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Cheques and Payment Orders Amendment (Turnback of Cheques) Bill 1998
Schedule 1 Amendment of the Cheques and Payment Orders Act 1986 relating to turnback of cheques drawn on failed banks

   

1  At the end of paragraph 59(a)

Add “or”.

2  After paragraph 59(a)

Insert:

                    (aa)  if the drawee bank has become a failed bank within the meaning of subsection 70A(2); or

3  Subsection 66(1)

Omit “section 59”, substitute “sections 59 and 70B”.

4  At the end of section 69

Add:

Note:          A cheque may be taken to be dishonoured in certain circumstances (see section 70A).

5  At the end of Part IV

Add:

Division 3 Turnback of cheques drawn on failed banks

70A   Certain cheques taken to be dishonoured

             (1)  A cheque that is lodged for collection with a financial institution that is not the drawee bank is taken to be dishonoured if the drawee bank becomes a failed bank:

                     (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 bank becomes a failed bank.

Note 1:       For when the drawee bank becomes a failed bank, 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 bank becomes a failed bank if, and only if:

                     (a)  the bank becomes a body corporate that is an externally administered body corporate within the meaning of the Corporations Law because the bank is, or is likely to become, insolvent; or

                     (b)  someone takes control of the bank’s property for the benefit of the bank’s creditors because the bank is, or is likely to become, insolvent; or

                     (c)  the Reserve Bank of Australia:

                              (i)  appoints a person to investigate the affairs of the bank, or assumes control of the business of the bank, under section 14 of the Banking Act 1959 ; and

                             (ii)  determines, in writing, that the bank is to be treated as a failed bank 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 bank’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 determine that a settlement system is a recognised settlement system for the purposes of this section. A determination:

                     (a)  must be given in writing; and

                     (b)  is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901 .

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.

70B   Consequences of cheque being taken to be dishonoured

                   If a cheque that has been lodged with a financial institution (the collecting financial institution ) for collection is taken to be dishonoured under section 70A (the deemed dishonour ) then:

                     (a)  the deemed dishonour has the same consequences as if the cheque had been duly presented for payment and had been dishonoured in accordance with section 69; and

                     (b)  if the cheque has not been duly presented for payment, the requirement in section 66 to duly present the cheque for payment does not apply; and

                     (c)  if the collecting financial institution has made a provisional credit to an account in respect of the cheque, it may reverse that provisional credit; and

                     (d)  if the drawee bank has made a provisional debit to an account in respect of the cheque, the provisional debit is taken to be reversed , by force of this section, immediately after the deemed dishonour.

6  Paragraph 70A(2)(c)

Repeal the paragraph, substitute:

                     (c)  the Australian Prudential Regulation Authority:

                              (i)  appoints a person to investigate the affairs of the bank, takes control of the business of the bank or appoints an administrator to take control of the business of the bank under section 13A of the Banking Act 1959 ; and

                             (ii)  determines, in writing, that the bank is to be treated as a failed bank for the purposes of this Division.

7  Subparagraph 71(b)(ii)

After “paragraph 59(a)”, insert “or (aa)”.

8  Subparagraph 73(b)(ii)

After “paragraph 59(a)”, insert “or (aa)”.

9  Subsection 97(1)

Omit “section 59”, substitute “sections 59 and 70B”.

 

 

[ Minister's second reading speech made in

House of Representatives on 8 April 1998

Senate on 29 May 1998 ]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54/98)