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Tokeley, K --- "Late Departures: Consumers' Rights Under the Consumer Guarantees Act 1991" [2003] OtaLawRw 7; (2003) 10 Otago Law Review 411

Late Departures:

Consumers’ Rights Under the Consumer Guarantees Act 1993

Kate Tokeley[*]

A late departure is a common and frustrating experience for passengers on trains, buses, ferries and aeoroplanes. Sometimes transport services can run hours late and disrupt the holiday plans of hundreds of passengers and their family or friends. This article explains how the Consumer Guarantees Act 1993 provides some passengers who experience a late departure with a right of redress against the transport operator. It also assesses the practical reality of obtaining redress and considers some options for improving passengers’ access to justice.

1. Do the Guarantees in the Consumer Guarantees Act 1993 Apply?

The Consumer Guarantees Act 1993 provides the consumer with rights of redress against suppliers and manufacturers for non-compliance with a set of statutory guarantees. In respect of the supply of services, the guarantees apply whenever “services” are “supplied” to a “consumer”.[1] The definitions of “supply”[2] and “services”[3] given in section 2(1) are broad enough to cover the supply of transport services.

The final and most significant requirement is that the services must be supplied to a “consumer”. A “consumer” is defined in section 2(1):

"Consumer" means a person who—
(a) Acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption; and
(b) Does not acquire the goods or services, or hold himself or herself out as acquiring the goods or services, for the purpose of—
(i) Resupplying them in trade; or
(ii) Consuming them in the course of a process of production or manufacture; or
(iii) In the case of goods, repairing or treating in trade other goods or fixtures on land:

The excluded purposes in part b) of the definition are not relevant to the supply of transport services. Whether or not persons who acquire transport services are consumers under the Act depends on whether the transport services are the type of services that are ordinarily acquired for personal, domestic or household use. In Nesbit v Porter the Court of Appeal interpreted the word “ordinarily” as meaning “as a matter of regular practice or occurrence” or “ in the ordinary or usual course of events or state of things”.[4]

Ferry, train, and bus services are, as a matter of regular practice, acquired for personal use. Although these services might sometimes be acquired for business purposes, they are more commonly acquired for personal use. Domestic and international[5] airline services are more likely than trains, ferries and buses to carry business passengers. Nevertheless, the airline services are “ordinarily” acquired for personal use in that it is a regular occurrence for passengers to use the services for personal use. The Court of Appeal in Nesbit v Porter concluded that the fact that a good or service is ordinarily acquired for business purposes does not exclude the possibility that that good or service is also ordinarily acquired for personal use.[6]

Those passengers who acquire a transport service for business use will be covered by the Act unless the transport operator has contracted out of the Act. Contracting out of the Act in respect of passengers who acquire the services for personal use is not permitted.[7] The details of the rules relating to contracting out of the Consumer Guarantees Act are discussed further in part 4 below.

Section 3 of the Consumer Guarantees Act states that the Act binds the Crown. So if at any time a transport service is owned and operated by the Crown, the passengers of that service have the same rights of redress against the Crown as they would have against a privately owned transport service.

According to the section 2(1) definitions, passengers are “consumers” “supplied” with the “service” of transport. They are therefore protected by the guarantees provided by the Consumer Guarantees Act 1993.[8]

2. When will the Guarantee have been breached?

Obviously if a transport service is simply running a few minutes late the Consumer Guarantees Act will not have been breached. The Act does not provide that service suppliers will be strictly liable for all imperfections in the provision of a service. However, if a transport service is significantly delayed it is possible that the transport operator will have breached the guarantee as to reasonable care or the guarantee as to fitness for purpose. The guarantee as to completion within a reasonable time in section 30 is irrelevant because it does not apply to situations where the time for the service to be completed has been fixed by the contract. In the case of transport services the time of completion is fixed by the contract in that the parties will have agreed that the transport service is to arrive at its destination in close to the scheduled amount of time.

2.1 Section 28 – guarantee as to reasonable care

Section 28 of the Consumer Guarantees Act provides that:

Subject to section 41 of this Act, where services are supplied to a consumer there is a guarantee that the service will be carried out with reasonable care and skill.

The section does not elaborate further on the degree of skill and care required. It is reasonable to assume that, like the common law of negligence and contract, the standard of skill and care required is not that which is reasonable for any person but what is reasonable and appropriate to a person of the defendant’s professional status.[9] However, this should not mean that an industry can rely on usual industry practice or Codes of practice as always setting the standard of reasonableness.[10] The Courts are the final arbiters of the standard of reasonable care. Matters of usual industry practice or Codes of practice are used by a Court simply as evidence of reasonableness in a particular case.

If a transport service is delayed because the service has not been carried out with reasonable care and skill, then section 28 has been breached. However, if the transport service is delayed due to other reasons such as bad weather, reasonable error or unavoidable mechanical problems, then section 28 will not have been breached because the late departure is not due to a failure of the transport operator to take reasonable care and skill.

The difficulty for passengers is that they may not know the exact reason for a delayed departure. Sometimes passengers are given no explanation for a late departure. Even if the transport operator is asked directly for an explanation, it is unlikely openly to admit to negligence. Unless a passenger is able to prove that negligence was the cause of the late departure, it will be easier to pursue a claim under section 29.

2.2 Section 29 – guarantee as to fitness for purpose

Section 29 of the Consumer Guarantees Act requires that the service and any product resulting from a service must be:

(a) Reasonably fit for any particular purpose; and
(b) Of such a nature and quality that it can reasonably be expected to achieve any particular result,—
that the consumer makes known to the supplier, before or at the time of the making of the contract for the supply of the service, as the particular purpose for which the service is required or the result that the consumer desires to achieve, as the case may be, except where the circumstances show that—
(c) The consumer does not rely on the supplier’s skill or judgment; or
(d) It is unreasonable for the consumer to rely on the supplier’s skill or judgment.

The section requires that the consumer “makes known” to the supplier the particular purpose or result for which the service is acquired. Curiously, where goods rather than services are supplied to a consumer, section 8(1)(a) requires that the consumer “makes known, expressly or by implication” the purpose for which goods are being acquired. The question arises as to whether the phrase “makes known” in section 29 includes impliedly makes known. In ordinary usage the phrase “makes known” can include impliedly makes known. It is only in contrast to section 8 that the doubt arises. The consumer protection objectives of the Act suggests that “makes known” should be interpreted as including impliedly make known.[11]

Passengers of transport services do not always expressly state that they require the transport service for the purpose of getting them from A to B in close to the scheduled amount of time. However, it is possible for a consumer to impliedly make known the purpose for which a good or service is purchased simply by the fact of purchase. Thus, in Taylor v Combined Buyers Ltd the Court pointed out that if nothing is said to the contrary then it can be assumed that the seller knows that “food is bought for the purpose of being eaten, and motor-cars for the purpose of locomotion”.[12] In the case of transport services, the transport operator represents that the service will arrive at its destination at a particular time. The passengers therefore impliedly make known, by the fact of embarking on the journey, that they require the transport service to be fit for the particular purpose of arriving at the destination more or less at this scheduled arrival time. Subject to two exceptions, there will have been a breach of section 29 if departure is significantly delayed, even if the transport operator took reasonable care.[13]

The first exception is where the failure to comply with section 29 is only because of an act or default or omission of, or any representation made by, any person other than the supplier or a servant or agent of the supplier.[14] So, for example, if a train is delayed because a passenger negligently pulls the emergency stop handle, then there will be no breach of section 29. The second exception to liability under section 29 is where the failure to comply with the guarantee is due to a cause independent of human control.[15] Thus, if a ferry is delayed because of stormy weather then there will have been no breach of section 29. Where a late departure is due to a mechanical fault, the transport operator cannot escape liability simply by claiming to have taken reasonable care. Unless the mechanical fault was entirely beyond human control the operator will have breached section 29.

The passenger’s case under section 29 is especially strong in cases where the transport operator represents that the particular transport service is desirable (and thus more expensive) because it is speedier than its regular counterpart. If a “fast ferry” or a “speedy bullet train” is delayed and consequently takes as long (or longer) to make the journey as an ordinary ferry or train, then the service is not fit for its purpose. The passengers have not received what they paid for and section 29 has been breached.

The exact amount of time that the transport service must be delayed before a breach of section 29 has occurred is debatable. It is likely to depend on the reasonable expectations of passengers. One relevant factor is likely to be the length of the journey. A half an hour delay on a ten-hour journey is clearly less significant than a half an hour delay on a twenty-minute journey.

3. Remedies

Section 32 sets out the remedies available to a consumer who has been supplied with a service in respect of which a supplier has breached one of the guarantees in sections 28 to 30. Section 32(b) sets out the remedies for those failures that cannot be remedied or are of a substantial character. In the case of a delayed transport service it is not possible to remedy the failure.

Section 32(b) allows the consumer, not the supplier, to choose the remedy. The consumer is entitled either to cancel the contract under section 32(b)(i) or to obtain damages from the supplier to compensate for any reduction in value of the product of the service under section 32(b)(ii). The reference to “product” makes most sense if interpreted widely as meaning any output or outcome of a service rather than requiring a tangible good.

The aggrieved passengers are likely to be entitled to the same amount of money regardless of whether they choose a remedy under section 32(b)(i) or 32(b)(ii). If the consumer chooses to cancel the contract under section 32(b)(i), he or she will, prima facie, be entitled to recover a full refund of the money paid for the journey. However, section 39 gives the Court or the Disputes Tribunal the power to make various orders granting relief if it is just and practicable to do so, including an order to permit a supplier to retain part or all of the money paid in respect of services under the contract. In considering whether to make such an order and on what terms, the Court or Tribunal must have regard to several factors including any benefit or advantage obtained by the consumer by the supply of the service and any other matters that it thinks fit.[16]

These ancillary powers under section 39 allow the Court or Tribunal to recognise the fact that the operator has transported the passengers safely to their destination even though the late departure amounted to a breach of the Act. The Court or Tribunal is likely to order that the transport operator be permitted to retain that part of the money paid which represents the value of the safe arrival of the passengers.[17] The resultant partial refund is likely to be the same amount as any compensation for reduction in value of the outcome of the transport service that the passenger is entitled to under section 32(b)(ii).

In addition to the above remedies, the passengers are also entitled to obtain a remedy for resulting foreseeable, consequential loss under section 32(c). This section allows the consumer to obtain damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the product of the service), providing it was reasonably foreseeable. So, for example, since in some circumstances it will be reasonably foreseeable that a late departure will result in some passengers missing connecting transportation or incurring the expense of an additional night of accommodation, then these passengers will be entitled to damages to compensate for this loss too. In some cases it may also be reasonably foreseeable that a late departure that amounts to a breach of the Act will result in a significant degree of distress and inconvenience. The passengers may also, therefore, be able to claim compensation for this loss.[18]

4. Contracting Out

The right to contract out of the Consumer Guarantees Act 1993 is very limited. Section 43(2) allows the transport operator to contract out of the Act only if the transport services are acquired by a particular consumer for business purposes. Usually the majority of passengers using public transport are using it for personal use and the transport operator has no opportunity to contract out of the Act in respect of these passengers.

If the transport operator attempts to contract out of the Act otherwise than in accordance with section 43(2), the provisions of the Act will have effect notwithstanding the attempt to contract out. Moreover, transport operators that purport to contract out of the Act otherwise than in accordance with section 43(2) will have committed an offence under section 13(i) of the Fair Trading Act.[19] The offending supplier or manufacturer is liable for a fine of up to $30,000 in the case of an individual, and up to $100,000 in the case of a body corporate.[20] Section 13(i) prohibits a person in trade, in connection with the supply or possible supply of goods or services or the promotion of goods or services, from making any Ò ... false or misleading representation concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedyÓ.

Although it is unlikely that a transport operator will blatantly attempt to contract out of the Consumer Guarantees Act, it is not uncommon for a general exclusion clause inadvertently to purport to contract out of the Act. An offence will have been committed whether or not the transport operator intended to contract out of the Act. For example, a transport operator might include the following paragraph in the terms and conditions printed on the ticket:

If for any reason the sailing/flight/train journey is delayed, the (transport operator) will not be liable for any loss suffered as a result of the service departing after the scheduled time.

This paragraph does not mention the Consumer Guarantees Act. However, it does suggest to passengers that there is no legal entitlement to a refund or compensation in any case of a late departure. As the preceding discussion has explained, this is incorrect. The Consumer Guarantees Act, in certain circumstances, gives passengers who experience a late departure the right to a partial refund and possibly compensation for consequential loss. The paragraph is therefore likely to be misleading and the Courts could find that the transport operator is illegally purporting to contract out of the Act.

Nevertheless, it is possible that in certain circumstances the above exclusion clause might effectively limit liability under section 29 (the guarantee as to fitness for purpose). For example, if the transport service were sold as a less expensive option specifically because it offers no guarantees as to the time of arrival then the guarantee as to fitness for purpose will not be breached if the transport service is delayed. This is because the supplier has not represented that the service is fit for arriving at its scheduled arrival time. However, there is still the possibility that the guarantee as to reasonable skill and care might be breached. It therefore remains misleading to passengers to suggest that they never have a right to compensation in respect of a late departure.

Transport operators should be careful when drafting exclusion clauses to make it clear that passengers’ rights and remedies under the Consumer Guarantees Act remain intact. If the transport operator wishes to contract out in respect of business passengers only, then this needs to be stated clearly in the exclusion clause.

5. Access to Justice

As the above discussion shows, in certain circumstances, passengers who experience a late departure are entitled to redress. Unfortunately, the existence of this right to redress does not ensure that redress will be obtained. Passengers who experience a late departure face several barriers to accessing justice.[21]

Probably the most significant barrier for passengers is a lack of knowledge about their legal rights. Many passengers are unlikely to be aware that they are entitled to redress. Moreover, most passengers will naturally, albeit erroneously, assume that a clause on the ticket that purports to exclude liability for late departures will have the effect of excluding such liability. Even if some passengers are aware that they are likely to have some legal rights they may not know how to discover the specific content of these rights or how to enforce them. In most instances seeking advice from a lawyer on the matter is an unrealistic option given the low monetary value of the claim. In addition, it may be difficult to discover the exact reason for a late departure and this information may be necessary in order to establish a right to compensation.

Assuming that a passenger is aware of his or her rights, there are further barriers to accessing justice. The unequal bargaining power between the passenger and the transport operator is likely to impede the passenger’s attempts at accessing justice. The passenger may feel intimidated or embarrassed about making a complaint. Even if the passenger is sufficiently confident to make a complaint it might be difficult to identify the correct person to whom a complaint should be made. The management is unlikely to be present on the mode of transport and, when attempting to make a complaint over the telephone, it might be difficult to talk directly to any person with the power to resolve the problem. In addition, the transport operator is likely to have more knowledge about legal procedures than most passengers. This puts the passengers at a comparative disadvantage in the dispute resolution process.

There is also a degree of social conditioning in our society that inhibits people from making complaints. People are afraid of being seen as a “whinger”. Many of the passengers on a delayed journey are likely to complain to their friends and family about the poor service but will not make a complaint to the transport operator.

A further barrier to accessing justice is the time, effort and money required to pursue a claim. If the transport operator does not readily provide redress on request, the passenger must be motivated enough to take the claim to the Courts or the Disputes Tribunal. The amount of each individual passenger’s claim is likely to be so small that pursuing the claim will be seen as an unrealistic option for most passengers. Although the Disputes Tribunal is a cheaper and speedier alternative to the Court system, the passenger still needs a significant degree of energy and time to pursue this option.[22] Moreover, the cost of taking the claim to the Tribunal, although lower than the cost of a Court action, may in some cases be almost as much as the amount that the passenger wishes to claim from the transport operator. For example, if a passenger simply wants a refund of $40 to represent the reduction in value of the delayed transport service, he or she will have to pay $30 to have the dispute heard in the Disputes Tribunal. In these cases it is not worthwhile for passengers to attempt to assert their legal rights unless they are doing so for reasons of principle rather than a desire to be compensated.

The small amounts of money involved might lead one to conclude that the passengers’ claims are unimportant. However, this conclusion fails to appreciate the cumulative effect of a significantly late departure. Although each claim is small, the total amount of harm caused is significant.[23] If the passengers have no ability to access their legal rights, the transport operator is able to escape liability. The passenger, although having paid money for a service of a particular standard, is relatively powerless in the face of a less than acceptable quality of service. Liability should not cease simply because a person has caused a small amount of harm to a lot of people rather than a lot of harm to a single person.

The barriers to accessing justice mentioned above are of particular concern in light of the fact that the transport industry is largely dominated by monopolies. Passengers who are dissatisfied with the quality of service that they receive from a particular operator often have no alternative but to continue using the same operator for future journeys (unless they switch to a different mode of transport). Consequently, the forces of competition cannot be relied upon to coerce transport operators into reducing the occurrence of late departures. The situation would be improved by an increase in access to justice for passengers. If passengers were able to obtain redress relatively easily for late departures, this would provide a powerful incentive to transport operators to keep the occurrence of late departures to a minimum.

6. Possible Solutions to the Access to Justice Problem

6.1 Education

The most significant barrier to accessing justice for late departures is passengers’ lack of knowledge about their rights. It would therefore be useful to attempt to break down this barrier by educating passengers about their rights. Passengers should know not only their substantive rights but also about the availability of the Disputes Tribunals as an avenue for resolving a dispute. Educating passengers about their rights is a difficult task, especially since many passengers are unlikely to be interested in the information until the time that they are faced with a significantly delayed departure.

The Consumer Guarantees Act 1993 provides a reasonably clear statement of consumers’ rights. However, its existence does not remove the problem of consumers’ lack of knowledge about their rights. Statutes are written so that people are able to gain knowledge about the law that governs them and yet many people are probably unaware of how to find a particular statute. In addition, the degree of detail required to make a sound and workable statute often means that the information is not presented in a simple, readable way with examples and directions about whom to ask for further information. It is therefore important to compile easily digestible information and make it readily available to consumers.

There are several options for educating passengers about their rights. The Ministry of Consumer Affairs could publish a pamphlet specifically referring to transport services and consumers’ rights. This would work best if the pamphlet were free of charge and available at airports, bus stations and train stations etc. The pamphlets could also be made available at public libraries and citizens’ advice bureaus. Another strategy would be to make it mandatory for transport operators to put signs up in transport depots outlining passengers’ rights under the Consumer Guarantees Act or to include this information on the travel tickets.

Passengers’ lack of knowledge about their rights is in part caused by the exclusion clauses used by some transport operators. These exclusion clauses can mislead passengers about their rights. Transport operators need to analyse all their exclusion clauses in light of the Consumer Guarantees Act. The clauses must not give passengers the impression that they have no legal rights in all cases of a late departure. If the operator wishes to exclude liability in respect of its business passengers then the exclusion clause must make it clear that the exclusion is limited in this way.

If passengers are aware of their legal rights they are more likely to be confident in asking the transport operator for redress. Likewise, the transport operator is more likely to award redress if the complainant is confident and well informed. Unfortunately, no matter how well informed a passenger is about his or her rights, if the transport operator refuses to award compensation, the passenger is relatively powerless. The Disputes Tribunal is a possible forum for resolving the dispute but the aggrieved passenger must have the time, money and inclination to pursue this option. As was mentioned above, pursuing a claim is not a realistic option for most passengers.

6.2 Industry self-regulation

In some instances, transport operators self regulate for delays. In other words, the transport operator voluntarily offers the passengers compensation in the form of overnight accommodation and meal vouchers etc. Although these forms of compensation are important there are two objections to relying on self-regulation to resolve passengers’ access to justice problems.

First, the compensation offered by the transport industry often fails to match up to the compensation that a passenger is entitled to under the Consumer Guarantees Act. If the Act has been breached the passenger is entitled to a partial refund of the ticket price in addition to accommodation and meal vouchers. Transport operators seldom voluntarily offer to award any refund. Secondly, self-regulation is by its very nature a voluntary process and therefore industry members who operate in the least reputable manner are the very ones who will fail to establish a self-regulatory scheme.

6.3 An industry ombudsman

One option for improving access to justice for passengers would be to establish a transport industry ombudsman. Ombudsmen schemes have already been established for the banking industry and the insurance and savings industry.[24] An Electricity Complaints Commissioner has also recently been established and operates in essentially the same way as an ombudsman scheme. A transport industry ombudsman scheme could deal with all passenger complaints including those relating to late departures.

The aim of an ombudsman scheme is impartially to assist consumers in resolving their complaints against participating industry members. The reason for such schemes is that consumers in some industries face particular difficulty in accessing justice in the traditional justice system.[25] Nadja Tollemache, New Zealand’s first Banking Ombudsman, has said that:[26]

the first objective of a private sector Ombudsman scheme is to resolve disputes in such a way that the sheer inequality of power between a large, wealthy institution such as a bank, and its customer does not produce a situation where the customer feels unable to obtain redress.

The transport industry is an industry where consumers experience particular access to justice problems. An ombudsman scheme is one way of offering alternative dispute resolution processes that are specialised, free of charge, speedy and informal.

The current industry ombudsmen schemes were set up by the industries themselves. Decisions of the Ombudsmen or Commissioner are legally binding on the participants because of the contractual nature of the schemes rather than any statutory power given to the Ombudsmen or Commissioner. Those industry members that choose to participate in the schemes pay a levy to a Commission. The Commissions comprise an independent Chairperson, two representatives of participating industry members and two consumer representatives. These Commissions then fund the Ombudsmen or Commissioner and their Offices.

The incentive for industry members to join the schemes is the benefit of improved public relations that can help to make them more competitive. They are able to offer their clients an informal, alternative dispute resolution process that is free of charge. Unfortunately, in the transport industry the predominance of monopolies means that there is little incentive for the industry members to establish or join an ombudsman scheme. It would therefore be more appropriate to establish a statutory ombudsman scheme funded by the government. In a statutory scheme, membership would be compulsory.

A statutory industry ombudsman scheme, funded by the government, also has the advantage of providing an adjudicator who would be truly independent.[27] The current industry ombudsman schemes claim to be totally independent dispute resolution processes. However, an examination of the institutional structures of the schemes described above show that the schemes cannot be said to be truly independent. The schemes are funded by the industries and the existence of the Commissions as intermediaries between the industries and the Ombudsman or Commissioner does not change this fact. The very existence of the schemes is dependent on industry membership and industry funds and this means that there is a real danger that the Ombudsman or Commissioner might unwittingly favour the industry over the consumer. There is also a risk that consumers may not perceive the schemes as being impartial and this might undermine the credibility of the scheme. In a statutory scheme the ombudsman would be funded by the government rather than the industry and would therefore be truly independent

A transport ombudsman scheme would be unlikely to guarantee that the decisions of the Ombudsman would be correct in law.[28] The lack of a requirement to follow the law or follow precedents is necessary to keep the process inexpensive and informal because it avoids the need for lawyers and formality. However, given a truly independent transport ombudsman and a clear statute such as the Consumer Guarantees Act, it is likely that in most instances passengers would receive their full legal entitlement.

6.4 Travel Insurance

As it is so difficult for a passenger to receive access to justice, it might be considered a sensible option for passengers to purchase travel insurance to cover them for the risk of loss due to a late departure. Certainly travel insurance would eliminate the risk of loss for those individual passengers who choose to purchase it. However, travel insurance is not a satisfactory solution to the access to justice problems facing consumers of transport services.

Travel insurance should not be necessary given the statutory rights under the Consumer Guarantees Act. To rely on insurance as a solution to the difficulties of accessing rights under the Act renders the protections of the Act meaningless. It also allows the transport industry to avoid responsibility for breaches of the guarantees under the Act.

6.5 Public enforcement of the Consumer Guarantees Act

The fact that passengers face barriers to accessing justice under the Consumer Guarantees Act raises a wider question of whether it would be appropriate for a public enforcement agency such as the Commerce Commission to be responsible for administering the Act. A public enforcement agency would make it more likely that transport operators would be penalized for breaching the Act and that aggrieved passengers would receive redress under the Act. It would also allow consumers of other goods and services more easily to access their rights under the Act. Currently the Commerce Commission is responsible for enforcing the Fair Trading Act 1986, which is a significant piece of consumer protection legislation dealing with, among other things, misleading conduct and misleading and false representations in trade.

If a public enforcement agency did play a part in enforcing the Consumer Guarantees Act this would not need to replace the role of individual consumers enforcing their rights under the Act. Instead, the public enforcement agency could enhance the effect of the Act by providing aggrieved consumers with a place to go when a complaint to the supplier concerned has been unsuccessful. The agency could investigate the matter on behalf of the consumer and if necessary could take an action in Court on behalf of a consumer or group of consumers.

7. Conclusion

Passengers have a right under the Consumer Guarantees Act to receive transport services that are carried out with reasonable care and skill and are fit for purpose. A transport service that is significantly delayed will, in some circumstances, result in a breach of the Consumer Guarantees Act and passengers on that service are entitled to redress.

Despite this legal entitlement, most passengers will not even make a request for redress from the transport operator because they are unaware of their legal rights. Those passengers who are aware of their legal rights would be well advised to ask the transport operator for redress. In some instances this approach might be successful. Unfortunately, if the transport operator refuses to award compensation, the passenger is relatively powerless.

There are several options for increasing access to justice for passengers. These include educating passengers about their rights, implementing a public enforcement agency to enforce the Consumer Guarantees Act or alternatively establishing a transport industry ombudsman scheme to assist passengers in resolving their complaints against transport operators.

Unfortunately, consumer problems often fail to attract resources and attention simply because the harm caused to each individual is relatively small. However, the total harm spread throughout the consuming public is often large as an accumulation of little injustices mounts up. The Consumer Guarantees Act has made such small injustices illegal but without education and the appropriate enforcement machinery, the Act is ineffective.

[*] Senior Lecturer in Law, Victoria University of Wellington

[1] See the introductory words to each of the sections in Part IV of the Act that establishes a guarantee.

[2] “Supply” in relation to services is defined widely in section 2(1) as “provide, grant, or confer”.

[3] Section 2(1) defines “service” as “any rights, benefits, privileges, or facilities that are or are to be provided, granted, or conferred by a supplier under any of the ... classes of contract [specified by the section]”. The list of specified types of contract is broad and includes any contract for the performance of work.

[4] Nesbit v Porter [2000] NZCA 288; [2000] 2 NZLR 465, at p 473.

[5] If the international airline services are provided by an overseas operator it is likely that the New Zealand Consumer Guarantees Act will apply rather than the consumer laws of the country from which the airline originates. To establish the “proper” law of a contract the Court will infer the intention of the parties in the circumstances and consider what system of law has the closest and most real connection with the transaction. See McDonnell Dowell Constructors Ltd v Lloyd’s Syndicate 396 [1987] NZCA 144; [1988] 2 NZLR 257, 272-273. The fact that the airline services depart from New Zealand, that the services are purchased in New Zealand and that the overseas airline has a place of business in New Zealand are all factors supporting a conclusion that New Zealand law is the “proper” law in this situation.

[6] See above at p 473.

[7] Section 43 of the Consumer Guarantees Act 1993.

[8] Section 40(c) of the Consumer Guarantees Act provides that nothing in Part IV of the Act (which deals with the supply of services) limits of affects “any enactment which defines or restricts the rights, duties, or liabilities arising in connection with a service of any description”. The Carriage by Air Act 1967 defines some liabilities of air transport service providers. Section 25(1) of this Act provides that domestic air carriers are liable for damage occasioned by delay in the carriage of passengers. Liability may be avoided if the delay was caused by factors such as meteorological conditions, or compliance with advice given by an air navigation service. There is also no liability if all necessary measures that were possible were taken to avoid the damage. These liabilities remain in place despite the enactment of the more general provisions of the Consumer Guarantees Act in 1993.

[9] Bolam v Friern Hospital Management Committee [1957] 2 All ER 118 at 121, [1957] 1 WLR 582 at 586 per McNair J.

[10] In Panasonic Australia Pty Ltd v Burstyner (1993)ATPR 41-224, 41,083 the Federal Court of Australia stated that Industry Codes of Practice cannot be relied on as imposing standards of reasonableness into the Trade Practices Act 1974.

[11] See A. Fraser, “The Liability of Service Providers under the Consumer Guarantees Act 1993” (1994) 16 New Zealand Universitites Law Review 23 at p 36.

[12] Taylor v Combined Buyers Ltd [1923] NZGazLawRp 133; [1924] NZLR 627 at 629. See also Frost v Aylesbury Dairy Co [1905] UKLawRpKQB 48; [1905] 1 KB 608; [1904-7] All ER 132 (CA) where it was assumed that milk is purchased for the purpose of being consumed, and Priest v Last [1903] UKLawRpKQB 120; [1903] 2 KB 148 where it was held that the purpose for which a buyer acquires a hot water bottle is to warm his or her body.

[13] The exceptions are provided for in section 29(c) and 29(d). It is an exception where the circumstances show that —

(c) The consumer does not rely on the supplier’s skill or judgment; or

(d) It is unreasonable for the consumer to rely on the supplier’s skill or judgment.

[14] Section 33(a).

[15]Section 33(b).

[16] Section 39(4).

[17] Section 39(2)(e) and section 38(1)(a).

[18] See Hosking v The Warehouse Ltd Unreported, District Court, Auckland NP 1476/97, 5 October 1998 and Auckland Property Restoration Ltd v Blackford unreported, District Court, Auckland, NP 3852/97, 25 November 1998. In these two cases the District Court awarded damages for distress and inconvenience under the Consumer Guarantees Act 1993.

[19] Section 43(4) of the Consumer Guarantees Act 1993.

[20] Section 40(1) of the Fair Trading Act 1986.

[21] For discussion of the problem of access to justice for consumers in general and solutions to this problem see W. Harris “Consumer Disputes and Alternative Dispute Resolution” (1993) 4 Alternative Dispute Resolution Journal 238; A. J. Duggan “Consumer Redress and the Legal System” in A. J. Duggan & L. W. Darvall (eds) Consumer Protection Law & Theory (Sydney, Law Book Company Ltd, 1980), at p 200; P. Finkle and D. Cohen “Redress Through Alternative Dispute Resolution” (1993) 13 Windsor Yearbook of Access to Justice, 82; R. Thomas “Alternative Dispute Resolution – Consumer Disputes” (1988) 7 Civil Justice Quarterly, 206; I. Ramsey “Consumer Redress Mechanisms for Poor Quality and Defective Products” (1981) 31 University of Toronto Law Journal 117; J. Braucher “An Informal Resolution Model of Consumer Product Warranty Law” (1985) Wisconsin Law Review 1405.

[22] If the claim is for an amount under $1000 the fee is $30; if the claim is for an amount less than $5000 but more than $1000 the fee is $50; and if the claim is for an amount less than $12,000 and more than $5000 the fee is $100.

[23] Note that although the option of a class action procedure may at first glance appear a sensible solution to the problem of many identical small claims, such a procedure is unlikely, for several reasons, to be a realistic option for most cases of late departure. The main difficulties will be the unlikelihood of there being a passenger motivated enough to act as a representative plaintiff and the improbability of that representative being able to contact all the other passengers affected by the late departure.

[24] The Banking Ombudsman scheme was established in 1992 and was followed by the establishment of the Insurance & Savings Ombudsman scheme in 1995. For discussion on these schemes see A. Fraser “A Banking Ombudsman for New Zealand” [1992] New Zealand Law Journal 320, 320-321; N. Tollemache “Taking the Ombudsman Concept into the Private Sector: Notes on the Banking Ombudsman Scheme in New Zealand” (1996) 26 Victoria University at Wellington Law Review 233, 239; S. Rogers “The New Zealand Insurance and Savings Ombudsman Scheme” (1996) 26 Victoria University at Wellington Law Review 791; D. Clarke “The Use of Insurance Codes of Practice – Are Consumers getting a Fair Go” (1996) 26 Victoria University at Wellington Law Review 717, 723.

[25] For discussion of the access to justice problems facing consumers in the transport industry see part 5 of this article.

[26] N. Tollemache “Taking the Ombudsman Concept into the Private Sector: Notes on the Banking Ombudsman Scheme in New Zealand” (1996) 26 Victoria University at Wellington Law Review 233 at p 239.

[27] A Review Committee report of the Australian Banking Ombudsman Scheme recommended that the voluntary scheme be replaced by a statutory one because it considered that the institutional structure of the voluntary scheme undermined the credibility of the scheme. See R. B. Jack (Chairman) Banking Services: Law and Practice Report by Review Committee (1989) Cmnd, 622.

[28] Both the Banking and the Insurance and Savings schemes provide that the Ombudsman is not required to follow the law or any precedents.

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