Review of the Hire-Purchase Act 1959

Chapter Four

AN OVERVIEW OF HIRE-PURCHASE LEGISLATION IN OTHER STATES

4.1 Hire-Purchase Acts are operative in Northern Territory, Queensland, Tasmania, and Western Australia. They have been repealed in the Australian Capital Territory, New South Wales and South Australia.

4.2 In Queensland, Victoria and Western Australia the hire-purchase legislation applies to hire-purchase transactions that are not affected by their Credit Acts. Transactions for farmers and small business fall outside the Credit Acts and consequently come under the Hire-Purchase Acts. Until only very recently hire-purchase has been regulated for both consumer and commercial purposes Tasmania and the Northern Territory.[1] In the Australian Capital Territory, New South Wales and South Australia hire-purchase is subject to general credit laws and unregulated by specific legislation.

4.3 Credit Acts in the Australian Capital Territory, New South Wales, Northern Territory, Queensland and Western Australia generally regulate contracts for the hire of commercial vehicles and farming machinery.

4.4 In Victoria the business use exception within the Credit Act results in all hire purchase transactions involving commercial vehicles or farming machinery being exempt from the regulatory regime of the Credit Act.

* The Act will become redundant over the next five years.

OPTIONS TAKEN BY OTHER STATES

4.5 New South Wales and Queensland have enacted legislation to provide specific protection for farmers. Tasmania has introduced legislation to gradually deregulate commercial lending transactions in that state.

New South Wales

Contracts Review Act 1980 (NSW)

4.6 The Contracts Review Act 1980 addresses matters involving unconscionable contracts and provides for the re-opening of harsh and unconscionable contracts. The legislation is beneficial and must be interpreted liberally,[2] while regard must be given to the public interest.[3] The Act deals with conduct up to the making of the contract and the terms of the contract itself. Once the contract is made, the way it operates in the future is not within the scope of the Act. Jurisdiction is conferred to hold a contract to have been unjust, unconscionable, harsh or oppressive, in the circumstances, at the time it was made.

4.7 In determining whether a contract is unjust the matters to be considered by the Court are to include the following-- the material inequality in bargaining power between the parties; the absence of prior negotiation, any inability to protect one's interests in a reasonable manner; the relative economic circumstances, educational background and literacy of the parties; the physical form of any written contract and the intelligibility of its language; the existence of independent advice; any exertion of undue influence, unfair pressure or unfair tactics.[4]

Farm Debt Mediation Act 1995 (NSW)

4.8 The Farm Debt Mediation Act 1995 specifically addresses debt incurred by a farmer whether as a natural person or a corporation. The object of this Act is to provide mediation on farm debts before a creditor can take possession of property or other enforcement action under a farm mortgage.[5]

4.9 The Act which commenced operation on 12 February 1995 provides that a credit provider cannot take enforcement action under a farm mortgage until at least 21 days notice of serving a farmer with notice of intended enforcement action and the availability of mediation under the Act. A farmer may within 21 days after such a notice is given, notify the creditor requesting meditation. The Rural Assistance Authority is required to make arrangements for mediation for the purposes of the Act. The Committee was advised by Chief Parliamentary Counsel the application of the Act to mortgages of farming land and machinery used in connection with farming makes it broader than the Victorian Hire-Purchase Act.[6]

4.10 In a review of the administrative operations of the Act, the Farm Debt Mediation Review Committee reported to the Minister for Agriculture that following fifteen months operation of the Act there had been 165 mediations. In brief summary, the materials submitted to the review Committee put the view, that the Act was not working as well as intended. Nevertheless, on the whole most were in favour of maintaining the basic framework of the Act. In its submission to the Review Committee, the NSW Farmers Federation favoured farm debt mediation provided it is structured on a completely equitable basis.[7] The main issues highlighted by the Review Committee were categorized as--

1. A power imbalance between the creditor and farmer
2. High expectations coupled with a lack of knowledge regarding the operation and outcomes of the Act
3. A lack of clarity on many issues within the Act
4. Refinement of the administration of the Act
5. The need to actively market and promote the Act
6. Future - research and funding

The Review Committee made 35 recommendations addressing the above mentioned concerns.

Northern Territory

4.11 The hire-purchase legislation was repealed in the Northern Territory to co-incide with the coming into effect of the Consumer Credit Code.[8]

Queensland

Credit (Rural Finance) Act 1996 (Qld)

4.12 The Credit (Rural Finance) Act 1996 (Qld) was introduced to coincide with the commencement of the Consumer Credit Code. With the commencement of the Code, which replaces the Credit Act, farmers entering new credit contracts for the purchase of farming equipment would not come within the ambit of the Code.

Farming these days is a business, and as the Code will only apply to credit provided for a personal, domestic or household purpose, credit extended to a farmer for the purchase of farming equipment will be outside its scope.

The policy objective of the legislation is the continuation of the protection available to farmers contained in the Queensland Credit Act. Section 116 provides for a moratorium of 12 months in some circumstances before farm machinery can be repossessed by a mortgagee.[9] The primary objective of the statute is to give farmers the right to apply to a court for a moratorium of up to twelve months against repossession and/or sale of their farming equipment by mortgagees.

4.13 Further, the provisions of the Credit (Rural Finance) Act 1996 complement the Hire Purchase Act 1959 (Qld) which allow a farmer who hires farming goods under a hire-purchase agreement to apply to a court for a moratorium of up to 12 months against repossession of the goods by the owner.[10]

4.14 Chief Parliamentary Counsel advised the Committee that section 13 (1) provides that where--

the mortgagor has defaulted under a mortgage in respect of equipment and the mortgagee has exercised, or purported to exercise, a right under the mortgage to take possession of the equipment; or

the mortgagor has given the mortgagor a default notice in accordance with the Act in respect of farming equipment--

the mortgagor may apply to the court for a relieving order if the mortgagee has not taken possession of the equipment or, if the mortgagee has taken possession of the equipment, has not disposed of the equipment.

The court may order the mortgagee return the equipment to the mortgagor or not take possession of, or sell, the equipment for a period not exceeding twelve months.[11]'

Tasmania

4.15 The Consumer Credit (Miscellaneous Amendments) Act 1995 was introduced to remove the application of the Money Act 1915 and the Hire Purchase Act 1959 to consumer transactions. These Acts were amended to remove any conflicts with the Consumer Credit Code. The introduction of the Consumer Credit (Miscellaneous Amendments) Act 1996 followed consultation with Tasmanian and national business, which agreed that the early Acts `should no longer apply to commercial transactions in the contemporary market place'.[12] The Minister stated--

While there is agreement among business and government across Australia for more comprehensive and uniform laws for consumer credit, there is also agreement for the deregulation of commercial transactions. Therefore, this (has the effect of) deregulating commercial lending transactions in Tasmania.

4.16 The effect of the amendments is to provide that any contracts made under existing law before the commencement of the Act will continue to be regulated by existing legislation for the life of that contract. Any contracts entered into after that date will be unregulated. The Tasmanian government has not enacted specific protective legislation for farmers.

Western Australia

4.17 The Hire Purchase Act 1959 (WA) was assessed for review by the Legislative Council Legislation Committee in relation to the Consumer Credit (Western Australia) Bill 1995.[13] The Committee in that State determined that the repeal of the HPA (WA) essentially was a matter of government policy and that the Western Australian Government appeared to intend for the HPA to remain operative. A recommendation of that Committee was to review the operation of the HPA twelve months after the introduction of the Consumer Credit Code .

Last update 29/01/97 ©Parliament of Victoria