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Tokeley, Kate --- "When Not All Sellers Are Traders: Re-Evaluating the Scope of Consumer Protection Legislation in the Modern Marketplace" [2017] SydLawRw 3; (2017) 39(1) Sydney Law Review 59

When Not All Sellers Are Traders: Re-Evaluating the Scope of Consumer Protection Legislation in the Modern Marketplace

Kate Tokeley[∗]


Consumer protection statutes in both Australia and New Zealand impose obligations on people who are in trade. Courts have consistently interpreted the ‘in trade’ limitation as excluding private transactions. In New Zealand,

a statutory provision operative since 2014 requires all sellers ‘in trade’ who transact over the internet to make it clear to consumers that they are a ‘vendor in trade’. This helps consumers buying online to assess whether or not they are protected by consumer legislation. This article explores the emerging interpretation difficulties presented by the private seller exclusion in an age of online selling where the distinction between a commercial seller and a private seller is not always clear. The article considers whether there are good reasons, both in terms of policy and as a matter of statutory interpretation, to abandon the idea that private transactions are not ‘in trade’ and, therefore, not subject to consumer protection legislation. If the private seller exclusion is not abandoned, it is argued that there is an urgent need to update consumer legislation to clarify when sellers cross the line from being a seller entering a private transaction to being a person acting ‘in trade’. Recommendations are made for the development of new statutory guidelines and definitions.

I Introduction

Australian consumers generally receive the full protection of consumer statutes only if they are dealing with persons who are ‘in trade or commerce’.[1] The scope of New Zealand consumer statutes is, similarly, limited to persons ‘in trade’.[2] The meanings of the terms ‘in trade or commerce’ and ‘in trade’ are, therefore, central to the operation of consumer law.

There is no meaningful difference between the Australian statutory phrase ‘in trade or commerce’ and the New Zealand statutory phrase ‘in trade’.[3] Indeed, New Zealand consumer statutes include ‘commerce’ in their broad definition of ‘trade’.[4] Any practice considered ‘in trade or commerce’ in Australia is also likely to be viewed as ‘in trade’ in New Zealand. There are, therefore, times in this article when the phrase ‘in trade’ is used as a shorthand term to also encompass the phrase ‘in trade or commerce’.

Over the years, the Australian and New Zealand courts have grappled with the precise parameters of the notion of being ‘in trade’. For example, the courts have considered issues such as: whether the conduct of a charitable organisation can be considered to be ‘in trade’;[5] whether internal communications between employees can be considered as ‘in trade’;[6] whether conduct ‘in trade’ refers only to conduct by a person who is trading on his or her own account, rather than as a director of a company;[7] and whether an employee of a trader is acting ‘in trade’ when engaging in misleading conduct in the course of his or her employer’s trade.[8] This article focuses on issues surrounding the question of whether a person selling goods or services in his or her capacity as a private individual should be considered as acting ‘in trade’. On this matter, the courts in both Australia and New Zealand have consistently said that the term ‘in trade’ is to be interpreted as excluding all transactions that are essentially private in nature.[9]

The interpretation of ‘in trade’ as excluding private transactions posed few difficulties in the pre-internet era. Consumers buying a bicycle from a high street shop, for example, are clearly buying from a commercial seller and are therefore afforded more legal protection than someone buying a bicycle in a garage sale where the seller is clearly selling as a private individual. Nowadays, however, a large and growing number of transactions are conducted over the internet either via a website or online auction, or some other digital platform.[10] In some of these cases it will not be clear to consumers whether or not they are dealing with a commercial seller. Consequently, the consumer in this situation has no clear idea as to their legal rights if there is a problem with the sale.

In 2014, s 28B(2) was inserted into the Fair Trading Act 1986 (NZ) (‘FTA’) in an attempt to improve this situation.[11] Section 28B(2) requires all vendors ‘in trade’ who are selling online to make it clear to potential purchasers that they are a ‘person in trade’.[12] This new provision, which has no counterpart in the Australian Consumer Law (‘ACL’), should bring much needed assistance and protection to consumers purchasing from New Zealand online sellers. Nevertheless, it is also likely to cause uncertainty for the growing number of individuals who sell products on the internet on a relatively small scale, often operating from their own home. The amount of income, volume of products sold, the number of sales and the frequency of sales will vary in each case. In some cases, it will be difficult to identify at what point a seller should be categorised as a ‘vendor in trade’.

The interpretation difficulties posed by the private seller exclusion are somewhat more pronounced in New Zealand than in Australia. This is because New Zealand has recently extended its consumer statutory guarantees (one of the cornerstones of consumer protection law) to cover auctions (both online and in person).[13] Prior to this change, sales by auction were excluded from the consumer guarantees regime. Determining at what point a frequent user of an online auction site crosses from being a private to a commercial seller is particularly challenging. Sales by auction remain excluded from the guarantees regime under the ACL.[14] Problems determining when a seller using an online auction is ‘in trade’ remain relevant when applying other provisions in the ACL, such as those prohibiting misleading conduct and misrepresentations. The Australian auction exclusion is likely to be removed as a result of the review of the ACL that is presently underway.[15] Indeed, it is difficult to find a compelling reason to allow traders to escape liability under the consumer guarantees regime simply because they choose to use the online auction method of selling, rather than using some other online selling method or selling in a face-to-face transaction. The exclusion is even more questionable and arbitrary given that when buyers on an online auction site choose to use the ‘Buy it Now’ option, they will be covered by the ACL consumer guarantees because this circumvents the auction process.[16] If Australia follows New Zealand and extends the ACL consumer guarantees to cover all auctions, then the difficulties interpreting ‘in trade’ will expand into this commonly used sector of the online marketplace. As it stands, there are, nonetheless, many areas of online selling in Australia where the current interpretation of ‘in trade’ leads to uncertainties. Indeed, one of the matters raised by Consumer Affairs Australia and New Zealand in the 2016 ACL Review Issues Paper is the lack of clarity in respect of the term ‘in trade or commerce’ in relation to online peer-to-peer selling.[17]

This article examines the difficulty in understanding what the term ‘in trade’ means in the context of the modern online marketplace. It examines reasons, both in terms of policy and as a matter of statutory interpretation, to abandon the idea that private transactions are not ‘in trade’ and, therefore, not subject to consumer protection legislation. If the private seller exclusion is not abandoned then, it is argued, there is a critical need to redraft the statutory definitions of ‘in trade’ and ‘in trade and commerce’ so as to provide more guidance as to the exact nature and boundaries of the exclusion. A proposal for the development of new statutory guidelines and definitions is suggested.

II How Do the Terms ‘In Trade’ and ‘In Trade or Commerce’ Feature in Consumer Legislation?

The relevant Australian statutory provisions are contained in the ACL. The ACL is set out in sch 2 of the Competition and Consumer Act 2010 (Cth). The two most important New Zealand consumer protection statutes are the FTA and the Consumer Guarantees Act 1993 (NZ) (‘CGA’). This part of the article explains how these statutory protections are generally limited to conduct that is ‘in trade’.

A Australian Consumer Law

Part 3-2 of the ACL contains a set of consumer guarantees that provide minimum mandatory standards of quality in the supply of goods and services to consumers and a set of remedies for breach of these standards.[18] These include guarantees that services are provided with reasonable care and skill and are fit for purpose; and guarantees that goods are of acceptable quality, fit for purpose and correspond to their description. The guarantees of title, undisturbed possession and undisclosed securities apply to all supplies of goods.[19] The other nine guarantees apply only if the goods or services in question are supplied ‘in trade or commerce’. The sections that establish each of these guarantees are all prefaced with the words ‘if a person supplies, in trade or commerce, goods [or services] to a consumer ...’.[20]

Part 2-1 of the ACL prohibits misleading or deceptive conduct. These provisions also apply only to persons engaging in conduct ‘in trade or commerce’.[21] Part 2-3 regulates unfair consumer contracts. These provisions are not specifically limited to conduct ‘in trade’, but will inevitably be restricted to commercial sellers because they only apply to standard form consumer contracts. Private sellers are unlikely to be using standard form contracts.[22]

Part 2-2 of the ACL prohibits unconscionable conduct. Once again the provisions in this part are limited to conduct that is ‘in trade or commerce’.[23]

B Consumer Guarantees Act 1993 (NZ)

The ACL statutory guarantees regime is modelled on the New Zealand CGA. The wording of both regimes is very similar. The CGA contains statutory consumer guarantees relating to matters such as quality and fitness for purpose and establishes a regime of remedies for breach of these guarantees. Section 41(1) provides that nothing in the Act applies to supplies that are not ‘in trade’. This exception is somewhat superfluous given that, according to the definitions in s 2(1), a person is only a ‘consumer’ if he or she acquires goods or services from a ‘supplier’, and the definition in s 2(1) of ‘supplier’ is a person ‘in trade’.[24]

C Fair Trading Act 1986 (NZ)

The FTA protects consumers from being misled or unfairly treated by sellers. It also imposes consumer information standards and safety standards for prescribed goods and services. Much of the Act applies to both business-to-business and business-to-consumer transactions.

Arguably, the most far-reaching provisions in the FTA are those that prohibit misleading conduct and false, misleading or unsubstantiated representations. Section 9 prohibits misleading and deceptive conduct in general and ss 10 and 11 prohibit misleading conduct in relation to goods and services respectively. Each of these sections specifically requires that the conduct occur ‘in trade’. Section 12A is a new provision that was inserted into the Act in June 2014 as part of a package of consumer law reforms.[25] It prohibits a person from making unsubstantiated representations and is likewise limited to representations made ‘in trade’. Section 13 prohibits false and misleading representations about specified matters such as quality, price or place of origin. Sections 14 and 14A address false representations in relation to land and vendor bidding at auctions for property. These sections are also specifically limited to representations made ‘in trade’.

The most significant change made to the FTA in the recent overhaul of consumer law is the addition of rules prohibiting unfair contract terms in consumer standard form contracts.[26] These new rules are also limited to transactions that occur ‘in trade’. The rules only apply to terms in standard form ‘consumer contracts’, which are described in s 2(1) as contracts where the supplier is supplying the goods or services ‘in trade’ to a consumer.

As has already been mentioned, the recent reforms have also added a requirement that vendors selling online disclose their identity as a trader to consumers. Section 28B provides that:

(1) This section applies when —

(a) goods or services are offered for sale to consumers on the internet;


(b) the offer is able to be accepted via the internet.

(2) If the vendor of the goods or services is in trade, the person making the offer must make it clear to potential purchasers that the vendor is a person in trade.

(3) If the offer and any resulting sale are managed by an intermediary that is not party to the sale (such as an intermediary that operates an online bidding process), the intermediary must take reasonable steps to ensure that the person offering the goods or services for sale complies with subsection (2).

This identification of trader status will assist consumers to determine whether they are entitled to the statutory rights and remedies offered by the FTA and the CGA. Ideally, all traders should disclose their trader status clearly in every website or online platform they use where a consumer can make a purchase.

III Current Definitions of ‘In Trade’ and ‘In Trade or Commerce’

A Dictionary and Ordinary Usage

The English Oxford dictionary defines ‘trade’ simply as ‘[t]he action of buying and selling goods and services’.[27] This definition could apply equally to commercial and private transactions. On the other hand, it defines ‘the trade’ as ‘[t]he people engaged in a particular area of business’, which suggests the area of commercial transactions.[28] The Macquarie Dictionary also points to transactions with a commercial flavour in its first definition of ‘trade’ as ‘the buying and selling, or exchanging, of commodities, either by wholesale or by retail, within a country or between countries: domestic trade; foreign trade’.[29] However, the second definition of ‘trade’ provided by the Macquarie Dictionary is ‘a purchase, sale, or exchange’. This is far broader and could include private transactions.

In ordinary usage, it would not be uncommon to describe a person who sells an unwanted possession on an online auction site as ‘making a trade’. Indeed, New Zealand’s most used online auction site (Trade Me), used by thousands of private sellers, has the word ‘trade’ in its title.[30] The internet has opened up new possibilities for us all to be traders and to enter into the world of commerce. However, there may be a difference between making trades and being in trade. The addition of the word ‘in’ before the word ‘trade’ arguably denotes a commercial element.

B Statutory Definitions

Both the Australian statutory definition of ‘in trade or commerce’ and the New Zealand statutory definition of ‘in trade’ are remarkably wide. There is no express statement in either statutory definition that indicates whether private transactions are excluded. Moreover, no assistance is given in respect of where any dividing line between private and commercial conduct might lie.

Section 2(1) of the ACL defines ‘trade or commerce’ as:[31]

(a) trade or commerce within Australia; or

(b) trade or commerce between Australia and places outside Australia;

and includes any business or professional activity (whether or not carried on for profit).

This definition offers little assistance in determining the nature of the activity that should be classified as ‘in trade or commerce’. There is certainly nothing that expressly excludes trades made by a private individual. The words in brackets indicate that the drafters envisaged the possibility of activities that are not intended to make a profit being considered as ‘business or professional’ activities and thus included in the phrase ‘in trade or commerce’.[32] The ACL does not, however, provide a complete definition of each of the words ‘trade’ and ‘commerce’. It has, thus, been left largely to the courts to establish the meaning of these two words.[33]

The definition of ‘in trade’ given in the New Zealand consumer statutes — the FTA and the CGA — is also broad. Section 2(1) of the FTA defines ‘trade’ as ‘any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land’.

Section 2(1) of the CGA adopts a definition of ‘trade’ in relation to goods or services that is identical to that provided in the FTA. In both statutes, the word ‘business’ is separately defined as meaning ‘any undertaking that is carried on whether for gain or reward or not; or any undertaking in the course of which goods or services are acquired or supplied; or any interest in land acquired or disposed of—whether free of charge or not’.[34] Like the ACL, the definition of ‘trade’ in the FTA and the CGA does not expressly exclude private transactions. It includes the broad concept of ‘any undertaking relating to the supply or acquisition of goods or services’. This catch-all phrase could arguably cover any task relating to any sale of goods or services. There is nothing in that wording that specifies that the supply of goods or services must be part of a commercial undertaking or part of some kind of business venture.

C Judicial Interpretation of the Phrases

Despite the apparent breadth of the statutory definitions of ‘in trade or commerce’ and ‘in trade’, the courts in both Australia and New Zealand have, for many years, interpreted the phrases as excluding transactions that are essentially private in nature.[35] For example, in O’Brien,[36] the Federal Court of Australia proceeded on the basis that a private transaction would fall outside the scope of the legislation. It concluded that ‘[t]he conduct complained of was not something done by the appellants in the course of carrying on a business and it lacked trading or commercial character as a transaction. It thus fell outside the scope of s.53A’.[37]

In Ellis v Red Eagle Corporation Ltd, the Supreme Court of New Zealand noted that the term ‘in trade’ is ‘a broad term encompassing all kinds of commercial dealing’.[38] At times the courts have had to grapple with determining whether or not specific conduct is in fact private in nature but the conclusion that private transactions are excluded from the phrase ‘in trade’ has been consistent.[39]

In Houghton,[40] the High Court of Australia concluded that the conduct of two employees was ‘in trade’ even though they were not themselves commercial sellers. The conduct was ‘in trade’ because it occurred in the course of working for an employer who was ‘in trade’.[41] Obviously Houghton is not authority for removing the private transaction exclusion. The defendants might not have been commercial sellers, but their employer was clearly a commercial seller and therefore the transaction had the requisite commercial character.

Judicial analysis of the terms ‘in trade’ or ‘in trade or commerce’ has focused on the potential meaning of these statutory words rather than an in-depth examination of the purpose of the consumer statutes. Resolving any ambiguity in statutory words should always involve consideration of the overall purpose of the statutes. Both the Australian and New Zealand rules on statutory interpretation require that the interpretation that would best achieve the purpose and object of the Act is to be preferred.[42] Analysis of the purpose of the relevant statutes arguably supports a wide interpretation of ‘in trade’ or ‘in trade or commerce’, so that both private and commercial transactions are covered. Indeed, the overall purpose of the ACL, as stated in s 2, is simply ‘to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection’.[43] This purpose might be best served by extending protection to all consumers who are misled or sold defective goods by any type of seller, not just commercial sellers. Nevertheless, a clear judicial precedent has been set in respect of the exclusion of private dealings and courts are unlikely to revisit the issue now.

D Recent Addition to the FTA

In New Zealand, the recent addition to the FTA of s 28B in 2013 consolidates the judicial presumption that ‘in trade’ is limited to activities of a commercial nature. As already mentioned, s 28B provides that where goods are for sale on the internet then ‘[i]f the vendor of the goods or services is in trade, the person making the offer must make it clear to potential purchasers that the vendor is a person in trade’. The requirement applies only to those sellers ‘in trade’, thus indicating not all people who sell goods or services online are considered to be ‘in trade’. Presumably the element of being ‘in trade’ in this context is intended to indicate commercial selling as opposed to private selling. Indeed, the very reason for the trader status identification requirement is to alert consumers to the type of seller they are purchasing from so that they can ascertain the relevant level of statutory consumer protection.[44]

E Consequences of the Private Seller Exclusion

The consequences of excluding private sales from the concept of ‘in trade’ are significant. Australian and New Zealand consumer legislation strengthen consumer rights by setting up relatively simple and easily accessible statutory schemes that ensure that goods and services are of a consistently reasonable quality, that consumers receive adequate and accurate information, that consumers are treated fairly and have a clear set of statutory remedies. Contracting out is not generally permitted.[45] Buyers entering private transactions do not currently receive the benefits of the legal protection offered under these statutes. Nevertheless, they are not left with a complete absence of legal protection. If something goes wrong with the sale, they have rights under the general law of contract. These rights will be unique to the particular contract in question. There are also some limited statutory rights, however, the parties have the option of contracting out of these provisions.[46] For example, in New Zealand the buyer has rights under the Contractual Remedies Act 1979 (NZ).[47] Overall, the legal position of a buyer purchasing from a private seller is far more tenuous than the position of a buyer purchasing from a commercial trader.

IV Difficulties Assessing Trader Status in an Online World

Given that the private dealings exclusion represents a fundamental constraint on consumer protection, it is unfortunate that the legislation itself does not expressly state this exclusion. It seems inefficient to expect sellers and consumers to digest the case law or engage in an in-depth statutory interpretation exercise in order to discover the scope of the legislation. Moreover, consumers are exceedingly unlikely to undertake this kind of research.[48] The addition of an express statutory provision stating that private dealings are excluded would certainly be useful. However, this alone will not be enough to solve uncertainty. In the online marketplace the very notion of a private rather than commercial dealing is becoming harder to define.

Before the digital age this private/commercial distinction was usually relatively straightforward. It is easy to know that if you go into a bricks and mortar shop, you are buying from a commercial ‘trader’, and if you buy something from a one-off sale at the school fair, you are not. Similarly, if you buy a car from a motor vehicle dealer’s car yard, you know that you are buying from a ‘trader’. By contrast, if you buy a car from a person who advertises the car for sale in the private classified advertisements in the newspaper you know that you are not buying from a ‘trader’. Both the consumer and the seller in these situations are reasonably clear about the nature of the sale (even if they are not educated about the legal consequences of this). However, there will still be occasions in the offline world where the boundary between being a high-volume private seller and a commercial seller is unclear.

With online trading, the nature of the transactions can become far murkier. For a start, the consumer cannot see the seller. When dealing with a wellknown online seller such as Apple, it is easy for the consumer to determine that the seller is a commercial seller. However, when dealing with a less well-known seller or when buying a product on an online auction site, there are often no clues as to whether the seller is a private or commercial seller. This should now be changing in New Zealand as sellers begin to comply with the new FTA s 28B trader status identification requirement. Australia would be wise to follow New Zealand’s lead on this requirement. Nevertheless, while a trader status requirement is advantageous, it also introduces a problem for many online sellers who will be uncertain about whether or not they are a ‘vendor in trade’. The current law provides little guidance on the issue of where the boundary lies between prolific online private sales activity and commercial trading.

Certainly, a student selling one unused textbook online on eBay or Trade Me can be reasonably confident that he or she is not ‘in trade’ under current definitions. Equally, the owners of large online stores such as Ezibuy or Kogan will be in no doubt that they are ‘in trade’. However, it is not immediately clear whether, for instance, a student who regularly buys and resells textbooks on Trade Me or eBay in order to help finance her studies is acting as a seller ‘in trade’. Similarly, it is not clear whether a person who makes jewellery in his spare time and sells it in online auctions or on Facebook is acting ‘in trade’.[49] It is also not clear whether the value of the goods sold is as important as the quantity of goods sold. For example, a person who sells six second-hand vehicles in a year might be more likely to be considered ‘in trade’ than a person who sells six Barbie dolls.[50] A further area of uncertainly arises where a seller merges different types of selling activity. For example, is a person who employs a team of people to work full-time reselling refurbished iPhones and laptops online acting ‘in trade’ when selling his or her own used iPhones and laptops in an online auction?[51]

Difficulties assessing trader status are also likely to arise in transactions that occur on websites such as Airbnb. This website allows owners of houses or apartments to rent out a room or entire dwelling to people on holiday or business trips. Undoubtedly the Airbnb Company is ‘in trade’ (although arguments might arise as to the scope of the service it provides and is therefore responsible for — is it merely the service of connecting the consumer and supplier or does it extend to the service of providing the accommodation itself?). The more difficult question is whether the homeowners renting out their houses on Airbnb are also ‘in trade’. A person who lists her primary dwelling on Airbnb, but indicates that it is only available to rent for a couple of weeks a year when she is on holiday might not be considered to be ‘in trade’. However, a person who has a secondary dwelling permanently available on Airbnb as a holiday rental might be considered to be ‘in trade’.

Airbnb is an example of a growing technological business model where third parties facilitate the sale of goods or services by providing an online platform to connect consumers and suppliers. The taxi company Uber is another example of a company purporting to use this business model. A recent Issues Paper published by Consumer Affairs Australia and New Zealand as part of a review of the ACL refers to this business model as the ‘sharing economy’ or ‘peer-to-peer selling’. It points out that:

While a traditional ‘garage sale’ is unlikely to be covered [by the term ‘in trade or commerce’], the situation may be less clear where a ‘sharing’ platform makes peertopeer selling easier and a seller increases the volume and frequency of their transactions. These sellers may not be aware of their responsibilities under the ACL, nor consider themselves as engaging ‘in trade or commerce’.[52]

The online bookstore Amazon now allows any author to publish online, as well as in hard copy, without a traditional publisher. In this way, Amazon is operating under a version of the sharing economy model. It is providing a platform that makes direct peer-to-peer selling easier. The question arises as to whether the authors selling their books directly online in this way are ‘in trade’.

Another new and growing phenomenon is the use of community exchange websites where people trade their own services or goods in return for other people’s services or goods, without the use of money.[53] It is not clear whether or not any of these people are ever operating ‘in trade’.

The use of the internet as a trading platform has opened up a large and variable marketplace where people trade with each other in ways that are diverse in both manner and scale. There are many situations for which the current statutory definitions do not adequately assist sellers or consumers to determine whether a particular seller is ‘in trade’. This lack of clarity is particularly concerning in New Zealand now that the FTA places a positive duty on online sellers who are ‘in trade’ to identify themselves as ‘vendors in trade’. Sellers who fail to comply with this requirement are liable to pay a fine of up to NZ$10 000.[54]

There are secondary sources, such as the current New Zealand Commerce Commission guidelines and the Trade Me website, which explain that private dealings are excluded and list some factors that could be relevant to determining if a seller is a trader.[55] While these guidelines are useful, it is dangerous to rely on industry and government agencies to establish the meaning of the law. The statutes themselves should be clearer. There is a strong case for both New Zealand and Australia to introduce new express provisions to exclude private transactions and establish new statutory guidelines to elucidate the distinctions between private sellers and commercial sellers. If Australia follows New Zealand and extends the guarantees to auctions and also adopts an online trader-status identification requirement, then the need for the ACL to offer greater clarity in respect of the exclusion of private dealings will become even more pressing.

Before embarking on suggestions for a new definition and guidelines, it is necessary first to consider the fundamental question of whether there are good policy reasons underpinning the private seller exclusion.

V How Convincing is the Rationale for the Exclusion of Private Transactions?

As we have seen, it is well established now that the contrast between truly private dealings and commercial dealings is one of the key frameworks that the courts use to interpret the statutory phrases ‘in trade or commerce’ or ‘in trade’. This part of the article will examine the broader question of why, from a policy perspective, it might or might not be reasonable to exclude private sellers from consumer protection legislation. A critical examination of the policy arguments is useful in assessing whether or not any new statutory guidelines or definitions should merely reflect and clarify the current approach or make the more substantial reform of abandoning the private/commercial dichotomy.

A Power Imbalance

Literature that examines the rationale for consumer protection legislation refers to the unequal bargaining power between the consumer and the seller, and asymmetries in information.[56] The archetypal imbalanced consumer–supplier relationship comprises a vulnerable unsophisticated consumer and a giant multinational corporate supplier. Consumer protection legislation is designed to redress this power imbalance. It moves away from the ancient principle of caveat emptor (‘buyer beware’), a principle more suited to the pre-industrialised village marketplace.[57] The aim of the legislation is to protect consumers from the misconduct of commercial sellers. There is a paucity of literature addressing in depth the issue of whether private sellers should also be included in consumer legislative regimes. There is, likewise, a lack of academic discussion about whether the private seller exclusion still makes sense in the modern world of online commerce. The assumption is that there is no power imbalance between a private seller and a consumer, and therefore no need to provide legislative protection to consumers in these transactions. For example, Debra Wilson, when considering the private seller exclusion in relation to the FTA, points out that:

[The FTA] is not concerned with one-off sales of items by people who do not normally sell these items (for example, someone who sells their car so they can upgrade), but with conduct of people in trade. The Act is intended to reduce the disparity in bargaining that results from a situation where a consumer who may not generally deal with a particular item is purchasing it from someone who does deal with it regularly and therefore has more knowledge about it.[58]

In the online marketplace, however, the assumption that there is no imbalance in bargaining power between consumers and private sellers is somewhat less convincing. This is because the internet adds a layer of power imbalance that does not exist in face-to-face transactions. In a sale over the internet (either on an online auction site or from a website or some other digital platform), the consumer suffers from a vulnerability that remains the same whether the seller is a commercial or a private seller. Namely, the consumer is unable to see the seller (and make a visual assessment of trustworthiness) and is unable to inspect the goods.

B Ability to Pay and Overly Burdensome Liability

A second, and related, policy argument in favour of the private seller exclusion is based on concern over the ability to pay damages and the risk of imposing overly burdensome liability. A commercial trader is generally considered to be more likely to be able to afford to pay damages for liability than a private seller who could be crippled by liability. In many cases, the commercial seller may also, unlike a private seller, be in a position to insure themselves against costs of liability. This is important given the possibility of a disproportionate level of damages that might arise under the provisions that allow a consumer to claim for all reasonably foreseeable loss caused by failure to comply with the statutory consumer guarantees.[59] For example, a supplier of lightning conductors who sells a defective conductor that results in a consumer’s house burning down is potentially liable for the cost of a new house. Such a potentially burdensome level of liability is of particular concern given that there is limited scope to contract out of consumer guarantees legislation.[60]

One problem with justifying the private seller exclusion on this basis alone is that the online marketplace has many small-scale commercial sellers who have no more resources to pay fines and damages than a private seller. The internet opens up new opportunities for very small-scale commercial selling. A person selling homemade cookies, organic shampoo, clothing, taxi services, or elder care can now use a Facebook page, online auction, or other digital platform to regularly sell their product or services and may find themselves within the definition of being ‘in trade’. No longer is there a need for expensive retail premises or a large quantity of available stock. Consequently, the current scope of the legislation is by no means limited to imposing liability on parties with deep pockets and extensive risk management strategies. Of course, this could be seen as an argument for excluding small businesses from the definition of ‘in trade’, rather than extending the definition to all sellers. Further inquiry, however, suggests that fears of overly burdensome liability are easily overstated. The reason for this is rooted in the discretionary and flexible language used in the Australian and New Zealand consumer statutes. If the law were to be extended to cover private sellers this language could possibly mitigate the risk of unacceptable liability being placed on private sellers. The language requires the courts to consider all the circumstances of the sale and they are therefore likely to treat a commercial seller and private seller differently.

For example, in both Australia and New Zealand the guarantee as to acceptable quality is based on the standard of what a reasonable consumer fully acquainted with the state and condition of the goods would regard as acceptable, having regard to all the relevant circumstances.[61] The standard that a reasonable consumer would regard as acceptable is likely to be much lower where the supplier is a private seller selling a second-hand or homemade product in a one-off sale at a low price, than it will be where the supplier is a large multinational corporation selling high-end, expensive products. The ACL and the CGA list the following examples of relevant circumstances: the nature of the goods; the price; any statements made about the goods on any packaging or label on the goods; and any representation made about the goods by the supplier or the manufacturer.[62] The CGA also includes ‘the nature of the supplier and the context in which the supplier supplies the goods’ as a relevant consideration.[63] Other circumstances that are likely to influence the standard that a reasonable consumer would regard as acceptable might include the supplier’s actual or imputed knowledge of the consumers’ circumstances and whether the defect in the goods was a common one for the type of goods in question.

The guarantee as to fitness for purpose in the ACL and the CGA is also worded in such a way that a private seller is unlikely to have to meet the same standards as a commercial seller. The relevant provisions, in respect of both services and goods, state that the guarantee does not apply where the circumstances show that the consumer does not rely on the supplier’s skill or judgment, or it is unreasonable for the consumer to rely on the supplier’s skill or judgment.[64] In the case of a sale by a private seller, it will often be the case that the consumer either does not rely, or it is unreasonable to rely, on the private seller’s skill or judgment. So, for example, where a consumer purchases a second-hand refrigerator from a garage sale, it is less reasonable to rely on the seller’s skill and judgment than if the consumer purchases a new refrigerator from an appliance store. Likewise, if a person pays an amateur friend to take photographs of their baby, it is less reasonable to rely on the seller’s skill than if a professional photographer is engaged.

The ACL provisions on unconscionable conduct apply to conduct ‘in trade or commerce’, so if this phrase was extended to include private transactions then private sellers could be liable under these provisions. If policymakers were concerned that imposing this kind of liability would be too onerous, then a statement expressly limiting the provisions to commercial sellers could be inserted. It should, however, be noted that the unconscionable conduct provisions are framed in such a way that there is arguably little risk of genuinely excessive liability being placed on private sellers.[65] Conduct will only be considered unconscionable if it is extremely harsh or oppressive to the weaker party.[66] Section 2 lists matters that the court may have regard to when determining if there has been unconscionable conduct in relation to the supply of goods or services. These matters include: the relative bargaining strength of the parties; whether the weaker party could understand any documentation used; the use of undue influence; pressure or unfair tactics by the stronger party; and the extent to which the parties acted in good faith. In many private transactions, there is no difference in bargaining strength between the parties and so there is no weaker party and, therefore, no possibility of unconscionable conduct. In cases where there is a discrepancy in bargaining power, the seller’s conduct would only be considered unconscionable if it was viewed as going against conscience as judged against the norms of society.[67]

If the private seller exclusion is removed, there is also little need for concern about the reach of the unfair terms rules. The Australian unfair terms rules do not in fact refer to the term ‘in trade’. The New Zealand unfair terms rules apply to transactions ‘in trade’, but like the Australian unfair term rules, they apply only to standard form contracts. Therefore, even if private sellers are considered to be ‘in trade’ the rules will not apply to private sellers because private sellers do not use standard form contracts.

The discretionary nature of monetary penalties for misrepresentations under the ACL and FTA could also provide a safeguard against overly burdensome liability in respect of private sellers. In both Australia and New Zealand, a monetary penalty may be imposed for making various misrepresentations about goods or services. The language is discretionary, so that the courts can choose the appropriate level of penalty. The monetary penalty under the FTA for an individual is an amount up to NZ$200 000, but there is no stated lower limit.[68] Under the ACL, the penalty for an individual is up to A$220 000.[69] In determining the appropriate pecuniary penalty, the ACL states that the court must have regard to all relevant matters including the circumstances in which the act or omission took place.[70] This would allow courts to take into account the fact that a supplier was a private seller and not operating a business.

In both New Zealand and Australia there is only civil, not criminal, liability for a breach of the general provisions against misleading conduct in trade.[71] In both jurisdictions, the law applies even if the defendant did not intend to mislead, and in this sense the scope of potential liability is considerable. In New Zealand, however, the power to make an order in civil proceedings for engaging in misleading conduct is couched in discretionary language and this could protect against disproportionate liability being imposed on private sellers. If a person has, or is likely to suffer loss due to the defendant’s conduct, then the Court or Disputes Tribunal may make a range of orders, but are not bound to make any particular order.[72] Under the ACL, the language is less discretionary. Provided that the consumer can show that he or she has suffered loss or damage because of the misleading conduct of the supplier, then the consumer is entitled to recover the amount of that loss or damage.[73]

Many consumer disputes in New Zealand come before the Disputes Tribunal, rather than a court. The Disputes Tribunal has an even greater overall discretion than the courts because it is not tethered to strictly following the law, but instead must decide according to the substantial merits and justice of the case.[74] This flexibility would allow tribunals to treat private sellers differently from commercial sellers and this would reduce the scope for unacceptable liability.

Overall, the discretionary language used in consumer statutes allows the courts and tribunals some scope to consider the specific facts of each case in order to determine a reasonable level of liability. This is arguably a better approach than the current one where the judicial reasoning is focused not on appropriate levels of liability, but on the meaning of the words ‘in trade’.

C Fair Allocation of Risk

The previous section has discussed concerns about sellers’ ability to pay and the related claim of potential overly burdensome liability as reasons for the private seller exclusion. This part of the article argues that these concerns should not determine whether the private seller exclusion is justifiable. Instead, the scope of liability ought to be determined by what is a fair allocation of risk. The ability to pay might be one factor in making an assessment as to fairness, but it should not be the deciding factor. In the end, it is either the consumer or the seller who will have to shoulder the loss caused by a defective product or misleading conduct. The exclusion of private sellers from consumer protection legislation arguably has the effect of denying statutory protection to genuinely vulnerable consumers and protecting the wrongdoer.

To frame the analysis, it is useful to consider an example with two hypothetical sales in an online auction on Trade Me in New Zealand. Let’s call them ‘Buyer A’ and ‘Buyer B’. Both buyers purchase a second-hand iPhone on Trade Me. Buyer A makes the purchase from a small-scale trader in the business of selling second-hand iPhones. Buyer B buys the exact same type of iPhone from a private individual who is selling the phone as they want to update to the next model. The seller in both cases knowingly describes the iPhone as having specifications that it does not have and in each case the iPhone has a serious defect known to the seller. The defect is unable to be seen by looking at the online images of the iPhone. Both Buyer A and Buyer B suffer the same mischief — being misled and being sold defective goods not fitting their description. Both buyers have potential remedies in contract, but only Buyer A will have rights and remedies under the FTA and CGA.

From Buyer B’s perspective this might not seem fair. It might seem more reasonable if all buyers could rely on all sellers to trade fairly, and to allow all buyers to have recourse to the same simple statutory scheme to assess their rights of redress. There seems to be no obvious reason for treating Buyer B differently from Buyer A.

One potential reason for the different treatment lies in the idea of ‘buyer beware’. The new trader identification rules under the FTA mean that Buyer A should be informed that he or she is buying from a ‘trader’. Buyer B might, if welleducated on the matter, realise that the lack of any indication of trader status on the auction listing means that the seller is a private seller and that there is a lower level of consumer protection. It could be argued that Buyer B has, therefore, voluntarily taken a risk in purchasing from a private seller and that the principle of ‘buyer beware’ should apply. This argument is not, however, hugely persuasive. Many people in Buyer B’s position will not realise that they are taking on a higher degree of risk.

If the iPhone example occurred on eBay in Australia, the situation would be slightly different. The exclusion of auctions from the ACL consumer guarantees regime would mean that neither Buyer A nor Buyer B could sue for a breach of one of the guarantees if the auction proceeded. If the parties used the ‘Buy it Now’ option, then Buyer A would have rights under the guarantees regime, but not Buyer B. The other provisions of the ACL, such as the prohibition on misleading conduct, would apply to Buyer A (regardless of whether the ‘Buy it Now’ option was used), but not to Buyer B. In all scenarios, neither Buyer A nor Buyer B would be legally entitled to be given information online about whether the seller is ‘in trade’. Without this information, the ‘buyer beware’ argument is even less convincing than in New Zealand. If neither buyer is aware of the type of seller with whom they are dealing, then how can it be said that one has made a conscious choice to assume the risk of buying from a private seller? Bestowing on Buyer A the legal protection of the ACL provisions and leaving Buyer B unable to rely on the ACL is arguably an arbitrary approach given that, in many cases, neither buyer will be aware of their respective legal positions. It is also treats the same type of wrongdoing in different ways.

If Australia follows in the footsteps of New Zealand and expands the consumer guarantees to cover auctions, then the gap between the way that buyers buying from private and commercial sellers are treated under the law will further widen.

D Subtle Distinctions Determine the Level of Legal Protection

The New Zealand Commerce Commission website offers examples of people who are ‘in trade’ and, thus, must comply with the FTA and CGA, and those who are not ‘in trade’.[75] These examples illustrate the subtle distinctions that separate a legally well-protected consumer from a less protected one. First, there is Paula who regularly buys books, reads them and then sells them online — she is not ‘in trade’ when she does this. Paula also makes jewellery from home that she sells through online auctions. She is ‘in trade’ when she does this. Then there is Ben who travels overseas on holiday. While away, he buys a pair of shoes for himself and nine other pairs to sell online when he gets home. Ben is ‘in trade’ when he sells the nine extra pairs. If he had bought them for personal use, but never wore them, and later decided to sell them, then he probably wouldn’t be ‘in trade’. Then there is Kate who has a young son who has outgrown his clothes and she sells all of these online. She is not ‘in trade’. It is arguable that what is considered ethical behaviour should be consistent across all these sales and that the available redress for misconduct in each case should also be the same.

A further example, which illustrates the subtle distinctions created by the private seller exclusion, can be found in the New Zealand case of Hamid v England.[76] This case concerns misleading conduct under the FTA regarding the weather-tightness of a house. Mr England was a real estate agent by profession and assigned sole agency for selling his family home to the real estate agency he worked for. He also used the Trade Me online auction site to advertise the house as a private sale. The Court determined that Mr England was acting in his professional capacity when he sold the house to Mr Hamid and was, therefore, acting ‘in trade’.

Mr England told Mr Hamid that he was not personally aware of any weather-tightness issues. The Court found this to be factually incorrect.[77] Mr England knew that a report carried out on the house had identified weather-tightness problems and that the works recommended in the report had not all been carried out. The house was blighted by leaks and Mr Hamid later had to sell the property at a loss.

The Court concluded that Mr England had engaged in misleading conduct in trade and was, therefore, liable under the FTA.[78] There would have been no such liability if Mr England had not been a professional real estate agent or if the Court had accepted his submission that he was selling the house in his capacity as a private seller.[79] In either of these two scenarios, Mr England would have engaged in the same misleading conduct in the sale of the house. Yet Mr Hamid would have had no rights under the FTA. A more principled approach might require all sellers not to mislead buyers and would provide relief for all buyers under the same statutory scheme. The culpability of Mr England’s behaviour and the consequences that it had on Mr Hamid are arguably the same, no matter how one characterises the nature of the house sale. Those arguing on the other side of this issue might point out that it is more reasonable for a buyer to rely on statements made by a professional real estate agent than statements made by a private seller and that the buyer in a private sale would, in any case, have rights under general contract law, in particular, the Contractual Remedies Act 1979 (NZ).[80] It is also worth noting that while Mr England knowingly misled the buyer, the FTA does not require an intention to mislead. There is a stronger argument that imposing liability on private sellers is overly onerous in cases where there is no mens rea.[81]

E Removing Interpretation Difficulties

There is one further policy argument that favours the removal of the private seller exclusion. This argument is practical rather than philosophical. It contends that removing the exclusion is desirable because it would make the application of the ‘in trade’ or ‘in trade or commerce’ requirements simpler to apply in the modern day marketplace. As the discussion in the previous part of this article has demonstrated, there is an increasingly unclear line between the domain of commerce and that of private sales. Part IV of this article has explored the increasingly difficult issues that can arise in marginal cases that lie in the grey area between private and commercial transactions. If the phrases ‘in trade’ and ‘in trade or commerce’ were redefined to include the selling of goods or services in a private capacity, there would no longer be a need to struggle with determining the boundary between private and commercial selling.[82]

F Balancing the Arguments

There is much to be said for the argument that anyone who sells a product should be required, by the same set of laws, to refrain from engaging in misleading conduct and conform to basic guarantees such as the guarantee of acceptable quality and fitness for purpose. However, there is also room for concern about the implications of such an approach. Ultimately, the issue comes down to opposing policy considerations. On the one hand, consumer protection considerations and interpretation difficulties point to a broad approach. On the other hand, the undesirability of potentially imposing overly burdensome liabilities points to maintaining the private seller exclusion. Certainly, the possibility that a private seller might be subject to pay far-reaching damages for reasonably foreseeable loss is a concern. If the private/commercial dichotomy is to remain part of the law, then there is a serious need to bring greater clarity to the statutory definitions and introduce guidelines to help sellers and buyers to determine whether a person is ‘in trade’. The following Part of this article makes some suggestions for an improved definition and new guidelines.

VI A New Statutory Definition and Guidelines

A redrafted definition of ‘in trade’ or ‘in trade or commerce’ must first remove any ambiguity about the exclusion of private sellers. If the current approach is to be maintained on this issue, there should be an express statement inserted into the statutory definitions of ‘in trade’ and ‘in trade or commerce’ providing that a person who sells goods or services in his or her capacity as a private individual is not

‘in trade’ or, in the case of the ACL, not ‘in trade or commerce’.

The next step would be to clarify when someone who is selling or offering to sell goods or services as a private individual becomes a person acting ‘in trade’. It is probably unrealistic to refine the definition of ‘in trade’ in order to illuminate the exact set of circumstances that will be required for a person to be considered as being ‘in trade’. Each case will need to be decided on its own facts. What would be useful, however, is the introduction of statutory guidelines that spell out the kind of circumstances that are relevant to making a determination as to trader status.

The guidelines suggested below focus on whether a person is ‘a person in trade’, rather than whether they are engaging in conduct that is ‘in trade’. The new trader identification provision in the FTA (s 28B) requires ‘vendors in trade’ to make it clear to potential purchasers that they are a ‘person in trade’. So the relevant question there will always be whether the person is someone who is ‘in trade’. Misleading conduct provisions refer to a person who is, in trade, engaging in misleading conduct, and the consumer guarantees provisions refer to a person who in trade supplies goods or services’.[83] In practice, the concepts of a person being in trade and conduct being in trade generally overlap, in the sense that there must first be a person who is ‘in trade’ and that person must be acting in his or her capacity as a person ‘in trade’ at the time of the relevant supply or alleged misconduct. It should be noted that a different approach is needed when considering the misleading conduct of employees and directors of companies, who are not themselves ‘in trade’.[84]

The suggested guidelines focus on the crucial preliminary issue of whether the relevant person is ‘in trade’. In some instances, the answer to this will be in the negative and generally no further inquiry is needed.[85] If the answer to whether a person is ‘in trade’ is affirmative, the follow up question will be whether that person is acting in their capacity as a person ‘in trade’ at the time of the sale or the alleged misconduct. This was the issue in Hamid v England where a real estate agent engaged in misleading conduct when selling his family home. He was clearly a person ‘in trade’, the issue was whether he was acting ‘in trade’ when selling this house. The Court held that he was acting ‘in trade’ because when he sold the house he was acting in his capacity as a real estate agent.[86]

The statutory guidelines should begin by stating that whether a person is ‘in trade’ will depend on all the circumstances. Next the guidelines should provide a non-exhaustive list of factors that should be taken into account when assessing whether a person is ‘in trade’.

The following is a suggested new definition and guidelines for the term

‘in trade’:[87]

Section XX

(1) The term ‘trade’ means ... [insert the current wording of the FTA, CGA or ACL provision].

(2) A person who sells goods or services in his or her capacity as a private individual is not ‘in trade’.

(3) Whether or not a person is ‘in trade’ will depend on all the relevant circumstances. In determining whether a person is ‘in trade’, the Court may (without limitation) take into account the following:

(a) whether the person bought, acquired or made the goods for the purposes of re-selling;

(b) whether the person regularly or habitually offers to sell goods or services;

(c) the total number of sales made by the person;

(d) the average number of sales made by the person per year;

(e) the total amount of income that the person receives per year from any sales;

(f) the span of time over which any selling activity has taken place;

(g) the nature of the type of digital platform on which the sale takes place;

(h) whether or not the person is registered for Goods and Services tax;

(i) whether the person has staff or assistants to help manage sales; and

(j) whether the person has incorporated a company or set up another type of trading vehicle.

All but the first of these factors point to objective matters that should be relatively easy to evaluate. The first factor is potentially problematic because it requires an assessment of a person’s subjective state of mind at the time of the initial purchase of the goods. It will not always be easy to deduce the purpose for which goods are initially purchased. Indeed, in some cases a person might purchase goods for personal use and also contemplate resale at a later date. In other cases, a person might be dishonest about the purpose for which they initially purchased goods in order to avoid liability. Determining the truth requires consideration of a range of other factors. For example, someone who asserts that she initially purchased a laptop for personal use and then sold it on eBay might not be believed if she has hundreds of auctions on eBay for second-hand laptops and many other electronics devices. If it is found that a person has bought goods for the purpose of resale, this is only one factor that points towards a finding that the person is ‘in trade’, but it is not definitive. If, for instance, a person buys a chest of drawers in order to paint patterns on it and sell it to a friend who has asked for this then the seller would not be a person ‘in trade’ even though he or she bought the drawers for the purpose of resale.

In conclusion, the addition of statutory guidelines along with an express exclusion of private transactions would greatly add clarity as to the scope of the term ‘in trade’.

VII Conclusion

Australian and New Zealand consumers are well protected under consumer protection legislation. The scope of this protection is, however, limited to conduct that occurs ‘in trade’. Although the statutory definitions of ‘in trade’ are wide, the courts have consistently interpreted the phrase as excluding private transactions. This article has argued that this exclusion is increasingly difficult to apply in the modern marketplace, where there is no clear line between private selling and commercial selling. Moreover, there are policy arguments for abandoning the exclusion. One of the strongest arguments is that the exclusion leaves equally vulnerable consumers in different legal positions.

If the current approach is, however, to be maintained, it is vital that consumer statutes are clearer about the existence and the application of the private transaction exclusion. The lack of certainty surrounding the meaning of ‘in trade’ has become more important in the wake of the 2014 reforms in New Zealand that require all vendors in trade to ‘make it clear to potential purchasers that the vendor is a person in trade in situations where the offer and acceptance both occur on the internet’.[88] Placing a positive duty on sellers to identify themselves as being ‘in trade’ requires a far greater level of clarity in the statutory definition of ‘in trade’ than is currently provided. This article has given suggestions for an updated statutory definition of ‘in trade’ and new guidelines to assist in determining when a seller has crossed the line from being a seller entering a private transaction to being a person acting ‘in trade’.

[∗] Senior Lecturer, Law Faculty, Victoria University of Wellington, New Zealand.

[1] The Australian Consumer Law (‘ACL’) (Competition and Consumer Act 2010 (Cth) sch 2) operates largely in the realm of conduct that occurs ‘in trade or commerce’. For further detail on how the ACL is worded and the statutory definition of ‘in trade or commerce’, see below Parts II–III.

[2] See, eg, Consumer Guarantees Act 1993 (NZ) (‘CGA’); Fair Trading Act 1986 (NZ) (‘FTA’).

For further detail on how these statutes are worded and the statutory definition of ‘in trade’, see below Parts II–III.

[3] For a full discussion of the statutory definitions of ‘in trade’ and ‘in trade or commerce’, see below Part III.

[4] For the definition of ‘trade’, see FTA s 2(1); CGA s 2(1).

[5] E v Australian Red Cross Society [1991] FCA 20; (1991) 27 FCR 310; (1991) 99 ALR 601, 641.

[6] Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594, 604–5 (‘Concrete Constructions’).

[7] Body Corporate 202254 v Taylor [2008] NZCA 317; [2009] 2 NZLR 17, 38–43 [68]–[78] (‘Body Corporate 202254’); Kinsman v Cornfields Ltd (2001) 10 TCLR 342 (CA), [27].

[8] See Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553, 554 (‘Houghton’). In this case, the High Court of Australia concluded that the conduct of employees can be ‘in trade’ even though the employees are not themselves ‘in trade’, but are engaging in conduct that occurs in the course of working for someone who is ‘in trade’. Nonetheless, this case is not authority for removing the private transaction exclusion because the employer in that case was a commercial seller. The transaction in question had the requisite commercial character. See also Megavitamins (NZ) Ltd v Commerce Commission where Tipping J commented, in respect of secondary offenders, that it ‘would be wrong in principle if a mere junior employee could be held strictly liable for helping to draft some publicity material which turned out to be misleading without any knowledge that this was so’: (1995) 5 NZBLC 103,834, 103,838. On the other hand, when the majority of the Court of Appeal in Body Corporate 202254 [2008] NZCA 317; [2009] 2 NZLR 17, 42–3 [78] imposed liability on a company director for misleading conduct they accepted that such a broad approach might also result in unexpected liability being imposed on employees.

[9] O’Brien v Smolonogov (1983) 53 ALR 107,111 (‘O’Brien’); Concrete Constructions [1990] HCA 17; (1990) 169 CLR 594, 603–4.

[10] Online trading now generates about a third of FTA complaints to the New Zealand Commerce Commission. This is twice the level of complaints generated by ‘in-store’ shopping: Commerce Commission New Zealand, Consumer Issues 2015 (2015) 31. There are many different ways of selling online including via websites or smartphone applications, emails, text messaging, social media, online auctions such as Trade Me and eBay, and daily deal and group buying websites.

[11] Inserted, on 17 June 2014, by the Fair Trading Amendment Act 2013 (NZ) s 17.

[12] This new provision was part of a major reconsideration of New Zealand consumer law that began in 2010. See Ministry of Consumer Affairs, Consumer Law Reform, A Discussion Paper (June 2010) Ministry of Consumer Affairs <> . The reform process resulted in the Consumer Law Reform Bill 2011 (NZ), which was subsequently split into the Fair Trading Amendment Act 2013 (NZ), the Consumer Guarantees Amendment Act 2013 (NZ) and the Weights and Measures Amendment Act 2013 (NZ). The reforms updated New Zealand consumer protection statutes in order to reflect modern business practices.

[13] The exclusion of sales by auction from CGA was provided for in s 41(3). This section was repealed in 17 June 2014 by the Consumer Guarantees Amendment Act 2013 (NZ) s 12.

[14] See ss 54(1)(b), 55(1)(b), 56(1)(b), 57(1)(b), 58(1)(b) and 59(1)(b), which all state that the guarantee applies where ‘the supply does not occur by way of sale by auction’.

[15] See Consumer Affairs Australia and New Zealand, Australian Consumer Law Review: Issues Paper (March 2016) 21 <> (highlighting the issue of whether to extend the consumer guarantees to cover goods and services bought at auction).

[16] ‘Buy it Now’ (‘BIN’) is an option that sellers can include on their auctions on eBay. In New Zealand, it is called the ‘Buy Now’ option. The option enables buyers to purchase the item immediately at a fixed price (listed as the buy now price), rather than using the bidding process.

[17] See Consumer Affairs Australia and New Zealand, above n 15, 58.

[18] Competition and Consumer Act 2010 (Cth) sch 2, ss 51–62. Section 4B defines ‘consumer’ as a person acquiring goods or services for less than A$40 000, or a person acquiring goods or services priced at more than A$40 000 where the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption (or the goods consist of a commercial road vehicle).

[19] ACL ss 51–53.

[20] See ACL ss 54–62.

[21] See ACL ss 18, 29, 151.

[22] Section 27 of the ACL provides that a contract is presumed to be a ‘standard form contract’ if a party to a proceeding alleges that a contract is a standard form contract and unless another party to the proceeding proves otherwise. In determining whether a contract is a standard form contract, s 27(2) allows a court to take into account any matters it thinks relevant, but requires it to take into account certain factors such as relative bargaining power, pre-preparation of the contract, and the opportunity for negotiating the terms.

[23] See ACL ss 20–21.

[24] Section 2(1) of the CGA defines ‘consumer’ as 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.

[25] See above n 12.

[26] See ss 26A, 46H–46M. These new rules were introduced in March 2015 by the Fair Trading Amendment Act 2013 (NZ) ss 14, 36. If a court, on application by the Commerce Commission, declares that a term in a standard form consumer contract is an unfair contract term, the unfair contract term should not be included in a standard form contract and no person is able to apply, enforce, or rely on the unfair contract term in a standard form contract. Note that the requirement that the Commerce Commission (rather than a consumer) make the application to the Court for a declaration that a term is unfair, limits the protective power of these provisions. The corresponding Australian laws about unfair contract terms are not restricted in this way. For discussion on the differences between the Australian and New Zealand unfair terms laws, see Alexandra Sims ‘Unfair Contract Terms: A New Dawn in Australia and New Zealand?’ [2013] MonashULawRw 24; (2013) 39(3) Monash University Law Review 739.

[27] See Oxford Dictionaries, Definition of Trade in English <

definition/trade>. The term ‘in trade’ was historically used to describe a category of British social class that worked for a living as distinct from both the titled members of society (those in possession of heredity peerage) and the landed gentry (landowners who could live entirely from rental income).

[28] Ibid.

[29] Macquarie Dictionary, Trade <> (emphasis in original).

[30] Trade Me, Our Story <> .

[31] The Australian Trade Practices Act 1974 (Cth) applied to conduct ‘in trade or commerce’. The relevant sections of this Act have been subsequently replaced by the ACL.

[32] Indeed, the word ‘business’ is also separately defined in s 2(1) as including a business not carried on for profit.

[33] See Part III(C) below for discussion on the court’s’ interpretation of the phrase ‘in trade’.

[34] CGA s 2(1); FTA s 2(1).

[35] Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 22 ALR 621, 648–9; O’Brien (1983) 53 ALR 107, 111; Concrete Constructions [1990] HCA 17; (1990) 169 CLR 594, 603–4; Bevanere Pty Ltd v Lubidineuse [1985] FCA 134; (1985) 7 FCR 325, 330 (‘Bevanere’); Burmeister v O’Brien [2009] NZHC 1575; [2010] 2 NZLR 395 (‘Burmeister’); Hamid v England [2011] NZHC 1149; (2011) 13 TCLR 376, [90].

[36] (1983) 53 ALR 107.

[37] Ibid 114.

[38] [2010] NZSC 20; [2010] 2 NZLR 492, 502 [26] n 13.

[39] For example, the Court in Bevanere [1985] FCA 134; (1985) 7 FCR 325, 330–32 held that a one-off transaction will not necessarily be viewed as being part of a private dealing if it is within a broader business context. In that case, the proprietor of a beauty clinic who sold her clinic did not succeed in arguing she was not acting ‘in trade’ because she had never sold a business before. The sale of the clinic was considered part of her commercial beauty therapy activity. For a New Zealand example, see Hamid v England [2011] NZHC 1149; (2011) 13 TCLR 376. In that case, a person was selling his family home, but was also a real estate agent by profession. The Court’s analysis focused on determining whether he was acting in his capacity as a real estate at the time he engaged in misleading conduct. See also Burmeister [2009] NZHC 1575; [2010] 2 NZLR 395.

[40] [2006] HCA 59; (2006) 225 CLR 553.

[41] Ibid 554. See also Body Corporate 202254 [2008] NZCA 317; [2009] 2 NZLR 17, 42–3 [78] where the NZ Court of Appeal imposed liability on a company director for misleading conduct and in so doing accepted that such a broad approach might also result in unexpected liability being imposed on employees.

[42] The Acts Interpretation Act 1901 (Cth) s 15AA states that ‘[i]n interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation’. Similarly, the Interpretation Act 1999 (NZ) s 5 states that ‘[t]he meaning of an enactment must be ascertained from its text and in the light of its purpose’.

[43] The purpose sections of the FTA and CGA are perhaps a little less illuminating. Section 1A(1) of the FTA and s 1A(1) of the CGA both provide the same statutory purpose: to contribute to a trading environment in which the interests of consumers are protected, businesses compete effectively, and consumers and businesses participate confidently. Nevertheless, it is arguable that consumers’ interests are best protected if they have access to statutory rights in all cases where they purchase defective goods or are misled, rather than limiting the protection to transactions of a commercial nature.

[44] See New Zealand Parliament, Bill Digests: Consumer Law Reform Bills 2011 (6 December 2013), 5 <> . Of course, not all consumers will be aware that they are in a stronger legal position if they buy from a commercial seller rather than a private seller. Moreover, there is no requirement that private sellers identify themselves as not being ‘in trade’.

[45] Parties have some rights to contract out of the obligations under consumer guarantees provisions in business transactions: ACL ss 64–64A; CGA s 43; FTA s 5D. The parties will not, however, be bound by a contracting out term if this would be unfair or unreasonable: CGA s 43(2)(d); ACL s 64A(3).

[46] There is a Sale of Goods Act in each of the Australian states and territories and in New Zealand. Sale of Goods statutes are generally limited to sales with commercial suppliers, but there are some provisions that apply to all sellers. For example, under s 14 of the Sale of Goods Act 1908 (NZ), there is an implied undertaking on the part of the seller that he or she has a right to sell the goods, that the buyer enjoys quiet possession of the goods and that the goods are free from any unknown or undeclared charges or encumbrances in favour of any third party.

[47] Section 6 provides that if a party has been induced to enter into a contract by a misrepresentation made by another party, then the party who has suffered a loss is entitled to damages from that other party as if the representation was a term of the contract that had been broken.

[48] Likewise, consumers typically do not read disclosure documents for investment products or examine the terms of standard form contracts. For discussion of consumers failing to examine the terms of standard form contracts, see Todd D Rakoff, ‘Contracts of Adhesion: An Essay in Reconstruction’ (1983) 96(6) Harvard Law Review 1173; Russell Korobkin, ‘Bounded Rationality, Standard-form Contracts, and Unconscionability’ (2003) 70(4) The University of Chicago Law Review 1203.

[49] In February 2015, Facebook introduced a new feature for Facebook Groups intended to make it easier for members of a ‘For Sale’ group to list their items. The new feature allows members to generate a post where they can add a description of the item for sale, set a price and set a pick-up or delivery location. See Sarah Perez, Facebook Adds A New Way To Sell Items In Groups (10 February 2015) Tech Crunch <> .

[50] Interestingly, the Motor Vehicle Sales Act 2003 (NZ) treats a person who sells six or more motor

vehicles in a specified period of time as a ‘motor vehicle trader’ unless that person can prove that the vehicles were not sold primarily for the purpose of gain (see ss 7–8).

[51] This kind of issue was highlighted when I recently asked a question to a seller of an iPhone 4 on Trade Me.

My Question: Your auction says it is a new iPhone 4, but you must have used the iPhone 4 for a while? Is it your iPhone you are selling? I see you’ve had 15,000 trades in 2 years so I assume you are a trader of some kind? Is that right? Thanks Kate

Answer: Hi, I am a trader, and this is my personal phone. I guess a trader can also sell their personal stuff, right?

[52] See Consumer Affairs Australia and New Zealand, above n 15, 58.

[53] See, eg, Community Exchange System Australia <>.

[54] FTA s 40(1B)(a).

[55] See Commerce Commission New Zealand, Buying and Selling Online (23 April 2014) <> Trade Me, In Trade Disclosure <> . The operators of the Trade Me auction site have no doubt included these guidelines in an attempt to comply with FTA s 28B(3), which requires an intermediary that operates an online bidding process to take reasonable steps to ensure that the person offering the goods or services for sale complies with the trader status identification obligation.

[56] For discussion on the theoretical foundations of consumer law, see, eg, Jacob Ziegel, ‘The Future Of Canadian Consumerism’ (1973) 51 Canadian Bar Review 191; Ross Cranston, ‘Consumer Protection and Economic Theory’ in Anthony J Duggan and Leanna W Darvall, Consumer Protection Law and Theory (Law Book Company Ltd, 1980); Anthony Duggan ‘Some Reflections on Consumer Protection and the Law Reform Process’ [1991] MonashULawRw 11; (1991) 17(2) Monash University Law Review 252; Brian Harvey and Deborah Parry, The Law of Consumer Protection and Fair Trading (Butterworths, 6th ed, 2000) ch 1; Iain Ramsay, Consumer Law and Policy (Hart Publishing Ltd, 3rd ed, 2012) ch 2. The Australian Productivity Commission identifies consumer information deficiencies as one of the key rationales for consumer law: Australian Productivity Commission, Review of Australia’s Consumer Policy Framework, Productivity Commission Inquiry, Report No 45 (2008) 12. See also Geraint Howells, ‘The Potential and Limits of Consumer Empowerment by Information’ (2005) 32(3) Journal of Law & Society 349.

[57] For analysis of the history of caveat emptor, see Walter H Hamilton, ‘The Ancient Maxim Caveat Emptor’ (1931) 40(8) Yale Law Review 1133; Richard M. Jones, ‘Comment: Risk Allocation and the Sale of Defective Used Housing in Ohio — Should Silence be Golden?’ (1991) 20 Capital University Law Review 215, 216–21.

[58] Debra Wilson, ‘Consumer Information’ in Kate Tokeley (ed), Consumer Law in New Zealand (LexisNexis, 2014) 128.

[59] See ACL ss 259(4), 267(4); CGA ss 18(4), 32(c). The extent of liability is potentially even wider in Australia, as it is possible to sue for compensation for personal injuries caused by defective goods or services. In New Zealand, consumers are barred from suing for damages to compensate for personal injuries due to the New Zealand accident compensation scheme: Accident Compensation Act 2001 (NZ) s 317.

[60] Parties have some rights to contract out of the obligations under consumer guarantees provisions in business transactions: ACL ss 64, 64A; CGA s 43; FTA s 5D. The parties will not, however, be bound by a contracting out term if this would be unfair or unreasonable: s CGA s 43(2)(d); ACL s 64A(3).

[61] ACL s 54; CGA ss 6, 7.

[62] ACL s 54(2); CGA s 7.

[63] CGA s 7(1)(ha), as inserted by Consumer Guarantees Amendment Act 2013 (NZ) s 8 on 17 June 2014.

[64] ACL ss 55(3), 61(3); CGA ss 8, 29.

[65] ACL ss 20–22.

[66] ‘Unconscionable conduct’ does not have a precise statutory definition. It is a concept that has been developed on a case-by-case basis. See Hurley v McDonald’s Australia Ltd [1999] FCA 1728

(17 December 1999), [22]; Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17; (2009) 253 ALR 324, 346–7 [113]; Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 (21 December 2011), [291], [293]; Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (2013) FCAFC 90 (15 August 2013), [41].

[67] Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 (15 August 2013) [41].

[68] Breaching s 9 of the FTA, the general prohibition on misleading conduct in trade, is not a criminal offence: FTA pt 5.

[69] ACL ss 151(1), 155(1)(b).

[70] Ibid s 224(2).

[71] Ibid s 18; FTA s 9.

[72] FTA s 43.

[73] ACL s 236.

[74] In appropriate cases, the Tribunal will simply assist the parties to negotiate an agreed settlement. Where the parties cannot agree and the Tribunal proceeds to determine the case, it must do

so according to ‘the substantial merits and justice of the case’ and in doing so must have regard to the law, but it is not bound to give effect to strict legal rights or obligations: Disputes Tribunal Act 1988 (NZ) ss 18(1), 18(5), 18(6).

[75] See Commerce Commission New Zealand, above n 55.

[76] Hamid v England [2011] NZHC 1149; (2011) 13 TCLR 376, [70].

[77] Ibid [101].

[78] Hamid v England [2011] NZHC 1149; (2011) 13 TCLR 376, [95].

[79] Mr Hamid may, however, have had rights under the Contractual Remedies Act 1979 (NZ).

[80] Section 6 provides that if a party has been induced to enter into a contract by a misrepresentation made by another party then the party who has suffered a loss is entitled to damages from that other party as if the representation was a term of the contract that had been broken.

[81] Note that the severity of any criminal liability is reduced by the availability under s 44 of the FTA of defences such as reasonable mistake and reasonable reliance on information supplied by another person.

[82] It might, at this point, be thought that the interpretation problem could be addressed by abolishing the ‘in trade’ requirement altogether, rather than redefining it. The ‘in trade’ element would, however, need to remain simply to indicate that the consumer protection laws are intended to apply in the area of life where people are selling and buying goods and services, and not in other areas of people’s lives. There is no intention that the laws prohibit misleading conduct in a person’s private life or that someone giving a gift should be required to adhere to any guarantees in respect of this gift.

[83] The ACL guarantee provisions apply when a person supplies, in trade or commerce, goods [or services] to a consumer and CGA s 2(1) defines a ‘supplier’ as a person who ‘in trade’ supplies goods or services. The misleading conduct provisions in both the ACL and the FTA refer to prohibiting a person from engaging in misleading conduct ‘in trade’.

[84] In these cases, the conduct is not being engaged in by a person who is ‘in trade’ on his or her own, but instead occurs in the course of working for a company that is ‘in trade’. The trend in both Australia and New Zealand is to consider such conduct to be ‘in trade’. The issue in these cases, however, is not about whether or not the transactions are of a private nature — the transactions in these cases have the requisite commercial character. See Houghton [2006] HCA 59; (2006) 225 CLR 553, 554, where the High Court of Australia held employees liable for misleading conduct misleading representations they made in the course of their employers trade ‘in trade’. See also Body Corporate 202254 [2008] NZCA 317; [2009] 2 NZLR 17, 42–3 [78] where the New Zealand Court of Appeal held a director liable for misleading conduct ‘in trade’ even though he was not trading on his own account.

[85] Further inquiry might be needed if the person is an employee or director of a company that is itself ‘in trade’: see above n 84.

[86] Hamid v England [2011] NZHC 1149; (2011) 13 TCLR 376 [70].

[87] The suggestions are intended to be useful for clarifying the meaning of ‘in trade’ under the FTA and CGA and the meaning of ‘in trade or commerce’ in the ACL.

[88] FTA s 28(2).

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