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1996
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
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VETERANS’ AFFAIRS LEGISLATION
AMENDMENT BILL (NO.1) 1996 |
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EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Veterans’
Affairs,
The Honourable Bruce Scott MP)
78587 Cat. No. 96 4952 2 ISBN 0644 443448
This Bill gives effect to certain measures relating to Veterans'
Affairs legislation.
· Amendments to
the Defence Service Homes Act 1918 will incorporate certain provisions of
the Consumer Credit Code that is to be adopted by all State and Territory
Governments in 1996. It will also allow Defence Service Homes Scheme
beneficiaries rights under the Consumer Credit Code for matters not specified in
this amending bill.
· Amendments to the
Veterans' Entitlements Act 1986 will streamline the granting of a pension
to the dependant of a veteran who dies from a war-caused injury or
disease.
Unless otherwise indicated, the measures in this Bill have nil
or negligible financial impact.
Schedule 1 Amendments of the
Defence Service Homes Act 1918
The amendments ensure loan
beneficiaries under the Defence Service Homes Scheme will have consumer rights
similar to those that other borrowers will have when all State and Territory
Governments adopt a common Consumer Credit Code.
Date of effect Schedule
1, with the exception of item 5 (unless the date of Royal Assent is 1 November
1996) commences on Royal Assent. Item 5 commences on 1 November 1996 or, if the
commencing day of the Consumer Credit Code is after
1 November 1996, the
commencing day of the Code.
Financial
impact 1996-97 ($4.418m)
Schedule 2 Amendments of the Veterans'
Entitlements Act 1986
The dependant of a veteran who dies from a
war-caused disability will be eligible for a pension without the need for the
service relationship to be re-established.
Date of effect Royal
Assent
Clause 1 sets out how the Act is to be cited.
Clause 2 sets out the various commencement dates of the provisions
in the Act. These will be explained in more detail as each topic is
explained.
Clause 3 provides that the Acts specified in a Schedule to the Act
are amended or repealed as set out in the schedule concerned, and that any other
items in the schedules that do not amend another Act also have
effect.
Schedule 1 amends the Defence Service Homes Act 1918 and
Schedule 2 amends the Veterans’ Entitlements Act 1986. Both these
Schedules are explained in detail below.
Overview
The amendments in this Schedule ensure loan beneficiaries under the
Defence Service Homes Scheme will have consumer rights similar to those that
other borrowers will have when all State and Territory Governments adopt a
common Consumer Credit Code.
Background
In July 1993, the State Governments agreed to introduce uniform
legislation to regulate the provision of consumer credit. The resultant
Consumer Credit Code will apply to all credit provided in the course of business
of a credit provider to a borrower who is an individual, or strata corporation,
and if the credit is provided wholly or predominantly for personal, domestic or
household purposes. Implementation is planned for 1996.
Explanation of the Changes
The changes remove any potential conflict between the operation of
Commonwealth legislation in the form of the Defence Service Homes Act 1918
and the operation of State Consumer Credit legislation.
This Bill
ensures that Westpac Banking Corporation's legal obligations under the
Defence Service Homes Act 1918 largely comply with the requirements of
the Consumer Credit Code, and that the introduction of the Consumer Credit Code
does not prejudice the Defence Service Home Scheme.
The changes to the
Defence Service Homes Act 1918 will not exclude or limit the concurrent
operation of the Consumer Credit Codes of the States and Territories other than
those matters specified in the bill.
Explanation of the items
Amendments to the interpretation section
Item 1
inserts references to a number of new definitions into subsection 4(1). These
definitions are necessary to clarify the meaning of terms introduced into the
Defence Service Homes Act 1918 by these amendments.
The
definition of ‘supplementary agreement’ makes clear that
supplementary agreements are those agreements between the Commonwealth and
Westpac Banking Corporation that amend the principal agreement a copy of which
is set out in
Schedule 1 of the Defence Service Homes Act 1918. It
also clarifies that only that part of the content of a Supplementary Agreement
that is expressed to amend the principal agreement is part of the definition of
‘agreement’ for the purposes of the Defence Service Homes Act
1918.
Item 2 substitutes a new definition of 'agreement' in
subsection 4(1). The new definition makes clear that the principal agreement can
be varied by the Commonwealth and the Bank either by a supplementary agreement
or otherwise without requiring any further amendment to the subsection 4(1)
definition.
Defence Service Homes Act 1918 not to exclude Consumer
Credit Code
Item 3 inserts a new section 4D to ensure that
borrowers under the Defence Service Homes Act 1918 have the same consumer
rights as other borrowers have under the Consumer Credit Code apart from the
special provisions contained in this Schedule. Subsection 4D(1) provides that
apart from the provisions of Part IIIA and section 35A, the Defence Service
Homes Act 1918 does not exclude or limit the concurrent operation of the
Consumer Credit Codes of the States and Territories. Subsection 4D(2) ensures
that matters covered by subsection 23A(2) or section 23H are not subject to the
Consumer Credit Codes of the States and Territories.
Unjust
transactions
The Consumer Credit Code provides for the courts to
re-open unjust transactions and provides details of matters to be considered by
the court in determining whether a particular transaction is unjust.
The
lending criteria for granting loans under the Defence Service Homes Scheme are
more generous than Westpac Banking Corporation's normal lending criteria. To
avoid the Bank being challenged under the Code in relation to a transaction
entered into under the Defence Service Homes Scheme, the Court's re-opening
powers have been modified to take into account the special nature of the Defence
Service Homes Scheme and its clients.
Item 4 inserts a new Part
IIIA to provide certain remedies for Defence Service Homes borrowers in relation
to unjust transactions.
New subsection 23A(1) provides the general
power for the Court to re-open a transaction giving rise to a contract,
mortgage, guarantee or change.
New subsection 23A(2) excludes application
of this section to the annual rates of interest under a contract or mortgage, or
to a change in the annual rates of interest under a contract or mortgage. It
also excludes this section from applying to an establishment fee or other fee in
respect of which an application may be made under the new section
23F.
New subsection 23B(1) sets out the matters to be considered by the
court in determining whether a term of a particular contract, mortgage or
guarantee is unjust at the time it was entered into or changed.
New
subsection 23B(2) provides some additional factors associated with the Defence
Service Homes Scheme arrangement which the court is to have regard to in
determining whether a term of a particular contract, mortgage or guarantee is
unjust. It also specifies two factors which the court is not to have regard to
in such determinations. These two factors are necessary because Defence Service
Homes’ clients are tied to Westpac Banking Corporation for their Defence
Service Home loans in accordance with the Agreement between the Commonwealth and
that Bank, and because the age of borrowers is a factor specifically excluded
from the lending criteria in the Agreement.
New subsection 23B(3)
refines the references to persons who represented or assisted mortgagors or
guarantors in negotiations related to mortgages or guarantees. These provisions
are similar, in effect, to the Consumer Credit Codes.
New section 23C
provides that in determining whether a contract, mortgage or guarantee is
unjust, the court is not to have regard to any injustice arising from
circumstances that were not reasonably foreseeable when the contract, mortgage
or guarantee was entered into or changed. These provisions are similar, in
effect, to the Consumer Credit Codes.
New section 23D provides that in
determining whether to grant relief in respect of a contract, mortgage or
guarantee that it finds to be unjust, the court may have regard to the conduct
of the parties since it was entered into or changed. These provisions are
similar, in effect, to the Consumer Credit Codes.
New section 23E sets
out the various orders that the court may make if it re-opens a transaction
under new section 23A.
New section 23F provides the court with the power
to review unconscionable fees and charges, and sets out the matters to be taken
into account when determining the review.
New subsection 23F(1) will
empower the court to annul or reduce the fee or charge and make ancillary or
consequential orders.
New subsection 23F(2) provides that in
determining whether an establishment fee or charge is unconscionable, the court
is to have regard to whether the amount of the fee or charge is equal to Westpac
Banking Corporation’s reasonable costs in respect of that contract or its
average reasonable costs in respect of that class of contracts.
New
subsection 23F(3) provides that a fee or charge is unconscionable if it appears
to the court that it exceeds a reasonable estimate of Westpac Banking
Corporation's loss or reasonable costs in respect of a termination of a contract
or associated prepayment.
New subsection 23G(1) provides for a two year
time limit after the relevant contract, mortgage or guarantee is rescinded,
discharged or debt written off for an application to be lodged under section
23A.
New subsection 23G(2) provides for a two year time limit after the
relevant fee or charge is charged under the contract, mortgage or guarantee or
debt written off for an application to be made under section 23F.
New
section 23H lists exceptions where Part IIIA will not apply. New section 23H(1)
provides that new Part IIIA does not
apply:
· to a change to a contract,
mortgage or guarantee if the change was as a result of the enactment of this
Part or the new section 35A or any other Act or amendment to the agreement
between the Commonwealth and Westpac Banking Corporation. This is necessary to
ensure that Westpac Banking Corporation is not challenged under the court
re-opening powers as a result of a change to contract, mortgage or guarantee
which is the result of a changes to the Defence Service Homes legislation or the
agreement.
· to a contract, mortgage or
guarantee under which the borrower, mortgagor or guarantor is not an individual.
This is necessary because apart from assigned advances, Defence Service Homes
loans are only made to natural persons.
· to a contract under which the
borrower is borrowing for a purpose that is not wholly or predominantly a
personal, domestic or household purpose. This is necessary because some
assigned loans will be made to borrowers who are not individuals, but they will
be for personal, domestic or household
purposes.
· to a mortgage or guarantee
that secures or guarantees obligations under a contract under which the borrower
is not an individual or under which the borrower is borrowing for a purpose that
is not wholly or predominantly a personal, domestic or household
purpose.
· to a contract, mortgage or
guarantee that was entered into before the commencement of this
paragraph.
New subsection 23H(2) explains that an investment by a
borrower is not to be regarded as a personal, domestic or household purpose. It
also explains how to interpret the expression ‘predominant
purpose’.
New section 23J provides for access to legal aid for
challenges under new sections 23A or 23F. Subsection 23J(1) provides that such
persons may apply for a grant of assistance under this section. New subsection
23J(2) provides that, if satisfied that it would involve hardship to the
applicant to refuse the application for assistance, the Attorney-General or an
authorised person may authorise the grant of legal or financial assistance in
relation to the application under new sections 23A or 23F.
New section
23K provides for courts of summary jurisdiction of the States to be invested
with federal jurisdiction in respect of matters arising under Part IIIA. This
is necessary to avoid burdening the Federal Court with hearings under this Part
when the States will have the jurisdiction to hear the majority of credit
matters under the Consumer Credit Code.
New section 23L inserts a
definition of the term 'unjust'.
Modifications to the Agreement
and other instruments
Item 5 inserts a new section 35A which
provides for a change in the method of interest calculation from monthly to
daily balances and alters the ‘rest days’ which occur on the first
day of the month to the fifth day of the month.
New subsection 35A(1)
provides that, despite the provision in the Agreement specifying that interest
on subsidised advances shall be calculated on the principal outstanding at the
end of each preceding month and any existing loan documentation, interest on
Defence Service Homes loans is to be charged in arrears and calculated on the
daily balances. This provision is necessary to overrule the provisions of the
Agreement and the existing documentation so that interest charges may change
from the monthly to the daily balances method.
New subsection 35A(2)
provides for an amended definition of the term 'rest day' in clause 1.1 of the
Agreement. In effect, this new definition moves the rest days for Specified
Portfolio Assets from the first day of the month to the fifth day of the month.
Rest days are the monthly due dates for loan repayments.
New subsection
35A(3) provides that any reference to rest days in loan documentation is to be
taken as meaning the new description in new subsection 35A(2).
New
subsection 35A(4) provides that Part B of Schedule D to the Agreement is
omitted. Part B of Schedule D lists the information that Westpac Banking
Corporation is to provide in relation to variations in interest on loans each
month as part of its subsidy claim on the Commonwealth. As the method of
charging interest is being changed from in advance to in arrears in accordance
with new subsection 35A(1), there will no longer be a need for a variations
report each month. Accordingly, those arrangements are to be deleted from the
schedule to the agreement.
Item 6 inserts a new subsection 45(2)
to allow subclause 8.1 and several of the subclauses of Clause 11 of the
Agreement to be amended. The deadline referred to in the new subsection will
have the effect of ensuring that these amendments are made within the three
months following the date of Royal Assent of this Act. The restriction on
amending those subclauses in the agreement will then be reimposed after that
time.
Commencement, transitional and savings
provisions
Item 7 provides for commencement, transitional and
saving provisions in relation to new section 35A.
Paragraph (1) provides
that new section 35A commences on either 1 November 1996 or, if the Consumer
Credit Code's commencing day is after 1 November 1996, on the Code’s
commencing day.
Paragraph (2) provides authority for Westpac Banking
Corporation, despite
paragraph (1), to continue to charge interest under the
monthly balance method up until 1 June 1997. Westpac Banking Corporation has
advised that it will continue to use this method of interest calculation for its
existing Defence Service Homes customers until that date.
The Consumer
Credit Code requires that interest charged on loans does not exceed that based
on the daily balance method for new customers but not existing customers.
Westpac Banking Corporation has agreed to extend this potentially beneficial
method of interest calculation to its existing Defence Service Home loans for
administrative simplicity.
Paragraph (3) provides that if Westpac Banking
Corporation still uses the monthly balance method of calculation of interest
after Item 5 commences, but before 1 June 1997, for either existing or new
Defence Service Home loans, then the Agreement applies in relation to those
loans, whilst this method is being used, as it was in force before Royal Assent
and as if section 35A had not been enacted.
This provision is necessary
because the new subsection 45(2) to be inserted by Item 6 will allow the
Agreement to be amended in the three months after the Royal Assent in relation
to the method of calculation of interest. This means that it is necessary for
the clauses of the Agreement that currently apply in relation to the monthly
balance method to still apply where it is being used after the commencement of
the Consumer Credit Code.
Paragraph (4) provides that Westpac Banking
Corporation and the Commonwealth must notify, so far as possible, existing
borrowers of the effect of the change in the method of charging interest from
being based on monthly balances to daily balances.
Paragraph (5) is a
general provision to the effect that expressions used in this section that are
defined in subsection 4(1) of the Defence Service Homes Act 1918 are to
have the same meaning as in that subsection.
Commencement
Subclause 2(1) provides that Schedule 1, with the probable exception
of item 5, commences on Royal Assent.
Subclause 2(2) provides that
item 5 commences as set out in item 7.
Overview
The dependant of a veteran or a member who dies from a war-caused
disability will be eligible for a pension without the need for the service
relationship to be re-established.
Background
The Act requires that each claim for pension following the death of a
veteran be determined having regard to the relationship between the death and
the deceased’s service. Where the veteran dies from an injury or disease
that has already been determined by the Repatriation Commission to be
war-caused, a claim for pension by the dependant needs to re-establish the
service relationship. Similar provisions apply to dependants of members of the
Defence Force, members of the Peacekeeping Force and members who rendered
hazardous service.
Explanation of the changes
These amendments create additional grounds upon which a pension may be
granted to a dependant. If the veteran has died from an injury or disease that
has already been determined by the Repatriation Commission to be war-caused or
defence-caused then the death is to be taken to have been war-caused or
defence-caused.
Explanation of the items
Item 1 inserts a new paragraph in section 8 dealing with
war-caused death. New paragraph 8(1)(f) provides that the death of a veteran
will be taken to be war-caused if the injury or disease from which the veteran
died is one which has been determined to be war-caused.
A note to the new
paragraph spells out the effect of the paragraph. The note makes it clear that
if the veteran’s death is due to such an injury or disease, the
Repatriation Commission is not required to relate the death to the service and
that sections 120A and 120B (dealing with reference to Statements of Principles)
do not apply.
Items 2 and 3 insert new paragraphs in section 70
dealing with eligibility for pensions for members of the Defence Force or
Peacekeeping Force or their dependants
Item 2 inserts new paragraph
70(5)(e) which provides that the death of a member of the Defence Force or the
Peacekeeping Force will be taken to be defence-caused if the injury or disease
from which the member died is one which has been determined to be
defence-caused.
A note to the new paragraph spells out the effect of the
paragraph. The note makes it clear that if the member’s death is due to
such an injury or disease, the Repatriation Commission is not required to relate
the death to the service and that sections 120A and 120B (dealing with reference
to Statements of Principles) do not apply.
Item 3 inserts new paragraph
70(5A)(e) which provides that the death of a member who has rendered only
hazardous service will be taken to be defence-caused if the injury or disease
from which the member died is one which has been determined to be
defence-caused.
A note to the new paragraph spells out the effect of the
paragraph. The note makes it clear that if the member’s death is due to
such an injury or disease, the Repatriation Commission is not required to relate
the death to the service and that sections 120A and 120B (dealing with reference
to Statements of Principles) do not apply.
Item 4 provides that
items 1, 2 and 3 apply only for the purposes of claims made on or after 1 June
1994. This is the date referred to in sections 120A and 120B dealing with
reference to Statements of Principles.
Commencement
Subclause 2(1) provides that this Schedule commences on Royal
Assent.