Side note just to clear it up regarding leaving with the pax bag still in the hold (in Aus at least). If the pax voluntarily leaves a flight or no shows their bag must be removed as it could have been checked in for sinister purposes.
However, If the passenger is involuntarily removed (and therefore had no way of knowing they would be removed and would have travelled on the aircraft with the bag in hold) The bag can actually fly, as they had no way of knowing that they would not be on the flight. This is going back to DJ policy a few years ago, but I'm not aware of it being changed.
As far as I'm aware it is the law, as per the ATSR and ATSA, where even diversions require a special approval from OTS. This was the case at Ansett as well even before the OTS existed.
If VA are doing something different then they would appear to be in breach. I'm not sure that's the case. There was for some time, in the Ansett days certainly, a misunderstanding that the Captain could elect to proceed but that went years before, in the late 80s or early 90s.
If an aircraft is in Australia even if it's home country law is different it is obliged to conform to Australian Law, the same as in NZ when years ago, it was not a requirement to offload if the passenger died and it was able to be verified that it was not sinister the bags could remain on under Australian Law but not NZ, so QF for example had to offload in those circumstances as well when operating through NZ.