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 7 - Miscellaneous
Outline of chapter
7.1 Chapter 7 of this explanatory memorandum outlines provisions which deal with regulation-making powers and administration matters established in Chapter 7 of the National Consumer Credit Protection Bill 2009 (Credit Bill).
Summary of new law
7.2 The miscellaneous provisions contain standard administration and machinery type provisions that enable the effective operation of the Credit Bill. The provisions include (but are not limited to) the following matters:
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- circumstances in which a person will be liable for the conduct of others;
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- review by the Administrative Appeals Tribunal (AAT) of decisions made by the Australian Securities and Investments Commission (ASIC);
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- the making of regulations; and
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- other miscellaneous provisions such as Ministerial delegations.
Detailed explanation of new law
Part 7-1 - Miscellaneous
Division 2 - Liability of bodies corporate and persons for conduct of their agents etc.
7.3 There are certain circumstances which deal with the liability of bodies corporate under the Credit Bill and the conditions in which liability may be imposed on a body corporate where conduct is engaged in on behalf of a body corporate. In particular, conduct engaged in, by an officer, employee or agent of the body corporate (or by a person at the direction or with the consent or agreement of the officer, employee or agent) is taken to have been engaged in by the body corporate, provided the conduct is within that person's actual or apparent authority. [Part 7-1, Division 2, section 324]
7.4 Similarly, it is sufficient to show the state of mind of an officer, employee or agent (or of a person acting at the direction or with the consent or agreement of the officer, employee or agent), to establish the state of mind of the body corporate. [Part 7-1, Division 2, subsection 323(3)]
7.5 Part 2.5 of Chapter 2 of the Criminal Code, which deals with corporate criminal responsibility, does not apply to an offence under the Credit Bill [Part 7-1, Division 2, subsection 323(4)]. An equivalent provision, which provides for the liability of bodies corporate under the Credit Bill, is applied to liability for principals which would cover sole traders and partnerships. [Part 7-1, Division 2, section 325]
7.6 Regulations may modify this Division for the purposes prescribed in the regulations. [Part 7-1, Division 2, section 326]
Division 3 - Review of ASIC's decisions
7.7 Division 3 provides for a review by the AAT of a decision made by ASIC. However it is specifically provided that ASIC's compliance and enforcement decisions (including decisions made in relation to infringement notices) will not be subject to review by the AAT [Part 7-1, Division 3, subsection 327(1)]. This approach is consistent with the ASIC Act which effectively excludes the large majority of ASIC decisions made under that Act from AAT review.
7.8 It also excludes from AAT review all ASIC decisions made by legislative instrument [Part 7-1, Division 3, paragraphs 327(1)(a), (b), (f), (g) and (h)]. These decisions are already subject to Parliamentary review under the Legislative Instruments Act 2003.
7.9 The review by the AAT is a de novo review on the merits of the decision of the original decision-maker and empowers the AAT to exercise all the powers and discretions that are conferred on the original decision-maker. [Section 43 of the Administrative Appeals Tribunal Act 1975]
7.10 Section 27A of the Administrative Appeals Tribunal Act 1975, which requires a notice of decision and review rights to be given to a person affected by the decision, does not apply to decisions made under section 327 of the Credit Bill. [Part 7-1, Division 3, section 327(2)]
7.11 Where an ASIC decision is reviewable, persons whose interests are affected by the decision must be informed of the making of the decision and review rights relating to the decision. All reasonable steps in the circumstances must be taken to inform the person [Part 7-1, Division 3, subsections 328(1) and (2)]. However, a failure to do so does not invalidate the decision. [Part 7-1, Division 3, subsection 328(5)]
7.12 ASIC is not required to give notice to a person affected by the decision. In deciding not to do so, ASIC may have regard to:
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- the cost of giving notice to the person or persons; and
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- the way in which the interests of the person or persons are affected by the decision.
[Part 7-1, Division 3, subsection 328(3)]
7.13 A determination made by ASIC to not give a notice to a person affected by the decision is not a legislative instrument. This statement is merely declaratory of the law, consistent with section 5 of the Legislative Instruments Act 2003. [Part 7-1, Division 3, subsection 328(4)]
Division 4 - Regulations
7.14 The Governor-General may make regulations prescribing matters that are required or permitted by the Credit Bill or matters that are necessary or convenient to be prescribed for the purpose of carrying out or giving effect to the Credit Bill. [Part 7-1, Division 4, section 329]
7.15 Regulations may prescribe the location for where court proceedings in relation to matters relating to credit contracts and consumer leases must be brought. [Part 7-1, Division 4, section 330]
7.16 In adopting the old Credit Code on a national basis, the new Credit 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; and may cause particular vulnerabilities for debtors who could not afford or have the capacity to challenge a proceeding in another jurisdiction. Hence, the need to make regulations about the above matters.
7.17 Regulations may provide for a person who is alleged to have contravened a civil penalty provision to pay a penalty to the Commonwealth as an alternative to civil proceedings; and that the penalty must not exceed one-fortieth of the maximum penalty that a court could impose. [Part 7-1, Division 4, subsections 331(1) and (2)]
7.18 In the case of alleged contraventions of strict liability offences, infringement notices may be issued as an alternative to prosecution. A detailed explanation of the operation of section 331 is provided in Chapter 4 of this explanatory memorandum. [Part 7-1, Division 4, subsection 331(3)]
7.19 The value of the infringement notices is limited to one-fifth of the maximum the court could impose for the offence. [Part 7-1, Division 4, subsection 331(4)]
Division 5 - Other miscellaneous provisions
7.20 A person is taken to have contravened a civil penalty provision or committed an offence, if that person, does or omits to do, an act outside this jurisdiction; and if that person had done, or omitted to do, that act in this jurisdiction, the person would, by reason of also having done, or omitted to do, an act in this jurisdiction, have contravened a civil penalty provision or committed an offence against the Credit Bill. [Part 7-1, Division 5, subsection 332]
7.21 A failure to comply with any requirement of the Credit Bill does not affect the validity or enforceability of any transaction, contract or other arrangement. [Part 7-1, Division 5, subsection 333(1)]
7.22 This is subject to any express provision to the contrary in the Credit Bill or proposed regulations including regulations made specifically for this purpose. [Part 7-1, Division 5, subsection 333(2)]
7.23 There are certain circumstances under which a provision of a contract or other instrument is void. In particular, provisions which seek to modify the effect of the Credit Bill or to indemnify certain classes of persons from loss or liability arising under the Credit Bill are void. For example, a credit provider, mortgagee, beneficiary of a guarantee or lessor who is a party to such a provision commits an offence. The criminal penalty for the offence is a maximum of 100 penalty units. [Part 7-1, Division 5, subsections 334(1) to (3)]
7.24 This offence also carries strict liability [Part 7-1, Division 5, subsection 334(4)]. This strict liability will significantly enhance the role of ASIC in administering the enforcement regime [Part 7-1, Division 5, subsection 334(5)].
7.25 Subsection 324(2) does not prevent a credit provider from enforcing a guarantee relating to liabilities under a credit contract that is unenforceable solely because of the debtor's death, insolvency or incapacity. [Part 7-1, Division 5, subsection 334(5)]
7.26 Subject to the abovementioned contracting out provision, any indemnity for any liability under the Credit Bill is not void, nor can it be declared void on the grounds of public policy, despite any rule of law to the contrary. However, this does not apply to indemnities from liabilities under the Credit Code. [Part 7-1, Division 5, section 335]
7.27 It is not anticipated that the treatment of existing rights under the Credit Bill will result in any acquisition of property other than on just terms for the purposes of paragraph 51(xxxi) of the Constitution. However, for the avoidance of doubt, a provision has been included to ensure that an acquisition for the purposes of paragraph 51(xxxi) cannot take place. To the extent that an acquisition of property other than on just terms would occur by virtue of a provision of the Credit Bill (when enacted), the relevant law or instrument is taken not to apply. [Part 7-1, Division 5, section 336]
7.28 The Minister may delegate their functions and powers under the Credit Bill to a member or staff member of ASIC. Any such delegate must comply with any directions of the Minister in performing function or exercising powers under the delegation. [Part 7-1, Division 5, section 337]