchase, it is not easily understandable that for most matters a dispute can be taken to the MVDT but for financing disputes these must be taken to the ordinary Disputes Tribunal. As noted, a claim submitted to the ordinary Disputes Tribunal may not exceed $7,500 (or $12,000 with the agreement of both parties). The MVDT limit, on the other hand, is $50,000. It is possible that if a claimant has both issues to do with the vehicle purchase under the Consumer Guarantees Act and the CCCFA, they could be pursuing claims in the two tribunals with the same parties at the same time.

Discussion

A vehicle purchase is often referred to as the second largest purchase a consumer makes. In many cases, the purchase is made with borrowed funds. Matters that could be covered by extending the jurisdiction of the MVDT would be in relation to a motor vehicle trader when acting in a role of assisting the financial arrangements. It appears that a motor vehicle trader who arranges the finance when selling a motor vehicle to a consumer can be considered to be a broker or a paid advisor under the CCCFA. This is because they are paid a commission or fee by the finance company when they refer a motor vehicle purchaser to a finance company. Often this fee is paid by the consumer and is included as a fee on the credit contract. Motor vehicle traders are also usually paid a commission on credit related insurance products they sell with the finance. This is enough to meet the definition of broker and/or paid advisor under the CCCFA. Section 93 of the CCCFA makes it clear that a court can make an order against a broker or a paid advisor if they engage in conduct which amounts to a breach of the Act.

Example of How Increasing MVDT's Jurisdiction to CCCFA Would Help Consumers Purchasing Motor Vehicles on Credit

Random Motors[3] is the finance company and car dealer. Random Motors sold "Sally" a car that developed mechanical problems then, instead of replacing under the Consumer Guarantees Act, Random Motors refinanced Sally into a replacement car, including using the faulty car as a trade-in. The value of the original car was valued at $995 lower than when Sally purchased the car two weeks before. When this car was unacceptable for Sally's purpose, Random Motors refinanced her back into the original car purchased, again using the newer car as a trade-in and resulting in the consumer losing $495. Random Motors was misleading in their dealings with Sally, not only in regard to the finance, but there were also disclosure issues and oppression issues. Originally the amount in dispute was less than the $7,500 for the Disputes Tribunal but Random Motors had threatened to counter claim for an amount over $7,500 to take it out of the Disputes Tribunal. Sally would have been happy to take the claim to the MVDT with its higher limit but because the misleading behaviour was about the finance part of the transaction rather than the actual sale of the car, Sally was unable to take the claim to the MVDT. If the MVDT was able to hear claims under the CCCFA Sally would have been able to take the claim for oppression and non disclosure to the MVDT. Sally is now in debt for $26,000 to Random Motors (the original purchase price for the car was $8,995), has a bad credit rating and the car has been repossessed. Sally cannot afford to dispute this amount through the District Court as she is a solo parent on a benefit.

Complaints under the CCCFA can be taken to the Commerce Commission but complaints involving practices that affect only one consumer rather than several consumers are unlikely to meet their enforcement criteria. The Commission does not have the resources to investigate all complaints and is therefore primarily interested in systemic failures, rather than individual ones. However, the Commerce Commission can identify recidivist traders from the publicly available summary of MVDT decisions.

There have been instances reported where certain costs have not been disclosed by the motor vehicle trader when facilitating the finance arrangements, such as brokerage fees. This would be the type of claim that could be taken with an extended jurisdiction.

By extending the jurisdiction of the MVDT to include the CCCFA, consumers who have disputes regarding motor vehicle finance will have a greater opportunity to seek redress.

Public Policy Objectives Summary

Claim Limit

Section 90 states that the MVDT has jurisdiction only if the total sum of the application or claim does not exceed $50,000. There has been a suggestion that consumers have limited access to justice as a result of this claim limit. Currently, the claim limit means that if a dispute is taken to the MVDT that is in excess of $50,000, rescission of contract is not a possible remedy because the contract would be worth more than the claim limit and partial rescission is not possible.

In 2001, in the Briefing for the Select Committee during the passage of the Motor Vehicle Sales Bill, officials noted that while the $50,000 limit is somewhat arbitrary, it had been set at a level that would capture the vast majority of disputes over motor vehicles. Disputes are most likely to arise in respect of lower-value, used vehicles.

The MVDT operates like the ordinary Disputes Tribunal by providing a low cost alternative for consumers with claims below a defined amount. This means the option of an open limit for motor vehicle claims is not possible. If consumers have a claim over the defined amount they can access the District Court to seek redress. This process, however, has a higher cost. The principle behind both the MVDT and Disputes Tribunal is to provide low cost access to the court system for claims that do not justify the expenses that are likely to be incurred in accessing the District or High Courts.

Little evidence is available or collected relating to claims above $50,000 as the MVDT does not hear claims above this amount. However, the MVDT advises that recently they have had several enquiries from consumers regarding disputes over vehicles with claims greater than $50,000 and that consideration of increasing the claim limit would enable the majority of motor vehicle disputes to be heard in the MVDT. A survey of the most popular new vehicles indicates that the top selling cars retail for between $50,000 and $60,000.

Accordingly, it is recommended that section 90 of the MVSA be amended to allow for claims to the MVDT up to $60,000. It is considered that an increase to the limit to $60,000 limit is not unreasonable, preserves the intent of a low cost disputes resolution service, and should cover most disputes over motor vehicles. For higher value claims than $60,000, it is appropriate that they are filed in the District Court.

Public Policy Objectives Summary

Publication of Decisions of the Motor Vehicle Disputes Tribunal

Under section 94 of the MVSA, the MVDT must, for the purposes of protecting the public, arrange for the publication in the Gazette of a notice of any MVDT decision that has been determined against the trader. The MVDT may also provide a copy of such a decision to the news media. In practice, the MVDT provides details of all cases (names of consumers are excluded) to interested media and other groups.

Adjudicators, in their annual reports, have advised that in some instances it would be fair to withhold publication of some decisions that have been found against the trader or, alternately, to publish all decisions.[4] As currently written, section 94 precludes this. The adjudicators' reasoning for recommending this change is that occasionally the trader has made significant efforts to remedy the problem but the consumer's expectations are unrealistic. For example, a trader may offer a consumer $1000 to remedy the problem, but the consumer rejects the money and takes the case to the MVDT, expecting more money as an outcome. The MVDT then makes a decision against the trader for $500. This result is published as a decision against the trader, when the trader has more than satisfactorily attempted to remedy the problem. Suggested solutions from the adjudicators include amending section 94 of the MVSA to replace "must" with "may", so that the adjudicators have discretion on publication of decisions or amending section 94 to require publication of all decisions.

For comparison, under the ordinary Disputes Tribunal, decisions can be published by the Registrar as specified by the Minister. At present this means that only the parties involved have access to the decision. Under other legislation, the Employment Court has a default of publishing all decisions unless an order is made by the court not to publish. The Medical Practitioner's Disciplinary Tribunal publishes all cases on their website (suppressing the patient's name) with the option of suppressing all names. In contrast to a Gazette notice, the facts of the case and the decision are fully reported. This ensures that details such as degree of fault or mitigating circumstances are reported.

Options

Three possible approaches to publishing the MVDT findings have been identified. Option 1 is to amend the MVDT to allow the adjudicators to publish decisions at their discretion. The disadvantage of this approach is that the unfairness perceived by the adjudicators will not necessarily be solved by this option, as they will be required to judge whether a case is in the public interest. The preferred public policy position is to have open access to information unless there are compelling reasons to withhold it. This option would not achieve that objective. It also would not reflect current practice of the MVDT where all cases are provided to interested groups. This is not the preferred option.

Option 2 is to amend the MVSA to provide for the publication of all decisions, regardless of who the decision favours. This option is fair and non-discriminatory, ensuring that the degree of fault is clear. This option does not require the adjudicator to make decisions regarding publishing. It opens the way for full publication of decisions on an appropriate website (withholding personal details of the individuals to protect privacy), in a similar way to the Medical Practitioner's Disciplinary Tribunal and addresses the fact that consumers do not read the Gazette. The general approach taken by the Official Information Act 1982 can be applied here: that the information should be accessible unless there are good reasons for withholding it. These reasons would include:

Other reasons for withholding information would be included. However, it is questionable if this option meets the purpose of the Act, which is to promote and protect the interests of consumers in relation to motor vehicle sales. Publishing details of a decision that went against consumers may not promote or protect the consumer interest.

Option 3 is to amend the MVSA to continue to provide for publication of decisions against traders only and not to limit this to the Gazette. However, these decisions can be provided in full, indicating the level of mitigation that a trader may have attempted. This option is fair to the trader and also protects the consumer in accordance with the purpose of the Act. As with option 2, this option does not require the adjudicator to make decisions regarding publishing and ensures the degree of fault is clear. In addition, it meets the objective of the Act with respect to the promotion and protection of consumer interests.

The Ministry of Consumer Affairs invites comments on whether there should be publication of all decisions made by the MVDT or if the publication of the decisions should still be restricted to traders only, but these decisions be reported in full. It is considered that any publication should not be limited to the Gazette.

Public Policy Objectives Summary

Other Amendments to Motor Vehicle Disputes Resolution Considered

Filing Fees

Under the MVSA, claims to the MVDT must be accompanied by a $50 filing fee whereas under the Motor Vehicle Dealers Act 1975, the associated disputes tribunal was free. It has been suggested that the filing fee to the MVDT may be a barrier to redress for some cases and that the requirement to pay a filing fee should either be removed for all applicants to the MVDT or that the MVDT should be able to waiver the filing fee at its discretion. For example, if a consumer has a complaint relating to a motor vehicle that has been bought on hire purchase and the consumer is struggling to keep up payments then having to pay a filing fee could cause further financial burden and thus a claim is not taken.

Whilst previously access to the MVDT was free, it was also more difficult for a consumer to take a claim to the disputes tribunal because the claimant first had to get through the Motor Vehicle Dealers Institute complaints process. There is no hard evidence that the filing fee is preventing claims being filed and in most cases the fee is refunded to the consumer if their claim is successful. The filing fee is within the range ($30 and $100) set for access to the ordinary Disputes Tribunal, which considers claims of considerably smaller value. On balance, the filing fee is not considered onerous.

[3] This is a true example. The names of the company and the consumer involved have been changed to protect their privacy.

[4] See in particular the 2006 Annual Report of Mr Burnard.