(3) However, a goods mortgage need not be in the form of a written mortgage document if the credit provider lawfully had possession of the goods that are subject to the mortgage before the mortgage was entered into, otherwise than because the credit provider supplied the goods (for example, the goods were held by way of security).
(4) A mortgage is not enforceable unless it complies with this section.
43 Copy of mortgage for mortgagor
(1) If a mortgage is in the form of a written mortgage document and is not part of a credit contract, the credit provider must give the mortgagor a copy to keep, in the form in which it was made, within 14 days after it is made.
(2) This section does not apply if the credit provider has previously given the mortgagor a copy of the mortgage document to keep.
44 Mortgages over all property void
(1) A mortgage that does not describe or identify the property which is subject to the mortgage is void.
(2) Without limiting subsection (1), a provision in a mortgage that charges all the property of the mortgagor is void.
45 Restriction on mortgage of future property
(1) A provision in a mortgage to the effect that the mortgagor creates or agrees to create a mortgage over or in respect of property or a class of property that is to be, or may be, acquired by the mortgagor after the mortgage is entered into is void.
(2) However, this section does not apply:
(a) to a provision in a mortgage of property that is to be acquired wholly or partly with the credit provided under the credit contract secured by the mortgage; or
(b) to a provision in a mortgage relating to property or a class of property (whether or not ascertained) described or identified in the mortgage; or
(c) to a provision in a mortgage relating to goods acquired in replacement for, or as additions or accessories to, other goods subject to the mortgage; or
(d) to any other provision specified by the regulations.
46 Mortgages and continuing credit contracts
(1) A provision in a mortgage to the effect that goods supplied from time to time under a continuing credit contract are subject to the mortgage is void.
(2) However, this section does not apply to a provision in a mortgage relating to specified goods securing payment of a debt under a continuing credit contract.
47 All accounts mortgages
(1) In addition to securing credit provided by the credit contract or proposed credit contract, or securing obligations under a related guarantee or proposed related guarantee, to which a mortgage initially applies, the mortgage may contain a provision that secures credit provided under another future credit contract or future related guarantee.
(2) Any such mortgage is unenforceable in relation to such a future credit contract or future related guarantee unless the credit provider has:
(a) given the mortgagor a copy of the contract document of the credit contract or proposed credit contract or a copy of the guarantee or proposed guarantee to which the mortgage is to relate; and
(b) subsequently obtained from the mortgagor a written acceptance of the extension of the mortgage or obtained acceptance in some other form provided for by the regulations.
(3) Section 42 (Form of mortgage) does not apply to an extension of a mortgage under this section.
48 Third party mortgages prohibited
(1) A credit provider must not enter into a mortgage to secure obligations under a credit contract unless each mortgagor is a debtor under the contract or a guarantor under a related guarantee.
(2) A credit provider must not enter into a mortgage to secure obligations under a guarantee unless each mortgagor is a guarantor under the guarantee or a debtor under the related credit contract.
(3) A mortgage which does not comply with this section is unenforceable.
(4) The court may, on the application of a party to a mortgage that is unenforceable because of this section, order that the credit provider takes such steps as are necessary to discharge the mortgage.
(5) In this section, a reference to a credit contract or guarantee includes a reference to a proposed credit contract or proposed guarantee.
49 Maximum amount which may be secured
(1) A mortgage is void to the extent that it secures an amount, in relation to any credit contract which it secures, that exceeds the sum of the amount of the liabilities of the debtor under the credit contract and the reasonable enforcement expenses of enforcing the mortgage.
(2) A mortgage is void to the extent that it secures an amount, in relation to any guarantee which it secures, that exceeds the limit of the guarantor’s liability under the guarantee and the reasonable enforcement expenses of enforcing the mortgage.
(3) This section does not affect a provision of a mortgage permitted by section 47.
50 Prohibited securities
(1) A mortgage cannot be created over employees’ remuneration or employment benefits or benefits under a superannuation scheme unless the regulations permit it to do so.
(2) A mortgage cannot be created over goods that are essential household property unless:
(a) the mortgagee supplied the goods to the mortgagor as part of a business carried on by the mortgagee of supplying goods and the mortgagor has not, as a previous owner of the goods, sold them to the mortgagee for the purposes of the supply; or
(b) the mortgagee is a linked credit provider of the person who supplied the goods to the mortgagor.
(3) For the purposes of subsection (2), essential household property includes goods of a type prescribed under the regulations.
(4) A type of goods may be prescribed under subsection (3) only if the type is similar to a type of household property mentioned in regulations made under subparagraph 116(2)(b)(i) of the Bankruptcy Act 1966.
(5) A mortgage cannot be created over goods that are property used by the mortgagor in earning income by personal exertion if the goods do not have a total value greater than the relevant limit.
(6) An obligation under a credit contract cannot be secured by a cheque, or bill of exchange or promissory note, endorsed or issued by the debtor or guarantor.
(7) A mortgage or security is void to the extent that it contravenes this section.
(8) In this section:
antique item means an item of household property the market value of which is substantially attributable to its age or historical significance.
essential household property means household property as prescribed under regulations made under subparagraph 116(2)(b)(i) of the Bankruptcy Act 1966.
goods does not include antique items.
relevant limit, in relation to goods, means the limit prescribed from time to time under regulations made under the Bankruptcy Act 1966 for the purposes of subparagraph 116(2)(c)(i) of that Act for goods of that type.
51 Assignment or disposal of mortgaged property by mortgagor
(1) A mortgagor must not assign or dispose of property that is subject to a mortgage without the credit provider’s consent or the authority of the court under subsection (3).
Criminal penalty: 50 penalty units.
(2) The credit provider must not unreasonably withhold consent or attach unreasonable conditions to the consent (but a condition requiring security over property of an equivalent kind and value is not to be regarded as unreasonable).
(3) The court may, on application by a mortgagor, authorise the mortgagor to dispose of mortgaged property on conditions determined by the court if:
(a) the credit provider fails within a reasonable time to reply to a request for consent to do so by the mortgagor; or
(b) consent is unreasonably withheld, or unreasonable conditions are attached to the consent.
(4) Subsection (1) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
52 Conditions on consent to assignment or disposal of property subject to mortgage
(1) As a condition of granting consent to an assignment or disposal of property subject to a mortgage, the credit provider may make any or all of the requirements set out in this section. This section does not limit any other requirements that may be made by the credit provider.
(2) The credit provider may require any breaches of the credit contract to which the mortgage relates and of the mortgage to be remedied.
(3) The credit provider may require the mortgagor and the assignee or person to whom the property is disposed to execute and deliver to the credit provider an agreement relating to the assignment or disposal in a form approved by the credit provider under which, without prejudicing or affecting the liability of the mortgagor, the assignee or person to whom the property is disposed agrees with the credit provider:
(a) to be personally liable to pay the amounts due or that become due under the mortgage; and
(b) to perform and observe all other requirements and conditions of the mortgage.
(4) The credit provider may require the mortgagor and the assignee or person to whom the property is disposed to pay the reasonable costs (if any) incurred by the credit provider for:
(a) stamp duty in respect of the assignment or disposal agreement, or any other document the credit provider reasonably requires to be executed in connection with the assignment or disposal; and
(b) fees payable to a duly qualified lawyer.
53 Offence for noncompliance
(1) A credit provider must not:
(a) enter into a mortgage that contravenes a requirement of this Division; or
(b) otherwise contravene a requirement of this Division.
Criminal penalty: 50 penalty units.
(2) A credit provider must not enter into a mortgage that is void or unenforceable, or that includes a provision that is void or unenforceable, because of this Division.
Criminal penalty: 50 penalty units.
(3) Subsections (1) and (2) are offences of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
Division 2—Guarantees
54 Application of Division
This Division applies to a guarantee (under which the guarantor is a natural person or a strata corporation) to the extent to which it guarantees obligations under a credit contract, whether or not it also guarantees other obligations (see section 8).
55 Form of guarantee
(1) A guarantee must be in writing signed by the guarantor.
(2) It is sufficient compliance with subsection (1) if the guarantee is contained in a mortgage signed by the guarantor.
(3) The regulations may make provision for or with respect to the content of guarantees and the way they are expressed.
(4) A guarantee is not enforceable unless it complies with this section and regulations made under this section.
56 Disclosure
(1) Before a guarantee is signed by the guarantor, the credit provider must give to the prospective guarantor:
(a) a copy of the contract document of the credit contract or proposed credit contract; and
(b) a document in the form prescribed by the regulations explaining the rights and obligations of a guarantor.
(2) A guarantee is not enforceable unless paragraph (1)(a) is complied with.
57 Copies of documents for guarantor
(1) A credit provider must, not later than 14 days after a guarantee is signed and given to the credit provider, give the guarantor:
(a) a copy of the guarantee signed by the guarantor; and
(b) a copy of the credit contract or proposed credit contract.
(2) Paragraph (1)(a) does not apply if the credit provider has previously given the guarantor a copy of the guarantee document to keep and paragraph (1)(b) does not apply if the credit provider has previously given the guarantor a copy of the credit contract or proposed credit contract to keep.
58 Guarantor may withdraw before credit is provided
(1) Although a guarantee has been made, the guarantor may nevertheless, by written notice to the credit provider:
(a) withdraw from the guarantee at any time before credit is first provided under the credit contact; or
(b) withdraw from the guarantee after credit is first provided under the contract if the credit contract made differs in some material respect from the proposed credit contract given to the guarantor before the guarantee is signed.
(2) The guarantor may withdraw from a guarantee under this section to the extent only that it guarantees obligations under the credit contract.
(3) This section is subject to section 61.
59 Extension of guarantee
(1) In addition to guaranteeing obligations under a credit contract or proposed credit contract to which a guarantee initially applies, a guarantee may contain a provision that makes credit provided under another future credit contract subject to the guarantee.
(2) Any such guarantee is unenforceable in relation to such a future credit contract unless the credit provider has:
(a) given the guarantor a copy of the contract document of that future credit contract; and
(b) subsequently obtained from the guarantor a written acceptance of the extension of the guarantee or obtained acceptance in some other form provided for by the regulations.
(3) Section 55 (Form of guarantee) and section 56 (Disclosure) do not apply to an extension of a guarantee under this section.
60 Limitation of guarantor’s liability
Total amount for which guarantor can be liable
(1) A guarantee is void to the extent that it secures an amount, in relation to a credit contract to which this Code applies, that exceeds the sum of the amount of the liabilities of the debtor under the credit contract and the reasonable expenses of enforcing the guarantee, or any lesser amount agreed between the credit provider and the guarantor.
Unenforceable contracts
(2) Nothing in subsection (1) prevents a credit provider from enforcing a guarantee relating to liabilities under a credit contract that is unenforceable solely because of the debtor’s death, insolvency or incapacity.
Debtors under 18 years of age
(3) A guarantee which guarantees the liability of a debtor who was under 18 years of age when the liability was incurred cannot be enforced against the guarantor unless it contains a prominent statement to the effect that the guarantor may not be entitled to an indemnity against the debtor.
Guarantor may limit liabilities under continuing credit contract
(4) In the case of a continuing credit contract, a guarantor may, by notice to the credit provider, limit the guarantee so that it applies only to liabilities related to credit previously provided to the debtor under the credit contract (including any liabilities not yet debited to the debtor’s account) and such further amount (if any) as the guarantor agrees to guarantee.
Guarantee must not limit indemnity
(5) A guarantee is void to the extent that it limits the guarantor’s right to indemnity from the person whose liability the guarantor has guaranteed or it postpones or otherwise purports to limit the guarantor’s right to enforce the indemnity against the person.
Effect of section
(6) This section does not affect a provision of a guarantee permitted by section 59.
61 Increase in guarantor’s liabilities
(1) If the terms of a credit contract are changed to increase or allow for an increase in liabilities, the liabilities of a guarantor under a guarantee that secures those liabilities are not increased unless:
(a) the credit provider gives to the guarantor a written notice setting out particulars of the change in the terms of the credit contract; and
(b) the credit provider has subsequently obtained from the guarantor a written acceptance of the extension of the guarantee to those increased liabilities or obtained acceptance in some other form provided for by the regulations.
(2) This section does not apply to an increase in liabilities resulting from:
(a) a change of a kind referred to in paragraph 63(2)(a) or (b); or
(b) a change of which notice is required to be given under Division 1 of Part 4 (not being a change referred to in subsection 67(4) or section 67AA or 68); or
(c) a change under subsection 74(2) or a postponement under subsection 96(2); or
(d) a deferral or waiver of a debtor’s obligations for a period not exceeding 90 days.
62 Offence for noncompliance
(1) A credit provider must not:
(a) enter into a guarantee that contravenes a requirement of this Division; or
(b) otherwise contravene a requirement of this Division.
(2) A credit provider must not enter into a guarantee that is void or unenforceable, or that contains a provision that is void or unenforceable, because of this Division.
Criminal penalty: 50 penalty units.
(3) Subsections (1) and (2) are offences of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
Part 4—Changes to obligations under credit contracts, mortgages and guarantees
Division 1—Unilateral changes by credit provider
63 Application of Division
(1) This Division applies only to changes made unilaterally by a credit provider under a credit contract, mortgage or guarantee.
(2) This Division does not apply to the following changes under a credit contract:
(a) a change to a new annual percentage rate payable under the contract (not being a rate determined by referring to a reference rate), if both the new rate and when it takes effect are ascertainable from the contract;
(b) an increase in the amount of repayments, if the increase occurs automatically, as specified by the contract, and both the amount of the increase and when it takes effect are ascertainable from the contract;
(c) an increase in the term of a credit contract, if the increase occurs only because of an increase in the annual percentage rate or rates payable under the contract;
(d) a change made under Division 3.
(3) Nothing in this Division confers on a credit provider or a debtor any power or right to change the credit contract or its terms in addition to those conferred by the contract.