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Fair Trading Amendment Bill (Consistent) (Sections 14, 18, 25(c)) [2019] NZBORARp 66 (4 December 2019)
Last Updated: 27 May 2020
4 December 2019
LEGAL ADVICE
LPA 01 01 24
Hon David Parker, Attorney-General
Consistency with the New Zealand Bill of Rights Act 1990: Fair Trading Amendment
Bill
- We
have considered whether the Fair Trading Amendment Bill (‘the
Bill’) is consistent with the rights and freedoms affirmed in the New
Zealand Bill of Rights Act 1990 (‘the
Bill of Rights Act’).
- We
have concluded that the Bill appears to be consistent with the rights and
freedoms affirmed in the Bill of Rights Act. In reaching
that conclusion, we
have considered the consistency of the Bill with section 14 (freedom of
expression), section 18 (freedom of movement)
and section 25(c) (presumption of
innocence). Our analysis is set out below.
The Bill
- The
Bill amends the Fair Trading Act 1986 (the Fair Trading Act) to introduce new
protections against unfair commercial practices:
- The
Bill prohibits unconscionable conduct in trade. ‘Unconscionable
conduct’, to be determined by a court in each case,
is serious misconduct
that goes well beyond being commercially necessary or appropriate. This offence
will be subject to penalties
of $600,000 for bodies corporate and $200,000 for
individuals.
- The
Bill extends the Fair Trading Act’s existing protections against unfair
contract terms in standard form consumer contracts
so that these will also apply
to small trade contracts. It is an offence to contravene these
provisions.
- The
Bill amends the Fair Trading Act to strengthen the ability of consumers to
direct ‘uninvited direct sellers’ to leave
(or not enter) their
property. The Bill provides the consumer with the ability to use a
generally-worded written notice for this
purpose. Contravention of these
provisions will be subject to penalties of up to $10,000 for individuals and
$30,000 for bodies corporate.
- The
Bill also extends the powers of the Commerce Commission (under the Commerce Act
1986) to prohibit the disclosure of information
in the course of an
investigation under the Fair Trading Act.
- The
Bill makes other minor amendments, to improve the functioning of the Fair
Trading Act and for consistency with other legislation,
in the following
areas:
- disclosure
requirements relating to extended warranty agreements
- enforceable
undertakings, and
- court
processes for declaring that a contract term is unfair, so that the process
extends to small trade contracts.
Consistency of the Bill with the Bill of Rights Act
Section 14 – Freedom of expression
- Section
14 of the Bill of Rights Act affirms that everyone has the right to freedom of
expression, including the freedom to seek,
receive, and impart information and
opinions of any kind in any form. The right has been interpreted as including
the right not to
be compelled to say certain things or to provide certain
information.
- Under
the Commerce Act 1986, the Commerce Commission (the Commission) has wide-
ranging powers to require documents, evidence, or
other written and oral
information from any person. These powers can be exercised only if the
Commission considers it necessary for
the purposes of carrying out its functions
and exercising its powers.
- Section
100 of the Commerce Act gives the Commission the power to prohibit the
publication of any information it acquires in connection
with its functions. New
section 48T of the Bill extends this existing power of the Commission to
prohibit the disclosure of information
in the course of an investigation or
inquiry under the Fair Trading Act. This provision prima facie limits the right
to freedom of
expression of anyone who may wish to disclose such
information.
- However,
under section 5 of the Bill of Rights Act, a limit on a right may be justifiable
where the limit serves an important objective,
and where the limits on the right
are rationally connected to achieving that objective, limit the right no more
than necessary, and
are proportional to its importance.
- The
section 5 inquiry may be approached as follows1:
- does
the provision serve an objective sufficiently important to justify some
limitation of the right or freedom?
- if
so, then:
- is
the limit rationally connected with the objective?
- does
the limit impair the right or freedom no more than is reasonably necessary for
sufficient achievement of the objective?
- is
the limit in due proportion to the importance of the objective?
- The
objective of proposed section 48T is to ensure that the Commission’s
powers can be used consistently across investigations.
Currently, the Commission
cannot prohibit interviewees from sharing information provided to them under the
Fair Trading Act, but
it can if the information has been provided under the
Commerce Act. This can cause issues with the integrity of investigations, which
are an important mechanism for supporting the purpose of the Fair Trading Act in
protecting the interests of consumers, and to enable
businesses to compete
effectively and consumers and businesses to participate confidently. This
provision is therefore legitimately
and rationally connected with the
objective.
1 Hansen v R [2007] NZSC 7 at [123]
- Section
48T of the Bill extends the existing power of the Commission under the Commerce
Act to prohibit the disclosure of information
in the course of an investigation
or inquiry under the Fair Trading Act. The Commission may only make such an
order about information
obtained during the course of an investigation, and
there are limitations on time periods.2 This ensures
the right of expression is not limited any further than necessary for the
Commission to carry out its operations, and
is in due proportion to the
importance of the objective (to ensure that the Commission’s powers can be
used consistently across
investigations).
- For
these reasons, we conclude that any limits to the freedom of expression imposed
by the Bill are justified under section 5 of the
Bill of Rights
Act.
Section 18 – Freedom of movement
- We
have briefly considered whether the Bill’s provisions relating to
uninvited direct sellers engages the freedom of movement.
We have reached the
view that they do not. This is because, although the provisions of section 36RA
of the Bill apply to a person
about to enter residential premises (eg standing
outside on a public footpath), no offence is committed until a person has
entered
the residential premises.
Section 25(c) – Presumption of innocence
- Section
25(c) of the Bill of Rights Act provides that everyone charged with an offence
has the right to be presumed innocent until
proved guilty according to law. This
right requires the prosecution to prove, beyond reasonable doubt, that the
accused is guilty.
- We
have identified two strict liability offences in the Bill. Strict liability
offences give rise to a prima facie issue of inconsistency with section
25(c) because the accused is required to prove a defence (on the balance of
probabilities) to
avoid liability (in other criminal proceedings an accused must
merely raise a defence in an effort to create reasonable doubt). This
means that where the accused is unable to prove a defence, they could be
convicted even where reasonable doubt exists as to their guilt.
- The
Bill contains the following strict liability offences:
- Offences
relating to unfair contract terms in standard form small trade contracts
(proposed new section 26B);
- Offences
relating to the failure to follow directions not to enter or leave premises, and
re-entering the premises within a specified
timeframe (proposed new section
36RU).
- Both
of these offences are subject to section 44 of the Fair Trading Act, meaning
that a defendant can escape liability by proving
any of the defences set out in
section 44.
- Clause
10 of the Bill proposes to amend section 44 of the Fair Trading Act by including
additional defences to an offence under new
section 36RU. The new defences
require the defendant to prove that the person who gave the direction no longer
resided at the premises
at the time of the contravening conduct, or that the
contravening conduct was
2 Commerce Act 1986, section 100(1) and
(2)
with the permission of someone who resided at the premises or was acting with
the authority of someone residing at the premises.
- Proposed
new section 26C provides a definition of small trade contract. This is an
element of the offence under proposed section 26B.
Proposed new section 26C(2)
provides that if a party to a proceeding alleges that a contract is a small
trade contract, it will be
presumed to be so unless any other party proves
otherwise. This also places a persuasive burden on the defendant.
- Penalising
non-compliance by way of a strict liability offence is rationally connected to
the objectives of the amendments and the
overall purposes of the Fair Trading
Act. Strict liability offences have been considered more justifiable where, as
is the case here:
- the
offence is in the nature of a public welfare regulatory offence in order to
protect consumers;
- the
offender is in the best position to justify their apparent failure to comply
with the law rather than requiring the Crown to prove
the opposite;
and
- the
penalty for the offence (here a fine) is proportionate to the importance of the
Bill’s objective.
- The
purpose of these new provisions is to address gaps in the prevention of unfair
commercial practices including pressure tactics,
deception, one-sided contracts
terms or other behaviour that exploits consumers or small businesses. The
objective is to deter behaviour
that may lead to high levels of financial
detriment to consumers. Strong deterrence is considered necessary to achieve
these goals.
We are therefore satisfied that the penalties are proportionate to
both the commercial nature of the actors and the objectives of
the amendments,
as well as the overall purpose of the Fair Trading Act.
- We
further consider that the prima facie breach of section 25(c) is justified as it
would be difficult for a prosecution to prove
elements of mens rea with respect
to these offences. We agree that the defendant is best placed to explain how the
breach occurred
and any steps that had been taken to avoid it. For these
reasons, we consider it is justifiable that the burden of proof to establish
those matters be on the defendant.
- Strict
liability offences are generally associated with penalties at the lower end of
the scale. The penalties for contravention of
section 26B are at the higher end,
being a fine up to $200,000 for individuals and $600,000 for bodies corporate.
In respect of offences
under section 36RU, the penalty is a fine of up to
$10,000 for individuals and $30,000 for bodies corporate. We note that the
parties
governed by the offence provisions are commercial actors and bodies
corporate engaged in a regulated industry.
- We
have also considered whether proposed new section 26F relating to unconscionable
conduct is a strict liability offence. Although
the offence sits alongside other
offences that may be considered strict liability, we have concluded that it is
not likely to be
interpreted as such by a court. Section 26G sets out matters
that a court may consider in determining whether a person’s conduct
is
unconscionable, and these matters suggest a level of intention is required for
this offence.
- Accordingly,
we have concluded that the proposed new sections referred to above are justified
under section 5 of the Bill of Rights
Act.
Conclusion
- We
have concluded that the Bill appears to be consistent with the rights and
freedoms affirmed in the Bill of Rights Act.
Edrick Child
Deputy Chief Legal Counsel Office of Legal Counsel
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