Threat to popular car sales option

By Bill Foley

Increasingly popular "display-and-sell" car yards may be forced out of business after a landmark decision in the High Court.

Up to 100 such yards will be affected by the decision, which may also lead to restrictions in the way operators of car fairs can behave.

Motor dealers objected to the way the operators of some yards and car fairs acted like dealers but did not accept the same responsibilities and liabilities in terms of customer protection.

Opinion is divided on whether the Motor Vehicle Dealers Bill, before Parliament, will save the yards. But a spokesman for the Minister of Justice, Tony Ryall, said the bill did not contain a specific clause covering display-and-sell operators or car fairs, and its definition of a car dealer was similar to the 1975 act.

Of the 800,000 cars sold each year, 30 per cent are sold through licensed vehicle dealer networks, 10 per cent at auction and the rest privately, including through car fairs and display and sell yards.

In a test case in Napier taken by the Motor Vehicle Dealers Institute against two Hawkes Bay operators, Justice Wild ruled that the display-and-sell businesses were operating beyond the terms of the Motor Vehicle Dealers Act.

Operators of the yards were in effect operating as motor vehicle dealers and should therefore obtain a licence if consumers were to be protected.

Justice Wild said the danger of the display-and-sell business was that the yard operator could easily become involved in the deal as sales staff.

The largest display-and-sell operator in Auckland, Sell It Yourself, has vowed to fight to save his business.
Murray Rennie sells more than 4000 of the cars every year on his yards in Wairau Rd, North Shore, and Great South Rd, Otahuhu. He is concerned for his future.

"If this judgment is correct I'd have to close my door and walk out," he said. He is adopting a wait-and-see approach.

The operator of the Ellerslie Car Fair, which attracts thousands of people every weekend, is also concerned.
Gerald Miller,who employs 20 people every Sunday, said he would do what he could to stay on the right side of the law.

Justice Wild said risks to the consumer would not exist if the car yard operators confined their involvement to that of landlord. But providing services such as security, holding keys, giving test drives and supplying change-of-ownership forms were the functions of a motor dealer.

He said: "Licensed motor vehicle dealers have complained with force that an environment which allows de facto motor vehicle dealers, who are not licensed and who do not abide by the law, to continue in business is not a level playing field. And it is not. I agree."

He opposed de facto dealers because they gained "an unfair advantage over licensed, law-abiding" dealers.

"Competition in the marketplace is all very well, but it must be fair and lawful."
The case had ramifications for the whole industry, said Justice Wild.

The counsel for S. D. McDonald Ltd and Auto Exchange (Hastings) Ltd, Gregory Calver, agreed that the decision could be far-reaching.

It would be difficult for a yard to stay open if the owner could not have a presence for security reasons and to provide test drives, cleaning and other services, said Mr Calver.

"It's a dire situation for the operators and could have serious consequences." His clients were considering taking the case to the Court of Appeal.

The executive director of the institute, Steve Downes, said it would post a copy of the judgment to every display-and-sell yard.

He warned that if their operators did not heed the judgment they might find themselves in court.

"We receive a lot of complaints from members of the public about these outfits. Basically display-and-sell businesses operate on an all-care, no-responsibility basis. Clearly this opens up the consumer to all kinds of risks."