Proceedings under the National Consumer Credit Protection Act 2009

[41-000] Introduction

Commencing on 1 April 2010, the National Consumer Credit Protection Act 2009 (Cth) (the Act) introduced a National Credit Code (the Code) (contained in Sch 1 to the Act) that replaced the previous state-based Uniform Consumer Credit Code (the former Code).

Under the former Code, in New South Wales, the Consumer, Trader and Tenancy Tribunal (CTTT) had exclusive jurisdiction in respect of certain prescribed sections and shared jurisdiction with the courts in respect of all other parts.

Upon the referral of the area of consumer credit by the States and Territories to the Commonwealth and the introduction of the new Act and Code, some changes have occurred. Although the new Code largely replicates the former Code, consumer credit matters are now regulated solely by the Australian Securities and Investments Commission (ASIC) and matters previously determined by tribunals such as the CTTT must now be heard in court.

[41-020] Jurisdiction

Section 187 of the Act confers a civil jurisdiction on the Local Court in relation to matters arising under the Act, including the National Credit Code. In general terms, the Code applies to the provision of credit for a charge to a natural person or strata corporation, to be used wholly or predominantly for personal, domestic or household purposes or in relation to investment in residential property, by a credit provider carrying on business in Australia: see s 5 of the Code.

The conferral of jurisdiction in s 187 is subject to the court’s “general jurisdictional limits, including limits as to locality and subject matter”.

Section 199 sets out a range of proceedings that are to be dealt with as small claims proceedings if the plaintiff elects for the small claims procedure to apply. In view of the limitation in s 187, the Small Claims Division’s jurisdictional limit of $10,000 applies to such proceedings (s 29 Local Court Act 2007), notwithstanding s 199 providing generally for the availability of small claims procedure in matters where the maximum monetary value of the credit contract (as opposed to the amount outstanding under the credit contract) is $40,000.

The apparent effect of s 199 is to entitle a plaintiff to elect for the small claims procedure set out in the Act to be applied, including General Division matters where the quantum is between $10,000 and $40,000. This includes provision that:

  • the court is not bound by any rules of evidence and procedure: s 199(5)

  • leave of the court is required for a party to be represented by a lawyer: s 199(7). In granting leave, the court may impose conditions designed to ensure that no other party is unfairly disadvantaged: s 199(8).

  • costs may only be ordered against a party where the court is satisfied that the party brought the proceedings vexatiously or without reasonable cause, or that an unreasonable act or omission of the party caused the other party to incur the costs: s 200(2).

[41-040] Proceedings in relation to credit contracts under the former Code

Transitional provisions make arrangements for the Code to apply to certain contracts, made before 1 July 2010 to which the former Code applied. Section 3 Sch 1 National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 provides that the Code applies if the contract is a “carried over instrument”, that is, an instrument:

  • that was made before 1 July 2010 and in force immediately before that date, and

  • to which the former Code applied immediately before 1 July 2010. In general terms, the former Code applied in similar circumstances to the new Code, namely where:

    • the debtor is a natural person ordinarily resident or strata corporation formed in NSW

    • the credit is or is intended to be provided wholly or predominantly for personal, domestic or household purposes

    • a charge is or may be made for providing the credit, and

    • the credit provider provides the credit in the course of a business of providing credit, or as part of or incidentally to any other business of the credit provider.

[41-060] Proceedings in the Local Court

A wide range of matters arising under the Code can be dealt with in the Local Court.

The most frequently encountered matters are those in which a credit provider seeks an order to enter residential premises and repossess mortgaged goods (usually a motor vehicle) under s 100 of the Code. The section simply provides:

The court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, authorise the credit provider to enter residential premises for the purpose of taking possession of mortgaged goods.

The proceedings are brought against the debtor under the credit contract and/or another person who has possession of the mortgaged goods.

Often, the credit provider will also seek an order for delivery up of the mortgaged goods under s 101(1) of the Code, which provides that:

The court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, order a person who has possession of the goods to deliver them to the credit provider at a specified time or place or within a specified period.

The following paragraphs focus on proceedings where an order under s 100 of the Code is sought.

A plaintiff cannot elect to have the small claims procedure apply to proceedings for an order under s 100 of the Code where the quantum is between $10,000 and $40,000: see s 199 of the Act for the proceedings to which the small claims procedure may apply.

[41-080] Identification of the defendant

In some instances the plaintiff may seek to subpoena the records of a third party such as the Roads and Maritime Services in an attempt to locate the debtor or person with possession of the mortgaged goods.

Subject to the requirements of the relevant rule being met, the appropriate procedure for ascertaining the whereabouts of a prospective defendant is preliminary discovery under r 5.2 Uniform Civil Procedure Rules 2005 (UCPR). An application for preliminary discovery is made by summons and must be supported by an affidavit that addresses the facts relied upon and specifies the kinds of information or documents sought.

An applicant may seek preliminary discovery in respect of the details of multiple prospective defendants in the one application and need not make separate applications for each: see, for example RTA (NSW) v Care Park Pty Limited [2012] NSWCA 35 at [22].

[41-100] Commencement of proceedings

Proceedings should be commenced by summons in accordance with r 6.4(h) UCPR, which provides for this type of originating process where an application is made under any Act other than the Civil Procedure Act 2005.

The summons should be accompanied by a supporting affidavit, to which a copy of the contract is annexed, that addresses matters arising under the Code including the following:

  • Whether the contract is a “credit contract” to which the Code applies: see ss 4 and 5(1) of the Code. If the contract was made prior to 1 July 2010, the affidavit should address whether it is a “carried over instrument”: see [41-040].

  • The goods to which the proceedings relate.

  • The amount owing under the credit contract. Section 91(1) of the Code provides that a credit provider is not, without the court’s consent, able to repossess mortgaged goods where the amount owing is less than 25 per cent of the amount of credit provided under the contract or $10,000, whichever is less.

    The section also provides for certain exceptions. For example, s 91(1) of the Code does not apply where the credit provider believes on reasonable grounds that the debtor has removed or disposed of the mortgaged goods, or intends to do so, without the credit provider’s permission. If an exception is relied upon, it should be addressed.

  • The address in respect of which the entry order is sought. Section 100 of the Code specifies that the address is to be a “residential address”.

  • Steps taken prior to the commencement of proceedings. This may include a request to an occupier for entry to premises to take possession of mortgaged goods under s 99 of the Code. See cl 87 of the regulations as to the requirements for the proper making of a request.

  • A jurisdictional link that allows the proceedings to be brought in New South Wales. Regulation 36(3) of the National Consumer Credit Protection Regulations 2010 provides generally that a court proceeding relating to a credit contract under the Code must be brought in a court of the State or Territory where the debtor ordinarily resides. Regulation 36(8) provides for an exception where the contract is not a standard form contract (within the meaning of s 12BK Australian Securities and Investments Commission Act 2001 (Cth)) and provides for a court proceeding in relation to the contract to be brought in a particular State or Territory.

It is not uncommon for proceedings to incorrectly be brought as application proceedings under s 45 Local Court Act 2007. There is no procedure for the transfer of application proceedings to the civil jurisdiction and in such instances the application proceedings should be dismissed for lack of jurisdiction.

Ascertain whether the person who commenced the proceedings is entitled to commence and carry on those proceedings on behalf of the credit provider. It may be necessary to make orders as to the future conduct of the proceedings if the person is not so entitled. Commercial agents cannot commence and carry on proceedings on behalf of a credit provider for an order under s 100 of the Code. See Civil Trials Bench Book, Local Court at [1-0890] and By whom proceedings may be commenced and carried on at [2-5410].

[41-120] Service of summons

Before determining the proceedings, ascertain that the defendant has been served with the summons.

A credit provider may seek to argue that it is not required to serve the summons and supporting affidavit upon the defendant, with reliance placed on s 194 of the Code. As a matter of procedural fairness and having regard to the Code and the Act, as well as the UCPR, this argument should not be accepted.

Section 194(2) of the Code provides that a credit provider is relieved of an obligation to give a notice or other document to a person if a reasonable but unsuccessful attempt has previously been made. The provision is a general one that applies “to notices or other documents that are required to be given for the purposes of this Code” but makes no reference to court proceedings.

It is doubtful that the section is intended to extend to regulation of the service of originating process or other court documents at the expense of the local provisions applying in each court exercising jurisdiction under the Act, because the Code is silent on matters relating to court practice and procedure.

By contrast, the Act does expressly regulate court process in some areas, such as in the specification that certain matters can be dealt with as small claims proceedings in s 199.

In the absence of any specific instruction for other aspects of court practice and procedure such as service of originating process, it can be inferred that the local provisions apply.

Accordingly, service should be effected in accordance with r 10.20(2)(b) UCPR relating to service of originating process in the Local Court. The option of seeking an order for substituted service pursuant to r 10.14 is available to a credit provider in the event that it cannot practicably effect service on the defendant in the manner directed by r 10.20(2)(b) UCPR.

[41-160] Enforcement expenses and costs

A credit provider may seek to recover its reasonable enforcement expenses under s 107 of the Code. Enforcement expenses of a credit provider extend to those reasonably incurred by the use of the staff and facilities of the credit provider.

A credit provider may also seek an order for costs under s 98 Civil Procedure Act. Part F of the Local Court Practice Note Civ 1 applies to the awarding of costs in the General Division, and includes guideline amounts for various tasks or steps in the proceedings.

In matters where an election is made to have the small claims procedure under the Act apply, note the limitation on the circumstances in which the court may make a costs order against a party: see [41-020].

There are limits on the costs that may be ordered if the credit provider is not legally represented in the proceedings. See the NSW Civil Procedure Handbook (Thomson Reuters) at [42.0.580]; J Hamilton, G Lindsay, M Morahan & C Webster (eds), NSW Civil Procedure, Thomson Reuters, Australia, 2013 at [r Pt 42.580].