Late Payment of Commercial Debts (Interest) Bill 2003
First Reading
Late Payment of Commercial Debts (Interest) Bill 2003
First Reading
Download RTF 2002-2003
The Parliament of the
Commonwealth of Australia
THE SENATE
Presented and read a first time
Late Payment of Commercial Debts (Interest) Bill 2003
No. , 2003
(Senator Conroy)
A Bill for an Act to provide for interest to be levied on the late payment of commercial debts arising in relation to contracts for the supply of goods and services, and for related purposes
Contents
A Bill for an Act to provide for interest to be levied on the late payment of commercial debts arising in relation to contracts for the supply of goods and services, and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the
Late Payment of Commercial Debts (Interest) Act 2003.
This Act commences on the day on which it receives the Royal Assent.
The objects of this Act are to:
(a) improve the payment culture by penalising late payments of commercial debts; and
(b) compensate financially vulnerable companies for the impact on their cash flow of receipt of late payments of commercial debts.
In this Act, unless the contrary intention appears:
Commonwealth agency has the same meaning as agency in the Financial Management and Accountability Act 1997.
consumer credit contract means a contract for the supply of credit where the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes.
contract for the supply of goods and services means:
(a) a contract for the sale or transfer of goods; or
(b) a contract for the hire of goods; or
(c) a contract for the provision of services.
excepted contract means:
(a) a contract where the consideration for the sale, transfer, hire or service is not, or does not include, a money consideration; or
(b) a consumer credit contract; or
(c) a contract intended to operate by way of mortgage, pledge or other security.
large corporation means a corporation with a turnover in excess of $20 million per year.
purchaser, subject to section 13, means the buyer in a contract of sale of goods or the person who contracts with the supplier in any other contract for the supply of goods or services.
qualifying contract means a contract for the supply of goods and services, where the purchaser is a large corporation or a Commonwealth agency and the supplier is a small business and both are acting in the course of business, other than an excepted contract.
qualifying debt means a debt created by virtue of a qualifying contract.
relevant day means:
(a) if the supplier and the purchaser agree a fixed
Back to Top or conditional date for the payment of the debt--that day, unless the debt relates to an obligation to make an advance payment; or
(b) if the debt relates to an obligation to make an advance payment--the day on which the debt is treated by section 12 as having been created; or
(c) in any other case--the last day of a period of 30 days commencing on:
(i) the day on which the obligation of the supplier to whom the debt relates is performed; or
(ii) the day on which the purchaser has notice of the amount of the debt or, where that amount is not determined, the sum which the supplier claims is the amount of the debt;
whichever is the later.
small business means an independently owned and operated entity employing less than 20 people on a full-time employment basis.
statutory interest means interest carried by virtue of an implied term in a qualifying contract.
substantial remedy has the meaning given by section 11.
supplier, subject to section 13, means the seller in a contract of sale of goods or the person agreeing with the purchaser to transfer property in goods or provide a service in any other contract for the supply of goods or services.
(1) This Act binds the Crown in each of its capacities.
(2) However, nothing in this Act makes the Crown liable to be prosecuted for an offence.
(1) Statutory interest is payable by the purchaser to the supplier for late payment of qualifying debt in accordance with the terms of this Act.
(2) Statutory interest applies only to qualifying debts.
(1) It is an implied term in a qualifying contract that any qualifying debt created by the contract carries simple interest subject to, and in accordance with, this Part and Part 3 of this Act.
(2) Interest carried under an implied term is treated in the same way as interest carried under an express term.
(1) Statutory interest is applied to a qualifying debt for the period specified in this section.
(2) The application of statutory interest commences on the day after the relevant day for the debt, at the rate applying under section 9 at the end of the relevant day.
(3) The application of statutory interest ceases when the interest would cease to apply if it were carried under an express term in a contract.
(1) The Minister shall, in writing, determine:
(a) a formula for calculating the rate of statutory interest; or
(b) the rate of statutory interest.
(2) In setting the rate the Minister must consider:
(a) the extent to which it may be possible to set the rate so as to protect suppliers whose financial position makes them particularly vulnerable if they do not receive payment of qualifying debts by the relevant day; and
(b) the extent to which it may be possible to set the rate so as to deter in general the late payment of qualifying debts; and
(c) any other relevant matter.
Back to Top (1) Any contract terms are void to the extent that they purport to exclude the right to statutory interest in relation to a debt, unless there is a substantial contractual remedy for late payment of the debt.
(2) Where the parties agree a contractual remedy for late payment of a debt that is a substantial remedy, statutory interest is not carried by the debt, unless the parties agree otherwise.
(3) The parties may not agree to vary the right to statutory interest in relation to a debt unless either the right to statutory interest as varied or the overall remedy for late payment of the debt is a substantial remedy.
(4) Any contract terms are void to the extent that they purport to:
(a) confer a contractual right to interest that is not a substantial remedy for late payment of a debt; or
(b) vary the right to statutory interest so as to provide for a right to statutory interest that is not a substantial remedy for late payment of a debt, unless the overall remedy for late payment of the debt is a substantial remedy.
(5) Subject to this section, the parties are free to agree contract terms which deal with the consequences of late payment of a debt.
(1) A remedy for the late payment of a debt shall be regarded as a substantial remedy unless:
(a) the remedy is insufficient either for the purpose of compensating the supplier for late payment or for deterring late payment; and
(b) it would not be fair or reasonable to allow the remedy to be relied on to oust or to vary the right to statutory interest that would otherwise apply in relation to the debt.
(2) In determining whether a remedy is not a substantial remedy, regard must be had to all the relevant circumstances at the time the terms in question are agreed.
(3) In determining whether paragraph (1)(b) applies, regard must be had to the following matters:
(a) the benefits of commercial certainty; and
(b) the strength of the bargaining positions of the parties relative to each other; and
(c) whether the term was imposed by one party to the detriment of the other; and
(d) whether the supplier received an inducement to agree to the term.
(1) A qualifying debt created by virtue of an obligation to make an advance payment is treated for the purposes of this Act as if it was created on the day specified in subsection (2), (3) or (4).
(2) Where the advance payment is the whole contract price, the debt is treated as if it was created on the day on which the supplier's obligation is performed.
(3) Where the advance payment is part of the contract price, but the sum is not due in respect of any part performance of the supplier's obligation, the debt is treated as if it was created on the day on which the supplier's obligation is performed.
(4) Where the advance payment is a part of the contract price due in respect of any part performance of the supplier's obligation, but is payable before that part performance is completed, the debt is treated as if it was created on the day on which the relevant part performance is completed.
(5) For the purposes of this section an obligation to pay the whole outstanding balance of the contract price is to be regarded as an obligation to pay the whole contract price and not as an obligation to pay a part of the contract price.
The operation of this Act in relation to qualifying debts is not affected by:
(a) any change in the identity of the parties to the contract creating the debt; or
(b) the passing of the right to be paid the debt or the duty to pay it (in whole or in part) to a person other than the person who was the original creditor or the original debtor when the debt was created.
The Governor-General may make regulations prescribing matters:
(a) required or permitted by this Act to be prescribed; or
(b) necessary and convenient to be prescribed for carrying out or giving effect to this Act.