70ACertain cheques taken to be dishonoured

70A Certain cheques taken to be dishonoured

(1) A cheque that is lodged for collection with a financial institution that is not the drawee institution is taken to be dishonoured if the drawee institution becomes a failed financial institution: (a) after the cheque is lodged; and (b) at a time when the cheque has not been settled. The dishonour is taken to occur at the time when the drawee institution becomes a failed financial institution.

Note 1: For when the drawee institution becomes a failed financial institution, see subsection (2).

Note 2: For when a cheque has not been settled, see subsections (3) and (4).

(2) For the purposes of this section, a drawee institution becomes a failed financial institution if, and only if: (a) the institution becomes a body corporate that is a Chapter 5 body corporate within the meaning of the Corporations Act 2001 because the institution is, or is likely to become, insolvent; or (b) someone takes control of the institution’s property for the benefit of the institution’s creditors because the institution is, or is likely to become, insolvent; or (c) the Australian Prudential Regulation Authority: (i) appoints a person to investigate the affairs of the institution, takes control of the business of the institution or appoints an administrator to take control of the business of the institution under section 13A of the Banking Act 1959; and (ii) determines, in writing, that the institution is to be treated as a failed financial institution for the purposes of this Division. (3) For the purposes of this section, a cheque has not been settled if, and only if: (a) it has not been exchanged for settlement under a settlement system that is recognised under subsection (4); or (b) it has been exchanged for settlement under a settlement system that is so recognised but the drawee institution’s liability in respect of the settlement for the exchange that includes the cheque has not been discharged under that system. (4) The Reserve Bank of Australia may, by legislative instrument, determine that a settlement system is a recognised settlement system for the purposes of this section. The Reserve Bank of Australia is to take the public interest into account in determining that a settlement system is a recognised settlement system, and, in doing so, is to have regard to the rules that govern the system.