HL Deb 16 May 1990 vol 519 cc359-76

7.27 p.m.

Baroness Ewart-Biggs

My Lords, I beg to move that the Bill be now read a second time.

The Bill was introduced into the other place by my honourable friend Mr. Martyn Jones, the Member for Clwyd, South-West, following his success in the Private Members' Ballot. It has had a rather unusual history and, for that reason, before I go into the details of the Bill, perhaps your Lordships will allow me to go briefly into its background.

I shall do that because there is one anomaly which would strike any noble Lord who did not know the history of the Bill. Both the Short and Long Titles of the Bill refer to consumer guarantees, yet no provision among the clauses relates to guarantees. It is therefore appropriate for me to remind your Lordships that, when the Bill was introduced in another place, it contained 15 clauses relating to guarantees. They sought to implement the recommendations of the National Consumer Council which had been set out in its report, The Consumer Guarantee. I understand that that report was the result of a two-year review led by the noble Baroness, Lady Oppenheim-Barnes. I am happy to see that she has now joined us and will take part in the debate. I shall look forward to what she has to say and any suggestions that she might have to improve the Bill.

Without wishing to pre-empt anything that the noble Baroness might wish to say, I should like briefly to cover the proposals on guarantees contained in the original Bill, which sought to make guarantees legally enforceable, to control unfair terms in guarantees and, most centrally, to defend the terms of a consumer guarantee. That consumer guarantee would contain clear rights and simple remedies to ensure that, if a guaranteed project broke down, the loss would be the producer's and not the consumer's. The consumer guarantee was to be not mandatory but voluntary. To ensure that consumers knew at the point of sale which businesses stood by their products, with new cars and major household appliances it would have to be stated whether or not they came with the guarantee.

This very simple idea commanded widespread support. It had a great deal of support from consumers and the public. In fact as many as 96 per cent. of people said that they wanted their MP to support the Bill. There was support not only from regulatory bodies and the media but also from retailers and manufacturers. I received a letter from the Retail Consortium which reiterated its support for the principle of meaningful guarantees and the aims behind my honourable friend's Bill as it then was. Moreover, my honourable friend, in an effort to work with the Minister for Consumer Affairs in another place, agreed that in addition to the provisions on guarantees, he would include in his Bill seven clauses given to him by the department to implement a 1987 report of the Law Commissions.

The passage of the Bill through another place commenced with an unopposed Second Reading on 26th January after a five hour debate. It was recognised that the principle to be considered was the need to legislate on guarantees. The Bill was in Committee for three sessions, when a number of amendments were made to the provisions on guarantees. Although the Minister for Consumer Affairs did not table any amendments, he expressed his concern about the clause which provided for negative indications. Nevertheless, it appears from Hansard that as the discussion in Committee continued he seemed to withdraw many of his objections.

Shortly before Report stage the Government considered that the provisions on consumer guarantees should have the benefit of public expenditure of some £1 million. That necessitated recommittal, which was taken on the Floor of the House on 30th March, immediately before the Bill's Report stage. The recommittal was drawn out by procedural wrangling and therefore hardly any time was available to consider the Bill on Report although a number of amendments had already been listed.

In those circumstances my honourable friend Martyn Jones in the final 10 minutes of the Bill's passage through the Commons withdrew the clauses on the consumer guarantee. I should like to make quite clear that that decision was forced on the Bill's sponsor. He is on record in the Official Report of another place as saying that he had no choice but to take that line in order to retain at least part of the Bill for consideration in your Lordships' House. He hoped that that would provide some scope for legislation to protect consumers to be developed in this House.

That only left clauses dealing with the Law Commissions' report. As if to reflect the unclear view of the other place, no attempt was made to amend either the Short Title or the Long Title of the Bill, nor to ensure that the commencement provisions fitted the detailed clauses.

I am sorry to have taken up the time of the House in detailing that background. However, I thought it necessary because the background is an unusual one and it would be difficult to understand the Bill before us tonight without it.

The clauses of the Bill concern the existing law on the supply and sale of goods. As such they relate to 19th century judge-made rules which were codified in the Sale of Goods Act. They apply to transactions between the Government and a multinational as much as they do to a consumer who buys a newspaper. It was against that background that in 1979 the Law Commissions were asked to consider certain aspects of the Act and in particular the defmition of "merchantable quality".

Clause I contains the Law Commissions' recommendations on the implied terms of quality. It contains a revised definition for Sections 14 (2) and 14 (6) of the 1979 Sale of Goods Act and clarifies the relationship between Sections 14 (2) and 15 (2) (c). Those changes make clear that, where appropriate, a court may consider all aspects of the goods when deciding whether they comply with the terms of quality. Those changes are seen by many experts as changes of form rather than substance. Nevertheless, I commend them to your Lordships because they make it clear to the layman that if he or she does not find the goods satisfactory then he or she may have a claim. After all, that is far better than the existing term "merchantability", which clearly means the ability of a merchant to resell and which could not be less appropriate for consumers.

Clause 2 makes changes to the remedies available to buyers when their rights have been infringed. It makes it crystal clear that the buyer may lose his right to reject the goods or get a refund, even though he has not had a reasonable chance to test the goods. I know that some noble Lords may wish to comment on that provision. I am very well aware that it was not properly considered in another place. As a starting point, however, we have a certainty. Let us not dismiss the merits of certainty.

Clause 3 is also concerned with circumstances in which a buyer may reject goods. It deals with partial rejection, or the situation where part of a consignment is defective. As noble Lords will be aware, the clause is aimed at commercial and not consumer transactions.

Clauses 4 and 5 address the same problem. One clause looks at it in England and Wales and the other clause covers it in Scotland. The policy behind the clause is very bold. It concerns the case where the buyer has yet to lose his right to a refund and so addresses the days immediately following the purchase. The clause ensures that commercial buyers are not allowed to be unreasonable when they reject faulty goods. If the breach is slight and can, for instance, easily be remedied, the commercial buyer cannot reject the goods but must content himself with the other remedy of a claim for compensation.

However, the consumer is not to be bound by such constraints. The intention is that, should anything at all be wrong with, say, a new car, the consumer should and will be entitled to demand a refund. That is because of the new definition of quality in Clause 1. For example, if a new car is defective because of a faulty connection to the windscreen wiper, the Law Commissions' view and that of the Government is that the consumer should not have to put up with the inconvenience and frustration of a repair but should be given back his money. That is how those clauses will better the position for consumers. They will penalise the shopkeeper or garage who sells the product which has or quickly develops minor faults or cosmetic blemishes.

Clause 6 will be very welcome north of the Border because it extends to Scotland that part of the Supply of Goods and Services Act 1982 which deals with goods. Clause 7 and Schedule 2 set out minor and consequential amendments. Clause 8 deals with commencement and is at present out of sync. with the rest of the Bill, as noble Lords will have noticed. It is the unamended commencement provision from the 22-clause Bill to which the other place gave an unopposed Second Reading.

I conclude by affirming that undoubtedly this Bill contains some welcome provisions. The three major provisions are the revised quality term to be known as "satisfactory quality"; the provisions on the supply of goods in Scotland; and the strong message to those who sell faulty goods. However, it would be entirely unrealistic on my part were I not to accept that the Bill contains some serious anomalies.

Either the titles and Clause 8 must be changed or the House must make some provision about guarantees. It is for that reason that I look forward to the Committee stage. I shall be very happy to consider any suggestions from noble Lords who may wish to put forward ideas and amendments to remedy those contradictions, and amendments that will produce the safeguards and the justice that consumers so obviously desire. In the meantime, I beg to move.

Moved, that the Bill be now read a second time—(Baroness Ewart-Biggs).

7.40 p.m.

Lord Meston

My Lords, we are grateful to the noble Baroness for her explanation of the Bill and its somewhat chequered history. It has indeed become a rather difficult and confusing Bill. Reading it as it has come to this House, one realises that it no longer lives up to its Long or Short Title because it was truncated towards the end of its passage through another place. On reading the Law Commissions' report one realises that what is now left is the Law Commissions' draft Bill. As always the Law Commissions' recommendations are the product of thorough consultation and careful reasoning. On reading the briefing material of the National Consumer Council and Consumers' Association, one realises that they disagree with the Law Commissions on one important point about the right to reject goods, and that they disagree with each other about the usefulness of enforceable consumer guarantees as originally proposed in the Bill.

Finally one looks at the debate in another place for some enlightenment. The debate—if one can call it that—on 30th March has to be read to be believed and raises serious questions about which House of Parliament is more in need of reform.

Clause I of the Bill provides welcome modernisation of the concept of merchantable quality, now a somewhat arcane expression. It also provides a focus on the characteristics of the article sold which make it of satisfactory or unsatisfactory quality. Those include durability. No one will have any criticism of Clause 1.

Clause 2 is the controversial clause. It concerns the rights to reject goods and to claim a refund. Whatever else happens to the clause, and indeed to the Bill, one must not lose sight of the fact that much of Clause 2 provides valuable rationalisation of the law for the benefit of the consumer and that the law would be improved even if Clause 2 is not amended.

Therefore by the new subsections (2) and (3) a purchaser is not deemed to have accepted goods until he has had a reasonable opportunity to examine them. A purchaser cannot have his rights taken away prematurely by so-called acceptance notes. The new subsection (6) means that a request for repairs does not prevent rejection. That, too, is valuable.

The difficulties are posed by the new subsections (4) and (5). The arguments for and against those proposals for a status quo are finely balanced. The new subsection (4), which restates existing law, provides that, The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them". Thus, despite the proposed subsection (5), the right to reject goods, and the right to a refund, may be lost irrespective of the opportunity to examine those goods. It may well be in practice that the lapse of a reasonable time, and lapse of reasonable opportunity to examine the goods, may occur at the same time. That point can be used for or against the proposed provisions. However, I am persuaded that we should see it clearly stated that in ordinary circumstances a purchaser should not lose by mere lapse of time the right to reject and the right to a refund for defective goods, even if that may mean that in exceptional circumstances the purchaser should give credit for the use and benefit which he has had from the goods.

Whatever improvements to the law we make, one can see that difficult cases will continue to emerge. But the removal of the proposed subsection (4) should not be a great hardship to those who are responsible suppliers of goods and should be a hardship only to those who provide shoddy goods. It may assist those who buy in haste and repent at leisure. It may protect those who are remarkably stupid. I have represented a couple who managed to buy a motor car without a test drive and after dark. They got it home—just. Home was a mile and half down the road, but the car never did more than five miles in its life in their hands and was a rich source of litigation, I am glad to say.

Normally neither the Government nor any of us has to think very hard when presented with an authoritative Law Commission report. I suspect that this is the exception. The difficulties of the Bill, and the arguments which surround it, suggest that there will be an onus on the Government to rethink their position so that the effort and the time which have so far been extended on the Bill and alt that has led up to it are not wasted.

As the noble Baroness explained, the concept of the enforceable consumer guarantee has been dropped from the Bill. I understand that the National Consumer Council has lowered its sight, if it has not altogether dropped its guns. Indeed there may well be merit in a modified version of the NCC proposal, if only as a back-up to the remedies that I hope the Bill will provide with an improved version of what is presently before us. Accordingly I hope that the opportunity will be taken in the course of the Bill to breathe some life back into the concept of consumer guarantees.

The noble Baroness explained that much of the Bill extends to Scotland. That appears to be a welcome variant of the view that what is good for Scotland is also good for England. The commencement provisions of the Bill puzzle me slightly. I wonder why part of the provision is to start on 1st March 1991 and part on 1st October 1991, in particular when the Law Commissions proposed a simple two-month gap before the Bill came into force.

I support the Bill so far as it goes. There is a lot to be said for half a loaf But the question that will arise is whether it goes far enough.

7.48 p.m.

Lord Allen of Abeydale

My Lords, the noble Baroness has explained very clearly the curious position in which we find an opposition spokeswoman introducing a Bill drafted by the Government's Law Commission which has a title that bears no relation to its contents and which omits altogether provisions suggested by the National Consumer Council that, for her part, she would have liked to see enacted.

I can well understand the frustration of the National Consumer Council and those who agree with it over the fact that the proposals for some form of consumer guarantee—on which it has worked so hard and consulted so widely—have not prospered. The NCC is clearly right in thinking that the present protection proposed by the law for the consumer is unsatisfactory and it has made a brave attempt to improve the consumer's legal rights. The story of what happened to that attempt must be grievously disappointing. I do not know how far it will be possible to recover the ground.

I should like to limit myself—as rather foreshadowed by the noble Baroness when she opened the debate—by touching on a point to which the noble Lord, Lord Meston, has already referred. I should like to draw attention to one aspect of what I might describe as the "Law Commission Bill" that is before us.

Although it took the commission eight years to produce its report, I cannot say that it is the most persuasive document I have ever read. I have taken against its habit of putting relevant arguments into the footnotes. My main criticism is that, after all this time, Part 5 of the report fails to come forward with any new suggestion to improve the right of the buyer to recoup the purchase price of goods which prove to be defective. I am no lawyer, but I understand that the existing law confers on the buyer the right to reject goods which are not of merchantable quality. In practice, it then takes away much of that right by saying that the buyer cannot reject the goods and recoup his money once he has accepted them. The courts have held that the buyer accepts the goods when he takes delivery or so soon thereafter as to make little difference. That means that if a defect which is present when the goods are brought comes to light only after an interval it is probably too late.

Many noble Lords will have in mind the decision of the courts in the case of Mr. Bernstein, in which he took delivery of a new Nissan car. It is strange that the name of the car featured in the case is, on the whole, a byword for reliability. The car suffered a catast-ophic breakdown three weeks and 140 miles after delivery. However, as a matter of law the judge held that it was too late for Mr. Bernstein to recover his money. Surprisingly, the Law Commission thought that perfectly all right. Its reasoning appeared to be that it was more important that there should be finality in commercial terms from the seller's point of view than that the interests of the consumer should be looked after. Therefore, in reformulating the existing law, Clause 2 rubs in what I might describe as the "Bernstein limitations" on the buyer's rights. I have in mind subsection (4), which provides that a buyer is deemed to have accepted goods when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. There are no prizes for guessing that "a reasonable time" will not be prolonged.

The result will be that a buyer may lose his right to reject defective goods before he has even discovered that they are defective. There is an indication to suggest that the Law Commission's report and perhaps the Bill have made matters worse. I have the impression that if, after buying an expensive new video which breaks down, one takes it back a week later one will be told that it is too late. It will be repaired but the seller will not take it back.

The buyer is better off if he buys his car or goods on hire purchase. In that case there is no similar principle of acceptance and he retains a continuing right to reject. Again, the Law Commission appears to be perfectly happy to endorse that difference. It does so for reasons which will carry conviction to some but not to all.

I should make it clear that I am speaking about goods which clearly had a defect in them at the start although that may be revealed only after a period of time. It is obvious that the longer the buyer has the goods before the defect appears the more difficult it will be for him to show, as he rightly must, that the defect was there originally. I wonder whether there is not something to be said for getting rid of the doctrine of acceptance altogether as regards dealings by consumers. Or it might be possible to provide that the period for rejecting defective goods starts to run only from the time the buyer discovered, or could reasonably have discovered, the defect which was present in the goods at the start.

The last examination of this topic took eight years and, therefore, I am not optimistic enough to suppose that the problem can be solved before the next stage of the Bill. I do not wish to stand in the way of the other comparatively minor improvements effected in the Bill as it stands or of attempts by others to improve it. However, the Government should be made fully aware of the continuing disquiet in respect of the problem that I have discussed and of the widely felt disappointment at the failure of the Law Commission to do better so that, for the reasons that I have explained, it managed to make the situation even worse. It is a strange and somewhat disquieting story. If this evening the Government can offer words of comfort, I shall be glad to hear them.

7.56 p.m.

Baroness Oppenheim-Barnes

My Lords, I am grateful to the noble Baroness, Lady Ewart-Biggs, for introducing the Bill. I am also grateful to all noble Lords who have taken part in the debate for supplying some of the background to the story of why we are debating the measure this evening. The noble Lord, Lord Meston, has described it as "half a loaf. I should not describe it as such; I should describe it as a pathetic remnant. That is no disrespect to the noble Baroness, Lady Ewart-Biggs.

When I became chairman of the National Consumer Council it was patently obvious to me, to my council and to everyone who worked there that as a result of the Bernstein case consumers had no proper protection under the Sale of Goods Act. We were determined that that would be the central theme of our consumer reform. When we looked at the Law Commission's report, which is enshrined in the Bill before us, we believed—and I still believe—that it left consumers worse off. Their right to reject is not enshrined in the law and that lack of right is being perpetuated in this new legislation.

Worst of all, the Law Commission stated in its recommendations that it was doubtful about how far the process of patching up the Sale of Goods Act could go. In other words, we need a new Sale of Goods Act which is enforceable and easily understood by consumers. Clearly, the Government did not have room for such a large piece of legislation in their timetable. But we at the National Consumer Council were not daunted. We said, "How can we help consumers? What can we do to help them to enforce their rights and give them the power to reject? What is the biggest area of complaint?" It is the motor car industry where competition is completely distorted. The issue was raised only last week in the referral to the Monopolies and Mergers Commission. Attention was drawn to the price of cars in Britain compared to other countries. That results from distorted competition and the fact that 50 per cent. of all cars sold in this country go to company fleets.

We undertook a review of guarantees and consumer rights. We consulted over 100 bodies and visited the United States to see how consumers there fared and how the law was upheld. We discovered that, because of greatly enhanced competition, not only were consumers able to buy motor cars far more cheaply but they were given greater rights under the warranties they received with the cars that they bought. Indeed, some warranties were for parts and services lasting up to eight years. We were told that this had come about because of the Magnusson Moss Act which started a warranty war and stimulated competition. That is the lesson. It is most important in an area where competition is very distorted. Once one motor car manufacturer offered a firm warranty, others were forced to follow suit. I felt that that was an ideal way of bringing about a better climate for consumers.

I thought that a Conservative Government would welcome that sort of approach from the National Consumer Council. Accordingly, we drafted a Bill. When we first consulted the Consumers' Association it expressed a degree of support for the work we were doing. That support appears to have been withdrawn in the brief circulated to noble Lords which looks as though it may have been drafted by departmental officials. It is totally incomprehensible; it seems to contradict itself all the way through.

However, as has been said, we consulted 100 bodies and received tremendous support for the principle of a standard guarantee for consumers which could be introduced as a consumer guarantee giving to consumers rights which were enforceable in the courts. In order to be completely reasonable we said that that should be only permissive. Companies may or may not introduce such guarantees, but if they did not do so then they must state the fact. We thought that that would stimulate the kind of competition which we had seen in the United States. It would give to consumers easily understandable rights and a means of enforcing them. We felt that that was a simple answer rather than the complicated and, I believe, useless answer which has been provided by the Law Commission.

In another place Martyn Jones took on the Bill. There were a great many Members competing for the Bill. However, as Mr. Jones was first in the ballot, we decided it was right that he should have the Bill. He was supported by all-party sponsorship and at Second Reading in the other place over 22 Conservative Members voted in favour of it. On a Friday that is a very high number of votes to command. Clearly, the Bill had all-party support.

The Minister for consumer affairs did not move a single amendment to the Bill in Committee. He has been blamed by many people for destroying what, I believe, was a very good Bill without in any way attempting to amend it or to seek agreement upon it. I do not level those accusations against him. I feel rather sorry for him and I can understand his position. Officials in his department probably said, "Look, Minister, this is not practical. It cannot be because we did not think of it. We cannot possibly advise you to accept this Bill and therefore we must find a way of defeating it".

I understand that because I was in that position when I was Minister for consumer affairs in 1982. At that time the same thing happened. There was a Private Member's Bill—and it was first in the ballot —called the Supply of Goods and Services Bill. My officials said more or less the same thing to me, but I said, "Wait a moment. I believe that there is some good in this Bill. It may not be perfectly drafted and may have some defects, but you find a way of rectifying those defects and provide me with the amendments which are needed so that we can accept the Bill". That is what we did and the Bill helped consumers. I am sorry that the present Minister for consumer affairs was overpowered by his officials. I was not prepared to be so overpowered in my day.

What subsequently happened in another place is also very sad. A great deal of work had taken place on something which we at the National Consumer Council believed would not impose a great burden on industry and would not cost anything. We believed that it would stimulate competition and, most importantly, would give consumers stronger rights which could be enforced in a court of law.

I find the Bill before us quite unacceptable. I have made my views known to the noble Baroness, Lady Ewart-Biggs. However, in Committee I propose to move amendments of such a modest nature that they will be irresistible to the Government. I shall do that in full consultation with the Government. I should like to see a modified version of what was originally proposed in the Bill in another place. That would give to consumers enforceable rights and write into the Bill a standard form of guarantee which manufacturers could, or could not offer, as they chose. If the Government felt able to accept that very modest form of amendment I should be happy to support the Bill, if not, I shall feel bound to oppose it.

8.6 p.m.

Lord Williams of Elvel

My Lords, the House is grateful to my noble friend Lady Ewart-Biggs for introducing the Bill. As a number of noble Lords have said, it raises a very important issue, and I shall come to that basic issue in a few moments. However, thanks to the intervention of the noble Baroness, Lady Oppenheim-Barnes, we have had a full history as to how the original Bill came about. That was due to the efforts of herself and the National Consumer Council to meet certain problems which are certainly extremely important. That is the first point that I wish to make. We have a major problem in respect of consumers and their rights because there is no genuinely enforceable guarantee. That is the first problem which must be dealt with in some form or another.

It is also surprising to me—and I join with the noble Lord, Lord Meston, in this—to be speaking to a Bill on Second Reading, the Short Title of which has nothing to do with the text of the Bill and the Long Title of which has provisions to do with the text of the Bill but leaves a great gap where it allows the Act to provide for consumer guarantees. I am bound to say that it is the first time that I have spoken to a Bill the text of which has very little to do with the Short Title.

The Bill contains amendments to the Sale of Goods Act 1979, an extension of the Supply of Goods and Services Act 1982 to Scotland and consequential amendments to various pieces of legislation. The noble Lord, Lord Allen of Abbeydale, commented on that. I join with him in believing that the Law Commission is not necessarily infallible in producing the right solutions for legislation. There are times when people at the Law Commission could be slightly more perceptive in what is required in the real world. Nevertheless, the Law Commission has produced the Bill, so for what it is worth, subject to any amendments which the noble Lord, Lord Allen, may wish to move in Committee, I do not propose to challenge my noble friend's Bill.

I do not propose to follow the noble Lord, Lord Meston, in his interesting comment on the provisions of the Bill because I want to get on to what I regard as a more important subject. However, I was very interested to hear what the noble Lord, Lord Meston, said, and I look forward to any discussions which may take place in Committee.

The question we have to face is what should have been in the Bill and not what is in the Bill. There should have been a consumer guarantee. That is what the Bill says. That should substantially be in the form which my honourable friend Mr. Martyn Jones in another place introduced it after, as the noble Baroness, Lady Oppenheim-Barnes, said, consultation and with the support of all parties and with the support of a number of organisations such as the Retail Consortium. That is what should have been said in the Bill.

The problem of a Consumer Guarantees Bill, which is what the Bill is called, relates to consumer guarantees. After the Bernstein case, there can be no doubt whatever—as the noble Baroness, Lady Oppenhe m-Barnes, very persuasively argued —that there is a gap in our legislation. No possible amendment in the Sale of Goods Act can deal with that. We must have proper legislation of a new sort. For the solution, I looked at what the National Consumer Council provided in the way of briefs and in the way of history; I looked at what the Consumer Association provided. I looked at what my honourable friend in another place said and at what other pecple in the other place said. I am bound to say that I cannot find any fault whatever with the basic formula that the NCC produced, subject to modifications which may take place and may be adopted in Committee. I am perfectly clear on this matter; I think that that should be in this Bill.

As the noble Baroness, Lady Oppenheim-Barnes, said—I am embarrassed to continue citing her because I believed almost every word that she said—competition is not just about price. Competition is also concerned with quality and services. There is no point saying that if the price competition is right, then everything else will be right. Consumers have an absolute right to know on what basis they are buying something, a motor car, a video or whatever it may be. It may be on the basis of quality, guarantees, what the follow-up will be, the service and on the basis of price. That is what the whole; business is about.

I am astonished that the Government have not seen that and adopted it. I recognise that there are ways in which the other place deals with Private Members' Bills. I have not been a Member of the other place. Their procedures have been decided by them and I cannot comment on that. However, in your Lordships' House we have ample time to develop these themes and to amend the Bill as it comes before us.

I shall support the noble Baroness, Lady Oppenheim-Barnes, if, in Committee, she moves the amendments that she described. I very much hope that the Government will also support those amendments. I have to say to the Government in the starkest possible terms that they are either in favour of a consumer guarantee or against it. If they are against it, then they will have to fight for their position in this House. If they are in favour, let them join with us and try to amend the Bill in a satisfactory manner which, as the noble Baroness said, would be acceptable to the Conservative Party and should be part of the Conservative Party platform. Let them reverse the position that they held in another place, when they persuaded my honourable friend Mr. Jones to withdraw that part of the Bill which contained the guarantee.

If the Government are against the Bill, and if they persist in the view that they will not accommodate any amendment which the noble Baroness, Lady Oppenheim-Barnes, moves, then I am bound to say that we do not accept that position. We shall fight it in this House and, if necessary, my party will fight it in front of the electorate.

8.15 p.m.

Viscount Ullswater

My Lords, I must begin by congratulating the noble Baroness, Lady Ewart-Biggs, on her sponsorship of this Bill. This Government are committed to the consumer interest and we therefore welcome a measure which will both clarify and strengthen consumers' rights. The Bill has the full support of the Government but some minor tidying amendments will be needed as a consequence of the changes made in another place. If this House grants the Bill a Second Reading, the Government will table the appropriate amendments in Committee.

There is already an extensive body of legislation which exists to protect consumers of which the Sale of Goods Act 1979 forms an important part. It covers the sale of everything from a packet of butter to a luxury yacht. Among other provisions it states that there is an implied condition, on the part of a person who sells in the course of business, that the goods in the sale transaction are of "merchantable quality"; correspond to their description and are reasonably fit for the purpose. Traders cannot avoid these obligations in their contracts with consumers. It also allows the buyer to reject goods that are not of merchantable quality and receive back the purchase price. He may reject the goods provided that he has not intimated to the seller that he has accepted them, or has not acted in relation to them in a way which is inconsistent with the ownership of the seller or, after the lapse of a reasonable time, he has not retained the goods without intimating to the seller than he has rejected them.

The noble Baroness, Lady Ewart-Biggs, summarised the background to the Law Commissions' proposals. In 1987 the Law Commission and the Scottish Law Commission carried out a review of certain aspects of the law governing the sale and supply of the goods. They examined the present statutory provisions for implied terms in contracts for sale, the remedies for breach of those terms and the rules governing the loss of the right to reject non-conforming goods.

They recommended that the old term "merchantable quality" should be replaced by a clearer, more up-to-date definition, and that the amended Act should state explicitly that relevant aspects in determining quality include fitness for all the purposes for which goods of the kind in question are commonly supplied, the appearance and finish of the goods, their freedom from minor defects, their safety and their durability. They also recommended that a number of other minor changes to the 1979 Act should be made but that the basic rules governing acceptance should not be changed.

The changes which the Law Commissions proposed attracted very widespread support on consultation by the DTI. I believe that there is a good case for enacting the Bill which is based on their conclusions. This is a fundamental area of law and it is sensible that the provisions should be kept under review and updated when necessary. The new provisions on merchantable quality will make the law more easily understandable to consumers, traders, the courts and everybody else concerned.

Other new provisions will usefully correct minor unfairness in the present law and give a statutory basis to certain case law. I am thinking of the provision that signature of a so-called acceptance note would not deprive a buyer of his rights to a reasonable opportunity to examine goods and subsequently to reject them if they are defective. Another example is the explicit provision that a buyer would not be deemed to have accepted goods within the meaning of the Act merely because he asks for, or agrees to, their repair. Overall, the measures should serve to promote the effective operation of the market and a fair trading environment.

The noble Lords, Lord Meston and Lord Allen of Abbeydale, argued that legislation on the sale and supply of goods should be amended to allow for a long-term right to reject faulty goods. I think that it is worth spending a little time on explaining the Government's position on this issue which was one of the main questions considered by the Law Commissions in their review. The Sale of Goods Act 1979 does not allow the buyer a long-term right of rejection: the buyer is allowed a "reasonable opportunity" of examining the goods but once a "reasonable time" has expired, he is deemed to have "accepted" them. In other words, he cannot reject the goods and get his money back if a latent defect comes to light after they have been in use for some time. But he does have the remedy of damages in these circumstances. The basic principle was expressed by a judge in 1823 ruling that a purchaser could not reject a chandelier after a lapse of six months. He said: If a man takes an article, and keeps it, and uses it as his own, though it were not according to contract, he is bound to keep it and pay for it".

Baroness Oppenheim-Barnes

My Lords, on that point, does my noble friend therefore agree that three weeks was a reasonable time for Mr. Bernstein to have had his car and to have lost his right to reject it under the law that my noble friend is commending to us?

Viscount Ullswater

My Lords, I shall turn to the Bernstein case in a moment.

Section 35 of the Sale of Goods Act 1979 provides as one of the tests of acceptance that a buyer is deemed to have accepted goods when, after the lapse of a reasonable time, he retains them without intimating to the seller that he has rejected them. The Law Commissions recommended retention of the existing rules governing acceptance but acknowledged that the concept of a "reasonable time" did not provide a certain answer which could be applied in every case. They commented that no one on consultation was able to provide a better solution than at present; nor were they aware of any common law system which provided a better answer. They said that, The search for a formula which will achieve certainty is, we are forced to conclude, a search for something which is not there to be found". The new Section 35 (5) in the Bill now provides that among the questions that are material in determining whether a reasonable time has elapsed for the purpose of deciding whether the buyer has accepted the goods is the question of whether the buyer has had a reasonable opportunity of examining the goods. This provision permits a wide flexibility in taking into account all the circumstances, but ensures that one of the questions which will be taken into account is whether the buyer had a reasonable opportunity to examine the goods. A more rigid provision, if intended to apply to all types of goods, would inevitably create certainty at the expense of justice.

To answer the question put to me by both the noble Lord, Lord Allen of Abbeydale, and my noble friend, it would be wholly wrong and misleading to imply that the detailed circumstances of the Bernstein case are a definitive statement of consumers' rights of rejection under the Sale of Goods Act. Other plaintiffs in different cases have sought to exercise their right of rejection under the Sale of Goods Act with different conclusions. In Rogers v. Parish, a claim to reject was upheld after 5,000 miles and a period of six months, during which several attempts to remedy defects had been made, but without total success.

The Law Commissions recommended against creating a long-term right of rejection, arguing that such a right would be extremely unfair to sellers. Consumers who bought a defective product would in effect be entitled to free use of it until the defect emerged. The seller would then be obliged to take back a used product and refund the full purchase price. Such a regime would simply be too biased in the consumer's favour. It would also be inflationary as manufacturers would seek to recover the higher costs by increased prices.

It would be possible to make a long-term right of rejection less unfavourable to sellers by allowing the seller to deduct an element from the purchase price for use and enjoyment of the goods before rejection; but the Law Commissions did not believe that any meaningful principles or formulae could be devised in relation to a credit for use which did not depend upon criteria so uncertain "as almost to invite dispute". It would greatly complicate the law and would substantially reduce the attraction of the rejection remedy from the consumer's point of view.

The Law Commissions concluded that it would be preferable to retain a relatively short-lived right to reject, with a corresponding automatic right to a full refund. Their report noted that this whole issue attracted considerable comment upon consultation and that their conclusion was generally—though not universally—supported. On this question, I very much agree with the Law Commissions' view that the law should not be changed.

The issue of legal redress in consumer disputes and the problems associated with seeking redress in some circumstances is one which is often raised. Following the Civil Justice Review, the Lord Chancellor last year announced the introduction of a programme of reforms under the Courts and Legal Services Bill designed to improve access to justice by speeding up, simplifying and reducing the cost of civil proceedings. This will enable more cases of higher value to be handled and tried in the county courts which should assist smaller plaintiffs to pursue claims more effectively.

A further change which the Lord Chancellor plans to introduce next year is the raising of the upper limit for small claims proceedings from £500 to £1,000. This will bring about a substantial increase in the number of consumers able to benefit from the simplified proceedings.

I now turn to the consumer guarantees provisions referred to by the noble Baroness, Lady Ewart-Biggs, my noble friend Lady Oppenheim-Barnes and, of course, the noble Lord, Lord Williams of Elvel. The Government have made clear their concerns about the former provisions of the Bill on consumer guarantees which were deleted at Report stage in another place. Our main areas of difficulty are on record. In UK law, liability under contract is, in general, restricted to the parties to that contract and the buyer s remedies are against the seller and not the manufacturer or importer. This is an important principle with considerable practical advantages. The consumer guarantees provisions would have created different remedies against different persons in different circumstances; and contrary to the Law Commissions' recommendations, they would have created a long-term right of rejection.

The Bill was presented as introducing a purely voluntary regime. However, it would have required producers of specified products to label them with a statement as to whether or not the product was covered by a consumer guarantee. This would have exerted undue pressure on such producers to provide the guarantee and would have created a barrier to trade within the EC and with other countries.

The Bill prohibited an additional charge for the consumer guarantee. The associated increases in costs would therefore have been reflected in prices across the Board. The Bill also contained many legal and technical problems. The Government did not believe that, even on the basis of the sponsor's own policy, a coherent and legally sound Bill could have been produced within the necessary time.

Although the Government cannot accept the approach of the consumer guarantees provisions which were formerly a part of the Bill, we believe that the subject of guarantees and the remedies they provide is worthy of further consideration. However, I must tell my noble friend that any new proposals should be based on a comprehensive analysis of the extent of the problem and indentification of particular areas where reform is needed, in the light of full public consultation. As my honourable friend the Minister for Industry and Consumer Affairs has indicated, the Department of Trade and Industry will conduct a review into the general issue of guarantees once the consideration of this Bill has been completed.

Finally, I shall end by congratulating the noble Baroness, Lady Ewart-Biggs, once again on her sponsorship of the Bill. The Sale of Goods Act was never intended to be a complete code. It was essentially a statement in statutory form of the principles of law derived from decided cases. Indeed, one reason for the longevity of the provisions of the original 1895 Act may have been that in many instances it was not necessary in practice for buyers to rely on the Act. For example, there are shops which will always allow customers to return recently purchased goods, whether or not they are defective. Whatever the reasons, the Act has given rise to comparatively little litigation over the meaning of its terms. Nevertheless, it is important that it should be kept under review so that disputes are kept to a minimum. The reforms which the Law Commissions have proposed are not revolutionary but they do represent an increase in protection for consumers which is very welcome. They will also make the law more easily intelligible to all concerned.

Lord Williams of Elvel

My Lords, before the noble Viscount sits down, can he help me on one point? He said that the Government were favourably disposed in principle to consumer guarantees but that the DTI was conducting its own inquiry into the facts. Does he not recognise, first, that the National Consumer Council conducted a very detailed inquiry into the facts and that they are already established? Secondly, in order to assist our future deliberations, can the noble Viscount tell the House how long the DTI inquiry will take? Will it be another 10 years before it does anything?

Viscount Ullswater

My Lords, I accept that the NCC has undertaken a review. The DTI is undertaking its own review. I cannot indicate to the noble Lord when that review will be complete. It is useful now that the Bill has arrived and further consideration will take place soon.

8.30 p.m.

Baroness Ewart-Biggs

My Lords, I am very grateful to noble Lords who have taken part in this debate. I find myself in a very unusual position, which I hope I shall not occupy too often again. I am proposing a Bill which is heartily endorsed by the Minister and which is very strongly slated by my noble friend on my own Front Bench. The noble Lord, Lord Allen, has pointed out the anomaly of an Opposition spokesperson introducing a Bill which contains the Law Commission's recommendations which were asked for by the Government in the first place. That again puts me into a very unusual position.

However, I am grateful to the noble Lord, Lord Meston, who gave serious study to the Bill which is before us. He made some very useful comments about it. I understand that he felt that there was very little left of the original Bill. He hoped that the Bill before us would be improved in Committee. I am also grateful to the noble Lord, Lord Allen, for pointing out very clearly what he finds lacking in the Bill before us because of his feelings about the Law Commission's recommendations, which, he believes, have not advantaged the consumer in any way.

The noble Baroness, Lady Oppenheim-Barnes, was in a very strong position to give the history of the Consumer Guarantees Bill in a fuller way than I could because she played a central part in it as chairman of the National Consumer Council. The points she made were absolutely unarguable. I am very grateful to her for saying that, at Committee, she will move a very modest version of the original Bill which will give consumers enforceable rights and a standard form of guarantee. I believe that is what she said. I very much look forward to Committee stage when she will be doing that.

I suppose I have to be grateful to the Minister for welcoming the Bill which I am moving tonight. I am happy at what everybody has said. The Minister was very content with the Sale of Goods Act, which he felt gave good protection to the consumer. However, as I understand it that Act was a consolidation measure. That being so, it did not create new law. Part of the justification for this Bill rests on the fact that the existing law is dated. Perhaps the Minister was not quite right on that matter.

I am worried about what he has said concerning Committee stage and the proposals put forward by noble Lords that they wish to amend this Bill to bring back a very modest version of the original one moved by my honourable friend in another place. I am also worried that he feels that it is better to discard the very long and profound inquiry made by the National Consumer Council, which, as I said in my opening speech, received an enormous amount of support not only from all the regulatory bodies and the media but also from consumers. That puts the Government in rather a weak position, as, though they consider themselves such strong supporters of the consumer, they go against something which had very obvious support from ordinary people who have very often suffered from buying goods which subsequently proved to be defective and which have left the buyers in a very serious situation.

I am grateful for all the useful contributions made by noble Lords to this debate. I eagerly look forward to Committee stage. By that time I hope that the Minister will have changed his mind and will be a little more receptive to the idea of bringing back a consumer guarantee. In the meantime, I ask the House to give the Bill a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.