Indonesia was last week successful in its World Trade Organisation (WTO) appeal against dumping duties imposed by Australia on Indonesian A4 copy paper.  Australia was found to have imposed dumping duties that were inconsistent with its obligations as a WTO member.  The outcome flowed from the approach adopted by the Anti-Dumping Commission (ADC) – importantly, it is the same approach adopted in respect of most dumping duties imposed on Chinese steel and aluminium products.  This means that the decision could result in Australia having to alter or re-investigate a wide range of duties.
What is dumping and why is the WTO involved?
Dumping is said to occur when an exporter exports products to Australia at prices that are lower than the “normal value”.  The “normal value” is usually the sale price of the same good in the exporter’s domestic market.  Dumping is not illegal.  However, where dumping causes material injury to an Australian industry, Australia is permitted under the rules of the WTO to impose dumping duties.
It is important that the requirements of the WTO are met as otherwise the imposition of dumping duties is in breach of the basic WTO principle that all WTO members are afforded the same duty rates (with the main exception being free trade agreements).
Australia has been a very active user of the anti-dumping system to impose dumping duties on a range of products, with the largest category being steel and aluminium products from China.  Those duties can exceed 100% of the value of the goods.
The WTO becomes involved where a country that is the target of dumping duties complains that the duties were imposed outside of the WTO rules.
How did Australia breach the WTO rules?
General approach by the ADC
When calculating dumping duties, the normal comparison is between domestic sale prices and export prices.  The idea is to identify international price discrimination.  However, where there is a “particular market situation” in the exporter’s country, the Australian Anti-Dumping Commission (ADC) adopts a different approach.  An example of a “particular market situation” is Government interference in the market for the goods, or materials used to produce the goods.  In respect to Indonesia, the ADC found that the A4 copy paper prices in Indonesia were artificially low due to Government influence on raw materials (pulp) and the provision of subsidies.
Where a particular market situation is identified, the ADC constructs a “normal value” (the comparison value) and instead of using the real cost of production, it substitutes the manufacturer’s actual material costs with what it considers to be a benchmark fair market price.  Usually this is a price based on an international index.  However, it only does this with the “normal value” and not the export price.  The export price is still the actual sale price which was naturally based on the low actual material costs.
Under this approach it is easy to find dumping, even if the real domestic sale prices and export prices are identical.  This is because half of the equation, the real domestic sale price, is replaced with a higher price based on the benchmark material costs, not the actual material costs.
Why is this in breach of WTO Rules?
Exporters are very aggrieved by this approach as they argue that if there is a Government influenced low material cost, that influence affects domestic sales and export sales identically.  As a result it is argued that it is still appropriate to compare actual sale figures and not construct an artificial, and higher, “normal value”.
The WTO held that while a low cost input can constitute a “particular market situation” and justify the use of a constructed value, this outcome is not automatic.  In each case, the ADC needs to investigate the effect of the particular market situation on the domestic price in comparison to the effect on the export price.  The WTO Panel noted that the low cost input may have a different impact in different markets.  For instance, tight competition in an export market may mean that the manufacturing saving is fully passed on, while lesser competition in the domestic market, may mean that manufacturing profits are increased.
Importantly, the WTO Panel held that if the investigating authority finds that a proper comparison between domestic and export sales is not possible, it is required to give a reasoned and adequate explanation of its conclusion.
In the Indonesian A4 paper case, the ADC didn’t even review whether a proper comparison was possible, let alone provide an explanation for its conclusion.
Implications for Indonesian A4 copy paper
The Indonesian Government has reported that Australia will not appeal the decision.  As a result, Australia now has a reasonable time to correct the dumping measures and bring them into line with the WTO Panel finding.  If Australia does not do this, Indonesia can impose retaliatory tariffs.
Implications for other dumping duties
Impact is wide
The impact of this decision will extend beyond Indonesian copy paper to all cases where the ADC has identified a particular market situation and used this finding, without further examination, to construct an inflated comparison value.  This is the case with Chinese steel and aluminium products.  Australia has for many years found that Chinese Government interference in the market for materials used for the manufacture steel and aluminium products constituted a particular market situation.  Australia has then disregarded actual Chinese domestic prices and calculated dumping margins by reference to various commodity indexes.
When doing this, the ADC has not investigated whether the low cost inputs impact Chinese domestic and export sales equally.  It may well be that the impact is equal as the competition in both markets may consist predominately of Chinese suppliers, all with access to the low cost input.  The more generic the product and the greater number of Chinese exporters, the greater the argument will be that the domestic and export prices remain comparable and dumping duties incorrectly imposed.
Existing measures
If Australia accepts the finding of the WTO Panel, and wishes to be a compliant WTO member, it should voluntarily review all past investigations that have used a constructed normal value and assess whether that approach was in accordance with WTO requirements.  This could result in the assessment of reduced dumping margins, or even the finding that there was no dumping.
China was a third party to the WTO proceeding and would be keenly aware of the outcome.  Australia will know that if China is so minded, it will have the ability to bring a successful WTO proceeding.  In this context, it is considered likely that China and Australia will reach a resolution regarding how Australia can bring its existing measures relating to Chinese exports in-line with WTO requirements.
Future reviews and investigations
Exporters and importers involved in future investigations need to fully understand the impact of this case and what is now required of the ADC.
Exporters faced with a finding of a particular market situation should, where appropriate, make a submission regarding the extent to which that situation impacts domestic sales and exports equally.  Doing this in a convincing manner could be the difference between an investigation being terminated with no duties, or the imposition of significant, supply chain ending, dumping duties.
To discuss the impact of this WTO Panel decision and any other dumping or countervailing duty matters, please contact Russell Wiese.
Australian loses WTO dumping dispute – implications for a range of Australian dumping duties | Hunt & Hunt Lawyers

The new Local Government Bill 2019 was introduced into Victorian parliament in mid-November, with the aim of modernising local government regulation.
It closely reflects the reforms contained in the Local Government Bill 2018 which lapsed last year when the State election was called.
From an employment law perspective, key changes include the streamlining of the engagement of senior officers.  The red tape relating to senior officer appointments that appears in the current 1989 legislation has simply been removed.
The new legislation will require Councils to introduce CEO Employment and Remuneration Policies consistent with the Government of Victoria’s Policy on Executive Remuneration in Public Entities.  This is intended to:

ensure CEO salaries and allowances align with existing State Government policies for public sector executives; and
require Councils to obtain independent professional advice on CEO appointments.

Councils will need to adopt a CEO Employment and Remuneration Policy within six months of the commencement of the new Act.
The reforms also cover other Council functions, including the introduction of mandatory training for council election candidates and councillors.
Hunt & Hunt’s Managing Principal, Tony Raunic, routinely provides induction training for new councillors and update training for councillors and council officers on their statutory obligations relating to issues such as conflict of interests, misuse of position, gifts and hospitality.
For further information or assistance with employment law matters, please contact David Thompson or Richard Scougall on 8602 9252.
New Local Government Legislation introduced to Victorian Parliament set to Change CEO Policies | Hunt & Hunt Lawyers

It is common to now see wording at the footer of an email that claims all business is according to the sender’s terms and conditions of trade.  We are often asked whether this wording to mean that the sender’s terms and conditions form part of the contract between the email sender and the recipient. The County Court of Victoria ruled on this issue in a recent case involving an Australian freight forwarder and its customer.  The outcome – email footers can act to incorporate the senders terms and conditions into the contract.
Key takeaways

Email footers can on their own be sufficient to bind the recipient to the sender’s terms and conditions.
An important issue will be whether the emails were contractual documents. If they are, the whole of the email is the relevant document, including the footer
Email footers will be most effective where they specifically refer to limitations of liability or other onerous clauses
avoid the unintended operation of email footers by expressly rejecting terms and conditions by return email and/or having the agreement set out in a signed agreement

Technology Swiss Pty Ltd v Famous Pacific Shipping (Vic) Pty Ltd [2019]
The facts of the case are relatively simple.  Technology Swiss required equipment to be transported from Australia to Thailand and engaged Famous Pacific Shipping to do so.  Famous did not correctly secure the freight, it was damaged during transport and could later only be sold as scrap.  Famous was liable to Technology Swiss unless the parties had contractually agreed otherwise.
While Famous had standard terms and conditions, it had not provided these to Technology Swiss and the parties had not signed any documents relating to the services.  There was agreement between the parties that an email From Famous providing a quote (Quote Email), and the subsequent reply from Technology Swiss formed part of the written contract between the parties.  The Quote Email, and all other emails sent by Famous, included the following footer:
“All business transacted is subject to the company’s Standard Trading conditions of Contract, a copy of which is available on request and which, in certain circumstances, exclude the Company’s liability and include indemnities which benefit the Company” (Email Footer)
The body of the Quote Email also included the line:
‘The above is subject to the following:
Fps standard trading terms and conditions” (Additional Reference)
Arguments for ignoring the Email Footer
Technology Swiss argued that the Email footer should be given no weight as a reasonable business person would be unlikely to read or take any notice of the sentence because of its location, it was in all correspondence and its wording was vague and generic.
Further, Technology Swiss noted that the Email Footer did not state where the terms and conditions could be inspected or whether they were accessible via Famous’ website.  Technology Swiss submitted that there should have at least been a link to the terms and conditions in the Email Footer.
Court rules that the email footer formed part of the contract
The Court held that the wording of the Email Footer could not have been clearer and that Technology Swiss elected to take a commercial risk in contracting without reviewing those terms and conditions.  This risk could be clearly understood as the Email Footer did refer to the terms and conditions having the effect of limiting Famous’ liability.
The Court saw no justification in ignoring the Email Footer simply because of its location, especially due to the Additional Reference.  The Court also could see no reason to dismiss the Email Footer due to its “generic language”.  As for its repetition, the Court felt that this actually strengthened the position of Famous.
An argument was put forward that the terms were so onerous that no one would anticipate them to form part of the commercial contract.  The Court held that onerous exclusion clauses were standard in shipping contracts. However, it should be noted that the Court did interpret the exclusion clause in a way that favoured the shipper and had the effect that the exclusion clause was not particularly onerous.
Ultimately the Court held that the Famous terms and conditions did form part of the contract between the parties.  Unfortunately the decision does not make clear the extent to which the Additional Reference was important.
Other issues – Issuing of the house bill of lading
The email footer issue may not have been significant if Famous could have relied on the terms of its house bill of lading.  Most BOLs include terms that expressly limit liability and also act as a shipping document with the effect that liability is limited under international conventions.
In this case Famous provided Technology Swiss with the front page of its house BOL 6 days after the vessel carrying the goods had departed.  The house BOL referred to the “terms overleaf”.  However, only the front page of the BOL was provided and not the back page with the “terms overleaf”.
The Court held that the terms of the BOL did not form part of the contract for the following reasons:

the actual “terms overleaf” were not provided to Technology Swiss and it was not incumbent on Technology Swiss to seek out those terms;
it was reasonable for Technology Swiss to assume that the “terms overleaf” were the same as the Famous standard terms and conditions; and
the house BOL was provided after the contract had already been concluded and the goods had been shipped.

An argument was put by Famous that the terms of the BOL were incorporated by operation of Famous’ standard terms and conditions which stated that any terms of a BOL issued by or on behalf of Famous would take priority over its standard term and conditions.  This argument was rejected by the Court.  One of the reasons was the that house BOL was not clearly issued by the defendant (Famous Pacific Lines (Vic) Pty Ltd).  This was because the house BOL simply described the carrier as “Famous Shipping Lines”.  The Court held that it could not be determined that “Famous Shipping Lines” was the alter ego of the defendant.  As a result, the house BOL was not taken to be a BOL issued by Famous.
Ultimately the Court held that the contract was formed in October 2014 and Famous did not have the right to unilaterally alter the terms and conditions by issuing a house BOL after the goods had been shipped in December 2014.
Application of the Famous terms and conditions
While Famous was successful in its argument that it terms and condition applied, the application of those terms and conditions did not go entirely as it would have hoped.  The terms and conditions had the expected clauses limiting liability for loss or damage to a small portion of the value of the goods.  However, the terms and conditions contained an additional clause that expressly stated that compensation shall be calculated by reference to the invoice value of the goods plus freight and insurance (Invoice Value Clause).  This clause was directly contrary to the other clauses that drastically limited Famous’ liability and the clause seems to have the purpose of calculating the value of goods, not the liability limits.
Standard exclusions of liability make “commercial nonsense”
There was much argument concerning the construction of the contract.  In finding that the Invoice Value Clause set a higher liability limit the Court noted:

the contract must be interpreted so as to avoid making commercial nonsense;
limiting liability as argued by Famous (about 3% of the invoice value of the goods) would make commercial nonsense.

This is a significant finding as most transport contracts seek to significantly limit liability of the service provider or carrier.  If these limitations of liability do in fact make commercial nonsense it will be crucial for the service provider to obtain written acceptance of the terms.
A Court is likely to look hard for reasons to prevent a freight forwarder escaping liability for their negligence and this can include unfavourable interpretation of any vague provisions of a contract.
Exclusion of consequential loss (loss of profit, storage, delay)
The Court was, however, prepared to accept a limitation of liability that capped loss at the value of the goods plus freight.  This effectively capped liability for pure economic loss, loss of profit, delay and deviation.    In this case the costs of related legal expenses and storage exceeded $400,000 and were effectively excluded.
Lessons for freight forwarders

Incorporate a standard email footer that refers to your terms and conditions and draws specific attention to limitations of liability
Provide the terms of the BOL before the goods have shipped
Make sure your house BOL correctly identifies your company and does not use the trading name of the global group
Have your terms and conditions accepted in writing. This will avoid arguments regarding the application of onerous exclusion clauses
Have your terms and conditions reviewed to ensure the limitation of liability clause effectively work together

Please contact us to discuss your use of email footers and how you contract with your customers or service providers.
 
Fine print at the footer of an email – When it forms parts of the contract | Hunt & Hunt Lawyers

This article is an extract of an article that first appeared in the Autumn 2019 edition of Across Borders which can be found here
There is nothing like a trade war to motivate customs duty evasion. Suppliers are desperate for their sales not to be damaged by increased duty rates. Suppliers come up with a range of solutions for their importing customers. Below we set out some common tactics and the associated risks.
The shelf company
Under this tactic, goods subject to high duty rates are deliberately reported as a different kind of good and imported by a $1 shelf company. The tactic isn’t clever, the plan simply being that if the deliberate non-compliance is detected, the liable party will be a shelf company that can be wound up at little cost.
There are some basic problems with this approach. Firstly, the individuals that act to facilitate the non-compliance can be charged with aiding and abetting the shelf-company in its non-compliance. If that person is a director, deliberately engaging in tax avoidance may amount to a breach of his or her directors duties.
If the shelf-company on-sells the goods to a related company, that related company may be deemed to be in possession of the goods and liable to pay the underpaid duty by this reason alone.
Transshipment
Under this approach goods made in a country subject to high dumping duty, such as China, are ordered by an Australian company and rather than being shipped direct from China, the goods are transshipped to a third country and then disguised as the goods of that country. This includes new commercial documents and even Government issued certificates of origin.
The Australian Border Force is aware of this tactic and will investigate whether the supposed third country manufacturer exists. It is not unheard of for the investigators to find a vacant block at the location of a supposed factory.
Transshipment does not prevent goods being categorised as having been exported from China to Australia. It just makes the export harder to detect. To facilitate the deception the importer needs to falsely declare the country of origin and the identity of the supplier. In doing so, the importer exposes themselves to strict liability for making a false statement resulting in an underpayment of duty and obtaining a financial advantage by deception.
Again, the underpayment of duty will follow the goods. As the ultimate purchaser of the goods, there is no way to wash your hands of the duty consequences.
Invoice splitting
Often it is only one part of the consignment that attracts high duty. For instance, where the goods are used to mount solar panels on roof, the component that attracts dumping duty may be the rails, but associated clamps may be duty free. A supplier will be tempted to produce invoices for customs purposes that greatly inflate the value of the clamps and has a corresponding reduction in the value of the rails.
The ABF audits many legitimate importers and has a lot of intelligence as to the value of common imports. Invoice splitting will be easy to detect if the relevant imports are the subject of an audit. Where the invoices have been manipulated, the ABF can disregard the invoice value in determining the customs value of the goods. The ABF can determine the value by reference to the price of similar goods, or by the Australian sale price of the goods (less certain post importation costs).
Test imports
We have heard reports of exporters offering to sell the goods on the basis that liability for dumping duty will not be declared and if the import is detected by the ABF, the import will be abandoned with the exporter paying the costs of export to a third country.
There is nothing illegal in agreeing that a supplier will pay the costs of re-exporting goods if the importer no longer wants to import them. The problem exists from what happens if the goods are not detected at the time of import. In this scenario the goods will be imported with dumping duty being deliberately underpaid. The underpayment will have resulted from falsely describing the goods or incorrectly claiming that they are subject to an exemption.
Unless the importer is upfront about the potential dumping duty (such as via an amber line entry), this approach is no different than simply making false statements. Agreeing to not import the goods if you are caught will not be much of a defence if you appear before a Court.
Supplier as the importer
Under this approach, the supply of the goods occurs as a domestic sale in Australia. The overseas supplier is both the exporter and the importer. If the overseas supplier makes the relevant declarations to the ABF, it will be the entity that would be subject to any fines that are payable.
The overseas supplier will also be first in the ABF’s firing line if there is any underpayment of duty. However, first in line is not the same as being the only one on the line. Australian case law shows that if there is an underpayment of duty, the ABF can pursue that duty from the Australian customer, even if that customer had no involvement in the import and was unaware of the duty avoidance.
When the choices are between an Australian resident company and a foreign supplier, its easy to guess who the ABF debt collection team would prefer to pursue.
What are the risks?
The risks start at liability for the underpaid duty and GST and go up from there. In respect of underpaid duty, the ABF can base its demand on the past 4 years of imports. It can go back further if there is evidence of deliberate avoidance of duty. We have seen multi-million dollar demands made by the ABF.
Where the ABF can prove deliberate duty avoidance, the minimum penalty a Court can hand down is 2 times the underpaid duty, the maximum is 5 times the underpaid duty.
Even if the offence is merely a non-deliberate false statement, the maximum penalty is an amount equal to the underpaid duty.
However, the ABF does not have to trouble the Director of Public Prosecutions and take the importer to Court. Rather, the ABF can issue infringement notices of an amount equal to 75% of the underpaid duty without needing to prove a single allegation.
Put simply, if caught, you can expect to pay the underpaid duty plus at least 75% extra.
This is just the financial penalties, it does not take into account the impact on your supply chain of increased levels of compliance activity.
While all of the above is scary, if there is deliberate avoidance of a large amount of duty, the Commonwealth may chose a criminal, rather than customs, prosecution. This means that a penalty option is a jail sentence.
What now
Importers should not believe in an offer that is too good to be true. These offers all rely on non-compliance not being detected and leave the importer greatly exposed when the inevitable happens.
If you believe that you may have been involved in past non-compliance, there are significant benefits associated with voluntary disclosure. For a start, the ABF will not be able to issue infringement notices. More importantly, the ABF mindset is very different for importers who are voluntarily seeking to improve compliance. If non-compliance is detected in an audit, it is very hard to have the ABF, or a Court, see you in a positive light.
Please contact Russell Wiese ([email protected]) for assistance with managing customs compliance and rising rates of dumping duty.

Importers/customs brokers – Customs duty evasion tactics to watch out for | Hunt & Hunt Lawyers

Some sad news; last night Ian Hunt passed away. He was 94 and our oldest employee.
Ian joined Hunt & Hunt on his return from serving overseas in the Royal Australian Airforce during the Second World War. He was admitted to practice as a solicitor on 5 May 1950, 69 years ago.
Ian has served the firm, its clients and the community throughout his working life.
Ian’s incredible life of service to the community was recognised in the Queen’s Birthday Honours in June 2002 when he was awarded the Order of Australia Medal. The citation reads:
“For service to the community through a range of church, health care, social welfare and aged care organisations.”
On behalf of all the partners and staff, we extend to his daughter Barbie, brother David Hunt, and all the Hunt family our deepest sympathy and thanks for the life and work of Ian Sinclair Hunt.
Ian Sinclair Hunt | Hunt & Hunt Lawyers

If you are the executor or beneficiary of an estate and you are struggling to sell the deceased’s main residence for reasons out of your control, then the Australian Taxation Office (“ATO”) Practical Compliance Guideline PCG 2019/5 (“Guideline”) might be of interest to you.
The ATO has recently released Practical Compliance Guideline PCG 2019/5 which sets out a “safe harbour” for executors and beneficiaries if the deceased’s main residence or pre-capital gains tax dwelling is sold more than two years after the deceased’s death.
Background
Generally, capital gains tax (“CGT”) is not payable in relation to the sale of a dwelling that was the deceased’s main residence (and not used to produce assessable income at the time of the deceased’s death) or a dwelling that was acquired by the deceased before 20 September 1985 if it is sold by the executor or beneficiary of the dwelling within two years of the deceased’s death. It is important to keep in mind that ‘sold’ means that ownership of the dwelling must have changed within two years; the date of settlement or completion of the sale is relevant, not the date of the contract for sale.
ATO Discretion and Guideline
Under the CGT rules, the Commissioner of Taxation has a discretion to extend the two-year period during which the executor or beneficiary must sell the main residence or the pre-CGT dwelling. Under the Guideline, it is no longer necessary to apply to the Commissioner for the discretion to be exercised. If the executor or beneficiary has complied with the safe harbour compliance rules set out in the Guideline, the executor or beneficiary can manage their tax affairs as if the Commissioner had exercised the discretion to extend the two-year period by up to 18 months.
Safe Harbour Rule
To rely on the safe harbour rule, you must meet all of the following conditions:

During the first two years after the deceased’s death, more than 12 months was spent addressing at least one of the following:

a challenge to the ownership of the dwelling; or
a challenge to the deceased’s will; or
a life or other equitable interest given in the will delays the sale of the dwelling; or
delays caused by the complexity of the deceased estate; or
settlement of the contract falls through or is delayed for reasons out of your control.

The dwelling was listed for sale as soon as practically possible after the circumstances preventing the sale were resolved and the sale was then actively managed until settlement.
The sale completed within 12 months of the dwelling being listed for sale.
None of the following were material reasons for the delay in selling the dwelling:

waiting for the property market to improve;
delays due to refurbishment to improve the sale price;
inconvenience in arranging the sale; or
unexplained periods of inactivity by the executor in administering the estate.

The additional period in which the sale occurs is no longer than 18 months after the initial two-year period.

Record Keeping
As it is possible that the ATO will conduct a compliance check, you should maintain records to show the relevant conditions were met.
What happens if the Safe Harbour Rules are not met?
If the circumstances of the case fall outside the safe harbour rule you can apply for a private ruling for the Commissioner to exercise the discretion to extend the two-year period. This will involve the Commissioner considering all the facts and circumstances of the case, including those that may be in favour of or against allowing an extension.
Other relevant factors the Commissioner may take into account when exercising the discretion include:

the sensitivity of your personal circumstances and/or of other surviving relatives of the deceased;
the degree of difficulty in locating all beneficiaries required to prove the will;
any period the dwelling was used to produce assessable income; and
the length of time you held the ownership interest in the dwelling.

The ATO stresses that the circumstances that caused the delay beyond the two-year period are more important than the length of the delay. The ATO will not grant any extension of time if there are no relevant favourable factors present that led to the delay.
If you are an executor or beneficiary and you are unsure whether you comply with the safe harbour rule, please contact us. Our experienced Wills & Estate Law Team will be able to assist you with this or any other question.
Deceased Estates: Can I sell two years later and not pay Capital Gains Tax? | Hunt & Hunt Lawyers

From 11-13 October 2019, the Penny Arcade Expo Australia (PAX Aus) will take place in Melbourne.
Our team will take part by hosting a panel on Startups and Indie-Developers in the Gaming industry entitled, ‘Game to Reality: Funding the Dream’.
Hosting the event is Hunt & Hunt Associate, Nicholas Commins, who will be joined by various experts to discuss the common issues faced by startups and developers in the diverse area of game development, including funding and legal issues. The panel will take live questions – it’s a great opportunity to get your burning questions answered!
Speakers include Nicole Butler (Senior Associate, Hunt & Hunt), Lucy Hughes (Deals Manager, PwC), Shannon Kelly (Foxtale Games), and Chris Charla (ID@Xbox Director).
The panel will take place in the Galah Theatre (Level 2, MCEC) at 10:30 am Friday 11 October 2019.
What does Hunt & Hunt do in the games industry?
Event information
10.30 am, Friday 10 October
Melbourne Convention Centre, Galah Theatre, Melbourne, Victoria
https://aus.paxsite.com/schedule/panel/game-to-reality-funding-the-dream

Enquiries
[email protected]
See us at PAX Aus | Hunt & Hunt Lawyers

You may have read recently about some of the real concerns regarding Identity theft. The ABC has published an interesting article discussing the dangers of fraudsters acquiring your Driver’s licence and the difficulty of repairing the damage.
The loss or theft of a major piece of identification, such as those worth more than 30 points in the ‘100 point’ system, is a serious issue. Not just because a fraudster might attempt to use your details in the near future, but because your personal information could be traded and used indefinitely. While you might be able to change your passport or driver’s licence, you cannot change your date of birth or any biometric data.
Generally, we are good at looking after physical versions of our important identity documents – rarely do we lose our passports or licences unless they are stolen. But what about the people or businesses who hold copies of these documents? Do they need to have copies of these documents, and if so, how are they keeping them safe?
As we discuss in our earlier article, businesses which are subject to the Australian Privacy Principles (APPs) have specific requirements regarding, among other things, the security of personal information. Importantly, APP 11 requires that if a business no longer needs the information (and is not required to be kept due to law), the business must take reasonable steps to destroy the information or otherwise de-identify it.
In practice, many businesses appear to keep this information for ‘convenience’ or misunderstand how a person’s personal information may be used and disclosed. Remember, if personal information has been collected on a specific basis (for example, by scanning your ID to verify your age when entering say a pub) then it cannot be used for another purpose without your consent. If that purpose is now redundant or has been fulfilled, the personal information must be destroyed.
If any of these questions has you thinking: “I want to check on the businesses I’ve given my identity documents to”, or “I should check what identity documents my business holds and why”, then its time for a privacy check-up.
Privacy Check-up for your Business or Person – Identity Documents
For the individual:
Who have I given my identity documents to?
For example: did I give my driver’s licence to my bank to open an account?
Did I give my driver’s licence to a rental company for that weekend away?
What about my real estate agent when I applied for a rental property?
If I have given my identity documents to someone… do they still hold a copy of them?
Under APP 12 an individual has the right to request that a business (that is subject to the APPs) provide the person with access to their personal information held by the business.
In effect this means a business must confirm what information they hold about you. You can also request the information be corrected under APP 13.
If yes, should they still have it?
On what basis was your personal information collected? A good place to start is the business’s Privacy Policy, or if they have given you an information collection notice. This then becomes an exercise in comparison – if the business is holding your information but has no legal basis to use it, they cannot continue to hold it.
If a business still holds my personal information but has no legal basis, what can I do?
While the APPs do not state that a person has the right to request the information be deleted, this obligation is implied by APP 11. As such, if after speaking with the business they refuse to remove your information (remembering you can always confirm what they hold about you) and you believe they should, you can complain to the Office of the Australian Information Commissioner.
For a business:
What personal information do we collect?
This question often involves a detailed review of your information collection process.
For example: do you only collect information from a customer when they fill in an application form? Or, do you routinely collect additional information from the customer by asking them to give you more details (for example their preferences for goods and services, or additional contact details).
What do our Privacy Documents say about using personal information?

Your privacy policy for example will need to clearly set out when you collect, use and disclose personal information. Vague statements should be clarified and remember: the APPs require your Privacy Policy is current and up-to-date.
Does our privacy policy and any personal information collection notices (Privacy Documents) mirror our collection practices?
If not, these important legal documents will need an update, or you may need to change your practices.
Do we still have a valid “use” for a person’s personal information, or have we obtained the person’s consent for further use
If not, you will need to delete or de-identify this information. Remember: even de-identifying information can be problematic – if de-identified information is paired with other information and allows a person to be identified, then it still counts as personal information and the rules regarding its use, disclosure and security apply.
Do we have a robust and efficient method of allowing people to access their personal information?
If someone reads this article and contacts you, are you able to give them what they are seeking without investing precious time and resources to accommodate their legitimate request?
Have we reviewed our security methods (both physical, and technological) that protect the personal information we hold?
If you are a business and are not sure about any of these questions, you should seek professional advice. The Hunt & Hunt privacy team are experts and able to give you detailed advice and practical steps to make sure your business is compliant and keeps its information safe.
 
Author: Nicholas Commins, Associate
Privacy Update: Where Oh Where is my Driver’s Licence? | Hunt & Hunt Lawyers

The Senate voted in Federal Parliament on Monday night (16 September) to defeat an ALP motion to disallow the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (“Regulations”). The regulations are designed to assist employers in opposing claims made by casual employees for payment of annual and other leave entitlements under the National Employment Standards (“NES”).
The introduction of the Regulations last December was driven by a decision of the Full Federal Court on 16 August 2018 in WorkPac Pty Ltd v. Skene [2018] FCAFC 131. In that case, the Court found that a former casual employee of WorkPac was an employee entitled to annual leave payments under the NES. One of the reasons for the finding was the casual employee’s regular pattern of hours and expectation of continuing work.
As a result of this decision, the then Minister for Jobs and Industrial Relations Kelly O’Dwyer announced the introduction of the Regulations. The key concern following the Skene decision was the potential for “double-dipping” of entitlements.
“Double-dipping” could occur where an employee has been employed as a casual and paid casual loading (usually 25%) to compensate them for non-accrual and payment of leave entitlements. But, if the employee was then found to be “an employee other than a casual employee” under the NES, this allowed them to receive these leave entitlements for which they had already been compensated for by being paid a casual leave loading.
Where a claim is made by a casual employee for payment of NES leave entitlements, the Regulations allow the employer to apply to have the casual loading amount taken into account when determining the amount payable. This allows the employer to offset the casual loading previously paid against any leave entitlements found to be owing.
In recent months, class actions have already been issued by the Construction Forestry Maritime Mining And Energy Union and various plaintiff law firms against employers claiming large sums of money in unpaid annual leave entitlements for casual employees. These claims had the potential to have a major impact on the bottom line and, in some cases, the viability of many businesses, had the Regulations been disallowed. The Regulations now continue to operate.
Hunt & Hunt’s Employment Law team can assist you in ensuring any claims under the NES are accurately reviewed and calculated in the event it is found that the employee was an employee other than a casual employee. Contact David Thompson, Principal, for further advice.
Casual Loading & ‘Double-Dipping’ Win for Employers | Hunt & Hunt Lawyers

Hunt & Hunt Senior Associate Daniel Murray has been selected as an Australia China Business Council NSW Young Professional Ambassador for 2019-20.
The Young Professional Ambassadors program is a year-long program designed to help young professionals enhance their professional profiles and advance their leadership capabilities through learning, networking and access to leadership and career development opportunities.
ACBC is a membership-based, non-profit, non-governmental organisation comprised of National Office, eight Branches, and more than 1500 representatives from over 900 Australian companies who do business with China which seeks to actively promote two-way trade and investment, and economic cooperation and understanding, between the business communities of Australia and China.
“I would like to congratulate Daniel on his appointment,” said Hunt & Hunt NSW Managing Director, Jim Harrowell AM. “This further cements the firm’s very strong relationship with the Chinese business community.”
Jim recently toured provinces in China with her Excellency the Honourable Margaret Beazley AO QC, Governor of New South Wales, on a Vice Regal Mission.
Daniel joined Hunt & Hunt in 2015 and is a member of our Property team in the Sydney office.
Hunt & Hunt in China
In 1987, Hunt & Hunt became one of the first foreign law firms to enter the Chinese market. Since then, our experience, community ties and relationships have continued to strengthen and grow.
We have a clear understanding of the Chinese business environment and can help with the commercial and legal aspects of doing business in China. We have assisted investors from China in working through government processes, conducting due diligence on projects and advising on investment policies and procedures.
Are you involved in a Chinese dispute or looking to set up business operations in China? Our China Advisory Lawyers can help. 
Daniel Murray selected as an Australia China Business Council NSW Young Professional Ambassador | Hunt & Hunt Lawyers

Hunt & Hunt Managing Partner Jim Harrowell AM accompanied Her Excellency the Honourable Margaret Beazley AO QC, Governor of New South Wales, as part of the delegation on a Vice Regal Mission to the People’s Republic of China.
The visit marks the 40th anniversary of the Sister-State relationship between New South Wales and Guangdong Province, reinforces the important relationship between China and New South Wales, and shows support for the NSW-Guangdong Joint Economic Meeting to be held in Sydney in October.
Jim attended the trip in his role as the NSW Special Envoy to China. In this role, Jim provides advice and assistance to the Premier of NSW, the Minister for Trade and various New South Wales Department and Agencies on engaging with China to develop two-way trade and investment.
During the trip, Governor Beazley undertook high-level meetings with His Excellency Mr Ma Xingrui, Governor of Guangdong; Mr Chen Rugi, Mayor and Secretary of the Party Leadership Group of the Shenzhen Municipal People’s Government; as well as numerous Australian and Chinese business people in Guangzhou and Shenzhen.
The Governor’s visit to China underlines the important bilateral relationship between Guangdong and New South Wales.

Hunt & Hunt in China
In 1987, Hunt & Hunt became one of the first foreign law firms to enter the Chinese market. Since then, our experience, community ties and relationships have continued to strengthen and grow.
We have a clear understanding of the Chinese business environment and can help with the commercial and legal aspects of doing business in China.
We have assisted investors from China in working through government processes, conducting due diligence on projects and advising on investment policies and procedures.
Are you involved in a Chinese dispute or looking to set up business operations in China? Our China Advisory Lawyers can help.
Jim Harrowell accompanies Governor of NSW on mission to China | Hunt & Hunt Lawyers

Recently there has been a lot of discussion in the media regarding Australia’s use of Electric Vehicles (EVs), particularly in the lead up to the last election. Some have even suggested that the development of EVs could support a further mining boom in Australia for products such as lithium.
According to the Electric Vehicle Council of Australia there were 2,284 EVs (hybrid and battery-only vehicles) sold in Australia in 2017 – 0.2% of new car sales in Australia. Two thirds of Australians will be driving electric cars within the next 10 years according to Jaguar. And, it looks like 2019 is shaping up to be a big year for EVs with Hyundai, Kia, Nissan, Audi and Mercedes Benz all set to release new vehicles into the Australian market.
Most EVs require their batteries to be charged by an external source, usually a charging station. Currently in Australia there are approximately 800 charging stations, with Victoria leading the way followed by NSW and Queensland.
Charging Along the Way
What could the increased presence of EVs on the road mean for your business?
Those travelling long distances will no longer only stop for fuel at traditional service stations along the route but will stop their vehicles. This could mean a new ‘captive audience’ for businesses offering charging stations.
In August 2018, the State Environmental Planning Policy (Infrastructure) 2007 (Infrastructure SEPP) was amended to allow for the development of charging stations by any person on certain land that adjoins a public road with consent from local council. This will allow charging stations to be developed in more areas than previously – helping businesses attract passing traffic while also increasing the business’ green initiatives.
The Evolution of the Traditional Service Station
Is your business already a traditional service station, highway service centre, or car washing facility? Have you thought about diversifying your business by providing access to EV chargers? Do you want to increase your green initiatives?
The amendments to the Infrastructure SEPP also allow for charging stations to be development on land adjoining a public road in any zone where the land is an existing service station, highway service centre, or car washing facility, with consent of local council.
Are you located on a major route? This could be a major opportunity for your business. Have you been thinking about the possibility of installing a charging station but now sure about what approvals are necessary?
This increased diversification of the automotive market is bringing endless opportunities for many Australian businesses and landowners. With so many opportunities and avenues to explore, it’s important to be aware of the risks along the way and to ensure you have the correct consents in place.
Do you need specific advice in relation to planning controls for EV charging stations and associated infrastructure? Our planning and environment team has specific expertise – contact us.
Flicking the Switch: Electric Vehicles offer new Opportunities | Hunt & Hunt Lawyers

Since the beginning of the new financial year, there have been many industry changing developments in the banking sector. Implementation of the recommendations of the Royal Commission in to Banking Industry are well underway, and the Court threw a spanner in the works at ASIC in the Westpac case, throwing industry guidelines into responsible lending into turmoil.
ASIC have also been busy, moving to ban unsolicited sales of life insurance and severely limiting marketing and offering consumer credit insurance, as well as moving against short term lenders with the new Product Intervention Powers.
Many of these developments are ongoing, and it will be interesting to watch as they continue to evolve.
This edition provides a brief snapshot as to the current state of developments. We will continue to provide in-depth analysis as these issues evolve, however please don’t hesitate to contact us if you require any further information.
In this edition:
1. APRA fines Westpac $1.5 million for late filing of returns.
2. AFCA Statements of Approach on various topics
3. Cash Transactions for more than $10,000 in aggregate to be criminalised from 1 January 2020 for businesses
4. ASIC consults on how to exercise its new Product Intervention Powers
5. ASIC’s inaugural use of its Product Intervention Powers – Blitzes a lender engaging in dodgy lending
6. ASIC still unhappy about Consumer Credit Insurance (CCI) – will ASIC intervene?
7. ASIC moves to ban unsolicited telephone sales of direct life insurance and consumer credit insurance
8. Reforms to Debt Administration Agreements showing potential to reshape the debt administration industry
9. Responsible Lending guidance in turmoil following decision by the Federal Court in the Westpac case
10. ASIC Issues an Enforcement Update for the first half of 2019
11. House of Representatives Standing Committee on Economics to inquire into progress made by relevant financial institutions in implementing the recommendations of the Royal Commission
12. Open Banking Laws are finally passed by parliament
13. Legislative Agenda for implementation of the recommendations of the Royal Commission released
14. Extending Unfair Contracts Terms to insurance contracts
15. The Bill to abolish Grandfathered Commission Arrangements introduced to Parliament and ASIC investigates
16. Draft Legislation released to implement mortgage broker recommendations made by the Banking Royal Commission
17. AFCA now has power to “name and shame” Financial Firms” involved in complaints.
18. Scope of Referrer Exemption – ASIC takes National Australia Bank to court
19. ASIC releases its Corporate Plan for 2019 to 2023
 
1. APRA fines Westpac $1.5 million for late filing of returns.
In a sign that APRA is taking a tougher approach with institutions under its supervision, on 8 August APRA announced that it had issued infringement notices on Westpac Banking Corporation (Westpac) and two of its subsidiaries for failing to meet their legal obligations to report data to APRA under the Financial Sector (Collection of Data) Act 2001 by the relevant deadlines.
2. AFCA Statements of Approach on various topics
Any Financial Firm that has a complaint referred to the Australian Financial Complaints Authority (AFCA) needs to be aware of the guiding principles that AFCA follows in dealing with complaints. AFCA continues to update guidance notes previously issued by its predecessor FOS.
These can be viewed on the AFCA website. AFCA Approach documents that are particularly important to note include:

Financial difficulty series – our power to vary credit contracts
Financial difficulty series – dealing with common financial difficulty issues
Mortgagee sales

And another hot topic one at present – Financial elder abuse
One notable omission is the guidance previously issued by FOS on the topic of Responsible Lending. No doubt this guidance note will be incorporated after the current ASIC review of responsible lending is concluded and RG 209 updated. Still, the FOS guide on approach to responsible lending is useful to refer to in the interim.
3. Cash Transactions for more than $10,000 in aggregate to be criminalised from 1 January 2020 for businesses
On 26 July 2019, the Government released an exposure draft of the Currency (Restrictions on use of Cash) Bill 2019 the Use of Cash) Bill 2019 and a proposed exemptions Instrument for public consultation.
If enacted, it is proposed that the new laws will apply to general businesses from 1 January 2020 and certain AUSTRAC reporting entities from 1 January 2021.
Importantly, the new laws will not affect authorised deposit taking institutions (ADIs) who will continue to report under existing AUSTRAC rules.
Treasury has provided a useful summary as to how the new prohibition will work:
What transactions are covered by the cash payment limit?
The limit applies to all cash transactions equal to or in excess of $10,000, except for those that meet the conditions specified in the draft Currency (Restrictions on the Use of Cash—Excepted Transactions) Instrument 2019.
What are examples of exempt transactions?
All cash deposits and withdrawals from your bank account with an authorised deposit-taking institution (ADI), exchanging foreign currency and all consumer to consumer transactions such as selling a second-hand car but excluding real property transactions.
What happens if you break the limit?
From 1 January 2020 it will be a criminal offence to make or accept a payment from businesses that includes $10,000 or more of cash. It is also offence to make or accept a cash donation equal to or in excess of $10,000. The maximum penalty is up to two years imprisonment and/or 120 penalty units ($25,200).
How does the cash payment limit apply to payment plans?
The cash payment limit will apply to the total price of a single supply of goods or services, regardless of whether the price is split into a series of payments over time.
4. ASIC consults on how to exercise its new Product Intervention Powers
In August 2018 we analysed the then proposed new Product Intervention Powers  to be granted to ASIC. The legislation was passed by Parliament and is now law.
ASIC has recently consulted as to how it proposes to exercise its powers – refer CP 313 issued in late June 2019. The consultation period only recently ended on 7 August.
Two issues we noted when reading the consultation paper were:

ASIC is required to consult with “affected parties”. It proposes to do so, not directly but by publishing a consultation paper!
Two examples were given of circumstances in which ASIC might have used its product intervention powers, one of which related to automatic rollover of term deposit. This demonstrates that the power can and will be used against mainstream lenders, not only just fringe lenders.

A draft regulatory guide is attached to the consultation paper.
5. ASIC’s inaugural use of its Product Intervention Powers – Blitzes a lender engaging in dodgy lending
ASIC didn’t even wait until the consultation period on how to exercise its new Product Intervention Powers had ended before it actually exercised its power in relation to a particularly objectionable lending operation. Mind you we don’t blame them – we thought these types of lending practices had ceased over a decade ago.
On 7 July 2019, ASIC released a consultation paper (CP 316) on the first proposed use of its new product intervention power. In the words of ASIC – “On this inaugural occasion, ASIC is looking to address significant consumer detriment in the short term credit industry”
ASIC has been ‘gunning’ for this lending model for a while.  ASIC took another lender (Teleloans Pty Ltd) using this model to the Federal Court back in 2018 but unfortunately lost. However, ASIC might have lost the battle but it appears it won the war – Teleloans Pty Ltd was deregistered as a company on 18 June 2019.

Case study 1: Impact of default fees

Consumer A was on a Centrelink Newstart allowance when she obtained short term credit through Cigno for $120.
Under the contract:
• Cigno charged a $90 financial supply fee;
• Cigno charged $5.95 in weekly account keeping fees;
• GSSF charged a credit fee of $6; and
• the total amount to be repaid was $263.60, by four fortnightly payments of $66 (with the fourth payment being $65.60).
Consumer A could not afford the repayments and immediately defaulted. She was charged various dishonour fees and ongoing weekly account-keeping fees. As a result, Consumer A became liable to repay $1,189 on the original amount of $120 (or 990% more than she borrowed).

The issue being addressed is a scheme utilised by a company by the name of Cigno to advance small amount of short term credit to consumers relying upon exemptions contained in the National Credit Code which had the effect of rendering the credit provided – unregulated.  The loans would take 2 or so weeks to be processed, but consumers were able to engage the services of another company to expedite the process, but for a fee. The imposition of the additional fee resulted in the consumer paying far more than would otherwise be permitted if the loan were regulated – as illustrated in the example above.
6. ASIC still unhappy about Consumer Credit Insurance (CCI) – will ASIC intervene?
On 11 July 2019 ASIC released yet another report REP 622 on CCI products finding that there are still unacceptable sales practices, poor product design and significant remediation costs in CCI sold by major banks and lenders.
ASIC might be inclined to use its new Product Intervention Powers to address its concerns, a possibility canvassed in media release, MR 19-180.
ASIC notes that it is addressing the problems identified in the following ways:

undertaking investigations into the suspected misconduct of several entities involved in the CCI product market, with a view to enforcement action. The defendants to ASIC’s future action will be publicly identified at the time proceedings commence;
shortly consult with all interested participants and consumers with a view to completely banning the practice of unsolicited outbound sale of CCI by telephone, and
ASIC’s work has led to a significant remediation program expected to exceed $100 million paid to over 300,000 consumers.
ASIC has stated that it expects all CCI lenders to incorporate a four-day deferred sales model for all CCI products across all channels, not just those entities that subscribe to the Banking Code of Practice.
ASIC has also stated that it expects lenders and insurers to design and offer products with significantly higher claims ratios and will continue to collect and publish data to measure improvements

Realistically, the days of CCI are numbered. The 4 day deferred sales model has already had a major effect in the ability to sell the product. If CCI cannot be sold at the time a loan taken out, the likelihood of being able to sell it later is remote.
7. ASIC moves to ban unsolicited telephone sales of direct life insurance and consumer credit insurance
In late July 2019 we released an article on the proposal by ASIC to ban unsolicited telephone sales of life insurance (including funeral insurance) and Consumer Credit Insurance (CCI) when sold with general or no advice. This proposed ban will even extend to financial advisers who make unsolicited telephone sales of direct life insurance where general or no advice is given.
8. Reforms to Debt Administration Agreements showing potential to reshape the debt administration industry
On the 1 August 2019, we released an article on the recently introduced reforms to Debt Administration Agreements and their potential to reshape the debt administration industry.
9. Responsible Lending guidance in turmoil following decision by the Federal Court in the Westpac case
On the 15 August 2019 we released an article on the decision of the Federal Court of Australia in Australian Securities and Investments Commission v Westpac Banking Corporation (Liability Trial) [2019] FCA 1244 handed down on Tuesday, 13 August 2019 and commented that it had set the “cat amongst the pigeons” with regard to responsible lending obligations and ASIC’s proposal to issue fresh guidance on this issue.
10. ASIC Issues an Enforcement Update for the first half of 2019
On Sunday 18 August ASIC released its update on enforcement for the first half of 2019.
A different format has been taken in this report by ASIC and it is light on detail when compared to earlier reports.
The main takeout from the report is that in the first half of 2019, 77 new investigations have commenced, no doubt some of those related to the outcome of the recently released report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
This links in with comments made by ASIC deputy chairman (enforcement) Daniel Crennan, QC, to The Australian Financial Review that on top of the 13 referrals from the commission, the regulator was looking at “three times as many” case studies with a view to legal proceedings. Mr Crennan is quoted as saying that “there are a very large number of investigations on foot and there will be cases being issued in coming weeks, which are the result of those investigations’’.
11. House of Representatives Standing Committee on Economics to inquire into progress made by relevant financial institutions in implementing the recommendations of the Royal Commission
On the 2 August 2019, the Government announced that the remit of the House of Representatives Standing Committee on Economics had been extended to include assessing the progress made by financial institutions in implementing the recommendations of the Royal Commission. Other financial instructions and industry associated services associations are also expected to be included in that review.
12. Open Banking Laws are finally passed by parliament
In a previous article we reported on the progress towards implementation of Open Banking, noting that while Treasury Laws Amendment (Consumer Data Right) Bill 2019 (Cth) was introduced into Parliament in February 2019, unfortunately the legislation failed to pass before the election and the bill lapsed in April 2019.
The legislation has now passed Parliament and on 12 August 2019 The Treasury Laws Amendment (Consumer Data Right) Act 2019 received Royal Assent and commenced operation the next day.
13. Legislative Agenda for implementation of the recommendations of the Royal Commission released.
On 19 August 2019, the Federal Treasurer, The Hon Josh Frydenberg MP, released the “Implementation Roadmap” detailing the timetable for implementing the reforms recommended in the Financial Services Royal Commission’s Final Report. The Roadmap has been issued by Federal Treasury.
The implementation roadmap is a detailed and comprehensive document.
The legislative agenda for 2019, 2020 and beyond is breathtaking in its scope. We have extracted that part of the Roadmap and it can be viewed on our website.
14. Extending Unfair Contracts Terms to insurance contracts
On 30 July 2019, the Federal Treasurer, The Hon Josh Frydenberg MP, released an exposure draft of the Treasury Laws Amendment (Unfair Terms in Insurance Contracts) Bill 2019 which will extend the unfair contract term regime to insurance contracts. This is implementing recommendation 4.7 of the Banking Royal Commission.
The consultation period on the exposure draft of the legislation ended on the 28 August 2019.
The legislation when passed will apply to new insurance contracts entered into or renewed after the date the legislative changes take effect.
15. The Bill to abolish Grandfathered Commission Arrangements introduced to Parliament and ASIC investigates
On the 1 August 2019, the Government introduced the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 into Parliament which is proposed to facilitate the phasing out of grandfathering of conflicted remuneration by 1 January 2021. This is implementing recommendation 2.4 of the Banking Royal Commission. Prior to the introduction of this legislation, there was a consultation conducted by Federal Treasury in February this year.
In a related but separate move, in media release 19-218MR ASIC announced on the 21st August 2019 that it is investigating the extent to which grandfathering is being voluntarily ended by the industry and whether the benefits are being passed on to affected clients. ASIC has been directed by the Treasurer to conduct this investigation.
16. Draft Legislation released to implement mortgage broker recommendations made by the Banking Royal Commission
On 26 August 2019, the Federal Treasurer, The Hon Josh Frydenberg MP, released an exposure draft of the National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 for consultation. This is implementing recommendations 1.2 and 1.3 of the Banking Royal Commission.
Federal Treasury will consult on the exposure draft legislation. The consultation period ends on 4 October 2019.
The provisions of the draft of the legislation are described by Treasury in the following terms:
The exposure draft Bill requires mortgage brokers to act in the best interests of consumers when providing credit assistance. The bill and regulations make changes to mortgage broker remuneration by: requiring the value of upfront commissions to be linked to the amount drawn down by borrowers instead of the loan amount; banning campaign and volume-based commissions and payments; and capping soft dollar benefits. Furthermore, the regulations limit the period over which commissions can be clawed back from aggregators and mortgage brokers to two years and prohibit the cost of clawbacks being passed on to consumers. Entry into force of the reforms is scheduled for 1 July 2020.
A principles based approach to the issue of “best interests duty” is proposed under the draft legislation. However, with respect to the issue of “conflicted remuneration” and other issues, a more prescriptive approach is indicated. Regulations proposed to be made sets out additional criteria relating to issues around conflicted remuneration.
It is expected that there will be serious engagement by broker associations in connection with the proposed legislation during the consultation period.
ASIC is leaving nothing to chance on this issue. In what is to our mind a somewhat clumsy step, on Thursday 29 August 2019, ASIC released a report REP 628 examining consumer experiences and expectations in looking for a home loan.
Media Release (19-232),  summaries the thrust of the report succinctly – “ASIC research highlights the importance of reforms for mortgage brokers and home lending”. We suspect ASIC is preparing for pushback from the mortgage broking industry.
17. AFCA now has power to “name and shame” Financial Firms” involved in complaints.
In a sign that AFCA is taking a more aggressive approach, ASIC has approved a change to the ACA Rules to permit AFCA to name Financial Firms the subject of complaints.
ASIC, in Media Release 19-224MR (ASIC approves AFCA rule change enabling the naming of firms) issued on 26 August 2019, explained the rationale thus:
ASIC’s view is that naming firms in determinations can help identify conduct or market problems within firms or affecting specific products or services, as well as highlighting where firms have done the right thing. It will also enhance transparency and accountability of firms’ performance in complaints handling and of AFCA’s own decision-making.
To support the new Rules, AFCA will shortly be issuing updated operational guidelines which set out examples of the circumstances in which a determination naming a financial firm would not be published. This includes where naming may expose confidential information about a firm’s systems or policies.
This reform appears to bring AFCA into line with its UK equivalent, the UK Financial Ombudsman Service which had had the power to name Financial Firms since 2013.
In a somewhat ominous development, ASIC noted in its media release that transparency in relation to number and type of complaints might be extended to Internal Dispute Resolution processes:
Naming firms in AFCA determinations is part of a broader set of reforms aimed at increasing transparency in financial services. This includes Parliament giving ASIC power to collect and to publish internal dispute resolution (IDR) data at firm level.
18. Scope of Referrer Exemption – ASIC takes National Australia Bank to court
Real estate agents, lawyers and others may refer loan applicants to lenders without being required to be credit authorised in certain limited circumstances. Basically, a referrer can refer a person to a lender for a loan by merely passing on name and contact details of the consumer and a brief explanation of the type of credit sought.
Under the National Australia Bank (NAB) “Introducer Program” which operated between 2013 and 2016, the NAB pushed the limits and it is likely NAB will now have to pay the price.
The proceeding issued by ASIC in the Federal Court of Australia seeks the imposition of a civil penalty on NAB.
ASIC has sensibly limited the scope of its application – only alleging breaches by 16 bankers accepting loan information and documentation from 25 unlicensed introducers in relation to 297 loans. The application could have been far more extensive.
Comment has been made that ASIC is “looking for a quick win” – whether this is the case will no doubt be revealed in due course.
The last article we wrote on the scope of the “referrer” exemption under the National Consumer Credit Protection Act 2009 was back in 2010. It appears timely to update our prior guidance on this issue.
19. ASIC releases its Corporate Plan for 2019 to 2023
On Wednesday 28 August 2019, ASIC issued a media release advising release of its Corporate Plan for the next four years – 19-229MR.
We may comment further on the corporate plan at a later date.
Industry changing developments in the Banking & Finance Sector – July/August 2019 | Hunt & Hunt Lawyers

On Monday 19 August 2019, the Federal Treasurer, The Hon Josh Frydenberg MP , released the “Implementation Road map” detailing the timetable for implementing the reforms recommended in the Financial Services Royal Commission’s Final Report. The Road map has been issued by Federal Treasury.
The implementation road map is a detailed and comprehensive document.
There is one part of the road map we would like to share with clients and that is the legislative agenda for 2019, 2020 and beyond – breathtaking in its scope.
We have extracted the legislative reform agenda for the Treasury document and now extract it below – verbatim.
As each piece of legislation is issued We will provide detailed commentary at the time each item of legislation is introduced or the consultation process commences.
APPENDIX A: GOVERNMENT IMPLEMENTATION PLAN
In this table, timelines are set out for Government actions, including for introduction of legislation where relevant.

Legislation to be consulted on and introduced by end-2019

Measures to improve consumer protections

Recommendation 1.2 – Mortgage broker best interests duty
Recommendation 1.3 – Mortgage broker remuneration (consistent with the Government’s response)
Recommendation 2.4 – Ending grandfathered commissions for financial advisers (legislation introduced on 1 August 2019)
Recommendation 4.2 – Removing the exemptions for funeral expenses policies
Recommendation 4.7 – Application of unfair contract terms provisions to insurance contracts
Recommendation 4.8 –  Removal of claims handling exemption for insurance

Measures to strengthen financial regulators

Additional Commitment – ASIC’s search warrants powers (ASIC Enforcement Review)
Additional Commitment – ASIC’s telecommunications interceptions powers (ASIC Enforcement Review)
Additional Commitment – ASIC’s licensing powers (ASIC Enforcement Review)
Additional Commitment – ASIC’s power to ban people in the financial sector (ASIC Enforcement Review)

Legislation to be consulted on and introduced by 30 June 2020

Measures to improve consumer protections

Recommendation 1.7 – Removal of point-of-sale exemption
Recommendation 1.15 – Enforceable code provisions for industry codes of conduct
Recommendation 2.1 – Annual renewal and payment for financial advice
Recommendation 2.2 – Disclosure of lack of independence of financial advisers
Recommendation 3.1 – No other role or office for trustees of Registrable Superannuation Entities (RSE)
Recommendation 3.2 – No deducting advice fees from MySuper accounts
Recommendation 3.3 – Limitations on deducting advice fees from choice superannuation accounts
Recommendation 3.4 – No hawking of superannuation products
Recommendation 4.1 – No hawking of insurance products
Recommendation 4.3 – Deferred sales model for add-on insurance
Recommendation 4.4 – Cap on commissions paid to vehicle dealers for sale of add-on insurance products
Recommendation 4.5 – Duty to take reasonable care not to make a misrepresentation to an insurer
Recommendation 4.6 – Limiting circumstances where insurers can avoid life insurance contracts
Recommendation 4.8 – Removal of claims handling exemption
Additional commitment in response to Recommendation 4.2 – Restricting use of the term ‘insurer’ and ‘insurance’

Measures to strengthen financial regulators

Recommendation 1.6 – Reference checking and information sharing for mortgage brokers
Recommendation 2.7 – Reference checking and information sharing for financial advisers
Recommendation 2.8 – Licensee obligations to report compliance concerns
Recommendation 2.9 – Licensee obligations where misconduct by financial advisers
Recommendation 3.8 – Adjustment of APRA’s and ASIC’s roles in superannuation
Recommendation 6.3 – General principles for ASIC and APRA to co-regulate superannuation
Recommendation 6.4 – ASIC as conduct regulator for superannuation
Recommendation 6.5 – APRA to retain current functions for superannuation
Recommendation 6.9 – Statutory obligation for APRA and ASIC to co-operate and share information
Recommendation 6.14 – A new oversight authority for APRA and ASIC
Recommendation 6.11 – Improving ASIC’s Board meeting procedures
Recommendation 7.2 – Implementing the ASIC Enforcement Review Taskforce’s recommendations to improve the breach reporting regime
Additional commitment in response to Recommendation 7.2 – Implementing the ASIC Enforcement Review Taskforce’s directions power recommendations

Legislation to be consulted on and introduced by end-2020

Access to redress and new disciplinary body

Recommendation 2.10 – A new disciplinary system for financial advisers
Recommendation 7.1 – Compensation scheme of last resort

Measures to strengthen financial regulators − executive accountability regime

Recommendation 3.9 – Extending the Banking Executive Accountability Regime (BEAR) to RSE licensees
Recommendation 4.12 – Extending the BEAR to APRA-regulated insurers
Recommendation 6.6 – Joint administration of the BEAR
Recommendation 6.7 – Statutory amendments to facilitate co-regulation
Recommendation 6.8 – Extending the BEAR to all APRA-regulated financial services institutions.
Additional commitment – extension of the executive accountability regime to non-prudentially regulated financial entities to be administered by ASIC.

 
 
Implementing the Recommendations of the Banking Royal Commission – Legislative Agenda | Hunt & Hunt Lawyers

Contents:
1. The Case
2. The First Case on Responsible Lending
3. Westpac Saves $35million
4. Issues on which the case was decided
4.1 Taking Declared Living Expenses into Account in the Credit Assessment Process
4.2 Determining affordability of loans with an Interest Only Period
4.3 Royal Commission acknowledged limitation of scope of case
5. The Court’s Decision
5.1 The 1st Issue – taking Declared Living Expenses into account in the credit assessment process
5.2 Determining affordability of loans with an Interest Only Period
6. The Analysis of the Court – the 1st Issue
6.1 Credit Assessment
6.2 ASIC argued that credit provider in performing a credit assessment must base that on the consumer’s financial information
6.3 The Process by which the Court arrived at its conclusion on the 1st Issue
7. The case as a test of HEM?
8. Classic Quotes
9. Our View in 2016
10. The recommendations of the Royal Commission
11. The Way Forward
12. What should Lenders now do?
1. The Case
The decision of the Federal Court of Australia in Australian Securities and Investments Commission v Westpac Banking Corporation (Liability Trial) [2019] FCA 1244 handed down on Tuesday, 13 August 2019 has set the “cat amongst the pigeons” and embarrassingly comes only days before the next round of ASIC public consultations on how Regulatory Guide 209 (Responsible Lending) should be updated.
While it is really too early to assess the full impact of the decision on the responsible lending practices of lenders, one thing is clear and that is that the responsible lending guidebook will need to be substantially rewritten.
2. The First case on Responsible Lending
The first and the most important issue to be mentioned is that as far as the Federal Court is concerned, this is the first case on “responsible lending”
At paragraph 92 of the Judgement we note the following comments:
92: For completeness, I should note that ASIC submitted that its construction was supported by a number of decisions of this Court…
…I do not accept that any of these cases is of assistance.  ASIC v Cash Store was an undefended case.  There was no debate about the issue which is presently before the Court.
…Accepting in ASIC’s favour that there are various brief remarks in these judgments which are consistent with its proposed construction, the short fact is that none of these statements results from a contested hearing or any process of analysis by the Court: cf. CSR Limited v Eddy [2005] HCA 64; 226 CLR 1 at 11-12 [13]-[15] per Gleeson CJ, Gummow and Heydon JJ.
In my opinion, these decisions have no value in the present contest.
3. Westpac Saves $35 million
In November 2018, the Federal Court refused to accept a proposal made jointly by ASIC and Westpac to resolve proceedings brought by ASIC proposing that the Court impose a civil penalty of $35 million on Westpac for contravening the  National Consumer Credit Protection Act 2009 (NCCP Act) in assessing the suitability of home loans for customers in the period between 12 December 2011 and March 2015.
In his reasons for refusing to make the orders the parties had proposed, The Honourable Justice Perram said that the conduct expressed in a declaration proposed by the parties was not conduct that “could possibly be a contravention of section 128”
By this judgement, Westpac has saved itself $35 million plus legal costs.
4. Issues on which the case was decided
The case was decided on narrow issues.
4.1. Taking Declared Living Expenses into account in the credit assessment process
The first issue in contention was whether Westpac, in using an automated decision system (ADS) to conditionally approve home loan applications, had taken into account the “declared living expenses” of applicants. It was not about “all” expenses or income – only “declared living expenses”. The case did not touch on “verification” of expenses nor whether a loan met the customer’s “requirements or objectives”.
4.2 Determining affordability of loans with an Interest Only Period
The second issue decided by the Court was whether an assessment of unsuitability in relation to interest only loans requires the credit assessment to be made by reference to the level of repayments due after interest only period had ended (i.e. on principal and interest repayments) rather than on repayments averaged over the whole term of the loan. The Court rejected ASIC’s submissions in this regard and found in Westpac’s favour that averaging was acceptable.
4.3 Royal Commission acknowledged limitation of scope of case
The Royal Commission acknowledged that “verification was not considered in the case”.
I observe that the Statement of Agreed Facts filed by the parties for the purposes of the application determined by Perram J said nothing at all about ‘verification in accordance with section 130’ (as mentioned in section 128(d)) and nothing about the operation of section 130(1)(c) requiring a licensee, for the purposes of section 128(d), to take ‘reasonable steps to verify the consumer’s financial situation’.
5. The Court’s decision
5.1  The 1st Issue – taking Declared Living Expenses into account in the credit assessment process
The Court ruled that Westpac had sufficiently taken into account the declared living expenses of loan applicants in conducting the credit assessment. ASIC’s claim that Westpac had not taken into account the declared living expenses of loan applicants failed on the facts.
The Court further decided that ASIC’s assertions as to the way in which NCCP Act operated were not correct.
In the Westpac loan application process, customers’ “declared living expenses” were taken into account along with a range of other matters which  did not invalidate the credit assessment made.
Specifically, one of the assessment rules under the ADS was the “70% Ratio Rule”. Under that rule, the customer’s situation was analysed in terms of “risk of default”.
ASIC submitted that:
Credit risk to the bank, on the one hand, and the inability of the consumer to meet the financial obligations under the credit contract, on the other, were not identical matters…….. the fact that a credit provider reached the conclusion that there was no credit risk in the case of a consumer did not ‘necessarily mean that it met the standard in the legislation’. (Paragraph 25)
In response the Court stated that:
I do not accept that a rule whose purpose is to gauge the risk of default is not also a rule with respect to the ability of the consumer to meet their financial obligations under the credit contract …… (Paragraph 25)
It seems that the emphasis has shifted back to lender considerations as a consequence of this Judgement.
5.2             Determining affordability of loans with an Interest Only Period
The Court rejected ASIC’s submissions and found in Westpac’s favour that averaging was acceptable
6.  The Analysis of the Court – the 1st Issue
The Court could have stopped there – findings that the alleged breaches of responsible lending obligations were not proved on the “facts”, but the Court went much further.
What makes this case so interesting and important is how the Court interpreted the requirements of the responsible lending obligations contained in the NCCP and the implications that flow from that interpretation.
6.1   Credit Assessment
The crux of the issue as far as the Court was concerned was whether Westpac has complied with its responsible lending obligations in conducting its credit assessments.
The Court said that there were basically 2 questions that Westpac had to answer when conducting a credit assessment pursuant to section 129 of the NCCP  relating to the Assessment of unsuitability of the credit contract. These questions were determined by the provisions of section 131(2).
The 2 questions to be answered are:

whether the consumer will be unable to comply with their financial obligations under the contract (i.e. make the repayments) (Question 1)
whether the consumer, whilst able to afford the repayments, will not be able to do so without being placed in circumstances of substantial hardship (Question 2)

6.2  ASIC argued that credit provider in performing a credit assessment must base that on the consumer’s financial information
ASIC argued differently. ASIC tried unsuccessfully to roll the obligation to make reasonable inquiries about a consumer’s financial situation (under section 130) into the credit assessment process.
ASIC argued that it was mandatory that the credit assessment be based on the results of the inquiries about the consumer’s financial circumstance (certainly in relation to “declared living expenses”)
That proposition was considered problematic by the Court (paragraph 60) and was ultimately rejected by the Court.
6.3  The Process by which the Court arrived at its conclusion on the 1st Issue
This is the way the analysis progressed:
ASIC accepted that a credit provider did not need to take into account all of the information gathered under its enquiry process about the consumer’s financial position (paragraph 65).
However, ASIC argued that the credit provider at a minimum needed to assess the individual consumer’s financial situation as a whole (paragraphs 65 and 67).
The Court noted that ASIC’s argument (with regard to gathering information about the financial situation of a consumer) does not identify what a credit provider is to do with the financial information it has gathered. (paragraph 69).
ASIC conceded that what the credit provider did with the information about the financial situation of the borrower was ‘legitimately up to the lender’ (paragraph 69).
The Court agreed that it was mandatory that the credit provider ‘must at least conduct an assessment of the consumer’s financial situation with a sufficient understanding of the consumer’s income and expenses’ (paragraphs 70 and 71).
But, the Court then goes on to ask what is it that the credit provider is actually meant to be doing with the information obtained?
The Court concluded that the only statutory purpose for which the financial information is collected is to answer the 2 questions that need to be answered in the credit assessment process (paragraph 70).
The Court concludes that it is unable to discern why information about a consumer’s declared living expenses is a mandatory matter that must be considered as part of the credit assessment process in answering Question 1 (paragraph 73).
The Court acknowledged that “stated living expenses” of a borrower were not immutable. A borrower could adjust their expenses in order to be able to afford the loan repayments – give up gym memberships, not take an overseas holiday etc. (paragraphs 74 and 78)
The Court provides a worked example in relation to answering Question 1 (whether the consumer will be unable to comply with their financial obligations under the contract (i.e. make the repayments))
74:
A worked example illustrates the problem.  Let it be assumed artificially that a consumer with a monthly after-tax income of $4000 has three declared living expenses of food ($1200 per month), utilities and internet ($200 per month) and gym memberships ($200 per month).  The declared living expenses are therefore $1600 per month and the consumer will have a surplus of $2400 per month.  If the consumer proposes to take out a home loan which will require monthly repayments of $2500 the outgoings will then be $4100 per month as opposed to the after-tax income of $4000 per month.  The consumer will therefore have a shortfall of $100 per month.
75:
But this does not tell one that the consumer cannot afford to meet the repayments.  One reason this is so is because the consumer may choose to discontinue their gym memberships and meet the repayments in that way.  The problem for ASIC’s argument is that the mere fact that there are living expenses is not necessarily relevant to whether a consumer will be unable to comply with their loan obligations because it is always possible that some of the living expenses might be foregone by the consumer in order to meet the repayments.
77:
Without additional information, I do not consider that it is possible to accept that the consumer’s declared living expenses tell one anything about their capacity to meet the repayments under the loan…
The Court reaches a similar conclusion in relation to the relevance of “declared living expenses” in relation to Question 2 (whether the consumer, whilst able to afford the repayments, will not be able to do so without being placed in circumstances of substantial hardship):
78:
Here the issue is not whether some or all of the declared living expenses can be done without but the even more complex question of whether, if done without, this would give rise to circumstances of substantial hardship.  Again, one cannot say that as a matter of necessity this can be discerned from the declared living expenses by themselves.
78:
The fact that the consumer spends $100 per month on caviar throws no light on whether a given loan will put the consumer into circumstances of substantial hardship.  Nor for that matter does knowing that the consumer spends $500 per week on basic food items.  For that to be relevant to the hardship question posed by s 131(2)(a) one would need to know at least the following matters:
(a)          that the loan repayments would require the consumer to cut their budget by a certain amount, say for the sake of argument, $200 per week;
(b)          that the $200 would have to be cut from the amount the consumer spent on food (i.e. $500 per week); and
(c)          if the consumer cut the amount spent on basic food from $500 per week to $300 per week then this would place the consumer in circumstances of substantial hardship.
79:
With those additional facts, one may be able to say that the declared living expenses must necessarily be relevant to the second … questions
As a consequence, the Court concludes that declared living expenses by themselves do not necessarily have to be relevant to the credit assessment process.  If declared living expenses do not necessarily have to be relevant to the answering the 2 questions then it cannot be said that declared living expenses must be taken into account in performing an assessment of unsuitability.  (paragraph 80)
In conclusion (and as a final blow), the Court states that:
82:
The policy of the statute that unsuitable loans should not be made is explicitly and directly given force by ss 131 and 133.  Given that statutory fact, what purpose can be served by prescribing how a credit provider goes about the assessment process?  Sections 131 and 133 make that the problem of the credit provider.  A credit provider may do what it wants in the assessment process, so far as I can see; what it cannot do is make unsuitable loans.  ASIC’s argument creates a whole new range of implied rules which appear altogether unnecessary in light of ss 131 and 133.
7.  The case as a test of HEM?
This case was hailed to be a test of use of HEM (Household Expenditure Measure) – it was not.
At paragraph 36:
36:
Both parties made oral and written submissions about the HEM benchmark but by the trial’s conclusion it was of marginal relevance.  This is because, as finally articulated, ASIC’s case did not turn on the fact that Westpac had used the HEM benchmark but instead on the alleged fact that it did not use any of the consumer’s declared living expenses in answering the s 131(2)(a) Questions.  Indeed, ASIC accepted that it was lawful for Westpac to use the HEM benchmark to answer those questions.  What it could not do was to answer them without taking into account any of the consumer’s declared living expenses.
8.  Classic Quotes
There are a number of classic quotes used in the judgement which already have consumer advocates up in arms on the basis that the Judge is out of touch with the average punter. Mind you they are great quotes and should be acknowledged.
76:
…I may eat Wagyu beef everyday washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare…
78:
The fact that the consumer spends $100 per month on caviar throws no light on whether a given loan will put the consumer into circumstances of substantial hardship.
71:
I do not, however, accept ASIC’s contention that all of the financial circumstances of the consumer can be such a mandatory matter.  ……………… Questions of whether the consumer could in absolute terms afford the repayments; so too, the fact that the consumer takes an annual first class holiday to the United States is not relevant to assessing whether the repayments will put the consumer into circumstances of substantial hardship.
Far from being out of touch, The Honourable Justice Perram is thinking deeply about how the responsible lending rules might apply to him.
For me, it might be the difference between a bottle of “Wirra Wirra Church Block” and a bottle of “Jacobs Creek”. For my kids, it might be the difference between “plain label” and “branded products” at the supermarket.
While the rules around responsible lending affect us all in different ways – the rules around responsible lending do still affect us all, each in our own way.
For the consumer lobby to argue about the validity of this judgement as they appear to already be doing is really not helpful.
9.  Our view back in 2016
Back in 2016, we thought that the distinction between “ability to meet repayments” and “credit risk” was thought to be a feature of the new responsible lending regime, which required lenders to go further. Refer to our article published in January 2016 – Responsible Lending Obligations: Saving Borrowers from Themselves
In that article we commented that:
Saving borrowers from themselves
Traditionally the credit assessment process for lenders was aimed at avoiding losses to lenders.  Initially, this was done by way of ensuring there was sufficient equity in any security so that moneys lent could be recovered in circumstances of default.  Now, lenders look at the credit assessment process in terms of capacity of the borrower to repay the amount lent from their own resources rather than realisation of any security.  That was always the case in relation to unsecured loans – the difference now is it applies to secured loans as well.  But, it does not really matter how robust a lender’s credit assessment procedures are, a lender can still fall foul of the responsible lending obligations set out in the National Credit Act.
Why is this so?
This is so because credit assessment procedures are no longer about protecting the position of the lender – instead, the responsible lending provisions under the National Credit Act are all about protecting the borrower – “saving borrowers from themselves”.
If lenders and credit assistants do not recognise this paradigm shift they will continue to get into trouble in the area of compliance with responsible lending provisions. And that trouble will not only come from ASIC. More and more now it is the external dispute schemes that are leading the charge in this area.
If one were to take a cynical view on matters one could form the view that in order to comply with responsible lending obligations nothing a prospective borrower says on the loan application is to be accepted on face value.
It seems now that the distinction we identified at that time might not be all that significant.
10.            The recommendations of the Royal Commission
Recommendation 1.1 of the report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was:
Recommendation 1.1 – The NCCP Act
The NCCP Act should not be amended to alter the obligation to assess unsuitability.
That recommendation was predicated in part on the fact that at the time of issue of the Report of the Royal Commission the subject Westpac Case had not yet been decided. As a consequence, the Report made the following observations about the pending case (starting at page 54):
It is necessary for me to say something about two developments relating to benchmarks that followed the Interim Report.
First, in November 2018, Perram J of the Federal Court refused to accept a proposal made jointly by ASIC and Westpac to resolve proceedings brought by ASIC alleging that Westpac had contravened section 128 of the NCCP Act.
The parties proposed that the Court impose a civil penalty of $35 million on Westpac for contravening the NCCP Act in assessing the suitability of home loans for customers in the period between 12 December 2011 and March 2015. 19 Westpac had used the HEM in its assessment of the loan applications.
In his reasons for refusing to make the orders the parties had proposed, Perram J said that the conduct expressed in a declaration proposed by the parties was not conduct that ‘could possibly be a contravention’ of section 128…
The proceedings remain undetermined and, absent some different agreement being reached and resulting in final orders disposing of the proceeding, await trial and judgment. That being so, it would not be right for me to offer any view about the conclusions reached by Perram J or to say anything at all about the reasons that have been published. At the time of writing, the proceedings between ASIC and Westpac remain on foot and may well go to trial.
The court processes must play out without commentary from me.
If the court processes were to reveal some deficiency in the law’s requirements to make reasonable inquiries about, and verify, the consumer’s financial situation, amending legislation to fill in that gap should be enacted as soon as reasonably practicable.
Let’s see what view the Government takes on any perceived “deficiencies revealed by the law by this judgement.
11.  The Way Forward
The way forward is unclear.
How can ASIC in all honesty continue with its prescriptive guidance as to how to comply with responsible lending obligations in the light of the decision of the Federal Court? In particular at paragraph 82:
82
The policy of the statute that unsuitable loans should not be made is explicitly and directly given force by ss 131 and 133.  Given that statutory fact, what purpose can be served by prescribing how a credit provider goes about the assessment process?  Sections 131 and 133 make that the problem of the credit provider.  A credit provider may do what it wants in the assessment process, so far as I can see; what it cannot do is make unsuitable loans.  ASIC’s argument creates a whole new range of implied rules which appear altogether unnecessary in light of ss 131 and 133.
The way forward will be revealed with time.
Legislative change could be on the table, but it is unclear whether that would gain traction given the current economic environment.
12.            What should Lenders now do?
In the interim, lenders would be unwise to unwind their current practices and procedures around responsible lending – it is certainly not open slather.
“Steady as she goes” is the best advice.
Responsible Lending guidance in turmoil following decision by the Federal Court in the Westpac case | Hunt & Hunt Lawyers

Strategies for start-ups to enhance value and reduce risk
So you’ve decided to start up a new business.
You’ve:

decided upon the vision, values and goals;
assessed the competition and resources challenges;
identified your target customer base and sought feedback from them (and your suppliers), to identify what is likely to work and what isn’t, and
prepared your business plan.

What next? What strategies can you employ from the outset to maximise value, protect your business and enable it to respond best to the challenges all startups face?
Having advised many new businesses (the good, the bad and the ugly) over three decades, here are my thoughts:
1. Find the right advisers
It’s important to invest the time at the outset to find the right advisors (most commonly, in accounting, financial land legal) to guide your business as it grows.
This is about more than choosing the most well-known name your budget allows. It’s about finding someone who understands you, your business and what you want to achieve. Getting that fit right in the beginning will give you access to real wisdom, and save time and significant expense over the journey.
2. Choose a suitable business structure
Various options are available – your advisers can help you choose the best.
If you are starting the business with a view to selling in the future, a structure which is likely to be the most attractive to a potential buyer will avoid the discount and/or restructuring costs
of a poor structure.
It’s likely that a company structure will be the most suitable option for the trading entity, rather than a discretionary trust or a unit trust.
3. Seek out appropriate funding
Finding the right investors/financiers scan be tricky – some demand too much in return.
Don’t give it away! Try to source funding which doesn’t require you to give up a share of your business (i.e. loans from friends and family may be a simpler and cleaner option than issuing equity).
Similarly, as much as possible, avoid giving personal guarantees for the business’ obligations.
4. Select the right bank
Don’t just go straight to the bank you’ve used as a consumer. Find one that understands your business and with which you feel comfortable.
Some banks offer incentives for new business customers – find those relevant to your business.
5. Ownership rights
If you plan to own the business with others, agreeing at the outset on how ownership relationships will function will save time and expense if disagreements arise later (e.g. an owner unexpectedly decides to exit the business and demands to be paid their “fair share”).
Like a marriage, no one starts a business with others expecting the ownership relationship to break down. But if it does, having a written agreement to point to when issues arise and owners
aren’t willing to cooperate is crucial.
For example, if your business is structured as a company, these rights can be set out in a Shareholders’ Agreement covering issues such as:

how are decisions made?
how do we decide if we want to allow a new owner on board?
if I want to leave, to whom can I sell my share and how is  the price set?

6. Manage employment risks
Investing in reliable employment agreement templates for both ordinary and management staff will help manage risk (and the cost if things going wrong) as you take on more staff. These
days, the cost of this investment represents real value in the medium term.
Preparing a basic but appropriate employee handbook containing your internal policies, will provide new starters with a clear understanding of what is expected and reduce your risk.
Depending on your business, you may also need to address OHS compliance.
Research/seek advice which awards or agreements will apply to employees in your industry to ensure you are providing the proper pay rates and conditions.
7. Understand regulatory requirements
Depending on the nature of your business and where it is based, different licences, permits, registrations and certificates may be required.
Understanding the regulatory requirements which apply (here and possibly also overseas) will improve your business planning and avoid future compliance issues. Government and industry
websites and your advisers can help you with this.
8. Branding and marketing
Your business name can be one of your most valuable assets – it is your identity with your customers, differentiating you from competitors.
If you want to trade under a different name from your company name, you’ll need to register a business name and potentially a trade mark as well, so only you can use it.
Before deciding on a name and checking availability for registration, check if your preferred name is available as a web address and social media profiles.
Do a web search to check for any similar sounding names or initials both here and overseas and check their reviews to minimise any reputation risk by association.
If you have a designed logo to identify your brand, this is also something to consider protecting with a trade mark.
9. Protect IP
Intellectual property is increasingly valuable and so important to protect. Usually, this means registering a trade mark so only you can use its identifying features. It may also mean ensuring that you own the copyright in developed software or key marketing material.
If you have developed something novel that may be able to be patented, take great care not to generally disclose this, as it may preclude patent registration.
It is important to understand how intellectual property can be created, owned and protected and a helpful guide can be accessed here.
10. Consider appropriate insurance cover
Insurance cover is a key tool for protecting your business and minimising exposure to risk.
This can include insuring your main commercial risks, insuring your income and insuring against relevant liabilities.
The right insurance broker will help you identify possible risks and assess whether insurance is a sensible solution.
11. Maintain business records and protect privacy
Financial and tax records must be properly maintained and stored for well after the relevant financial year. Your accountant can help.
Legal documents such as company records, key contracts and employment agreements should also be safely maintained.
If your business involves handling your customers’ “personal information”, understanding your privacy law obligations will help avoid complaints and protect your reputation.
12. Make it “owner-proof”
From the start, set up your business so that dependence on you is minimised. Your exit value depends on this – a buyer will only pay good money to the extent that they are confident the
business will operate profitably without your involvement.
So establish systems across the business to build this separation and, as far as possible avoid anything (key relationships, name, technical competency, brand etc) that relies on your ongoing
involvement.

These strategies are just a small, but important, selection of things you should do to ensure you get the most out of your startup, making the foundations the most secure and avoiding unnecessary headaches (and the costs that come with them) in the future.
Starting Out on the Right Foot | Hunt & Hunt Lawyers

ASIC has announced it will hold public hearings in Sydney on 12 August 2019 and Melbourne on 19 August 2019 in response to its proposal to update guidance on responsible lending.
When ASIC released consultation paper CP 309 in February 2019 setting out its proposals to update its guidance on Responsible Lending contained in RG209,  it is obvious that it did not expect the extent of the reaction from industry or the number and extent of submissions. In total, 72 submissions were received. ASIC had originally proposed to release its responses to submissions in August or September 2019.
This is an unusual step for ASIC to take and reflects the importance of this issue. As ASIC explains:
On this occasion, ASIC has decided to use its hearing power to help it develop its regulatory guidance on responsible lending obligations. The application of these obligations is critical to the making of appropriate credit decisions, and we are aware that our guidance on these obligations is a matter of significant public interest.
We think public hearings will provide a useful and transparent way to robustly test with selected participants some of the main issues and views raised in the written submissions in response to Consultation Paper 309.
While the hearings will be open to the public and live streamed, appearance at the hearing is by invitation only. ASIC has already contacted those parties invited to participate in the hearings. ASIC has stated that it will update its “hearings page” with a list of participants for each hearing once the final list has been confirmed as well as an expected link to the live stream.
ASIC’s thought process behind its selection criteria for who has been invited to appear is explained thus:
We have selected from the submissions some parties that we consider will be able to provide additional views and perspectives on key issues that have been raised across a range of industry and consumer stakeholders.
At the public hearings, the acceptability of using the Household Expenditure Measure (HEM) to assess and verify expenses will no doubt be a topic of hot debate.
While it is clear that to do so is not in accordance with the requirements of the National Credit Act, it appears that relying on a HEM based benchmark may not necessarily lead to an adverse consumer outcome. It is interesting to note that at paragraph 56 of the Agreed Statement of Facts filed in the Federal Court proceeding in ASIC V Westpac Banking Corporation NSD293/2017 in September 2018, it was acknowledged that Westpac loans which were assessed using its Automated Decision Process did not result in a higher incidence of defaults or hardship applications. Paragraph 56 is extracted below.
Home Loans Conditionally Approved by the Automated Decision System during the Relevant Period have to date:
(a)        had a lower rate of hardship applications than manually approved Home Loans originated during the Relevant Period; and
(b)        had a similar rate of 60+ Days Delinquency to manually approved Home Loans originated during the Relevant Period.
Manual assessment may not be what it is cracked up to be!
For those involved in credit activities, these public hearings will be critical to follow.
ASIC Public Hearings on Responsible Lending Reforms to take place next week | Hunt & Hunt Lawyers

With rates sometimes exceeding 100%, dumping duties are one of the key focus areas of the Australian Border Force and importers.  Importers can face unexpected dumping duty bills that run into the millions of dollars and feel that they have no ability to fight the duty.  For some importers, one way of lowering the cost of a dumping duty bill is to make an application for a dumping duty assessment.  This does not involve arguing that the goods are not covered by the dumping duty notice, but rather is a claim that the rate is too high.
In some cases a dumping duty assessment could see a rate near 100% significantly reduced.
How can the rate change
Following a dumping duty investigation, the duties that are imposed on subsequent imports are referred to as interim dumping duties.  This is because those duties are based on the historical information reviewed in the investigation, but may not be the correct rate for subsequent imports.  Importers have the right to apply for a dumping duty assessment under which the actual dumping margin for those imports is determined.  Realistically, an importer can only do this with assistance from the overseas supplier.  Where this assistance is available, a dumping duty assessment can be a method of significantly reducing duty on past imports.
The actual rate may be significantly lower than the amount paid at import.  This is because the importer may have been subject to an “all other importer” rate.  This is not a rate for a specific exporter, but rather is a figure calculated by reference to data provided by other exporters and is designed to produce a very high duty rate.  If an actual exporter is assessed and the margin based on their real data, the dumping margin may be a lot lower than the made up rate.
Strict timeframes
The catch is that an application for a dumping duty assessment must be made within 6 months of the end of relevant importation period.  Each month period following the imposition of dumping duties is an importation period. For example, if dumping duties were first imposed on 1 January, the first importation period would be 1 January – 30 June.  An application for a duty assessment for imports during that importation period would have to be lodged by 31 December.
The Anti Dumping Commission (ADC) has repeatedly said that complete applications for a dumping duty assessment need to be lodged prior to the due date.  It asks for applications to be lodged well in advance of this date so that if there are deficiencies in the application, these can be cured by the due date.  The ADC’s position was that a deficient application could not be cured after the due date, ending the right for a dumping duty assessment.
Whether this position was correct was considered by the Federal Court in Downer Utilities Australia Pty Ltd v Commissioner of the Anti-Dumping Commission [2019] FCA 1190.  This case concerned an application for a duty assessment required to be lodged by 2 January 2018 and which was lodged on 29 December 2017.  The lodgement was incomplete as not all required imports were listed and some listed figures were not totalled.  The failure to total the relevant figures was due to a problem with the ADC electronic form.
The representative for Downer tried calling the ADC regarding the problems with the ADC form.  However, due to the Christmas and New Year period, the ADC did not respond to the query.
The legislation give the ADC 20 days to review an application and form a view whether or not it is deficient.  The issue in this case was, if a deficiency was identified in that 20 day period, did the ADC have an obligation to inform the applicant and allow them to correct the deficiency?
The ADC argued that the 20 day period was merely for it to screen the application, and that it did not have an obligation to inform applicants of deficiencies and even if it did, applicants could not cure those deficiencies after the due date.
The Court held that:

deficiencies could be cured in the 20 day screening period; and
the ADC had an obligation to inform Downer of the deficiencies (which were minor) and allow them the opportunity to correct these in that 20 day period.

The ADC’s rejection of the application in the circumstances meant that Downer was denied procedural fairness and Downer was able to have the decision set aside.
A more lenient approach?
The decision is important as previously the ADC has been very strict in its view that deficiencies could not be cured after the initial due date.  Applicants who have had applications rejected due to deficient applications may have been denied procedural fairness.
The decision hopefully makes seeking dumping duty assessments easier for importers.  Often an assessment is sought after an Australian Border Force audit results in an unexpected dumping duty liability.  In these circumstances, the importer may only find out about the dumping duty liability near the due date for the dumping duty assessment application.  This is likely to result in rushed applications that may have minor deficiencies.  This decision is a clear message to the ADC that it cannot take advantage of minor deficiencies to deny a substantially compliant claim.  Rather, the ADC must notify the applicant of the errors and allow them the opportunity to correct those errors.
Tips for the future
If significant dumping duty is payable, importers should quickly determine the due date for a dumping duty assessment.  If the timeframe has not passed, the importer should speak to the exporter about whether that exporter will cooperate with a dumping duty assessment.
If there is a willingness to assist, the importer and exporter should be able to work together to determine a likely outcome of a dumping duty assessment application.  The previous investigation report and associated documents will provide a good guide to the ADC’s methodology to calculating the dumping margin.  The size of a likely refund can inform whether there is any merit in proceeding with a dumping duty assessment.
If the importer plans to proceed with an assessment, the importer should obtain a list of imports during the importation period.  Not listing all imports can be a reason for the ABF to reject the application.
Of course, the best approach is to lodge the assessment application well before the due date.  Importers have 6 months in which to lodge an application.  Lodging early will allow the ADC time to notify the applicant of errors prior to the due date, enabling a compliant form to be lodged.
A dumping duty assessment is not the answer for all importers.  However, it should be one of the options that is considered.  As it is time sensitive, this option should be considered as early as possible.
Please contact Russell Wiese if you wish to discuss any demand for dumping duty or an investigation being undertaken by the Anti-Dumping Comission.
Dumping duty assessments – A possible solution to unexpected dumping duties | Hunt & Hunt Lawyers

The Bankruptcy Amendment (Debt Agreement Reform) Act 2018 (Cth) was designed to and is already having a major impact on the debt administration industry in Australia following its commencement on 27 June 2019.
The aim of the legislation is to tighten up regulation of the debt administration industry and place additional restrictions on such agreements, including limiting the duration of any agreement to a maximum term of 3 years.
Until now, debt administration agreements entered into under Part IX of the Bankruptcy Act 1966 (Cth) have proved an effective way for debtors to deal with unmanageable debt burdens.  Between 2007 and 2016, new debt agreements increased from 6,560 to 12,640 per year. Over the same period, new bankruptcies declined from 25,754 to 16,842 per year.
It is therefore surprising that the recently implemented reforms have not attracted more attention. Part of the reason for this is probably that these reforms have taken so long to come to fruition and that most updates concerning these reforms were written back in 2018.
However since the legislation commenced, many of our clients have noticed that there has been a move away from formal Part IX debt administration arrangements and a significant number of “informal debt agreements” are now being proposed.
Registered Debt Administrators (or their related corporations) who hold a credit licence authorising them to provide “credit assistance” can readily to avail themselves of this option and effectively bypass the new reforms.
The changes seem make such agreements less profitable for debt administrators and make it more difficult to make proposals acceptable to creditors when the maximum term of an agreement is now only 3 years.
The maximum 3 year term of a debt agreement brings them into line with the period of bankruptcy which is also 3 years.
What then are the changes recently implemented?
The explanatory memorandum explains the intent to the legislation in these terms:
The Bill will effect a comprehensive reform of Australia’s debt agreement system. ………….
 Significant measures in the Bill make provision for:

the types of practitioners authorised to be debt agreement administrators
registration, deregistration and the obligations of debt agreement administrators
formation, administration, variation and termination of debt agreements
protections against debt agreements that cause financial hardship or have other defects, and
powers of the Inspector-General in Bankruptcy (Inspector-General) with respect to debt agreements and debt agreement administrators.

It is intended that the measures in the Bill will boost confidence in the professionalism of administrators, deter unscrupulous practices, enhance transparency between the administrator and stakeholders, and ensure that the debt agreement system is accessible and equitable.
Some of the more significant reforms include:

Nature of reform
More Details

length of debt agreements
Maximum three years,
 
Except where debtor owns and has equity in real property, in which case, maximum 5 years.
 
Ability to extend existing debt agreements up to 5 years if debtor circumstances deteriorate

Impose maximum payment to income ratio
This ratio has not yet been prescribed.
 
The reforms are designed to prevent a debtor from giving the Official Receiver a debt agreement proposal if the total proposed payments under the agreement exceed the debtor’s yearly after-tax income by a prescribed percentage (the payment to income ratio)
 

Asset Threshold
The reforms double the maximum asset threshold – now currently $231,467.00 as at 27 June 2019 (note that debt threshold is currently $115,733.80)

Reimbursement of expenses
Greater transparency around seeking reimbursement of expenses

Proposals to vary debt agreements
Administrator has duty to ensure that certificate to vary debt agreement is correct.

Undue hardship to debtor
Official Receiver can refuse to accept an agreement proposal if they reasonably believe that complying with the agreement would cause undue hardship;

Voting by related parties prohibited
Often debt administrators are related to credit providers. Related credit providers will not be allowed to vote on proposal made

Insurance
Debt Administrators required to obtain and maintain adequate and appropriate professional indemnity and fidelity insurance;
 

Disclose Relationships
Debt Administrators required to disclose details of any broker or referrer relationships, including details of payments made;

 
These reforms have the potential to reshape the debt administration industry. It will be interesting to review how the changes have impacted the industry after the reforms have been in place for 12 months.
Reforms to Debt Administration Agreements showing potential to reshape the debt administration industry | Hunt & Hunt Lawyers

ASIC has proposed to ban unsolicited telephone sales of life insurance (including funeral insurance) and Consumer Credit Insurance (CCI) when sold with general or no advice. This proposed ban will even extend to financial advisers who make unsolicited telephone sales of direct life insurance where general or no advice is given.
As explained in its Consultation Paper 317 released on Thursday 19 July, the expression “life insurance” includes all ‘life risk insurance products’ as defined in sections 761A and 764A(1)(e) of the Corporations Act 2001. Specifically, it includes life insurance products including term life insurance, accidental death insurance, trauma, total and permanent disability insurance (TPD), funeral insurance and income protection insurance.
Direct telephone sales of these products are currently permitted if certain requirements are met as outlined in section 992A(3)(a)–(e) of the Corporations Act.  Regulatory Guide 38 explains the scope and limits of the current exemptions.
In February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) recommended that the hawking of insurance and superannuation products should be prohibited and a legislated definition of ‘unsolicited’ should be introduced. The Government responded to this recommendation by committing to strengthen and clarify the prohibition on hawking in s992A, including defining ‘unsolicited’.
Rather than wait until the legislation is changed, ASIC intends to use modification power in s992B(1)(c) of the Corporations Act to implement this ban:
C1:  We intend to use our modification power in relation to the hawking provisions in the Corporations Act to prohibit unsolicited telephone sales of life insurance (including funeral insurance) and CCI, when only general advice or no advice is given at the point of sale.
By using its modification powers now, ASIC’s proposed ban will provide interim protections to consumers ahead of broader law reform by the Government.
ASIC could have intervened by using its new “product intervention powers”, but has formed the view that use of its modification power is more appropriate.
ASIC’s rationale for the proposed changes is:
Imposing a ban on unsolicited telephone sales of direct life insurance and CCI would address the concerns raised in our reviews that current industry practices can result in consumers paying for life insurance and CCI policies that are not suitable for their needs. Such a ban would promote informed decision making and reduce consumer harms. 
We consider that the proposed ban appropriately:  
(a) ensures that consumers have an opportunity to consider their needs and the products available before taking out an insurance policy; and 
(b) reduces the likelihood that consumers will be sold insurance products that are not necessary or suitable. (CP317 59-60)
ASIC is also seeking views on whether the prohibition on unsolicited telephone contact should be extended to other financial products provisions, such as other insurance and superannuation products, currently captured by the hawking provisions.
The timelines proposed for the Consultation process are:

Stage 1
18 July 2019
ASIC consultation paper released

Stage 2
29 August 2019
Comments due on the consultation paper
Review submissions and make policy decision

Stage 3
December 2019
Consider changes to existing regulatory guidance
Consult on possible draft instrument

Stage 4
March 2020
Finalise instrument

Things to watch out for:
The scope of the changes will to a large extent be determined by how ASIC updates Regulatory Guide 38 and in particular how ASIC defines the expression “unsolicited”. This will be especially relevant in the context of cross selling and requests by consumers that they be contacted to discuss provision of life insurance products.
One thing is certain – these changes if implemented will radically change how risk based life and other insurance products are sold in Australia.
Hold the Phones! ASIC moves to ban unsolicited telephone sales of direct life insurance and consumer credit insurance | Hunt & Hunt Lawyers