THE COMMENCEMENT CONUNDRUM:
How I brought the Fiji Islands banking system to a standstill

By John F. Wilson
(Formerly First Parliamentary Counsel, Fiji Islands)

~ Introduction
It is not often that a law drafter single-handedly brings the banking system of a country to a standstill by giving advice on a legislative matter. But that is in effect what happened in the Fiji Islands a few years ago when the question arose of whether a Minister had power to defer the commencement date of an Act of Parliament after the date had been appointed.

The Act of Parliament in question is the Consumer Credit Act, 1999 (No. 15 of 1999), which received the President’s assent and was Gazetted on 19th March 1999. The banking standstill was in respect of lending for consumer purposes.

~ Background
Under the Fiji Islands Interpretation Act, a statute comes into force on the date it is Gazetted, unless some other date is appointed by or under the Act. Acts of Parliament in the Fiji Islands, following the U.K. practice, frequently provide for the date of commencement to be a date appointed by the Minister by notice in the Gazette.

Opinions differ over whether it is appropriate for Parliament to empower a Minister to appoint a commencement date, rather than setting one itself. The practice in Australian federal statutes and in New Zealand tends to be that Parliament sets the date in the Act. If the Minister is given power to set the commencement date, the Act will specify a time limit for commencement. This ensures that the Minister does not, by exercise of the executive power, frustrate the intentions of Parliament in enacting a Bill. This approach assumes, not unreasonably, that if the government brings a Bill to Parliament, it is because it wants the law enacted within a certain time.

The other approach, to be found in U.K. statutes and those of several other Commonwealth jurisdictions, is to allow the Secretary of State or Minister to appoint the commencement date, without any limit being stated. The rationale for this is that the government may need time in which to put into place the necessary administrative machinery needed to implement an Act; people affected by the Act may also need time to bring their affairs into line with it. This approach accepts that not all the details can be put in place before a Bill is passed, and that the public may need educating in the effects of a new and complex statute. There is also the question of whether budgetary provision has been made for implementing a major new piece of legislation.

Both approaches have merits and demerits; this paper illustrates the dangers of giving a Minister power to appoint the commencement date, if insufficient thought is given to the implications of the date once the Act has been assented to.

~ The Act
The Consumer Credit Act is a complex piece of law, based on a Queensland precedent. It requires all providers of consumer credit (i.e. credit for personal and household purposes as distinct from commercial or business purposes) to provide certain information and use certain documentation. The Bill took several months to pass through both Houses of Parliament and a sector standing committee, during which time various representations were made to the Minister about the commencement of the Bill. The consumer groups wanted it brought in as soon as possible, while the retail stores wanted it delayed as long as possible.

At the same time, the clock was ticking for the life of the government, as general elections were due to be held in the week beginning 10 May 1999. It was becoming increasingly apparent that the government might not survive the elections. The Minister of Commerce therefore decided to bring the Consumer Credit Act into operation before going out of office, and I was instructed to draft the Commencement Notice.

The Act came into force on 7 May 1999. The elections the following week produced a change of Government, and a new Minister of Commerce was duly sworn in on 19 May. By 27 May the banks had presented a joint submission to the new Minister asking that the commencement of the Act should be deferred as they said they would not be able to comply with its provisions for at least 2 years.

~ Political views
It could be argued that the former Minister of Commerce should not have exercised the power to bring a major statute into force in the dying days of the old administration. Some people would say that the government was in a ‘caretaker’ mode at that time, although that phrase more correctly applies to the position after an election and before a new government is formed. (The convention in the Fiji Islands - reinforced by agreement of the then parliamentary parties in the Korolevu Declaration in March 1999 - is that the government is in ‘caretaker’ mode once the writs for a general election have gone out.) At all events, there is an argument for saying that a Minister should not tie his successor’s hands by bringing a major Act into force in the last week of his term of office.

The contrary view is that Parliament had already passed the Act and it was entirely up to the Minister when it should commence. To delay the commencement unnecessarily would defeat the intentions of Parliament in passing the Act and therefore be undemocratic. To be fair to the Minister, I should say there was no suggestion that the Bill was unpopular with the incoming administration; it could hardly be so, as the new government was formed mainly by the Fiji Labour Party which supported protection for consumers.

The reality is, no doubt, that the former Minister wished to ensure that his term of office would be marked by at least one significant item on the statute book; perhaps also he did not wish to see all the work put into the Bill go for nothing. As the drafter of the Bill I suppose I should be grateful to him for that !

~ Law drafter’s position
In drafting the commencement notice, I did not feel it was my duty to ascertain the motives for the Minister wishing to bring it into force. I knew the Bill had been delayed several months already and that there had been extensive consultations with and representations from the interested parties. I was told as long ago as August 1998 that the Bill was urgent; why should I suspect that there would be any problem about bringing it into force ? The Ministry of Commerce had its own legal adviser and no-one would thank me for causing delay.

However, when the banks urged on the new Minister the need to defer the commencement of the Act, I felt I needed to take a stand for principle. I pointed out that the date for the commencement of the Act had passed, so that members of the public were now entitled to organise their affairs on the basis that it was law. Any consumer credit contract which did not comply with the Act was now unenforceable, and to alter that position by amending the commencement notice would deprive people of a right they had acquired i.e. to treat certain contracts as not binding on them.

I further pointed out that even if the commencement date had been appointed but had not yet arrived, the Minister could not alter it, as appointing a commencement date is an administrative and not a legislative act, so that the provisions in the Interpretation Act relating to amendment of legislative instruments do not apply. Having appointed a date, I argued, the Minister is functus officio and his powers are spent; they cannot be used again to amend the date.

As a practical solution, I suggested that, as enforcement of the Act was a matter for the Office of Fair Trading, which came under the general direction of the Minister, the government could give an assurance to the banks that they would not be prosecuted for breaches of the Act if they could produce an acceptable timetable for compliance with its provisions.

~ Banks’ position
The banks rejected my proposed solution, arguing that it would amount to the Minister seeking to legislate by executive fiat, contrary to the principle stated in the New Zealand case of Fitzgerald v. Muldoon (1976 NZLR vol. II p. 615). (That was a case in which an incoming Prime Minister announced that a superannuation scheme enacted under his predecessor would not be implemented; the court held that the announcement was unlawful, as it anticipated legislation which had not yet been enacted. It amounted to usurpation of the role of Parliament ‘by regall authority’, contrary to the Bill of Rights, 1688.)

The banks accepted, with reluctance, the view that a commencement notice could not be amended once made, but proposed instead an Act of Parliament to vacate the commencement date and appoint a new date or series of dates. So far as I was concerned, this was an acceptable solution, and I still think it would have been the best one. (It is interesting to note that subsequently, the new government decided to defer the commencement of the Public Finance Management Act 1999. Deferral of that Act, which set out the commencement dates, was achieved by the Public Finance (Deferral and Amendment) Act 1999.)

~ The government position
In the case of the Consumer Credit Act, the new government was reluctant to agree to introduce a Bill to defer the commencement date. This was probably partly due to annoyance with the banks for having waited until the last minute to make their representations. As I have said, the Bill was widely circulated and discussed for several months, and although the retail stores made submissions, the banks were strangely silent. It was only after the new government came into power that the banks spoke up, claiming the Act was unworkable etc. There was a strong suspicion that the banks were trying to take advantage of an inexperienced government and to get more concessions than they needed.

Another factor was that the government very early on announced that it would be asking the banks to reduce interest rates, for housing initially, and for other purposes in due course. It could well be that the banks saw the problem over the Consumer Credit Act as a good bargaining counter in their dealings with the government on the issue of interest rates. At all events, a stalemate developed, with the banks insisting they needed an Act to defer the commencement date, and the Minister saying he would not give them one.

~ The standstill
At this point (28 May 1999), the banks suspended all lending for consumer purposes. They said they could not safely lend on contracts which did not comply with the new Act as they might be unenforceable; and that it would take the banks 2 years to become compliant with the Act. People found themselves unable to borrow from the banks for any domestic purpose; soldiers about to depart for Lebanon found they were unable to get advances for their personal needs.

The government made some half-hearted attempts to find other sources of consumer credit, such as encouraging the Fiji Development Bank to provide it. The Housing Authority stepped into the breach by expanding its lending for personal purposes. One retailer claimed it was the only store to be fully compliant with the new Act (a difficult feat, as the implementing regulations had not been Gazetted!)

The banks lost a lot of money on personal loans; they spent a lot of money on full page advertisements in the newspapers explaining why they had ceased consumer lending. It was quite a dramatic time; probably a rather difficult time for those needing personal credit; an expensive time for the banks. And it all came about because of my advice to the Minister that he should not defer the commencement of the Consumer Credit Act by amending the previous Minister’s notice.

~ The solution
The solution finally arrived at was for the Minister to exercise his powers, under section 7(12) of the Consumer Credit Act, to grant exemptions from the operation of various provisions of the Act. Regulations were made which exempted providers of credit from the provisions of the Act listed in the Schedule up to the dates respectively specified. The earliest date specified was 1 March 1999; the latest was 1 July 2000, so in the end the banks were only given 12 months deferment, not the 24 months they had asked for. Interestingly, they found they could become compliant in that time.

The Consumer Credit (Exemption) Regulations 1999 were Gazetted on 24 June. The banks resumed lending for consumer purposes on the same day, after a break of 4 weeks. The crisis was over, and legislative principle had been upheld.

~ Epilogue
The lesson learned from this episode was to avoid giving a Minister the power to appoint the commencement date for an Act, if possible. But other solutions can also prove problematical. For instance, I once put a specific commencement date in a Bill so as to enable people to prepare for the new law. The date was the one on which in the normal way the Act would have been be Gazetted after the Bill had passed through Parliament and received the President’s assent. Then Cabinet decided to defer the designated meeting of the Senate for 2 weeks. Had the Bill gone to that meeting, the date I had provided for would not have worked. In the event, the Bill was passed in an earlier meeting of the House of Representatives and went to the Senate early, so all was well. But beware of putting specific dates for the commencement of Acts.

So there are many problems associated with commencement notices. It is a curious conundrum that one of the shortest documents a law drafter ever has to draft can be one of the most problematical of all.