LAW30002 Faculty of Business & Law Finance Law
Semester 1 2020
Answer all questions in this part.
Question One (20 marks)
What purpose do the various codes of practice found in the financial industry (Code
of Banking Practice, ePayments Code, General Insurance Code of Practice, Life
Insurance Code of Practice, Insurance in Superannuation Voluntary Code of Practice
(2018)) serve? Do they achieve their purpose? Could they be combined into one
Question Two (30 marks)
(a) Tracey reported the loss of her ATM card to the bank on 3 February 2020,
saying that the card was in her wallet, which was stolen from her house on 16
December 2019. Also, in the wallet was her driver’s licence with her date of
birth (1/2/1980) and address. Tracey also had a quote from the bible on a piece of
paper. The quote was from Romans 15:13 (‘May the God of hope fill you with all
joy and peace as you trust in him, so that you may overflow with hope by the
power of the Holy Spirit.’). Tracey was dismayed to learn that the thief had
guessed her PIN (1513) after firstly making an unsuccessful attempt by using her
date of birth. The thief used the card to withdraw $3,000 from her savings
account. Her bank is a subscriber to the ePayments Code, and has stated that
warned their customers they will not bear responsibility for any unauthorised
transaction if the passcode is recorded in an easily understood code, e.g. A=1.
Advise Tracey whether she has to bear the loss of $3,000.
(b) Irene conducts a fish wholesaling business called: “Fishy Details”. Her primary
market is the restaurants in Melbourne’s CBD. The business had prospered for
some years, earning approximately $250,000 annually, but deteriorated with the
closure caused by Covid-19 in March 2020. Fishy Details lost 70% of its income
for the months of March through to June.
She approached her bank, Second National Ltd, to increase her overdraft (credit
account) but it refused to extend her any more credit. They justified their decision
by stating that her reduced income was unlikely to improve according to
economists in the bank. Irene argued that since the bank was a subscriber to the
Code of Banking Practice it is obligated to provide her with a new loan due to her
circumstances caused by Covid-19.
Is Second National Ltd obliged by the Code of Banking Practice to provide Irene
with a new loan or to increase the existing overdraft due to her circumstances
caused by Covid-19?
(Part (a) + Part (b) = 30 marks)
Question Three (50 marks)
Wendy approached Credit Ltd, a finance company, for an unsecured loan of $8,000 to
buy a car for private use, and also for her part-time Uber food delivery three nights a
week and on Sundays. Amongst the terms was the following (Clause 14):
“Credit Ltd may by notice in writing to the Borrower, require the
Borrower to immediately pay the outstanding balance of the amount
financed if the Borrower defaults in the punctual payment of any
amount payable under this loan contract.”
Wendy’s repayments of the loan proceeded smoothly for some months until,
unexpectedly, profits declined and her business went into liquidation. This came at a
difficult time because Wendy’s husband was ill with Covid-19 and their cash reserves
were depleted as a result of his medical expenses and his leave from his work as a
Wendy approached a representative of Credit Ltd. She pointed out that she would be
unable to meet her repayments for the time being, and while she was not confident of
immediate alternative employment, her husband would be able to resume work when he
recovered. Credit Ltd’s representative showed little sympathy and stated that the
company had already been generous in granting Wendy a loan despite an adverse credit
reference from Wendy’s bank. Wendy was shocked by this bank disclosure and insisted
that the bank’s reference was wrong. Nonetheless, the representative insisted that Credit
Ltd would enforce its rights if Wendy should fail to meet her payments when due.
(a) Does the National Credit Code and the NCCP Act apply to Wendy’s loan?
(b) Whether Wendy can ask the Court to strike out Clause 14?
(c) Whether Credit Ltd had engaged in misleading and deceptive conduct?
Assuming Credit Ltd had engaged in misleading and deceptive conduct, what
remedies should Wendy seek?
(d) Assume that the National Credit Code and the NCCP Act apply to Wendy’s
loan. Has Credit Ltd engaged in “irresponsible lending”?
(Part (a) + Part (b) + Part (c) + Part (d) = 50 marks)