What are “business addresses”?

Recently I had to get documents sent from a government department in Mulgrave St, Thorndon, Wellington to an Embassy that was also in Thorndon. It was vital to get the documents to the Embassy as soon as possible. As the Embassy was closed by the time the documents were ready for collection Courier Post was used as the government department assured me that the documents would get there in the morning of the next working day. (If they weren’t going to arrive the morning of the next working day I would have arranged for a bike courier to collect the documents and deliver them directly to the Embassy.)

When I used the track and trace the next wording day Courier Post’s website said:

  • Service Type:

Overnight: Delivery target is 9am next working day for business addresses and next working day for residential addresses.

I naturally assumed that as the Embassy was a business address (ie people worked there) the parcel would get there that morning. It didn’t. When I contacted Courier Post I was told that the Embassy was in the “middle of a suburb” so it was regarded as a residential address which meant that the target for delivery was up to 5pm that day. Courier Post said that it is the recipient’s location that determines delivery time, not whether the recipient is a business. But this is not the meaning that I (and others) took from Courier Post’s wording. Granted Courier Post does not guarantee that parcels to “business addresses” will be delivered at 9am, but there is a large difference between aiming to get a parcel to an address by 9am or by 5pm.

Courier Post’s wording is problematic and arguably a breach of sections 9 and 11 of the Fair Trading Act 1986 and needs to be changed. The question is what will it be changed to? It isn’t as easy as saying that suburbs are residential as the postal address for the government department was in a suburb yet Courier Post classed it as being a business address.

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Consultation on Unfair Contract Terms Guidelines

On 17 March 2015 New Zealand’s unfair contracts term law will finally come into force (for the provisions see this and this). Unlike in Australia where both regulators and consumers can challenge terms as being unfair, in New Zealand only the Commerce Commission can challenge terms on the basis that they are unfair. The Commerce Commission has released its draft unfair contract term guidelines. Submissions on the draft guidelines close on 30 September 2014.


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CGA and consequential loss

Fair Go is an excellent consumer affairs TV show. A recent story about damage done to a wooden floor raised a number of issues in respect to the Consumer Guarantees Act (CGA), although the CGA was not mentioned in the story at all.

A consumer wanted to protect his wooden floor against damage from stilettos at a party. He contacted Hirepool and inquired whether it had a suitable flooring he could hire, Hirepool said that yes it did, it had plastic flooring that was suitable for covering and protecting wooden floors. When the consumer went to pick the flooring up, he noticed it had sharp plastic edges, he asked if the plastic flooring was suitable for wooden floors and he was assured that it was. Upon removing the flooring after the party, while there was no damage from the stilettos, the floor was marked heavily by the plastic flooring and it was estimated it would cost $1200 to repair the floor (sanding and the application of polyurethane). Hirepool claimed its terms and conditions stated clearly that the consumer took the risk of damage and therefore it was not liable for the damage. Hirepool merely offered to refund the hirage fee ($75). Hirepool also claimed that many people had used the plastic flooring on wooden floors with no problems (although the plastic flooring was advertised on its website as being “suitable for basic grass coverage”).

Hirepool relied upon the following clause to exclude its liability: “10.1. … the Hirer acknowledges that [Hirepool] has no liability to the Hirer for any direct or indirect or consequential loss or damage … [Hirepool] is not liable for any indirect or consequential loss or damage … suffered by the Hirer…”.

Fair Go was clear it thought that Hirepool was acting unfairly and Hirepool eventually agreed to pay the cost of repairing the floor, but only as a “gesture of good faith”.

Based on clause 10.1 Hirepool was not liable for the damage done to the floor, but clause 10(4) went on to provide that “Nothing in the Contract affects the Hirer’s rights under the Consumer Guarantees Act 1993.” Indeed, even if clause 10.4 had not been present the CGA would still apply as Hirepool could not contract out of the CGA for the contract with the consumer (although it could if the flooring was being hired for business purposes, see section 43).

Was the CGA breached? Section 8 sets out a guarantee of fitness for purpose. That guarantee was breached twice here. First, section 8(1)(a) provides that “the goods are reasonably fit for any particular purpose that the consumer makes known, expressly or by implication, to the supplier as the purpose for which the goods are being acquired by the consumer”.  The consumer had told Hirepool the plastic flooring (goods) would be used on a wooden floor and it was not reasonably fit for that use as it marked the floor. Second, section 8(1)(b) also states that “the goods are reasonably fit for any particular purpose for which the supplier represents that they are or will be fit.” Hirepool stated that the plastic flooring was suitable for use on wooden floors, which it wasn’t as it damaged the floor.

Section 18 deals with remedies when goods fail to comply with the guarantees. Section 18(4) provides that the consumer may obtain from the supplier (Hirepool) damages for any loss or damage to the consumer resulting from the failure which was reasonably foreseeable as liable to result from the failure. It was forseeable that the wrong flooring could scratch a wooden floor. Thus the $1200 was recoverable under the CGA – there was no need to rely upon Hirepool’s good nature.

Fair Go suggested that the reason why the consumer’s floor had been damaged when other floors had not been was because his floor was “a softer type of wood”. However, if the plastic flooring was suitable only for very hard wooden floors, then Hirepool should have made this clear to the consumer when the plastic flooring was being hired.

The wording of Hirepool’s terms and conditions which purports to deny liability and then makes a brief mention of the CGA, is all too common in contracts in New Zealand. Many consumers will be misled as they may not know their rights under the CGA. An amendment is required to the CGA. I suggest that the Australian approach is followed. In Australia it is mandatory for suppliers such as Hirepool to include the following in their terms and conditions/contracts:

“Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.” [Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) (Cth), sch 3, cl 90(2)].

After all, Australia essentially copied our CGA into its relatively new Australian Consumer Law (ACL), it’s time we did a bit of our own copying, especially as so many businesses now supply goods in both New Zealand and Australia.

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The delivery of goods (and its problems)

Increasingly consumers are purchasing goods online. Prior to June 17 2014 if a supplier dispatched goods and the goods were lost, damaged or late in arriving, the consumer had no redress against the supplier or the carrier. (The fault lay with the carrier the supplier used – but the consumer was unable to sue the carrier as the contract for delivery was between the supplier and the carrier – stupid, I know, but that is just the way that the law works – who says anything about the law being fair or according to common sense.) This state of affairs was, not surprisingly, seen as unsatisfactory and section 5A of the Consumer Guarantees Act (“CGA”) has changed things for the better for consumers by introducing a delivery guarantee.

Now if the supplier is responsible for delivering or arranging the delivery of the goods (for example, a consumer buys a tablet online), the supplier is responsible for the delivery of the tablet. (Of course, if consumers are purchasing goods from private sellers the guarantee does not apply.) Almost all goods that a consumer purchases online from suppliers are covered by the CGA and thus the guarantee of the delivery of goods. The question is what is the supplier liable for?

Before looking at the supplier’s liability, the key to the guarantee is that the guarantee is that the goods will be received by the consumer:

  • at a time, or within a period, agreed between the supplier and the consumer; or
  • if no time or period has been agreed, within a reasonable time

Therefore, if a consumer needs goods to be delivered by a date or before a certain date and the supplier agrees to this, delivery after that date will breach the guarantee. If no date is agreed, the time is simply what would be considered “reasonable”.

The remedies for a breach of the guarantee for delivery of goods is different than the other guarantees under the CGA. Remedies are available in two situations only. First, if the failure is of a substantial character the consumer can reject the goods (s5(2)(a)) and obtain at the consumer’s choice either a refund of the purchase price of the goods (s23(1)(a)) or goods of the same type and of similar value to replace the rejected goods if those goods are reasonably available to the supplier as part of the supplier’s stock (s23(1)(b)). Section 21 defines failure of a substantial character as:

  • a reasonable consumer who knew the full extent of the nature of the failure would not have acquired those goods
  • the goods are significantly different from the description under which they were sold, or from the sample or demonstration model
  • the goods are substantially unfit for the purpose they were supplied for and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose
  • the goods are unsafe.

If the consumer’s tablet did not arrive, this would be a failure of a substantial character. The supplier would be required to refund the purchase price of the tablet or replace the table if the supplier had one in stock (the consumer has the choice of which option to take).

The second situation in which a remedy can be awarded is for consequential loss (under s 18(4)). Consequential loss is where the failure causes the consumer loss or damage that was reasonably forseeable. For example, say the consumer who had purchased the tablet intended to use that tablet to watch movies on flights, but because the consumer did not have the tablet she had to pay to watch movies on the flights the the supplier would be liable to refund the cost of purchasing the movies on the flights.

So far so good. The problem with the guarantee; however, is that often goods are damaged en route to consumer. The Select Committee on page 11 of its Commentary on the Consumer Law Reform Bill stated that:

“We recommend inserting into new clause 35A a new section 5A of
the Consumer Guarantees Act as a more precisely focused way of
increasing protection to consumers. This section would provide a
new delivery guarantee, to the effect that when a supplier delivered
or arranged delivery of goods to a consumer, the goods would have to
be received by the consumer when agreed (or in a reasonable time),
and the acceptable quality guarantee in section 6 of the Consumer
Guarantees Act would apply at and from the time when the goods
were actually received by the consumer.”

It is clear to me that the Select Committee by using the words “the acceptable quality guarantee in section 6 of the Consumer Guarantees Act would apply at and from the time when the goods were actually received by the consumer” that if the goods were damaged en route then to the consumer then the acceptable quality guarantee would be breached, the supplier would be liable, and the normal consequences under the CGA would flow.

The problem is that the actual wording of section 5A doesn’t make supplier liable for damage to goods only late or non delivery. But it seems absurd that the supplier would be liable for non or late delivery, but not for damage caused to the goods.  The courts could use the purposive approach and the Select Committee’s observation to make the supplier liable for damage. On this reading, a tablet with a cracked screen would be a failure of a substantial character as no consumer would purchase a tablet with a cracked screen. With the tablet the consumer would have the choice of obtaining a refund for the purchase price of the tablet, or receive a replacement tablet (if the supplier still has one in stock).

The question, of course, is whether the courts will take a purposive view of the delivery guarantee. Not to impose liability on suppliers for damage caused en route to consumers would leave consumers relatively unprotected and would continue with the tradition of the law failing to accord with common sense.

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The (invisible) Telecommunications Disputes Resolution (TDR) Scheme

The Telecommunications Disputes Resolution (TDR) scheme provides a free service to consumers when they have disputes with telecommunication companies (telcos) that are members of TDR (while the large telcos are members of TDR some of the smaller ones are not). In addition to hearing disputes about telco’s services, TDR also hears disputes over faulty mobile phones that telcos supply. The problem is that most people do not know about TDR and many are paying and often taking time off to work to go the Disputes Tribunal when the TDR can hear and resolve the dispute for free. Indeed, as Chris O’Connell, TUANZ acting chief executive, has noted, the Australian Telecommunications Industry Ombudsman (TIO), the Australian equivalent of the TDR, hears substantially more disputes (36,256 for the first quarter of 2014 compared to the TDR’s 840 received so far this year).


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Increase to the limit Disputes Tribunal can hear long overdue

On 1 August 2009 the Disputes Tribunal’s limit to hearing disputes was raised from a paltry $7500 to $15,000 (or $20,000 if both parties agree) by section 7 of the Disputes Tribunals Amendment Act 2009. The $7500 limit had been described as ‘a nonsense’ and it was argued that the Disputes Tribunal’s jurisdiction be increased to $25,000 or even $50,000. While $15,000 is not exactly $50,000 it was still better than nothing.

In December 2013, Judith Collins (as Minister of Justice), proposed increasing the current limits of $15,000/$20,000 to $30,000. Legislation was planned to be introduced this year (2014); however, none has been forthcoming and it is unlikely for anything to be introduced before the election.

Collins’ arguments for the raise are convincing and compelling, they include:

  1. For disputes above $15,000, people are: cutting down the amount claimed so the Disputes Tribunal can hear the dispute; attempting to resolve the dispute privately (which isn’t a bad thing); giving the dispute up; or going to the District Court. (Currently in fewer than 1% of the disputes heard by the Disputes Tribunal do the parties agree to increase the limit to $20,000).
  2. It is considerably more expensive and time consuming to go through the District Court.
  3. It would bring New Zealand into line with comparable jurisdictions, in Queensland and Victoria small claims procedures have a maximum claim level of $AUS25,000. In Canada the most common limit is $CAN25,000.

Whatever the outcome of the election, I hope that common sense prevails and the limit is raised to $30,000.

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Consumer Law Reform (at last) for New Zealand

June 17 was a momentous day for New Zealand’s consumer law as a number of key reforms came into force. I will be blogging about the changes over the next few weeks. In the meantime for a good summary see this from Consumer NZ. This quiz (again from Consumer NZ) is fun to take.

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