LAW30002: Faculty of Business and Law - Credit Ltd - Second National Ltd - Law Assignment Help

Assignment Task:

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 “mega-code”? Discuss. 

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. B=2. 

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? 

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 psychiatric nurse. 

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 B 

Please answer all questions in this part. Each section is worth 5 marks ( 4 x 5 = 20 marks). For the following questions, please note down the letter (for example: a, b, c, or d) of your response which is most correct and EXPLAIN your answer. Be careful that more than one of the multiple-choice answer options may be correct. 

Question One (5 marks) 

In 1999, Patricia began work as a high school teacher. As part of securing her position at a secondary school Patricia must join the Education Superannuation Fund. Sadly in 2020, Patricia died from covid-19. Patricia was survived by her de facto partner, Charles. Charles and Patricia had begun their romantic relationship in 2005 and, except for a “break” between 2016 and 2018, had lived with each other since 2010. The Trustee refused to pay Patricia’s superannuation “death benefits” to Charles on the basis that he could not prove that he was in a relationship with Patricia. 

Charles wishes to have the AFCA review this decision. 

(a) Charles will not be successful because this was a fair and reasonable decision.

(b) Charles will not be successful because the AFCA does not review Superannuation complaints.

(c) Charles will be successful because this was not a fair and reasonable decision.

(d) None of the above answers are correct. 

Question Two (5 marks) 

Freight Company was insured against ‘loss, damage or liability’ to any of its trucks. An endorsement on the policy excluded liability if the driver did not have “all relevant licenses” (Car Licence, Heavy Vehicle Licence). Can the insurer refuse a claim if a driver, who had 25 years’ experience driving in India and held all relevant licenses in India, had driven a truck that was damaged in an accident? 

(a) No, the duty of utmost good faith does not apply to the insured.

(b) Yes, the insured has engaged in misleading and deceptive conduct by remaining silent.

(c) No, the requirement only stated “licenses” not Australian or Victorian licenses.

(d) None of the above answers are correct. 

Question Three (5 marks) 

Fred and Wilma recently got married and plan to purchase life insurance. They spoke to Barney an insurance broker. He recommended a Life Insurance policy with HealthForever Ltd. The couple questioned a few of the terms of the policy such as clause 13, which stated: 

“This policy will be rendered void if a party becomes infected with Covid-19.” 

Barney responded to their query as follows: 

“Look it is an untested clause which was only recently introduced. To be honest I don’t think it will be actioned, so don’t worry.” 

Reassured the couple each sign their respective life insurance policy. Two months later Fred is diagnosed with Covid-19, and the insurer declares his life insurance policy void. 

Advise Fred. 

(a) Clause 13 is an unfair term and should be declared “void” by the Courts.

(b) HealthForever Ltd owes Fred and Wilma a duty of care to provide accurate information regarding the terms of the contract.

(c) None of these answers are correct. 

Question Four (5 marks) 

Mandarin recently migrated from the United Republic of Orangeland (URO). He has started working as a chef at the Hilton Hotel in Melbourne, and is unsure about which Superannuation fund he should join. He approaches a broker, Michael, who advised that he should join a fund called HelpMe Super Fund. He told Mandarin to check the fund’s website where he can find a PDS and FSG that outlines the details of the fund. After a few days, Michael sent an e-mail to Mandarin as follows: 

“Thanks for your interest Mandarin in our Superfunds. I hope you have found the information you want. Please contact me if you need extra help. However, there is not much more I would add to my advice from the other day. I have attached the policy, which contains much of what I told you, so if you’d like to apply, please sign and return to me as soon as possible. All the best.” Advise Michael and HelpMe Super Fund. 

(a) Michael has failed to comply with all disclosure requirements.

(b) Michael has not failed to comply with all disclosure requirements.

(c) Michael has engaged in unconscionable conduct.

(d) None of the above answers are correct. 

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