Appendix B
Letter from the Clerk of Delegated Legislation
to the Department of Trade and Industry
Draft Regulatory Reform (Trading Stamps) Order
2005
Thank you for your letter of 26 August to my colleague
Stuart Deacon.
Having consulted the Committee's counsel, I have
to advise you that in our view the Committee is unlikely to abandon
its recommendation in paragraph 85 of its Ninth Report of 2003-04
(HC 817) unless satisfied that it is clear that the assumed protection
(that the terms implied by section 4 of the 1964 Act are liabilities
of both the retailer and the scheme promoter) does not exist.
The department appear now to argue that it does not
(and thus retract the statement in the penultimate sentence of
paragraph 19 of their Explanatory Statement), although the point
is addressed only in relation to section 4(1)(a). They argue that
"promoter" in section 4(1)(a) can refer only to the
person who owns the goods which are provided on the redemption
of trading stamps - and only one person can be the prior owner.
They argue this conclusion is supported by an analysis of the
various provisions of the Act in the light of the definition of
"promoter" in section 10(1).
The definition of "promoter" states - "
'promoter', in relation to a trading stamp scheme, includes, in
a case where a person carrying on a retail trade or business assumes
responsibility for the redemption of trading stamps, that person".
The use of "includes", as opposed to "means",
indicates that, in such cases, the retailer may not be the only
person who is a "promoter" for the purposes of the Act.
The reference to the redemption of trading stamps indicates that
the definition is likely to apply to provisions dealing with that
aspect of the operation a trading stamp scheme. Section 10(1)
provides that the definitions given apply in the Act unless the
context otherwise requires.
Section 4 implies four warranties -
that the "promoter" has a right to give
the goods in exchange;
that the goods are free from undisclosed charges
or encumbrances;
that the recipient will enjoy quiet possession;
that the goods are of satisfactory quality.
The department argue that (a) can only be fulfilled
by one person, since only one person can have the right to transfer
the property in the goods. They appear to conclude from this that
all of the implied warranties must apply to that person alone.
This does not necessarily follow. As in the case of some consumer
credit transactions, it is possible for a non-supplier to be made
liable by statute for breaches of terms by the supplier. Although
section 4(1)(b) and (c) does not say on whose part the terms implied
by those provisions subsist, they must surely be liabilities of
the "promoter". On that basis no difficulty arises in
construing the 1964 Act as imposing dual liability as regards
terms (b) to (d), and that seems to be the intended effect of
the definition of "promoter".
There is a difficulty in regarding (a) as imposing
a liability on two parties because of the words "he has a
right", in contrast to the passive language in which the
remaining terms are cast. But it would be odd if the dual liability
which would otherwise arise in respect of terms (b) to (d) on
a natural reading of the Act should be regarded as displaced
by reason of the linguistic difficulty of applying that approach
to section 4(1)(a). It is difficult to be certain how a court
would resolve this difficulty. It is at least arguable, perhaps
quite strongly arguable, that a court would seek to interpret
the Act in a way which furthers its apparent purpose - to protect
consumers who obtain and redeem trading stamps. It might thus
conclude that section 4(1)(a) is to be read, in relation to whichever
of the sponsor or retailer does not own the goods, as implying
a warranty that the recipient will receive such right to the goods
as the other "promoter" has.
The remaining provisions of the Act do not seem to
point to the conclusion that the definition should not apply in
section 4.
Sections 1(1) and 2(2) apply to persons " [who
carry] [carrying] on business as the promoter of a trading stamp
scheme". As the department note, it seems most unlikely that
these provisions are intended to apply to retailers. This conclusion
could be supported on the basis that a retailer who assumes responsibility
for the redemption of trading stamps does so incidentally to his
retail business and does not carry on business as a person who
redeems stamps.
Section 3 can, and should, apply to a retailer if
he assumes responsibility for redeeming stamps for cash.
Section 3 can, and should, apply to a retailer if
he assumes responsibility for redeeming stamps for cash.
Section 5 can, and should, apply to a retailer who
publishes catalogues or stamp books.
The reference to a person carrying on a business
in which a trading stamp scheme is operated in section 6 seems
to create a contrary intention for the purposes of section 10(1),
as it makes it unnecessary to apply the definition of "promoter"
there. Either way the section can, and should, apply to a retailer
who publishes a relevant advertisement.
If, as indicated above, it is not clear that dual
liability does not apply to the implied terms in section 4, it
seems unlikely that the Committee will readily abandon its recommendation.
The questions of agency and the likelihood or not of retailers
concealing the identity of their suppliers are not directly relevant
to the recommendation that dual liability should be preserved
where trading stamps are redeemed.
I think I should emphasise that the passage of a
Regulatory Reform Order is a legislative process, which cannot
be resolved by negotiations at official level. It is up to the
Government to decide to what extent they wish to take account
of the Committee's view on a Proposal in drawing up a draft Order.
I do not think that it would be appropriate for us to set up
a meeting at this stage between officials.
Depending on how you decide to proceed in drawing
up the Order, it may be sensible to plan for a Minister or officials
to appear formally in public before the Committee to respond to
questions the Committee may have on the form of the Order before
it reports its conclusions to the House.
15 October 2004
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