[Vol. 18
NOTES
A New Approach to the Protection of Used Car Buyers
Second-hand car dealers are regarded by many members of
the community today in much the same lignt as were used slave
dealers in Ancient Rome and horse traders in more recent times;
that is, inherently tricky, mostly dishonest, and always a gamble
to do business with. While this view is probably too harsh, con-
sumer grievances with used car purchases have always constituted
a major area of complaint.
The most common legal response to the need to protect con-
sumers against abuses in the used car trade has been to require
dealers to be licensed. The Quebec Consumer Protection Act 1971 1
is the most recent example in Canada of such a response. Licensing
has not, in the past, proved a marked success in this area. Firstly,
the effectiveness of a licensing system largely depends on the size
of the resources appropriated to administering it. Too often, inade-
quate resources have led to understaffing and ineffective policing.
Secondly, de-licensing is a draconian sanction and only likely to
be invoked in very extreme cases or after a substantial accumulation
of more minor infractions. Thirdly, an aggrieved consumer gains
nothing directly out of sanctions attaching to a licensing system
and has little incentive to press complaints seriously.
A less common response in Canada has been the introduction of
a certificate of roadworthiness system. While the details of these
systems vary considerably from one jurisdiction to another, com-
monly they require that a dealer must provide a used car buyer,
at the time of sale, with a certificate of roadworthiness from a
registered mechanic certifying that certain components in the car
pertaining to its safe operation are in sound condition. Again, this
system has proved much less than a fully effective counter to
consumer problems with used car purchases. Firstly, such a system
is concerned only with safety-related defects. Secondly, standards
of certification vary greatly (in all good faith) from one mechanic
to another. Thirdly, malpractices in the issue of, or trafficking in,
‘Bill 45, 29th Leg., 2nd Sess., 1970, Que. Nat. Ass.
No. 2]
NOTES
certificates, tend to develop. Fourthly, a consumer’s private law
redresses against the mechanic and the dealer for an inaccurate
certificate are unclear.2
In 1969, a committee, of which the writer was a member, from
the Adelaide Law School, reported to the Australian Attorneys-
General on reform of the law of consumer credit.3 The report con-
tained proposals for a new approach to the regulation of used car
sales 4 inspired, appropriately enough, by provisions in Justinian’s
Corpus Juris on used slave sales.” These proposals provoked
widespread industry opposition at the time and seemed destined
for a dusty fate. However, late in 1971, the South Australian Parlia-
ment enacted the Second-Hand Motor Vehicles Act 1971 which
gives effect to most of the Committee’s recommendations.
The Act has three broad thrusts:
a. Licensing of Used-car Dealers (ss.6-22)
All used-car dealers must be licensed by a special Second-hand
Vehicle Dealers Licensing Board, appointed by the Government, in
order to carry on business. The licensing provisions of the Act
in themselves call for no special remark except that the potential
for committing infractions under other provisions of the Act is
such (as will be seen) that the threat of loss of licence may be
more real than under other licensing systems.
b. Provision of Information (s. 23)
Every car offered for sale by a dealer must have attached to
it, in prescribed form, a notice setting out:
i) the name and business address of the person from whom
the vehicle is to be bought;
ii) the name of the last non-trade owner;
iii) the odometer reading at the time the vehicle was acquired
from the last non-trade owner;
iv) the cash price of the vehicle;
v) the year of first registration and the model designation of
the vehicle.
2Presley v. Macdonald, (1963), 38 D.L.R. (2d) 237 (Ont. Co. Ct.); D.M. McRae,
Warrant of Fitness and the Sale of Motor Vehicles, Legal Research Foundation,
School of Law, University of Auckland, (New Zealand, 1968).
3 Adelaide Law School Report on the Law Relating to Consumer Credit and
4 lbid., chap. XIII.
5 See Digest, 21. 1. 44.1; Macintosh, Roman Law of Sale, (1907), at pp. 278-9.
Moneylending, (S.A. Gov’t. Printer, 1969).
McGILL LAW JOURNAL
[Vol. 18
A dealer commits a criminal offence if any of this information
is false. A defence of reasonable care is provided in the case of (v).
c. Imposition of a Statutory Guarantee Against Defects (ss. 24-29)
By far the most important aspect of the Act is the imposition
of mandatory guarantees against defects. When any used car is
sold by a dealer to a non-trade buyer for a price of $1,000 or more,
any defect (undefined) which appears in the vehicle during the
next 5,000 kilometres or three months (which ever arrives first),
whether or not the defect existed at the time of the sale, must
be made good by the dealer so that the car is placed in a reasonable
condition having regard to its age. In the case of cars sold for a
price between $500 and $1,000, a similar guarantee is imposed except
that its length is limited to 3,000 kilometres or two months. Neither
guarantee applies to accidental damage occurring to the vehicle
after sale, to defects arising from misuse or negligence on the part
of any driver of
to defects
occurring
the tires, battery or prescribed accessories. The
only general circumstance
these guarantees can be
excluded is where the dealer attaches to a vehicle offered for sale
a notice in prescribed form setting out with reasonable particularity
any defect that he believes to exist in the vehicle together with, in
relation to each defect, the estimated cost of repairing the defect.
A purchaser must receive and sign a copy of this notice at the time
of the sale if the dealer is to avoid liability for the defects disclosed.
If he under-estimates the cost of repairing a defect, he is liable
to the purchaser for the difference between his estimate and the
fair estimated cost of repair.
the vehicle after the sale, or
in
in which
If a dispute arises between a purchaser and dealer as to the
application of the guarantee to any situation, the two parties can
agree in writing to submit the dispute to the Commissioner of
Consumer Affairs or his nominee who will make a final and binding
determination of the dispute. If the parties cannot agree on a
reference to the Commissioner, the consumer will have to litigate
his rights in the Local Court which is enjoined to hear and determine
the matter as expeditiously as possible.
The only major departure by the Act from the Committee’s
proposals is in relation to the question of rescission. The Com-
mittee recommended that where the cost of repairing defects which
materialised during the guarantee period exceeded a certain figure,
or where defects were disclosed but the estimate of repair fell
short of the actual cost of repair by this figure, the buyer should
No. 2)
NOTES
have a right of rescission of the contract of sale (and any collateral
finance arrangement), with an automatic right to recover his pur-
chase money from the dealer within a specified number of days
of the purported rescission on pain of a penalty for non-payment.
If the dealer wished to claim that the rescission was wrongful
because [e.g.] consumer misuse had caused the defect, he would
have been required subsequently to sue the consumer in damages
for wrongful rescission. He could not, however, resist the rescission
at the time it was claimed or refuse return of purchase monies.
Thus the onus of litigation would rest with the dealer and the
consumer would not be without his money pending resolution of
the case. It remains to be seen whether the Act has adequately met
the problems created by requiring a consumer to litigate what may
be a relatively small, but, to him, important claim. It may be that
the desire to avoid the publicity attached to litigation will be a
sufficient inducement to dealers to utilize the arbitration machinery
provided in the Act. One other apparent deficiency in the Act at
present is its failure to require a dealer to furnish a buyer with
notice of his rights under the Act at the time of sale. Hopefully, the
wide regulation-making powers in the Act will be invoked to fill this
lacuna.
The widespread opposition from business interests to the Com-
mittee’s recommendations and subsequently to the Act, culminating
in a late night dead-lock conference between the two Houses of
the South Australian Parliament before the Act was passed, suggests
that it starts to touch the heart of consumer problems in the used
car field. Canadian jurisdictions, which are still searching for ways to
take the bulk of the risks out of used car buying, may find that
the South Australian Act would repay close study.
M.J. Trebilcock.*
* Of the Faculty of Law, McGill University.
