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House of Assembly - Fifty-Second Parliament, First Session (52-1)
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LEGAL SERVICES COMMISSION (CHARGES ON LAND) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 8 June 2011.)

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice, Minister for Urban Development, Planning and the City of Adelaide, Minister for Tourism, Minister for Food Marketing) (17:04): Can I say before the honourable member for Bragg starts that I have read her amendment. I understand what it is, I understand why it is there and I understand what her concerns are, if that is of any help.

The SPEAKER: I think that was a bit out of order, Attorney-General—however, we didn't hear it. But I hope the member for Bragg did. The member for Bragg.

Ms CHAPMAN (Bragg) (17:05): I rise to speak on the Legal Services Commission (Charges on Land) Amendment Bill. The question of the retrospectivity of this is one which I will address first, then I will come to the substance of the bill.

There are some general fundamental principles and one of them is that people need to know what they are liable for or vulnerable to in our legal system, as published and applicable, as at the time of the commission or omission of their acts and behaviour. Therefore, there has to be presented to the opposition, to get its support, some significant threshold of evidence to move from that principle and, in particular, to introduce a new regime or a new set of rules that is to act retrospectively and therefore would have effect against people who may have acted or failed to act in the past, who would not fall foul of the previous law but, under the amendments, would.

So, in this instance, I say that the opposition has been provided with a briefing on the general issues but, on the retrospectivity, we have raised questions about whether any examples of injustice have occurred or, where there has been a significant problem identified, an example of how there has been a failure to recover the funds that are the subject of this bill. We still do not have that. Nothing has been identified to us as an event which would persuade us that it is necessary for us to allow this piece of legislation to be retrospective. Hence, I will be moving an amendment.

Let us look at the substance of the bill which came before us in June this year. At present, under the Legal Services Commission Act 1977, there is a capacity for a statutory charge to be placed over land under the Real Property Act 1886 to provide a security for funds that might be advanced to an applicant for their legal fees and services. In that, there is a regime and a process by which any debt to the commission that is created as a result of advance of this support can be recovered. It boils down to the extent, nature, reliability and easy access to the recovery, in the enforcement process for that.

Currently, the Legal Services Commission notifies the Registrar-General of a charge over land so that it is noted on the title who registers that notice by entering a memorandum of charge in the register book or a register of crown leases.

Members may know that we have a system in respect of the title of real property in this state, which is a very good one and in which there is a very clear obligation for rights and entitlements to be in writing; and, secondly, that to be recognised in any secure way has to be identified on a title. So, this is a process where information is recorded that first alerts others to the existence of the charge and therefore that a liability is sitting out there for anyone who wishes to deal with that land in some way.

If there is under the current procedure a default in the payment of the contribution, then the commissioner has the same powers of sale over the charged land as a mortgagee would have under the Real Property Act 1886 (which I referred to) in respect of a mortgage when there has been a default in payment of the principal. Perhaps I should explain to members that what occurs in the advance of financial supporters is that sometimes a very significant amount of money is advanced to pay the legal costs, disbursements and so on of a person. That does not necessarily mean that, at the end of the case and the bill being issued and paid, the Legal Services Commission immediately then under the security of this charge goes and sells someone's property. In fact, that does not actually happen very often.

What frequently occurs is that there is some assessment then as to what the obligation of the recipient of this benefit should be and how they might repay that portion or all of it—if it is assessed to be—to reimburse the Legal Services Commission. I think that members should be assured that this is not a practice at the moment where a charge is put over a property and automatically people's properties are sold at the end of cases and that they lose them. That is the rarity. But it does provide security for the commission if the beneficiary of the legal funds has failed to comply with a regime of repayment or contribution which has been under a prior agreement.

The claim is that we have got this bill to provide a remedy based on the fact that some years ago the status of the charge was uncertain, and that, as a result of this advice received, that may impede the commission's ability to recover the funds that are secured by that charge when the property is sold; and the second reading explanation of the Attorney explains that this exercise is going to remedy it. There are some unusual aspects of this because the doubt arises from the fact, as is claimed, that, despite the purpose of section 18A—that the charge be treated as an interest registered under the Real Property Act 1886—the recording of the memorandum of charge by the Registrar-General does not of itself amount to a registration of the charge under the Real Property Act 1886.

This has resulted on occasion in disputes over the commission's entitlement under the Real Property Act to a share in the proceeds of the sale of the charged land by a prior registered mortgagee or encumbrance. Continuing uncertainty, it is claimed, may diminish the effectiveness of the charge.

I think it is also important to identify here that there are certain ways that you can protect an interest, or moneys that are owed to you or potentially owed to you, or to provide as some incentive for repayment as a security. One of them is to have the person who receives the legal aid funds execute a mortgage, and this is a document which is subject to stamp duty and which, if in registrable form, can be registered with the Lands Title Office, and there is a registration fee. It is, I suppose in the sense of protection, a superior process and form of documentation to a charge. It is more expensive but it is more secure. I make the simplification but with the caveat that I am trying to illustrate the significance of the fact that there is quite a different cost, and there is a different process which someone has to go through to be able to contract under a mortgage as distinct from a charge.

For example, as members might know, when you execute a mortgage, apart from all the other documentation with the bank which essentially means that the bank gets everything if you default, there are a number of steps that you have to go through, including having certain information presented to you so that there is an assurance of understanding about the contents of the documents and that it is signed in the presence of an authorised signatory, etc.

Some real attempt has been made by the law to make sure that the person who signs to provide their home as security for a loan (or a car, or anything else, for that matter), in a mortgage sense as distinct from a shadow mortgage over real estate, has quite a number of hoops that need to be jumped through (thresholds to be achieved) to be able to do that. In the end, you are supposed to have pretty much an ironclad security and priority over that asset to fulfil the repayment of what is owed to you as distinct from others who might be waiting in line. There are a few exceptions to that, but registered mortgagees are in a superior position generally.

The charge system which operates under this current act is the cheap option but it has been developed in a way so as to take into account that there was not a desire, in fact, to create a cumbersome and expensive process. I think that those who were looking for this security were saying, 'We want something that is not going to be expensive for these people.' After all, the people coming to the Legal Services Commission to get support and subsidy for their legal costs do not have anything in the way of income or available or disposable assets. They may only have a home—and that is not insubstantial—but they are simply without the capacity to go and borrow from another financial institution or the like. Whilst I describe this as a cheap option, it is not designed to be critical. I think it is simply to reflect the fact that there was an attempt to get some form of security at a modest price but be able to provide a recovery. I think I have fairly assessed that as being the objective at the time.

When the Law Society had a look at this, it said that it did not have strong objection to the bill but it did raise a couple of issues. First, there was a questioning of the proposed section 18A(6a), which differs from other provisions in relation to the charge, in treating the charge as an encumbrance rather than a mortgage. The Law Society recommended that the bill be amended to consistently treat the charge as if it were a mortgage, and, secondly, objected to the retrospective effect. Obviously, the second aspect we are covering by the amendment.

In the absence of having presented to us, either during the briefing or subsequently, circumstances where the Legal Services Commission has been severely prejudiced financially by any particular cases, we are leaving a risk which was apparently identified a very long time ago. I do not have the notes of my briefing here as to exactly what the time frame was, but my recollection was that this was years and years ago and there has not been any circumstance that has arisen in which there was detriment and, therefore, as I say, we are not mindful to have the retrospectivity.

I note the Law Society's idea of treating it not as an encumbrance but as if it were a mortgage. I suppose it raises the fundamental question that if we were to go down the Law Society's recommendation, how is it that one party can have access to what is effectively a cheap mortgage but with the same protection and others not have that? Are we going to say that all instrumentalities that distribute taxpayers' funds should be able to be accessible to this type of security?

Are we going to say that debts outstanding for child support, for example, should be able to have the sort of cheap option process that is legislatively provided for, as is in this bill? There is a powerful case for that, where someone may be income poor, have failed to make a contribution to child support, which is now under national legislation which prescribes a percentage of income under a fairly complicated formula for a child or children that is identified as legally dependent of someone, and where there is a very significant accumulation of debt and attempts to recover it.

I have always been concerned that the legislation we had close to 40 years ago, where some ministers actually had a caveat power to place over someone's asset to protect against defaulters in these types of situations, has been removed. It used to be very effective, I might say, when ministers had the power to caveat to protect an interest for outstanding child maintenance, as it was in those days. When somebody trotted along to the bank to try to extend a loan or to discharge one and apply for another security, they were met with this obligation that had to be released before the caveat could be removed, before they could then proceed to do their other ordinary course of business.

So, there are other mechanisms to do it and they can have legislative enforcement, but it does beg the question, as I say, that we have cheaper processes for good reason, but are we really moving down the line here where we have a new regime that is specific to this group and of which I think that with a bit of careful thought there are a lot of other worthy organisations which might be responsible for the precious funds of people who can ill afford to have it wasted or should not, on any accountability of taxpayers funds, be able to go down this cheap option? I think we are on a bit of a slippery slope if we go down that line.

With those few words I indicate that I will be seeking to go into committee to move our amendment. I am not certain if there is anyone else to speak on our side. This has been a very—

Mr Pederick: We think you have summed it up very well.

Ms CHAPMAN: —important piece of legislation.

An honourable member: What more could we add?

Ms CHAPMAN: Thank you.

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice, Minister for Urban Development, Planning and the City of Adelaide, Minister for Tourism, Minister for Food Marketing) (17:24): I thank the member for Bragg for her contribution. I am going to suggest a course of action which may or may not meet with people's favour. You have really raised two questions, member for Bragg. One is this broader question about how these securities are done and whether there should be a broader range of instrumentalities that are able to take advantage. That is a much bigger debate than this. In one form or another the commission already has that facility, so in a way this is not novel. It is about overcoming a perceived gap in this existing regime rather than creating something completely new. So I think that is probably a debate for another day. I note you have only moved an amendment in relation to the other matter.

As to the question of retrospectivity, again, obviously I understand the point, although my instruction, as I understand it, from the commission is that it is probably not the case that anybody would be grossly disadvantaged by a retrospective application given that they have already been notified of their position and believe that they have a charge anyway. That said—

Ms Chapman interjecting:

The Hon. J.R. RAU: Yes, I take the point. What I was going to propose to the member for Bragg is that I do not mind if we go into committee here but, if we do, I cannot accept your amendment here because I have not had an opportunity to talk to the commission about it and explore the matters you have raised today. If we go into committee, I want the members to know that I will be opposing the amendment.

I can also say this: whether we go into committee or not, I imagine in another place the amendment will be brought up, and between here and there I am happy to talk to the member for Bragg and the commission about the matters that the honourable member raises, and it may be that this can be a matter that is accepted—that is, your proposed amendment.

So, in a sense, I am in the honourable member for Bragg's hands. It is now on the record what I am offering. If we do go into committee, I will oppose the amendment at this point but, if the matter goes through as it is, I will fully expect the amendment to bob up somewhere else and between now and then I am happy to talk to the honourable member and the commission to see whether it is possible for us to accept this proposition.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 4 passed.

Schedule 1.

Ms CHAPMAN: I move:

Page 3, lines 3 and 4—

Delete 'apply, after the commencement of section 4, in relation to charged land whether the charge was created before or after that commencement' and substitute:

only apply in relation to a charge on land created after the commencement of section 4.

I confirm that this is to remove the proposed effectiveness of retrospectivity of the legislation. I have listened carefully to what the Attorney has had to say about the offer to consider this amendment after consultation with the commission, and I thank him for that indication.

What surprises me, though, is that many times I come into this house and the Attorney tells us how disappointed he is that we do not move amendments here and sort out these matters. If this was an amendment which came like some bolt of lightning that no-one had any notice of, then I would understand this, but this was a piece of legislation that came in in June. I think the very next day we had consultations around it. We raised our concern about retrospectivity.

Since then, a letter has come into us and, as we understand it, to the government raising the concerns about this, and why this matter has not been traversed between the Attorney or his representative and the Legal Services Commission, I do not know. It just seems to me that this is an aspect which is ideally suited to being resolved in this house between two sensible members of parliament, which he frequently suggests is the process which we should follow. I am very disappointed that this is not an amendment that we can move and deal with quickly and which can be sensibly and responsibly resolved in this house.

However, perhaps there was a lapse of attention in some way by the Attorney or someone in his office to actually follow this up. It is not an issue which requires such urgency that we need to be alarmed by the failure of the Attorney's office to deal with it and do that consultation. However, I note for the record that we have listened to his advice in the past, we have acted on it, we are here to do an amendment—and it is a bit like a little slap in the face. Here we are on the last day; we could have had a chance to fix this up.

The Attorney should be very clear that when we return—after the season of refreshment that we are supposed to be having, going off to investigate ideas and so on for our renewed contribution next session—I will be reminding him of this if he suggests in the future that we leave matters to be dealt with between houses or in another house. With that, I hope that the Attorney has the opportunity to attend to this before he undertakes other important duties during the session break.

The Hon. J.R. RAU: I thank the honourable member for Bragg for that contribution. I think I have already expressed my view about what I would like to see happen with this particular amendment. Can I say that in the interests of consistency I accept the criticism made of me for not having dealt with this. It has been here for a while, it has not snuck up on me and I certainly cannot criticise the member for Bragg for not having put an amendment up, so I take that.

Ms Chapman: Fall on your sword!

The Hon. J.R. RAU: I fall on my sword. I accept that 'it's a fair cop guv'nor'—I think that is probably all I can say on that one. We will try to make sure that, by the time we get back here, we have an answer to it. I have to say that I do agree: it would have been nice if we did have an answer to it right now so that we could just dispense with the matter completely. As I said, I consider myself chastised.

Amendment negatived; schedule passed.

Title passed.

Bill reported without amendment.

Third Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice, Minister for Urban Development, Planning and the City of Adelaide, Minister for Tourism, Minister for Food Marketing) (17:33): I move:

That this bill be now read a third time.

Bill read a third time and passed.


At 17:34 the house adjourned until Tuesday 13 September 2011 at 11:00.


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