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This is a Bill, not an Act. For current law, see the Acts databases.
2002-2003
The Parliament of
the
Commonwealth of
Australia
THE
SENATE
Presented and read a first
time
Late
Payment of Commercial Debts (Interest) Bill
2003
No. ,
2003
(Senator
Conroy)
A Bill for an Act to provide for
interest to be levied on the late payment of commercial debts arising in
relation to contracts for the supply of goods and services, and for related
purposes
Contents
A Bill for an Act to provide for interest to be levied on
the late payment of commercial debts arising in relation to contracts for the
supply of goods and services, and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the Late Payment of Commercial Debts
(Interest) Act 2003.
This Act commences on the day on which it receives the Royal
Assent.
The objects of this Act are to:
(a) improve the payment culture by penalising late payments of commercial
debts; and
(b) compensate financially vulnerable companies for the impact on their
cash flow of receipt of late payments of commercial debts.
In this Act, unless the contrary intention appears:
Commonwealth agency has the same meaning as
agency in the Financial Management and Accountability Act
1997.
consumer credit contract means a contract for the supply of
credit where the credit is provided or intended to be provided wholly or
predominantly for personal, domestic or household purposes.
contract for the supply of goods and services
means:
(a) a contract for the sale or transfer of goods; or
(b) a contract for the hire of goods; or
(c) a contract for the provision of services.
excepted contract means:
(a) a contract where the consideration for the sale, transfer, hire or
service is not, or does not include, a money consideration; or
(b) a consumer credit contract; or
(c) a contract intended to operate by way of mortgage, pledge or other
security.
large corporation means a corporation with a turnover in
excess of $20 million per year.
purchaser, subject to section 13, means the buyer in a
contract of sale of goods or the person who contracts with the supplier in any
other contract for the supply of goods or services.
qualifying contract means a contract for the supply of goods
and services, where the purchaser is a large corporation or a Commonwealth
agency and the supplier is a small business and both are acting in the course of
business, other than an excepted contract.
qualifying debt means a debt created by virtue of a
qualifying contract.
relevant day means:
(a) if the supplier and the purchaser agree a fixed or conditional date
for the payment of the debt—that day, unless the debt relates to an
obligation to make an advance payment; or
(b) if the debt relates to an obligation to make an advance
payment—the day on which the debt is treated by section 12 as having been
created; or
(c) in any other case—the last day of a period of 30 days commencing
on:
(i) the day on which the obligation of the supplier to whom the debt
relates is performed; or
(ii) the day on which the purchaser has notice of the amount of the debt
or, where that amount is not determined, the sum which the supplier claims is
the amount of the debt;
whichever is the later.
small business means an independently owned and operated
entity employing less than 20 people on a full-time employment basis.
statutory interest means interest carried by virtue of an
implied term in a qualifying contract.
substantial remedy has the meaning given by section
11.
supplier, subject to section 13, means the seller in a
contract of sale of goods or the person agreeing with the purchaser to transfer
property in goods or provide a service in any other contract for the supply of
goods or services.
(1) This Act binds the Crown in each of its capacities.
(2) However, nothing in this Act makes the Crown liable to be prosecuted
for an offence.
(1) Statutory interest is payable by the purchaser to the supplier for
late payment of qualifying debt in accordance with the terms of this
Act.
(2) Statutory interest applies only to qualifying debts.
(1) It is an implied term in a qualifying contract that any qualifying
debt created by the contract carries simple interest subject to, and in
accordance with, this Part and Part 3 of this Act.
(2) Interest carried under an implied term is treated in the same way as
interest carried under an express term.
(1) Statutory interest is applied to a qualifying debt for the period
specified in this section.
(2) The application of statutory interest commences on the day after the
relevant day for the debt, at the rate applying under section 9 at the end
of the relevant day.
(3) The application of statutory interest ceases when the interest would
cease to apply if it were carried under an express term in a contract.
(1) The Minister shall, in writing, determine:
(a) a formula for calculating the rate of statutory interest; or
(b) the rate of statutory interest.
(2) In setting the rate the Minister must consider:
(a) the extent to which it may be possible to set the rate so as to
protect suppliers whose financial position makes them particularly vulnerable if
they do not receive payment of qualifying debts by the relevant day;
and
(b) the extent to which it may be possible to set the rate so as to deter
in general the late payment of qualifying debts; and
(c) any other relevant matter.
(1) Any contract terms are void to the extent that they purport to exclude
the right to statutory interest in relation to a debt, unless there is a
substantial contractual remedy for late payment of the debt.
(2) Where the parties agree a contractual remedy for late payment of a
debt that is a substantial remedy, statutory interest is not carried by the
debt, unless the parties agree otherwise.
(3) The parties may not agree to vary the right to statutory interest in
relation to a debt unless either the right to statutory interest as varied or
the overall remedy for late payment of the debt is a substantial
remedy.
(4) Any contract terms are void to the extent that they purport
to:
(a) confer a contractual right to interest that is not a substantial
remedy for late payment of a debt; or
(b) vary the right to statutory interest so as to provide for a right to
statutory interest that is not a substantial remedy for late payment of a debt,
unless the overall remedy for late payment of the debt is a substantial
remedy.
(5) Subject to this section, the parties are free to agree contract terms
which deal with the consequences of late payment of a debt.
(1) A remedy for the late payment of a debt shall be regarded as a
substantial remedy unless:
(a) the remedy is insufficient either for the purpose of compensating the
supplier for late payment or for deterring late payment; and
(b) it would not be fair or reasonable to allow the remedy to be relied on
to oust or to vary the right to statutory interest that would otherwise apply in
relation to the debt.
(2) In determining whether a remedy is not a substantial remedy, regard
must be had to all the relevant circumstances at the time the terms in question
are agreed.
(3) In determining whether paragraph (1)(b) applies, regard must be had to
the following matters:
(a) the benefits of commercial certainty; and
(b) the strength of the bargaining positions of the parties relative to
each other; and
(c) whether the term was imposed by one party to the detriment of the
other; and
(d) whether the supplier received an inducement to agree to the
term.
(1) A qualifying debt created by virtue of an obligation to make an
advance payment is treated for the purposes of this Act as if it was created on
the day specified in subsection (2), (3) or (4).
(2) Where the advance payment is the whole contract price, the debt is
treated as if it was created on the day on which the supplier’s obligation
is performed.
(3) Where the advance payment is part of the contract price, but the sum
is not due in respect of any part performance of the supplier’s
obligation, the debt is treated as if it was created on the day on which the
supplier’s obligation is performed.
(4) Where the advance payment is a part of the contract price due in
respect of any part performance of the supplier’s obligation, but is
payable before that part performance is completed, the debt is treated as if it
was created on the day on which the relevant part performance is
completed.
(5) For the purposes of this section an obligation to pay the whole
outstanding balance of the contract price is to be regarded as an obligation to
pay the whole contract price and not as an obligation to pay a part of the
contract price.
The operation of this Act in relation to qualifying debts is not affected
by:
(a) any change in the identity of the parties to the contract creating the
debt; or
(b) the passing of the right to be paid the debt or the duty to pay it (in
whole or in part) to a person other than the person who was the original
creditor or the original debtor when the debt was created.
The Governor-General may make regulations prescribing matters:
(a) required or permitted by this Act to be prescribed; or
(b) necessary and convenient to be prescribed for carrying out or giving
effect to this Act.