Making Consumer Redress a Reality - The Consumer Claims Tribunal & the Rights of Consumer Associations under Maltese Law

Paul Edgar Micallef

Consumer Law in Malta – its Beginnings and Development over the Years.

Consumer law in Malta has a short history. The first laws directly concerned with consumer protection were enacted in the eighties and then only to deal with specific issues such as the role of consumer associations, false and misleading trade descriptions and door-to-door trading. Until the early nineties there was no clear long-term comprehensive plan by the Maltese Government on consumer affairs. This was to some extent rectified in 1991 when the Government published a White Paper entitled “Rights for the Consumer”, thereby for the first time establishing a clear sense of direction for consumer affairs. Subsequently partly in line with the proposals in the 1991 White Paper, a coherent legislative programme was gradually implemented. In this context the first legislative measure was the enactment of the Consumer Affairs Act in 1994 the purpose of which was to put in place the administrative structures responsible for consumer affairs including the creation of a Consumer Claims Tribunal as an alternative means of consumer redress. More recently fairly wide-ranging amendments to the Consumer Affairs Act and other consumer related laws have been enacted, introducing legislative measures on various areas that were either inadequately regulated or, worse, not regulated at all.

In this paper I focus on two areas directly related to consumer redress, namely the Consumer Claims Tribunal and the rights of consumer associations. In both areas the Maltese legislator has implemented some interesting measures, in part influenced by the experience of other jurisdictions and in part dictated by local circumstances. The Consumer Claims Tribunal has now been operating for almost five years and is perceived by many consumers and traders alike as a relatively informal, inexpensive and quick means of dispute resolution. Proof of this is the increase each year of the number of disputes lodged before the Tribunal. The role of consumer associations, on the other hand, has always been a focal point for the Maltese legislator in various consumer-related laws enacted to date. Indeed throughout the relatively short history of consumer law in Malta, there has been a gradual increase, albeit at times not quite as far-reaching as one might wish, in the rights that recognized consumer associations enjoy at law, culminating with the recent amendments enabling registered consumer associations to request the issue of compliance orders.

The 2000 Amendments to the Consumer Affairs Act

The 2000 Amendments are without doubt the most far-reaching consumer laws enacted to date. A significant measure introduced under these amendments is the recognition by the Maltese legislator of the importance of two basic consumer rights. These are respectively - the right of consumers to effective, quick and inexpensive means of redress; and the right to form and join consumer associations and to have consumer interests represented in the making and execution of government policy. This was done as a result of the inclusion of these rights among the declaration of principles inserted in the amendments to the Consumer Affairs Act. Though these principles are only meant to serve as general guidelines and are not directly enforceable before the courts, their inclusion in the Consumer Affairs Act, demonstrates a clear pronunciation by the legislator as to what the guiding principles in the sphere of consumer protection are.

Significantly the 2000 amendments to the Consumer Affairs Act have added entirely novel measures in the sphere of consumer law, including provisions:

·        prohibiting the use of unfair terms in consumer contracts, misleading advertising and the so-called pyramid schemes;

·        regulating comparative advertising;

·        on liability for defectives goods; and

·        on the sale of goods to consumers.

In the sphere of consumer redress the 2000 Amendments have introduced new substantial measures, including a threefold increase in the monetary jurisdiction of the Consumer Claims Tribunal and the right of consumer associations to request the issue of compliance orders.

The Consumer Claims Tribunal – an alternative means of redress

One measure introduced under the Consumer Affairs Act of 1994 which has proved to be quite successful, is the establishment of the Consumer Claims Tribunal as an alternative means of redress to that available before the ordinary courts. Since the Consumer Claims Tribunal started to operate in early 1996, the number of cases presented has generally increased from one year to another. In the first year of its existence 94 cases were presented before the Tribunal. The number of cases presented in 1997 increased to 143, in 1998 to 177 and in 1999 to 249. The year 2000 saw a slight drop to 226 cases. The increase in the number of claims presented before the Consumer Claims Tribunal is a confirmation that the Tribunal is perceived by many consumers as an effective means of redress. This is even more significant when one considers that consumers may alternatively choose to file their claims before the Small Claims Tribunal or the Court of Magistrates as the case may be.

In all probability the number of claims lodged before the Consumer Claims Tribunal will continue to increase now that the monetary jurisdiction of the Tribunal has been increased from previous Lm500 to Lm1500. There of course remains room for improvement, notably with regard to the need of having in place a more practical and effective system for those cases where traders refuse to comply with Tribunal decisions awarded against them. This notwithstanding, overall it appears that the Consumer Claims Tribunal is proving to be a popular means of redress in consumer versus trader disputes.

The need for a specialized tribunal to determine consumer vs. trader disputes

The proposal for a specialized tribunal to hear and determine consumer versus trader disputes was first raised in the White Paper “Rights for the Consumer” issued by the Maltese Government in 1991. The White Paper whilst proposing the creation of a “small claims court” or tribunal to which a consumer could have recourse for a swift and cheap remedy, raised a number of issues related to the establishment of such a tribunal. Among the issues discussed were whether the jurisdiction of such a tribunal should be voluntary or mandatory and if the creation of such a tribunal would not lead to a duplication of the work of the Court of Magistrates which until then was the competent forum for small claims.

Until 1995 small claims involving amounts of up to Lm100 fell within the jurisdiction of the Court of Magistrates. The procedure followed before the Court of Magistrates in hearing and determining such small claims was in practice similar to that followed before the Courts of the superior civil jurisdiction, this notwithstanding that article 215 of the Code of Organization and Civil Procedure stated (and still does!) that the Court of Magistrates when hearing civil litigation “…shall proceed summarily and with the utmost despatch consistent with the due administration of justice…”.

Though article 215 may give the impression that small claims were heard and determined by the Court of Magistrates in a relatively short span of time, in practice most claims if contested by defendant under the former adjudicative system, were invariably destined to take some time to be concluded. The Court of Magistrates would invariably have a list of some twenty five to thirty cases (at times even more!). If the case involved the taking of evidence of several witnesses, it would then be adjourned from one sitting to another until all the parties to the suit declared that they had no evidence and after the parties concluded with their submissions to the court. This procedure resulted in lengthy and formal proceedings and in many instances served to deter many consumers with valid claims from seeking redress before the ordinary courts. In such circumstances it was obviously impractical for most consumers (and indeed most other litigants) to pursue a claim involving a relatively small monetary amount, given the time-consuming procedures involved.

Faced with such a situation it was imperative that a more practical means of consumer redress be introduced. The end-result was the creation of the Consumer Claims Tribunal following the enactment of the Consumer Affairs Act in 1994. The intention behind the Consumer Claims Tribunal was to have in place a forum where consumer versus trader disputes could be heard and determined in a quick, informal, inexpensive and effective manner. To some extent these goals appear to have been achieved, though of course there remains room for considerable improvement especially with regard to the enforcement of tribunal decisions.

The Consumer Claims Tribunal – what claims may it determine

The Consumer Claims Tribunal is presided by an arbiter chosen by the Prime Minister from among advocates with at least five years practice in the legal profession. The appointment is for a three-year period and can be renewed for further three-year periods. The Tribunal may hear and determine claims made by consumers against traders relating to the provision of goods or services, provided the monetary value in dispute does not exceed Lm1500. It is up to the consumer to decide if he wants to file his claim before the Consumer Claims Tribunal or before the ordinary courts. However once the consumer has presented his claim before the Consumer Claims Tribunal, he cannot then bring the same claim before the ordinary courts. Conversely while the consumer may choose to lodge his claim before the Consumer Claims Tribunal or the ordinary courts, the trader has no such choice. If a claim has been filed against him before the Tribunal, the trader cannot ask that the dispute be referred to the ordinary courts. To this extent the Consumer Claims Tribunal may be described as optional for the consumer but mandatory for the trader.

The reason for this situation is fairly simple. If the trader had the option of refusing to submit to the jurisdiction of the Consumer Claims Tribunal by insisting that the claim be referred to the ordinary courts, then it would have been quite possible for an unscrupulous trader intent perhaps on prolonging proceedings, to take advantage of such an option to render the adjudicative process frustrating to the consumer. The consumer would have been confronted with a situation where having commenced proceedings before the Tribunal, the trader could then refuse to accept the Tribunal’s jurisdiction, thus forcing the consumer to start proceedings anew before the ordinary courts. Such a situation could moreover have lead to the gradual extinction of the Consumer Claims Tribunal as a means of effective consumer redress, once few consumers would have been prepared to commence proceedings before a tribunal to whose jurisdiction traders might object.

The Consumer Affairs Act establishes three other instances where the Tribunal has jurisdiction:

·     When a consumer has filed an action before an ordinary court and the claim would otherwise fall within the jurisdiction of the Tribunal, then if the trader against whom the claim has been made agrees, that claim may be transferred for trial to the Tribunal;

·     When a trader has brought an action before an ordinary court and the consumer has filed a counter-claim, then provided both the trader and the consumer agree, the claim and counter-claim may be transferred to the Tribunal;

·     When a claim is presented by a consumer before the Tribunal, the trader against whom the claim has been made, may then himself make a counter-claim against the consumer provided the counter-claim relates to the claim made by the consumer and does not exceed the monetary jurisdiction of Lm1500.

It is relevant to note that the Tribunal when determining a claim against a trader may also award a consumer up to Lm100 as moral damages for “any pain, distress, anxiety and inconvenience” suffered. This is somewhat of a novelty in Maltese Law, since the instances at law where one can claim “moral damages” are few. The Tribunal has in several cases when upholding the claim made, awarded moral damages where it felt that the consumer had suffered considerable inconvenience. Hence in a case where a telecommunications provider failed to reconnect a special communications system to an elderly customer without giving any valid reason, causing in the process distress to the customer, the Tribunal awarded the maximum amount of moral damages permissible.

It is relevant to note in this regard that whilst the jurisdiction of the Tribunal has been increased threefold from Lm500 to Lm1500, the limit up to which a consumer can claim moral damages has remained Lm100. There is no evident reason why the limit on the amount of moral damages that may be awarded, was not similarly increased. The maximum Lm100 that may be awarded remains a relatively small amount that does not cater for all the possible instances that may justify the award of moral damages. Clearly in this regard the Maltese legislator should consider revising the amount of moral damages that may be awarded to more realistic figures.

Who are the “consumer” and the “trader” in proceedings before the Consumer Claims Tribunal?

The 2000 Amendments to the Consumer Affairs Act revised substantially the definitions of “consumer” and “trader”. The 1994 Act defined a “consumer” as being “any individual who not in the course of a business, trade or profession, buys or hires goods from a trader or engages the services of a trader for a fee or reward”. This definition was criticized as being too narrow. On the one hand the business community argued that the definition of a “consumer” should be extended to all end users to include persons in business who buy or hire products or services for the needs of their business. On the other hand the consumer lobby advocated that the definition of a “consumer” be rephrased to cater for situations where the consumer needed to be protected even if he was not buying or hiring goods or services. Hence for example the former definition of “consumer” did not necessarily protect a consumer who during the pre-contractual stage was on the receiving end of hard sell techniques or similar malpractices. In this respect the former definition of a “consumer” was clearly deficient.

The definition of a “consumer” introduced under the 2000 Amendments rectifies the shortcomings of the former definition. The new definition considers as a “consumer” any individual who in transactions and other matters covered by consumer legislation, “is acting for purposes which are not related to his trade, business, craft or profession”. The new definition is in part similar to that adopted in various European Union consumer policy directives. Rather than stating who the consumer is, thereby limiting the protection and remedies available to a consumer who buys or hires goods or services, the new definition considers a “consumer” to mean any individual who is not acting for purposes relating to his business, craft, trade or profession. Significantly the new definition of “consumer” has also been extended to include any individual who though not the immediate purchaser or beneficiary, have been authorised by the consumer to use or benefit from the goods or services provided to the consumer by the trader. Furthermore the Minister responsible for consumer affairs after consulting the Consumer Affairs Council, is empowered to designate as “consumers” any other class or category of persons. This leaves the door open for the Minister to extend the definition of consumers even to certain end-users who are not traditionally considered to be consumers such as traders who purchase products they need in the course of their business.

The definition of “trader” has also been substantially revised. Under the former definition “trader” included any person who or which in the course of a trade or business sold or hired, or offered to sell or hire goods or services to consumers. The former definition of “trader” however did not automatically include public owned or public controlled commercial entities. It was only the Prime Minister who could designate by notice in the Government Gazette, which government department, public corporation, authority or organisation providing goods or services for as fee, should be considered as a “trader” for the purposes of the Consumer Affairs Act. This meant that the Prime Minister had the discretion of deciding if and when the Consumer Affairs Act would apply to public owned commercial entities, giving such entities an advantage over their rivals in the private commercial sector.

The new definition of a “trader’ makes no exception for public owned or public controlled entities. A “trader” is defined as being “any person, including any body corporate or incorporate who in relation to any transactions or other matters covered by this Act or regulations made thereunder is acting for purposes relating to his trade, business, craft or profession”. One other notable difference with the former definition is that “trader” now includes also the professions and therefore claims can now also be filed against members of the different professions such as lawyers or architects with regard to any services rendered.

Pre-trial Procedure – the role of the Director and of the consumer associations

A feature of the Consumer Claims Tribunal which distinguishes this Tribunal from the ordinary courts, is the requirement that a claim must first be referred to the Director of Consumer Affairs or to a registered consumer association before it is presented before the Tribunal. The purpose of such a measure is to enable the Director or the consumer association as the case may be, to assist the litigants in arriving at an agreement on all the issues in dispute. If after fifteen working days from when the dispute was referred to the Director or consumer association, no agreement is achieved, then the consumer may present his claim before the Tribunal.

It would appear that the system is working quite well, even if it may not be working exactly as it was originally intended. Most of the cases being presented before the tribunal are claims where the consumer initially asked the Director of Consumer Affairs for his intervention and where the consumer had no intention (at least initially) of presenting his claim before the Tribunal. Indeed it would appear that few consumers approach the Tribunal directly without having first asked for the intervention of the Director to resolve the dispute. In practice what happens in most cases is that a consumer first approaches the Director with his claim. If the Director fails to resolve matters, the Director then informs the consumer of the possibility of presenting his claim before the Tribunal. Conversely it would appear that it is only in a small minority of cases that consumers first approach the Tribunal and then are referred to the Director so that the latter may assist in amicable settlement of the dispute. One reason which may explain this situation is that whilst the role of the Director in assisting consumers with their disputes is widely publicised, that of the Tribunal has not perhaps been given the same degree of publicity. It will moreover be interesting to see how the system will operate now that consumers can also approach a consumer association for its intervention prior to the filing of a claim before the Tribunal.
 

The conduct of proceedings before the Tribunal

A characteristic of most consumer redress or small claims procedures is that the presiding adjudicator is not required to abide by the formal rules of court procedure in hearing and determining disputes and may adopt the procedure which he considers to be appropriate. This norm has also been adopted under the Consumer Affairs Act whereby the arbiter in hearing and determining a claim, is free to regulate the proceedings as he thinks is “best suited to the ends of justice in accordance with the rules of natural justice.”

Complimentary to this general norm, the Act establishes a number of criteria aimed at ensuring that where possible claims are heard and determined quickly and informally. Article 23(2)(a) of the Act states that the Arbiter shall ensure that as far as is reasonably possible, a claim is decided on the same day of the hearing. This however may not always be possible. In practice few claims - generally those that are not contested - are decided at a first hearing. One must take into account that there are various circumstances that may justify an adjournment to another date such as the illness of a vital witness or indeed of one of the litigants. To date cases before the Tribunal have been heard and determined in relatively reasonable time spans, with the majority of cases taking an average of three to four sittings. This compares quite well with the length similar cases take before the ordinary courts and in this regard the Tribunal has proved to be quite effective.

Article 23(2)(b) of the Act empowers the arbiter to inform himself in any manner he thinks fit. In doing so the arbiter is not bound by the rules of best evidence or the rules on hearsay evidence if he is satisfied that the evidence before him is sufficiently reliable for him to decide the case. The arbiter, after having taken into account the circumstances of the litigants including whether they are for example assisted or not by legal counsel, may also intervene by putting questions to any of the litigants or their witnesses or by explaining any legal terms or expressions used. This measure is in consonance with the general concept behind the Tribunal of having in place an informal means of redress where litigants can represent themselves and are not at an disadvantage because they are not assisted by legal counsel.

Another measure aimed at curtailing adjournments in cases before the Tribunal is the express requirement under article 23(2)(c) stating that the arbiter is to refrain “…as far possible from appointing technical referees to give expert evidence….”. The appointment of such experts is in certain cases unavoidable if the Tribunal is to arrive at an equitable and fair judgement and indeed there have been quite a few instances where the Tribunal had no alternative but to appoint an expert. The Tribunal has rightly shown considerable restrain in appointing experts motivated by practical factors, such as the amount in dispute and the nature of the defective product taking into account the particular circumstances of each dispute.
 

Deciding claims according to equity

Undoubtedly one of the main features of the Consumer Claims Tribunal, is that the Tribunal may decide “the issues in dispute in any claim or counter-claim before it according to the substantive merits and justice of the case, and in accordance with equity.” The idea of empowering such a Tribunal to decide claims according to equity is a measure that has been introduced in various jurisdictions. Hence article 113 of the Italian Code of Civil Procedure expressly empowers the guidice di pace to decide claims involving small monetary values according to equity. Other jurisdictions even if not using identical wording have introduced similar provisions. Queensland’s Small Claims Tribunals Act provides that the referee (as the presiding adjudicator is called) in determining a dispute is required to make an order which “is fair and equitable to all the parties to the proceeding concerning the dispute…”. New Zealand’s Disputes Tribunal Act states that the Tribunal in determining a dispute must decide “according to the substantial merits and justice of the case”. In doing so the Tribunal must have regard to the law but is not bound to give effect to strict legal rights or obligations or to legal forms or technicalities.

The concept of deciding claims according to equity is relatively new to Maltese law. To date the Court of Appeal has not in the appeals from the Consumer Claims Tribunal dealt with the issue as to what constitutes “equity”, in particular the extent if at all that the Tribunal may decide a case without necessarily adhering to the strict word of the law. The Court of Appeal has however dealt with this issue in various appeals from decisions given by the Small Claims Tribunal which Tribunal is also empowered to decide disputes according to equity. The Court of Appeal in an appeal from a decision of the Small Claims Tribunal in the case “The Performing Rights Society Ltd. vs. Reno Fenech” held that the concept that the Small Claims Tribunal decides claims according to equity does not mean that if a person has a legal right then that right can be refused on the grounds of “equity”. The Court observed that equity in itself requires that justice must be done and that if there is a legal right then equity requires that that right be upheld and protected by the Tribunal. 

It is pertinent however to note that the wording of the relevant provision in the Small Claims Tribunal Act empowering the adjudicator presiding in that Tribunal to decide claims according to equity, is different from the wording used in article 21(1) of the Consumer Affairs Act. Article 7 of the Small Claims Tribunal Act provides that that Tribunal “shall determine any claim or counterclaim before it principally in accordance with equity”. Moreover it is an express ground of appeal if it is shown that the Small Claims Tribunal acted “in a serious manner contrary to the rules of impartiality and equity according to law” and such action prejudiced the rights of the appellant. Significantly in article 21(1) of the Consumer Affairs Act the legislator omitted the word “principally” and added the words “according to the substantive merits and justice of the case”. This substantial difference in wording does not preclude a different interpretation by the Court of Appeal in the applicability of the concept of “equity” by the Small Claims Tribunal and the Consumer Claims Tribunal.

Appeals

An appeal from a decision of the Consumer Claims Tribunal to the Court of Appeal, is possible only if the Tribunal has acted contrary to the rules of natural justice and as a result the rights of the appellant have been seriously prejudiced. If the Court of Appeal finds that the appeal is justified then it shall quash the decision of the Tribunal and determine the original claim itself. In doing so the Court of Appeal as is the case with the Tribunal, is required to decide the claim in accordance with equity. The number of appeals made to date has been quite small. In part at least this is obviously due to the limited grounds on which an appeal may be lodged.

In the initial months of the existence of the Tribunal a few test cases were made before the Court of Appeal. The Court of Appeal has however constantly retained that a right of appeal exists only if it is shown that the Tribunal acted against the principles of natural justice and in doing so, seriously prejudiced the rights of the appellant. Otherwise there are no other grounds of appeal. This in practice is very difficult to prove, and most appeals lodged to date have as a result been quashed. Hence in Johann Camilleri vs. Ronald A. Cachia Phoencia Laundry and Dry Cleaning, the Court of Appeal quashed the appeal of the Laundry firm, observing that while appellant gave various reasons in support of his appeal such as the alleged failure of the Tribunal to give due weight to the evidence given by officials from the Department of Consumer Affairs and the failure of a witness to give evidence on oath, none of these demonstrated that the Tribunal had acted in breach of natural justice thereby prejudicing the rights of the appellant.

Rose Loftus et vs. Ray Mallia (Blye Engineering Co. Ltd.) was one of the few instances where the Court of Appeal upheld an appeal from a decision of the Tribunal. In this case the Court of Appeal said that the arbiter had failed to motivate his decision as to why he upheld the consumer’s claim when the evidence given by the expert appointed by the Tribunal give credence to the arguments of the trader. Presumably (once the Court of Appeal did not clearly state so in its decision) the Court considered the failure of the arbiter to motivate his decision as being a breach of the rules of natural justice which seriously prejudiced the rights of the appellant.

The costs involved

Making and replying to a claim before a Consumer Claims Tribunal is relatively cheap, especially when compared to the expenses involved in making similar claims before the ordinary courts. The fee for filing a claim before the Tribunal is related to the monetary value in dispute with the fees ranging from Lm3.00 if the claim is of Lm250 or less, up to a maximum of Lm10 if the claim exceeds Lm1000. The fee for the filing of an appeal from a decision of the Tribunal before the Court of Appeal is Lm15.

These fees are comparatively much cheaper than those charged for similar claims made before the ordinary courts. Hence in the case of the Small Claims Tribunal a flat rate of Lm10 is charged irrespective of whether the amount in dispute is of Lm50 or Lm1000, whereas the fee for the filing of an appeal from a decision of the Small Claims Tribunal is of Lm30. The fact that the relative fees have remained low is also in line with the declaration of principles in the Consumer Affairs Act which recognize the right of the consumer to an effective, quick and inexpensive means of redress.

Matters that must be addressed

The main shortcoming of the Consumer Claims Tribunal, is the difficulty a consumer has to face if a trader is not prepared to abide by the Tribunal’s decision. This in practice means that the consumer must have recourse to the ordinary courts for the issue of the relative warrants to enforce the Tribunal’s decision. Many consumers faced with the prospect of more expenses and time-consuming procedures in court, remain passive and do not proceed any further, moreso if the award in their favour involves a relatively small monetary amount.

A measure that is being actively pursued to redress this situation is the issue of factual public statements by the Director of Consumer Affairs stating which Tribunal decisions have not been complied with mentioning the defaulting trader by name. It is interesting to note in this regard that some jurisdictions empower the competent authorities to publish the names of those who fail to abide with the decision given by the competent consumer or small claims tribunal. Hence under the New South Wales Consumer Claims Act the Director General of the Department of Fair Trading is empowered to establish and maintain a list of “unsatisfactory suppliers” who have failed to comply with the requirements of an order by the Fair Trading Tribunal.

Another possibility is for the competent Maltese authorities to provide some form of mechanism to assist the consumer in enforcing the Consumer Claims Tribunal’s decision. Under Ireland’s Small Claims Court system, the consumer, for the fee of six Irish pounds, may request the assistance of the Count Registrar for the execution of unsatisfied court decisions. The fee is later refunded to the consumer once the decision has been successfully executed.

Finally as I observed earlier the number of claims filed before the Tribunal is increasing each year and will no doubt proportionately continue to increase with the coming into force of the new monetary jurisdiction of Lm 1500. One of the apparent reasons why many consumers opt to refer their disputes to the Tribunal rather than to the ordinary courts is, that the Consumer Claims Tribunal is seen by many as a relatively quick means of redress. However in order to maintain the current time-scales during which such disputes are heard and determined by the Tribunal, then it is imperative that measures are undertaken to forestall the accumulation of cases waiting their turn to be heard. Though it is difficult at this early stage to predict what the increase in caseload before the Tribunal will be with the coming into force of the new monetary jurisdiction, clearly one part-time arbiter with an average of one to two sittings cannot realistically hear and determine disputes within the present time-scales. The alternatives are either to appoint additional arbiters or else a full-time arbiter on a permanent basis. Whatever measures are taken, these must be taken in anticipation of the increase in the workload of the Tribunal therefore pre-empting a probable backlog of cases before the Tribunal and possible disenchantment by consumers with the system.

Consumer Associations – their rights under Maltese law

The first steps – the Consumer Protection Act and the Trade Descriptions Act

One of the first Maltese consumer laws was the relatively short “Consumer Protection Act” enacted in 1981. This Act dealt exclusively with the role of consumer associations, empowering the competent Minister to recognize as a “consumer organization” any voluntary association of persons whose principal objective was to promote the protection and education of consumers. According to this Act any voluntary organization recognized by the Minister as a “consumer organization” under the Act, was free from any civil or criminal liability when issuing public statements in good faith about any product, provided such a statement was intended for the protection or education of consumers. Any person who wanted to object to a statement issued by a consumer association under this Act, could then protest in writing to the Minister and the protest would be referred to a committee of the House of Representatives appointed for the purpose. This committee would then report back to the Minister with its recommendations, stating whether the protest was justified or not. From a reading of the Act it was not clear what steps the Minister could take if he retained that the protest was justified other than possibly withdrawing the recognition granted to the association under the Act. In which case the association would then not benefit of the protection given to it by law when issuing other statements.

The Trade Descriptions Act was the next law under which consumer associations were given specific rights. Article 30 of this Act provides that in any criminal proceedings for any offence under the Act other than for offences under articles 23 and 24, a representative of a registered consumer association duly appointed for the purpose shall be deemed to be an injured party for the purposes of article 410(3) of the Criminal Code and such a representative may assist the competent authorities during the course of the criminal proceedings instituted under the Act. To date it is worth noting that this procedure has never been availed of.

The proposals under the 1991 White Paper “Rights for the Consumer”

The 1991 White Paper proposed a radical overhaul of the Consumer Protection Act of 1981 which was then still in force. Various shortcomings were identified among them the absolute discretion of the competent Minister in deciding whether to recognize a consumer organization, the lack of clear criteria in recognizing such associations and notably that the protection from civil or criminal liability when issuing public statements was curiously limited to products and made no mention of services.

The 1991 White Paper proposed various measures in order to improve those under the Consumer Protection Act of 1981. These included:

·     The removal of ministerial discretion in recognising consumer associations. In lieu the White Paper proposed that a Consumer Protection Council should determine whether an association was entitled to be recognised as a consumer association on the basis of a series of clear criteria established under law;

·     the right of consumer associations to institute legal actions and appear in court proceedings, representing the general interest of consumers; and

·     that the provisions of the Consumer Protection Act of 1981 should extend to public statements about services.

It is pertinent to note in this regard that these proposals pre-date by several years and go well beyond the measures in the EU directive on injunctions for the protection of consumers’ interests. Indeed Maltese consumer legislation at least in this context, may be considered to be substantially wide-ranging. Clearly the 1991 White Paper proposals and their gradual implementation at law through the years, are indicative of the attempts by the Maltese legislator to promote strong consumer associations.

The Consumer Affairs Act of 1994

The Consumer Affairs Act of 1994 in part implemented the proposals made in the 1991 White Paper. The Consumer Affairs Act improved the position of consumer associations in various respects continuing on the foundations laid under the previous legislation whilst doing away with certain shortcomings. The great innovation introduced under this Act is the requisite that only those consumer associations which conform with the criteria established in the Act and which are duly recognised by the Consumer Affairs Council, are entitled to be considered as “registered consumer associations” and therefore to the rights enjoyed by such associations at law.

Under article 28 of the Consumer Affairs Act the Council must be satisfied that a consumer association wishing to be registered fulfills the following five criteria namely:

·     that the association has a minimum of one hundred paid up members of majority age who are Maltese citizens or permanent residents in Malta;

·     that the statute of the association states in substance that the principal object of the association is to promote consumer protection and to guide, inform and educate consumers;

·     that the statute of the association provides that it is to be managed by persons who are freely elected by the members of the association in an election held once every calendar year;

·     that the association does not have profit making as one of its objects;

·     that the association is independent of any other association, organisation or grouping whose principal object is not the protection of consumers.

It would appear that according to article 29 the only circumstance where the Council may refuse to register a consumer association is if that association does not comply with any of the above-mentioned criteria. Otherwise it would appear that an association is by right entitled to be recognised by the Council as a registered consumer association. This clearly is a substantial improvement on the former absolute discretion of the competent Minister who decided whether or not an association should be recognised as a consumer association and therefore be entitled to the rights enjoyed by such associations at law.

The Council is required to keep a register of all registered consumer associations stating the names, dates of registration and number of their members and any other particulars the Council may consider appropriate. This register is open to inspection by any person, though the identity of the individual members of an association is not open to public scrutiny. Each registered consumer association is required to keep an updated record of the names, addresses and identity card numbers of its members and must submit to the Council any information on its membership and activities as the Council may require.

Part IV of the Act gives registered consumer associations three rights namely:

·     exemption “….from any liability or responsibility whether civil or criminal, in respect of any publication, statement or other communication or activity, which is bona fide and is intended solely for the better information, education or protection of consumers.” This exemption is extended to all those persons publishing, printing, broadcasting or in any way communicating such information. If a person alleges bad faith by the registered consumer association in the issue of a statement, then it is up to that person to prove his allegations. This exemption is an improvement on the previous exemption under the Consumer protection Act of 1981 since the protection for any statement, publications etc. made, is comprehensive and is not limited to statements about products as was the case under the 1981 Act;

·     the right to make reports or complaints to the competent authorities and to participate in the prosecution of any offences resulting therefrom; and

·     exemption from the payment of income tax.

Moreover under article 4 of the Act, the Minister in appointing one of the members of the Consumer Affairs Council, must consult with those consumer associations which have been registered in terms of Part IV of the Act. Though there is no legal requirement that the Minister must choose a representative from a registered consumer association, in practice to date the Minister has always chosen at least one person suggested by the consumer association.

The one important measure proposed in the 1991 White Paper which the Consumer Affairs Act as enacted in 1994 did not address adequately, was the proposal that consumer associations be entitled to institute judicial proceedings in the general interest of consumers. As we shall see this proposal has in part been implemented under the recent amendments to the Consumer Affairs Act.

The Competition Act

Under the Competition Act a registered consumer association acting on behalf of consumers generally, may request in writing to be admitted to intervene at any stage in procedures before the Commission for Fair Trading. While this measure in itself is a positive one, it would appear that a registered consumer association, unlike an undertaking whose activities have been affected or a “complainant”, cannot formally request the commencement of procedures before the Commission. Indeed article 7(a) of the Schedule to the Competition Act provides that “Procedures before the Commission shall be commenced by a request in writing by the Director, or by an undertaking or a complainant through the Director according to the provisions of this Act”, making no mention whatsoever of registered consumer associations. Similarly under article 15 of the Act it is only an undertaking which or a complainant who can through the Director of Fair Competition, request the Commission to take interim measures to suspend any restrictive practice under investigation by the Director.

It is to say the least strange to have a situation where a registered consumer association can intervene at any stage during the course of procedures before the Commission, yet cannot of its initiative formally request that procedures be initiated. Clearly there is no evident reason why a registered consumer association can intervene but cannot initiate procedures. This is a situation that should be rectified either by interpreting “complainants” to include registered consumer associations or by amending the Competition Act to do away with such an anomaly.

The Amendments to the Consumer Affairs Act - new rights and new roles for consumer associations

The Amendments to the Consumer Affairs Act have introduced three changes that relate directly to registered consumer associations, changes that should continue to enhance the role of such associations as representatives of the general consumer interest.

Decrease in the number of members for an association to be recognised.

The norm under article 28(a) of the Act requiring a minimum of 250 members which a consumer association must satisfy in order to recognised by the Consumer Affairs Council as a registered consumer association, has now been reduced to 100 members. Consumer associations and indeed the consumer movement in general in Malta remains weak and has failed to attract enough support to enable it to operate effectively. Possibly this change may help to attract more interest, moreso since the previous requirement of 250 members was seen as being too high.

However this amendment may be counterproductive. Whilst there is nothing wrong in encouraging more interest in consumer associations, in practice what is needed is a strong consumer movement rather than a proliferation of separate consumer associations. More consumer associations may lead to a duplication of the existing limited resources, something that frankly for a small country like Malta does not really make much sense. Rather what is needed is a full rationalization of the sparse financial, human and material resources thereby ensuring that there is in place a strong and effective consumer movement able to represent consumer interests. Various consumer associations would mean that the few resources available would be spread among different associations rather than centred in one strong association. This obviously would be to the detriment of consumers in Malta.

Disputes referred to the Consumer Claims Tribunal – a role for consumer associations

An important change that should give registered consumer associations more direct involvement in the amicable settlement of individual consumer versus trader disputes, is that implemented as a result of the amendment to article 23(4) of the Act.

Prior to this amendment, a consumer who wanted to file a claim before the Consumer Claims Tribunal first had to refer his claim to the Director of Consumer Affairs. The Director then had 15 working days in order to try and assist the consumer and the trader against whom the claim was lodged to arrive at an agreement on the issues in dispute. If on the lapse of the 15 working day period no such agreement was reached, then the consumer could file his claim before the Tribunal. Now a consumer during the 15 working day period, has the option of referring his claim either to the Director or to a registered consumer association. The Director or the association as the case may be, during the fifteen working day period, must then try to bring the consumer and the trader to agreement on all the issues in dispute. If no such agreement is arrived at on the lapse of the 15 working day period, the consumer may file his claim before the Tribunal.

One particular result of this new measure, is the elimination of duplication in the handling of consumer versus trader disputes by the Director of Consumer Affairs and by a registered consumer association. Prior to the amendment, a consumer who wanted to file a claim before the Consumer Claims Tribunal, in all instances had to refer his case to the Director, this irrespective of whether the consumer had sought the intervention of a registered consumer association in trying to resolve the dispute. In such instances the consumer was faced with a situation where if he initially had sought the intervention of an association and later decided to file a claim before the Tribunal, then notwithstanding he would still have to refer the same claim to the Director so that the latter in accordance with his functions at law, would try to assist the parties in resolving the dispute amicably. The new amendments now does away with such a situation since claims which have been referred to a registered consumer association, need not again be referred to the Director if the consumer wishes to pursue the claim before the Tribunal.  

The right of consumer associations to request the issue of a compliance order 

The most significant change with regard to registered consumer associations introduced under the 2000 amendments to the Consumer Affairs Act, is the right of such associations to request the issue of compliance orders. It is pertinent to note in the first instance that the inclusion in the amendments to the Act of Part IX dealing with compliance orders, was motivated partially by Malta’s implementation of the EU Directive on injunctions to protect consumers’ interests. The legislator has not however limited himself simply to implementing this Directive. Indeed in some respects Part IX of the Act includes measures which go beyond the minimum stated in the Directive. The most significant difference is that whilst the Directive only requires that measures be implemented to enable “qualified entities” to request the issue of an order “requiring the cessation or prohibition of any infringement”, under Part IX of the Act a compliance order may also be issued to require a person to rectify the consequences of an infringement in breach of consumer law.  

The core provision under Part IX of the Act dealing with Compliance Orders is article 94 which empowers the Director of Consumer Affairs either of his own initiative or on a written application to him by a “qualifying body” to issue a compliance order on any person:

·     requiring the deletion or alteration of terms in a consumer contract which the Director considers to be unfair to consumers in accordance with Part VI of the Act;

·     requiring the incorporation of terms in a consumer contract which the Director considers to be necessary for the better information of consumers, or for preventing a significant imbalance between the rights and obligations of the parties, and this to the benefit of consumers;

·     requiring him to discontinue or refrain from engaging, promoting or undertaking any advertising which is misleading or else is not permitted comparative advertising;

·     requiring him to take any measure and within such time as may be specified in the order to ensure compliance with the Consumer Affairs Act, any regulations made thereunder, or any other law dealing with consumer rights as may be designated by Order in the Gazette by the Minister after consulting the Council; and

·     requiring him to cease or desist from committing an offence under the Consumer Affairs Act, any regulations made thereunder or any other law dealing with consumer rights as may be designated by Order in the Gazette by the Minister after consulting the Council.  

A qualifying body when applying to the Director for the issue of a compliance order, does not have to show that it is affected by the matter in relation to which it is asking for the issue of an order. This measure effectively makes it possible for a registered consumer association (and indeed any other body recognised as a “qualified body”) to act in the general public interest to curb any practices which may be of detriment to consumers, without having to prove that it is directly affected by a specific interest.  

The Director when issuing a compliance order must serve a copy of the order on each person against whom the order is made, stating briefly the reasons for the issue of the order. A person against whom an order has been made, has 15 days from notification of the order on him, in which to contest the order by undertaking proceedings for its revocation before the Court of Magistrates in its civil jurisdiction. In such an instance the court may confirm, change or cancel the compliance order on any terms or conditions it considers appropriate. Such action may only be commenced on the following grounds:

·     on a material point of law; or

·     if the making of the compliance order is grossly unreasonable or unjustified.  

In this regard there appears to be a lacuna since the Act – specifically Part IX - does not state what rights a qualified body has when a person against whom a compliance order issued by the Director following an application by a qualified entity, decides to contest that order before the court. In such an instance can the qualified entity at whose request the order was issued, intervene in the court proceedings instituted by the person against whom the order was made? It is not quite clear in the absence of an express provision in the Act on this point, if a qualified body would to be entitled to intervene. The Code of Organization and Civil Procedure which in the absence of a specific provision in the Consumer Affairs Act, applies to regulate such a circumstance, states that any person who shows to the satisfaction of the court that he is interested in any suit pending before other parties, may apply to the Court to be admitted as party to the suit at any stage of the proceedings. Therefore it would appear that on the basis of the general law of procedure a qualified body would also be entitled to intervene in such proceedings.  

It is relevant to note that a compliance order comes into force with immediate effect unless the order is contested before the court, in which case the order will be stayed pending the outcome of the court proceedings. This notwithstanding, the Director if he “considers it appropriate or necessary in the public interest” may request the court to issue an “interim compliance order” ordering that the compliance order continue in force pending the final outcome of the court proceedings. In doing so the court may order any such modifications to the order as it may deem appropriate.  

The Director may decline to accede to an application by a registered consumer association for the issue of a compliance order. In such a case, the Director must notify the association in writing with his decision, giving his reasons as to why he has decided not to issue the order. The association then has fifteen days from the date of the notification of the Directors’ decision, to institute an action before the Court, asking for the Court to order the Director to issue a compliance order. The association must notify the person against whom the order is being requested, with such proceedings thereby enabling such a person to make his submissions before the Court. Indeed the Act expressly provides that the persons against whom the compliance order is requested “shall be parties to the suit…”. It is pertinent in this regard to consider briefly the experience of other jurisdictions that in part have influenced the current legislative measures under Maltese law.  

The European Union Directive on “injunctions for the protection of consumers’ interests” 

This Directive complements the measures in favour of consumer associations provided for in the Directives on misleading and comparative advertising, and on unfair terms. In both these latter directives members states were required to enact provisions under their national law whereby persons or organisations regarded as having a legitimate interest in protecting consumers could take the necessary action before the courts or the competent administrative bodies to curb misleading or unpermitted comparative advertising or the use of unfair terms as the case may be. The injunctions Directive is very much in the same vein, even if more detailed and far-reaching in its desired goals given that under this directive action can be taken to prohibit acts done in breach of at least nine directives.  

Perhaps the most significant measure under the Injunctions Directive is that a consumer association which is recognised in its own country, can , as a result of the implementation of this directive, also undertake proceedings in another member state, if the association can show that the interests which it protects are affected by the infringement originating from that other member state. However at this stage it is still premature to comment on the effects of this directive since at the time of writing, various member states are still in the process of enacting the necessary legislation. Clearly the implementation of this directive throughout the European Union, should result in a better standing for recognised consumer associations, though even at this early stage one can already foresee practical problems especially if such associations decide to take action with regard to abusive practices done by traders operating from other member states. Such a system to operate smoothly presupposes strong consumer associations operating in unison with their counterparts in other countries backed by solid financial and legal resources. As things stand, though some positive steps have already been taken in this regard, there is still a long way to go.  

The rights of consumers organizations under the Laws of Alberta  

Few British commonwealth jurisdictions grant their consumer associations any rights at law to undertake action in the general interest. One jurisdiction that has in recent years implemented various measures in favour of consumer associations is the Canadian province of Alberta. Under Alberta’s Financial Consumers Act a consumer organization can initiate proceedings in court against a supplier, agent or financial planner in respect of an activity that the organization alleges, contravenes the Act. In doing so a consumer organization, as is the case for a qualified body under Maltese law, does not need to have an interest in or be affected by the subject matter in order to start the court proceedings. However unlike under Maltese law, a consumer organization in order to be considered as such for the purposes of the Financial Consumers Act must satisfy only two criteria namely:  |

·        that it has as its primary objective the protection or   advancement of the interests of consumers; and

·        that it is not incorporated for the purpose of acquiring financial gain for its members.

Another Alberta law granting consumer organizations the right of action is the Fair Trading Act. Article 17(1) of this Act provides that a consumer organization or a group of consumers may commence an action in court against a supplier who is engaging in or has engaged in an unfair practice. The court in this regard may make an order declaring the practice or act to be unfair and grant an injunction restraining the supplier from engaging in the unfair practice. As under the Financial Consumers Act, the consumer organization in bringing an action does not need to have an interest in or be affected by the matter in issue.

Looking ahead – a meaningful role for consumer associations

On paper registered consumer associations in Malta enjoy substantial rights at law even when compared to the rights that their counterparts in other countries enjoy. In practice however there is still a long way to go. The problem is not that such associations do not enjoy any rights at law but rather that there is an evident lack of enthusiasm by consumers in supporting such associations. Why this is so, is not quite clear. At present there is one consumer association that has now been operating since the early eighties. Regrettably support and interest by consumers in general in this association has always been relatively poor. The income of this association is essentially limited to a paltry annual membership fee of Lm1.00 and limited occasional grants by Government. Otherwise this association has no other sources of funding. This obviously hampers the role of the association in promoting consumer interests and assisting consumers in any disputes they may have. Indeed as things stand the association lacks funds to support even a part-time employee. As a result all the work for the association is done by volunteers in their free time. Directly related to the practical problem of human and financial resources of the sole consumer association operative in Malta, is that to date most of the rights whereby such associations can intervene in criminal proceedings or complain under the Competition Act have not been availed of. If the situation does not change, in particular if the same support and interest in consumer association remains as it is, then there is a distinct possibility that the new rights given to such associations as a result of the recent amendments to the Consumer Affairs Act, will remain a dead letter.

While there is no doubt that the latest amendments to the Consumer Affairs Act are a significant step forward in giving registered consumer associations a pro-active role, the lack of adequate funds and professional staff, in practice restricts the role of such associations. There is no easy solution to this. There is a limit as to the amount of funding that Government can give, though in this context assistance could for example be tied to specific projects approved by Government. The solution perhaps lies in changing the perception of consumers towards such associations. Possibly one of the reasons why consumers in Malta has failed to support their associations may be related to the fact that the sole consumer association at present operative, can only offer very limited services to its members shackled as it is by lack of funds and material resources.

Finally a valid criticism made by the consumer lobby is that in most instances there is no consumer representation on the administrating boards of various regulatory authorities, notably the Malta Standards Authority, the Malta Tourism Authority and the recently created Malta Communications Authority and Malta Resources Authority. To date the only instance where there is a statutory requirement to consult registered consumer associations in choosing a member on a Government appointed body is with regard to membership of the Consumer Affairs Council.
 

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