Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The committee is considering government amendments (8) to (10) and (44) to (46) on sheet BJ236, moved by Senator Evans.

Question agreed to.

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

by leave—I move government amendments (1), (11), (12), (15) to (19), (21) to (24), (36), (41), (47), (48), (51) to (55), (63) and (66) on sheet BJ236 together:

(1)   Clause 2, page 2 (table item 2), omit the table item, substitute:

(11)  Schedule 1, item 1, page 6 (line 20), before “Without”, insert “(1)”.

(12)  Schedule 1, item 1, page 7 (after line 21), at the end of section 4, add:

        (2)    Before the Governor-General makes a regulation for the purposes of subsection (1)(n) prescribing a kind of term, or a kind of effect that a term has, the Minister must take into consideration:

             (a)    the detriment that a term of that kind would cause to consumers; and

             (b)    the impact on business generally of prescribing that kind of term or effect; and

             (c)    the public interest.

(15)  Schedule 1, item 2, page 9 (lines 29 to 31), omit “, and paragraph (b) has not already applied in relation to the contract”.

(16)  Schedule 1, item 2, page 10 (line 3), omit “applies to the contract”, substitute “applies to the term”.

(17)  Schedule 1, item 2, page 10 (after line 6), after subitem (2), insert:

(2A) If paragraph (2)(b) applies to a term of a contract, subsection 2(2) and section 7 of Schedule 2 to the Trade Practices Act 1974 applies to the contract.

(18)  Schedule 1, item 2, page 10 (line 7), after “paragraphs (2)(a) and (b)”, insert “and subitem (2A)”.

(19)  Schedule 1, item 2, page 10 (line 7), after “contract”, insert “, or a term of a contract,”.

(21)  Schedule 1, item 11, page 13 (line 16), omit “(1)”.

(22)  Schedule 1, item 11, page 13 (lines 18 to 20), omit subsection 130(2).

(23)  Schedule 1, item 11, page 13 (line 21), at the end of the heading to section 131, add “etc.”.

(24)  Schedule 1, item 11, page 13 (lines 24 to 26), omit subsection 131(2), substitute:

        (2)    Despite section 130, Part 2 of the Australian Consumer Law does not apply to, or in relation to:

             (a)    contracts that are financial products; or

             (b)    contracts for the supply, or possible supply, of services that are financial services.

(36)  Schedule 2, item 73, page 50 (line 2), after “paragraph (1)(b)”, insert “or (d)”.

(41)  Schedule 3, page 51 (before line 5), before item 1, insert:

        1A Subsections 12AE(1) and (3)

Before “Subdivision C”, insert “Subdivision BA (sections 12BF to 12BM),”.

(47)  Schedule 3, item 7, page 53(line 17), before “Without”, insert “(1)”.

(48)  Schedule 3, item 7, page 54 (after line 20), at the end of section 12BH, add:

        (2)    Before the Governor-General makes a regulation for the purposes of paragraph (1)(n) prescribing a kind of term, or a kind of effect that a term has, the Minister must take into consideration:

             (a)    the detriment that a term of that kind would cause to consumers; and

             (b)    the impact on business generally of prescribing that kind of term or effect; and

             (c)    the public interest.

(51)  Schedule 3, item 8, page 56 (lines 32 to 34), omit “, and paragraph (b) has not already applied in relation to the contract”.

(52)  Schedule 3, item 8, page 57 (lines 5 and 6), omit “applies to the contract”, substitute “applies to the term”.

(53)  Schedule 3, item 8, page 57 (after line 8), after subitem (2), insert:

(2A) If paragraph (2)(b) applies to a term of a contract, subsection 12BF(2) or section 12BK of the Australian Securities and Investments Commission Act 2001 applies to the contract.

(54)  Schedule 3, item 8, page 57 (line 9), after “paragraphs (2)(a) and (b)”, insert “and subitem (2A)”.

(55)  Schedule 3, item 8, page 57 (line 10), after “contract”, insert “, or a term of a contract,”.

(63)  Schedule 3, item 44, page 80 (line 25), after “paragraph (1)(b)”, insert “or (d)”.

(66)  Schedule 3, item 55, page 82 (lines 15 to 20), omit subsection 12GND(1), substitute:

        (1)    The Court may, on the application of a party to a consumer contract or on the application of ASIC, declare that a term of such a contract is an unfair term.

     (1A)    Subsection (1) does not apply unless the consumer contract is a standard form contract that is:

             (a)    a financial product; or

             (b)    a contract for the supply, or possible supply, of services that are financial services.

I understand there has been considerable discussion of these amendments and there will not be any need for a prolonged debate.

The delay in the commencing of the unfair contract provisions of the bill to 1 July 2010 or a date fixed by proclamation within six months of royal assent is the subject of these amendments. They seek to specify considerations the minister must take into account when prescribing terms that may be examples of unfair terms, such as the detriment caused to consumers by a term, the impact on business generally and the public interest. The amendments seek to clarify the transitional arrangements for contracts and effects before the commencement of the law, and there are various technical amendments to correct drafting errors in the bill.

Question agreed to.

I move government amendment (38) on sheet BJ236:

(38)  Schedule 2, item 74, page 50 (lines 10 to 12), omit subsection 87AC(1), substitute:

        (1)    The Court may, on the application of a party to a consumer contract or on the application of the Commission, declare that a term of such a contract is an unfair term.

     (1A)    Subsection (1) does not apply unless the consumer contract is a standard form contract.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I move amendment (1) standing in my name on sheet 6093:

(1)   Government amendment no. 38 on sheet BJ236, after “Commission”, insert “or any other person”.

To put it in context, the government’s amendment (38) allows a person who is party to a consumer contract to, along with the ACCC, seek a declaration that a term is unfair. The amendment that I have moved seeks to add ‘or any other person’ to this so as to allow parties such as consumer groups to seek a declaration that a term is unfair on behalf of all Australian consumers who may not be able to do so on an individual basis. So it is a question of standing in terms of any action, and I commend the amendment to the Senate. This is about broadening the category of persons that can actually bring an action, and it is much more practical for a consumer group, an entity representing consumers, to take this matter forward, rather than relying on either the ACCC or an individual to do so.

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

The government’s position is that Senator Xenophon’s proposed amendment is unnecessary and would not add anything to the provision. What the original, government amendment seeks to do is clarify that an individual party to a contract, rather than a regulator only, has standing to apply to a court for the declaration that a contract term is unfair. At the Commonwealth level, this standing is already granted by the federal courts act 1996. However, this amendment is necessary to ensure that individuals can access state courts and tribunals under the applied Australian consumer law.

Question negatived.

Original question agreed to.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

by leave—I move amendments (3), (4) and (8) standing in my name on sheet 5898 together:

(3)    Schedule 1, item 1, page 6 (after line 18), at the end of section 3, add:

        (5)    A term of a consumer contract is presumed not to be unfair if it has been authorised by the Commission in accordance with section 3A.

(4)    Schedule 1, item 1, page 6 (after line 18), after section 3, insert:

3A  Commission may authorise model terms in consumer contracts

        (1)    The Commission may authorise:

             (a)    model industry contracts; and

             (b)    model contract terms; and

             (c)    specific variations of a standard form contract; and

             (d)    specific contract terms of a standard form contract.

        (2)    An authorisation under subsection (1) may be made:

             (a)    on application by a party to a potential consumer contract; or

             (b)    on application by an industry association; or

             (c)    on application by or on behalf of persons or classes of persons prescribed by the regulations.

        (3)    An application under subsection (2) must:

             (a)    identify the person making the application; and

             (b)    include any other information prescribed by the regulations; and

             (c)    be in the form prescribed by the regulations.

        (4)    In considering whether to make an authorisation under subsection (1) the Commission must have regard to:

             (a)    whether the proposed contract terms reflect a reasonable balance between the rights and obligations of the parties of the contract; and

             (b)    where the contract term or terms relate to the imposition of a fee or charge for the provision of a service—whether the fee or charge is reasonably proportional to the justifiable costs or costs of providing the service; and

             (c)    whether the contract term or terms are reasonably necessary to protect the legitimate interests of the larger party; and

             (d)    any other matter prescribed by the regulations.

        (5)    Prior to making an authorisation under subsection (1), the Commission must:

             (a)    publish the application on its website for the purposes of public consultation for a minimum of 30 days; and

             (b)    accept and consider submissions in relation to the proposed authorisation; and

             (c)    do anything else prescribed by the regulations.

        (6)    The Commission must notify an applicant under subsection (2), in writing, of a decision to make, or not to make, an authorisation, within 42 days of the end of the consultation period.

        (7)    The Commission must keep a register of authorisations which are made in accordance with subsection (1) and publish the register on its website.

        (8)    An authorisation made under subsection (1) is not a legislative instrument.

(8)    Schedule 3, item 7, page 53 (after line 15), at the end of section 12BG, add:

        (5)    A term of a consumer contract is presumed not to be unfair if it has been authorised by the Australian Competition and Consumer Commission in accordance with section 3A of Schedule 2 of the Trade Practices Act 1974.

These amendments—and I am grateful for the advice of Associate Professor Frank Zumbo in relation to these amendments—are designed to include a provision in this bill for safe harbours, thereby providing greater business certainty. Under these safe harbours, businesses and business associations can choose to approach the ACCC to seek approval or authorisation of particular contracts or contract terms. The ACCC would review the contract or contract term against the legislative set of criteria for the granting of the safe harbour, and these approvals or authorisations would be an exemption to the unfair contract terms provisions of the legislation. The legislative criteria to be applied by the ACCC in granting an authorisation would include the following requirements: that the contract term or terms reflect a reasonable balance between the rights and obligations of the parties to the contract; further, where the contract term or terms relate to the imposition of a fee or charge for the provision of a service, that the fee or charge is reasonably proportional to the justifiable cost or costs of providing the service; and that the contract term or terms are reasonably necessary to protect the legitimate interests of the larger party. Under this mechanism, the ACCC can authorise model contracts or model contract terms and, as a result, facilitate the development of fairer contracts or contract terms which can apply to whole industries in contract groups.

I am grateful to Senator Bushby for his comments in his contribution to this. I think it is fair to say that Senator Bushby found the concept interesting and was attracted to the concept in terms of it being a way forward. I know that is not the coalition’s position at this stage, but I would urge honourable senators to consider this as a sensible way forward. It would actually work. If the government are not going to support it now, which I suspect they will not, will the government at least consider this, have this on the agenda, as a way forward in terms of a practical implementation of consumer laws?

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

The government is not able to support Senator Xenophon’s amendments. The safe harbour regime as proposed has been looked at by other bodies, including the Productivity Commission. The advice I have been given is that that proposal has been rejected on the grounds that it would actually add to the complexity, with limited benefit to be derived. The safe harbour regime as proposed would impose a higher resource burden on the regulator and would place the regulator in a position of determining unfairness, which is not appropriate because that is the job of the courts. The safe harbour decisions would be open to legal challenge but not add a useful protection to any business, and the regulator would find it very difficult to offer a comprehensive view on a single type of standard form contract in the many different circumstances in which such propositions tend to be used.

Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Link to this | Hansard source

Very briefly, the coalition concurs with those remarks. It has stated that it sees that the safe harbour provisions, although there is some merit in the proposal, would lead to increased compliance costs associated with having the ACCC review this process and, as such, will not be supporting the amendments.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Without delaying this part of the debate, I would be grateful if the government could provide to me in due course the matters raised in terms of the Productivity Commission and the other concerns so there can be an ongoing discussion when consumer legislation is brought up again. I am disappointed that Senator Joyce last night was full of sympathy for my amendments but has no sympathy this morning! I will see if there is any sympathy from the coalition for my remaining two amendments.

Question negatived.

I move my amendment (5) on sheet 5898:

(5)    Schedule 1, item 1, page 9 (after line 23), after section 8, insert:

8A  This Part applies to contracts of insurance

                 Despite section 15 of the Insurance Contracts Act 1984, this Part applies to contracts of insurance.

Under section 15 of the Insurance Contracts Act, insurance contracts are excluded from the operation of any act, Commonwealth, state or territory based, that provides relief in the form of a judicial review of harsh or unfair contracts. This amendment is designed to delete this exemption. To allow insurance contracts to remain exempt from this bill would undermine its intent, which is to provide safeguards for consumers against unfair contract terms.

Insurance contracts can be incredibly confusing, lengthy and jargon filled and in most cases are not clearly understood by consumers. Indeed, it would be unfair to allow this exemption to remain to protect insurance contracts from being subject to unfair contract terms legislation. I commend these amendments. I do not see why the insurance industry should be exempt from legislation that is aimed at targeting unfair contract terms when one of the biggest sources of difficulties for consumers is the way that insurance contracts are drafted and interpreted, and consumers have to fight for their rights with a very unlevel playing field.

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

The government does not support this amendment. As drafted, the national unfair contract term law does not apply to the insurance contracts. This is because section 15 of the Insurance Contracts Act 1984 provides that contracts for insurance cannot be made the subject of relief under any other Commonwealth, state or territory legislation. It is my understanding that Minister Bowen, the Minister for Financial Services, Superannuation and Corporate Law, will be issuing an options paper on the application of unfair contract terms shortly as related to insurance contracts.

Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Link to this | Hansard source

Ninety-eight per cent of claims are paid in insurance; only 0.065 of one per cent end up going to the ombudsman. That seems to indicate that the system is working appropriately. If there was greater recognition that there were more problems in the insurance industry then we would be more inclined to support this amendment, but at this stage the coalition will not be supporting it.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Without unnecessarily delaying the debate, I welcome the government’s commitment to look at this. In relation to Senator Joyce’s comments, if the figure is 98 per cent, I think you will find that for certain categories of insurance contracts, particularly for personal injury policies or disability insurance, the proportion is much higher. I accept that, if it is a case of a motor vehicle accident or a property damage claim, those sorts of things are generally resolved very quickly, but where there are issues of interpretation to deal with personal accident policies I think you will find the proportion is much higher.

Question negatived.

by leave—I move my amendments (3) and (4) on sheet 5891 revised together:

(3)    Schedule 2, item 18, page 31 (line 9), omit “(other than an award of damages)”.

(4)    Schedule 3, item 26, page 69 (line 4), omit “(other than an award of damages)”.

These amendments are designed to ensure recovery of damages for non-party consumers and provide that the court may order damages as it sees fit, including an award of damages. I think it is anomalous that it is unduly restricted in the current legislation framework. This is intended to deal with that anomaly.

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

The government will not be supporting the amendments. The bill as drafted allows a court to make a wide range of orders which it deems appropriate for the non-party consumers, but not an award of damages. The court cannot establish the amount of loss to parties which are not party to proceedings simply because evidence about their individual circumstances is not before that court. The provisions do not prevent an individual from seeking damages in their own individual court proceedings.

Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Link to this | Hansard source

I am very sympathetic to Senator Xenophon that he has not had much support here today, but I would remind him that maybe in the future he might get a little bit more sympathy than he has got in the past. However, on this occasion, Senator Xenophon, I have to say that, although we are very sympathetic about your statements, we do not see that the broad powers that the court has to redress applicants will be assisted or deterred by the amendments. Therefore, in this instance I am very sorry to say that, although extremely sympathetic, we will not be supporting them.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I feel as though I should get a ‘with deepest sympathy’ card from Senator Joyce because of all the amendments he has helped kill off!

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

You might get a St Patrick’s Day card instead.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I appreciate the government’s position and the opposition’s position. I think these are matters that will need to be revisited. I infer by Senator Carr’s comments earlier that Minister Bowen is looking at some of these matters in terms of insurance contracts. I still think this has been a lost opportunity. We could have gone further; we could have put in some further sensible reforms for the benefit of consumers. My concern is that this legislation will not give the degree of protection to consumers that it was intended to give in the first place.

Question negatived.

Bill, as amended, agreed to.

Bill reported with amendments; report adopted.