A new Banking Code of Practice…
On 1 July 2019 the major Australian banks adopted a new Banking Code of Practice.
The new Banking Code of Practice, replaces the 2013 code and applies to the individual customers and small business clients of the banks.
The terms of the new Banking Code of Practice are incorporated as terms in the contract arrangements between the bank and the customer.
The new Banking Code of Practice sets out in clear and simple language the obligation of the banks to provide information about the ethical standards they set for themselves, the ways in which they will meet those standards and the services they provide. There is particular reference to vulnerable members of the community such as the elderly, the disabled and indigenous members of our society. The banks commit to provide information to customers that are most suited to the circumstances of the customer rather than most profitable to the bank.
In addition there is a commitment to train staff to understand and comply with the terms of the new Banking Code of Practice.
It is hoped that the new Banking Code of Practice will see fewer disputes between bankers and costumers and if there are disputes quicker and fairer resolution .
If any of our readers would like a copy of the new Banking Code of Practice please contact Peter Jackson at firstname.lastname@example.org or Costin Stan at email@example.com.
Normal commercial practice sees a financier lose its priority in a caveat dispute…
In early 2017, Cashflow Finance Australia Pty Ltd entered into an agreement with Madebra Enterprises Pty Ltd to provide invoice finance. The agreement provided that the advances could be secured by a caveat over a property at Chipping Norton owned by the guarantors of money owing under the facility. Cashflow Finance did not lodge a caveat immediately because they considered that it would not be a “good selling point“. However, by November 2017, Cashflow Finance considered that Madebra was in default and lodged a caveat on the Chipping Norton property .
In early in 2017 a short term lender, LTDC Pty Ltd, advanced $150,000 to Madebra and lodged a caveat on the Chipping Norton property to secure the loan .
The argument before the Supreme Court of New South Wales was whether the later caveat of Cashflow Finance should take priority over the caveat of LTDC Pty Ltd.The starting position is that the first registered caveat has priority. To decide whether the order of priority should be changed, Justice Darke agreed with a submission put to him that all of the circumstances of the case should be looked at including what happened at the time of acquiring the equitable interest that could have been protected by the lodgment of a caveat.
Cashflow Finance regarded its right to lodge a caveat to secure its position as secondary security. The failure of Cashflow Finance to lodge a caveat is explained by their normal commercial practice which was the same across the industry. Cashflow Finance admitted that they were prepared to take the risk of not lodging a caveat and understood that another party might lodge a caveat that would have priority over their own.
Cashflow Finance criticized the due diligence conducted by LTDC and argued that if enquiries were made of Madebra the finance facility and the right to lodge a caveat of Cashflow Finance would have been discovered. His Honour rejected this criticism because of the nature of the loan advanced by LTDC.
In all the circumstances, His Honour found that the priority that LTDC enjoyed because they were first registered should not be disturbed. At the time of the hearing, the property had been sold and the balance of the sale price after payment of the first mortgage was held in a solicitor’s trust account. Because of the interest payable all of this money was ordered to be paid to LTDC and Cashflow Finance was ordered to pay the costs of LTDC in relation to the proceedings.
What appeared to be good commercial practice had disastrous consequences when it came to recovering the money owing.