Welcome to Chapman Tripp’s consumer law update for March

Our monthly review helps you to keep tabs on consumer law developments in New Zealand and overseas. This edition reviews updates and developments from the  NZ and UK courts and the New Zealand and Australian consumer regulators. We also look at some recent market developments.

Cases

New Zealand Courts

Wellington City Council v Dallas [2014] NZCA 631

At issue was a leaky house built by Kingdom Residential Housing Ltd (Kingdom). The home owners sued Wellington City Council for defects in the house’s construction. The Council in turn sued third parties involved in the construction process, including Mr Dallas, the former managing director of Kingdom. It alleged that Mr Dallas had been misleading by stating that the kick outs on the house had been completed by a Kingdom plumber and that the house complied with the Building Act 1991.

The High Court found that Mr Dallas did not breach s 9 of the Fair Trading Act.

But the Court of Appeal reversed the High Court’s decision, saying that the High Court had not asked the right question. It had asked whether the Council’s reliance on Mr Dallas was reasonable but the test, under  s 9 of the Act, is whether a reasonable person in the Council’s position and with characteristics which Mr Dallas knew or ought to have known the Council to have, would likely have been misled or deceived by the relevant statements.

Mr Dallas raised the “mere conduit” of information defence but the Court rejected this argument on the basis that Mr Dallas did not make plain that he was merely passing on information. Mr Dallas’ letter responding to the Council’s questions began with the sentence, “I have worked through your letter and have numbered your points along with the information needed as follows”. The Court found that, through this statement, Mr Dallas presented “himself as having worked through the issues and as having personal involvement in or knowledge of the solutions to the Council’s requirements”.

The Court concluded that there should be a 50% reduction in liability because the Council failed to follow its usual process of checking that the kick outs were actually installed.

Link: Wellington City Council v Dallas

United Kingdom Courts

Typo by UK Companies House causes a 124 year old business to collapse

The English High Court has found that the UK Companies House (equivalent to our Companies Office) is liable at common law for a clerical error which caused a company’s insolvency. In this case, the Companies House wrongly listed Cardiff engineering firm Taylor & Sons Ltd as being in liquidation. The mistake was caused by a Companies House clerk who, against correct internal procedures, registered a winding up order without having the company registration number as a reference. Once on the website, the incorrect information was on-sold to credit reference agencies.

The Companies House amended the error on its website but found that it had no mechanism to recall the information that had been on-sold.

The case is a timely reminder to all businesses to check it carefully the accuracy of information before uploading to the internet where it can be viewed by the world.

Link: Sebry v Companies House and the Registrar of Companies

Legislation

New unfair contract terms regime

The new unfair contract terms (UCT) provisions of the Fair Trading Act will come into force on Tuesday, 17 March 2015. They will apply to standard form consumer contracts entered into on or after that date and to existing standard form consumer contracts (except insurance contracts) that are renewed or varied on or after 17 March 2015.

The Commerce Commission has published its final Unfair Contract Terms Guidelines, which set out its intended approach to enforcing the new UCT provisions. The Commission is also currently developing a fact sheet for consumers that will enable them to identify unfair contract terms. The fact sheet will be released in the near future.

Link: Chapman Tripp commentary – unfair contract terms

Link: Commerce Commission’s unfair contract terms guidelines

New regime for repossession agents

All repossession agents, as well as their employees, must be registered and licensed from 6 June 2015. Those who breach the new laws can be liable for fines up to $40,000 under the Private Security Personnel and Private Investigators Act.  The mandatory licensing is one of a number of changes that increase consumer protection under the Credit Contracts and Consumer Finance Amendment Act 2014 (CCCFA). Under the CCCFA, a lender who uses an unlicensed agent will also be liable on conviction for a fine of up to $600,000.

Link: Stricter laws for repossession agents

Commerce Commission

Commission probes Air New Zealand sales of insurance on an “opt-out” basis

The Commerce Commission has confirmed that Air New Zealand is being investigated over possible misleading or deceptive conduct in the way it sells insurance with air fares.  Presently, insurance is being sold to customers on an “opt-out” basis.

Link: Commission probes Air New Zealand sales of “opt-out”insurance

Link: Commission probes Air New Zealand sales of “opt-out”insurance

Advertising Standards Authority (ASA)

The ASA has partially upheld a complaint against an advertisement by the Greater Wellington Regional Council (GWRC) in the Hutt News community newspaper promoting the Local Government Commission’s draft proposal for the re-organisation of the Wellington region.

The ad presented a mix of statements within speech marks which purported to quote the Commission’s draft proposal but which were not in fact direct quotes. The Hutt City Council complained to the ASA that the ad was misleading. The ASA agreed, saying readers had the right to assume statements within speech marks were “a verbatim quote from the draft proposal, not what the advertiser had decided was the ‘essence’ of the Commission’s plan.”

The ASA reiterated that while advertisers are permitted to express opinions in advocacy advertising, the expression of opinion must be robust and clearly distinguishable from facts.

Link: ASA’s decision – Greater Wellington Regional Council

Australian Competition and Consumer Commission

Regulatory action

Fisher & Paykel to pay $200,000 for false or misleading extended warranty representations

The Federal Court has ordered by consent that Fisher & Paykel Customer Services Pty Ltd (Fisher & Paykel) made a false or misleading representation in the course of offering an extended warranty to consumers.  The Court also imposed a pecuniary penalty of $200,000.

From 2011 to 2012, Fisher & Paykel sent letters to customers who had purchased a Fisher & Paykel appliance inviting them to purchase an extended warranty. The statement included a number of declarations, including: “Your Fisher & Paykel appliance is now a year old, which means that you have 12 months remaining – after that your appliance won’t be protected against repair costs.”

The Judge held that the letters contained the false or misleading representation that consumers would not be protected against repair costs for their appliance after two years from the date of purchase, unless they purchased the extended warranty. In reality, under Australian Consumer Law, consumers may be protected beyond the manufacturer’s warranty period without the purchase of an extended warranty.

Link: ACCC v Fisher & Paykel Customer Services Pty Ltd [2014]FCA 1393

Origin Companies fined for false and misleading representations

The Federal Court has ordered by consent that Origin Energy Ltd and two of its subsidiaries (Origin) pay penalties totalling $325,000 for making false or misleading representations concerning the level of discount that residential consumers would receive under the DailySaver energy plan.

The rates used to calculate usage charges under the DailySaver energy plan, to which the discount applied, were higher than the rates under Origin’s subsidiaries’ standard retail contracts. As a result, consumers who signed up to the DailySaver energy plan effectively received a reduced discount.

Link:  Origin companies fined for false and misleading representations

Public Statement

ACCC Chairman Rod Sims has outlined the Commission’s compliance and enforcement priorities for 2015. The top priorities include:

  • monitoring truth in advertising
  • improving online businesses’ responsiveness to consumer complaints about either the product itself or delivery
  • advocating for the court to impose penalties at a level which achieves both specific and general deterrence, and
  • release of industry codes, for example the introduction of a Code of Conduct to address unfair practices in the grocery sector.

Link:  Priorities 2015

Australian Securities and Investments Commission

Federal Court of Australia orders record penalty against payday lender

The Federal Court has awarded record penalties totalling $19 million against a payday lender and a loan funder for breaches of their responsible lending obligations and engaging in unconscionable conduct. This is the first Australian case brought under the responsible lending provisions.  New Zealand’s responsible lending provisions come into force on 6 June 2015.

Link: Chapman Tripp commentary – responsible lending regime

Market news

US Senator’s report reveals automobile privacy vulnerabilities

A report released by US Senator Markey suggests that carmakers are building wireless technologies, such as Bluetooth, Wi-Fi and navigation systems, into cars without enough security to protect personal information. It has also been reported (January 2015) that about 2.2 million BMW, Mini and Rolls-Royce vehicles have a security flaw that leaves them vulnerable to hackers. Carmakers have acknowledged the need for greater protection for the consumer’s privacy.

Link: Tracking & Hacking: security and privacy gaps put drivers atrisk

UK Government call for information on the commercial use of consumer data

The UK Government wants feedback on how businesses collect and use data for commercial purposes. The consultation closes on 6 March 2015. We will keep you informed of developments.

Link: Commercial use of consumer data

EU Art 29 Working Group releases report on website cookie usage

A survey of 478 popular European websites, across the e-commerce, media and public sectors, has shown that many website operators inform their users about cookies but that:

  • expiry dates are often excessive, and
  • the websites still have more work to do on gaining valid consent for their use of cookies.

Link: Report – Cookie sweep combined analysis