House of Commons Hansard Debates for 20 May 1994

Mr. Stewart : On a point of order, Mr. Deputy Speaker. I wonder if you could give the House guidance on what now happens.

Every political party in Scotland has supported this Bill

Mr. Deputy Speaker : Order. I can give that advice. We go on to the next Bill.

Mr. Sheerman : On a point of order, Mr. Deputy Speaker. The Bill has been killed by the Government and their tactics because they were unable to control the filibuster

Mr. Deputy Speaker : Order. The House must settle down. It is getting into a mess.

Mr. Stewart : On a point of order, Mr. Deputy Speaker. I do not want to raise the temperature in the House today of all days, but would you not rule that the Bill has been universally accepted by political

Mr. Deputy Speaker : Order. With great respect to the Minister, I have already ruled. We must go on to the next business.

Mr. Luff : On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker : Is this a point of order on the same subject ? If it is, I have already ruled on the matter.

Mr. Luff : Further to that point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker : There is no further point of order on the subject. We have moved on.

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Sale and Supply of Goods Bill

Not amended (in the Standing Committee), considered .

Clause 1 --

Implied term about quality

11 am

Mr. James Paice (Cambridgeshire, South-East) : I beg to move amendment No. 15, in page 1, line 8, leave out

in the course of a business'.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse) : With this, it will be convenient to discuss the following amendments : No. 16, in page 1, line 10, at end insert

whenever the seller sells goods in the course of a business and otherwise when in all the circumstances it is reasonable to imply the same.'.

No. 10, in page 1, line 14, after first relevant' insert, any representations or other statements made by or on behalf of the seller expressly or by implication which it is reasonable for the buyer to rely upon'.

No. 11, in page 1, line 15, at end insert

including the commercial reputation of the seller, as the seller himself by himself or by any associated company or brand name may have induced in respect of the particular class of goods or otherwise by advertising, marketing or otherwise promoting the same.'. No. 7, in page 2, line 9, at end insert

(2) In section 14 of that Act, for subsection (3) there is substituted

"(3) Where the seller sells goods in the course of a business there is an implied condition that the goods supplied are reasonably fit for the purpose usually intended or to the knowledge of the seller or an agent of the seller (including any credit-broker) actually or reasonably foreseeable intended by the buyer for such goods, and in determining reasonableness regard shall be had to all the circumstances including the commercial reputation of the seller, as the seller himself by himself or by any associated or brand name may have induced in respect of the particular class of goods or otherwise by advertising, marketing or otherwise promoting the same.".'.

Mr. Paice : I must declare an interest as an adviser to the Dixons group of companies, which are obviously involved in the sale and supply of goods.

The House will be aware that during the past few weeks--culminating in a vote in the House last week--I have single-mindedly pursued the issue of horse racing on Sundays. I am grateful to the House for its support on that issue, which I pursued with similar single-mindedness to that of the hon. Member for Kingswood (Mr. Berry) in relation to the Civil Rights (Disabled Persons) Bill. For that reason, I have only recently been able to turn my attention to other issues. As the interest that I have just declared makes abundantly clear, I am concerned about the sale and supply of goods.

Amendments Nos. 15 and 16 are linked and refer to the implication that a seller is operating a business for the supply or sale of goods even though he or she is not.

Many hon. Members will be familiar with the fact that car boot sales, Sunday markets and other opportunities for people to dispose of goods are burgeoning. Car boot sales have come a long way since their origins as somewhere where people could sell unwanted household commodities from the boots of their cars. Many different people now operate at them, sometimes as genuine businesses, but sometimes on the very fringes of respectability, selling a

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range of commodities, both new and second hand. I dare say that some of the commodities are purported to be new but are not. Another development is shop squatting, which has caused great distress to the retail industry. As premises become vacant, for whatever reason--sadly, during the past two or three years it is often because the previous tenant had to close the business down--people move into them, often at Christmas time, to sell a range of commodities. In such cases, the goods are almost entirely new, but they are of fairly dubious quality.

The common feature of car boot sales, Sunday markets and shop squatting arrangements is that the sellers appear to be operating as businesses. The Bill clearly sets out to protect consumers and I do not want to detract from that aim. I am trying to enhance consumer protection in that respect. We must therefore ensure that members of the public are not excluded from the protection offered by the Bill because someone is masquerading as a business, but is not one in reality.

It is impossible for a consumer to know for certain whether someone is legitimately operating a business or whether they have managed to procure a pile of out-of-date groceries, tinned foods, Christmas decorations or any one of the countless variety of products that are on sale on such occasions. A potential purchaser does not know the business background. Perhaps someone has been left the goods, found them in their attic or obtained them by dubious means, which is a matter for the Sale of Goods (Amendment) Bill, which is next on the Order Paper. Or they may simply have gone out and purchased them.

Mr. Oliver Heald (Hertfordshire, North) : Does my hon. Friend agree that the law should state that only the purely private seller is excluded ? His amendments would give the courts discretion to achieve that, which has been impossible under existing legislation.

Mr. Paice : I always bow to the judgment of colleagues who are experts in the legal profession, as I am not. I am therefore even more grateful that my hon. Friend appears to endorse my argument. In my constituency, many people who go to, or purchase goods from, the various sales that I mentioned are greatly concerned and I am sure that other hon. Members also find that that is the case. Car boot sales are especially common and purchasers have no idea of the origin of the products on sale. It is impossible to know whether the goods are being sold genuinely and whether they are genuinely new. Goods often seem to be in the original packaging, but sometimes there are grounds for doubting that they are new.

The Bill as drafted, and after the Standing Committee, does not protect the consumer if sellers of goods can demonstrate that they are not selling them as a business.

Mr. Nigel Waterson (Eastbourne) : I appreciate that my hon. Friend's proposal will not apply to charities, but existing law applies to second- hand goods. What effect would his amendments have on the following situation, which is not unheard of in my constituency ? Someone--perhaps a farmer--takes a sort of rental for the number of people coming to a big car boot sale. People might not come regularly to set up a stall as they might have full-time jobs during the week. Perhaps they come along from time

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to time to sell stuff that is theirs or that they have acquired in the way that he described, which might include second-hand goods.

Mr. Paice : The second-hand goods aspect is extremely important and I am pleased that the Bill as drafted proposes that protection be extended to cover second-hand goods. I want that protection also to be extended to similar goods sold in situations where purchasers believe that they are buying from a business when they are not. Once one moves to the second-hand goods arena, one must clearly begin to question the origins of the goods. There is no way that purchasers can know who has title to the goods. One has to assume that it is the seller. One must also assume that the seller is telling the truth if he says that he bought the product new only a year ago and that it has hardly been used, or that it was his grandmother's and has never been turned on because she died shortly after buying it. A range of salesman's glib talk can be used to persuade the gullible to purchase goods that they believe to be in good condition, but when they get them home they find that they are not.

If it can be proved that the person from whom the item was bought was not operating as a business, the buyer has no right of redress, which the Bill seeks to provide. I am anxious, therefore, that the provisions regarding a business should extend not only to new products but to second-hand goods, as I understand that they would if the amendments that I have drafted were made.

That would not be a precedent. Already, every classified advertisement must declare at the end if it is a trade sale. That is most commonly seen in vehicle advertisements. I am sure that all of us are old enough to remember reading classified advertisements for second-hand cars in the days when an ancient car was all that we could afford, and telephoning about a car only to find that one was telephoning a garage when one had thought that it was a private number because it was in the classified advertisements. If a garage advertises in those columns now, it must make it clear that it operates as a trade business. The extension of that principle to the sale and supply of goods would give much greater protection to the consumer.

I conclude by making a positive statement to the House. The subject has arisen many times, and I hope to pre-empt accusations that may be made later. In tabling my amendments, I have not had any advice, assistance, participation or, to the best of my knowledge, any knowledge from Ministers, civil servants or parliamentary counsel. They were drafted by myself in conjunction with other Back-Bench colleagues who are lawyers and better able to put them into legal language.

Mr. David Clelland (Tyne Bridge) : I accept entirely what the hon. Gentleman has said about the drafting of his amendments. I think that the proof of what he has said is the fact that most of his amendments were ruled out of order by the Speaker. However, as the hon. Gentleman has been a Member of the House for a considerable time and was here in 1989, the last time that the measure was debated, will he explain why, with his great interest in the subject, he did not table those amendments then ?

Mr. Paice : Life moves on in this place and Members' interests tend to vary. The hon. Gentleman will find that during the period to which he refers I was actively involved in other aspects of the legislation of the House. I am a firm

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believer in the fact that one cannot concentrate on too many things at once, and that people who try to do so end up in difficulties. I am grateful for the hon. Gentleman's acceptance of the statement about the authenticity of the amendments, although his comment about the proof of it was perhaps unnecessary.

I have proposed my amendments Nos. 15 and 16 specifically because I wish to protect the consumer, who may be misled into believing that he or she is buying from a genuine business, only to find, when seeking redress, that it was not a genuine business. That is the sole purpose of the amendments. I commend them to the House.

Mr. Roger Evans (Monmouth) : The Bill is a welcome measure of consumer protection as far as it goes, and the amendments in the group all deal with specific matters designed to improve consumer protection. I welcome what my hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice) has said and I shall develop his argument a little further as it introduces the other amendments, Nos. 10 and 11, which stand in my name.

Part of the problem is that branded goods acquire a commercial reputation. If one buys from a private citizen a nearly new second-hand something-or- other--perhaps a rather expensive motor car--which turns out to be what the Americans call a lemon, what happens ? Under the existing law, and under the Bill as drafted unless it is amended in the way that we are discussing, a sensible private seller would say nothing more than that it is a nearly- new something-or-other. The fact that it may have been very unsatisfactory in the six months for which one owned it is neither here nor there. The law imposes no obligation on the seller to say anything about the item. If the seller does say something about it, the law imposes a liability on the seller only if the seller makes a misrepresentation of existing fact--a narrowly defined category--or if the seller makes a contractual promise, which most sellers are not foolish enough to do.

11.15 am

Amendments Nos. 15 and 16 catch that situation, where someone buys a nearly -new something-or-other which is sold by a private citizen but the private citizen receives a higher price as a result of the commercial reputation of that class of goods. I suggest that that is the classic situation in which it would be reasonable for the court to treat the item as being sold in the course of a business. That leads to amendments Nos. 10 and 11, which tackle the problems caused by the fact that the vast expenditure on advertising, marketing and promotion induces in members of the public--very reasonably, since that is why the money is spent--expectations of quality, which are not always met. The public, as consumers, should have wider protection in those circumstances. As the Bill is currently drafted--I welcome it although I am nostalgic for that useful ancient term, "merchantable", although I can understand that it is no longer up to date--clause 1(2A) provides :

"For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods". I pause there because that deals with amendment No.

10--description--which is a very narrow legal category.

What I suggest should be considered specifically as part of all the circumstances are representations--that is perhaps not so controversial or novel--and all other statements made on behalf of the seller, expressly or by

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implication, on which it is reasonable for the buyer to rely. If the seller puffs up the goods, it seems to me that it ought to be specifically drawn to the court's attention as something to which it is reasonable to have regard. That is fair and just because it is the seller's expenditure on advertising, promotion and marketing that has raised expectations in the public of satisfactory quality, and that should be specifically brought into account.

Mr. Heald : In one of my amendments, which was not selected, I tried to tackle the problem, which my hon. Friend approaches in a different way, of a seller making a statement, for example, to the effect that the vehicle has a defective vacuum pump, but not explaining the full relevance of that- -the full relevance being that the braking system would fail if the vehicle went on the road. In such circumstances, would the quality and nature of that statement be fully taken into account in deciding whether the quality was satisfactory ?

Mr. Evans : I am grateful for that intervention because my hon. Friend makes an extremely important argument. I imagine that most of us, as consumers, would regard that situation as crying out for a just remedy.

The intention of the wording introduced in amendment No. 10, "other statements", is that if those statements are incomplete in the way described in my hon. Friend's example, or if a part-truth is told, which may be true as far as it goes but nevertheless does not go any further

Mr. Alfred Morris (Manchester, Wythenshawe) : I am grateful to the hon. Gentleman for giving way. Can he gave the House a broad estimate of how long he intends to speak on this group of amendments ?

Mr. Evans : I should not have thought that that was relevant to what I am saying. I shall not speak at great length. From the clock, I believe that I have been speaking for about three minutes.

Mr. Morris : How long are you going to speak ?

Mr. Evans : I shall not continue very much longer, if the right hon. Gentleman will just listen. These are important technical matters. I have spent more than 20 years at the Bar arguing about cases arising from the existing legislation and I have been struck by the degree of injustice whereby consumers do not obtain what they reasonably expect and anticipate. The amendments are intended to catch the wily Arthur Daley type of salesman, who ought to be sued successfully. It should not be enough to say, "I have said just enough and it is accurate as far as it goes," in the way my hon. Friend the Member for Hertfordshire, North (Mr. Heald) described. That is what I want to catch.

I will move on quickly to amendment No. 11, which refers to a good point that I should have thought that Opposition Members would find attractive. I want to add a specific provision as to "all the circumstances",

"the commercial reputation of the seller, as the seller himself by himself or by any associated company or brand name may have induced in respect of the particular class of goods or otherwise by advertising, marketing or otherwise promoting the same.'". It would seem to me unjust for large commercial organisations to arouse expectations of quality which, in a particular case, they manage to get out of because under the existing law nothing has been said that is specific. Clause 1, which is highly satisfactory and desirable, could be strengthened in that way to deal with that problem. I commend the amendment to the House.

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I do not intend to go on for much longer, which should console the right hon. Member for Manchester, Wythenshawe (Mr. Morris), who seems to be still here. My final point is that I am deeply troubled by what the Bill does to section 14 of the Sale of Goods Act 1979. In the 20 years since I passed my Bar exams, the law has been altered twice, and in drafting terms it is a dog's dinner. I have a specific question which I hope that my hon. Friend the Minister will answer specifically. Why is section 14(6) left in when it should not be ? I appreciate that those who drafted amendment No. 7 may not have thought of the importance of section 14(3), but if we are to have a new and effective definition of satisfactory quality, the definition of

"reasonable fitness for the purpose intended"

contained in that subsection should be brought up to date as well. The House must bear in mind the fact that when I sat the Bar finals it was the other way round : reasonable fitness came first as the primary remedy, then merchantable quality. Parliament subsequently inverted that and we are now playing around to improve merchantable quality and, rightly and properly, substituting "satisfactory quality". It is necessary to broaden the test of reasonable fitness, which was traditionally far too narrow and again favours businesses and does not protect the consumer. The way in which it works at present is that where the buyer makes known a particular purpose to the seller, the goods have to be reasonably fit for that purpose. That is all very well as far as it goes, but it is extremely limiting.

If I were to say to you, Mr. Deputy Speaker--and if you were in trade, which you are not--that I wanted a something-or-other to do something-or- other, it would be fair game, if you were going to sell it to me, that it should be reasonably fit for that purpose. Most of us go into large retail warehouses to buy goods and we should have the same kind of protection. There is bound to be, and there always has been, an overlap between merchantable quality and reasonable fitness. Because the term "satisfactory quality" is so much better drafted, there will be even wider overlap.

Amendment No. 7 would ensure that the goods should be reasonably fit for usual purposes, and that should be spelt out. It would also ensure that the actual purposes of the buyer, which the seller knows, are made clear. It goes further, however, and refers to the purposes of the buyer which are "reasonably foreseeable" by the seller. In other words, if the commercial reputation of the seller and the goods in question is such, all the matters which have been aroused in the way of expectations on the part of members of the public should have a remedy. That is the purpose of the amendment.

It is my submission to the House that this combination of amendments strengthens this welcome Bill. When my hon. Friend the Minister speaks in due time, I hope that he will consider each of those aspects and see how far he can follow the spirit of the arguments that have been put. I commend what I have said to the House.

Mr. Heald : I pay tribute to my hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice), who has tabled amendments Nos. 15 and 16, which address problems that I have encountered in the courts as a barrister in the past 20 years. Those problems arise from the

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definition in section 14 of the Sale of Goods Act 1979 that the implied term as to "merchantability", or now "satisfactory condition" arises

" where the seller sells goods in the course of a business". Those words cause two problems. First, the words "in the course of" have considerable uncertainty to them at law and do not provide adequate consumer protection. We should remember that the Bill, dealing as it does with the supply and sale of goods, affects all our constituents. It is not to be lightly trifled with and if there are mistakes and errors in the law, which there are, they should be remedied.

The second problem is that the word "business" is not a legal term of art, but it is an etymological chameleon, which means different things, depending on its context. There is a need for additional flexibility to protect the consumer.

To appreciate the nature of those problems it is necessary to consider the background. The words were first inserted in the Supply of Goods (Implied Terms) Act 1973 and are similar to words used in the Trades Description Act 1968 that the false description must be applied

"in the course of a trade or business".

The Unfair Contract Terms Act 1977 uses similar words,

"makes the contract in the course of a business"

The policy of the words has never been clear at law. If I make a brief reference to "Benjamin On Sale of Goods", which is the leading text on this, the problem can be appreciated. About those words, it states :

" It seems plain that they cover not only a seller making a regular sale of goods in which he deals, but also a seller who by way of business manufactures or obtains or sells a commodity for the first time : this is supported by authority on the former wording . . . It seems also to be generally agreed, though such authority as there is derives from decisions in other contexts, that there is no need for the seller to be in the business of selling items such as that sold, or indeed to be in the business of selling at all ; a one-off adventure will suffice."

On that basis, it was generally thought up to 1984 that the purpose of the wording was to include all sales except those by purely private sellers. In an earlier intervention I made that point to my hon. Friend the Member for Cambridgeshire, South-East. Most of us thought that that was the law and it is my submission today that it should be and that the amendments would achieve that.

I successfully argued in cases that the principle should be that only private sellers were excluded. In the earlier edition of "Benjamin on Sale of Goods", the following passage appeared, which seemed to support that :

"A farmer who sells off a surplus tractor, or a medical practitioner or solicitor or local government department disposing of surplus equipment which sells a used typewriter acts in the course of a business and so attracts the operation of the statutory term." You may feel, Mr. Deputy Speaker, that if you were purchasing an item of property--a computer or a typewriter from a local authority--you would expect it to meet a certain standard and you would be somewhat surprised and feel that you should have a remedy at law if it was in a poor condition, unsatisfactory or, to use the old word, "unmerchantable".

The law was thrown into confusion in 1984 by the House of Lords decision in Davis v. Sumner, which is reported in the weekly Law Reports . That was a case under the Trades Description Act upon the wording,

"in the course of a trade or business".

The House of Lords decided in that case that a "sporadic" sale of an item was not covered and that there must be some degree of regularity to the provision of those goods in a business.

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In that case a self-employed courier sold a car that he had used for his business during the preceding two years. The sale was held not to be

"in the course of a trade or business".

He had done 118,000 miles on his car, but the odometer showed 18, 000 miles. He sold it and signed to say that 18,000 was genuine. The House may find it rather extraordinary to discover that it was held that he was not liable when the goods were not of merchantable quality--in this particular instance they did not meet their trades description.

There is a distinction to be drawn between the Trades Description Act and the Act with which we are concerned, the Sale of Goods Act. Under the Trades Description Act one is talking about the criminal standard and one is trying to restrain criminal activity. It is therefore right that the definition in that Act should be restrictive. I shall develop the argument that the same considerations can be applied under the Sale of Goods Act 1979. The House of Lords decision in Davies v. Sumner was followed in a 1988 case, R and B Customs Brokers Co. Ltd. v. United Dominions Trust. As it was not reported until early 1989, that explains why my hon. Friend did not bring it to the attention of the House on a previous occasion. That case was brought under the Unfair Contract Terms Act 1977, where it was held that the buying of goods must form at least an integral part of the buyer's business or be a necessary incidental thereto.

Because that decision failed to make the distinction between the two purposes of the two Acts, the effect is to reduce protection for buyers.

11.30 am

It is right that there should be a restrictive definition in a criminal statute, but a more liberal one is required where the consumer and his protection is at stake in a civil context, as here. It appears that a sporadic sale by someone who is not in the business of selling would not be covered by the protection. That is wrong, and amendment is needed. The words "in the course of" are inadequate for the purpose of consumer protection. The amendment is needed for that reason. The same is true in respect of the meaning of "business". Trading corporations or partnerships are businesses, but there are numerous borderline cases--non-trading corporations, partnerships, private individuals, and non-profit making organisations such as universities, colleges, schools and nursing homes.

Is a hospital restaurant, university book shop or even school tuck shop a business within the meaning of the statute ? That may seem an arcane point, but it arises regularly in the provision by charities of low-cost furniture and the sale of secondhand clothes at jumble sales. One assumes that the charity itself would not be covered, but a problem arises where a charity or any of those other institutions moves into the commercial field.

In the leading text, that problem is outlined as follows : "There are also organisations of a non-profit making nature such as universities, colleges, schools, nursing homes and so forth which make sales : although the whole activity may perhaps not be appropriately designated as a business, certain portions of it (e.g. a university bookshop or hospital restaurant) may be. Such cases must be solved with the aim of the legislation in mind ; this seems to be the protection of consumers against those who sell with some degree of professionalism and regularity. The answer will turn on the circumstances of each case, and it is doubtful whether any specific principles can be laid down. At present such authority as there is . . . arises in other contexts".

The amendment would delete the words

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"in the course of a business"

and add to the concept of a sale in the course of a business the flexibility that the implied term may be implied when, in all the circumstances, it is reasonable to do so.

In a proper case, that would enable the court to allow in the implied term, to deal with two particular problems. They are the case of a sporadic sale by a business man whose business was not that of selling--the problem that I outlined in respect of a farmer selling a tractor--and situations such as car boot sales, which are the subject of considerable public concern.

At present, the Government are amending the law on markets in three ways. One is a provision in the Deregulation and Contracting Out Bill. There is currently a prohibition on setting up a market within six and a half miles of an existing market.

Mr. Roger Evans : Six and two third miles.

Mr. Heald : Within six and two third miles of an existing market. That prohibition is going. The provision as to market overt may go if the Sale of Goods (Amendment) Bill [ Lords ] is dealt with today. Car boot sales and their implications as markets are also being considered.

The law as it stands is not capable of dealing with the problems that arise for the consumer in knowing whether the place where he is purchasing goods is reputable. At car boot sales there will be individuals who are not selling in the course of a business as existing law would have it, but who none the less frequently attend car boot sales with items for sale. The flexibility provided by the amendment would address that situation.

My only concern is that the flexibility is too widely drawn. When my hon. Friend the Minister considers amendments Nos. 15 and 16, I should be grateful if he would address their specific wording and say whether their breadth and flexibility is too wide and might catch private individuals who sell goods, perhaps through a newspaper--whom we all agree should be excluded from the ambit of the legislation. I look forward to hearing my hon. Friend's response.

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