House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Human Services Minister for Financial Services, Superannuation and Corporate Law the Hon Chris Bowen MP)

Chapter 4 - Remedies

Outline of chapter

4.1 Chapter 4 of this explanatory memorandum outlines the remedies and sanctions regime, the dispute resolution and court framework administered by the Australian Securities and Investments Commission (ASIC) to support the National Consumer Credit Protection Bill 2009 (Credit Bill), established in Chapter 4 of the Credit Bill.

4.2 It also sets out the remedies available to consumers, including remedies in relation to unlicensed conduct.

4.3 It sets out the jurisdiction and procedure of the courts, and the dispute resolution mechanisms available to consumers.

Context of new law

Background

4.4 In transferring the regulation of consumer credit from the States and Territories to the Commonwealth, some of the bodies providing dispute resolution services and exercising jurisdiction under the new legislation will change.

4.5 Currently:

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Some providers of credit and credit services have voluntarily joined an external dispute resolution (EDR) scheme in relation to credit matters. Membership of an EDR Scheme is often a key component of being a signatory to an industry code, for example the Banking Code of Conduct, or to achieve membership of an industry body.

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As part of being a member of an EDR Scheme or signatory to an industry code of conduct, some credit and credit service providers are also expected to provide appropriate internal dispute resolution schemes.

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Relevant State and Territory Fair Trading or Consumer Affairs bodies provide dispute resolution and conciliation functions between lenders and consumers.

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Consumers may raise a dispute or seek court intervention under the Uniform Consumer Credit Code (UCCC) in the relevant State or Territory tribunal, specialist court or local court.

4.6 As part of the transfer of consumer credit regulation, the Commonwealth cannot confer federal jurisdiction upon State and Territory tribunals which are not courts within the meaning of Chapter III of the Constitution. In addition, the relevant State and Territory Fair Trading and Consumer Affairs bodies will no longer provide official dispute resolution services for credit matters.

4.7 Some concerns have been raised about the potential gaps between what matters can be heard by federal courts and, State courts and tribunals. Concerns have also been raised about the relative accessibility of the federal courts compared to the relevant State courts and tribunals, particularly in relation to costs and ease of access.

4.8 The dispute resolution framework seeks to address these concerns.

4.9 Consequently, wherever possible, parties will be encouraged to resolve disputes without resorting to litigation. It is expected that courts would generally only be utilised where internal dispute resolution (IDR) and EDR processes have not resolved the matter, or where EDR is considered inappropriate.

4.10 This arrangement is in line with trends to provide accessible, timely and cost effective dispute resolution processes. For example, as reported in its 2007-08 Annual Report, the Victorian Civil and Administrative Tribunal (VCAT) resolved 48 per cent of credit disputes via VCAT's Mediation Services or through settlement agreements reached at or before a hearing. This figure does not include mediations which resulted in debtors and lenders trying new repayment arrangements before finally settling, or matters that were settled during a hearing.

4.11 This also recognises that in cases of hardship or other consumer credit issues, a facilitated or negotiated outcome can be more favourable to a debtor than if it had been formally heard and determined under law.

4.12 The key policy objective of the amendments is to maintain accessibility to dispute resolution in terms of location, procedural simplicity and costs, taking into account the different jurisdictional context when transferring the regulation of credit from the States and Territories to the Commonwealth.

Summary of new law

4.13 The key provisions establish a civil penalty and consumer remedy framework that promotes strong consumer protections, including a civil enforcement regime and broad civil remedies.

4.14 The key provisions:

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enable ASIC to seek a court declaration of contravention for a civil penalty and seek a pecuniary penalty;

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set out the administrative provisions in relation to a civil penalty;

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enable the court to grant remedies to consumers and other relevant parties for loss and damage suffered as a result of a contravention of the Credit Bill, including through varying the contract as well as monetary redress;

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enable the court to grant relief to consumers and other relevant parties for unlicensed conduct; and

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permit infringement notices to be issued by ASIC for strict liability offences and civil penalties as provided by regulations.

4.15 In addition, they facilitate the transfer of consumer credit to the Commonwealth and promote accessibility in terms of location, procedural simplicity and costs of dispute resolution. This includes:

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access to all relevant Commonwealth, State and Territory courts;

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delineation of civil and criminal jurisdiction, including transfer and appeal arrangements;

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'opt in' streamlined court procedures for certain consumer remedies; and

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a presumption that a court may not impose an adverse cost order in certain circumstances.

Sanctions and remedies regime

4.16 As part of the implementation of a national consumer credit regulation framework, it was agreed that ASIC would have enhanced enforcement powers. These enhanced powers have been partly achieved by extending the range of penalties and sanctions available to ASIC that can be responsive to the tenor and magnitude of a contravention.

4.17 The overall structure includes a tiered approach to sanctions in the Credit Bill, which reflect considerations of the Review of Sanctions in Corporate Law (Treasury, 2007), the Commonwealth Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers (Attorney-General's Department, 2007). It also seeks to maintain consistency with the Corporations Act 2001 (Corporations Act) and other Commonwealth consumer protection law, where there are offences in respect of similar conduct.

4.18 The tiered approach to the sanctions regime includes:

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criminal offences, including strict liability offences;

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civil penalties;

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infringement notices; and

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administrative sanctions to be exercised by ASIC as the consumer credit regulator, including banning orders against individuals, and the power to cancel or suspend an Australian credit licence (ACL), further explained in Chapter 2 of this explanatory memorandum.

4.19 Further, ASIC's current regulatory powers under the Australian Securities and Investments Commission Act 2001 will be largely replicated for credit matters, further explained in Chapter 6 of this explanatory memorandum.

4.20 Consumer remedies are an important element of the enforcement package as it enables consumers to take direct action against a licensee who breaches the law and causes them loss or damage. Private suits are considered a useful way of influencing and curbing market behaviour, particularly in relation to the National Credit Code (Code).

Criminal sanctions

4.21 Criminal sanctions will apply to breaches of law where:

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the objectives of the offence suggest that such an outcome would be warranted; or

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the offence is analogous to similar provisions in the Corporations Act, to ensure consistency of application of 'like' offences.

4.22 Where the credit licensing regime is similar to the existing financial services licensing regime in the Corporations Act, creating offences in respect of the same type of conduct, the offences and penalties in the Credit Bill have generally been made consistent with those in the Corporations Act.

4.23 Some breaches that are procedural in nature (record-keeping, lodgment of documents or disclosing information) have criminal sanctions, including indictable offences, attached. This is necessary because:

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criminal sanctions play an important role in deterring inappropriate corporate behaviour and ensuring that ASIC can prevent or minimise losses to investors, consumers and the Government;

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a failure of a licensee to comply with provisions, such as maintaining records, audit, and lodgment of documents can seriously jeopardise ASIC's ability to investigate questionable behaviour and mitigate any losses or potential losses; and

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the disclosure of information in documents to consumers is a significant policy component of financial services regulation to address the particular economic 'harm' of information asymmetry in the market.

4.24 Generally the activities that attract the strongest criminal sanctions are those that address what is considered to be the most serious 'moral' culpability in relation to the credit contract; acting unlicensed and entering, or suggesting or assisting a person to enter, an 'unsuitable' credit contract. For example, the jail terms available for putting someone into an 'unsuitable' contract is intended to target 'equity stripping' and predatory lending.

4.25 The criminal procedures in relation to criminal offences are consistent with the provisions in Part 9.6A, Division 2 of the Corporations Act.

Civil penalties

4.26 Civil penalty sanctions apply in the Credit Bill where the misconduct affects or potentially affects the integrity of the credit market and where there may be an absence of malicious or reckless intention. Civil sanctions have a lower burden of proof than criminal sanctions and are an alternative source of imposing legal obligations and deterring conduct.

4.27 It is also recognised that civil penalties play a useful role for regulating corporate wrongdoing as the amount of the penalty is a disincentive for corporate misbehaviour. They are also used as alternatives to criminal penalties.

4.28 For example, civil penalties are utilised instead of criminal sanctions in some responsible lending requirements, noting that the main 'harm' (entering or suggesting an unsuitable credit contract) is being rectified as both an indictable offence and civil penalty. Often breaches of these laws adversely affect the consumer where they have been placed in an 'unsuitable' credit product.

4.29 The maximum civil penalty for all relevant offences is 2,000 penalty units. This equates to $1,100,000 for corporations and $220,000 for individuals.

4.30 The administration and procedural provisions for civil penalties are consistent with Part 9.4B of the Corporations Act. This includes the application of civil pecuniary orders in section 1317G of the Corporations Act.

Infringement notices

4.31 Infringement notices are employed for breaches, where a higher volume of contraventions are expected, or where a penalty is more effective where it is imposed immediately, and the person committing the breach still has a fresh memory of their conduct, and may be more inclined to remedy it in the future. They will apply automatically to all strict liability offences, but will also apply to civil penalties where specified in the regulations.

4.32 The issuing of infringement notices is at the discretion of ASIC.

4.33 The legislation and regulations allow for infringement notices to be issued to persons alleged to have committed certain strict liability or civil offences. This allows ASIC to deal with suspected minor offenders without the need to summons a person to appear in court.

4.34 In addition, systemic breaches may be grounds for administrative action in relation to a licence and/or a relevant civil and criminal penalty.

Tiered approach

4.35 The tiered approach enables ASIC to target the penalty to the nature and type of contravention. For example, in addition to a 'fault' based criminal offence, a strict liability penalty may also be included, with an associated infringement notice attached.

4.36 A tiered approach also recognises that when regulating a broad range of credit providers and credit service providers, different types of sanctions may be appropriate.

4.37 For example, an infringement notice may not be a significant deterrent for a large financial institution, but it is likely to be a deterrent for a small broker. Alternatively, it recognises that imprisonment may not be appropriate for an administrative oversight, but would be useful against a person involved in a contravention where the licensee has deliberately not complied with the law (for example, predatory lending and equity stripping).

4.38 It is recognised that most credit providers and credit service providers are ordinarily inclined to comply with the law. However the tiered approach enables a targeting of the most appropriate sanctions.

Example 4.1 : Licensing

Section 49 requires a licensee to comply with a written direction by ASIC to provide a written statement about the credit activities they have engaged in, within the time they have specified. Failure to comply can result in an indictable offence, a strict liability offence, a civil penalty and/or an infringement notice.

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For a failure to submit a suitable statement on time (some defects), ASIC may issue a licensee with a $220 infringement notice.

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If this statement is grossly late, ASIC may consider a strict liability offence more appropriate (maximum penalty of $1,100).

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If the statement is significantly defective and does not meet ASIC's direction, ASIC may consider pursuing a civil penalty. The civil penalty amount sought would reflect the level of defect. A civil penalty may also be pursued against a larger financial institution against which a strict liability offence or an infringement notice may not be a sufficient future deterrent (the maximum penalty will be $220,000 for an individual and $1,100,000 for a corporation).

•

If ASIC's requests are deliberately avoided or purposefully not complied with (particularly where it is suspected that compliance with the direction to provide information may reveal unlawful or inappropriate behaviour), ASIC may choose to pursue an indictable offence against the licensee (maximum 25 penalty units and/or a jail term of six months).

Consumer remedies

4.39 Consumer remedies are an important element of the enforcement package as it enables consumers to take direct action against a provider who breaches the law and causes them loss or damage. These actions can provide sufficient deterrent against breaches of the law. Private actions are considered an important way of influencing and curbing market behaviour.

4.40 Consumer remedies also enable consumers to obtain redress from illegal behaviour or misconduct, such as predatory lending or equity stripping, and the opportunity to receive just and equitable outcomes, particularly where they have experienced loss and damage from the unlawful conduct.

4.41 Consumers will have a range of remedies available to them where they experience loss or damage from the misconduct of a credit provider or credit service provider.

4.42 Consumers will also have remedies available to them where the credit provider or credit service provider is acting unlicensed. The consumer can, among other things, prevent an unlicensed provider from obtaining profit or gain from them for their credit activity.

Dispute resolution framework

4.43 The sanctions and penalties regime is supported by a dispute resolution framework that facilitates the enforcement of the Credit Bill and assists consumers to obtain redress.

4.44 The Credit Bill provides for a three-tier dispute resolution system for consumer credit issues:

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First, consumers are able to access the licensee's internal dispute resolution (IDR) process.

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Secondly, if they are dissatisfied with the outcome of the IDR process, consumers may access the licensee's EDR Scheme. Membership of an ASIC-approved EDR Scheme is a compulsory requirement for registration and licensing.

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Thirdly, consumers retain access to the courts to seek redress. Neither IDR nor EDR processes will remove a consumer's right to seek redress directly from a court.

4.45 The purpose of these provisions is to establish a dispute resolution framework that enables a commensurate level of rights to be retained and address key transitional issues relating to consumer credit dispute resolution.

EDR Schemes

4.46 EDR Schemes provide consumers with an independent, informal and no-cost alternative to going to court. EDR Scheme members (licensees) are bound by a decision of an EDR Scheme. Consumers retain their right to access the courts following a decision or outcome by an EDR Scheme.

4.47 EDR Schemes are required to take measures to deal with the privacy of personal information in accordance with the Privacy Act 1988 (where it is applicable) and this may include making contractual arrangements with members about dealing with privacy matters.

4.48 The application of section 131 of the Evidence Act 1995 would apply so that evidence of a communication made or a document prepared in connection with settlement negotiations undertaken through EDR proceedings is not admissible in subsequent court proceedings. That is, materials prepared in connection with a negotiation are generally inadmissible in court unless, for example, both parties' consent if given, where communication between parties includes a statement it was not to be confidential, or the proceedings are to enforce the agreement made through EDR.

Diagram 4.1 : Overview of interaction between the Civil Penalty, Criminal Offence and Consumer Remedy Framework

Comparison of key features of new law and current law

Detailed explanation of new law

Part 4.1 - Civil penalty provisions

4.49 The administration and procedural provisions of civil penalties are consistent with the provisions of the Corporations Act (see Part 9.4B - Civil consequences of contravening civil penalty provisions). This includes the application of civil pecuniary orders (see section 1317G of the Corporations Act).

Division 1 - Declarations and pecuniary penalty orders for contraventions of civil penalty provisions

4.50 ASIC may seek a declaration of contravention of a civil penalty provision against a person that contravened that provision. [Part 4-1, Division 2, section 166]

4.51 The declaration of a contravention is conclusive evidence of the civil penalty breach [Part 4-1, Division 2, subsection 166(4)]. This enables ASIC to seek a pecuniary penalty against a person for contravening the civil penalty [Part 4-1, Division 2, section 167]. It also enables a consumer to rely on the declaration of contravention when seeking compensation for loss or damage. [Part 4-2, Division 2, section 178, Part 4-2, Division 2, section 179]

4.52 ASIC may also apply for an order that a person pay a pecuniary penalty once a declaration has been made. [Part 4-1, Division 2, section 167]

4.53 ASIC can only seek a declaration and pecuniary penalty order within six years of a person contravening the provision. This is consistent with section 1317K of the Corporations Act, and section 77 of the Trade Practices Act 1974.

4.54 Civil penalties attract a maximum penalty of 2,000 penalty units on all civil penalties. This amounts to a maximum of $220,000 for individuals and $1,100,000 for corporations, partnerships or multiple trustees [Part 4-1, Division 2, paragraph 167(3)(b)]. A 'penalty unit' has the meaning given by section 4AA of the Crimes Act 1914.

4.55 The civil penalty limit was adopted to maintain general consistency with the Corporations Act (a maximum of $200,000 for individuals and $1,000,000 for corporations). However, it is expressed as a penalty unit and not in dollar terms. These amounts are broadly familiar to the financial services industry. It is recognised that these amounts need to be substantial to sufficiently deter inappropriate corporate or business behaviour.

4.56 The pecuniary penalty may be recoverable as a debt due to the Commonwealth, and therefore goes to the consolidated revenue fund as required by section 81 of the Constitution.

General provisions relating to civil penalty provisions

4.57 A contravention of a civil penalty is not a criminal offence. [Part 4-1, Division 3, section 168]

4.58 A person who is involved in the contravention of a civil penalty provision is taken to have contravened that provision [Part 4-1, Division 3, section 169]. This would include, among other things, where the person has:

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aided, abetted, counselled or procured the contravention;

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induced the contravention, whether by threats or promises or otherwise;

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been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to effect the contravention; or

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conspired with others to effect the contravention.

4.59 The court must apply the rules of evidence and procedures for civil matters when hearing proceedings for a declaration of contravention. This replicates section 1317L of the Corporations Act to ensure that the court applies the rules of evidence and procedures for civil matters when hearing proceedings for a declaration of contravention. As discussed in the Australian Law Reform Commission Principled Regulation Report: Federal Civil and Administrative Penalties in Australia, December 2002, the court should retain the flexibility to ensure that there is procedural fairness in each case. [Part 4-1, Division 3, section 170]

4.60 The court is not allowed to make a declaration or contravention where the civil proceeding occurs after a criminal proceeding for substantially the same conduct. [Part 4-1, Division 3, section 171]

4.61 This provision ensures that an order is not made against a person where the person has been convicted of an offence that is substantially the same as the conduct that constituted the contravention. This is analogous to the 'double jeopardy' rule applicable to criminal offences.

4.62 Proceedings for a civil penalty are to be stayed where criminal proceedings are commenced against the person for an offence constituted by substantially similar conduct to the conduct constituting the contravention. [Part 4-1, Division 3, subsection 172(1)]

4.63 The civil proceeding may be resumed if the person is not convicted of the offence. Otherwise, proceedings for the declaration or order are dismissed. [Part 4-1, Division 3, subsection 172(2)]

4.64 ASIC may still reserve the right to commence criminal proceedings notwithstanding the imposition of a civil penalty order. [Part 4-1, Division 3, section 173]

4.65 The admissibility of evidence given in proceedings for a civil penalty order is not admissible in a criminal proceeding. [Part 4-1, Division 3, section 174]

4.66 There is also a provision to protect a person from civil double jeopardy, where a person is not liable to pay a penalty under another provision of the law for the same conduct. [Part 4-1, Division 3, section 175]

4.67 A person in contravention of a civil penalty provision can get relief from liability where it appears to the court that:

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the person acted honestly; and

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having regard to all the circumstances of the case the person ought fairly to be excused from the contravention.

[Part 4-2, Division 2, section 183]

4.68 This acts as a defence to a contravention of the civil penalty. The court may relieve the person either wholly or partly from liability.

4.69 Section 183 is modelled on section 1317S of the Corporations Act.

Consumer remedies - Overview

4.70 A consumer and other affected parties have a number of remedies available to them under the Credit Bill.

4.71 For example, a consumer may have suffered loss or damage as a result of being entered into or suggested an unsuitable credit contract in breach of the responsible lending conduct requirements (see Chapter 3 of this explanatory memorandum). If a consumer is put into or suggested an unsuitable credit contract by a licensed credit provider, they can:

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seek an injunction against the provider from collecting more interest payments [Part 4-2, Division 2, section 177];

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seek compensation for the loss or damage, with the maximum amount payable determined according to the limits in quantum of the selected court [Part 4-2, Division 2, section 178]; and

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seek an order to compensate, prevent or reduce the loss or damage suffered by, among other things, varying the contract, enforcing some, or part of the contract, or declaring the contract void [Part 4-2, Division 2, section 179].

4.72 A consumer also has remedies against an unlicensed provider. If a consumer was put into or suggested an unsuitable credit contract by an unlicensed credit provider they will be able to obtain an order from the court to, among other things:

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prevent the non-licensed credit provider from profiting from a credit contract;

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seek compensation for loss or damage suffered as a result of the person having engaged in the credit activity; and

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prevent or reduce any loss or damage suffered or likely to be suffered.

[Part 4-2, Division 2, section 180]

Part 4.2 - Power of the courts to grant remedies

Injunctions

4.73 To maximise remedies available to consumers and the enforcement powers of ASIC, the court may grant injunctive relief where there is a contravention, or is a proposed contravention of the Credit Bill. [Part 4-2, Division 2, section 177]

4.74 On application by ASIC or a person, a court can issue an injunction on such terms as it considers appropriate, if it is satisfied that a person is engaged or is proposing to engage in conduct that would contravene or attempt to contravene the Credit Bill (including an offence or a civil penalty). [Part 4-2, Division 2, subsection 177(1)]

4.75 The court may grant an injunction with the consent of all relevant parties to the proceeding, whether or not the court is satisfied that the person has engaged or is engaging in the relevant contravening conduct. [Part 4-2, Division 2, subsection 177(2)]

4.76 The court may also:

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grant an interim injunction [Part 4-2, Division 2, subsection 177(3)];

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revoke or vary an injunction or interim injunction [Part 4-2, Division 2, subsection 177(4)];

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grant an injunction restraining a person from engaging in conduct, as necessary [Part 4-2, Division 2, subsection 177(5)]; or

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grant an injunction to require a person to do an act or thing, as necessary [Part 4-2, Division 2, subsection 177(6)].

4.77 Where ASIC applies for an injunction, the court cannot make an undertaking as to damages a condition of obtaining an interim injunction [Part 4-2, Division 2, subsection 177(7)]. This is to ensure ASIC is not financially constrained from acting when seeking an interim injunction.

4.78 However, the court has the power to award damages in addition to, or in substitution for, the granting of an injunction [Part 4-2, Division 2, subsection 177(8)]. For example, where a guarantor seeks an injunction against a lender for a property being re-possessed and sold, the court may grant damages to the debtor who might otherwise have benefited from the sale of the property, if not for the injunction.

Compensation orders for loss or damage

4.79 Where a licensee has contravened a civil penalty or committed an offence, and a consumer has suffered loss or damage from that contravention, the consumer can seek compensation in two ways:

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through a specific order for a compensation amount for loss and damage [Part 4-2, Division 2, section 178]; or

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through a general order to compensate loss or damage or prevent or reduce the loss or damage suffered or is likely to suffer, through a broader range of remedies [Part 4-2, Division 2, section 179].

4.80 ASIC may make an application on behalf of the consumer with their consent for both types of orders.

4.81 The primary reason for the two separate orders is to enable access to streamlined court procedures in section 199 for straightforward compensation matters. It is recognised that more complex claims warrant a more formal assessment under the law. However, straightforward and small claims could be addressed in simpler court proceedings. Consequently, a separate remedy for only monetary compensation in provided in section 178.

4.82 If the amount of compensation sought under section 178 is less than $40,000, a consumer can 'opt-in' to a streamlined court procedure at their local court, Magistrate's Court, or the Federal Magistrates Court. This procedure permits more streamlined and informal proceedings, including not having to regard legal forms and technicalities and a presumption against legal representation (see below).

4.83 An order can be made under this provision; whether or not a declaration of contravention under section 166 has been made.

4.84 Both types of compensation orders are limited to offences or contraventions of the Credit Bill other than the Code. This is because the Code contains self-contained civil remedies that are currently known to industry and consumers. These provisions would likely be in conflict with provisions in the Code.

4.85 The compensation orders may only be made within six years of the day the cause of action (that is, the loss or damage to the consumer) that relates to the contravention or offence accrued. This is to capture the situation where the contravention (for example, putting a consumer into an unsuitable contract) does not result in loss or damage to the consumer until a later time.

4.86 Section 179 is modelled on section 1325 of the Corporations Act.

4.87 A court may make an order as it thinks appropriate to compensate a consumer or any other affected party (the plaintiff), or prevent or reduce that loss or damage suffered where the loss or damage is the result of a contravention of a civil penalty provision or a commission of an offence under the Credit Bill [Part 4-2, Division 2, subsection 179(1)]. The defendant is the person who committed the contravention or offence [Part 4-2, Division 2, paragraph 179(1)(b)].

4.88 The type of orders the court can make include:

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voiding or partially voiding the contract, deed or arrangement;

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varying the contract, deed or arrangement;

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refusing to enforce some or all of the terms of such a contract, deed or arrangement; and/or

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directing the contravener to pay an amount of compensation.

4.89 This remedy is particularly important where precise restitution or compensation is not possible. It enables the court to do what is practically or equitably just between the parties.

4.90 The flexibility given to the courts to rewrite the credit contract is due to the way in which credit contracts operate. The consumer may have utilised the credit in a way that does not allow the court to void the contract (for example, due to the purchase of a home or where the principal is used to purchase goods or services that cannot be sold, such as travel).

4.91 An award of money may not be the most effective way of providing compensation, compared with varying the terms of the contract. Cancelling the contract (rescission) may also give a consumer an unfair benefit in the use of the principal of the loan.

Example 4.2 : Responsible lending

Samuel was an electrician who earned $1,200 a week. He spent $600 a week on expenses. He went to a lender to get a home loan of $200,000. Samuel needed a loan with an average interest rate that he could pay off over the medium term. Instead, he was offered a loan for $500,000 with a high fixed interest rate and therefore repayments that he could not readily afford.

As he was experiencing hardship, Samuel sought an injunction against the lender collecting his mortgage repayments. Samuel then sought compensation for the loss and damage he had suffered for being put into an unsuitable loan. The court, under section 179, ordered the lender to reduce the overall debt Samuel owed to the lender commensurate with what he would have owed if he had been provided with a loan that was not unsuitable minus:

•

the amount he had already paid to the lender; and

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the amount in compensation for any loss and damages he suffered as a result of getting the unsuitable product.

This recognised that Samuel received a benefit from the initial credit provided, but that he experienced loss and damage from being put into the unsuitable loan.

4.92 Any compensation to a consumer or an order in relation to loss or damage can be mitigated (including limiting the amount of compensation) if the consumer has made a false or misleading representations in order to obtain the credit. This is to take into account what is practically just in the circumstances.

Example 4.3 Consumer False and Misleading Representation

In order to obtain a credit card with a $3,000 limit, Flower claimed that she had an income of $50,000 and had one personal loan valued at $5,000. In fact, Flower only had an income of $18,000 and also had another personal loan of $3,000 plus a credit card with a credit limit of $4,000 from other credit providers.

The credit provider offered her the credit card.

The credit provider relied on the information provided by Flower and made some reasonable steps to verify her financial circumstances in order to provide the loan. However, the credit provider did not suitably verify her income. If the credit provider had known of her true financial circumstances, they would not have offered her the credit.

When Flower could no longer meet the repayments, she sought compensation for being placed into an unsuitable credit contract.

In this instance, the court considered that Flower was entitled to a lower amount compensation for loss and damage, even if the credit provider did not suitably verify her income. This is because she made false and misleading representations to the credit provider about her financial circumstances.

Preference for compensation

4.93 A person who contravenes the Credit Bill may be required to both pay a fine and compensate those who have suffered loss or damage as a result of the contravention. Where the person who has contravened the Credit Bill has insufficient financial resources for both, section 181 will require the court to give preference to making a compensation order to compensate those who have suffered loss or damage. [Part 4-2, Division 2, section 181]

4.94 This is not directed at allowing the court to waive or reduce the fine where it considers that the defendant does not have sufficient financial resources, thereby allowing the defendant to avoid punishment. The court may still impose a fine. The provision allows the court to order that a person who has suffered loss or damage will be compensated first, that is, before the fine is paid into consolidated revenue. Where a fine is not paid, proceedings for enforcement and recovery may be commenced.

Orders in relation to unlicensed conduct

4.95 A consumer also has remedies against an unlicensed provider. [Part 4-2, Division 2, section 180]

4.96 An unlicensed provider is someone who acts in contravention of section 29; that is, acts without holding a licence.

4.97 For example, if a consumer was put into or suggested an unsuitable credit contract by an unlicensed credit provider, the consumer will be able to obtain an order from the court to:

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prevent the non-licensed person from profiting from the credit contract;

•

seek compensation for loss or damage suffered as a result of the person having engaged in the credit activity; and/or

•

reduce or prevent any loss or damage suffered or likely to be suffered.

[Part 4-2, Division 2, section 180(1)]

4.98 ASIC can make an application on behalf of the consumer, only if it has obtained written consent from them. [Part 4-2, Division 2, subsections 180(3) and (4)]

4.99 The provision suggests that dealing with an unlicensed credit provider is equivalent to a criminal offender profiting from their crime. As a result, they should not be able to profit or gain from their unlawful credit activity.

4.100 The person engaging in unlawful credit activity should not be able to retain fees, charges, interest, commissions, interest payments and other monetary benefits or profits from the contract while acting unlicensed (including where their licence has been suspended).

4.101 In addition, the consumer should be able to recover or prevent any loss and damage they have suffered.

4.102 Therefore, the court should be able to vary a contract to take into account any benefits the lender may have received from the contract created when acting unlicensed, taking into account any benefit the consumer had from the use of the principal amount.

4.103 The Credit Bill provides that these orders can be made against a credit provider or credit service provider irrespective of whether they notified the customer that they were not licensed.

4.104 It is considered that the need to deter persons who engage in credit activities when unlicensed means that they should not be able to avoid the civil consequences of that conduct through a simple form of disclosure. It is also considered that disclosure of the person's unlicensed status will not result in consumers reconsidering their decision to enter into the loan where they are particularly vulnerable (for example, because they have an urgent need for money to purchase medication).

Other remedies

4.105 ASIC may seek an adverse publicity order against a person who has contravened or committed an offence against the Credit Bill. Under a publicity order, a court may require a person to disclose certain information in a specified way and to publish the information at their own expense. [Part 4-2, Division 2, section 182]

4.106 They would be required to publicise the fact that they have breached the Credit Bill, along with details of any remedial action they have been required to undertake. For example, a corporation may be ordered to publicise the fact that it has breached the Credit Bill and details of what it has been ordered to do to rectify the breach.

4.107 Similar provisions exist in section 12GLB in the Australian Securities and Investments Commission Act 2001.

4.108 Section 184 enables the court to make multiple orders, that is, one or more remedies in relation to the same breach.

Infringement notices

4.109 Section 331 allows regulations to be made for infringement notices to be issued to persons alleged to have committed:

•

strict liability; or

•

civil penalty contraventions as provided in the regulations.

4.110 This allows ASIC to deal with suspected minor offenders without the need to summons a person to appear in court.

4.111 In relation to strict liability offences, the maximum fine must not exceed one-fifth of the maximum penalty that a court could impose on the person for that offence.

4.112 In relation to civil penalties, the maximum fine must not exceed one-twentieth of the maximum penalty.

4.113 The infringement notice power will be supported by regulations that establish the form and manner in which they are issued.

4.114 This provision is modelled on section 799 of the Fair Work Act 2009.

4.115 The following provisions which attract a civil penalty may have an infringement notice attached in regulations at a later stage: sections 113, 114, 115, 117, 118, 120, 121, 128, 130, 131, 132. (This list is indicative only.)

Part 4.3 - Jurisdiction and procedure of courts

4.116 Generally under the Credit Bill:

•

Civil jurisdiction is conferred upon all Federal and State Courts (except Family Courts) subject to their general jurisdictional limits.

•

Criminal jurisdiction is conferred upon all State Courts, subject to their general jurisdictional limits.

4.117 More broadly, the jurisdiction, appeal, transfer and procedural arrangements are intended to be consistent with the Corporations Act, where appropriate, to ensure that ASIC can administer and enforce its obligations consistently.

4.118 The law establishes the rules that restrict cross-jurisdictional appeals and manage the transfer of proceedings under the Credit Bill between those courts. These rules are intended to produce many of the same outcomes as Division 1 of Part 9.66A of the Corporations Act.

4.119 These arrangements also apply to the Code.

4.120 A number of measures have been introduced to maintain current rights and obligations in relation to dispute resolution and to transition jurisdiction into the Commonwealth sphere.

Civil Proceedings - Division 2

4.121 Division 2 of Part 4-3 deals with civil proceedings. It also contains rules about the transfer of civil proceedings between courts and other matters, such as when proceedings may be dealt with as small claims proceedings and when a cost order can be made.

4.122 The Division applies to the exclusion of the Jurisdiction of Courts (Cross-vesting) Act 1987 and section 39B of the Judiciary Act 1903. This does not limit the application of the other provisions in the Judiciary Act 1903. [Part 4-3, Division 2, section 186]

4.123 This approach is consistent with the operation of the Corporations Act and reflects the agreed court structure as part of the National Credit Law Agreement 2009.

Conferral of civil jurisdiction

4.124 Under the new law, credit jurisdiction for civil proceedings will be conferred to the:

•

Federal Court;

•

Federal Magistrates Court, but the court does not have jurisdiction to award an amount for loss or damage that exceeds $750,000 or another amount prescribed by regulation; and

•

courts of the States and Territories (including the magistrates or local courts), subject to their general jurisdictional limits, including (but not limited to) limits as to locality and subject matter.

[Part 4-3, Division 2, section 187]

4.125 This will ensure continuity with current arrangements under the Uniform Consumer Credit Code (UCCC), and allows matters which are currently being handled by State courts to continue to be heard. Courts in Queensland, South Australia, Tasmania and the Northern Territory can continue to deal with consumer credit matters.

4.126 It also ensures that lower cost and accessible court options (such as the local and magistrate's courts) remain available. This facilitates access to the court process for parties wishing to enforce their rights in a court regardless of the value of the credit contract or lease in dispute. This reflects that such matters will range in value and should be heard in different courts for cost and expediency.

4.127 The Family Courts will continue to exercise their general and accrued jurisdiction in relation to credit matters where appropriate. As the arrangements being regulated under the Credit Bill relate to the provision of credit in the course of business activities, it was not considered necessary to confer direct jurisdiction on the Family Courts.

Other civil proceedings relating to criminal prosecution

4.128 The civil jurisdiction of the Federal Court and Federal Magistrates Court is restricted in certain circumstances.

4.129 The Federal Court and the Federal Magistrates Court is prevented from exercising jurisdiction in relation to particular types of civil proceedings (proceedings where a person is seeking a writ of mandamus or prohibition or an injunction) that relate to a prosecution of an offence under the Credit Bill [Part 4-3, Division 2, section 188]. This limitation reflects that the Federal Courts do not have criminal jurisdiction under the Credit Bill.

4.130 The Federal Court or the Federal Magistrates Court cannot exercise jurisdiction where a person seeks these types of civil proceedings against an officer or officers of the Commonwealth in relation to:

•

a decision to prosecute a person for an offence under the Credit Bill, where the prosecution is proposed to be conducted in a State or Territory court [Part 4-3, Division 2, subsection 188(1)]; and

•

for a 'related criminal justice process decision' where a prosecution for an offence of the Credit Bill or an appeal arising out of such a prosecution, is before a State or Territory court [Part 4-3, Division 2, subsection 188(2)].

4.131 This does not apply if the 'related criminal justice process decision' occurred after the relevant civil proceeding [Part 4-3, Division 2, subsection 188(4)]. However, in such a situation a prosecutor may apply for a permanent stay of proceedings, if such a matter is better dealt with in the criminal justice process or will not substantially prejudice the person [Part 4-3, Division 2, subsection 188(5)].

4.132 A related criminal justice process decision is a decision made in the criminal justice process in relation to an offence (other than a decision to prosecute). [Part 4-3, Division 2, subsection 188(3)]

4.133 In this section, appeal includes an application for a new trial and a proceeding to review or call in question the proceedings, decision or jurisdiction of a court or judge. [Part 1-2, Division 2, section 5]

4.134 This provision has effect, despite anything else in the Credit Bill or any other law. [Part 4-3, Division 2, subsection 188(6)]

4.135 This provision is consistent with section 1337D of the Corporations Act.

Cross-jurisdictional appeals

4.136 The process of cross-jurisdictional appeals is set out to take into account the cross-jurisdictional application of the Credit Bill in a referral context.

4.137 Despite the national nature of the credit reforms, cross-jurisdictional appeals will not be permitted. This is consistent with section 1337F of the Corporations Act. That is:

•

the Federal Court cannot appeal to a court of a State, a court of a Territory, or the Federal Magistrates Court [Part 4-3, Division 2, item 1 in the table in section 189];

•

the Federal Magistrates Court cannot appeal to a court of a State or Territory [Part 4-3, Division 2, item 2 in the table in section 189];

•

a court of a State cannot appeal to the Federal Court, Federal Magistrates Court, or a court of a Territory or another State [Part 4-3, Division 2, item 3 in the table in section 189]; and

•

a court of the Australian Capital Territory or Northern Territory cannot appeal to the Federal Court, the Federal Magistrates Court, or a court of a State or another Territory [Part 4-3, Division 2, items 3 and 4 in the table in section 189].

4.138 However, all courts are expected to act to support and be in aid of one another in relation to civil matters arising under the Credit Bill. [Part 4-3, Division 2, section 190]

Transfers between courts - Jurisdiction of proceedings

4.139 Part 4-3, Division 2, Subdivision C of sets out the transfer arrangements between the courts that have jurisdiction for civil matters under the Credit Bill.

4.140 The transfer and cross-vesting procedures are consistent with the model in Part 9.6A, Subdivision C of the Corporations Act. It was considered important to maintain consistency with the Corporations Act where possible, to ensure that ASIC can address credit activities and matters arising from the Corporations Act together where appropriate.

4.141 This arrangement operates to the exclusion of the Jurisdiction of Courts (Cross-vesting) Act 1987. [Part 4-3, Division 2, section 186]

4.142 Among other things, the Jurisdiction of Courts (Cross-vesting) Act 1987 does not achieve the objectives of the Credit Bill because it only addresses the transfer of proceedings between the State Supreme Courts and the Federal and Family Courts. It does not address the transfer of proceedings in relation to State lower courts, as is necessary under the Credit Bill.

4.143 In addition, the transfer arrangements assist in ensuring that legal proceedings for credit occur in the most appropriate jurisdiction.

4.144 The UCCC requires that debtors must be a natural person ordinarily resident in the UCCC's jurisdiction (the relevant State or Territory). By operation of this, a legal proceeding against a debtor was brought in the State or Territory the debtor was ordinarily resident in at the time the contract was made.

4.145 In adopting the UCCC in the Commonwealth context as the National Credit Code (Code), the Code's jurisdiction is no longer limited to the State and Territory where the contract was made. This could make it difficult for consumers in another jurisdiction to respond to or engage with those proceedings. This may cause particular vulnerabilities for debtors who could not afford or have the capacity to challenge a proceeding in another jurisdiction.

4.146 The court transfer arrangements work in conjunction with section 330 to address these specific issues that arise from regulating credit matters in the Commonwealth context.

When a transfer can occur

4.147 A court (the transferring court) can transfer a proceeding (transfer matter) to another court (the receiving court) that:

•

exercises jurisdiction under the Credit Bill; and

•

has the power to grant the remedies being sought.

[Part 4-3, Division 2, section 191]

4.148 A transfer can only occur at the instigation of a party to the proceedings or the court itself if it appears to the transferring court that the transfer matter:

•

arises or relates to another proceeding that has come or is about to come before a receiving court; or

•

is otherwise in the interests of justice for proceedings to be bought in another court.

[Part 4-3, Division 2, section 194]

4.149 Generally, it would not be in the interests of justice for a party to commence legal proceedings that did not comply with the requirements set out under section 330 regarding where legal proceedings must be brought. [Part 4-3, Division 2, paragraph 193(1)(b)]

4.150 The transferring court must take into account a number of criteria, including the principal location or business of the parties, where the event took place and if it involves real property, and the jurisdiction where the real property is located [Part 4-3, Division 2, subsection 193(2)].

Example 4.4: Criteria for transfer in the credit context

In examining whether a transfer was appropriate in the credit context the transferring court could take into account, among other things:

•

the debtor's current location or place of residence [Part 4-3, Division 2, paragraph 193(2)(a)];

•

the jurisdiction in which the credit contract was entered into [Part 4-3, Division 2, paragraph 193(2)(b)];

•

the location of the mortgaged real estate [Part 4-3, Division 2, paragraph 193(2)(c)];

•

whether an enforcement proceeding against a credit contract should be heard in the same jurisdiction as where an application of hardship is made [Part 4-3, Division 2, paragraph 193(2)(d)];

•

when bringing an enforcement proceeding against a debtor for a credit contract, the credit provider was acting in good faith and was not bringing proceedings against a debtor in a different jurisdiction to which they reside in order to frustrate or limit the debtors ability to challenge the proceedings [Part 4-3, Division 2, paragraph 193(1)(b)]; and

•

if a matter was referred by a lower court to another court in a different jurisdiction [Part 4-3, Division 2, paragraph 193(1)(e)].

4.151 These transfer arrangements do not apply to Federal Court or the Federal Magistrates Court which are subject to the transfer arrangements set out in section 32AB of the Federal Court of Australia Act 1976 and section 39 of the Federal Magistrates Act 1999. [Part 4-3, Division 2, subsection 191(2)]

4.152 There are separate transfer procedures in relation to the lower courts, that is, the Federal Magistrates Court, or a District court, County court, Magistrates Court or Local court of a State or Territory. A superior court is the Federal Court or the Supreme Court of a State or Territory. [Part 1-2, Division 2, section 5]

4.153 A 'lower court' may transfer matters to the Supreme Court in their jurisdiction, with a recommendation that the matter be transferred to another superior court in another jurisdiction. [Part 4-3, Division 2, subsection 192(2)]

4.154 The transfer arrangements also set out the documents and procedure, the conduct requirements and the rights of legal practitioners, where such a transfer occurs. [Part 4-3, Division 2, sections 195 to 197]

4.155 A decision by a 'transferring court' to transfer the matter to another court is not subject to appeal. [Part 4-3, Division 2, section 198]

Small claims proceedings

4.156 Section 199 enables 'opt-in' streamlined court proceedings to be adopted for consumer actions for:

•

matters arising for compensation for loss or damage up to $40,000 under the Credit Bill, including the Code [Part 4-3, Division 2, items 1,10, 11, and 13 in subsection 199(2)];

•

some court orders available under the Code, where the value of credit contract, mortgage, guarantee or consumer lease is no more than $40,000 [Part 4-3, Division 2, items 2, 3, 6, 7, 9, and 12 in the table in subsection 199(2)]; and

•

requests in relation to a hardship variation (under Schedule 1, Part 4, Division 3, sections 72 and 73 of the Code) and postponements of enforcement proceedings (under section 96 of the Code) [Part 4-3, Division 2, items 4, 5 and 8 in the table in subsection 199(2)].

4.157 The procedure is designed to expedite proceedings for small claims matters and replicate some of the advantages that State tribunals offered. It addresses some of the concerns arising from the inability to continue to access State tribunals, where they were available. It also improves consumer access to dispute resolution in jurisdictions where tribunals are not utilised.

4.158 Once a small claims procedure is triggered, the court can make ancillary or consequential orders in relation to the proceedings, even if those orders are not listed in section 199. [Part 4-3, Division 2, subsection 199(4)]

Example 4.5: Ancillary or consequential orders

Premjit, a mortgagor had his $3,000 fridge repossessed by the credit provider.

Premjit applied to the court under section 108 of the Code to have his mortgaged fridge returned and uses the streamlined court proceedings. The court duly orders the return of the fridge to Premjit, but also:

•

makes an order under section 109 of the Code for the fridge be delivered to the mortgagor's home on Thursday at 8 am; and

•

a separate order under section 110 of the Code for $2,000 to compensate the mortgagor for the food that was spoiled and lost when the credit provider repossessed his fridge.

Compensation for loss or damage up to $40,000

4.159 A person may 'opt-in' to a small claims procedure where they are seeking compensation under sections 178 and 106, subsection 107(3) and section 118 of the Code.

4.160 The monetary limit on amounts that may be awarded under the small claims procedure is $40,000 with the regulations allowing a higher amount to be set, if considered appropriate. This amount is greater than the limit of $20,000 under the Fair Work Act 2009, but is consistent with its arrangements for small claims proceedings.

4.161 The monetary limit recognises that matters over $40,000 are likely to be more complex and should attract more formal consideration of the Court. This procedure should cover most claims under the Code. For example, the Victorian Civil and Administration Tribunal noted in its 2007-08 Annual Report that claims under $10,000 comprised 87 per cent of all its general civil applications, including credit matters.

4.162 The monetary limit is also consistent with the current jurisdictional limits for the award of damages in State and Territory magistrate and local courts.

4.163 An applicant may opt for the small claims procedures in relation to a credit contract that exceeds the monetary amount or where they may be entitled to amounts greater than $40,000. However, the maximum amount a court could award under this procedure is $40,000.

Example 4.6 Small Claims Compensation Limit

Regina believes she is entitled to $50,000 in compensation for loss and damage from her credit provider. She decides to use the opt-in small claims procedures since she believes this will be easier, reduce any upfront costs of obtaining legal representation, and will allow her to settle her claim faster.

However, in deciding to use the opt in small claims procedure, the court may only be able to award her compensation of up to $40,000. Regina considers it is worth forfeiting this extra $10,000 of her claim, for the benefit of having her claim considered under the small claims procedure.

Other orders

4.164 A number of orders that are available under the Code have been included where they would benefit from a streamlined court procedure. Access to this procedure is restricted to matters where the value of the credit contract, mortgage guarantee or consumer lease is less than $40,000.

4.165 The value of the credit contract, mortgage or guarantee is determined by the amount of credit that has been or may be provided under a credit contract to which it relates [Part 4-3, Division 2, subsection 199(3)]. An eligible credit contract would include, for example, a credit card with a maximum credit limit of $30,000, where the credit limit had been reached and paid out a number of times.

4.166 In relation to consumer leases, the value is based on the amount payable under the consumer lease, including fees and charges. [Part 4-3, Division 2, subparagraph 199(3)(b)(iv)]

4.167 Orders in relation to unjust transactions (section 76 of the Code) and unconscionable fees and charges (section 78 of the Code) were included to facilitate such complaints. However, it is considered that more complex and serious cases may benefit from more formal consideration by the court. These include matters that relate to a person's residential property.

4.168 Some court orders in relation to the Code have been included to facilitate cases involving the repossession of goods (section 108). These orders are considered to be commonly used by consumers.

4.169 In such a situation, the borrower may be able to apply for hardship variation, stay or postponement of enforcement and also have access to the provisions in relation to getting their goods returned, or payment of compensation for repossession in breach of the Code. These cases are considered to involve relatively small amounts of money.

4.170 In addition, orders in relation to statement of accounts and dispute accounts (sections 37 and 38 of the Code) were included as a straightforward matter that would benefit from streamlined procedures.

Hardship variations and postponements of enforcement

4.171 Requests for hardship variations (section 74) and postponements (section 96) under the Code are also eligible for streamlined court proceedings, in recognition that consumers seeking these requests may already be suffering hardship and are likely to be in need of an expedited and lower cost avenue for redress.

4.172 There is no monetary threshold to accessing the small claims procedure in relation to a hardship variation or postponement of enforcement proceeding.

Court procedures for small claims

4.173 This procedure is consistent with procedures already available in State magistrates and local courts for workplace relations matters. Under the Workplace Relations Act 1996, the small claims procedure currently applies to proceedings in a State magistrates or local court. The Fair Work Act 2009 extends the small claims procedure to the Federal Magistrates Court.

4.174 When dealing with a matter under the small claims procedure, the Federal Magistrates Court (or a State or Territory magistrates or local court) may act in an informal manner. It will not be bound by formal rules of evidence and it may act without regard to legal forms and technicalities. This is intended to ensure that claims for a relatively small amount of money, or that need to be heard quickly, such as hardship, are dealt with efficiently and expeditiously by the courts. [Part 4-3, Division 2, subsection 199(5)]

4.175 At any stage of the small claims procedure, the court may amend the papers commencing the proceeding so long as sufficient notice is given to any party adversely affected by the amendment. This is intended to ensure that small claims procedures are not subject to onerous procedural requirements and to clarify the nature of the legal issues in dispute. [Part 4-3, Division 2, subsection 199(6)]

4.176 There is also a presumption against legal representation. A person may only be represented by a 'lawyer' with the leave of a court. The term lawyer is defined in the Credit Bill as a person admitted to the legal profession by the High Court, Federal Court or Supreme Court of a State or Territory. The definition of 'lawyer' is intended to have the same or a similar meaning to the legislation regulating the legal profession in most States and Territories. It extends to all admitted lawyers. [Part 4-3, Division 2, subsection 199(7)]

4.177 That person is not taken to be represented by a lawyer if the lawyer is an employee or officer of the person. [Part 4-3, Division 2, subsection 199(9)]

4.178 Where a court has given permission for a person to be represented by a lawyer, it may do so subject to conditions designed to ensure that no other party is unfairly disadvantaged. [Part 4-3, Division 2, subsection 199(8)]

4.179 For example, if one party is a company and represented by an employee who is legally qualified (as permitted, under the exemption in subsection 199(9)), the court may consider it appropriate for the other party to be represented by a person who is a lawyer.

Costs - adverse cost orders

4.180 Costs in relation to court proceedings may include fees, disbursements, and other expenses. The standard position is that costs follow the event; that is, an award of costs will generally flow with the result of litigation with the successful party being entitled to an order for costs against the unsuccessful party.

4.181 Adverse cost orders are seen as a disincentive for a consumer to raise a dispute in court. In particular, they are seen as a disincentive for debtors seeking a hardship variation under the Code, due to the potential of experiencing large costs.

4.182 The removal of adverse cost orders in tribunal proceedings were seen as an advantage of a tribunal compared to the courts.

4.183 A presumption against issuing adverse cost orders apply to applications:

•

that occur under the small claims proceeding in section 199; or

•

section 72 (hardship variation) or section 94 (postponement of enforcement proceedings) of the Code (regardless of whether the matter is heard in a small claims proceeding).

4.184 This presumption can be rebutted if the proceedings were vexatious or without reasonable cause or where a party's unreasonable act or omission caused the other party to incur costs. [Part 4-3, Division 2, section 200]

Criminal proceedings - Division 3

4.185 Division 3 deals with criminal proceedings and sets out the laws that are to be applied in relation to criminal proceedings.

4.186 This Division is intended to be consistent with Part 9.6A, Division 2 of the Corporations Act.

4.187 It does not limit the operation of the Judiciary Act 1903, except in relation to sections 68, 70 and 70A. [Part 4-3, Division 3, section 203]

Criminal jurisdiction

4.188 Jurisdiction for criminal matters, including summary and indictable convictions, is conferred to the courts of each State and Territory where they have jurisdiction to deal with such matters [Part 4-3, Division 3, section 204]. This also extends to, among other things:

•

the examination and commitment for trial on indictment;

•

an offender's sentencing punishment and release; and

•

any appeals arising from proceedings connected with such matters.

[Part 4-3, Division 3, section 204(2)]

4.189 Section 204 has the same legal effect as section 1338B of the Corporations Act. This provision has been amended to improve its readability.

4.190 In addition, the jurisdiction conferred onto the courts of the Northern Territory and Australian Capital Territory is restricted by its constitutional limits. [Part 4-3, Division 3, subsection 203(3)]

4.191 The Federal Courts do not exercise criminal jurisdiction under the Credit Bill. This is because the Federal Courts generally do not exercise criminal jurisdiction, particularly in relation to indictable offences. This is consistent with the operation of the Corporations Act.

Summary Offences

4.192 The jurisdiction in relation to summary offences is unlimited, despite any limits as to locality of the jurisdiction of that court under the law of the State or Territory. [Part 4-3, Division 3, subsection 204(7)]

4.193 Only a magistrate can exercise criminal jurisdiction for a summary conviction, or examination or commitment for trial. [Part 4-3, Division 3, subsection 204(3)]

4.194 Further, a court may decline to exercise their jurisdiction in relation to a summary offence if, having regard to all the circumstances (including the public interest), the court is satisfied that it is appropriate. [Part 4-3, Division 3, subsection 204(9)]

Indictable offences

4.195 However, indictable offences can only be heard in a court if:

•

the offence was committed (begun or completed) in its jurisdiction, that is, it was committed in the jurisdiction of the relevant State or Territory; or

•

if the offence was committed outside of Australia.

[Part 4-3, Division 3, subsection 204(10)]

4.196 A person who pleads guilty to an indictable offence may be sentenced or otherwise dealt with without trial. [Part 4-3, Division 3, subsection 204(4)]

4.197 Reference to 'any such trial or conviction' in the criminal jurisdiction conferred to the courts includes jurisdiction in relation to the relevant criminal law of a State or Territory. [Part 4-3, Division 3, subsections 204(4) and (5)]

4.198 'Relevant criminal law', includes criminal law relating to the conviction or sentencing of an indictable offence. [Part 4-3, Division 3, subsection 204(7)]

4.199 A person may be dealt with in accordance with the relevant criminal law even if, apart from the operation of this section, the offence is required to be prosecuted by indictment or either summarily or on indictment. [Part 4-3, Division 3, subsection 204(6)]

Criminal proceedings

4.200 The laws of a State or Territory apply to a person who is charged under the Credit Bill in relation to the arrest, custody, criminal procedure and the rules of evidence applied to criminal procedure. [Part 4-3, Division 3, subsection 205(1)]

4.201 'Criminal procedure' relates to the procedure in relation to examining and obtaining a conviction, including the hearing and determination of appeals or any related proceedings. [Part 4-3, Division 3, subsection 205(2)]

4.202 ASIC, or a delegate of ASIC, or a representative authorised by the Minister may lay or make a charge in relation to an offence against the Credit Bill. This does not affect the operation of the Director of Public Prosecutions Act 1983. [Part 4-3, Division 3, section 206]

4.203 When ASIC is undertaking a prosecution, ASIC may seek assistance from certain persons in relation to the defendant, to give all assistance in connection with the prosecution that they are reasonably able to give. [Part 4-3, Division 3, section 207]

4.204 These persons are:

•

if the defendant is a natural person, a person who is or was a partner, employee or agent of the defendant; or

•

if the defendant is a body corporate, a person who is or was an officer, employee or agent of the defendant.

4.205 Failure to comply with a reasonable request for assistance from ASIC gives rise to an offence of strict liability [Part 4-3, Division 3, subsection 207(3)]. This is consistent with the equivalent requirements in section 1317 of the Corporations Act and will enable ASIC to properly discharge its investigative and prosecution functions.

4.206 Any person who is or is likely to be a defendant to the proceeding in relation to which ASIC is seeking assistance, or such a person's lawyer, is not required to assist and has a defence to any action taken against them under subsection 207(2) [Part 4-3, Division 3, subsection 207(4)]. This is similar to the equivalent provisions in section 49 of the ASIC Act.

4.207 This provision operates in conjunction with the rules of evidence or common law that applies in the relevant jurisdiction. The privilege against self-incrimination and legal client privilege only apply as permitted by the rules of evidence or the common law of the relevant jurisdictions. [Part 4-3, Division 3, subsection 205(1)]

4.208 These procedures work in conjunction with ASIC's powers to bringing criminal proceedings for an offence against the Credit Bill when relying on evidence gathered from a formal investigation under section 247. [Part 6-4, Division 2, section 274]

4.209 ASIC may seek a court order to obtain compliance with such a request. [Part 4-3, Division 3, subsection 207(5)]

4.210 A body corporate does not have a privilege against self-incrimination. This reflects current common law principles [Part 4-3, Division 3, section 208]. This is consistent with section 1316 of the Corporations Act.

Proceedings generally - Division 4

4.211 Division 4 contains rules about proceedings generally, such as ASIC's power to intervene in proceedings and the standard of proof to be applied.

4.212 ASIC has the power to intervene in proceedings relating to a matter arising under the Credit Bill. This power is based on section 1330 of the Corporations Act. It enables ASIC to make submissions to a Court for any purpose (not just to secure a civil penalty), for example, to make submissions on the way legislation should be interpreted. [Part 4-3, Division 4, section 20]

4.213 A Registrar, or another proper officer of an Australian Court, may make a certificate that states that a person was convicted by that court of an offence, including that a person was found to have committed that offence, but that court did not proceed to convict that person of an offence, for the purposes of the Credit Bill. [Part 4-3, Division 3, section 210]

4.214 This certificate is considered conclusive evidence, unless it is proven that offence was quashed or set aside, or that the finding was set aside or reversed.

4.215 This has the effect, among other things, of assisting a person or a corporation to rely on earlier proceedings when making an application for compensation without having to 'reprove' all the matters that were decided in the earlier proceedings. This has a similar effect to obtaining a declaration that a person has contravened a civil penalty provision, for obtaining a civil penalty order or compensation.

4.216 This replicates section 1333 of the Corporations Act.

4.217 Nothing in the Credit Bill restricts or affects the court from punishing contempt of court when a person contravenes an order of the court and commits an offence. [Part 4-3, Division 3, section 211]

Application and transitional provisions

4.218 Federal jurisdiction commences for claims that arise under the new legislation from the commencement of the Credit Bill.

4.219 The Federal Court, Federal Magistrates Court and State and Territory courts would all be able to exercise federal jurisdiction in relation to claims that arise under the new legislation from commencement.

4.220 The Credit Bill will provide a provision about the preservation of rights to enable persons to pursue a remedy or court action in the Federal Court, Federal Magistrates Court and State and Territory courts for matters that arose before the commencement of the Credit Bill, in relation to laws referred to the Commonwealth, such as the Code.

4.221 The State courts retain jurisdiction over credit laws not referred to the Commonwealth. These arrangements more specifically are set out in the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009.