3

THE AUSTRALIAN
01
LEGAL SYSTEM

LEARNING OBJECTIVES

This chapter provides an overview of the Australian legal system and shows how
governmental and judicial legal systems operate both at the federal and state levels. Law-
making at the federal and state levels by parliaments and courts is explained to highlight
how the tensions between governments have been interpreted and balanced by the High
Court of Australia.
On successful completion of this chapter, students should be able to:
– understand the meaning and main sources of law in Australia;
– describe the doctrine of precedent and the ways it operates in Australia;
– understand the basic court structure in Australia;
– describe the law-making process by parliaments;
– understand the main functions of the of the High Court of Australia; and
– understand alternative dispute resolution process and methods.

Oxford University Press Sample Chapter

4 Part 1 Introduction to Business Law

government.
jurist
A person recognised for
their legal writing and
scholarship.

federal
The system of
government whereby
all legislative, executive
and judicial powers
are divided between
two levels. In
Australia, provision is
made for
a federal system of
government by the
Commonwealth of
Australia Constitution
Act 1900 (UK). Other
examples of countries
with a federal system
of government are
Canada and the USA. In
comparison, the UK is
an example of a unitary
system of government,
in which there is only
one level.

state
The Australian states
were formed from
the original British
colonies and together
form the second level
of government in the
Australian federal
system, sharing power
with the Commonwealth.

Westminster system
The parliamentary
system based on the
English Parliament
and consisting of three
parts—the Crown, an
upper house and a lower
house—from which the
party with the majority
of seats forms the
INTROD
shaped by the political, economic, religious and moral considerations that shaped the English
legal system.

UCTION The Australian political and legal systems, which operate on a two-tiered basis at both
federal and state levels, are partly a function of history. Our English heritage, for example,
Every has given us the legacy of the Westminster system of government and a judicial system
society in based on the common law (judge-made law), with the result that Australian law comes from
our day two main sources: statute law and common law.
and age The Australian political and judicial systems operate in a federal model that was
requires a established in 1901. Since governmental and judicial decision-making occur at both federal
system of and state levels, sometimes this creates confusion in the mind of a student or observer
laws in of the Australian legal system as to how these parallel systems can work cooperatively.
order to Historically, although the federal system has worked reasonably well in Australia, tensions
function between the governments at both levels have frequently surfaced in areas such as regulation
properly. of corporations and financial markets, health, education and the environment.
Over the
centuries
many legal THE NATURE AND FUNCTIONS
OF LAW
philosophe
rs and
jurists have
Law has been described as a body of rules, developed over a long period of time, that is
attempted
accepted by a community as binding. This set of rules may be comprised of enacted and/
to define
or unenacted laws. At times, the rules may be contained in the customs and traditions of a
and
society.
describe
Although law may be described as a body of rules, not all rules are laws. For example,
law, and
the private rules of a family, rules pertaining to sporting clubs and institutions, and rules
these
created by your tutors to govern student behaviour are not laws. When we talk about law, we
definitions
are referring to legal rules governing the interactions between the members of the society,
and
and between individuals and governments.
description
s have The main purpose of law is to provide social cohesion by avoiding conflicts that may

been occur in a society, for if there is conflict there will be disorder, confusion and chaos. Since

highly law is accepted by a community as binding, it reflects the values of a society and sets

influenced standards for its smooth operation. Law also dictates various sanctions if society’s

by the standards are

social,
political,
religious
and moral
views of
the society
in which
they lived.
Australian
law has
also been
 01 The Australian Legal System 5

transgressed and, where possible, provides the means for the peaceful settlement of disputes. judicial
By doing so, law provides stability, certainty and predictability to a society. 1. Concerning a judge.
2. Done with the
authority of a

BUSINESS AND THE LAW

court of law.

judge-made law
Law made by precedent.
If law is a body of rules, then one could query how these rules apply to the commercial
statute law
activities of businesses and what functions they serve for the business community. Generally
Law created by
speaking, business law comprises a body of rules that regulate the day-to-day
legislation, in contrast to
commercial operations of businesses. In Australia, these rules are contained in laws
common law.
pertaining to contracts, consumer protection, company and finance sector regulation,
common law
bankruptcy, agency and partnerships. The main function of business law is to regulate,
1. The system of law
facilitate and adjudicate commercial transactions.
developed by the English
As a regulator, business law regulates business activities by advising businesses (both courts through the
companies and individuals) to be fair and ethical in their dealings with consumers. For principles of precedent,
example, the consumer protection and fair trading laws of the federal and state governments in contrast with a civil
law system. 2. The
reflect the regulatory nature of business law.
law laid down by the
As a facilitator, it facilitates business transactions. For example, contract law common law courts, in
provides how legally binding agreements can be made and what remedies innocent parties contrast with the rules
can seek if binding agreements are breached. of equity. 3. Unwritten

As an adjudicator, it endeavours to settle disputes between business operators law, including

common law and
(manufacturers, wholesalers, retailers and distributors) and consumers, and between buyers
equity, as distinct
and sellers of goods or services.
from written or statute
law.
AC T I V I T Y 1.1 4. Historically, the rules
of law common to all
You attend your first class at university. Your lecturer advises you of the following class
people in England
rules which she advises will be enforced strictly:
decision
1. All students in her class must wear white T-shirts and black pants.
A term for the judgment
2. You must attend all lectures and tutorials. of a court.
3. You must submit your assignments on time and undertake an examination at the end of law
the semester. A body of rules that is
4. You must meditate for ten minutes before the lecture begins. accepted by the society
as binding.
5. You may use offensive language in class as long as others do not hear it.
6. You must not bother her in class by asking irrelevant questions and there is no business

consultation time for you for this semester. For the purposes
of income tax, any
What is the validity of these rules?
trade, profession, or
employment other than
being an employee.
6 Part 1 Introduction to Business Law

statute law
Law created by SOURCES OF LAW
legislation, in contrast to
Let us look at where law comes from and how laws are created. There are two main sources
common law.
of law in Australia:
statutory
Concerning a statute. 1. statute law: the body of law enacted by the nine parliaments (one Commonwealth, six
state and two territory), for example:
Australian Competition
and Consumer – state legislation such as the Goods Act 1958 (Vic); Crimes Act 1958 (Vic);
Commission (ACCC) – Commonwealth legislation such as the Competition and Consumer Act 2010 (Cth) and the
The federal Corporations Act 2001 (Cth).
administrative body
– Parliaments can also delegate some of their law-making powers to subordinate or
established in 1995 by
the merger of the
delegated bodies such as local councils, university councils and other statutory
Trade Practices authorities established under relevant legislation. When these bodies produce rules,
Commission and the regulations, guidelines, by-laws, orders and ordinances pursuant to the provisions of
Prices Surveillance the relevant acts, this is called ‘subordinate’ or ‘delegated’ legislation. For example,
Authority, with
guidelines of the Australian Competition and Consumer Commission (ACCC) and
responsibility
rules of the Australian Securities and Investment Commission (ASIC) have the same
for disseminating
force of law as statutes.
information, conducting
research into issues 2. common law: the body of unenacted laws that emanate from the courts at federal, state and
concerning trade territory levels, for example:
practices, and assessing
– decisions of the High Court of Australia;
and taking proceedings
– decisions of the state and territory Supreme Courts; and
for violations against
relevant trade practices – decisions of the federal and family courts of Australia.
and consumer
legislation. FIGURE 1.1 SOURCES OF LAW IN AUSTRALIA
Australian Securities
and Investments /DZ PDGH E\ SDUOiDPHQWV RI WKH VWDWHV,
Commission (ASIC) Statute law WHUUiWRU\ DQG &RPPRQZHDOWK
The body was 5HIHUUHG WR DV $FWV RI
SDUOiDPHQWV/OHJiVODWiRQ
established as a
Commonwealth
authority in 1989, /DZ GHYHORSHG E\ WKH FRXUWV iQ
Common law $XVWUDOiD
replacing the Austra-
5HIHUUHG WR DV FRPPRQ ODZ/FDVH ODZ
lian Companies and
Securities Commission.
It is responsible for Because of the globalisation of contract and trade laws, Australian law is increasingly
the policy concerning influenced by international law, which is reflected in multinational conventions and treaties,
the administration and memoranda of understanding, and reciprocal and bilateral arrangements to which Australia
regulation of Australian
is or will be a signatory.
corporations and
Customary law refers to a body of unwritten rules that have been followed by a particular
securities.
community or group of people for many generations, so much so that they become part of
their way of life. Though customary law is an acceptable source of law in the English legal
 01 The Australian Legal System 7

system and has been incorporated in English common law, Australia has given little weight court
to this source of law. Since the Australian Law Reform Commission report of 1986, 1 the 1. A place where
debate continues as to whether Australia should recognise Indigenous customary law as part judicial proceedings are

of Australian law. So far, there is only limited recognition of Indigenous law in Australia. heard.
2. The arbitrator of
a judicial

Statute law/legislation proceeding.

High Court of Australia

In most liberal democratic systems, Parliament is the supreme law-making authority. Since
The most senior court
laws made by parliaments undergo parliamentary scrutiny (meaning they are discussed, in the Australian judicial
debated and widely published), they become an authoritative source of law. Laws made by system. The High Court
parliaments are the most significant source of commercial law in Australia. This body of law exercises original
is contained in numerous Acts of Parliament found in the raft of Commonwealth, state and jurisdiction in both civil
and criminal matters,
territory legislation dealing with the regulation of different types of contracts. Examples are
although much of its
the Competition and Consumer Act 2010 (Cth) (‘CCA’) and the Goods Act 1958 (Vic) and equivalent
time is spent deciding
statutes in other states and territories. disputes involving the
Contract law was traditionally the province of the states; however, the enactment of the Commonwealth and
Competition and Consumer Act 2010 (Cth) (‘CCA’), replacing its predecessor Trade Practices Act states, which arise

1974 (Cth), marked the entry of the Commonwealth into the area of trade and commerce. All under Commonwealth
legislation or require
the sections of the CCA have been drafted so as to fall within the scope of the
an interpretation of
Commonwealth Parliament’s legislative powers, which are set out in s 51 of the
the Commonwealth
Commonwealth Constitution. Thus the CCA primarily regulates the activities of Constitution.
‘corporations’ as defined in s 51(xx). It also extends to the business and commercial customary law
activities of individuals who engage in interstate or overseas trade, or trade with the A rule of conduct that is
Australian Capital Territory or the Northern Territory. generally considered to
The Commonwealth has also used its trade and commerce power and its postal power be binding on the people
who are affected by its
under the Constitution to establish and legitimate its presence in the business arena (see
scope because of its
Chapter 2). Today, a significant number of areas of contract and commercial law are being
long usage. Customary
developed in the Federal Court because of this jurisdiction. law—for example,
Aboriginal customary
law—is usually oral and
Law-making by parliaments based on tradition and
usual practice rather
The main function of a parliament is to make laws. There are nine parliaments
than written codes or
(Commonwealth, state and territory) engaged in the law-making process in Australia.
principles.
Usually, each Parliament in Australia comprises three elements:
1. a lower house (that is, the House of Representatives in the federal Parliament and the
Legislative Assembly at state and territory level);
2. an upper house (that is, the Senate in the federal Parliament and the Legislative
Council
at state and territory level);2

1 Recognition of Aboriginal Customary Laws, Report 31, Australian Law Reform Commission, 1986.
2 The Queensland Parliament contains only the lower house.
8 Part 1 Introduction to Business Law

parliament 3. the Queen or her representative (that is, the Governor-General at federal level, the
The legislative arm Governor at state level and the Administrator at territory level).
of government. There
are nine parliaments
T IP
in Australia: the
Commonwealth In order to become a law, a Bill must pass through various stages (readings)3
Parliament, six state in the lower and upper houses of the parliament and receive royal assent. In
parliaments and two the absence of this procedure, a Bill may not become a statute, thus will
territorial parliaments.
not be a source of law. The main function of parliament is to make law.
The Commonwealth
Parliamentarians are the elected members of the public who represent
Parliament and the
parliaments of each the interests of the general population including the interests of their
of the states, except constituency, in the parliament. The proposal to make, amend or repeal law is
Queensland, are initiated in the parliament in a form of a Bill.
bicameral (consisting
of an upper and lower
In Australia, the procedure for law-making by parliaments is as follows:
house). In Queensland,
the Northern Territory
– Proposals for making (or amending) a law may come from government, pressure groups
and the Australian (such as consumer groups and environmental protection lobbies) or the media.
Capital Territory, – Parliamentary drafters draft the Bill and the relevant minister initiates the Bill in
the parliaments are parliament.
unicameral, having only
– The Bill undergoes various stages or readings (that is, a first, second and third
one legislative house.
reading) where it is discussed and debated in detail.
enactment
– If passed by the lower house of parliament with a majority vote, the Bill proceeds to the
An Act of Parliament.
upper house for further debate and discussion.
lower house
In a bicameral
– If passed by both houses with a majority vote, the bill is sent to the Governor (if it is a
parliament, generally state bill) or the Governor-General (if it is a federal bill) for royal assent.
the larger and more – The Bill then becomes an Act of Parliament (also called a statute).
representative
Some acts may commence immediately, as specified in the Act itself, while others may
legislature in which
commence at a later stage, on a date proclaimed by the Governor or Governor-General and
the party with the
majority of seats published in the Government Gazette. Provisions about the commencement date of acts are
holds the government. not uniform.4 Section 3A of the Acts Interpretation Act 1901 (Cth), for example, provides that
In Australia, the if a Commonwealth Act does not contain a commencement date, it should commence 28
lower house of the days after the Governor-General gives the royal assent; in South Australia, Victoria and
Commonwealth
Queensland, it commences on the date of assent.
Parliament is the House
While the majority of bills pass through both houses smoothly, some may be rejected
of Representatives.
or refused by one house (usually the upper house, where the government may not hold a
majority). This situation is called a deadlock and can prove to be problematic for those who

3 The Bill must pass through three ‘readings’: first, second and third reading in both houses of the Parliament. If
the Parliament consists of one house only, the Bill will pass through three readings in one house and then is
sent for royal assent.
4 See, for example, Interpretation of Legislation Act 1984 (Vic); Interpretation Act 1987 (NSW); Acts Interpretation Act 1954
(Qld); Interpretation Act 1984 (WA); Acts Interpretation Act 1983 (Tas); Legislation Act 2001 (ACT); Interpretation Act 1978
(NT); Acts Interpretation Act 1915 (SA).
 01 The Australian Legal System 9

originally initiated the bill (usually the government of the day).5 Both Commonwealth and House of
state constitutions contain provisions for resolving deadlocks between houses of parliament. 6 Representatives

One of the important themes in law to be aware of is the interface or relationship between The lower house of
the Australian federal
common law and statute law. In the event of inconsistency between common law and statute
Parliament. The
law, statute law will prevail.
party or parties that
hold the majority of
RI SK M A N A G E M E N T T IP seats in the House of
Businesses should be mindful of the provisions of the statute law. In case of Representatives make
up the Commonwealth
contradiction between the common law rules relating to contracts and the
Government of the day.
provisions of statute law, the statute law always will prevail.
Members of the House
of Representatives sit for
Although the courts are still an important source of law in Australia, the influence of a three-year term.
this source is diminishing as more and more statutes are being enacted both at the state Legislative Assembly
and Commonwealth levels to protect consumers from the unscrupulous activities of some (Abbreviation: LA).
businesses. Indeed, there is an argument today that, despite the historical pre-eminence of the The lower house of
common law in the area of contract law, statute—and in particular the consumer protection Parliament in New

provisions of the Competition and Consumer Act 2010 (Cth) and predecessor Trade Practices South Wales, Victoria
and Western Australia.
Act (‘TPA’)—have undermined the significance of the traditional common law principles
It is equivalent to the
relating to contracts.
House of Assembly in
Since its enactment in 1974, the TPA (and now under the CCA) had a dramatic impact South Australia and
on the rights and remedies available to consumers dealing with businesses. Consumers Tasmania. It is the sole
today have greater protection under the CCA than at common law. To take one example, house of Parliament in
Queensland, and the
a party may now bring an action for misleading or deceptive conduct under the broad
Northern and Australian
parameters of s 18 of Schedule 2 of the CCA7 and not have to rely on common law
Capital Territories.
misrepresentation with all its restrictive technicalities. 8 Indeed, the strict duty not to act
upper house
in a misleading or deceptive manner under s 18 has imposed a far-reaching new regime of
In a bicameral
good faith on contract negotiations and on contractual dealings generally. This means that parliament, the upper
the strict application of the common law rules of contract law is no longer the sole house is generally
consideration in resolving contract disputes between parties. the smaller and
less representative
legislature, acting as
5 For an example, read the Senate debates about amendments to the Rudd government’s a house of review for
Industrial Relations Bill. Consider the reservations of Senator Steve Fielding (Family First) the lower house. In
and Senator Nick Xenophon (Independent) to the Bill at www.feargalquinn.ie/index.php/What-I-ve-Said/
Australia, the members
Democracy-Governance.
of the upper houses of
6 See, for example, Constitution Act 1975 (Vic); Constitution Act 1902 (NSW); Constitution Act 1934 (SA) and s 57 of the
Commonwealth of Australia Act 1900 (Imp). The problem of deadlock does not arise in the Queensland Parliament, Parliament, in every
as it contains only the lower house. There are no such provisions in the Constitutions of Western Australia and jurisdiction where they
Tasmania. The position in Western Australia and Tasmania seems to be that if the upper house rejects a Bill, exist, are elected.
the Bill does not become a statute.
The upper house of
7 Schedule 2 of the CCA contains the Australian Consumer Law (‘ACL’). Consumers have wider remedies under
ACL than common law. the Commonwealth
8 Common law distinguishes between an innocent, negligent and fraudulent misrepresentation. Section 18 of Parliament is the
the ACL imposes direct liability on businesses for misleading or deceptive conduct and false or misleading Senate.
representations.
10 Part 1 Introduction to Business Law

Senate Similarly, businesses advertising their goods or services at a particular price with no
The upper house of intention of supplying them at the advertised price may not be able to argue that such
the Commonwealth advertisements were ‘invitations to treat’ (invitations to make offers: see Chapters 4 and 5),
Parliament whose
as they may be caught under the ‘bait advertising’ provisions of the CCA. Thus the CCA
members (senators)
imposes liability on businesses to engage in ethical and fair dealing by providing
are elected as
representatives protections to consumers which the common law may otherwise not provide.
of the states and
territories. The Senate
is the Commonwealth
AC T I V I T Y 1. 2
Parliament’s house of Tony runs a small shop of second-hand clothes. He has a notice displayed in his store
review and it has no which states ‘‘No refunds available’’ Customer Cozy demands that Tony must accept back
constitutional power the shirt he had bought from him because the shirt gives him ‘itch’ when he wears it.
to enact financial
Tony refuses to return the shirt and reminds Cozy of the notice. Does Cozy have a remedy
legislation.
under the contract?
federal
The system of
government whereby
all legislative, executive Rules of statutory interpretation
and judicial powers Courts are frequently called upon to adjudicate disputes where the language of a
are divided between
particular statute requires clarification. All statutes are written in general language which
two levels. In
may need to be given a specific context. Sometimes the language of a statute is
Australia, provision is
made for ambiguous, unclear or contains several meanings or messages. Statutory interpretation by
a federal system of courts may determine the meaning of a particular clause or a provision.
government by the When interpreting statutes, courts are mindful of the Acts Interpretation Acts at state,
Commonwealth of
territory and federal levels. These acts define many common terms and most of them
Australia Constitution
stipulate that courts should have regard to the underlying purpose of the legislation.
Act 1900 (UK).
Courts are also permitted to take into account extrinsic materials such as Hansard reports
Legislative Council
and other explanatory memoranda where there is doubt about the meaning to be
(Abbreviation: LC).
The upper house of
attributed to statutory language.
Parliament in New There are additional rules of statutory interpretation, which may assist the courts in their
South Wales, South task:
Australia, Tasmania,
– The literal rule represents the rule of statutory interpretation whereby a court applies the
Victoria and Western
provisions of legislation strictly as they are written. Hence, words are given their
Australia. Queensland is
the only state that does ordinary and grammatical meaning by a court. The use of this rule may lead to an
not have a Legislative absurd result, particularly when the language of the statute is unclear or ambiguous.9
Council, having – The golden rule refers to the principle of statutory interpretation whereby a court may
abolished it in 1922. take a commonsense approach to a statutory provision in situations where a strict
application of the literal rule would lead to an inconsistent, irrational or absurd outcome.
The golden

9 However, the ‘literal meaning of the legislative text is the beginning, not the end, of the search for the intention
of the legislature’ (McHugh J in Kelly v The Queen [2004] HCA 12 at 24).
 01 The Australian Legal System 11

rule may be applied where there is a clear understanding of the original intent of the Governor-General
legislation. The representative of
the English monarch,
– The mischief rule arises where the meaning of a word in a statute is ambiguous, illogical
as the head of state
or incomplete. This rule allows the court to examine parliament’s intention in
at the Australian
enacting the legislation, having regard to the ‘mischief’ that parliament intended to federal level. Under
remedy; in other words, the court will look at the reason why parliament passed the the Commonwealth of
act. To clarify this intent, the court will first look at the common law before the Australia Constitution
legislation was passed to determine the ‘mischief’ for which the common law did not Act 1900 (UK), the
Commonwealth
provide a remedy. The court then will use the text of the act and any ‘extrinsic
Parliament consists
material’10 available—including reports of law reform agencies, explanatory
of the House of
memoranda, relevant materials in parliamentary debates, Hansard reports and
Representatives, the
ministers’ speeches on the Bill—to determine what remedy the legislation intended Senate, and the English
to introduce.11 king or queen, who
delegates their functions
as the executive head of
Subordinate or delegated legislation the federal government
to the Governor-General.
As noted earlier, the major source of Australian law is legislation, enacted at both federal
Governor
and state/territory levels by parliaments. Given the volume of legislation and the pressures
The representative of the
upon parliamentary time, it may not be possible or desirable for parliaments to make English monarch, as the
decisions regarding the detail of such legislation. This is especially the case where the head of state in each
subject matter of the legislation is technical, or is likely to change frequently.12 In such Australian state.
cases, the parliament is given power to ‘delegate’ or refer the making of the detailed Bill
regulations to a subordinate body. This subordinate body is typically the Governor-General A proposed law that is
or Governor, a minister of the relevant government department responsible for implementing debated and passed

the act, or a local council, professional or statutory body. These bodies may in turn draw on through the legislative
processes of parliament
the experience of experts in formulating the regulations made pursuant to the Act of
and becomes an Act
Parliament (called the ‘enabling’ or ‘empowering’ statute).
of Parliament after
Since subordinate or delegated legislation (referred to variously as rules, regulations, receiving royal assent.
orders, ordinances, by-laws, statutory instruments, notices and proclamations) is made under royal assent
the authority of the enabling Act of Parliament, the rules must be made in the way specified The formal signing of
by the enabling act and must comply with all the formalities. A number of mechanisms a Bill that has already
ensure that delegated legislation has been properly made in accordance with the authority been passed by the

conferred by the parliament, and an explanation of these follows. parliament, by the

Governor (at state level)
Parliament itself exercises supervision over subordinate legislation:
or the Governor-General
– Delegated legislation must be ‘tabled’ or placed before parliament within a specified time (at federal level),
of having been made.13 indicating the Crown’s
assent to the proposed
law. Once a Bill has
10 See s 15AB of the Acts Interpretation Act 1901 (Cth) for the meaning of extrinsic material: ‘any material not forming received royal assent
part of the Act is capable of assisting in the ascertainment of the meaning of the provision’. it becomes an Act of
11 See J. Ponting, Oxford Legal Study Dictionary, Oxford University Press, Melbourne, 1998.
Parliament.
12 Delegated legislation may be altered relatively easily.
13 Legislative Instruments Act 2003 (Cth), ss 38 and 42.
12 Part 1 Introduction to Business Law

parliamentary debates.
Act of Parliament
A law made by
Parliament, as opposed
to common law, which is
made by the courts.
statute
An Act of Parliament.

commencement date
The date on which an
Act or parts of an Act
come into operation.
Very often an Act of
Parliament will not
become law until a
certain date fixed by the
Governor-General in
Council (Commonwealth
legislation) or the
Governor in Council
(state legislation).
deadlock
When a Bill is passed
by one house of the
Parliament but not by
the other.

right
The entitlement,
privilege or power to
do something.

liability
A civil or criminal,
legal responsibility or
obligation.

Hansard
The official
records of
parliamentary
proceedings. The reports
are named after Thomas
Hansard who printed
the first report of the
English parliamentary
debates in 1803. The
name ‘Hansard’ is
used to describe any
of the Australian
Commonwealth or state
 on and may find that it is invalid for the following reasons:
– Parlia – Ultra vires: This means that the delegated legislation is beyond the power of the authority
mentar that has been conferred by the enabling act. Ultra vires may be established by showing
y that the subordinate legislation is inconsistent with statute law or the common law.
commi This is because, unless special provision has been made for delegated legislation to
ttees prevail, it normally does not override existing statute law or common law. If a regulation
have is held to be ultra vires by the court, it becomes invalid and has no legal force of the law.
been – Lack of formalities: This means that the delegated legislation was within the power of
establis the subordinate body, but formalities were not met. Delegated legislation may be
hed to declared invalid where, for example, there has been a failure to follow mandatory
assess procedural steps, or there has been an attempt to sub-delegate the power to a third
the
party (it is an important principle of law that ‘who has been delegated power may not
validit
further delegate’).
y of
Delegated legislation may be altered or repealed either by subsequent statutes, which is
delegat
rare, or by subsequent delegated legislation. The repeal may be express or implied; delegated
ed
legislation is impliedly repealed if it is inconsistent with a subsequent statute or delegated
legislat
legislation.
ion and
Federal regulations commence on the date of notification in the Commonwealth of Australia
to
Gazette, unless a different date has been specified in the regulations.14 At state and territory
make
level, delegated legislation must normally be published in each government’s Gazette and
recom
takes effect either from the date of publication or from the date specified in the regulations. 15
mendat
Delegated legislation is interpreted according to the usual rules that apply to the interpretation
ions to
parlia of statutes.16

ment.
– Either AC T I V I T Y 1. 3
house 1. You are told that you cannot smoke inside the university buildings or within three metres
of of any university building. On a wet rainy day, you are caught smoking in your office. What
parliam can happen to you? Who has made this rule and who can enforce it?
ent
may
14 Section 48(1)(b) of the Acts Interpretation Act 1901 (Cth).
disallo
15 Subordinate Legislation Act 1994 (Vic), Part 3; Interpretation Act 1987 (NSW), s 39; Statutory Instruments Act 1992 (Qld),
w the ss 32–34; Subordinate Legislation Act 1978 (SA), ss 10, 10A, 10AA, 11; Interpretation Act 1984 (WA), s 41; Acts Interpretation
Act 1931 (Tas), ss 38A, 47; Subordinate Laws Act 1989 (ACT), ss 6, 7; Interpretation Act 1978 (NT), s 63.
regulati
16 Refer to the discussion above relating to the literal rule, the golden rule and the mischief rule.
ons by
passing
appropr
iate
resoluti
ons.
– Courts
can
also
review
delegat
ed
legislati
 01 The Australian Legal System 13

2. The local municipal council by-law prohibits you to subdivide land to build a flat, explanatory
townhouse, shed or other structure. You built a flat at the back of your house which memorandum
you say will be used for meditation purposes. On your neighbour’s complaint, your An executive report
local council inspector visits your property and asks to you to demolish the flat or face a issued by a minister to
explain the aims and
legal action. Have you breached any law? If so, which one?
operation of a proposed
statute.
literal rule

The common law or case law The rule of statutory

interpretation in
Common law is a source of law that has been primarily derived from the decisions of judges which a court applies
the provisions of
(in courts). It is therefore, appropriately called ‘case law’ or ‘judge-made law’.
legislation strictly as
It should be noted that the term ‘common law’ has various other connotations and they are written. The
has been used in a number of ways: literal rule is based on
– Common law meaning the system of law that was developed by English courts and applies in England: the assumption that

Countries that have been English colonies in the past (for example, Australia, New parliament intends the
text of legislation to
Zealand, the USA, Canada, India, Singapore and Malaysia) or have adopted the English
be interpreted.
legal system (for example, Pakistan, Bangladesh, Sri Lanka and some African countries)
golden rule
are common law jurisdictions, as they derive their legal systems from England.
This is the principle of
– Common law as opposed to equity: Essentially, common law refers to the law that was created statutory interpretation
by the older English common law courts, as opposed to the law that was developed at a to the effect that
later stage by the courts of equity (that is, the Chancery courts; equity as a source of law where a strictly literal
will be discussed later in this chapter). interpretation would
lead to an inconsistent
– Common law as opposed to civil law systems: Civil law is used in many European (for
or absurd outcome,
example, France and Germany) and some Asian countries (for example, Indonesia, Japan
a court may rely on a
and East Timor). more sensible approach.
– Common law as opposed to shariah law: Shariah law is used in many Islamic countries. The golden rule may be
applied where there is
a clear understanding
The doctrine of precedent of the original intention
of the legislation. The
Precedent means a judgment of a court that establishes a point of law. The doctrine of golden rule may be
precedent is based on the principle that ‘like cases should be decided alike’, and the rationale contrasted with the
behind the doctrine is certainty and predictability in laws, so that people should be able to literal rule.

plan their commercial affairs with a reasonable degree of certainty that what they are doing
is legal.17 Under this doctrine—which forms the bedrock of our common law system—where

17 Problems created by the doctrine of precedent should not be overlooked, however, and include multiple
judgments on different grounds, overruling by later decisions at the same or higher level in the hierarchy,
and abrogation by Parliament.
14 Part 1 Introduction to Business Law

mischief rule FIGURE 1.2 DEVELOPMENT OF LAWS BY COURTS

In statutory
Courts develop laws in two ways:
interpretation, where
by precedents and by statutory interpretation
the meaning of a word
in an act is ambiguous,
the mischief rule allows
the court to examine the
Parliament’s intention
in originally passing the
Act. To clarify the intent,
the court will look at Precedent: a decision of a court that Statutory interpretation: courts interpret an act of
establishes a point of law: parliament to clarify or determine its meaning
the common law before
the legislation was Binding precedent has to be followed by all Rules for statutory interpretation:
passed to determine lower courts in the same hierarchy, for Literal rule: words are given their common
example High Court decisions grammatical meaning
the mischief for which
Golden rule: words are interpreted with Parliament’s
the common law did Persuasive precedent has persuasive effect on
intention in mind Mischief rule: if words legislation
not provide. Then the judicial thinking, for example House of Lords
are
decisions
court will use the text of ambiguous, courts use extrinsic materials to
the act and any determine the mischief Parliament intended to
extrinsic material remedy
available, including
reports of law reform
agencies and the facts of cases are similar in material respects, the law expounded in the earlier cases is
explanatory memoranda, followed in the later (similar) cases.18
to decide what remedy
More specifically:
the legislation was
intended to introduce. – lower courts in any given judicial hierarchy are bound by earlier decisions of courts

law reform
higher up in the same hierarchy; and

The process of – decisions of courts at the very top of the hierarchy, such as the High Court of Australia,
improving the law have greater weight than those further down in the hierarchy, such as those of a single
by updating it to judge of a state Supreme Court.
reflect current social
Decisions coming from the higher courts in a hierarchy are said to be binding on all the
conditions, eliminating
lower courts in the same hierarchy. This notion is known as the doctrine of stare decisis, or
defects, and simplifying
and making its binding precedent. For example, decisions of the High Court of Australia are binding on all
administration more the lower courts of the states and territories, whereas a Magistrates Court decision would not
effective. bind the Supreme Court of a state.
parliamentary debates It should be noted that the entire judgment of the higher court is not binding on the lower
The official records courts; only the reasoning for deciding the case (referred to as the ratio decidendi) is followed
of parliamentary
by the lower courts. The ratio of a case differs from what is called obiter dicta (or obiter dictum
proceedings, known as
Hansard reports.

18 Although no two cases are precisely similar on their facts, it is possible to avoid an earlier precedent by a finding
that the facts of two cases are not similar ‘in material respects’. This technique is known as ‘distinguishing’
cases that are based on fundamentally different factual scenarios.
 01 The Australian Legal System 15

in the singular). Flying references and passing statements by a judge or hypotheses created parliamentary
by the court to make a point (that has nothing or very little to do with the present case) are committees
examples of obiter dicta. Various committees
comprising members
In the past, decisions of the Privy Council (formerly the highest court of appeal for
of the upper, lower or
Australia) have been binding on the High Court of Australia. Since 1986, however, all
both (joint) houses of
appeals to the Privy Council from Australian courts have been abolished.19 Parliament, established
Australian contract law, as we have seen, has its origins in English common law. Despite to inquire into specific
the fact that English decisions are no longer binding on Australian courts, they are still matters. During the
legislative process, the
frequently relied on and cited by our courts. Indeed, Australian courts frequently have regard
entire members of a
to decisions not only of the English House of Lords (the highest court of appeal for
parliamentary house
England), but also to decisions of the Supreme Court of the USA. In recent years, Australian
or a smaller group
courts have been influenced by decisions of the Canadian and New Zealand Supreme (select committee) sit
Courts.20 Such decisions, which originate from other judicial hierarchies, are not binding on to debate the provisions
Australian courts, but they may be of great persuasive authority. Similarly, decisions of the of proposed legislation.

Court of Appeal in Victoria are not binding on the Supreme Court of New South Wales, but Other parliamentary
committees sit to
may have persuasive effect on the judicial thinking of that court.
investigate issues either
Although Australia has inherited the common law system from England and, in the past, on an ad hoc basis, or
courts within Australia have unquestionably followed the judicial reasoning of the House on an ongoing basis as a
of Lords, the High Court of Australia has since made radical departures from the English standing committee.
common law. For example, the High Court of Australia has been engaged for many ultra vires
years in developing a uniquely Australian law of contract—a law that takes account of An action beyond the
21
our own geographical, cultural and social reality. There is an awareness today of the need limits of the legal
powers given to a
to adapt the common law to Australia’s needs, circumstances and values, and with England’s
parliament, public
increasing involvement in the European Union, the cultural severance of Australian law
authority, company or
from English law no doubt will increase. It is often said that the role of the judiciary is other body.
now more that of interpreting legislation than making law. Obvious exceptions are the High
invalid
Court decisions in Mabo (confirming native title; see below) and Wik (that pastoral leases could
Not valid, without legal
coexist alongside native title).22 These cases are a prime example of the law-making power force.
retained by the judiciary.23 third party
A person who does
not share a direct
19 See the Australia Act 1986 (Cth). legal relationship with
20 Kirby J laments that Indian jurisprudence has been largely ignored by the Western common law systems: M. Kirby, another person.
‘The Future of the Judiciary’, Australian Lawyers Conference, 17 July 1995, available at www.lawfoundation.net.
au/judgments/kirby.
21 A. Mason, ‘Australian Contract Law’ (1988) 1 Journal of Contract Law 1; N. Sneddon & M.P. Ellinghaus, Cheshire and
Fifoot’s Law of Contract, 7th Aust. edn, Butterworths, Sydney, 1997, p. 859.
22 Wik Peoples v Queensland (1996) 187 CLR 1.
23 In 1997, Prime Minister John Howard was reported as having said that, in the process of interpreting laws, the
High Court had become ‘a little adventurous’. He also insisted that judicial appointments to the High Court
were the federal government’s prerogative and would remain so: The Age, 20 February 1997.
16 Part 1 Introduction to Business Law

judge
(Abbreviation: J). An
officer of the Crown
whose function is to
adjudicate disputes
MABO V QUEENSLAND (NO. 2) 24
FACTS
brought before a
court. Judges are
FACT S
appointed to a state The plaintiffs were members of the Indigenous Australian group known as the Meriam
court by the Governor people. In this case, the legal rights of the Meriam people to the land of the Murray
in Council, or by the Islands were in issue. The Meriam people had been in occupation of the islands for
Governor-
generations before the first European contact. They were a Melanesian people who
General in Council to
probably came to the islands from Papua New Guinea. Their numbers had fluctuated
a federal court, and
between probably no more than 1000 and no less than 400. They lived in groups of huts
cannot be removed from
office other than by the strung along the foreshore, immediately behind the sandy beach. Although individuals
appointing body, and other than the Meriam people had lived on the Murray Islands from time to time and
only after both houses had worked as missionaries, government officials, or fishers, they had not been
of the appropriate permanent residents on the islands. Therefore, the Meriam people had a continuous
parliament request their relationship and connection with the Murray Islands.
removal on the grounds
In 1879 title to the Murray Islands passed to the State of Queensland. Queensland
of proven misbehaviour
or incapacity.
argued that, when the territory of a settled colony became part of the Crown’s
dominions, the Crown acquired the absolute beneficial ownership of all land in the
case law
territory.25 Queensland relied on previous law (known as the terra nullius doctrine)26
Principles of law
established by judicial that held that Australia, prior to European settlement, had been unoccupied, which
decisions and the granted the Crown upon settlement absolute title and sovereignty over Australia.
doctrine of precedent,
in contrast with I SS UE
legislation. The proposition that, when the Crown assumed sovereignty over an Australian colony,
equity it became the universal and absolute beneficial owner of all the land therein, was
The body of law the paramount issue to be decided in Mabo. The High Court was specifically asked
developed by the Court
to determine whether the Meriam people had lost their traditional native title to the
of Chancery in England
Murray Islands when title to the islands passed to Queensland on 1 August 1879.
to ensure fairness in the
legal system in areas
DE CIS IO N
where the common law
failed to provide a just Native title to the Murray Islands survived the Crown’s acquisition of sovereignty and
solution to a dispute. In radical title on 1 August 1879, and the rights and privileges conferred by native title
the event of a conflict were unaffected by the Crown’s acquisition of radical title to the islands. However,
between common law native title could be extinguished if Queensland exercised its sovereign power in a
and equity, the rules of
manner that was inconsistent with the continued right of the Meriam people to enjoy
equity prevail.
native title. In this way, native title throughout Australia had been extinguished by
law court
A place where judicial

proceedings are heard.

24 Mabo v Queensland (No. 2) (1992) 175 CLR 1, 107 ALR 1.
25 See A-G v Brown (1847) 1 Legge 312.
26 See ibid; Cooper v Stuart (1889) 14 App Cas 286; Williams v A-G (NSW) (1913) 16 CLR 439; Milirrpum v Nabalco
(1971) 17 FLR 141.
 01 The Australian Legal System 17
alongside

grants of traditional estates in land (such as freehold title), but not necessarily by
the grant of lesser interests (for example, grants to authorities permitting them to
prospect for minerals), where it could be shown that native title can mutually coexist
with the lesser interest.
In this case, the native title belonging to the Meriam people had not been
extinguished because there had been no grant of freehold title or any other interest in
the Murray Islands by Queensland.
Native title has its origin in the traditional laws and customs observed by the
Indigenous inhabitants of a territory, and the nature and incidents of native title are
determined as a matter of fact by reference to those laws and customs. The terra
nullius doctrine was described by the High Court as a legal ‘fiction’, by which the rights
and interests of Indigenous inhabitants in land were treated as non-existent, and this
‘fiction’ was held to have no place in the contemporary law of this country. Native title
could survive provided it could be shown that there existed a continuous association
between the Indigenous inhabitants and the land in question. In Mabo, the Meriam
people had established the customary link with the Murray Islands and, therefore,
their native title to the Murray Islands had survived the Crown’s claim of
sovereignty.

Equity as a source of law

Historically, the law of equity developed in the Middle Ages largely as a response to the
inadequacies of the common law. In the first place, the common law was very narrowly
focused on certain types of cases—crimes, property, contract and tort. Second, as the
doctrine of precedent developed, it became inflexible. Precedent would be applied rigidly
even where the original decision was clearly wrong or unjust, or where it had simply
become out of date. Furthermore, the common law provided remedies that were in many
cases inadequate, inappropriate or unsatisfactory. For example, the common law remedy of
damages for breach of contract may not be appropriate where the innocent party wants to
prevent the breach from occurring, or where the innocent party wants the other to perform
the contract in the way it was agreed. In some cases there were no common law remedies at
all. The common law had become increasingly concerned with form and procedure rather
than justice.
In such circumstances, dissatisfied litigants petitioned the Crown, as the highest judicial
authority, to provide an appropriate remedy. In time, these petitions came to be considered
by the Chancellor acting on behalf of the King or Queen and ultimately the petitions were
directly addressed to him. The Chancellor, who was the highest clergyman of the country,
acted as the conscience of the monarch. He had the practical power to override the rulings
of the common law courts, and he resolved disputes that came before him on the basis of
fairness and good conscience—the merits of the case and considerations of justice were
paramount. As the volume of work increased, the Court of Chancery was established. The
new court developed a distinct body of equitable rules and remedies, which operated
Chancery
The Court of Chancery was established during the Middle Ages to hear appeals against remedies
offered by the common law courts and was responsible for the development of
the equitable remedies, such as specific performance.
civil law
1. The law regulating conduct between private citizens, such as in
the law of negligence. Within this meaning, civil law is usually contrasted with other areas,
including criminal or administrative law.
2. The law originating from Roman law, which is the basis for the legal systems in several
European countries.
Civil law, in this sense, is contrasted with common law. Typically the civil law system relies on
the codification of areas of law instead of the principles of judicial precedent. 3. Law affecting
civilians, as opposed to military law.
precedent
The law developed by the courts; judge-made law. Judicial precedent is the key feature in the
development of common law, and laws made according to the doctrine of precedent are in contrast
with legislation.
18 Part 1 Introduction to Business Law

judgment
the common law rules. In 1620, King James I declared that, in cases of inconsistency
1. The decision of a
between the common law and equity, equity would prevail. Thus, equitable principles are
court as to the rights
and obligations of the superior to common law principles, as equity aspires to dispense justice to parties by
parties in an action removing the injustice, unfairness and harshness of the common law.
brought before it. The two systems—common law courts and equity courts (also known as Chancery
2. The court’s reason
Courts)—existed side by side in England until 1873. 27 Since then, the two systems have been
for its decision and its
integrated and Australia has inherited the combined principles of common law and equity.
pronouncement of the
legal consequences
In every Australian jurisdiction today all courts apply both common law as well as equitable
of that decision. 3. principles,28 and in the event of any inconsistency, the principles of equity prevail. Thus,
The remedy resulting lawyers continue to make a distinction between the common law and equity, even though the
from the decision of a two bodies of law are now administered by the same courts.
civil proceeding or the
There are, however, several differences between equity and the common law:
sanction imposed as the
result of a criminal trial – The common law is a complete and comprehensive system of law, whereas equity
(for example, a comprises many isolated principles specifying when a particular remedy may be given.
judgment debt). Equity does not apply to all civil cases and has no relevance in criminal disputes.
bind – Equitable rights are valid only against those people who are in conscience bound to
Put under legal recognise them (rights in personam). Common law rights are valid against the whole
obligation. world (rights in rem).
binding precedent
– Common law rights are enforceable at any time, subject to statutory limitation periods.
A decision of a superior
Equitable remedies must be applied for promptly. The equitable doctrine of laches
court that must be
prevents the enforcement of a right where there is negligence or unreasonable delay in
followed by an inferior
court in the same enforcing it.
hierarchy, in contrast – Equitable remedies are discretionary.
with a persuasive By way of summary, we can say that equity is concerned with preventing unconscionable
precedent.
conduct—conduct that is not based on good conscience. A good example of equitable
ratio decidendi
intervention is the doctrine of estoppel in contract law, which not only creates a mechanism
The legal reasoning
for enforcing promises in the absence of consideration (or legal value, such as money: see
of a court in reaching
Chapters 4 and 5), but also imposes on contractual parties an overarching duty of good
its decision. The
ratio behaviour or fair dealing in the market place. Another example is provided by the doctrine
decidendi of cases heard of unconscionable bargains expounded in the landmark case of Commercial Bank of
in higher courts form the Australia Ltd v Amadio.29
foundation on which the The High Court in that case acknowledged that relief against unconscionable dealing is a
doctrine of precedent
purely equitable remedy. This decision, which was the predecessor of statutory
operates because they
developments relating to unconscionable conduct, has had a profound and far-reaching
bind lower courts in
the same hierarchy to impact on standards of behaviour in commercial contracting. The statutory provisions
follow the same rule of contained in Schedule 2 of the CCA and equivalent provisions contained in the state and
law. Contrast with obiter territory Fair Trading Acts30
dictum.
27 The Judicature Act 1873 (Imp) combined the two parallel legal systems and set up a Supreme Court of Judicature
that applies both principles of law (common law and equity) in their decisions.
28 See, for example, the Law Reform (Law and Equity) Act 1972 (NSW).
29 (1983) 151 CLR 447. The facts of the case and commentary on the decision can be found in Chapter 9 on
 vitiating
factors.
30 See, for example, the
Fair Trading Act 1999
(Vic).
 01 The Australian Legal System 19

reinforce and expand upon the norms of good behaviour expected of market participants obiter dictum
31
originally established in Amadio. Accordingly, it is probably now true to say as a general (Plural: obiter dicta).
A judge’s reasoning
proposition that contracting parties are not permitted to claim, or deny, legal rights when it
behind a point of law
would be unconscionable to do so.
that does not form part
As discussed earlier, sometimes the common law remedy of damages for breach of of the ratio decidendi
contract (which is the most popular and main remedy under the common law) may not and is not binding as a
be appropriate for the innocent party, and thus flexible equitable remedies may prove to be precedent.

more appropriate for the party in dispute. For example: Privy Council

– An injunction is an equitable remedy where a court directs the defendant to stop (Abbreviation: PC). The
Judicial Committee of
doing something that could harm the interests of the plaintiff (such as selling or
the Privy Council is the
disposing of the goods to someone else where the goods have already been sold to
most senior court in the
the plaintiff).
British Commonwealth,
– The remedy of specific performance directs a person (the defendant) to carry out the historically hearing
contractual obligations as originally agreed by the parties (for example, to sell the goods appeals from colonial
to the plaintiff; perform the contract as per the agreement). and other courts of
British Commonwealth
countries. In 1986, the
Relationship between common law equity and statute law right of appeal from
As discussed earlier in the chapter, common law has been developed by courts and statute Australian courts to
law is the product of parliaments. The principles of equity on the other hand, had historically the Privy Council was
been developed by the Court of Chancery in a separate branch of law. Though equitable abolished.

principles are now part of common law, the principles maintain their identity in contractual court of appeal
dealings.32 In case of contradiction between the common law and statute law, statute law will An appellate court.

always prevail, as this branch of law develops through parliamentary debates discussions, House of Lords
analysis and scrutiny of both houses of the parliament. The common law, on the other hand, The upper house in the
is developed by the unelected members of the public (judges, not parliamentarians) whose English Parliament and
the highest appellate
main role is to interpret and apply it. In interpreting and applying laws, the judges do
court in England. The
develop laws. In legal terms, however, the actual law-making power has been bestowed on
House of Lords as a
the Parliament.33 Thus, statute law is superior to common law (judge-made or case law). court is composed of
Unlike statute and common law, the principles of equity aspire for a higher goal to do independent, legally
justice to parties. Equity provides a remedy if parties enter into transactions which are harsh, qualified practitioners,
called Law Lords, who
unjust, unfair and oppressive, thus allowing the parties to set aside unjust and
are given life peerages
unconscionable bargains even when the parties had freely and voluntarily entered into those
and sit as an appellate
bargains. For example, common law may provide clear legal directions about how to enter
committee of the House
into a legally binding contract. Courts over the centuries may follow these sets of principles of Lords, with no original
through precedents. The principles of equity may state that if the contract is made under jurisdiction.
circumstances which are harsh or oppressive or the contract contains unfair and
unconscionable terms, equity may allow the court to set aside the contract on basis of
unconscionability. Similarly,

31 Sections 20, 21 and 22 of the Australian Consumer Law, contained in Schedule 2 of the CCA.
32 Read for example, in contract law, the doctrine of promissory estoppel, the principle of unconscionable conduct,
remedy of rescission and specific performance.
33 See Chapter 1 (s. 1) of the Australian Constitution that states: ‘The legislative power of the Commonwealth shall
be vested in a Federal Parliament which shall consist of the Queen, a Senate and a House of Representative …
called The Parliament …’
20 Part 1 Introduction to Business Law

terra nullius under the promissory estoppel, courts may not allow parties to go back on their promises
‘Land that belongs to when one relies on the promise and suffers detriment.
no one’. In terms of
This is to say that, in case of contradiction between common law and the principles of
international law terra
equity, equity prevails because equity is concerned with doing justice rather than following
nullius means territory
that no one owns. Any the strict application of the judge made rules.
nation that discovers Statute law can change the common law,34 including of the principles of equity.
such a territory is The relationship between common law, equity and statute law can be further understood
entitled to keep it.
by Waltons Stores (Interstate) Ltd v Maher.35
justice
The principle of law
T IP
that each person is
entitled to legal rights Businesses should be careful of promises they make to others. If a person
and is bound by legal gives a promise or arouses an expectation in the mind of another that the
duties. contract exists or will be made in future, and the other person relies on the
litigant statement and suffers loss, court may not allow the promisor to go back on
A party to a the promise because it will be unfair for him or her to do so.
civil
proceeding.
AC T I V I T Y 1. 4
merits
The relative strengths
On Monday, A, an antique dealer, agrees to sell a rare antique ring to B for $5000. B is to
of the plaintiff’s claim collect the ring on Friday after work. On Thursday, A finds another buyer, C, who offers
or the defendant’s twice the price of the ring. Thinking that this is a lucrative deal, A sells the ring to C.
defence in a civil case. Since it is the only ring of its kind, B may not be able to buy the ring elsewhere. Advise B
equitable of his rights and remedies under the agreement.
Something that is fair.

equitable remedy
A discretionary remedy
granted by the court
where an award LAW IN A GLOBAL CONTEXT: THE
of damages is not
sufficient to provide
INFLUENCE OF INTERNATIONAL
relief to a dispute,
usually as a writ of
LAW
specific performance or A further source of law arises from the globalisation of trade, markets, and commercial and
a restraining injunction.
financial transactions. The globalisation and deregulation of trade barriers—along with
technological developments, scientific and biotechnological innovations, and the
‘information superhighway’—have created the need for uniform laws to govern international
trade, which has vastly increased in scope and in significance to the world economy.
International laws are created by multinational conventions, reciprocal arrangements,
treaties and memoranda of

34 Following the Review of the Law of Negligence report (Ipp Report, October 2002) all Australian states and territories’
parliaments introduced statutes modifying the law relating to negligence. Up until then, there is little statutory
intervention in the law of negligence as this branch of law has been entirely developed by courts. See, for
example, Wrongs and Other Acts (Law of Negligence) Act 2003 (Vic); Trade Practices Amendment (Personal Injuries and Death)
Act 2006 (Cth). The Ipp Report is available at www.amatas.com.au/assets/ipp_report.pdf
35 (1988) 164 CLR 387.
 01 The Australian Legal System 21

understanding, along with bilateral arrangements (such as the free trade agreements (FTAs)) estoppel

to which Australia is or will be a signatory. The rule in civil

procedure preventing a
Australia has ratified approximately 900 international treaties and conventions since
person from asserting
Federation. These treaties have been implemented in Australia by the enactment of
a position contrary to
Commonwealth laws under the Commonwealth Parliament’s ‘external affairs’ power (s 51(xxix) one that already has
of the Constitution; see Chapter 2 for the full text of s 51). Some of the well-known been established. The
agreements to which Australia is a party are as follows: estoppel rule may be
demonstrated in three
– the Vienna Sales Convention: a multinational treaty that sets out standards of conduct for
ways: where a fact in
sales agreements between traders of the parties to the Convention;
dispute has already been
– the General Agreement on Tariffs and Trade (GATT): a multinational treaty which aims judicially determined;
to encourage free trade in goods between countries; where a party seeks
– the Asia Pacific Economic Cooperation (APEC): a regional treaty that provides special to deny a statement
that they have made
trading status to its members; and
earlier in a deed; and
– the South Pacific Area Regional Trade and Economic Cooperation Agreement
where a party has
(SPARTECA): a regional treaty (like APEC) that provides special trading advantage to previously acted in a
member states. A convention may be implemented through Commonwealth or uniform manner consistent with

state legislation, the position that is now

being denied.
see:
unconscionable bargain
– the International Arbitration Act 1974 (Cth), which ratifies the United Nations Commission
An agreement that is
on International Trade Law (UNCITRAL) Model Law on Arbitration;
unfair and unscrupulous
– the Foreign Judgments Act 1991 (Cth); because it gives an
– the Consular Privileges and Immunities Act 1972 (Cth), which ratifies the Vienna Convention on advantage to a stronger
Consular Relations, signed by Australia on 24 April 1963; party who has exploited
the weakness of the
– the Sale of Goods (Vienna Convention) Act 1986 (Vic), Sale of Goods (Vienna Convention) Act 1986
other party. Typical
(NSW), Sale of Goods (Vienna Convention) Act 1987 (NT), Sale of Goods (Vienna Convention) Act
areas of exploitation
1987 (ACT), Sale of Goods (Vienna Convention) Act 1986 (SA), Sale of Goods (Vienna Convention) may include financial
Act 1987 (Tas) and Sale of Goods (Vienna Convention) Act 1986 (WA), which give effect to the need, illness or
convention on the international sale of goods; disability, ignorance, or

– Part 5.6, Division 9 of the Corporations Act 2001 (Cth), which implements the UNCITRAL language difficulties. An
unconscionable bargain
Model Law on Cross-border Insolvency and Payment Netting;
is voidable in equity.
– the Cross-Border Insolvency Act 2008 (Cth), which gives effect to the UNCITRAL Model Law
interest
on Cross-Border Insolvency; and
A personal advantage or
– the Electronic Transactions Act 1999 (Cth), which gives effect to the UNCITRAL Model Law
concern.
on Electronic Commerce 1996. Australia adopted the United Nations Convention on the Use of
remedy
Electronic Communications in International Contracts in 2011 by enacting the Electronic Transactions
(Plural: remedies).
Amendment Act 2011 (Cth).36 States and territories are also passing similar legislation to
Something that
adopt the reforms proposed in the Commonwealth Act, especially regarding traditional redresses a wrong.
rules concerning the formation of a contract.37

36 www.comlaw.gov.au/Details/C2011A00033.
37 See www.ag.gov.au/RightsAndProtections/ECommerce/Pages/UNConventionElectronictransactionsininternati
onalcontracts.aspx. The Electronic Transactions Amendment Act 2011 (Cth) is available at www.comlaw.gov.au/
Details/C2011A00033..
22 Part 1 Introduction to Business Law

obligation
A legal relationship COURTS AND TRIBUNALS IN
between two people,
where one person’s right
AUSTRALIA
is the other person’s
duty. The hierarchy of courts
federal courts
Courts and tribunals are vital to the operation of law as they dispense justice, resolve
Any of the courts
disputes, compensate innocent parties (victims) for their injuries and punish the wrongdoers
created in accordance
with the Constitution for their offending conduct. In Australia, legal disputes are heard in a variety of state,
by the Commonwealth territory and Commonwealth courts and tribunals. Each of the Australian states and
Parliament to exercise territories, as well as the federal system, has its own hierarchy of courts. ‘Hierarchy’ refers to
the judicial power of the ranking of courts according to their importance in the legal system. In Australia, we have
the Commonwealth.
a three-tiered system at state and territory level (with the exception of Tasmania, the
Examples of Australian
Australian Capital Territory and the Northern Territory, which have two levels), with an
federal courts are the
overlay of federal courts and administrative tribunals.
High Court of Australia,
the Federal Court of The court structure essentially provides that the most serious and costly cases (in terms
Australia and the Family of seriousness of offence or value of money involved) are handled at the highest level by the
Court of Australia. ‘higher’ courts, while minor offences that can be dealt with relatively quickly are handled in
offence the readily accessible ‘lower’ courts. In between, in the middle band, there are the
A wrong that is ‘intermediate’ courts. Each court in the court structure, or court hierarchy, has a specific
prohibited by
jurisdiction; that is, it has specific functions and powers.
criminal law; a crime.
This structure facilitates the following:
higher courts
– The vast majority of cases, both criminal and civil, are dealt with in lower jurisdictional
Higher courts are courts
that sit at the top of courts such as the Magistrates Courts, the Courts of Petty Sessions and the Local Courts
court hierachy (that in the various states and territories.
is, state and territory – The hierarchy of courts and the division of jurisdiction allow for greater specialisation
Supreme Courts and the
by judges and courts in specific areas of the law; for example, the Supreme Court of each
High Court of Australia)
state and territory has a number of divisions and ‘lists’, including the Commercial and
Magistrates Court
Equity Division, the Probate Division and the Common Law Division.
An inferior court in
– Decisions of the lower courts can be reconsidered through appeals to higher courts,
the Australian Capital
Territory, Queensland, provided the higher court grants special leave to appeal on a point of law.
South Australia, – The ranking of courts provides for the sharing of the workload of higher courts, so
Tasmania and Victoria, that they can focus on cases that are of utmost importance for the state, the territory
which has jurisdiction or the nation. For example, the state and territory Supreme Courts hear disputes that are
to decide minor civil
serious in nature, either in terms of money or the offence itself, and the High Court of
and criminal cases and
Australia hears disputes that require further clarity and certainty on legal principles
to conduct preliminary
hearings. It is equivalent that are important for the entire nation.
to the Local Courts of
New South Wales and
the Northern Territory.
 01 The Australian Legal System 23

FIGURE 1.3 THE HIERARCHY OF COURTS hierarchy

The grading of courts
The High Court is the highest court in the court that enables the
hierarchy operation of the
doctrine of precedent
and an appeals system.
In Australia, courts are
ranked in ascending
)HGHUDO State Courts order from inferior,
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through intermediate, to
superior.
+iJK &RXUW RI $XVWUDOiD )XOO FRXUW RI WKH 6XSUHPH leave to appeal
)DPiO\ &RXUW ɒ )HGHUDO &RXUW (&RXUW RI $SSHDO) The permission to
&RXUW appeal granted either
by the court from which
6XSUHPH a decision is being
&RXUW appealed or by the
+HDUV DSSHDOV IURP
court to which an
lower courts
lQWHUPHGiDWH application is being
lQWHUSUHWV DQG
JXDUGV WKH &RXUWV made, depend- ing on
&RPPRQZHDOWK (e.g. County the courts involved.
Constitution Courts)
courts of summary
$GjXGiFDWHV GiVSXWHV
between states jurisdiction
Courts that handle
Children’s Court Magistrates Courts Coroner’s Court small, civil and criminal
(Local Courts)
matters.
matter
A civil proceeding.

Courts of summary jurisdiction debt

Courts of summary jurisdiction—Magistrates Courts (Victoria, Queensland, South Australia, A sum of money owed by
one person (the debtor)
the Australian Capital Territory the Northern Territory, Tasmania and Western Australia)
to another person (the
and local courts (New South Wales)—are established under federal, state and territory acts
creditor).
to handle small civil and criminal matters.
claim
They are referred to as summary courts because they handle minor or summary offences,
The assertion of
as well as small debt claims and other small civil matters, such as claims arising under right that is not yet
contract and tort, claims for victim compensation, compensation for injuries arising out of recognised by the law.
car accidents, claims as to title to land and some family law issues. An important title
prerequisite for access to courts of summary jurisdiction is the need to fall within the The right to ownership
monetary jurisdictional level, which typically varies from jurisdiction to jurisdiction. Matters and possession of
are usually heard quickly and relatively informally, and in criminal cases the magistrate property, in particular
real property.
typically imposes a bond or
24 Part 1 Introduction to Business Law

hearing
community service order for minor convictions. Overall, such courts handle the vast majority
The examination of
of legal matters going before Australian courts and provide an accessible means for the
a case in a court of
summary jurisdiction adjudication of disputes.
(for example, a Summary courts are presided over by a magistrate, who is not a judge but a more junior
Magistrates Court). judicial officer. In most jurisdictions, members of the Bar, solicitors, and government and
evidence academic lawyers are appointed to the position of magistrate.
Any material used The criminal jurisdiction of the summary courts fall into two categories:
in legal proceedings
1. Summary courts hold preliminary hearings (committal proceedings) into serious crimes,
to prove or disprove
a disputed fact. The such as murder, aggravated burglary, aggravated assault, and sexual offences, to
testimony of witnesses, determine whether the prosecution has sufficient evidence to proceed with a trial before
documents and objects judge and jury in a higher court.
may all be adduced as
2. Summary courts deal with summary offences (as opposed to indictable offences) such
evidence of a fact that
as failure to pay fines for traffic offences. These matters are tried ‘summarily’ by the
is being asserted by
magistrate and are disposed of in a summary manner by either the imposition of a fine
a party in support of
their case. The rules or imprisonment.
of evidence govern At the same level as summary courts in the hierarchy are specialist courts, such as the
the different types of Coroner’s Court and the Children’s Court.38
evidence admissible (for
The Coroner’s Court investigates all suspicious deaths, including homicides and arson.
example, circumstantial
evidence and expert
Most Coroner’s Courts also have a forensic division where evidence of the cause of death,
evidence) and which including bodies, is stored until identified by the next of kin. The forensic evidence, along
types are inadmissible with the clinician’s report, is used by the coroner to determine the cause of death.
(for example, hearsay The Children’s Court (known as the Youth Court in South Australia and the Juvenile
evidence or opinion
Court in the Northern Territory) hears most cases involving persons under the age of 18
evidence).
years who have been charged with any offence (except homicide).

The Federal Circuit Court of Australia39

The Federal Circuit Court of Australia, previously called the Federal Magistrates Court, was
established by the Federal Magistrates Court Act 1999 (Cth).40 It was established to share some
of the workload of the Federal and Family Courts and to provide a faster, less expensive, less
formal and accessible alternative to litigation in those courts. The court is presided over by

38 Each state and territory in Australia has its own courts and Divisions within Magistrates /Local Courts that deal
with specialised matters. For example, in 2004, Victoria established the Koori Court of Victoria, which
hears criminal cases against Indigenous children (juveniles) between the age of 10 and 17 years; Victoria also has
a Children’s Court which hears indictable and summary offences by children between the ages of 10 and 17
years. South Australia established the Family Violence Court at the Magistrates Court in Adelaide to deal with
family violence; as part of the drug prevention policy, New South Wales and Western Australia have established
a Drug Court to deal with the issues of use of illegal drugs. It should be noted that the role of the Coroner’s
Courts is only to investigate matters, but not to determine guilt or innocence or to prosecute the alleged
offenders.
39 Further up-to-date information about the functions and powers of the Federal Circuit Court is available at www.
federalcircuitcourt.gov.au.
40 Federal Circuit Court of Australia Act 1999 (Cth), enacted on 12 April 2013, renamed the Federal Magistrates Court to
the Federal Circuit Court of Australia. The Act is available at www.comlaw.gov.au/Details/C2013C00137.
 01 The Australian Legal System 25

a single federal magistrate and shares jurisdiction with the federal and family courts of the jury
Commonwealth on matters relating to family law and child support arising from the Child (Plural: juries). A body
Support Act 1991 (Cth), bankruptcy, copyright, consumer protection arising under the Australian of randomly selected
people, without legal
Consumer Law, industrial law and privacy. The Federal Circuit Court’s jurisdiction includes
expertise, summoned to
hearing appeals from tribunal decisions relating to visa issues for migrants and refugees and
court and empanelled
also hearing appeals from the Administrative Appeals Tribunal that are passed on by the to determine questions
Federal Court. of fact on the basis of
Although the Federal Circuit Court has concurrent jurisdiction with the many family and the evidence presented
in criminal trials on
federal court matters, in practice the majority of its workload pertains to family law and
indictment and in
child support matters.
some civil proceedings
and to determine the
Intermediate courts verdict. In a criminal
Intermediate courts, called County Courts or District Courts, exist in all jurisdictions except trial the jury usually

Tasmania, the Northern Territory and the Australian Capital Territory. They fall into the so- comprises 12 jurors
(can be 10 in Victoria).
called ‘middle band’ between Magistrates Courts and Supreme Courts. In terms of the way
If a jury is empanelled
they operate, intermediate courts bear similarities to Supreme Courts, but their upper
in a civil trial, its size
jurisdictional levels are in the middle band, with variations from jurisdiction to jurisdiction, may vary from four to
and there are some restrictions on what they can do in the areas of equity, admiralty and 12 members who are
probate. also responsible for
deciding the level of
These courts have an original jurisdiction (meaning they hear matters for the first time)
damages to be awarded
over important civil matters that may involve substantial amounts of money. They also have
if the plaintiff’s case is
an extensive criminal jurisdiction, but some of the more serious crimes (such as murder, rape successful.
and aggravated robbery) do not fall within their jurisdiction. The intermediate courts also
County Court
hear appeals from the summary courts.
An intermediate court
in Victoria. The County
Supreme Courts of the States and Territories Court is the equivalent

The state Supreme Courts are the ‘superior courts’: the highest court within a state or of the District Court
in New South Wales,
territory, with unlimited jurisdiction except for matters that fall within the jurisdiction of the
Queensland, South
federal courts or the High Court. Supreme Courts have both original and appellate
Australia and Western
jurisdictions to hear all civil and criminal cases (unless this has been removed by statute, Australia.
such as most divorce matters). The appellate jurisdiction of the Supreme Courts allows them
District Court
to hear appeals from lower courts. (Abbreviation: DC). An
The civil jurisdiction of the Supreme Courts usually covers large and complex cases intermediate court
where the monetary amounts involved exceed the levels of the intermediate courts. The in New South Wales,

Supreme Courts may also hear urgent matters such as applications for ex parte injunctions. Queensland, South
Australia and Western
The criminal jurisdiction of the Supreme Courts encompasses very serious matters such
Australia, equivalent
as charges of murder, and is exercised by a judge and jury.41 to the Victorian County
Court.

41 In civil cases, a jury normally consists of four members. In criminal cases, a jury always consists of 12 members.
26 Part 1 Introduction to Business Law

superior court
Courts of Appeal
A term for a court that
Three states (New South Wales, Queensland and Victoria)42 and both territories (the
has the authority to
supervise the decisions Northern Territory and the Australian Capital Territory) have established Courts of Appeal
of lower courts in a that exercise appellate jurisdictions and hear appeals from a single judge of the Supreme
hierarchy, through its Court. In other states, such power is exercised by the Full Court of the Supreme Court (also
appellate jurisdiction, known variously as the State Full Court and the Court of Criminal Appeal).
and the power to
issue the writs of
certiorari, mandamus or AC T I V I T Y 1. 5
prohibition. In Australia, Which court may hear the following matters?
the High Court is the
1. Tommy agrees to sell his car to Mario and now Tommy claims the agreement was
superior court at the
never made.
federal level. The
Supreme Courts are the 2. Li, aged 17, is caught speeding on police camera. She was travelling at 100 kilometres
superior courts in the per hour in 50 kilometre per hour zone. When she is breath-tested, Li is found to have
states and territories. a blood alcohol content level of over 0.08.
A superior court may 3. Sam’s negligent driving has caused physical injury to Ana. Due to her injuries, she may
be compared with an
never be able to work again.
inferior court.
4. A headless body has been found in front of a suburban hospital.
appellate jurisdiction
An appellate court’s
power to hear a case
on appeal. Because Federal courts43
each court deals with The federal judicial system encompasses the Federal Circuit Court, the Federal Court, the
different classes of
Family Court and the High Court of Australia. In addition, there are a number of other
civil and criminal
federal tribunals, including the Commonwealth Administrative Appeals Tribunal, the
appeals, their appellate
jurisdiction varies; but Industrial Relations Tribunal, the Copyright Tribunal and the Small Claims Taxation
appellate jurisdiction is Tribunal.
available in most courts The Commonwealth Constitution governs the federal courts. It empowers the
except Magistrates
Commonwealth Parliament to create federal courts or to confer federal jurisdiction upon a
Courts, which cannot
state court.44 In other words, questions arising out of federal laws may either be dealt with by
hear appeals.
a federal court, or by state-level courts with federal jurisdiction.
Against the background of these complex constitutional arrangements, and cases
involving overlapping jurisdictional issues, the Commonwealth, states and territories
designed a cross-vesting scheme in 1987, which enabled an entire case to be heard in the
one court.45

42 NSW established its own Court of Appeal in 1965, Queensland restructured its Supreme Court in 1991 to include
a Trial Division and a Court of Appeal, and Victoria established the Victorian Court of Appeal in 1995.
43 Federal courts consist of the High Court of Australia, the Federal Court and the Family Court of Australia. Each
court has its own structure.
44 Section 71 of Chapter III of the Australian Constitution, available at www.aph.gov.au/About_Parliament/Senate/
Powers_practice_n_procedures/Constitution. Section 71 of the Australian Constitution states that ‘The judicial
power of the Commonwealth shall be vested in a Federal Supreme Court, to be called the High Court of
Australia, and in such other federal courts as the parliament creates, and in such other courts as it invests with the
Federal jurisdiction …’. The transcript of the Australian Constitution can also be found at
http://foundingdocs.gov.au/ resources/transcripts/cth1_doc_1900.pdf
45 Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth).
 01 The Australian Legal System 27

Essentially it purported to vest state and territory Supreme Courts with the civil jurisdiction retrospective legislation
of the Federal Court. However, the High Court declared the scheme invalid on constitutional An Act of Parliament
grounds in 1999 in Re Wakim. 46
This created uncertainty in many areas, particularly that applies to
a situation that
corporate law and financial markets regulation. It further undermined the development of a
occurred prior to its
fully national and integrated system of corporate administration and adjudication. Steps were
commencement.
taken by governments at all levels as a matter of urgency to repair the damage, with all
Federal Court of
jurisdictions passing remedial and retrospective legislation to validate pre-Wakim decisions Australia
of federal courts. Finally, after months of constitutional uncertainty, the states and territories (Abbreviation: Fed Ct).
agreed in August 2000 to ‘refer’ their powers over corporations to the Commonwealth Established in 1976, the
Parliament (see Chapter 2). Federal Court replaced
the Federal Court of

The Federal Court of Australia Bankruptcy and the

Australian Industrial
The Federal Court of Australia was established under the Federal Court of Australia Act 1976 Court, which are
(Cth)47. It consists of 30 judges and a Chief Justice. The Federal Court contains two divisions— reflected in its General
General and Industrial—and exercises a wide jurisdiction covering intellectual property, Division and Industrial
corporations, trade practices, bankruptcy and insolvency, taxation, immigration and social Division.

services, and review of federal administrative law. The Industrial Division hears matters Chief Justice
relating to industrial law, including industrial arbitration and conciliation hearings, which are (Abbreviation: CJ). The

attended by trade union delegates, employers and employees. most senior justice in
either a state Supreme
The Federal Court also has an appellate division, which hears appeals from a single
Court or a federal court.
Federal Court judge; from state courts on federal matters including taxation, copyright and
conciliation
trade marks, patents, immigration and refugee status and reviews, and trade practices; and
A method of dispute
from state and territory Supreme Courts. Appeals from the Full Federal Court (comprising resolution where an
three judges) are heard by the High Court with special leave to appeal. independent third
person (concilia-
The Family Court of Australia48 tor) helps the parties
to reach a mutual
In order to discuss fully the federal court structure, it is important to note the powers and
agreement between
importance of the Family Court of Australia. The Family Court was established in 1976 to themselves, rather than
administer applications made under the Family Law Act 1975 (Cth).49 This court has original and making a decision in
appellate jurisdiction over a wide range of family law issues—divorce proceedings, custody favour of one party. The
and contact with children, division of matrimonial property and financial support, including process is considered

applications for the payment of maintenance allowances for spouses and children. It also to be more formal than
mediation and less
has the power to hear cases that include family issues which would otherwise be dealt with
formal than arbitration
or counselling.

46 Re Wakim; Ex parte McNally (1999) 198 CLR 511.

47 Further information about the functions and powers of the Federal Court is available at www.fedcourt.gov.au.
48 Information about the functions and powers of the Family Court of Australia is available at www.familycourt.
gov.au.
49 The Family Law Act 1975 (Cth) introduced no-fault divorce laws in Australia. Such laws allow couples to make a
divorce application if the relationship between them breaks down without any particular fault or reason.
28 Part 1 Introduction to Business Law

by the Federal Court.50 The High Court of Australia 51 sits at the peak of the Australian judicial
system. It is the highest court of appeal for all Australian jurisdictions. Established in 1903
under s 71 of the Commonwealth of Australia Constitution Act 1900 (Imp), the High Court
exercises both original and appellate jurisdictions and performs the following important
functions:
– It hears appeals from the state and territory Supreme Courts and the Federal Court. In
question of law order for a case to be heard on appeal by the High Court, it is necessary to obtain special
A question raising an leave to appeal on a question of law that may also involve an issue of great public
issue associated with interest.
the application of the
– It interprets and guards the Australian Constitution.
law to the evidence in
a case. Questions of – It hears disputes between states and territories, and between states, territories and the
law may be contrasted Commonwealth.
with questions of fact. The High Court consists of seven justices (a Chief Justice and six other justices) and
usually sits in Canberra, although it can also sit elsewhere within Australia if required. Most
appeals are heard by a bench (or court) of three justices. Important cases are usually heard by
a Full Bench or Full Court including all available justices of the Court (for example, the
Mabo case, discussed earlier, was heard by the Full Court).
Decisions handed down by the High Court are particularly significant as they are binding
on all Australian courts under the doctrine of precedent. It is important to note, however,
that the High Court is not bound by its own previous decisions, but will override them only
in exceptional circumstances.

The Privy Council

The constitutional arrangements linking the Australian judicial system with the UK have
been incrementally removed over time. Initially, the Privy Council (the highest appeal court
in the UK) heard appeals both from the High Court and Supreme Courts of the states and
territories in Australia, but the right of appeal to the Privy Council from any court within
Australia was abolished in 1986.52 This means that the High Court of Australia is the highest
court of appeal for all courts within Australia and is not bound by earlier decisions of the
Privy Council, although Privy Council decisions may be considered as persuasive
authority.53

AC T I V I T Y 1. 6
Which court may hear the following matters?
1. Mary and Terry have been married for 25 years and have five children. Terry’s long
absences from Australia have caused tensions in the family. Mary wants to divorce Terry
and says that she has run out of love for him.

50 Recent examples of cases include the hearing of applications made on behalf of children who have been
detained in Australian detention centres. The appeals were later heard by the High Court of Australia.
51 For further information on the powers and functions of the High Court of Australia, see www.hcourt.gov.au.
52 Australia Act 1986 (Cth).
53 See Barns v Barns (2003) 214 CLR 169 at 31, 99, 101 and 123.
 01 The Australian Legal System 29

2. Aron, the owner of a petrol station, employs Debo as his employee. The law requires
an employer to pay minimum award wages to all his employees. Aron pays much less
than the award wage. Debo and her friends protest in front of Aron’s petrol station. Aron
dismisses Debo.
3. There is a dispute between the states of New South Wales, South Australia and Victoria
over water in the Murray River. Each state argues that the others overuse the water in
the river.
4. The opposition party alleges that a particular government minister is providing trade and
military secrets to another country.

Tribunals and commissions tribunal

Any adjudicative body set
Tribunals exist at both federal and state/territory levels, and represent an important
up to hear and decide
dispute resolution avenue in the Australian legal system. Since the late 1980s and 1990s disputes by arbitration.
there have been a proliferation of tribunals that cater for a diverse range of matters including The term is usually
residential tenancies, building, equal opportunity and discrimination, industrial relations, reserved to indicate a

migration, native title, remuneration, consumer affairs and superannuation. body responsible for
administrative review.
Tribunals are less formal than courts and have proven to be popular because they offer
Tribunals are not
a relatively inexpensive, quick and fair resolution to disputes. Generally, tribunals are not necessarily bound by the
bound by formal rules of evidence and individuals need not be represented by lawyers. same rules of evidence
Because of the separation of powers doctrine contained in the Constitution, that bind the courts.

Commonwealth tribunals are limited to exercising non-judicial functions. Both applicant

Commonwealth and state/ territory tribunals offer applicants the opportunity to have The party who seeks to

administrative decisions made by government bodies and departments reviewed. This have a judicial decision
reviewed.
administrative review of decisions provides an important means by which individuals have a
right of appeal in decisions made by bureaucrats that may affect their lives. Entities such as quasi-judicial
Statutory authorities,
companies and partnerships are also given a right of appeal to have decisions that impact on
such as small claims
their financial and business practices reviewed by administrative appeals tribunals.
and other administrative
Numerous judicial and quasi-judicial tribunals have been established at federal and tribunals, which are
state/territory levels. The most significant tribunals for our purposes are: given specific judicial
– the Australian Competition Tribunal and Australian Competition and Consumer powers although they
are not strictly courts.
Commission (ACCC) at federal level; and
Australian Competition
– the Small Claims Tribunals at state and territory level.
Tribunal
While the ACCC can initiate proceedings for contraventions of the Competition and Consumer
The federal
Act (CCA) and may also institute prosecutions for offences under the consumer protection administrative body
provisions of that act, the Australian Competition Tribunal may review the decisions of the whose main function is
ACCC, especially regarding authorisation (allowing certain anti-competitive practices on to review the determi-
public grounds, which are otherwise prohibited under the CCA). nations made by the
ACCC.
30 Part 1 Introduction to Business Law

Small Claims Tribunals provide consumers with quick, inexpensive and informal
methods of dispute resolution if their claim involves a small sum of money:
– In Queensland, the Australian Capital Territory and the Northern Territory, the monetary
limit is $5000.
– In Victoria, the monetary limit is $10 000.
– In Tasmania and South Australia the monetary limit is $2000.
– In Western Australia the monetary limit is $6000.
– In New South Wales the monetary limit is $10 000 (for building disputes the limit is
$25 000).
In addition, there are several specialist tribunals and commissions at both state/territory
and federal level, for example:
– the Victorian Civil and Administrative Tribunal (established under the Victorian Civil and
Administrative Tribunal Act 1998 (Vic));
– the Commercial and Consumer Tribunal of Queensland (established under the Commercial
and Consumer Tribunal Act 2003 (Qld));
– the Administrative Appeals Tribunal (created under the Administrative Appeals Tribunal Act
1975 (Cth));
– the ACT Civil and Administrative Tribunal (established under the ACT Civil and Administrative
Tribunal Act 2008 (ACT));
– the federal Administrative Review Tribunal (established under the Administrative Appeals
Tribunal and Other Measures Act 2003 (Cth));
– the Australian Securities and Investment Commission (established under the Australian
Securities and Investments Commission Act 2001 (Cth)): ASIC is an independent body that
regulates and enforces company and financial services laws; and
– the NSW Civil and Administrative Tribunal (established under Civil and Administrative
Tribunal Amendment Act 2013 (NSW)).

AC T I V I T Y 1.7
Which tribunal has jurisdiction to deal with the following matters?
1. You buy an expensive second-hand fur coat from a shop for $3000. The sales assistant
advises you that the shop has a ‘no return policy’. You have an allergic reaction to the fur
of the coat. You want to return the coat, but the sales assistant refuses.
2. The Department of Immigration and Citizenship refuses your study visa on the basis that
you look like a suspected terrorist.
3. You enter a 12-month lease agreement with a landlord. A provision of the agreement
provides that the landlord can evict you from the property at any time without notice.
Late one night, you find your belongings outside your rented house. The landlord advises
you that he needs the house for his family.
 01 The Australian Legal System 31

4. The owners of two petrol stations in Melbourne meet to discuss the fluctuations in petrol
prices. They agree to offer 75 cents per litre for the petrol all days of the week. They
believe that it is the cheapest price that has been offered to customers with an intention
to help them save money.

ALTERNATIVE DISPUTE
RESOLUTION
Though most of us think that courts are the most effective way of settling disputes between
parties, there are various other ways that the disputes between parties may be resolved.
Dispute resolution processes that are ‘alternative’ to traditional court proceedings are often
referred to as alternative dispute resolution (ADR).54 In recent years, governments both at the
federal and state levels prefer parties to engage in alternative dispute resolution methods
before they initiate proceedings in a court. Alternative dispute resolution bodies employ a
variety of ADR methods to help parties to resolve their dispute. Some of the ADR methods
that have been proven to be effective in resolving disputes between the parties include
arbitration, mediation, conciliation and ombudsman.55

Arbitration
Arbitration is a process whereby parties to a dispute agree to be arbitrated by an independent arbitration
third party (an arbitrator) who assists the parties to settle their dispute and reach an A process whereby
agreement. Whether agreement is optional or compulsory will depend on the nature of parties to a dispute
present their arguments
the dispute. The parties present their arguments to an arbitrator, who makes a
and evidence to an
determination on the dispute. Arbitration is a less formal way of settling disputes than
arbitrator. After
courts and has been used to resolve complex industrial disputes.56 hearing both sides
of the arguments,
the arbitrator makes
Mediation determination on the
dispute.
Mediation involves a third party (a mediator) who assists the disputing parties to resolve
their conflict. The mediator’s role is to bring the disputing parties to the table and assist them
to identify issue which caused or is causing the conflict, and to explore options to resolve
the dispute. Mediators are often trained to seek cooperation from both parties and help
the

54 T. Sourdin, Alternative Dispute Resolution, 4th edn, Law Book Company, Sydney, 2012.
55 For further information about alternative dispute resolution, read Guide to Dispute Resolution at www.ag.gov.au/
LegalSystem/AlternateDisputeResolution/Pages/default.aspx.
56 Section 51 (xxxv) of the Australian Constitution provides ‘conciliation and arbitration for the prevention and
settlement of industrial disputes extending beyond the limits of any on State’.
32 Part 1 Introduction to Business Law

mediation parties to find their own solutions to the dispute. A mediator may suggest a possible solution
A process whereby to how their dispute may be resolved, but ‘has no advisory or determinative role in regards to
parties to a dispute the content of the dispute or the outcome of its resolution’. 57 Mediator helps parties to make
attempt to resolve the
their agreement considering all options available to them under their circumstances.58
dispute by negotiation
with the help of a
mediator.
Conciliation
conciliation Conciliation is a process where parties to a dispute, with the help of a third party
A method of dispute (conciliator) identify the issues in dispute, develop options, consider alternatives and make
resolution where an an agreement to resolve the dispute. The conciliator may make recommendations and
independent third
present various options to parties so that they can settle a dispute. Though a conciliator has
person (concilia-
an advisory role in guiding the parties to settle their dispute, they cannot force the
tor) helps the parties
to reach a mutual
disputing parties to reach an agreement.
agreement between
themselves, rather than TABLE 1.1 DIFFERENCES BETWEEN ARBITRATION, MEDIATION AND CONCILIATION
making a decision in
favour of one party. The ARBITRATION MEDIATION CONCILIATION
process is considered Disputing parties agree One party may refuse One party may refuse to
to be more formal than to have their dispute to undergo mediation undergo conciliation.
mediation and less arbitrated by the arbitrator. (voluntary process).
formal than arbitration
or counselling.
Both parties present their Help parties to explore Make recommendations
argument. options to resolve the and explore options for
dispute. parties.

Arbitrator makes a No advisory or Advisory but not

determination. determinative role. determinative role.

Ombudsman
ombudsman Though not technically ADR, the federal and state goverments have appointed ombudsmen
A public official who to act as independent reviewers of administrative decisions of government departments or
investigates complaints agencies. Ombudsmen investigate complaints by individuals who allege they have been
about the public subject to unfair and unreasonable treatment by government department or agencies.
departments and
Ombudsmen act as impartial bodies and endeavour to resolve the dispute in an informal
agencies.
manner.
Though ombudsmen may not have any power to override decisions made by the
government department or its agency, they can make recommendations to the government as
to how the matter in dispute could have been handled in a better way. Each state and territory
has its own ombudsman.

57 T. Sourdin, above n 54.

58 Many family, neighbourhood and building disputes have been effectively resolved by mediation.
 01 The Australian Legal System 33

In recent years, various industry ombudsmen have been appointed to investigate

complaints within the industry.59

RI SK M A N A G E M E N T T IP
The investigation by an ombudsman can lead to substantial changes in the
work ethics and complaint handling policies in a government department
or industry. It is advisable that departments, organisations, agencies or
industries must have just, fair and reasonable dispute resolution policies and
mechanisms.

SUMMARY

– Law has been described as a body of rules developed over a long period of time that
is accepted by the community as binding.
– All laws are rules, but not all rules are laws. This means that rules which receive
wider societal acceptance through parliamentary processes, and procedures which
culminate in a statute, become law. On the other hand, rules which bind certain
sections of the society (church, sporting organisations, social or cultural groups) and
may not have wider societal outside that group or organisation acceptance cannot be
called laws.
– In Australia, law comes from two main sources: statute law and common law.
Statute law is made by parliaments and common law is developed by courts.
– Parliaments may delegate some law-making powers to subordinate authorities such
as local councils, police, professional or statutory authorities. When these authorities
make rules, regulations, orders, by-laws, ordinances, notices and proclamations and
so on, they are called delegated legislation.
– Courts develop laws by precedents and statutory interpretation. Precedent is the
decision of a court that establishes a point of law (such as Mabo v Queensland (No. 2)
(1992) 175 CLR 1.
– Courts are frequently called upon to adjudicate disputes where the language of a
particular statute may require clarification. Statutory interpretation may be necessary
because the language of the statute is unclear, ambiguous, vague or contain several
meanings.
– When interpreting statutes, courts are guided by the Acts Interpretation Act of
the particular state, territory or Commonwealth which enacted the statute when
considering matters which courts should have regard to for determining the underlying

59 Fair Work Ombudsman available at www.fairwork.gov.au; Financial Ombudsman Service available at www.
fos.org.au; Telecommunications Industry Ombudsman available at www.tio.com; Credit Ombudsman Service
available at www.cosl.com.au,

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 34 Part 1 Introduction to Business Law

purpose of the statute. Courts use literal, golden or mischief rules to determine
the meaning of a word, phrase or clause used in the statute (the rule of statutory
interpretation).
– In Australia, there are various courts at the state, territory and Commonwealth
levels. At the state or territory levels, there are lower, intermediate and upper level
courts (Magistrates Court, County Court, Supreme Court and Court of Appeal). The
Commonwealth courts include the Federal Court, Family Court and High Court.
– The High Court is the highest court in Australia and sits at the peak of the
Australian court hierarchy. The main functions of the High Court of Australia are:
a. hearing the appeals from the lowers courts from the states and territories;
b. adjudicating disputes between states and between states and the commonwealth;
and
c. interpreting the Australian Constitution.
– Tribunals offer an inexpensive, fair and quick resolution of disputes than courts.
– Alternative dispute resolution may involve settling disputes by arbitration, mediation,
conciliation and ombudsman.

TUTORIAL EXERCISES
MULT IPLE- CHO ICE QUE S TIO NS
1. The Australian law comes from the following sources:
a. UK Parliament
b. United Nations Constituent Assembly
c. Courts and parliaments
d. None of the above.
2. The doctrine of precedent is based on a principle that ‘like cases should be decided
alike’, which means that:
a. Laws should be flexible.
b. Laws should be predictable.
c. A court must decide the case in the same way as was done by a higher court.
d. None of the above.
3. The term ‘common law’ has been used to refer to a legal system that has
been developed by:
a. English courts, but has not been followed elsewhere
b. Chancery Courts in England, but has been adopted by the Australian courts
c. English courts and followed by all Islamic countries
d. Courts.

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 01 The Australian Legal System 35

4. The following is true for a binding precedent:

a. It affects the judicial thinking in a way that all judges must take this into
consideration when deciding a case.
b. It may come from other court hierarchies.
c. The decisions of the higher courts are binding on the lower courts.
d. None of the above.
5. Equity is based on the principles of fairness, justice and good conscience. This means
that:
a. Unfair and unjust agreements may be set aside by courts.
b. Equity has no place in the common law.
c. Only English courts are bound by its principles.
d. None of the above.
6. The Supreme Court of Victoria is bound by the decisions of the:
a. International Court of Justice
b. High Court of Australia
c. Supreme Court of New South Wales
d. Federal Court of Australia.
7. The states of New South Wales, Victoria and Queensland are embroiled in a dispute
involving the water in Murray River each one claiming that they misused the water in a
way that there is no water left in the river. The dispute can be initiated in:
a. The Supreme Court of Queensland
b. The Privy Council
c. Courts of Appeal in the NSW and Victoria
d. The High Court of Australia.
8. ‘Hierarchy’ refers to the ranking of courts according to their importance in the legal
system. This means that:
a. International courts and tribunals are superior to all other systems.
b. All common law countries must follow the English legal system.
c. The High Court is the top court in Australia, thus superior in its ranking.
d. None of the above.
9. The difference between arbitration and mediation is:
a. Arbitration is always mandatory, but mediation is voluntary.
b. Arbitration forces the parties to enter an agreement, but mediation advises them to
make agreements.
c. The arbitrator makes the determination, but the mediator facilitates the
conversation.

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36 Part 1 Introduction to Business Law

10. Delegated legislation refers to the body of rules, regulations and orders which has
been developed by:
a. Local councils
b. Statutory bodies such as the Australian Competition and Consumer Commission
c. University councils
d. All of the above.

SHOR T-A NSW ER QUE ST ION S

1. What are the main sources of law in Australia?

2. How do courts and parliaments make law? What are the strengths and weaknesses of
each law-making process?
3. Explain the basic court structure in Australia. What are the functions of the High Court
of Australia?
4. Why is it necessary to interpret a statute and what rules do courts apply to interpret a
statute?
5. What are the advantages and disadvantages of settling disputes in tribunals?

DI SCUS SION QUE ST ION S

1. We say that Australia has inherited its legal system from the United Kingdom; however,
the decisions of the House of Lords and the laws made by the UK Parliament are
not binding on the Australian people. Explain the validity of laws made by the UK
and Australian parliaments and courts. Discuss how these laws reflect our legal
inheritance.
2. In recent years alternative dispute resolution (ADR) is a preferred way of settling
disputes between parties. Discuss how the settlement of disputes by ADR differs from
that of courts. In your answer, examine the role of the tribunals, commissions and
ombudsmen in settling disputes.

USEFUL INTERNET SITES

www.aph.gov.au—Parliament of Australia
www.austlii.edu.au—Australasian Legal Information Institute (AustLII)
www.comlaw.gov.au—ComLaw, the most complete and up-to-date collection of
Commonwealth legislation and includes notices from the Commonwealth government
(Notices Gazette from 1 October 2012)
www.fedcourt.gov.au—Federal Court of Australia
www.federalcircuitcourt.gov.au—Federal Circuit Court of Australia www.highcourt.gov.au—
High Court of Australia

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FURTHER READING

J. Carvan, Understanding the Australian Legal System, 6th edn, Law Book Company, Sydney,
2010.
C. Cook, R. Creyke, R. Geddes & D. Hamer, Laying Down the Law—The Foundation of Legal
Reasoning, Research and Writing in Australia, 7th edn, LexisNexis Butterworths, Sydney, 2009.
G.M. Crosling & M.H. Murphy, How to Study Business Law, 4th edn, LexisNexis Butterworths,
Sydney, 2009.
D. Greenberg, Laying Down the Law: a Discussion of the People, Processes and Problems that
Shape Acts of Parliament, Sweet & Maxwell, London, 2011.
R. Hinchy, The Australian Legal System, Pearson Education Australia, Frenchs Forest, 2008.
T. Sourdin, Alternative Dispute Resolution, 4th edn, Law Book Company, Sydney, 2012.

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