Bills Digest 22 1996-97 Veterans' Affairs Legislation Amendment Bill (No. 1) 1996


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WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest was available from 29 August 1996.

CONTENTS

Passage History

Veterans' Affairs Legislation Amendment Bill (No. 1) 1996

Date Introduced: 22 May 1996
House: House of Representatives
Portfolio: Veterans' Affairs
Commencement: While the amendments outlined in this Digest commence on Royal Assent, the amendments proposed by Schedule 2 will apply to pension claims made from 1 June 1994.

Purpose

The major amendments proposed by this Bill:

  • ensure that loan beneficiaries under the Defence Service Homes Scheme have rights similar to those other borrowers will have under the State and Territory Consumer Credit Codes; and
  • provide that where a member of the Defence Force or a Peacekeeping Force dies from an injury or disease that has already been determined to be defence or war caused, their dependants when claiming a pension will not have to re-establish the service relationship.

Background

As there is no central theme to the Bill, a brief background to each major amendment will be outlined below.

Main Provisions

Amendments to the Defence Service Homes Act 1918

Consumer Credit Code

In July 1993 the State and Territory Governments agreed to introduce uniform legislation (the Consumer Credit Code) to regulate the provision of consumer credit.

The Consumer Credit Code is intended to regulate all forms of personal, domestic and household credit, including:

  • personal loans;
  • housing loans;
  • hire purchase agreements; and
  • retail credit.

The Consumer Credit Code regulates the activities of all financial institutions and providers of personal credit, including:

  • banks;
  • finance companies; and
  • retailers providing credit.

The Consumer Credit Code will apply where credit the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes.

The proposed start date for the Consumer Credit Code is 1 November 1996.

Mortgages and the Consumer Credit Code

Mortgages are regulated by the Consumer Credit Code where they secure obligations under a credit contract or related guarantee and the mortgagor is a natural person or strata corporation.

General restrictions imposed by the Consumer Credit Code on mortgages include:

  • a mortgage must describe/identify the property which is subject to the mortgage;
  • where a mortgage charges all property of the mortgagor, the provision in a mortgage which does so is void;
  • generally, a provision in a mortgage which charges future property is void; and
  • a mortgage cannot be created over an employee's remuneration or employment benefits or superannuation benefits unless the regulations specify otherwise.

The amendments proposed by Schedule 1 of this Bill are intended to ensure that loan beneficiaries under the Defence Service Home Scheme have rights similar to those other borrowers will have under the Consumer Credit Code.

Defence Service Homes Scheme

Housing assistance has been available under the provisions of the Defence Service Homes Act 1918 to certain men and women who have served Australia since 1918. As at June 1994, there were 107 124 persons in receipt of Defence Service Homes (DHS) assistance. Assistance includes housing loan interest subsidies, comprehensive homeowners' insurance cover and home contents insurance. The maximum loan available is $25 000 repayable over 25 years. Under an arrangement between the Commonwealth and the Westpac Banking Corporation, the Commonwealth subsidises Westpac for low interest loans it provides to eligible persons.

Amendments

Exclusion of Consumer Credit Codes -The principal effect of item 3 of Schedule 1 is to provide for the application of the State and Territory Consumer Credit Codes to Defence Service Homes Scheme (DSH Scheme) borrowers, to the extent not provided for by the amendments proposed by this Bill.

Item 4 of Schedule 1 inserts a new Part IIIA (proposed sections 23A-23L) in the Defence Service Homes Act 1918 which provides DSH Scheme borrowers with remedies against certain unjust transactions.

Power to Reopen Unjust Transactions

Proposed section 23A accords a court power, subject to two exceptions, to re-open a contract, mortgage or charge where it is satisfied that at the time it was entered into or changed it was unjust. The two exceptions are to the annual rates, or change to the annual rates, of interest under a contract or mortgage, and an unconscionable establishment fee or charge, or other fee or charge (see proposed section 23F in relation to fees and charges).

Matters to be Considered by Court

In determining if a particular contract, mortgage or guarantee is unjust (the term 'unjust' is defined in proposed section 23L to include unconscionable, harsh or oppressive), a court must have regard to the public interest and the circumstances of the case, and may take into account certain matters, including:

  • the relative bargaining power of the parties;
  • the consequences of compliance, or non-compliance, with all or any provisions of the contract, mortgage or guarantee;
  • whether or not any provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with;
  • the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed;
  • whether the Bank or any other person used unfair pressure, undue influence or unfair tactics on the borrower, mortgagor or guarantor;
  • whether the Bank took measures to ensure that the borrower, mortgagor or guarantor understood the nature and implications of the transactions and, if so, the adequacy of those measures; and
  • any other relevant matter [proposed subsection 23B(1)].

Proposed subsection 23B(2) is a DSH Scheme specific provision which provides that a court must when determining whether a term of a contract, mortgage or guarantee is unjust have regard to certain matters, including that in some circumstances the Bank would not provide advances to an eligible person if it were assessed on ordinary commercial lending criteria instead of the criteria set out in the Principal Act. The proposed subsection also specifies two matters which the court is not to have regard to, namely, any inequality in bargaining power between the Bank and the borrower that arose because the borrower obtained a subsidised loan from the Bank and not from another institution, and the borrower's age.

Orders on Reopening of Transactions

Proposed section 23E sets out the orders that a court may make if it re-opens an unjust transactions. The orders may include:

  • relieving the borrower and any guarantor from payment of any amount in excess of the amount that the court considers to be reasonably payable;
  • set aside wholly or partly, or revise or alter, an agreement made or mortgage or guarantee given in connection with the transaction; and
  • order any steps necessary to discharge the mortgage.

Review of Unconscionable Fees and Charges

Proposed section 23F provides a court with power to review, annul or reduce unconscionable fees and charges. When making a determination as to whether a fee or charge is unconscionable, the court must consider whether the amount of the fee or charge is equal to the Bank's reasonable costs of determining an application for credit and the initial administrative costs of providing the credit; or is equal to the Bank's average reasonable costs in respect of that class of contract.

Time Limit

A person will have two years from the time a contract, mortgage or guarantee is rescinded, discharged, or the Bank writes off the debt to ask a court under proposed section 23A to reopen the contract, mortgage or guarantee [proposed subsection 23G(1)]. The same two year time limit will apply in respect to a fee or charge charged under a contract, mortgage, guarantee or the Bank writes off the relevant debt [proposed subsection 23G(2)].

Exceptions to Proposed Part IIIA

Proposed section 23H lists exceptions to proposed Part IIIA. Proposed Part IIIA will not apply to:

  • a contract, mortgage or guarantee under which the borrower, mortgagor or guarantor is not an individual;
  • a contract under which the borrower is borrowing for a purpose that is not wholly or predominantly a personal, domestic or household purpose;
  • a change to a contract, mortgage or guarantee where the change was a consequence of the amendments proposed by this Bill, any other Act or amendment of the agreement between the Commonwealth and Westpac; or
  • a contract, mortgage or guarantee entered into before the start of this paragraph.

Legal and Financial Assistance

Proposed section 23J provides for financial assistance for challenges under proposed sections 23A or 23F (see above). Financial assistance may be granted where the Attorney-General or an authorised person is satisfied that it would involve hardship to the applicant to refuse the application, and that, in all the circumstances, it is reasonable that the application should be granted. Assistance may be granted either unconditionally or subject to conditions.

Amendments to the Veterans' Entitlements Act 1986

Eligibility for a pension is determined having regard to the relationship between the death, injury or disease and service as a member of the Defence Force or a Peacekeeping Force. The principal effect of the amendments proposed by Schedule 2 of this Bill is to provide that where a member of the Defence Force or a Peacekeeping Force dies from an injury or disease that has already been determined to be defence or war caused, their dependants when claiming a pension will not have to re-establish the service relationship.

Section 8 of the Veterans' Entitlements Act 1986 (the Principal Act) sets out when the death of a veteran will be taken to have been 'war-caused'. The circumstances include: where the death of the veteran resulted from an occurrence that happened while the veteran was rendering operational service; the death arose out of, or was attributable to, any eligible war service; or the death resulted from an accident that occurred while the veteran was travelling to a place for the purpose of performing duty or a way from a place of duty.

Subsection 70(1) of the Principal Act provides that the Commonwealth is liable to pay the dependants of a member of the Defence Force or a Peacekeeping Force a pension where the members death was defence-caused; or to pay the member compensation where they become incapacitated from a defence-caused injury or disease.

Subsection 70(5) of the Principal Act sets out, for the purposes of pension eligibility, when the death, injury or disease of a member of the Defence Force or a Peacekeeping Force will be taken to have been 'defence-caused'. The circumstances include where the death, injury or disease arose out of, or was attributable to, any defence service or peacekeeping service of the member.

Item 1 of Schedule 2 inserts a new paragraph 8(1)(f) in the Principal Act which provides that the death of a veteran will be taken to be war-caused if the injury or disease from which he/she died is one which has already been determined to be war caused.

Item 2 of Schedule 2 inserts a new paragraph 70(5)(d) in the Principal Act which provides that the death of a member of the Defence Force or a Peacekeeping Force will be taken to be defence-caused where the injury or disease which caused the death is one which has already been determined to be defence-caused.

Item 3 of Schedule 2 inserts a new paragraph 70(5A)(d) in the Principal Act which provides that the death of a member of the Defence Force who has rendered hazardous service will be taken to be defence-caused where the injury or disease which caused the death is one which has already been determined to be defence-caused.

The amendments proposed by Schedule 2 will apply to claims made on or after 1 June 1994 (item 4 of Schedule 1).

Contact Officer and Copyright Details

Ian Ireland Ph. 06 277 2438
21 August 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
Commonwealth of Australia 1996

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 23 August 1996



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