Motor Vehicle Disputes Resolution Regime | Review of the Operation of the Motor Vehicle Sales Act 2003: Report Presented to the House of Representatives Pursuant to Section 163 of the Motor Vehicle Sales Act 2003

Review of the Operation of the Motor Vehicle Sales Act 2003

Review of the Operation of the Motor Vehicle Sales Act 2003: Report Presented to the House of Representatives Pursuant to Section 163 of the Motor Vehicle Sales Act 2003

Motor Vehicle Disputes Resolution Regime

Motor Vehicle Disputes Tribunal (MVDT)

229. The strategic aim of the disputes resolution regime is that consumers have access to adequate redress in relation to their purchase of motor vehicles. It is expected that this will be achieved through the Motor Vehicle Disputes Tribunal (MVDT) by ensuring that:

Key Elements of the Disputes Resolution Regime

230. The MVDT is a special Tribunal set up to hear claims relating to purchases of motor vehicles. It is administered by the Tribunals Unit of the Ministry of Justice. The relevant provisions of the MVSA are sections 82 to 94, section 142 and Schedule 1 which sets out the procedures of the MVDT.

Members of the Tribunal

231. Each Disputes Tribunal consists of an adjudicator who must be a barrister or solicitor of the High Court of not less than 5 years practice; and an assessor appointed by the adjudicator for the purposes of each hearing from a panel of assessors (approved by the Minister of Consumer Affairs). The role of the assessor is to act as an extra member of the Tribunal to assist in the determination of the claim, but the adjudicator alone determines the claim.

Scope of the Tribunal

232. The MVDT may hear disputes regarding sales of motor vehicles by motor vehicle traders. The claims may relate to the Consumer Guarantees Act 1993 (for example, quality issues and faults with the vehicle), the Fair Trading Act 1986 and Sale of Goods Act 1908 (misleading and deceptive conduct or false representations).

233. Claims may not exceed $50,000, unless consent is given to a higher figure by all parties.

Parties to a Claim

235. One of the parties to a claim must be a motor vehicle trader, whether registered or not. The Tribunal can, if it wishes to, include another party in the hearing if it considers their presence to be necessary to enable the Tribunal to fully determine the claim.

Claim Process

236. Proceedings are commenced by the filing of an application in a prescribed form together with the filing fee (if any) at the Disputes Tribunal. A copy of the application must be sent to the respondent who is given 14 days to submit a report or settle the claim. If the claim is not settled, a hearing date and venue is set. A consumer must present their own case unless they receive permission for someone else to represent them because they are under 18, have a disability or the adjudicator is satisfied that the consumer is unable to appear in person or could not present their case adequately. The representative cannot be a lawyer or an experienced advocate.

Notice Deemed to Have Been Served

238. Under section 142 of the MVSA any notice or any other document required to be served to any person under the Act is sufficiently served if in the case of an applicant for registration, or a registered motor vehicle trader, it is delivered or posted to the address for service, or sent to the fax number or email address provided to the Registrar for the purposes of registration; and in the case of any other person is sufficiently served if it is delivered to the person or is left at that person's last known place of residence or business in New Zealand, or posted to that person's last known place of residence or business in New Zealand.

239. The notice or document is treated as received by that person 2 days after it was sent with regard to a fax or email, or 7 days after it was posted, unless the intended recipient proves that it was not received, and that this was not through fault on their part.

Enforcement of an MVDT Decision and Rights of Appeal

240. Decisions of the MVDT are enforceable by the District Court. If necessary, any party may apply to the District Court to have the Tribunal's decision enforced.

241. Where the amount of a claim does not exceed $12,500, an appeal may be made only on the ground that the proceedings were conducted by the Tribunal in a manner that was unfair to the appellant and prejudicially affected the result.

242. Where the amount of a claim exceeds $12,500, an appeal may be made on the grounds the Tribunal's decision was wrong either in fact or law, or in both fact and law and that the proceedings were conducted by the Tribunal in a manner that was unfair to the appellant and prejudicially affected the result.

Banning Provisions of the MVSA

243. Under section 68(b)(i) a person who has more than once, and within a period of 10 consecutive years, failed to comply with an order of the MVDT, is banned from participating in the business of motor vehicle trading.

Publication of Certain Decisions

244. Where the Tribunal finds against a motor vehicle trader, for the purpose of protecting the public, the Tribunal must publish in the Gazette the name of the individual and their trading name, or the name of the company and the trading name of its motor vehicle trading business, and the amount of any award made against them.

Annual Report

245. The adjudicators must submit an annual report. This report must summarise the claims dealt with, mention any special cases and make any recommendations for amendments to the MVSA.

Implementation

246. The Tribunals Unit of the Ministry of Justice is responsible for the operation of the MVDT.

247. There are currently four Motor Vehicle Disputes Tribunals; three permanent and one travelling Tribunal. There are 3 adjudicators, 2 based in Auckland and 1 based in Wellington. All three adjudicators hear cases in the main cities as well as other cities depending on the demand. Each Tribunal consists of an adjudicator and an assessor. Claims are generally heard at the Tribunal closest to the place where the purchase took place, and in the case of internet sales, at the closest venue to the trader's premises. This is subject to the adjudicator's discretion as there are instances where the hearing is heard in the city where the purchaser resides.

248. The process a consumer follows for bringing a claim to the MVDT usually begins with the consumer contacting the MVDT office by telephone (0800 FORMVDT number). The consumer's query will either be resolved on the telephone or the consumer may request that an information pack and application form be sent to them (the application form is included in the pack). If the consumer submits an application and filing fee to the MVDT, the MVDT will first establish whether it has jurisdiction and the claim will be registered. However, sometimes jurisdiction issues are not established until the application is heard. A copy of the application will then be sent to the trader (to inform them of the claim) and applicant (acknowledging receipt of the claim and informing them of the process).

Summary of Complaints

249. Information provided by the Ministry of Justice Tribunals Unit for the period 15 December 2003 to 30 June 2005, indicates that on average the MVDT 0800 telephone number received 533 calls per month and that 141 information packs were sent out per month. On average 31 applications were filed per month.

250. In the same period the MVDT received a total of 390 claims. More than half of the disputes were filed at the Auckland MVDT.

251. The claims covered a range of issues regarding motor vehicle sales. Eighty-six percent (336) raised quality issues (primarily mechanical fault), 8 percent (33) concerned both quality and misrepresentation, 4 percent (16) concerned misrepresentation only and 1 percent (5) raised other issues. The majority of claims heard at the MVDT are founded upon consumer protections set up in the Consumer Guarantees Act.

252. Thirty two percent (116) of the disputes filed with the MVDT were withdrawn as a result of settlement being reached between the parties before the hearing date. Twenty-seven were yet to be resolved and 247 were resolved at formal hearings.

253. The outcomes of the 247 claims that went to formal hearing were as follows:

254. As at 31 December 2005 there were 59 outstanding cases, 13 were not ready for hearing, 9 were waiting for hearing dates to be set, 17 had hearing dates allocated and 16 were awaiting reserved decisions.

Assessment against the Disputes Resolution Objectives

255. In assessing whether the MVDT is providing consumers with adequate redress in relation to their purchase of motor vehicles, regard must be given to the transition from the Motor Vehicle Dealers Act (MVDA) to the MVSA. The transition to the MVSA has meant that disputes filed with regard to vehicles purchased prior to 15 December 2003 from licensed motor vehicle dealers continued to be dealt with by the MVDT until December 2004. By 31 March 2005 all claims under the previous legislation had been resolved. Thus, there has been less than a year of focus exclusively on the new disputes resolution processes.

Objective: Consumers Have an Informal, Accessible and Low Cost Forum for Redress

256. Consumers now have direct access to the MVDT. This has made the Tribunal more accessible than under the MVDA where the Tribunal could only hear cases referred by the Motor Vehicle Dealers Institute (MVDI).

257. In discussions with stakeholders and in some submissions, however, it has been suggested that there are MVDT access concerns related to:

Filing Fees

258. Under the MVSA, claims must be accompanied by a $50 filing fee whereas under the MVDA, the MVDT 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.

259. Whilst previously access to the MVDT was free, it was also more difficult for a consumer to take a claim to the MVDI because the claimant first had to get through the MVDI complaints processes. 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.

Language

261. It has been suggested that language may create a barrier to accessing information on the existence and function of the MVDT and may be a contributing factor for a consumer choosing not to take a claim before the MVDT.

262. In all MVDT hearings interpreters are provided/allowed if requested by either party. The ethnic diversity of New Zealand and the need to make sure that there is help available to those with English as a second language in accessing the MVDT was also recognised in the advertising programme that occurred between December 2003 and May 2004. A multi-language flyer Check before You Drive was delivered to 300,000 households in low-income areas.

263. Consumer awareness prior to entering the process needs to be lifted, however, and any future campaign or education resource development needs to bear in mind the ethnic diversity of New Zealand. There are various networks established with immigrant communities and use of these networks could be explored.

Place of Hearing

264. It is current practice to hold an MVDT hearing at a venue nearest to where the motor vehicle purchase took place. If the transaction took place over the internet the hearing is held at the MVDT closest to the trader's premises. It has been suggested that it is too onerous on the consumer to travel to where the car was sold and pointed out that by way of contrast the ordinary Disputes Tribunal holds its hearings in the Tribunal nearest to where the claim is made. The Ministry of Justice has advised that there have been instances where the place of hearing has been an issue for the consumer but not enough to warrant having MVDT hearings at every centre. Furthermore, the adjudicators have in the past heard claims in the region where the purchaser resides. If at some future date the jurisdiction of the MVDT was to be changed, issues of location and accessibility would need to be further considered.

Delays in Hearings

265. Various concerns have been raised surrounding how long it takes between a claim being filed and a dispute being resolved by both consumers and traders.

266. Delays in hearing a case can mean that defects with a car are exacerbated by use prior to the hearing. This compounds the problem for both the consumer and the motor vehicle trader who may be required to remedy a fault bigger than that of the original claim. Submissions indicate that trader concern with timeliness may be leading to pre MVDT settlements being offered because this is a cheaper option and less disruptive to ongoing business.

267. As at 30 June 2005, the Tribunals Unit statistics indicate that 363 of the total 390 disputes filed had been resolved or withdrawn, and 27 were still to be resolved. The 247 resolved disputes took an average of 4 months and 17 days from application of claim to dispute resolution.

268. One reason suggested for the delays in the hearing process is the failure of a party to turn up to the hearing. When a party fails to attend, the hearing must be adjourned. Evidence can still be taken but it must then be referred to the trader for comment. If an interim decision is made then it must be issued with a reserved right for the trader to be heard. These processes contribute to delays in final decisions being made.

269. The MVDT procedures should be subject to the rules of natural justice and the MVDT does its utmost to ensure that both parties are informed and have the opportunity to respond so that natural justice can be seen to be done. Schedule 1 clause 2(b) of the MVSA states "the adjudicators must fix the time .... and must notify each party to the application of the time and place fixed". The MVDT makes every effort to ensure that traders are informed of the claims and of the hearing dates. Notices of hearings are sent by registered mail, in instances where a trader has not replied within the 14 day negotiation period. A follow up phone call prior to the hearing date is also made to the parties.

270. There is a fine balance, however, when a trader is deliberately avoiding the process.

271. Currently under the rules of the MVDT the adjudicator may only award costs against any party if the applicant fails to attend a hearing without good cause. 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. As costs cannot be awarded against a trader for not turning up to a hearing, there may be a perverse incentive not to attend. To encourage all parties to attend a hearing, it is recommended that it be possible to also 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.

272. It has also been suggested that delays in the hearing process are caused by the small number of MVDTs. The Ministry of Justice has indicated that statistics do not support this. Apart from one-off claims at small centres, applications are heard within four to five weeks, including the two-week settlement timeframe, after the claim has been received. Delays are experienced in remote areas but this is not due to a lack of MVDTs but to the remoteness of the area and the expense of sending an adjudicator, assessor and clerk with only one case to be heard.

273. The Ministry of Justice has completed an evaluation of the workload of the Tribunal. The Ministers of Justice and Consumer Affairs have agreed to a proposal which will replace the appointment of three part time adjudicators with one-full-time adjudicator and one part-time adjudicator. It is considered that this will enable the Tribunal to schedule and deal with workload demands with a far greater degree of certainty and will improve accessibility of staff to informed advice and information on the merits and status of applications before the MVDT. Given the geographic spread of the claims it is expected that the full-time adjudicator would be based in Auckland and the part-time adjudicator would cover the lower North Island and the South Island.

274. It is also noted that under the MVSA Schedule which establishes the procedure of the MVDT that the adjudicator is given responsibility for many of the administrative functions of the Tribunal. To help facilitate some of the administrative aspects of the Tribunal, which do not require the legal expertise of the adjudicator, it is recommended that the Schedule be reviewed and administrative procedures amended to reflect those of the ordinary Disputes Tribunal, where appropriate.

275. Recommendation: It is recommended that section 14 of Schedule 1, be amended to allow costs to be awarded against any party to a claim, for non attendance at a hearing for no good cause.

276. Recommendation: It is recommended that Schedule 1 of the MVSA be reviewed and administrative procedures amended to reflect those of the ordinary Disputes Tribunal, where appropriate.

Claim Limit

277. 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.

278. The MVDT operates like the ordinary Disputes Tribunal by providing a low cost alternative for consumers with claims below a defined amount to seek redress. 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. This is not to suggest that these disputes do not exist. However, consumers with such claims have little or no chance of having them heard by the MVDT because they are unlikely to get consent from the trader to do so. It is considered that the $50,000 limit is not unreasonable and that it should cover most disputes over motor vehicles. For higher value claims, it is appropriate that they are filed in the District Court.

Awareness of MVDT and Disputes Resolution Regime

279. It has been suggested that consumers are unaware of where to go if they have a problem with their purchase of a motor vehicle.

280. The Motor Industry Association estimates that the consumer complaint rate to MVDT works out at about 1 complaint per 1000 sales/changes of ownership. Currently consumers consult all sorts of bodies on how to seek redress from a motor vehicle trader including the Motor Trade Association (MTA), Citizens Advice Bureaux (CAB) and Ministry of Consumer Affairs' Call Centre.

281. The MTA has a service to help customers using an MTA member. On average their call centre handles 400 calls a month. Ninety percent of complaints are resolved within 24 hours.

282. Consumers are also approaching the CAB about the MVSA. During the period September 2004 to March 2005 CAB received a total of 150 enquiries about the MVSA. Of these enquiries, only 15 were referred to the MVDT. 73 were referred back to the trader. It is not known whether the consumer was informed that the MVDT was available if talking to the trader did not rectify their problem.

283. The Ministry of Consumer Affairs' Call Centre received a total of 587 MVSA related calls from April 2004 to June 2005. This is an average of 2 calls a day. In the recent national consumer survey on awareness and experience of consumer legislation prepared for the Ministry of Consumer Affairs 104 out of 635 people that had bought a car had experienced some type of problem. Of this 104, 42 resolved the problem by going direct to the seller, 32 sought third party advice and none went through the formal MVDT disputes resolution process.

284. From various comments in submissions and discussions with stakeholders, it is apparent that consumer awareness needs to be raised about the operation and process of the MVDT. This needs to include raising consumer's comprehension of the jurisdiction of the MVDT, including that the MDVT hears claims under the Fair Trading Act 1986 and Consumer Guarantees Act 1993 with respect to motor vehicle sales.

285. There also needs to be better awareness of the MVDT process. For example, there seems to be a lack of awareness that at each MVDT hearing there is an industry expert present (the assessor). In particular, industry groups seem to have lack of knowledge of this and therefore have wondered what distinguishes the MVDT from a Disputes Tribunal, making it more suited to hearing claims about motor vehicle sales.

286. One way to raise the profile of the MVDT may be through providing a central contact point for consumers seeking information about their rights and avenues for redress regarding motor vehicle purchases. This could be in the form of a call centre as well as perhaps a well designed website with good links. It is also recommended that there are regular information and awareness campaigns to educate industry and consumers about the MVSA and MVDT.

Objective: Disputes Are Adjudicated by an Independent Party

287. The composition of the MVDT consists of a single neutral adjudicator (a barrister or solicitor of at least 5 years experience) and an assessor appointed from a panel of pre-approved assessors. The assessor's role is one of independent expert witness.

288. Section 83 of the MVSA requires that every adjudicator must be appointed by the Governor-General on the joint recommendation of the Ministers of Consumer Affairs and Justice. These checks are to ensure that the adjudicator is an independent party. Additionally, the assessor must take an oath before the adjudicator that the assessor will faithfully and impartially perform his duties.

289. It would be useful to receive formal feedback from the independent adjudicators as to how they view the MVSA. Section 87 of the MVSA requires adjudicators to submit an annual report. This report should provide important information on the operation of the MVDT as the report must summarise the claims dealt with, mention any special cases and make any recommendations for amendments to the MVSA. Currently the MVSA does not specify the time frame in which the reports are to be submitted. It does not also adequately take account of the fact that where there is more than one tribunal there will be multiple reports. It is recommended that this section be reviewed so that the reports can play a more useful role in informing the Minister of emerging issues.

290. Recommendation: It is recommended that section 87 be amended to provide a timeframe within which the Adjudicators annual reports are to be submitted and to deal appropriately with the receipt of multiple reports.

Objective: All Relevant Consumer Rights Specific to Motor Vehicles and General Law Are Taken into Account in Dispute Assessment

291. The MVDT examines disputes filed regarding alleged breaches in the responsibilities of registered and unregistered motor vehicle traders. It does not concern itself with private sales.

292. The jurisdiction of the MVDT is set out in sections 89-93 of the MVSA. The jurisdiction was widened under the MVSA to allow hearings of claims under the Sale of Goods Act 1908, the Fair Trading Act 1986 (FTA) and the Consumer Guarantees Act 1993 (CGA). These Acts offer good general protections to consumers.

293. The CGA covers all motor vehicles sold by a person in trade that are of a kind ordinarily acquired for domestic, personal or household use. The CGA provides that the vehicle must be of acceptable quality, must be fit for any particular purpose, must match its description, must comply with the sample, the trader must give the consumer good title to the vehicle and the vehicle must be of a reasonable price. Where the trader has breached a provision of the CGA, the consumer has the right to a repair, replacement or refund (depending on the nature of the problem).

294. The FTA provides that persons selling motor vehicles "in trade" must not engage in any conduct that misleads or deceives consumers. Vendors are required to disclose all information they know about a vehicle, especially when that information will be influential in the purchaser's decision making.

296. Statistics provided by the MVDT clearly show that the majority of claims heard at the MVDT are founded upon consumer protections set up in the CGA. The four "warranty" categories under the previous regime were replaced by the general provisions of the CGA and some concern has been expressed that there is no set standard for what constitutes "acceptable quality". It is acknowledged that there is some uncertainty here. It needs to be noted, however, that an important aspect of the CGA protections is that they are specific to the particular aspects of an individual transaction and any generalised determination of "acceptable quality" would detract from this. It is precisely for this reason that the four warranty categories were removed. It may be useful, however, if the MVDT, as apart of its annual report, highlights issues of major legal import.

Extension of Jurisdiction to Finance Arrangements

297. Various groups have suggested there is a need for the jurisdiction of the MVDT to be extended in section 89 of the MVSA to include the Credit Contract and Consumer Finance Act (CCCFA). 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.

298. 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 car under the CGA has been upheld or the consumer is deemed to have suffered loss due to conduct of the trader under the FTA.

299. The CCCFA provides among other things, that consumers must be fully informed in writing, of the conditions of the contract between the lender and the borrower including a "disclosure statement" of key terms and conditions. As a purchaser, the consumer may not have to pay all the charges of the credit sale or loan contract if they do not receive all the contract information within the required time. They may also cancel the financial arrangement within three working days from the date disclosure is deemed to have been made.

300. 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, and there may be some benefit to consumers if these issues could also be considered by the MVDT. At present such a claim would need to be submitted to the ordinary Disputes Tribunal, and if the size of the claim exceeded $7500 the consumer would have to seek remedy from the District Court. (It is considered unlikely that in such cases that the consumer would successfully obtain the other parties consent to an extended claim limit.) It is possible that if the claimant also has CGA issues with the vehicle they could be pursuing claims in the two tribunals, with the same parties at the same time.

301. A vehicle purchase is generally the second largest purchase a consumer makes and the purchase is often made with borrowed funds. Consideration should therefore be given to the inclusion of the CCCFA within the jurisdiction of the MVDT. Such consideration would need to look carefully at the extent to which the CCCFA should be applied: whether it included only the actions of a motor vehicle trader when acting in a role of assisting the financial arrangements or whether the parties to a claim before the MVDT should be widened to include creditors who have made finance available for a motor vehicle transaction. The CCCFA is a recent piece of legislation and the Ministry of Consumer Affairs will be conducting a review of its effectiveness in achieving its objectives. That review could be used to inform the future consideration of including the CCCFA within the MVDT jurisdiction.

302. Recommendation: It is recommended that section 89 be extended to allow the MVDT to also consider claims under the Consumer Credit and Consumer Finance Act 2003.

Objective: The Consequences of Non-Compliance with an Order from the MVDT Are Understood by Traders and Act as a Deterrent to Unethical Behaviour

303. Effective enforcement underpins the whole consumer protection regime of the MVSA. At the moment, it is perceived by both consumers and industry groups that some traders are being allowed to operate with an element of impunity. Part of this perception may arise from the fact that the MVDT has been able to focus solely on MVSA claims for only a short period. It may also relate to the general lack of awareness commented on earlier.

304. However, the MVSA gives the MVDT significant power to make decisions and provides provisions for enforcement of MVDT decisions. There are also important tools that can be used to signal that avoidance type behaviour will not be tolerated. Now that the MVSA has been in operation for two years, the MVDT should consider placing more emphasis on sending clear signals that non-compliance with the MVSA will have detrimental consequences for traders.

305. For example, as noted earlier, concern has been expressed that traders are delaying the process of a claim through the MVDT. While it is understood that the adjudicators wish to give both parties a fair hearing, it is a common perception that some traders are taking advantage of the adjudicators and that they are either failing to turn up to court or complaining they never received notice of the claim and the MVDT is accepting these excuses. Section 142 is quite clear on the conditions under which a notice is sufficiently served and it would be quite appropriate for the MVDT to take a stronger approach towards such traders.

306. Section 15 of Schedule 1 of the MVSA provides for enforcement of MVDT decisions by filing of the decision in the office of the District Court. This offers a further means of consumer protection against traders who ignore MVDT decisions. Many consumers are unaware that this is the way in which they can get an MVDT decision enforced if the trader fails to comply with the decision in the first instance. The package that consumers receive about making a claim does include this information and it is also included in the letter sent out with the final decision.

307. The problems of increasing awareness are well known. The establishment of one central contact point for information about motor vehicle issues may be beneficial.

308. Finally, under section 68(b)(i) of the MVSA, a person who more than once, within a period of 10 consecutive years, fails to comply with an order of the MVDT is banned from participating in the business of motor vehicle trading. While the MVSA places no legal requirement on the MVDT to follow through compliance orders under the Act, it is recommended that, where possible, the Registrar be advised of those traders that contravene an order of the MVDT so that documentary evidence exists in the event that it is considered desirable to make application under section 69 to the District Court for a banning order or to invoke the banning provisions under section 68(b)(i).

Specific Issues

309. Additional issues identified concerning disputes resolution including those raised in submissions and discussions, not addressed above, are now discussed.

Other Jurisdiction Issues

Overlap with the Ordinary Disputes Tribunal

310. Consumers may take a claim involving a motor vehicle sales dispute before the ordinary Disputes Tribunal or the MVDT. There may be compelling reasons for choosing either one venue or the other and these are perhaps not sufficiently outlined in the MVDT information pack.

311. The ordinary Disputes Tribunal can hear claims against registered and unregistered motor vehicle traders, and private sellers. It is currently practice for a Disputes Tribunal claim to be heard in the Tribunal nearest to where the claim is made. The claim may be made under a wide range of legislation, including the Credit Contract and Consumer Finance Act (CCCFA). The limit of a claim before the ordinary Disputes Tribunal is, however, limited to $7500, unless there is mutual consent to a higher claim.

312. The MVDT comparison deals only with motor vehicle disputes involving a motor vehicle trader (whether registered or not - though there may be some difficulty in establishing these facts where the trader is operating illegally). The claim must relate to contraventions of the Consumer Guarantees Act, the Fair Trading Act or the Sales of Goods Act. Currently an MVDT claim is heard at the Tribunal nearest to where the car was sold, which may be some distance from where the consumer lives. However, the MVDT is assisted by a technical expert and the limit for claims is $50,000.

313. The claimant, therefore, has a range of factors (location, jurisdiction, timeliness, value of claim) which may influence where they will seek redress. Depending on the specific nature of the claim the claimant may have a choice (balancing location against specialist expertise), or may be constrained to a particular venue (depending on legislative jurisdiction and the size of the claim).

314. It is important that the information provided about these tribunals clearly outlines their respective responsibilities and jurisdiction. When claimants do have a choice of applying to either the ordinary Disputes Tribunal or the MVDT and there are no compelling reasons for claims to be heard by the ordinary Disputes Tribunal, it is recommended that the transferral of proceedings provisions be utilised. The MVSA has set up the MVDT as a specialist tribunal that can better deal with claims regarding motor vehicle sales because an assessor who has qualifications and knowledge to aid the adjudicator is present at MVDT hearings.

Jurisdiction over Unregistered Traders

315. Submissions to the MVSA review revealed that many in the industry have the misconception that the MVDT does not have jurisdiction over unregistered traders. In fact, the MVSA has jurisdiction over all traders. This means even if a trader has contravened the law by failing to register they can still be brought before the MVDT. This major misconception provides further support for the need for an awareness campaign to both the industry and consumers about the MVDT.

Jurisdiction over Private Sellers

316. From comments made in submissions, it is noted that some in the motor vehicle industry cannot understand the distinction drawn between private sellers and traders. They advocate that the MVSA should also cover private sellers.

317. The exclusion of private sales is primarily historic. The MVDT took over the responsibilities of the Motor Vehicle Dealers Institute, which was an industry controlled body that levied its members to support the disputes resolution process. In addition the scope of the MVDT covers legislation that applies only to goods or services that are supplied "in trade".

318. Consumers who buy privately have very limited rights - the situation is one of buyer beware and the price, and any other terms of the sale, are negotiated informally between the buyer and the seller. Consumers generally accept the greater risk attached to a private sale, in part because they expect to obtain a lower price.

319. In making the transition to a regime that is enforced by government, rather than an industry controlled scheme it has probably been appropriate that the specialist disputes tribunal was limited to sales made only in trade. As all participants become more comfortable with the requirements of the regulatory regime governing the sales of motor vehicles, however, it will be appropriate to give further consideration to the scope and jurisdiction of the MVDT. There are compelling arguments for establishing in the future a single tribunal that would have responsibility for all claims relating to motor vehicles.

Publication of Decisions

320. 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. One adjudicator has advised that, in some instances, there would also be public benefit in publishing decisions which have not been found against the trader and that, as currently written, section 94 precludes this.

321. Recommendation: It is recommended that consideration be given to amending section 94 to allow the Motor Vehicle Disputes Tribunal to direct the publication of a notice of a decision made against the applicant, where there is a public benefit in so doing.

Consumer Redress Post the Motor Vehicle Dealers Fidelity Guarantee Fund

322. This report on the operation of the MVSA was specifically directed to consider the impact, if any, on the removal of the Motor Vehicle Dealers Fidelity Guarantee Fund (the fund).

323. Under the earlier Motor Vehicle Dealers Act, the fund existed to protect consumers when a dealer was unable to pay a compensation order or failed to account for money it held as an agent or failed to meet any other claim arising out of any activity or business of a licensed dealer in its capacity as a dealer. The main reason for such failure was because the company had become insolvent. Financiers were also able to claim against the fund when a motor vehicle they held security over was sold to a third party who was a consumer. The fund tended to be used more by these financiers than consumers - the group intended to be the primary beneficiary of the fund.

324. Since the MVSA has been implemented, cancellation of registration has been commenced against 52 companies. In nine instances, on the trader's application, registration has been restored. The cancellation process is commenced if the Registrar is satisfied that the motor vehicle trader has made been registered by reason of any false or fraudulent representation or declaration, if the application fee for registration has been subsequently dishonoured, if the trader is disqualified for registration under the Act, or if the trader has ceased to carry on the business of motor vehicle trading.

325. In 10 of the above cases, the company's cancellation was for reason of insolvency. None of these companies appear on the record of claims received by the MVDT and the removal of the fund would not therefore have had any impact in these instances.

326. However, there is concern that some companies facing, or having been issued with, a decision against them by the MVDT may have voluntarily ceased trading. In this instance the District Court will not pursue an order and the consumer has no access to remedy. While this situation is no different than that faced by any consumer with a claim against a company that has ceased trading, the relative cost for many, in a motor vehicle transaction is significant.

327. Since the introduction of the MVSA in 2003 the market has been relatively buoyant. If there is some downturn in the future and a contraction in the number and type of operators in the market, it will be important to monitor the impact of insolvencies on consumers.

Phoenix Companies

328. Discussions with stakeholders in the context of this review have highlighted concerns about an emerging trend in the creation of what are known as phoenix companies. This largely involves a trader liquidating one business and then setting up another, primarily to escape any legal obligations or claims against the original business. If a trader goes out of business, any outstanding cases are discarded.

329. Under the MVSA this means that where there may have been a successful prosecution or MVDT claim against the trader, had not the cases been discarded, this will not be entered into the record and would not appear in any future registration screening process. It would however be relevant information as to whether a person was "fit and proper" for the purposes of section 69 of the MVSA.

330. Clearly this type of activity needs to be monitored to establish whether this is a real issue in the motor vehicle industry. One industry group has suggested that outstanding cases be placed in abeyance, for re-issuance if the trader subsequently re-enters the business under the same or a different identity. Other measures could include regular networking by the relevant agencies so that important information and intelligence can be shared.

331. The Insolvency Law Reform Bill will soon be introduced to Parliament. This Bill contains provisions to prevent abuse of phoenix company arrangements. It is understood this will place restrictions on directors of "failed" companies such as forbidding the reuse of company names as well as obligations for the liabilities of the phoenix company.

Concluding Comments on Disputes Resolution under the MVSA

332. The MVSA, through the MVDT, has created a sound dispute resolution process.

333. The MVDT is intended to be an efficient means of redress for consumers and largely, this is the case. There are concerns relating to the frequency and geographic location of hearings, delays in hearings, and lack of both consumer and industry awareness and understanding of the full provisions of the MVDT. This is not unexpected given the short period of operation and the need to fully complete previous claims.

334. Consideration needs to be given to providing wider information on the role of the MVDT and to regularly promoting its existence. The information campaign needs to take into account the ethnic diversity of New Zealand and target all sectors of society as well as emphasising the benefits of the specialist expertise of the MVDT where otherwise there are no compelling reasons to use the ordinary Disputes Tribunal. Similarly the transferral of proceedings powers should be used where otherwise no compelling reasons exist to have the matter heard in the ordinary Disputes Tribunal.

335. The MVDT should have a focus on dealing more firmly with non-compliant traders who flout the processes of the Tribunal so that consumers gain more confidence in the MVDT and thus the wider industry. It will also be important that information is shared across agencies in relation to claims that are made but cannot be pursued because the trader has ceased trading. This will enable better utilisation of the banning powers under sections 68(b) or 69 of the MVSA and will also help to inform any future consideration of whether further protections are needed for consumers, such as the fidelity fund, bonds etc.

336. The MVDT adjudicators are required to submit an annual report to the Minister of Consumer Affairs. These reports should be prepared and forwarded as they are an important source of information on the operation of the MVDT and would assist in the early identification of any deficiencies in the legislation.

337. Consideration should be given to extending the jurisdiction of the MVDT to cover financial arrangements under the Credit Contracts and Consumer Finance Act.

Recommended Amendments to the MVSA in Relation to Disputes Resolution

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

It is recommended that section 14 of Schedule 1, be amended to allow costs to be awarded against any party to a claim, for non attendance at a hearing for no good cause (see discussion paragraphs 265 to 271).

Administrative Procedures of the Tribunal

It is recommended that Schedule 1 of the MVSA be reviewed and administrative procedures amended to reflect those of the ordinary Disputes Tribunal, where appropriate (see discussion paragraphs 272 to 274).

Submission of Adjudicators' Annual Reports

It is recommended that section 87 be amended to provide a timeframe within which the Adjudicators annual reports are to be submitted and to deal appropriately with the receipt of multiple reports (see discussion paragraph 289).

Extension of the Jurisdiction of the Motor Vehicle Dispute Tribunal

It is recommended that section 89 be extended to allow the Motor Vehicle Disputes Tribunal to also consider claims under the Consumer Credit and Consumer Finance Act 2003 (see discussion paragraphs 297 to 301).

Publication of Decisions of the Motor Vehicle Disputes Tribunal

It is recommended that consideration be given to amending section 94 to allow the Motor Vehicle Disputes Tribunal to direct the publication of a notice of a decision made against the applicant, where there is a public benefit in so doing (see discussion paragraph 320).