What happens when you pay for something like a couch or a stove, and the business goes under before you get the goods?
The recent demise of some big retail chains has raised some questions about consumer rights.
Smiths City, the well-known furniture and electronics retailer, went into voluntary administration on Tuesday.
When customers made their way to the store, they found all nine stores closed and the online one too, while the company’s finances are reviewed.
One Christchurch woman, who paid nearly $4500 for a lounge suite from Smiths City, is upset and angry about how she’s been treated by the company.
Lynette bought the Lazy Boy suite from the Hornby store in mid-April and now has no idea whether she’ll ever see it or get her money back.
She said she was too upset to talk about it but her daughter, Sara Mill told RNZ’s Checkpoint her mother was told she would have to wait around six weeks for the couch to arrive.
“Then two months had passed and we’re now in June and she hadn’t heard anything, so she chased it up and she rang them, and they couldn’t see where it was. But they told her it should be on the next [delivery], which would be in August.”
Lynette rang the store every two weeks looking for an update but never received a call back, up until two weeks ago.
“A man rang her from the Hornby store, and he was the new manager because I think they were amalgamating with the Colombo store, and he apologised and said he was so sorry and that she’d been waiting the longest and it should be in all this shipment.”
What customers need to know as retailer enters voluntary administration – watch on TVNZ+
The man also offered Lynette her money back, but she was keen on the couch and said she would continue to wait.
“Then this Saturday that’s just gone she rang again, and she was told by a lady at the store that there was actually the couch she wanted, the floor model was there.”
Lynette decided to go into the shop to pick up the couch, and it was put on hold for her to pick up on Tuesday.
“So, they rock round there on Tuesday to go and see it, and they arrive to a big group standing outside the store with the liquidation sign on the door.”
Sara said her mum had emailed the liquidation company but was yet to hear back.
Jess Pasco was also stung by the news.
Pasco spent about $1200 on a new washing machine at Smiths City just last Wednesday, after her old one broke.
She told RNZ’s Checkpoint she had the washing machine ordered from Christchurch to the Alexandra Smiths City which didn’t have one in stock.
“It arrived on Tuesday… but then we found out that the store was closed when we went to go and pick it up and we’ve had no contact from anybody,” she said.
“We’re kind of left not knowing when we can pick it up, so we’ve been having to go to the laundromat to do all of our washing.”
Unfortunate, but not uncommon
Auckland barrister Chris Patterson told RNZ’s Checkpoint while this situation was unfortunate, it wasn’t uncommon.
“It’s really devastating for customers when they hand over their good, hard-earned cash and the expectation that they’re going to receive something back that they want to return and they don’t,” Patterson said.
“We’re going through a terrible, terrible recession, brand and business failures are on the rise.”
Patterson said that for most customers, their rights came down to what was in the contract when they bought the item.
“The contract should hopefully say who has the legal title on the couch and when that transfers… in some cases it might transfer upon full payment and in other cases it might transfer when it’s delivered.”
But there are other issues that come with transferring the ownership of an item upon payment.
“The difficulty is often then being able to say whose couch is whose… because even if it’s said that the title passes, there may be some real practical difficulties.”
Patterson said customers who have paid a deposit on an item before a store closes its doors are entitled to get their money back, but it doesn’t mean they always will.
“You sit in the category of often what’s called an unsecured creditor and under our insolvency regime system, all the unsecured creditors have to be treated equally… and if there is not enough money to pay all the unsecured creditors out then they’re going to receive cents in the dollar, or if it’s really bad, they receive nothing.”
For people who had unspent gift cards, while it is their right to get that money back, it is often more hassle than it’s worth.
“A gift card – you’re an unsecured creditor, it’s a debt that’s owed to you and if if the business isn’t going to honour it, then then you could claim in the liquidation… but the practical reality is probably kissing it goodbye.”
While it may be unethical for businesses to take money off consumers while knowing they are on the brink of a shutdown, Patterson said there’s no clear laws to prevent this, meaning people should take steps to protect their own interests.
“No one knows when they walk into a store what the financial situation of that store is and they go in there in good faith thinking that business, whoever is running it, is running it properly and it’s not going to just close the doors the next day having taken money off them the day earlier,” he said.
“The law doesn’t provide clear answers and solutions for that problem, it’s just a problem that exists.”
He said it was clear the law was in need of a review.
rnz.co.nz
