BSB250 Module 4: Law and the Australian Legal System — Comprehensive Study Notes

What is law?

• Law is the set of rules, made by the state, and enforceable by prosecution or litigation. Therefore, business law is the set of rules regulating businesses and business activities made by the state and enforceable by prosecution or litigation. $ext{Law} = ext{rules} imes ext{state-made} imes ext{enforceable}$
• The law has several important functions in society and business:
  • resolves disputes (e.g. contracts)
  • maintains social order (e.g. taxation)
  • preserves and enforces community values (e.g. work health & safety)
  • protects the disadvantaged (e.g. anti-discrimination)
  • stabilises the economy (e.g. industrial relations)
  • prevents the misuse of power (e.g. consumer law)

The law and justice; different philosophical outlooks

• There can be a gap between what is morally right and what is legal. When faced with an unjust law, questions arise about precedence of justice or morality over law.
• Natural law: law derived from a higher source (divine or natural reason); long tradition from Plato and Aristotle; underpinning human rights ideas (often unstated).
• Positivism: law as rules imposed by sovereign power over citizens; tends to be secular and focuses on how things are, not how they ought to be.
• Classic explanations:
  • Bentham: law is man-made and can be whatever man chooses to make it.
  • Austin: separated law from justice; law is about power and who has power over whom.
• Your decision to obey or disobey can be tied to your philosophical perspective.

Ideal characteristics of law

• Ideally, law should be: $ext{Certain}, ext{Flexible}, ext{Accessible}, ext{Fair}$

The Rule of Law (core idea for a stable society and business)

• The Rule of Law provides a stable framework for business and society, enabling predictability and accountability.
• Core ideas (Dicey, 18th century):
  • The Law has absolute supremacy; official actions must be in accordance with the law; government actions are not themselves the law. $ext{Rule of Law} <br /> ightarrow ext{government actions must follow law}$
  • All are equal before the law (private citizen, judge, PM, government official).
  • Rights of citizens are enforceable in courts (e.g. trespass, defamation), independent of any special constitutional safeguards.
• Debates exist about how to interpret these principles (e.g., prospective vs retrospective laws).

Law and economic development

• The Rule of Law is foundational for a market economy; it fosters wealth creation, economic security, well-being, and better quality of life.
• It acts as the “software” of government regulation needed to operate the “hardware” of free markets.
• Poor respect for the Rule of Law has high cumulative costs in a modern economy. (Bufford, S. 2006)

Law vs justice: two broad schools of thought

• Natural law vs. positivism recap (as above).
• In practice, most people’s views influence whether they comply with laws that appear unjust.

Types and classification of law

• Two broad classifications:
  • Public law: relates to the relationship between the citizen and the state (Constitutional, Administrative, Criminal, Taxation).
  • Private law: relates to relationships between persons (Tort, Contract, Property, Commercial, Company law, etc.).
• Other common classifications:
  • Civil law vs Criminal law (in general)
  • Case law vs Statute law
  • Within case law: Common law vs Equity
• Common confusion: words like Common Law can refer to (i) a national legal tradition (Common Law system) or (ii) judge-made law within a system, or (iii) a specific area of law within judge-made law. Lower-case common law typically means judge-made law based on precedent; Upper-case Common Law system refers to the broader tradition (e.g., Australia, UK, US).
• Legislation, Acts, Statutes: often refer to the same thing (a law made by Parliament).

Six key areas of law in BSB250

• Constitutional law: regulates relationships between the various arms of government and between government and citizens.
• Administrative law: regulates administrative activities of the government.
• Tort law: provides remedies for harm caused by acts/omissions of others.
• Contract law: regulates contracts.
• Intellectual property law: protects copyright, trademarks, etc.
• Company law: regulates corporations.

Criminal vs Civil law in Australia

• Criminal law:
  • Establishes offences and penalties; prosecution by the state; standard of proof is beyond a reasonable doubt ($beyond ext{ }a ext{ }reasonable ext{ }doubt$).
• Civil law:
  • Regulates relationships between members of the community; civil actions are brought by harmed individuals; standard of proof is the balance of probabilities ($balance ext{ of probabilities}$).
• In business, examples include contract law and tort law (civil).

Other classification schemes

• Public vs private law; Criminal vs Civil; Case law vs Statute law; Common law vs Equity (within case law).

Terminology caveats

• The same word can describe different aspects of law (e.g., Common Law): national system vs judge-made law vs a specific area.
• Civil law can refer to a national civil-law system or private-law relationships within a Common Law system.
• Legislation, Act, and Statute can refer to the same thing (a law made by Parliament).

The Australian legal system: structure and powers

• Australia is a Federal/Commwealth government with a central Parliament in Canberra and six states (Qld, NSW, SA, Tas, Vic, WA) plus two territories (NT, ACT).
• Some business laws are Federal, some State, some both (concurrent/regulatory interplay).

Hallmarks of the Australian legal system

• Liberal democracy: representative democracy; laws made by elected representatives; executive government elected by citizens; rule of law; respect for constitutions.
• Common law legal system: based on the British tradition; contrasted with Civil Law systems.
• Constitutional monarchy: Head of State represented by Governor-General (Federal) and Governors (States).
• Federation: power shared between Commonwealth and States; not subordinates; powers listed in the Constitution.
• Separation of powers: legislative, executive, judiciary; organized to avoid power concentration.
• Responsible government: ministers are elected representatives and answer to the legislature (citizens).
• Note: Since Australia Act 1986, the King of Australia is a separate legal personality from the UK monarchy.

Historical development of Australia’s legal system

• Pre-colonial Indigenous legal orders existed long before European settlement.
• English law introduced with Captain Arthur Phillip establishing NSW colony; early laws thought primitive by English.
• NSW Act 1823 (Imp); Australia Courts Act 1828 (Imp) extended English laws to colonies as applicable to local conditions.
• Colonies Victoria, Tasmania, Qld became separate colonies; federation formed the Commonwealth in 1901.
• Post-1901: dual law-making authorities (State and Commonwealth) with potential conflicts resolved by the Constitution; Commonwealth law prevails in inconsistency (s 109).
• 1992 Mabo v Queensland (No. 2) recognized native title; 1993 Native Title Act followed.
• 1986 Australia Act ended UK Parliament’s formal power to legislate for Australia and removed appeals to Privy Council; reinforced sovereign status.

The Australian Constitution and federal/state power relations

• The Constitution sets out the distribution of legislative power between Commonwealth and States.
• Powers are categorized as:
  • Exclusive powers (exclusive to the Commonwealth)
  • Residual powers (exclusive to the States)
  • Concurrent powers (shared by both).
• Examples of exclusive signals: $exclusive ext{ power}$ of Parliament for certain topics like external affairs, taxation, currency, etc. (see s.90, s.92, s.105, s.114, s.115, s.122 in the Constitution).
• If Federal law covers a matter listed in s51, it can prevail over state law under s109 in case of inconsistency.
• Challenges to constitutional validity are heard by the High Court.
• In practice, both Commonwealth and States can legislate on concurrent matters; but Federal law prevails where inconsistent.

Separation of powers doctrine

• Three arms:
  • Legislative power to make laws (the Legislature)
  • Executive power to administer the law (the Executive)
  • Judicial power to interpret/apply the law (the Judiciary)
• In Australia, the Legislature is the Federal Parliament and State/Territory parliaments.
• The Executive is drawn from the Legislature (Responsible Government), creating overlap, but the Judiciary remains distinct from the other two.

The Legislature

• Role: make law; Parliament is a body of elected representatives acting on behalf of citizens (liberal democracy).
• Laws passed by Parliament are called legislation, statutes, or Acts of Parliament.

The Executive

• Role: administer the law, run government, maintain order and security.
• Composition: Prime Minister and federal ministers; Premiers and state ministers; Ministers can come from either House.
• Day-to-day governance is performed by the Executive Council/Cabinet; the Opposition provides a shadow cabinet.
• Delegation: Parliament may delegate some rule-making to the executive via delegated legislation (regulations, by-laws, local laws).

Delegated legislation

• Rationale: Parliament cannot legislate every technical rule; expert government departments can draft detailed regulations.
• Characteristics:
  • Delegated legislation has the force of law but is subordinate to the enabling Act.
  • Can be disallowed or struck down if beyond the enabling Act or inconsistent with it.
• Advantages:
  • Efficiency, technical expertise, proximity to problems.
• Disadvantages:
  • Undemocratic nature of making rules by unelected officials; more rules may accumulate; less public scrutiny.
• Example: Tobacco Plain Packaging Act 2011 (Cth) and Tobacco Plain Packaging Regulations 2011 (Cth).

The Judiciary

• Role: interpret and apply the law; resolve disputes.
• Structure: each state/territory has its own court hierarchy; plus a Federal court hierarchy.
• Court hierarchy benefits:
  • Allows appeals; different forms of hearing for gravity; supports doctrine of precedent.
• Doctrines of precedent: binding precedent within the same hierarchy; lower courts generally bound by higher courts; decisions of other hierarchies may be persuasive.
• Ratio decidendi vs obiter dictum:
  • Ratio decidendi: the legal reason binding in a decision.
  • Obiter dictum: incidental remarks not binding.

Doctrine of separation of powers in practice

• Traces to ancient Greece; Montesquieu’s L'Esprit des Lois (1748).
• The aim is to avoid power concentration by ensuring functional separation among the three arms.
• In Westminster systems like Australia, the executive is drawn from the legislature, so strict separation is not maintained as in the US; however, the judiciary remains independent.

Law making in practice: the federal Parliament process

• Proposals originate from various sources (public servants, lobby groups, media, courts, government policy).
• Parliaments are typically bicameral (two houses): Lower House and Upper House; Queensland is unicameral.
• Royal assent is required for a bill to become law; Crown representation is via Governor-General (Federal) or State Governors.

The Federal Parliament structure

• Two houses: Senate (Upper House) and House of Representatives (Lower House).
• Senate representation: equal across states (e.g., 12 senators per state, 2 per territory) to balance small and large states.
• House of Representatives: members elected from electorates; government is formed by the party with the majority in the House.
• House-to-government relationship: the executive is drawn from the party majority in the Lower House, but the Upper House can block or amend legislation; this creates a system of checks and balances.
• Current typical numbers: $151$ members in the House of Representatives; $76$ senators in the Senate.

The law-making process in the Federal Parliament

• Stages to move from proposal to law:
  • Drafting of a Bill (proposal)
  • First Reading
  • Committee (often in each House)
  • Second Reading
  • Third Reading
  • Royal Assent (Governor-General sign-off)
  • Commencement (when the law starts to apply)
• Bills may begin in either House but most start in the Lower House.

State law-making process (Queensland as example)

• Similar process to the federal level, but with a unicameral Parliament: Legislative Assembly only.
• The upper house (Legislative Council) was abolished in 1922.
• Reading/Committee process is similar; a flowchart explanation is available in parliamentary resources.

How the Executive makes law; delegated legislation again

• Legislation may set broad principles/objectives; detailed rules issued by executive agencies via delegated legislation.
• Examples named above show how delegations operate and why they exist.

How judges make law: case law and precedent

• Most court decisions are published, creating case law (second source of law).
• Doctrine of precedent requires courts to follow higher courts within the same hierarchy for similar facts.
• This supports certainty and fairness; cases are accessible publicly.

How precedent works (brief)

• A precedent is the decision of an earlier judge on a question of law.
• Binding precedent exists for higher courts in the same hierarchy; lower courts are bound by higher court decisions.
• A single judge does not bind themselves to a prior decision of a single judge, but is bound by decisions of the Full Court of the same court.

Court hierarchy (illustrative)

• High Court of Australia (appellate and original jurisdiction)
• Federal Court of Australia (original and appellate)
• Federal Circuit and Family Court of Australia (Division 1 and Division 2)
• State courts: Queensland example – Supreme Court (Court of Appeal and Trial Division), District Court, Magistrates Court
• The precise composition and jurisdiction depend on whether the matter is civil or criminal and on the level of appeal.

Examples of judicial development of law

• Mabo case (Reception and Mabo):
  • Terra nullius historically treated Indigenous peoples as having no native land rights; High Court clarified Native Title doctrine; Native Title Act 1993 followed.
  • Key cases: Mabo v Queensland (No. 2) (1992) $175 extrm{ }CLR extrm{ 1}$; Wik People v Queensland; The Thayorre People v Queensland (1996) $187 extrm{ }CLR extrm{ 1}$.
• Trading corporations concept refined by High Court interpretation of s51 powers:
  • Huddart Parker & Co v Moorhead (1908) held that certain domestic corporations could be considered trading or financial corporations; modern interpretation considers any corporation whose trading activities form a substantial part of its overall activities (profit not essential).

The problem of statutory interpretation; three core approaches

• Statutory interpretation arises because statutes are often ambiguous or incomplete and require judicial clarification.
• Three key approaches:
  • Common law rules (textual, purposive, and contextual influences)
  • Purposive approach (Act-based): interpret to achieve the purpose/object of the Act; extrinsic materials may be used to ascertain purpose when the text is unclear.
  • Contextual approach (contextualism): interpret by considering the immediate context, the Act as a whole, other legislation, prior law, and the mischief the act seeks to remedy.
• The purposive approach has become prominent and is supported by Acts Interpretation Acts (e.g., $s_{15AA}$ of the Commonwealth Act) which prefer interpretations that achieve the Act’s purpose.

Classic common law rules of statutory interpretation (three core rules)

• Literal rule (textualism): start with the literal, ordinary meaning of words (e.g., Fisher v Bell).
• Golden rule: modify literal meaning to avoid absurd results (e.g., Lee v Knapp).
• Mischief rule: identify the problem the act was intended to address and interpret to remedy that mischief (e.g., Smith v Hughes).

Purposive interpretation and extrinsic material

• The purposive approach guides courts to interpret in light of the Act’s purpose/object, even if text is ambiguous.
• Extrinsic materials can be used to illuminate purpose (e.g., explanatory memoranda, ministerial speeches) but not to override ordinary meaning of the statute.
• In 2011, Michael Kirby argued a combination approach: statutory interpretation should start with text, but aim to give effect to Parliament’s purpose; context and sentence/paragraph structure should inform meaning.

Contextual approach; putting it together

• Current predominant method: combine literal, purposive, and contextual considerations to reach a clear meaning.
• Practical example: a building-site provision about staying 5 meters from a crane; context helps clarify what the rule intends beyond a literal distance.
• Judges consider: immediate context, the Act as a whole, other legislation, prior law, and the mischief being remedied.

Real-world relevance and summary points

• In practice, you will encounter statutes across accounting, advertising, management, economics, and finance; understanding statutory interpretation helps in risk management, compliance, and decision-making.
• Courts rely heavily on the purposive approach today, but may still use common-law rules when needed.
• The skills discussed here help with critical thinking and legal reasoning in business contexts.

Notation highlights and quick references

• Federal vs State powers: $s<em>{51}$ (concurrent powers); $s</em>{109}$ (federal law prevails when inconsistent with state law).
• Exclusive powers: topics reserved for Commonwealth (e.g., external affairs, currency, taxation).
• Residual powers: powers not listed as exclusive to the Commonwealth fall to the States.
• The three branches: $ext{Legislature}, ext{Executive}, ext{Judiciary}$
• The three Dicey principles of the Rule of Law:
  • Supreme, non-arbitrary law; government actions must follow the law.
  • Equality before the law for all.
  • Citizens’ rights are enforceable in courts.

Quick examples and case references

• Fisher v Bell: literal rule.
• Lee v Knapp: golden rule (avoid absurd results).
• Smith v Hughes: mischief rule (address the mischief).
• Mabo v Queensland (No. 2) (1992) $175 extrm{ CLR }1$; Wik People v Queensland; The Thayorre People v Queensland (1996) $187 extrm{ CLR }1$; Native Title Act 1993 (Cth).
• Huddart Parker & Co v Moorhead (1908) for trading corporations.

End notes: reading and exam focus

• Understand the structure of the Australian legal system: its federal character, the separation of powers, and how law is made and interpreted.
• Be able to explain the difference between public and private law, and between criminal and civil processes.
• Know the major sources of law (legislation vs case law) and how they interact through precedent and statutory interpretation.
• Be able to discuss real-world implications of the Rule of Law and the role of delegated legislation in modern governance.