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Table of contents :
CONCISE AUSTRALIAN COMMERCIAL LAW
PREFACE
ACKNOWLEDGMENTS
TABLE OF CONTENTS
Table of Cases
Table of Statutes
Table of Abbreviations
Glossary
AN INTRODUCTION TO STUDYING LAW UNITS
PART 1: INTRODUCTION
1
An Introduction to Law and the Australian Legal System
PART 2: LAW OF CONTRACT
2
Introduction to the Law of Contract
3
Offer and Acceptance
4
Intention to Create Legal Relations
5
Consideration, Promissory Estoppel and Formalities
6
Contractual Capacity
7
Genuine Consent
8
Legality of Object
9
Contents and Interpretation of the Contract
10
Operation of the Contract
11
Termination and Breach of a Contract
12
Remedies
PART 3: CONSUMER PROTECTION
13
Consumer Protection
PART 4: TORTS
14
Law of Torts
15
Law of Agency
16
Law of Partnerships
17
Corporations Law
PART 6: BUSINESS ETHICS
18
Business Ethics
Appendix 1
Extracts from the Australian Consumer Law (Cth)
Appendix 2
Extracts from the Corporations Act 2001 (Cth)
Appendix 3
Extracts from the Civil Liability Act 2002 (NSW)
Index
Blank Page
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CONCISE AUSTRALIAN COMMERCIAL LAW

Thomson Reuters (Professional) Australia Limited 19 Harris Street Pyrmont NSW 2009 Tel: (02) 8587 7000 Fax: (02) 8587 7100 [email protected] www.thomsonreuters.com.au For all customer inquiries please ring 1300 304 195 (for calls within Australia only)

INTERNATIONAL AGENTS & DISTRIBUTORS

NORTH AMERICA Thomson Reuters Eagan United States of America

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EUROPE Thomson Reuters London United Kingdom

Concise Australian Commercial Law CLIVE TURNER LLB (B'ham), PhD (ANU) Sometime Associate Professor of Law University of Queensland

JOHN TRONE BA, LLB, PhD (UQ) Research Fellow Curtin Law School Curtin University

ROGER GAMBLE LLB (Melb), LLM (Mon), Dip Ed (Rus) Senior Lecturer in Law in the Department of Business Law and Taxation Monash Business School, Monash University

FOURTH EDITION

LAWBOOK CO. 2017

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW First edition 2011 Second edition 2013 Third edition 2015 Fourth edition 2017 National Library of Australia Cataloguing-in-Publication entry Turner, Clive, 1942– author. Concise Australian commercial law/Clive Turner, John Trone, Roger Gamble. Third edition. 9780455238104 (paperback) Includes index. Commercial Law — Australia. Trone, John, 1970– author. Gamble, Roger, author. © 2017 Thomson Reuters (Professional) Australia Limited Copyright of Cth legislative material: All Commonwealth legislative material is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. For reproduction or publication beyond that permitted by the Copyright Act 1968 (Cth), permission should be sought in writing from the current Commonwealth Government agency with the relevant policy responsibility. Editors: Ben Brocherie, Patrick Wu Product Developer: Vickie Ma Publisher: Robert Wilson Typeset by Thomson Reuters (Professional) Australia Limited Printed by Ligare Pty Ltd, Riverwood, NSW This book has been printed on paper certified by the Programme for the Endorsement of Forest Certification (PEFC). PEFC is committed to sustainable forest management through third party forest certification of responsibly managed forests. For more info: http://www.pefc.org

PREFACE It has been two years since the third edition of Concise Australian Commercial Law. The topics covered are those common to most business law units: an introduction to law and the Australian legal system, the law of contract, the law of torts, consumer protection, agency law, partnership and corporations law and a chapter on business ethics. This edition contains a substantial revision of the text, the inclusion of many new and interesting cases and an expanded and updated section on the Australian Consumer Law. As with the previous editions, the intention has been to write a text that covers these topics in a way that is clear and accessible yet has sufficient depth to be challenging for the non-law student, many of whom will be studying law for the first time and may be doing so with a heavy heart. Lecturers teaching non-law students are faced with great difficulty in determining the right level of legal content to include in the course. Very often, there is simply too much material because of the fear of culling a sacred cow or because of the real or imagined requirements of accreditation bodies. In this text, some of the hard decisions have been taken but lecturers can (and should) adapt to achieve the required balance between depth and breadth. To ensure this edition is a more complete teaching and learning package, there are tutorial activities at the end of each chapter, an extended introductory section on approaching the study of commercial law, including advice on how to approach the most common assessment tasks, particularly the hypothetical problem question (several extended answer guides are included), research assignments and multiple choice questions. There is an expanded glossary and most of the relevant legislation is located in the Appendix. Additional resources – slides, multiple choice questions, problem questions – are available to lecturers. My thanks to Vickie Ma, the product developer at Thomson Reuters, who has been so very conscientious and patient, and to the editors – Ben Brocherie and Patrick Wu – who kept me honest and pulled this fourth edition together so professionally. All have made the fourth edition a very pleasurable project for me. Continuing thanks to Clive Turner and John Trone for their permission to adapt ACL. ROGER GAMBLE Monash University, Melbourne January 2017

ACKNOWLEDGMENTS Extracts from the texts below have been reproduced in this book: CCH Australia: http://www.cch.com.au Australian Trade Practices Reporter (ATPR).

Council of Law Reporting for New South Wales: New South Wales Law Reports (NSWLR). © Council of Law Reporting for New South Wales.

HIH Royal Commission (Commonwealth of Australia): http://www.hihroyalcom.gov.au HIH Royal Commission, The Failure of HIH Insurance (2003), Vol 1.

Incorporated Council of Law Reporting for England & Wales: http://www.lawreports.co.uk Appeal Cases (AC). Chancery Division Cases (Ch D). King’s Bench (KB). Queen’s Bench (QB). Weekly Law Reports (WLR).

LexisNexis Australia: http://www.lexisnexis.com.au Australian Law Reports (ALR). Intellectual Property Reports (IPR). Queensland Reports (Qd R). Victorian Reports (VR).

Thomson Reuters (Professional) Australia Limited: http://www.thomsonreuters.com.au Australian Law Journal Reports (ALJR). Commonwealth Law Reports (CLR). Federal Court Reports (FCR). State Reports of New South Wales (SR (NSW)).

United Nations Global Compact: www.unglobalcompact.org United Nations Global Compact.

While efforts have been taken to establish and acknowledge copyright, Lawbook Co. (a part of Thomson Reuters (Professional) Australia Limited) tenders its apology for any accidental infringement. The publisher would be pleased to come to a suitable arrangement with the rightful owners in each case.

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PART 5: BUSINESS RELATIONSHIPS............................................................................................................. 387 An Introduction to Business Relationships and Organisations.............................................................. 389 Chapter 15: Law of Agency ........................................................................................................................... 393 Chapter 16: Law of Partnerships ................................................................................................................. 425 Chapter 17: Corporations Law ..................................................................................................................... 463 PART 6: BUSINESS ETHICS ........................................................................................................................... 495 Chapter 18: Business Ethics.......................................................................................................................... 497 Appendix 1: Extracts from the Australian Consumer Law (Cth) .......................................................................................... 513 Appendix 2: Extracts from the Corporations Act 2001 (Cth) ................................................................................................ 569 Appendix 3: Extracts from the Civil Liability Act 2002 (NSW) ........................................................................................... 589 Index .......................................................................................................................................................................................... 597

Table of Cases A A Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308 ........................ 8.470 ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338 ...................................... 10.140 ANZ Banking Group v Frost [1989] VR 695 ........ 3.740 ATCO Controls Pty Ltd (In liq) v Newtronics Pty Ltd (In liq) (2009) 25 VR 411 .................... 4.220 Abdurahman v Field (1987) 8 NSWLR 158 .......... 8.580 Adams v Lindsell (1818) 106 ER 250 ................... 3.540 Adeels Palace Pty Ltd v Mourabak (2009) 239 CLR 420 .................................... 14.102, 14.508 Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431 ........................................ 13.670 Akron Securities v Iliffe (1997) 41 NSWLR 353 ................................................................ 13.920 Alameddine v Glenworth Valley Horse Riding Pty Ltd [2015] NSWCA 219 ................ 9.280, 9.390, 13.1145 Alati v Kruger (1955) 94 CLR 216 ............ 7.630, 7.640 Alexander v Rayson [1936] 1 KB 169 ................... 8.320 Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40-873 ...................................... 15.590 Alzawy v Coptic Orthodox Church Diocese of Sydney, St Mary and St Merkorious Church (No. 2) [2016] NSWSC 1123 ............ 14.565 Amber Size Chemical Co v Menzel [1913] 2 Ch 239 ............................................................. 8.400 Anderson v Glass (1868) 5 WW & AB (L) 152 .................................................................... 5.70 Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 ...... 12.331 Andrews v Parker [1973] Qd R 93 ........................ 8.200 Andrews Bros (Bournemouth) Ltd v Singer & Co Ltd [1934] 1 KB 17 .................................... 9.360 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 ................................................................. 11.300 Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; [2002] HCA 35 .................................. Apand Pty Ltd v The Kettle Chip Co Pty Ltd (1994) 52 FCR 474 ........................................ 13.120 Armagas Ltd v Mundogas SA [1986] 1 AC 717 ................................................................ 15.640 Ascot Four Pty Ltd v Australian Competition and Consumer Commission (2009) 176 FCR 106 ........................................................ 13.370 Ashmore, Benson, Pease & Co Ltd v AV Dawson Ltd [1973] 1 WLR 828 ....................... 8.140

Ashrafi Persian Trading Co Pty Ltd v Ashrafinia [2001] NSWCA 243 ...................... 14.102 Ashton v Pratt [2015] NSWCA 12 ................. 4.80, 9.20 Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 ..................................................... 9.130 Astley v Austrust Ltd (1999) 197 CLR 1 ............ 12.250, 14.560 Attorney-General (Cth) v The Queen; Ex parte Boilermakers Society of Australia (1957) 95 CLR 529 .......................................... 1.150 Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1 .................. 3.630 Attwood v Lamont [1920] 3 KB 571 .................... 8.400 Atwell v Roberts (2013) 43 WAR 507 ................ 16.550 Aurel Forras Pty Ltd v Graham Karp Developments Pty Ltd [1975] VR 202 ............ 11.480 Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 .................................... 5.285 Australian Capital Territory v Munday (2000) 99 FCR 72 ....................................................... 8.510 Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (2009) 178 FCR 199 ...................................... 18.120 Australian Competition and Consumer Commission v Apple Pty Ltd [2012] ATPR 42-404; [2012] FCA 646 ................................ 13.713 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 .................... 13.210, 13.220 Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 ............................... 13.190 Australian Competition and Consumer Commission v Chrisco Hampers Australia Pty Ltd [2015] FCA 1204 ............................... 13.315 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 .................. 7.796 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 .................... 13.66 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (No 2) [2014] FCA 1022 ...... 13.66 Australian Competition and Consumer Commission v Dell Computer Pty Ltd (2002) 126 FCR 170 ...................................... 13.350 Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] ATPR 42-454; [2013] FCA 1267 .... 13.990 Australian Competition and Consumer Commission v Gordon Superstore Pty Ltd [2014] FCA 452 ............................................. 13.375

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Australian Competition and Consumer Commission v Halkalia [2012] FCA 534 ....... 13.995 Australian Competition and Consumer Commission v Harvey Norman Holdings Ltd [2011] FCA 1407 ..................................... 13.711 Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2015] FCA 1263 ........................................... 13.372 Australian Competition and Consumer Commission v Jutsen (No 3) (2011) 206 FCR 264; 285 ALR 110 ................................. 13.610 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 .......................................... 13.255 Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 ................................................................ 13.250 Australian Competition and Consumer Commission v Marksun Australia Pty Ltd [2011] FCA 695 ............................................. 13.395 Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8 .................................................................... 13.640 Australian Competition and Consumer Commission v Metricon Qld Pty Ltd [2012] FCA 797 ............................................. 13.145 Australian Competition and Consumer Commission v Radio Rentals Ltd (2005) 146 FCR 292 ................................................. 13.230 Australian Competition and Consumer Commission v Reckitt Benckiser [2016] FCA 424 .......................................................... 13.67 Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408 .............................................................. 13.495 Australian Competition and Consumer Commission v Samton Holdings (2002)117 FCR 301 ....................................... 13.225 Australian Competition and Consumer Commission v Stott [2013] ATPR 43-439; [2013] FCA 88 ............................................... 13.990 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 ........................... 13.61, 13.940 Australian Competition and Consumer Commission v Taxsmart Group Pty Ltd [2014] FCA 487 ............................................. 13.452 Australian Competition and Consumer Commission v Turi Foods Pty Ltd [2012] FCA 19 .......................................................... 13.980 Australian Competition and Consumer Commission v Turi Foods Pty Ltd [2013] FCA 665 .......................................................... 13.65 Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673 ...................... 18.20 Australian Development Corporation Pty Ltd v White (2001) 189 ALR 266 ........................... 10.80 Australian European Finance Corp Ltd v Sheahan (1993) 60 SASR 187 .......................... 4.220

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 307 ALR 512 ................................................................ 12.440 Australian Mutual Provident Society v Gregory (1908) 5 CLR 615 ............................ 10.190 Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479 ...................................... 14.101 Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253 ......................... 17.950, 17.975 Australian Securities and Investments Commission v Carey (No 3) (2006) 232 ALR 577 .......................................................... 18.20 Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364 ........................................ 3.720 Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291 ...................................... 17.900 Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 ............ 17.905, 17.910, 17.920 Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199 ................................................... 18.20 Australian Securities and Investments Commission v Plymin, Elliott and Harrison [2003] VSC 123 ............................ 17.1035 Australian Securities and Investments Commission v Vizard [2005] FCA 1037; (2005) FCR 57 ............................................... 17.990 Australian Woollen Mills Pty Ltd v Commonwealth of Australia (1954) 92 CLR 424 .......................................................... 4.227 Avery v Bowden (1855) 5 E & B 714 .................. 11.200

B BB Australia Pty Ltd v Karioi Pty Ltd (2010) 278 ALR 105 ........................................ 8.490, 8.492 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1978) 180 CLR 266 ....... 9.550, 9.560 Balfour v Balfour [1919] 2 KB 571 ......................... 4.40 Balog v Independent Commission Against Corruption (1990) 169 CLR 625 ..................... 1.420 Baltic Shipping Co v Dillon (1993) 176 CLR 344 ................................................... 12.210, 12.240 Bank of America Australia Ltd v Ceda Jon International Pty Ltd (1988) 17 NSWLR 290 .................................................................. 8.100 Bank of Australasia v Breillat (1847) 13 ER 642 ................................................................ 16.380 Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 ....................................................... 4.140, 4.222 Barac (t/as Exotic Studios) v Farnell (1994) 53 FCR 193 .......................................................... 8.200 Barton v Armstrong [1976] AC 104 ...................... 7.750 Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 .............. 3.670

Table of Cases

Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 ............................................... 1.360 Beswick v Beswick [1968] AC 58 ............... 10.25, 10.30 Bettini v Gye (1876) 1 QBD 183 ................ 9.120, 9.150 Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 ................................................................ 13.150 Birdanco Nominees Pty Ltd v Money (2012) 36 VR 341 ....................................................... 8.426 Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536; 282 ALR 571 ...... 13.270 Boghani v Nathoo [2011] EWHC 2101 .............. 16.600 Bojczuk v Gregorcewicz [1961] SASR 128 .............. 6.40 Bolton v Mahadeva [1972] 2 All ER 1322 .......... 11.24B Bolton v Stone [1951] AC 850 ............................ 14.425 Boncristiano v Lohmann [1998] 4 VR 82 ........... 12.245 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53 .......................... 3.750 Boyd v Ryan (1947) 48 SR (NSW) 163 ............... 12.390 Brakoulias v Karunaharan (Ruling) [2012] VSC 272 ........................................................ 14.435 Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 ............... 17.333 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels-gesellschaft mbH [1983] 2 AC 34 ................................................ 3.590 Brosnan v Katke [2016] FCAFC 1 ...................... 13.160 Buckland v Massey [1985] 1 Qd R 502 .................. 8.80 Buckley v Tutty (1971) 125 CLR 353 ................... 8.450 Burmic Pty Ltd v Goldview Pty Ltd [2003] 2 Qd R 477 ........................................................... 8.20 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 ...................................... 14.433 Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 ...................................... 12.170 Buseska v Sergio (1990) 102 FLR 157 ................ 15.264 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 ...................................... 13.177 Butler v Craine [1986] VR 274 ............................. 5.370 Byers v Dorotea Pty Ltd (1986) 69 ALR 715 ...... 13.155 Byrne & Co v Leon Van Tienhoven & Co (1880) 5 CPD 344 ............................................ 3.240

C CAJ Investments Pty Ltd v Lourandos (1998) 83 FCR 189 ................................................... 13.820 CAL No 14 Pty Ltd v Motor Accidents Board (2009) 239 CLR 390 ...................................... 14.150 CDPP v Hill and Kamay [2015] VSC 86 ........... 17.1046 Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 ............... 14.190 Cameron v Murdoch (1986) 60 ALJR 280 ............ 16.10 Caparo Industries Plc v Dickman [1990] 2 AC 605 ................................................................ 14.330 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 ..................................... 3.40, 3.50, 3.400, 3.480 Carney v Herbert [1985] 1 AC 301 ....................... 8.620 Carter v Hyde (1923) 33 CLR 115 ....................... 3.320 Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648 .................................. 12.180

Causer v Browne [1952] VLR 1 ............................ 9.230 Cedar Hill Flowers & Foliage Pty Ltd v Spierenburg [2003] 1 Qd R 482 ....................... 8.480 Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 ....................... 5.243 Century Insurance Co Ltd v Northern Ireland Road Transport Board [1942] AC 509 ........... 14.640 Chan v Zacharia (1984) 154 CLR 178 ............... 16.215 Chappel v Hart (1998) 185 CLR 232 ................. 14.508 Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87 ................................................................ 5.60 Chiarabaglio v Westpac Banking Corp [1989] ATPR 40-971; [1991] ATPR (Digest) 46-067 ........................................................... 14.320 Chief Executive Officer of Customs v Biocontrol Ltd (2006) 150 FCR 64 .................. 1.420 Chin Keow v Government of Malaysia [1967] 1 WLR 813 .................................................... 14.395 Chitts v Allaine [1982] Qd R 319 ........................... 8.40 Clark v Macourt (2013) 304 ALR 220 ................ 12.115 Claude Neon Ltd v Hardie [1970] Qd R 93 ........ 11.477 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 ............................................. 9.570, 11.430 Cody v JH Nelson Pty Ltd (1947) 74 CLR 629 .................................................................. 1.420 Collins v Godefroy (1831) 1 B & Ad 950; 109 ER 1040 .................................................... 5.100 Comcare v Thompson (2000) 100 FCR 375 ......... 1.360 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 ................ 7.880, 7.890, 13.200 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 ................ 12.90, 12.100, 12.190 Commonwealth Disposals Commission v McRae (1951) 84 CLR 377 ............................ 11.310 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 ...................... 9.570, 9.590 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ............................ 13.50 Construction Engineering Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 ............................... 16.395 Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297 ............................................... 1.390, 1.400 Cork v Kirby McLean [1952] 2 All ER 402 ........ 14.508 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 .......... 13.170A Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460 ........................................ 10.20 Council of the City of Sydney v West (1965) 114 CLR 481 ............................. 9.400, 9.410, 9.440 Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 ............... 3.730 Cowern v Nield [1912] 2 KB 419 ........................... 6.90 Cox v Hickman (1860) 11 ER 431 ..................... 16.185 Cox v Mosman [1909] QSR 45 .......................... 15.140 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 ........................... 15.130, 15.264

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Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 ........... 11.40 Cribb v Korn (1911) 12 CLR 205 ....................... 16.180 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 ..... 3.760, 5.287, 9.110 Cruttwell v Lye (1810) 34 ER 129 ...................... 16.300 Cummings v Sir William Arrol & Co Ltd [1962] 1 WLR 295 ......................................... 14.508 Cummings and anor v Claremont Petroleum NL [1992] FCA 674 ....................................... 17.980 Cundy v Lindsay (1878) 3 App Cas 459 .............. 7.210, 7.290, 7.360 Cutter v Powell (1795) 101 ER 573 ...................... 11.21

D Daly v Thiering (2013) 249 CLR 381 ................... 1.420 Daniels v Anderson (1995) 37 NSWLR 438 ...... 17.930, 17.940 Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338 ........................................... 15.330 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 ...................... 9.440, 9.450 David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 ................ 14.320 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 ........... 7.400 Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642 ..................................................... 9.390 Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 ..................... 11.313 Day v O’Leary (1992) 57 SASR 206 ................... 12.140 Day Ford Pty Ltd v Sciacca [1990] 2 Qd R 209 .................................................................. 8.620 De Francesco v Barnum (1890) 45 Ch D 430 ......... 6.80 Dearle v Hall (1828) 3 Russ 1; 38 ER 475 .......... 10.190 Deatons Pty Ltd v Flew (1949) 79 CLR 370 ...... 14.650, 15.650 Debenham v Mellon (1880) 5 QBD 394 ............. 15.190 Degiorgio v Dunn [2004] NSWSC 767 ............... 16.150 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ............................................... 7.500, 13.172 Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 ........................................ 9.580 Derry v Peek (1889) 14 App Cas 337 .................... 7.490 Dick Bentley Productions Limited v Harold Smith (Motors) Ltd [1965] 1 WLR 623 ............. 9.50 Director of Public Prosecutions v Walters [2015] VSCA 303 ............................................. 1.360 Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643 .......................................... 8.340 Dobler v Halverson [2007] NSWCA 335 ............ 14.480 Donoghue v Stevenson [1932] AC 562 ..... 14.40, 14.60, 14.100 Duff v Blinco (No 2) [2007] 1 Qd R 407 .............. 5.330 Duke Group Ltd v Pilmer (1999) 73 SASR 64 .... 16.460 Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847 ....................................... 5.30

E E v Australian Red Cross Society (1992) 31 FCR 299 ...................................................... 13.1060 EBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450 .................................................................. 9.500 Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 ........................ 9.380 Elizabeth City Centre Pty Ltd v Corralyn Pty Ltd (1995) 63 SASR 235 .................................. 3.560 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 .......... 3.350 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 .................... 4.10, 4.15 Ertel Bieber & Co v Rio Tinto Co Ltd [1918] AC 260 .......................................................... 11.330 Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 ................. 14.335 Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] 2 AC 269 ..................... 8.510 EzyDVD Pty Ltd v Lahrs Investments Qld Pty Ltd [2010] 2 Qd R 517 ......................... 8.400, 8.494

F Falko v James McEwan & Co Ltd [1977] VR 447 ................................................................ 12.220 Famestock Pty Ltd v Body Corporate for No 9 Port Douglas Road Community Title Scheme 24368 [2013] QCA 354 ....................... 9.530 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 ................................... 1.550 Felthouse v Bindley (1862) 11 CB (NS) 869; 142 ER 1037 .................................................... 3.370 Fibrosa Spolka Akcyjna v Fairbairn, Lawson, Combe, Barbour, Ltd [1943] AC 32 .............. 11.482, 11.485 Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257 ......... 12.333 First National Securities Ltd v Jones [1978] 1 Ch 109 ............................................................. 5.180 Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 .......................................................... 8.150 Fitzgerald v Penn (1945) 71 CLR 637 ................. 12.120 Fleming Bros (Monaro Agencies) Pty Ltd v Smith [1983] ATPR 40-389 .............................. 8.610 Foakes v Beer (1884) 9 App Cas 605 .................... 5.120 Foti v Banque Nationale de Paris [1990] Aust Torts Reports 81-025 ..................................... 14.320 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 .................................... 7.410 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 ..... 15.130, 15.210, 15.240, 15.250 Frost v Warner (2002) 209 CLR 509 .................. 14.640 Fry v Oddy [1999] 1 VR 557 .............................. 16.630 Fulcher & Ors v Knott Investments Pty Ltd & Ors [2012] QSC 232 .................................... 13.1305

Table of Cases

G Gaffney v Ryan [1995] 1 Qd R 19 .......................... 8.90 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 ................................... 13.790 Geraghty v Minter (1979) 142 CLR 177 .............. 8.400 Gibbons v Wright (1954) 91 CLR 423 .................. 6.180 Gibson v Manchester City Council [1979] 1 All ER 972 ......................................................... 3.80 Giles v Thompson [1994] 1 AC 142 ...................... 8.270 Gipps v Gipps [1978] 1 NSWLR 454 ................... 7.535 Gippsreal Ltd v Registrar of Titles (2007) 20 VR 127 .............................................................. 2.90 Given v Pryor (1979) 24 ALR 442 ...................... 13.410 Glasbrook v Glamorgan County Council [1925] AC 270 ................................................. 5.115 Gnych v Polish Club Ltd (2015) 255 CLR 414 .................................................................. 8.105 Godecke v Kirwan (1973) 129 CLR 629 ............. 3.440, 9.330 Goldberg v Jenkins (1889) 15 VLR 36 ................ 16.393 Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674 .......................................... 3.220 Goodridge v Macquarie Bank Ltd (2010) 265 ALR 170 ........................................... 10.140, 10.160 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 .................................................................. 13.52 Goudberg v Herniman Associates Pty Ltd [2007] VSCA 12 ............................................. 16.135 Gould v Vaggelas (1984) 157 CLR 215 ................. 7.560 Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 ...................................... 14.438 Great Northern Railway Co v Swaffield (1874) LR 9 Exch 132 ................................... 15.170 Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900 ...................................... 1.95

H H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] 1 QB 791 ................................ 12.130 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 ........ 13.810 Hadley v Baxendale (1854) 9 Exch 341 ............. 12.120, 12.123 Hall & Barker, Re [1878] 9 Ch D 538 .................. 11.22 Hamerhaven Pty Ltd v Ogge [1996] 2 VR 488 .... 16.430 Hamilton v Lethbridge (1912) 14 CLR 236 ............ 6.60 Harris v Nickerson (1872–73) LR 8 QB 286 ........ 3.140 Hart v O’Connor [1985] AC 1000 ....................... 6.180 Hartley v Ponsonby (1857) 7 E & B 872 .............. 5.133 Harvela Investments Ltd v Royal Trust Co of Canada Ltd [1986] AC 207 .............................. 3.170 Harvey v Facey [1893] AC 552 ............................... 3.90 Harvey v Harvey (1970) 120 CLR 529 ............... 16.280 Hatt v Magro (2007) 34 WAR 256 ..................... 13.850 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 ............................ 14.250, 14.270 Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 ............................... 9.580

Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 ............................................. 15.230, 15.263 Henjo Investments Pty Ltd v Collins Marrickville (1988) 79 ALR 83 ...................... 13.171 Henthorn v Fraser [1892] 2 Ch 27 ........................ 3.530 Herbert Morris Ltd v Saxelby [1916] 1 AC 688 ....................................................... 8.400, 8.410 Hermann v Charlesworth [1905] 2 KB 123 ......... 8.350, 8.640 Herne Bay Steamboat Co v Hutton [1903] 2 KB 683 ........................................................... 11.390 Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Ch 169 ........................................... 8.400 Hoenig v Isaacs [1952] 2 All ER 176 .................. 11.24A Hollis v Vabu Pty Ltd (2001) 207 CLR 21 .......... 14.620 Holwell Securities Ltd v Hughes [1974] 1 All ER 161 ............................................................. 3.550 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1952] 2 QB 26 ....... 9.170, 11.300 Hopcroft v Edmunds (2013) 116 SASR 191 ....... 15.231 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 .......................................................... 15.140 Howe v Teefy (1927) 27 SR (NSW) 301 ............. 12.200 Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 ......... 9.90 Humberstone v Northern Timber Mills (1949) 79 CLR 389 ........................................ 14.620 Humphries v Proprietors “Surfers Palms North” Group Titles Plan 1955 (1994) 179 CLR 597 ................................................... 8.620 Hurst v Bryk [2002] 1 AC 185 ............................ 16.570 Hyde v Wrench (1840) 49 ER 132 ........................ 3.280

I IRAF Pty Ltd v Graham [1982] 1 NSWLR 419 .................................................................. 8.610 Imbree v McNeilly (2008) 236 CLR 510 ........... 14.395, 14.400 Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd (2013) 101 IPR 484 ....................................... 10.150 Insight Vacations Pty Ltd v Young [2011] HCA CLR 149 ....................... 1.760, 9.370, 13.1145

J J Lauritzen AS v Wijsmuller BV [1990] 1 Lloyds Rep 1 .................................................. 11.479 JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 ........................................ 12.370 Jaensch v Coffey [1984] HCA 52 ........................ 14.106 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 ................................................... 13.820 Jardin v Metcash Ltd (2011) 285 ALR 677 ........... 8.422 Jarvis v Swans Tours Ltd [1973] 1 QB 233 ......... 12.235 Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 ......................................................... 5.250 Johnson v Buttress (1936) 56 CLR 113 ................. 7.810 Johnson Tiles Ltd v Esso Australia Pty Ltd [2004] VSC 466 ........................................................ Jones v Dumbrell [1981] VR 199 .......................... 7.510

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Jones v Vernon’s Pools Ltd [1938] 2 All ER 626 .................................................................. 4.210 Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd [1942] AC 154 .... 11.480

K Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 .......................................................... 7.925 Karatjas v Deakin University (2012) 35 VR 355 ................................................................ 14.102 Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 .......................................... 13.860 Keen Mar Corp Pty Ltd v Labrador Shopping Centre (1989) ATPR 46-048 ........................... 13.176 Keighley, Maxsted & Co v Durant [1901] AC 240 ................................................... 15.266, 15.550 Keith Spicer Ltd v Mansell [1970] 1 All ER 462 ................................................................ 16.140 Kelly v Kelly (1990) 64 ALJR 234 ....................... 16.270 Kelly v Solari (1841) 9 M & W 54; 152 ER 24 .................................................................... 7.370 Kelner v Baxter (1866) LR 2 CP 174 .................. 15.510 Khan v Miah [2000] 1 WLR 2123 ......... 16.130, 16.135 Khoury v Khouri (2006) 66 NSWLR 241 ............. 5.330 King v Philcox (2015) 255 CLR 304 .............................. Kiriri Cotton Co Ltd v Dewani [1960] AC 192 .................................................................. 8.560 Knight v Bell (1887) 13 VLR 878 ....................... 16.580 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 .......... 9.160, 11.300, 11.305, 12.30 Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 ....................... 15.660 Koufos v Czarnikow Ltd [1969] 1 AC 350 ......... 12.127 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ................................................... 7.520 Krell v Henry [1903] 2 KB 740 ........................... 11.370 Ku-ring-gai Co-operative Building Society, Re (No 12) Ltd (1978) 36 FLR 134 ...................... 13.50

L L J Hooker Ltd v W J Adams Estate Pty Ltd (1977) 138 CLR 52 ........................................ 15.410 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 ......................................... 11.275 LED Technologies Pty Ltd v Roadvision Pty Ltd (2012) 199 FCR 204 ................................. 10.80 L’Estrange v F Graucob Ltd [1934] 2 KB 394 ..... 9.200, 9.210, 9.460 Lancashire Loans Ltd v Black [1934] 1 KB 380 .................................................................. 7.800 Laurinda Pty Ltd Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 .............. 11.193 Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53 ......................................................... 13.1020 Le Mans Grand Prix Circuits Pty Ltd v Illiadis [1998] VSC 331 ............................................... 9.240 Leaf v International Galleries [1950] 2 KB 86 ........ 7.90, 7.100

Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509 .............................. 16.360 Leonard v PepsiCo 88 F Supp 2d 116 (1999) .......... 3.60 Leslie v Sheill [1914] 3 KB 607 ............................. 6.140 Lewis v Averay [1972] 1 QB 198 .... 7.260, 7.270, 7.630 Lift Capital Partners Pty Ltd v Merrill Lynch International (2009) 73 NSWLR 482 ............... 5.180 Liftronic Pty Ltd v Unver (2001) 179 ALR 321 ................................................................ 14.560 Lindner v Murdock’s Garage (1950) 83 CLR 628 .................................................................. 8.400 Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 .......................................................... 15.310 Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 .................................................... 8.420 Lloyd v Citicorp Australia Ltd (1986) 11 NSWLR 286 .................................................. 14.320 Lloyd v Grace, Smith & Co [1912] AC 716 ........ 16.530 Lloyd’s Bank Ltd v Bundy [1975] QB 326 ............ 7.840 Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505 ................................... 8.380 Louth v Diprose (1992) 175 CLR 621 .................. 7.910 Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 ......... 12.270 Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 ................................................................ 15.400 Lynch v Stiff (1944) 68 CLR 428 ........................ 16.460

M M Young Legal Associates Ltd v Zahid [2006] 1 WLR 2562 .................................................. 16.190 MWH Australia Pty Ltd v Wynton Stone Australia Pty Ltd (in liq) (2010) 31 VR 575 .................................................................. 9.390 Mabo v State of Queensland (No 2) (1992) 175 CLR 1 ................................................ 1.80, 1.90 MacKinlay v Derry Dew Pty Ltd [2014] WASCA 24 ....................................................... 8.610 Mahmoud & Ispahani, Re [1921] 2 KB 716 .......... 8.40, 8.120 Malago Pty Ltd v AW Ellis Engineering Pty Ltd [2012] NSWCA 227 .................................. 4.150 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 ................................................. 14.509 Marsh v Baxter (2015) 49 WAR 1 ................................. Marsh v Joseph [1897] 1 Ch 213 ........................ 15.140 Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232 ............... 15.540 Martin v Gale (1876) 4 Ch D 428 ........................ 6.130 Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 .......................................... 8.70 Masters v Cameron (1954) 91 CLR 353 ............... 3.420 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 .................................... 15.550 McEvoy v ANZ Banking Group Ltd [1988] Aust Torts Reports 80-151 ............................. 14.320 McFarlane v Daniell (1938) 38 SR (NSW) 337 .................................................................. 8.610 McHale v Watson (1964) 111 CLR 384 .............. 14.395

Table of Cases

McLaughlin v City Bank of Sydney (1912) 14 CLR 684 .......................................................... 6.180 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 .......... 7.110, 7.120 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 33 ALR 394 .................................................................. 13.95 Megevand, Re; Ex parte Delhasse (1878) 7 Ch D 511 ....................................................... 16.187 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 ................................................... 16.390 Mercantile Union Guarantee Corp Ltd v Ball [1937] 2 KB 498 ................................................ 6.90 Mercer v Commissioner for Road Transport and Tramways (NSW) (1936) 56 CLR 580 .... 14.438 Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145 284 ALR 1 .... 13.1075, 13.1190, 13.1220 Meridien AB Pty Ltd v Jackson [2014] 1 Qd R 142 ............................................................... 1.360 Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 ........................................................ 11.445 Merritt v Merritt [1970] 1 WLR 1211 .................... 4.60 Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] AC 119 ......................................... 11.410 Meyer v Kalanick No 15 Civ. 9796 ....................... 9.480 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 .................................................................... 1.30 Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506 ..... 15.500 Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365 ................................................... 15.360, 15.480 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 ........ 3.270 Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 ............... 14.102, 14.508 Molinas v Smith [1932] QSR 77 ......................... 16.340 Montefiore v Smith (1876) 14 SCR (NSW) 245 ................................................................ 16.270 Moorcock, The (1889) 14 PD 64 ............... 9.530, 9.540 Moss v Elphick [1910] 1 KB 846 ........................ 16.570 Motorcycling Events Group Australia v Kelly [2013] NSWCA 361 ..................................... 13.1145 Mules v Ferguson [2015] QCA 5 ........... 14.485, 14.506 Munro v Willmott [1949] 1 KB 295 .................... 15.180 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 ...................................... 13.790 Musca v Astle Corp Pty Ltd (1988) 80 ALR 251 ................................................................ 13.820 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 .................................................... 5.140 Mutual Life and Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 ............................ 14.280

NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98 ............................. 13.260, 13.317 Nagle v Rottnest Island Authority (1993) 177 CLR 423 ........................................................ 14.160 National Commercial Banking Corp of Australia Ltd v Batty (1986) 160 CLR 251 .... 16.490 National Employers Mutual General Insurance Association Ltd v Manufacturers Mutual Insurance Ltd (1989) 17 NSWLR 223 .................................................................. 1.360 Nationwide News Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 215 ........................................ 13.360 Nelson v Dahl (1879) 12 Ch D 568 ...................... 9.590 New South Wales v Fahy (2007) 232 CLR 486 ................................................................ 14.405 New South Wales v Lepore (2003) 212 CLR 511 ................................................................. 14.640 Noonan v Martin (1987) 10 NSWLR 402 .......... 15.740 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 ................ 8.370 Norris v Sibberas [1990] VR 161 ........................ 15.590 North East Solutions Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 .............................................................. 9.310 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705 ............ 7.780 Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 .................................... 3.530

N

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 ...................................................... 15.263A Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 ............ 12.331A

NE Perry Pty Ltd v Judge (2002) 84 SASR 86 ...... 8.430, 8.480

O O’Brien v Smolonogov (1983) 53 ALR 107 .......... 13.50 OOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255 .................. 11.472 O’Toole v Charles David Pty Ltd (1991) 171 CLR 232 .......................................................... 1.550 Office of Fair Trading v Ashbourne Management Services Ltd [2011] EWHC 1237 .............................................................. 13.316 Olley v Marlborough Court Ltd [1949] 1 KB 532 ....................................................... 9.270, 9.460 On Call Interpreters and Translators Agency Pty Ltd v the Commissioner of Taxation (No 3) [2011] FCA 366 .................................. 14.620 Oscar Chess Ltd v Williams [1957] 1 WLR 370 ......................................................... 7.580, 9.40 Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound No 2) [1967] AC 617 ..................................... 14.530 Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound No 1) [1961] AC 388 ........................ 14.515, 14.520

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Page One Records Ltd v Britton [1968] 1 WLR 157 ....................................................... 12.400 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 .......................... 15.262, 17.325, 17.335, 17.860 Pao On v Lau Yiu Long [1980] AC 614 .................. 5.75 Papas v Bianca Investments Pty Ltd (2002) 82 SASR 581 ......................................................... 7.280 Paris v Stepney Borough Council [1951] AC 367 ................................................... 14.433, 14.437 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ................ 13.100 Parker v McKenna (1874) 10 Ch App 96 ............ 15.340 Parkinson v College of Ambulance Ltd [1925] 2 KB 1 ................................................... 8.290, 8.550 Paul v Cooke (2013) 85 NSWLR 167 ................. 14.511 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 ........................................... 12.440, 12.445 Payzu Ltd v Saunders [1919] 2 KB 581 ............... 12.160 Pearce v Brain [1929] 2 KB 310 ............................ 6.110 Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187 .......................................................... 8.425 Peek v Gurney (1873) LR 6 HL 377 ..................... 7.490 Pennington v Norris (1956) 96 CLR 10 .............. 14.560 Pepper v Attorney-General [2008] 2 Qd R 353 .................................................................. 1.420 Perisher Blue Pty Ltd v Nair Smith (2015) 295 FLR 153 ........................................................... 14.50 Perre v Apand Pty Ltd (1999) 198 CLR 180 ...... 14.185, 14.515 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 ...................................... 11.140 Petelin v Cullen (1975) 132 CLR 355 ........ 7.320, 7.330 Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 .......................................................... 8.510 Petrofina (Great Britain) Ltd v Martin [1966] 1 Ch 146 .......................................................... 8.360 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795 .............................................. 3.110 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 .............................................. 3.110 Phillips v Brooks Ltd [1919] 2 KB 243 ................. 7.250 Photo Production Ltd v Securicor Transport Pty Ltd [1980] AC 827 ............... 9.350, 9.420, 9.430 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 ...... 12.190 Plummer v Thomas [2002] NSWSC 1185 ........... 16.186 Polkinghorne v Holland (1934) 51 CLR 143 ...... 16.500 Popat v Schonchhatra (1997) 3 All ER 800 ......... 16.212 Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (1980) 144 CLR 300 .......................................................... 10.40 Positive Endeavour Pty Ltd v Madigan (2009) 105 SASR 109 ....................................... 8.390, 8.600 Potter v Minahan (1908) 7 CLR 277 .................... 1.340 Powell v Lee (1908) 99 LT 284 ............................. 3.520 Press v Mathers [1927] VLR 326 ........................ 15.200

Price v Southern Cross Television (TNT9) Pty Ltd [2015] Aust Torts Reports 82-208; [2014] TASSC 70 ............................................. 4.145 Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462 .......................... 2.15 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 ........................... 11.195 Public Service Employees Credit Union Co-operative Ltd v Campion (1984) 56 ACTR 39 ......................................................... 8.240 Pukallus v Cameron (1982) 180 CLR 447 ............ 7.440

Q Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 ..... 13.850

R R v Clarke (1927) 40 CLR 227 ............................. 3.390 R v Hannes (2002) 173 FLR 1 .......................... 17.1045 R v Regos (1947) 74 CLR 613 .............................. 1.420 Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 Ex 109 ......................................... 3.500 Redgrave v Hurd (1881) 20 Ch D 1 ........... 7.535, 7.600 Reed Constructions Pty Ltd v Eire Contractors Pty Ltd [2009] NSWSC 678 ......... 3.680 Regal (Hastings) Ltd v Gulliver [1942] UKHL 1 .................................................................... 15.345 Regazzoni v KC Sethia (1944) Ltd [1958] AC 301 .................................................................. 8.310 Regent v Millett (1976) 133 CLR 679 .................. 5.390 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 .................................................... 9.620 Renehan v Leeuwin Ocean Adventure Foundation Ltd (No 3) (2006) 17 NTLR 83 ................................................................... 11.480 Riley v Osborne [1986] VR 193 ............................ 5.370 Ringrow Pty Ltd v BP Australia (2005) 224 CLR 656 ...................................................... 12.331B Roads and Traffic Authority of NSW v Dederer (2007) 238 ALR 761 ........................ 14.428 Robb v Green [1895] 2 QB 315 ............... 8.400, 15.330 Robinson v Davison (1871) LR 6 Ex 269 ........... 11.340 Robinson v Harman (1848) 154 ER 363 .............. 12.90 Rogers v Whitaker (1992) 175 CLR 479 ........... 14.120, 14.435 Roots v Oentory Pty Ltd [1983] 2 Qd R 745 ...... 15.590 Rose & Frank Co v JR Crompton & Bros Ltd [1925] AC 445 ................................................. 4.190 Ross v Allis-Chalmers Australia Pty Ltd (1980) 32 ALR 561 ............................................ 9.60 Royal Globe Life Assurance Co Ltd v Kovacevic (1979) 22 SASR 78 ........................ 15.610 Ruddock, Re (1879) 5 VLR 51 ........................... 16.155 Ryan v Mutual Tontine Westminster Chambers Assoc [1893] 1 Ch 116 .................. 12.380

Table of Cases

S SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87 .............................. 16.550 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 ........................................ 8.610 Sachs v Miklos [1948] 2 KB 23 ........................... 15.160 Saeed v Minister for Immigration and Citizenship [2010] HCA 23 .............................. 1.375 St John Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267 ..................................... 8.20, 8.150 Salomon v Salomon & Co Ltd [1897] AC 22 ....... 17.50, 17.55, 17.57 San Sebastian Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 ................................................................ 14.300 Sanders v Snell (1998) 196 CLR 329 .................... 10.80 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 ................................................. 11.120 Scanlon’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169 ........................................ 11.450 Scarborough v Sturzaker (1905) 1 Tas LR 117 ........ 6.40 Scolio Pty Ltd v Cote (1992) 6 WAR 475 ............. 8.250, 8.260 Scott v Coulson [1903] 2 Ch 249 ............................ 7.80 Scott v Littledale (1858) 8 El & Bl 815; 120 ER 304 ............................................................. 7.140 Scott v Scott (1904) 25 ALT 174 ........................... 8.350 Scotts and Momentum Productions Pty Ltd v Lewarne [2009] FCAFC 30 ............................ 16.230 Seidler v Schallhofer [1982] 2 NSWLR 80 ............ 8.210 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 ........................................................ 13.820 Seven Network (Operations) Ltd v Warburton [2011] NSWSC 386 ......................................... 8.424 Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225 ................ 14.285, 14.290, 14.295 Shafron v Australian Securities and Investments Commission [2012] HCA 18; (2012) 247 CLR 465 ......................... 17.905, 17.920 Sharp v Union Trustee Co of Aust Ltd (1944) 69 CLR 539 ................................................... 16.290 Shelley v Paddock [1980] QB 348 ......................... 8.570 Shevill v Builders Licensing Board (1982) 149 CLR 620 ........................................................ 11.190 Shields v Deliopoulos [2016] VSC 500 .................. 1.555 Sidhu v Van Dyke (2014) 88 ALJR 640 ................. 5.282 Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 ...................................... 13.712 Siu Yin Kwan (Administratrix of the Estate of Chan Ying Lung, Decd) v Eastern Insurance Co Ltd [1994] 2 AC 199 ................ 15.550 Slee v Warke (1949) 86 CLR 271 .......................... 7.410 Smith v Anderson (1880) 15 Ch D 247 .............. 16.115, 16.120 Smith v Hughes (1871) LR 6 QB 597 ................... 7.160 Smith v The Queen (1994) 181 CLR 338 .............. 1.420 Smythe v Thomas [2007] NSWSC 844 ...... 3.155, 9.460

Solahart Industries Pty Ltd v Solar Shop Pty Ltd (2011) 281 ALR 544 ................................ 13.120 Soltykoff, Re; Ex parte Margrett [1891] 1 QB 413 .................................................................. 6.130 Solution 1 Pty Limited v Optus Networks Pty Ltd [2010] NSWSC 1060 ................................. 9.640 Souter v Shyamba Pty Ltd (2002) 11 BPR 20,369 ............................................................. 3.460 South Australian Railways Commissioner v Egan (1973) 130 CLR 506 ............................... 7.870 Specht v Netscape Communications Corp 306 F 3d 17 (2d Cir 2002) ...................................... 9.470 Spector v Ageda [1973] Ch 30 .............................. 8.590 Spencer v Harding (1870) LR 5 CP 561 ................ 3.160 Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 253 ALR 364 ........................................ 8.600 Spira v Commonwealth Bank of Australia (2003) 57 NSWLR 544 .................................. 13.230 Spong v Spong (1914) 18 CLR 544 ...................... 7.830 Steele v Tardiani (1946) 72 CLR 386 .................. 12.446 Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119 ........................................ 3.430 Stevens v Bodribb Sawmilling Co Ltd (1986) 160 CLR 16 ................................................... 14.620 Stevenson Jaques & Co v McLean [1880] 5 QBD 346 ......................................................... 3.300 Stilk v Myrick (1809) 2 Camp 317 ......... 5.132, 5.132A, 5.135 Strong v Woolworths Ltd (2012) 246 CLR 182 ................................................... 14.500, 14.505 Sumpter v Hedges [1898] 1 QB 673 ................... 11.26A Sweeney v Boylan Nominees (2006) 226 CLR 161 ................................................................ 14.620 Swinton v China Mercantile Navigation Co Ltd (1951) 83 CLR 553 ................................. 14.433

T Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 .............. 12.90, 12.110 Tabet v Gett (2010) 240 CLR 537 .................... 14.509A Talmax Pty Ltd v Telstra Corporation Ltd [1997] 2 Qd R 444 ........................................ 13.820 Tame v New South Wales (2002) 211 CLR 317 .................................................................. 14.80 Taylor v Caldwell (1863) 3 B & S 826; 122 ER 309 ................................. 11.310, 11.350, 11.355 Taylor v Johnson (1983) 151 CLR 422 ..... 7.170, 7.180, 7.190, 7.360, 13.200 Thomas v Thomas (1842) 2 QB 851 ....................... 5.45 Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548 ...................................... 15.590 Thornley v Tilley (1925) 36 CLR 1 ....................... 9.590 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 ............................................................ 9.290 Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488 .......................... 5.340 Todd v Nicol [1957] SASR 72 ................................. 4.75 Todrell Pty Ltd v Finch (No 1) [2008] 1 Qd R 540 .................................................................. 5.330

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Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ........................ 9.210, 9.460, 15.200 Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761 .................. 5.245 Tower Cabinet Co Ltd v Ingram [1949] 2 KB 397 ................................................................ 16.450 Trego v Hunt [1896] AC 7 .................................. 16.300 Trevey v Grubb (1982) 44 ALR 20 ....................... 4.100 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 ....... 1.540, 10.50, 10.60, 10.70 Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436 ............................................ 15.730 Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 ...................................... 13.730 Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93 ................................................. 11.470 Turner v Bladin (1951) 82 CLR 463 ................... 12.390 Turner v Morlend Finance Corp (Vic) Pty Ltd [1990] ASC 56-006 .......................................... 1.360 Tutt v Doyle (1997) 42 NSWLR 10 ...................... 7.460 Tweddle v Atkinson (1861) 1 B & S 393 ............... 10.22

U Ultramares v Touche (1931) 255 NY 170 .......... 14.180, 14.515 United Dominion Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1 .......................................... 16.220 Upfill v Wright [1911] 1 KB 506 ........................... 8.200

V Van Den Esschert v Chappell [1960] WAR 114 ..................................................................... 9.80 Vandepitte v Preferred Accident Insurance Corp of New York [1933] AC 70 ..................... 10.40 Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd (2015) 47 WAR 547 ................. 3.450, 7.450 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 ...................... 12.125 Videon v Barry Burroughs Pty Ltd (1981) 37 ALR 365 ........................................................ 13.420 Vita Pacific Ltd v Heather (2001) 10 Tas R 334 .................................................................. 9.570 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 .................................... 9.630

W Wakefield Trucks Pty Ltd v Lach Transport Pty Ltd (2001) 79 SASR 517 .......................... 13.800 Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 ............................. 15.330 Walker v European Electronics Pty Ltd (1990) 23 NSWLR 1 ................................................. 16.480 Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 ................

Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 ............................................................ 9.360 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 .................. 5.270, 5.280, 5.285 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 ...................................... 13.860 Warner Bros Pictures Inc v Ingolia [1965] NSWR 988 .................................................... 12.400 Warner Bros Pictures Inc v Nelson [1937] 1 KB 209 ........................................................... 12.400 Watson v Delaney (1991) 22 NSWLR 358 ............ 5.380 Watt v Hertfordshire CC [1954] 1 WLR 835 ..... 14.438, 14.460 Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374 ........................................................... 15.264 Weigall & Co v Runciman & Co (1916) 85 LJKB 1187 ..................................................... 15.580 Weld-Blundell v Stephens [1920] AC 956 ............ 15.380 Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 .................................................................. 8.160 Westpac Banking Corp v Spice [1990] ATPR 41-024 ........................................................... 14.320 White v Bluett (1853) 23 LJ Ex 36 .......................... 5.55 Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421 ....................................................... 11.130 Wicks v State Rail Authority of New South Wales (2010) 241 CLR 60 ......................................... Wigan v Edwards (1973) 47 ALJR 586 ................... 5.90 Wik Peoples v State of Queensland (1996) 187 CLR 1 ......................................................... 1.90 Wilkinson v Osborne (1915) 21 CLR 89 .............. 8.300 Williams v Pisano (2015) 90 NSWLR 342 ............ 13.50 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 512 ............. 5.135 Williams Group Australia Pty Ltd v Crocker (2016) NSWCA 265 .......................... 15.255, 15.267 With v O’Flanagan [1936] Ch 575 ....................... 7.500 Woods v Multi-Sport Holding Pty Ltd (2002) 208 CLR 460 ................................................. 14.440 Woolley v Dunford (1972) 3 SASR 43 .................. 10.80 Wynbergen v Hoyts Corporation Pty Ltd (1997) 149 ALR 25 ........................................ 14.560 Wyong Shire Council v Shirt (1980) 146 CLR 40 ..................................................... 14.390, 14.410

Y Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 .......... 8.20, 8.50, 8.60 Yonge v Toynbee [1910] 1 KB 215 ......... 15.580, 15.750 Yorke v Ross Lucas Pty Ltd (1985) 158 CLR 661 ...................................... 13.174, 13.830, 13.840

Z Zhang v VP302 SPV (2009) 223 FLR 213 .......... 15.264 Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 ................... 10.80, 10.90

Table of Statutes COMMONWEALTH Acts Interpretation Act 1901: 1.350, 1.360 s 3A(2): 1.220 s 15AA: 1.410 s 15AB: 1.370 s 15AB(1): 1.370 s 15AB(2): 1.370 Atomic Energy Act 1953 s 65: 1.430 Australian Consumer Bill: 13.10 Australian Consumer Law: , 7.680, 7.960, 9.30, 9.580, 9.600, 13.10, 13.20, 13.30, 13.35, 13.40, 13.190, 13.210, 13.330, 13.375, 13.400, 13.430, 13.460, 13.600, 13.650, 13.660, 13.670, 13.730, 13.780, 13.830, 13.870, 13.880, 13.900, 13.930, 13.940, 13.980, 13.1000, 13.1020, 13.1140, 13.1150, 13.1170, 13.1180, 13.1200, 13.1280, 13.1290, 13.1310, 14.320, 18.30 s 2(1): 13.340, 13.830, 13.840, 13.850, 13.1010, 13.1020, , 13.1200, 13.1280 s 2(2)(a): 13.170, 13.170A s 2(2)(c): 13.170A s 3: 13.1150 s 3(1): 13.1020 s 3(2): 13.1020 s 3(3): 13.1020 s 4(1): 13.450 s 5-4: 13.1160 s 7: 13.1002 s 7(1): 13.1210 s 9(1): 13.1190 s 9(2): 13.1190 s 9(3): 13.1190 s 9(4): 13.1190 s 10(1): 13.580 s 18: 8.100, 9.60, 13.40, 13.61, 13.65, 13.66, 13.110, 13.140, 13.145, 13.150, 13.155, 13.170A, 13.173, 13.174, 13.176, 13.177, 13.190, 13.372, 13.390, 13.395, 13.495, 13.660, 13.710, 13.711, 13.820,

13.840, 13.850, 13.980, 13.990, 13.995, , 14.320, 15.590 s 18(1): 7.680, 13.50, 13.51, 13.60, 13.66, 13.95, 13.100, 13.120, 13.910, ss 18 to 37: 13.1002 s 19: 13.190 s 19(2): 13.190 s 19(3): 13.190 s 20: 13.200, 13.210, 13.220, 13.225, 13.230, 13.240 ss 20-22: 13.200 s 20(1): 13.210 ss 20 to 22: 7.960, 13.660, 13.710 s 21: 7.795, 13.200, 13.230, 13.240, 13.250, 13.265 s 21(1): 13.240 s 21(3)(a): 13.240 s 21(3)(b): 13.240 s 21(4)(a): 13.240 s 21(4)(b): 13.240 s 21(4)(c): 13.240, 13.265 s 22: 13.200, 13.240, 13.265 s 22(1): 13.240, 13.265 s 22(2): 13.240 s 23: 13.296 s 23(1): 13.290 s 23(1)(b): 13.320 s 23(3): 13.295 s 23(4): 13.295 ss 23 to 27: 13.660 s 24(1): 13.300 s 24(2): 13.300 s 24(3): 13.300 s 24(4): 13.300 s 25(1): 13.310 s 26(1): 13.320 s 27(2): 13.320 s 29: 13.140, s 29(1): 7.680, 13.340, 13.711 s 29(1)(a): 13.65, 13.66, 13.390 s 29(1)(a)(i): 13.145 s 29(1)(i): 13.350, 13.370, 13.372 s 29(1)(k): 13.390, 13.395 s 29(1)(m): 13.145, 13.315, 13.360, 13.375 s 30: 13.420 s 30(1): 7.680, 13.400 s 30(1)(f): 13.410 s 31: 13.470

s 32: 13.670 s 32(1): 13.480 s 33: 13.66, 13.67, 13.490, 13.495, 13.713 s 34: 13.500 s 35: 13.540 s 36: 13.560, 13.670 s 37: 13.440, 13.995 s 37(1): 13.430 s 37(2): 13.430 s 39(1): 13.570 ss 40(1) to (2): 13.580 s 40(4): 13.580 s 41(1): 13.590 s 41(2): 13.590 s 41(3): 13.590 s 41(4): 13.590 s 42: 13.590 s 43(1): 13.600 s 43(4): 13.600 ss 44 to 46: 13.610 s 47(1): 13.620, 13.710 s 48: 13.61, 13.625 s 48(1): 13.620 s 48(4A): 13.620 s 50: 7.795 s 50(1): 13.640 s 51: 13.1002, 13.1150 s 51(1): 13.1030 s 52: 13.40, 13.1002, 13.1030, 13.1150 s 53: 13.1002, 13.1150 s 53(1): 13.1030 s 53(2): 13.1030 s 53(3): 13.1030 s 54: 13.1002, 13.1050, 13.1060, 13.1280, 13.1290, 13.1305 s 54(1): 13.375, 13.1040 s 54(2): 13.1050 s 54(3): 13.1050 s 54(4): 13.1050 s 54(5): 13.1050 s 54(6): 13.1050 s 55: 13.1002, 13.1290, 13.1305 s 55(1): 13.1070 s 55(2): 13.1080 s 55(3): 13.1080 s 56: 13.1002, 13.1280, 13.1290 s 56(1): 13.1090 s 56(2): 13.1090 s 56(3): 13.1090 s 57: 13.1002, 13.1090 s 57(1): 13.1100

xxii

Concise Australian Commercial Law

Australian Consumer Law — cont s 58: 13.1002, 13.1280 s 58(1): 13.1110 s 58(2): 13.1110 s 59: 13.1280, 13.1305 s 59(1): 13.1002, 13.1120 s 59(2): 13.995, 13.1002 s 60: 13.1004, 13.1140, 13.1145, 14.50 ss 60 to 64: 13.1004 s 61: 13.1004 s 61(1): 13.1140 s 61(2): 13.1140 s 61(3): 13.1140 s 62: 13.1004, 13.1140 s 63: 13.1140 s 64: 13.1000, 13.1004, 13.1145 s 64(1): 9.360, 13.1150 s 64A: 13.1000 ss 64A(1) to (2): 13.1150 s 64A(1) to 64A(2): 13.1150 s 64A(3): 13.1150 s 64A(4): 13.1150 s 68: 13.1000 s 97(1): 13.315 s 106(1): 13.1310 s 109(1): 13.1310 s 114(1): 13.1310 s 118(1): 13.1310 s 122(1): 13.1310 s 123(1): 13.1310 s 123(1)(c): 13.1310 s 127(1): 13.1310 s 127(2): 13.1310 s 127(3): 13.1310 s 129: 13.1310 s 131(1): 13.1310 s 134: 13.1310 s 136(1): 13.1310 s 138(1): 13.1180 s 138(2): 13.1180 ss 138 to 150: 13.1170 s 139: 13.1180 s 139A: 13.1150 s 140: 13.1180 s 141: 13.1180 s 142: 13.1220, s 143: 13.1240 s 146: 13.1260 s 148: 13.1220 s 149: 13.1270 s 150(1): 13.1250 s 151(1): 13.380 s 151(1)(a): 13.390 s 151(1)(k): 13.390 ss 151 to 168: 13.650, 13.660 s 152(1): 13.420 s 153(1): 13.470 s 154(1): 13.480 s 155(1): 13.490 s 156(1): 13.520

ss 157(1) to (2): 13.550 s 158(1): 13.560 s 159(1): 13.455 s 161(1): 13.570 s 162(1): 13.580 s 162(2): 13.590 ss 163(1) to (2): 13.600 ss 164(1) to (2): 13.610 s 165(1): 13.627 s 166(1): 13.627 s 167(1): 13.630 s 168(1): 13.640 s 194(1): 13.1310 s 197(1): 13.1310 s 199(1): 13.1310 s 202(1): 13.1310 s 203(1): 13.1310 s 204(1): 13.1310 s 205(1): 13.950 s 207: 13.700 s 207(1): 13.680 s 207(2): 13.680 s 208: 13.700 s 208(1): 13.700 s 209: 13.700 s 210(1): 13.1310 s 212: 13.660 s 217: 13.660 s 218: 13.940 s 219: 13.950 s 223: 13.960 s 224(1): 13.67, 13.650, 13.710 s 224(1)(a)(i): 13.710 s 224(2): 13.67 s 224(3): 13.710 s 225(1): 13.710 s 232: , 13.650, 13.720 s 232(2): 13.730 s 233: 13.720 s 236: , 13.650, 13.780, 13.790, 13.800, 13.810, 13.820, 13.910 s 236(1): 13.780, 13.820, 13.830 s 236(2): 13.860 ss 236 to 238: 13.790 s 237: 13.650, 13.880, 13.900, 13.910 s 237(3): 13.880, 13.900 ss 237 to 238: 13.35 s 239: 13.900 s 239(1): 13.890 s 239(3): 13.890 s 239(4): 13.890 s 243: 8.100, 13.650, 13.900, 13.920 s 246(2): 13.970 s 247: 13.980 s 248(1): 13.990 s 250(3): 13.320 s 251: 13.700 s 252: 13.1310

s 255(3): 13.390 ss 255 to 257: 13.390 ss 256 to 257: 13.390 s 259(1) to (2): 13.1160 s 259(3): 13.1160 s 259(4): 13.1160 s 259(5): 13.1160 s 260: 13.1160 s 260(a): 13.1160 s 260(c): 13.1160 s 260(d): 13.1160 s 260(e): 13.1160 s 262(1): 13.1160 s 262(2): 13.1160 ss 263(2) to (3): 13.1160 s 263(4): 13.1160 s 266: 13.1160 ss 267 to 268: 13.1160 s 271: 13.1170, 13.1280, 13.1305 s 271(1): 13.1280 ss 271(1) to 271(2): 13.1002 s 271(3): 13.1280 ss 271(3) to (4): 13.1002 s 271(5): 13.1002, 13.1280 s 271(6): 13.1002 s 272: 13.1280 s 273: 13.1280 s 274: 13.1160, 13.1170, 13.1290 s 274(2): 13.1290 s 275: 13.1145 s 276: 13.1300 s 276A(1): 13.1300 s 276A(2): 13.1300 s 276A(3): 13.1300 s 276A(4): 13.1300 Ch 1: 13.35 Ch 2: 13.35 Ch 3: 13.35 Ch 4: 13.35 Ch 5: 13.35 Pt 3-2: 13.1001 Pt 3-2, Div 1: 13.340 Pt 3-3: 13.1310 Pt 3-5: 13.1170 Pt XI: 13.30 Sch 2: 15.590, 18.30 59 59: 13.1002 Australian Human Rights Commission Act 1986 ss 46P to 46PN: 1.900 Australian Securities and Investments Commission Act 2001: 18.60 Banking Act 1959: , 8.60 Bankruptcy Act 1966: 6.200, 11.520, 16.650 s 45(1): 16.650

Table of Statutes

Bankruptcy Act 1966 — cont s 45(2): 16.650 s 126: 6.200 s 269: 6.200 Pt X: 17.1060 Bills of Exchange Act 1909 s 8: 5.300 s 89: 5.300 Broadcasting Services Act 1992 s 125: 18.120 Business Names Registration Act 2011: 16.100 Cheques Act 1986 s 10: 5.300 Commercial Television Code of Practice cl 1.18: 18.120 Commonwealth of Australia Constitution Act 1900: 1.100, 1.140, 1.160, 1.180 s 1: 1.130 s 51: 1.130, 1.160 s 51(xiii): 1.160 s 51(xvii): 1.160 s 51(xviii): 1.160 s 51(xxix): 1.160 s 51(xxxv): 1.160 s 51(xxvi): 1.190 s 51(i): 1.160 s 51(v): 1.160 s 51(ii): 1.160 s 51(vi): 1.160 s 51(xx): 1.160 s 51(xii): 1.160 s 51(xiv): 1.160 s 51(xvi): 1.160 s 61: 1.100, 1.140 s 62: 1.140 s 64: 1.140 ss 71 to 80: 1.180 s 90: 1.160 s 109: 1.160 s 128: 1.190 Companies Act 1862 s 4: 16.120 Company Law Review Act 1998: 17.230 Competition and Consumer Act 2010: 1.580, 1.590, 1.670, 1.795, 2.15, 8.500, 8.510, 13.670, 13.1305, 15.590, 17.1060, 18.30, 18.120 s 2: 1.280 s 6(3): 13.30 s 51(2)(b): 8.510 s 51(2)(d): 8.510

s 51(2)(e): 8.510 s 131: 13.30 s 131(1): 13.30 s 137A: 13.1230 ss 138 to 138B: 13.30 s 139A: 13.1145 s 139A(1): 13.1150 s 139A(2): 13.1150 s 139A(3): 13.1150 s 139B(1): 13.670 s 139B(2): 13.670 ss 140 to 140K: 13.30 Pt IV: 8.510 Pt IVB: 18.110 Sch 2: 1.330, 7.680, 7.960, 9.30, 9.580, 13.10, 14.50, 14.320 Competition and Consumer Legislation Amendment Act 2011: 13.200, 13.265 Constitution Bill: 1.120 Copyright Act 1968 s 8: 5.60 s 196(3): 5.300 Corporate Code of Conduct Bill 2000: 18.120 Corporations Act 2001: , 1.230, 1.280, 1.795, 6.170, 16.160, 16.660, 17.20, 17.40, 17.70, 17.110, 17.375, 17.860, 17.900, 17.1010, 17.1040, 17.1060, 18.30, 18.60, 18.130 s 1: 1.260 s 2: 1.270 s 9: 17.90, 17.860, 17.880, 17.890 s 15AA: 1.360 s 57: 1.300 s 57(1): 1.300 s 57(2): 1.300 s 103: 16.40 s 115: 16.40 s 117(1): 17.45 s 117(2): 17.45 s 118(1): 17.45 s 119: 17.45 s 120: 17.350 s 121: 17.840 s 123: 17.140 s 124: 6.170 s 124(1): 17.50 s 124(2): 17.280 s 125: 6.170 s 125(1): 17.280 s 125(2): 17.280 s 126: 6.170, 17.50 s 127: 6.170, 17.50, 17.320, 17.325

s 127(1): 17.325 s 127(2): 17.325 s 128: 6.170, 17.325 s 128(3): 17.325 s 128(4): 17.320, 17.325 s 129: 17.325 s 129(1): 17.325 s 129(2): 17.325 s 129(3): 17.325, 17.330 s 129(4): 17.325 s 129(5): 17.320, 17.325 s 129(6): 17.320, 17.325 s 129(7): 17.325 s 130: 17.280 s 131: 15.140 s 134: 17.240 s 135(1): 17.230 s 135(2): 17.250 s 136(1): 17.270 s 140(1): 17.240 s 141: 17.250 ss 142 to 145: 17.840 s 172: 17.350 s 180: 1.230, 17.890, 17.895, 17.975, 17.1010, s 180(1): 17.890, 17.895, 17.900, 17.905, 17.910, 17.920, 17.930, 17.950, s 180(2): 17.930, 17.950, ss 180 to 183: 17.975, s 181: 17.890, 17.960, 17.975, 17.1010, ss 181 to 183: 17.890, 17.1010, s 182: 17.890, 17.970, 17.975, 17.1010 ss 182 to 3: 17.970 ss 182 to 183: s 183: 17.890, 17.975, 17.985, 17.990, 17.1010 s 184: 17.890, 17.1000, 17.1010, s 184(1): 17.1000 s 184(2): 17.1000 s 184(3): 17.1000 s 191(1): 17.1020 s 191(3): 17.1020 s 191(4): 17.1020 ss 191 to 192: 17.850 s 194: 17.1020 s 195(1): 17.1020 s 195(2): 17.1020 s 196: 17.1020 s 198A: 17.850 ss 200A to 200J: 17.1055 s 201A: 17.850 s 201M: 17.880 s 203C: 17.1050 s 203D: 17.1050 s 204A: 17.860 s 204D: 17.860 s 205G: 17.850 s 206B(1): 17.1060

xxiii

xxiv

Concise Australian Commercial Law

Corporations Act 2001 — cont s 206B(3): 13.990, 17.1060 s 206B(4): 17.1060 s 206C: 17.1060 s 206D: 17.1060 s 206E: 17.1060 s 206F: 17.1060 s 206G: 17.1060 s 206EA: 17.1060 s 206EAA: 17.1060 s 232: 17.990 s 588G: 17.1030 s 588G(1): 17.1030 s 588G(2): 17.1030 s 588H: 17.1030 s 588J: 17.1030 s 588M: 17.1030 s 601AD(1): 17.50 s 1013D(1)(l): 18.130 ss 1042A to 1042H : 17.1040 s 1043A: 17.1040, 17.1046 ss 1043B to 1043K: 17.1040 s 1043L: 17.1040 s 1043M: 17.1040 s 1317H: 17.1010 s 1317J: 17.1010 s 1317K: 17.1010 s 1317M: 17.1010 s 1317S: 17.1010 s 1318: 17.930 Pt 9.4B: 17.1010 Corporations Regulations 2001 reg 2A.1.01: 16.40 Criminal Code Act 1995 Sch 1, Div 70: 18.120 Sch 1, s 70.2(1A): 18.120 Sch 1, s 70.2(2): 18.120 Sch 1, s 70.2(3): 18.120 Sch 1, s 70.3: 18.120 Sch 1, s 70.4(1): 18.120 Sch 1, s 70.5(1): 18.120 Electronic Transactions Act 1999 s 8: 3.610 s 9: 3.620 s 10: 3.630 s 11: 3.640 s 12: 3.655 s 14: 3.660 s 14A: 3.670 s 14B: 3.600 s 15: 3.600 s 15(2): 3.600 Federal Court of Australia Act 1976: 1.580 s 33: 1.570 Immigration Restriction Act 1901 s 3: 1.340

Insurance Contracts Act 1984: 2.15, 10.70 s 48: 10.50 s 48(1): 10.70 Judiciary Act 1903 ss 35-35A: 1.570 Legislation Act 2003 s 38: 1.430 s 42: 1.430 Life Insurance Act 1995 s 200(2)(a): 5.300 Marine Insurance Act 1909 s 28: 5.300 Migration Act 1958 s 51A: 1.375 : 1.375 National Consumer Credit Protection Act 2009: 15.860 Sch 1: 7.970 National Credit Code: 7.970 s 7(8): 7.970 s 76(1): 7.970

s 71: 13.1060 s 74(1): 14.50 s 74B: 13.1305 s 74D: 13.1305 s 74G: 13.1305 s 75B: 13.840 s 75B(a): 13.830 s 82: 13.790, 13.800, 13.810, 13.820, 13.910 s 82(1): 13.820 s 87: 8.100, 13.790, 13.910 Pt IV: 8.510 Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015: 13.290 Venture Capital Act 2002: 16.680 Volunteers Protection Act 2003: 14.50

AUSTRALIAN CAPITAL TERRITORY

Native Title Act 1993: 1.90, 1.95

ACT Civil and Administrative Tribunal Act 2008 s 18: 1.690

Native Title Amendment Act 1998: 1.90

Age of Majority Act 1974 s 5: 6.20

Statute of Westminster Adoption Act 1942: 1.97

Agents Act 2003: 15.860 s 22: 15.860

Therapeutic Goods Act 1989 s 42DL(1)(f): 18.120

Australian Consumer Law and Fair Trading Act 2012 s 16: 16.510

Tobacco Advertising Prohibition Act 1992 s 13: 18.120 s 15: 18.120 Tobacco Plain Packaging Act 2011: 18.120 Trade Practices Act 1974: 1.670, 1.795, 7.680, 7.960, 8.500, 9.30, 9.580, 13.10, 13.30, 13.1000, 13.1040, 13.1305, 14.320, 15.590, 18.30 s 4M: 8.500, 8.510 s 51AA: 13.220 s 51AB: 13.250 s 52: 8.100, 13.40, 13.150, 13.155, 13.820, 13.840, 13.995, 14.320, 15.590 s 52(1): 13.95, 13.100, 13.110, 13.120, 13.910 s 53(e): 13.350 s 53(g): 13.360 s 53A: 13.420 s 59: 13.995 s 68: 13.1000

Civil Law (Property) Act 2006 s 204: 5.330 s 205: 10.160 s 219: 5.180 s 507: 5.320, 5.340 Sch 3: 5.320, 5.340 Civil Law (Wrongs) Act 2002: 14.50 s 3: 14.570 s 41: 14.50 s 43(1): 14.410 s 43(2): 14.410 s 44: 14.450 s 45(1)(a): 14.500 s 45(1)(b): 14.510 ss 95 to 96: 14.560 s 96: 14.570 s 98: 14.50 s 99: 14.50 s 102: 12.250, 14.560 s 221(2)(a): 8.270 Ch 8: 14.50 Pt 2.2: 14.50 Pt 2.2A: 14.50

Table of Statutes

Civil Procedure Rules 2006: 16.320 Electronic Transactions Act 2001 s 7: 3.610 s 8: 3.620 s 9: 3.630 s 10: 3.640 s 11: 3.655 s 13: 3.660 s 13A: 3.670 s 13B: 3.600 s 14: 3.600 s 14(2): 3.600 Fair Trading (Australian Consumer Law) Act 1992 s 7(1): 13.30 Human Rights Commission Act 2005 ss 54 to 67: 1.900 Imperial Acts (Substituted Provisions) Act 1986 s 3(1): 5.320, 5.340 Justice and Community Safety Legislation Amendment Act 2014 Sch 1 Pt 1.1 Item 1.3: 15.860 Law Reform (Miscellaneous Provisions) Act 1955 s 15: 14.560

s 34: 16.213 s 36: 16.213 s 39: 16.560 s 40: 16.580 s 41: 16.420 s 42: 16.440 s 44: 16.590 s 45: 16.610 s 48: 16.620 s 50: 16.640 Pt 6: 16.10, 16.680 Powers of Attorney Act 1956: 15.740 Sale of Goods Act 1954 s 7: 6.40, 6.180 s 11: 7.90 Unlawful Gambling Act 2009 s 47: 8.160

NEW SOUTH WALES Anti-Discrimination Act 1977 s 91A: 1.900 Australian Consumer Law and Fair Trading Act 2012 s 12: 16.510 Builders Licensing Act 1971: 12.445 s 45: 12.445

Law Reform (Miscellaneous Provisions) Act 1999 Sch 3: 5.320, 5.340

Building and Construction Industry Security of Payment Act 1999 : 3.680

Legislation Act 2001: 1.350 s 139: 1.360

Civil Liability Act 2002: 14.50, 14.560 s 5A(1): 14.50 s 5B: 14.410 s 5B(1): 14.390, 14.410 s 5B(2): 14.410 s 5C: 14.450 s 5D(1)(a): 14.500 s 5D(1)(b): 14.510 s 5D(2): 14.508 s 5G: 14.570 s 5O: 14.50, 14.435, 14.480 s 5P: 14.50, 14.480 s 5R: 14.560 s 5S: 14.560 s 12: 14.50 s 16: 14.50 s 21: 14.50 s 30(2): s 59: 14.435 Pt 1A, Div 5: 14.50 Pt 2: 14.50 Pt 5: 14.50 Pt 6: 14.560 Pt 9: 14.50 Sch 2, Item 2: 8.270

Married Persons’ Property Act 1986 s 5: 15.190, 15.860 Partnership Act 1963: 16.10 s 4: 16.110 s 5: 16.10 s 6: 16.110 s 7: 16.170 s 8: 16.100 s 9: 16.330 s 11: 16.350 s 12: 16.350 s 15: 16.520 s 17: 16.540 s 18: 16.460 s 21: 16.410, 16.420 s 22: 16.250 s 24: 16.270 s 29: 16.211 s 30: 16.211 s 31: 16.240 s 32: 16.260 s 33: 16.213 ss 33 to 35: 16.213

5L 5L: 13.1145 5M 5M: 13.1145 5N 5N: 13.1145 Commercial Agents and Private Inquiry Agents Act 2004: 15.860 Conveyancing Act 1919 s 12: 10.160 s 38(1): 5.180 s 54A: 5.330 s 163: 15.100 Electronic Transactions Act 2000 s 7: 3.610 s 8: 3.620 s 9: 3.630 s 10: 3.640 s 11: 3.655 s 13: 3.660 s 13A: 3.670 s 13B: 3.600 s 14: 3.600 s 14(2): 3.600 Factors (Mercantile Agents) Act 1923: 15.790 Fair Trading Act 1987 s 28(1): 13.30 s 79S(7): 1.690 Pt 6A: 1.690 Imperial Acts Application Act 1969 s 8(1): 5.320, 5.340 Interpretation Act 1987: 1.350 s 33: 1.360 Law Reform (Miscellaneous Provisions) Act 1965 s 10: 14.560 Legal Profession Act 1987: 14.50 Local Court Act 2007 s 29: 1.690 Married Persons (Equality of Status) Act 1996 s 4: 6.190 s 7: 15.190, 15.860 Minors (Property and Contracts) Act 1970: 6.40, 16.90 s 6(1): 6.20 s 48: 6.140 Partnership Act 1892: 16.10 s 1: 16.110 s 2: 16.170 s 4: 16.100 s 5: 16.330 s 7: 16.350 s 8: 16.350 s 11: 16.520 s 13: 16.540

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Partnership Act 1892 — cont s 14: 16.460 s 17: 16.410, 16.420 s 18: 16.250 s 20: 16.270 s 23: 16.320 s 24: 16.211 s 25: 16.211 s 26: 16.240 s 27: 16.260 s 28: 16.213 ss 28 to 30: 16.213 s 29: 16.213 s 30: 16.213 s 34: 16.560 s 35: 16.580 s 36: 16.420 s 37: 16.440 s 38: 16.590 s 39: 16.610 s 42: 16.620 s 44: 16.640 s 45: 16.110 s 46: 16.10 Pt 3: 16.10, 16.660, 16.680 Real Property Act 1900 s 88: 15.100 Real Property (Amendment) Act 1970 s 13: 15.100 Restraints of Trade Act 1976: 8.610 s 4(1): 8.610 Sale of Goods Act 1923 s 7: 6.180 s 11: 7.90 Travel Agents Act 1986: 15.860 Travel Agents Appeal Act 2014 : 15.860 Unlawful Gambling Act 1998 s 56: 8.160 s 56(2): 8.160

NORTHERN TERRITORY Age of Majority Act s 4: 6.20 Agents Licensing Act 1979: 15.860 Anti-Discrimination Act 1992 ss 78 to 81: 1.900 Auctioneers Act 1935: 15.860 Australian Consumer Law and Fair Trading Act 2012 s 16: 16.510 Commercial and Private Agents Licensing Act 1979: 15.860

Consumer Affairs and Fair Trading Act 1990 s 27(1): 13.30 Pt 11: 15.860 Consumer Affairs and Fair Trading Amendment Act 2014 s 6: 15.860 Electronic Transactions (Northern Territory) Act 2000 s 7: 3.610 s 8: 3.620 s 9: 3.630 s 10: 3.640 s 11: 3.655 s 13: 3.660 s 13A: 3.670 s 13B: 3.600 s 14: 3.600 s 14(2): 3.600 Interpretation Act 1978: 1.350 s 62A: 1.360 Law Reform (Miscellaneous Provisions) Act s 16: 12.250, 14.560 Law of Property Act 2000 s 56(6): 10.20 s 58: 5.340 s 62: 5.330 s 182: 10.160 s 221: 5.320 Sch 4: 5.320 Married Persons (Equality of Status) Act 1989 s 3: 6.190 s 5: 15.190, 15.860 Partnership Act 1997: 16.10 s 3: 16.110 s 4: 16.10 s 5: 16.110 s 6: 16.170 s 8: 16.100 s 9: 16.330, 16.380, 16.400 s 11: 16.350 s 12: 16.350 s 14: 16.470 s 15: 16.520 s 16: 16.470 s 17: 16.540 s 18: 16.460 s 21: 16.410, 16.420 s 22: 16.250 s 24: 16.270 s 27: 16.320 s 28: 16.211 s 29: 16.211 s 30: 16.240 s 31: 16.260

s 32: 16.213 ss 32 to 34: 16.213 s 33: 16.213 s 34: 16.213 s 38: 16.560 s 39: 16.580 s 40: 16.420 s 41: 16.440 s 42: 16.590 s 43: 16.610 s 46: 16.620 s 48: 16.640 Pt 3: 16.10, 16.680 Personal Injuries (Civil Claims) Act 2003: 14.50 Personal Injuries (Liabilities and Damages) Act 2003: 14.50 s 4: 14.50 ss 14 to 15: 14.560 s 20: 14.50 ss 24 to 28: 14.50 Racing and Betting Act s 135: 8.160 s 135(1): 8.160 Sale of Goods Act 1972 s 7: 6.40, 6.180 s 11: 7.90 Small Claims Act 2016 s 5: 1.690

QUEENSLAND Acts Interpretation Act 1954: 1.350 s 15AA: 1.360 Anti-Discrimination Act 1991 ss 158 to 164AA: 1.900 Australian Consumer Law and Fair Trading Act 2012 s 15: 16.510 Civil Liability Act 2003: 14.50 s 4(1): 14.50 s 9(1): 14.390, 14.410 s 9(2): 14.410 s 10: 14.450 s 11(1)(a): 14.500 s 11(1)(b): 14.510 s 14: 14.570 s 22: 14.50, 14.480, 14.485 s 23: 14.560 s 24: 14.560 s 48: 14.570 s 52: 14.50 s 54: 14.50 s 62: 14.50 Pt 1, Div 4: 14.50 Pt 3: 14.50 Pt 3, Div 2: 14.50

Table of Statutes

Civil Liability Act 2003 — cont Pt 4, Div 2: 14.560 Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Act 2014 s 52: 15.860 Electronic Transactions (Queensland) Act 2001 s 8: 3.610 s 9 to 13: 3.620 s 14 to 15: 3.630 s 16 to 18: 3.640 s 19 to 21: 3.655 s 23: 3.660 s 24: 3.670 s 25: 3.600 s 26: 3.600 s 26(2): 3.600 Factors Act 1892: 15.790 Fair Trading Act 1989 s 16(1): 13.30 Land Title Act 1994 ss 132 to 135: 15.100 Law Reform Act 1995 s 10: 12.250, 14.560 s 17: 6.20 s 18: 6.190 Local Government Act 2009 s 28(1): 1.430 Partnership Act 1891: 16.10 s 3: 16.100, 16.110 s 5: 16.110 s 6: 16.170 s 8: 16.330 s 10: 16.350 s 11: 16.350 s 14: 16.520 s 16: 16.540 s 17: 16.460 s 20: 16.410, 16.420 s 21: 16.250 s 23: 16.270 s 26: 16.320 s 27: 16.211 s 28: 16.211 s 29: 16.240 s 30: 16.260 s 31: 16.213 ss 31 to 33: 16.213 s 32: 16.213 s 33: 16.213 s 37: 16.560 s 38: 16.580 s 39: 16.420 s 40: 16.440 s 41: 16.590 s 42: 16.610

s 45: 16.620 s 47: 16.640 s 48: 16.10 Ch 3: 16.660 Ch 4: 16.10, 16.680 Ch Ch: 16.10 Personal Injuries Proceedings Act 2002: 14.50 Property Agents and Motor Dealers Act 2000 s 45: 15.860 s 117: 15.860 s 140: 15.860 s 217: 15.860 s 288: 15.860 s 346: 15.860 Property Law Act 1974 s 45: 5.180 s 55: 10.20 s 56: 5.340 s 59: 5.330 s 199: 10.160 Queensland Civil and Administrative Tribunal Act 2009 s 11: 1.690 Sch 3: 1.690

s 46: 14.560 s 47: 14.570 s 52: 14.50 s 53: 14.105 s 53(1): 14.105 s 54: 14.50 Pt 9, Div 11A: 14.50 Electronic Transactions Act 2000 s 7: 3.610 s 8: 3.620 s 9: 3.630 s 10: 3.640 s 11: 3.655 s 13: 3.660 s 13A: 3.670 s 13B: 3.600 s 16: 3.600 s 16(2): 3.600 Employment Agents Registration Act 1993 s 6: 15.860 Equal Opportunity Act 1984 s 27: 1.900 s 95: 1.900 Fair Trading Act 1987 s 14(1): 13.30

Racing Act 2002 s 341: 8.160 s 342: 8.160

Land Agents Act 1994 s 6(2): 15.860

Sale of Goods Act 1896 s 5: 6.40, 6.180 s 9: 7.90

Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001: 12.250, 14.560 s 7: 14.560

Statute of Frauds 1972 s 3(1): 5.320 Travel Agents Act 1988: 15.860

SOUTH AUSTRALIA Acts Interpretation Act 1915: 1.350 s 22: 1.360 Age of Majority (Reduction) Act 1971 s 3(1): 6.20 Australian Consumer Law and Fair Trading Act 2012 s 12: 16.510 Civil Liability Act 1936: 14.50 s 4: 14.50 s 32(1): 14.390, 14.410 s 32(2): 14.410 s 34(1)(a): 14.500 s 34(1)(b): 14.510 s 37: 14.570 s 41: 14.50, 14.480 s 44: 14.560

Law of Property Act 1936 s 15: 10.160 s 26: 5.330 s 41: 5.180 ss 92 to 111: 6.190 s 104: 15.190, 15.860 Lottery and Gaming Act 1936 s 50: 8.160 s 50A: 8.160 Magistrates Court Act 1991 s 3: 1.690 s 38: 1.690 Mercantile Law Act 1936: 15.790 Minors Contracts (Miscellaneous Provisions) Act 1979: 16.90 Partnership Act 1891: 16.10 s 1: 16.110 s 2: 16.170 s 4: 16.100 s 5: 16.330 s 7: 16.350

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Partnership Act 1891 — cont s 8: 16.350 s 11: 16.520 s 13: 16.540 s 14: 16.460 s 17: 16.410, 16.420 s 18: 16.250 s 20: 16.270 s 23: 16.320 s 24: 16.211 s 25: 16.211 s 26: 16.240 s 27: 16.260 s 28: 16.213 ss 28 to 30: 16.213 s 29: 16.213 s 30: 16.213 s 34: 16.560 s 35: 16.580 s 36: 16.420 s 37: 16.440 s 38: 16.590 s 39: 16.610 s 42: 16.620 s 44: 16.640 s 45: 16.110 s 46: 16.10 Pt 3: 16.10, 16.660 Pt 6: 16.10, 16.680 Partnership Act 1997 s 5: 16.380, 16.400 s 10: 16.470 s 12: 16.470 Powers of Attorney and Agency Act 1984 s 12: 15.740 Real Property Act 1886 s 156: 15.100 Recreational Services (Limitation of Liability) Act 2002: 14.50 Registration of Deeds Act 1935 s 35: 15.100 Sale of Goods Act 1895 s 2: 6.40, 6.180 s 6: 7.90 Security and Investigation Agents Act 1995: 15.860 Statutes Amendment (Enforcement of Contracts) Act 1982 s 3: 5.320, 5.340 Travel Agents Act 1986: 15.860 Travel Agents Repeal Act 2014 : 15.860 Volunteers Protection Act 2001: 14.50

Acts Interpretation Act 1983: 1.350

Married Women’s Property Act 1935 s 3: 6.190 s 7: 6.190 s 11: 6.190

Age of Majority Act 1973 s 3(1): 6.20

Mercantile Law Act 1935 s 6: 5.320, 5.330, 5.340, 16.20

Anti-Discrimination Act 1998: 1.900

Partnership Act 1891: 16.10 s 4: 16.110 s 5: 16.10 s 6: 16.110 s 7: 16.170 s 9: 16.100 s 10: 16.330 s 12: 16.350 s 13: 16.350 s 16: 16.520 s 18: 16.540 s 19: 16.460 s 22: 16.410, 16.420 s 23: 16.250 s 25: 16.270 s 28: 16.320 s 29: 16.211 s 30: 16.211 s 31: 16.240 s 32: 16.260 s 33: 16.213 ss 33 to 35: 16.213 s 34: 16.213 s 35: 16.213 s 39: 16.560 s 40: 16.580 s 41: 16.420 s 42: 16.440 s 43: 16.590 s 44: 16.610 s 47: 16.620 s 49: 16.640 Pt 3: 16.10, 16.660, 16.680

TASMANIA Acts Interpretation Act 1931 s 8A: 1.360

Australian Consumer Law (Tasmania) Act 2010 s 6(1): 13.30 Australian Consumer Law and Fair Trading Act 2012 s 17: 16.510 Civil Liability Act 2002: 14.50 s 4: 14.50 s 11(1): 14.390, 14.410 s 11(2): 14.410 s 12: 14.450 s 13(1)(a): 14.500 s 13(1)(b): 14.510 s 16: 14.570 s 22: 14.50, 14.480 s 23: 14.560 s 26: 14.50 ss 27 to 28: 14.50 s 34: Pt 2: 14.560 Pt 6, Div 5: 14.50 Pt 8B: 14.50 Pt 9: 14.50 Pt 10: 14.50 Conveyancing and Law of Property Act 1884 s 36: 5.330 s 63: 5.180 s 86: 10.160 Electronic Transactions Act 2000 s 5: 3.610 s 7: 3.630 s 8: 3.620, 3.640 s 9: 3.655 s 11: 3.660 s 11A: 3.670 s 11B: 3.600 s 12: 3.600 s 12(2): 3.600

Powers of Attorney Act 2000: 15.100 s 52: 15.740

Equal Opportunity Act 1984 ss 75 to 77: 1.900

Sale of Goods Act 1896 s 7: 6.40, 6.180 s 9: 5.340 s 11: 7.90

Factors Act 1891: 15.790 Magistrates Court (Civil Division) Act 1992 s 3: 1.690 s 7(2): 1.690

Property Agents and Land Transactions Act 2005 s 18: 15.860 Racing Regulation Act 2004 s 103: 8.160 s 103(2): 8.160

Security and Investigations Agents Act 2002: 15.860 Travel Agents Act 1987: 15.860

Table of Statutes

Wrongs Act 1954 s 4: 12.250, 14.560 s 44: 14.560

VICTORIA Age of Majority Act 1977 s 3(1): 6.20 Auction Sales Act 1958: 15.860 Auction Sales (Repeal) Act 2001 s 3: 15.860 Australian Consumer Law and Fair Trading Act 2012: 11.484, 11.485 s 11(1): 13.30 s 16: 16.510 s 35(1)(c): 11.485 s 36(1): 11.485 s 36(3): 11.485 s 37: 11.485 s 38(1)-(2): 11.485 s 38(3): 11.485 s 40: 11.485 s 41: 11.485 ss 182 to 192: 1.690 Credit Act 1984: 2.15 Electronic Transactions (Victoria) Act 2000 s 7: 3.610 s 8: 3.620 s 9: 3.630 s 10: 3.640 s 11: 3.655 s 13: 3.660 s 13A: 3.670 s 13B: 3.600 s 14: 3.600 s 14(2): 3.600 Equal Opportunity Act 2010 s 112: 1.900 Estate Agents Act 1980 s 49A: 15.860 s 50: 15.860 Gambling Regulation Act 2003 s 2.4.1: 8.160 s 2.4.2: 8.160 Goods Act 1958: 11.485 s 7: 6.40, 6.180 s 11: 7.90 ss 65 to 72: 15.790

s 35: 1.360

Travel Agents Act 1986: 15.860

Local Government (Decentralised Industries) Act 1963: 9.560

Travel Agents Appeal Act 2014 : 15.860

Marriage Act 1958 ss 156 to 161: 6.190

Wrongs Act 1958: 14.50 s 14G: 14.560 s 26: 12.250, 14.560 s 28F: 14.50 s 28G: 14.50 s 28H: 14.50 s 32(2): 8.270 ss 34 to 37: 14.50 s 44: 14.50 s 48(1): 14.390, 14.410 s 48(2): 14.410 s 49: 14.450 s 51(1)(a): 14.500 s 51(1)(b): 14.510 s 54: 14.570 s 59: 14.50, 14.480 s 60: 14.50, 14.480 s 62: 14.560 s 63: 14.560 Pt VBA: 14.50 Pt XXII: 14.50

Partnership Act 1958: 16.10 s 3: 16.110 s 4: 16.10 s 5: 16.110 s 6: 16.170 s 8: 16.100 s 9: 16.330 s 11: 16.350 s 12: 16.350 s 15: 16.520 s 17: 16.540 s 21: 16.410, 16.420 s 22: 16.250 s 24: 16.270 s 27: 16.320 s 28: 16.211 s 28(1): 16.211 s 29: 16.211 s 30: 16.240 s 31: 16.260 s 32: 16.213 ss 32 to 34: 16.213 s 33: 16.213 s 34: 16.213 s 38: 16.560 s 39: 16.580 s 40: 16.420, 16.430 s 41: 16.440 s 42: 16.590 s 43: 16.610 s 46: 16.620 s 48: 16.640 Pt 3: 16.10, 16.660 Pt 5: 16.10, 16.680 Property Law Act 1958 s 73: 5.180 s 134: 10.160 Residential Tenancies Act 1997: 2.15 s 1: 1.555 s 27(1): 1.555 s 68: 1.555 s 68(1): 1.555 s 452: 1.555 : 1.555 Sale of Goods (Vienna Convention) Act 1987 s 8: 5.320

Instruments Act 1958 s 126: 5.320, 5.330 Pt XI: 15.100

Supreme Court Act 1986 s 49: 6.120, 6.130 s 51: 6.130

Interpretation of Legislation Act 1984: 1.350

Transfer of Land Act 1958 s 94: 15.100

WESTERN AUSTRALIA Age of Majority Act 1972 s 5(1): 6.20 Auction Sales Act 1973: 15.860 Betting Control Act 1954: 8.160 Civil Liability Act 2002: 14.50 s 5B(1): 14.390, 14.410 s 5B(2): 14.410 s 5C(1)(a): 14.500 s 5C(1)(b): 14.510 s 5K: 14.560 s 5L: 14.560 s 5N: 14.570 s 5PB(1): 14.450 s 6: 14.50 ss 9 to 10A: 14.50 s 11: 14.50 Pt 1A, Div 4: 14.50 Pt 1C: 14.50 Civil Judgments Enforcement Act 2004 s 14(4): 16.320 Debt Collectors Licensing Act 1964: 15.860 Electronic Transactions Act 2011 s 8: 3.610 s 9: 3.620 s 10: 3.630 s 11: 3.640, 3.655 s 13: 3.660 s 14: 3.670, 3.600

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Electronic Transactions Act 2011 — cont s 14(2): 3.600 s 15: 3.600 Employment Agents Act 1976 s 12: 15.860 Equal Opportunity Act 1984: 1.900 ss 91 to 92: 1.900 Factors’ Acts Amendment Act 1878: 15.790 Fair Trading Act 2010 s 19(2): 13.30 Gaming and Betting (Contracts and Securities) Act 1985 s 4: 8.160 s 5: 8.160 Imperial Act 5 & 6 Vict, c 39: 15.790 Interpretation Act 1984: 1.350 s 18: 1.360 Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Act 1947 s 4: 14.560 Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Amendment Act 1947 s 4: 12.250 Law Reform (Miscellaneous Provisions) Act 1941 ss 2 to 3: 6.190 Law Reform (Statute of Frauds) Act 1962 s 2: 5.320, 5.330 Limited Partnerships Act 1909: 16.10, 16.660 Magistrates Court (Civil Proceedings) Act 2004 s 3: 1.690 s 26: 1.690 Partnership Act 1895: 16.10 s 3: 16.110 s 6: 16.10 s 7: 16.110 s 8: 16.170 s 10: 16.100

s 14: 16.350 s 15: 16.350 s 18: 16.520 s 20: 16.540 s 21: 16.460 s 24: 16.410, 16.420 s 25: 16.250 s 26: 16.330 s 30: 16.270 s 34: 16.211 s 35: 16.211 s 36: 16.211 s 37: 16.240 s 38: 16.260 s 39: 16.213 ss 39 to 41: 16.213 s 40: 16.213 s 41: 16.213 s 45: 16.560 s 46: 16.580 s 47: 16.420 s 48: 16.440 s 49: 16.590 s 50: 16.610 s 55: 16.620 s 57: 16.640 Partnership Act 1997 s 17: 16.470 s 19: 16.470 s 26: 16.380, 16.400 Property Law Act 1969 s 9: 5.180 s 11(2): 10.20 s 11(3): 10.20 s 20: 10.160 s 34(1): 5.330 s 85: 15.100 s 85(2): 15.740 Real Estate and Business Agents Act 1978 s 60: 15.860 Sale of Goods Act 1895 s 2: 6.40, 6.180 s 4: 5.340 Transfer of Land Act 1893 s 143: 15.100 s 144: 15.100 Travel Agents Act 1985: 15.860 Volunteers (Protection from Liability) Act 2002: 14.50

UNITED KINGDOM Australia Act 1986 : 1.97 Bills of Exchange Act 1882: 1.210 Companies Act 2006: 18.50 ss 171(1)(d) to (e): 18.50 Exchange Control Act 1947: 8.570 Judicature Act 1873: 1.460 Pharmacy Poisons Act 1933: 3.110 Sale of Goods Act 1893: 1.210 Statute of Frauds 1677: 5.310, 5.320, 5.340, 5.360, 16.20 s 4: 5.320, 5.330

TREATIES AND CONVENTIONS Convention on the Elimination of All Forms of Discrimination Against Women Art 2(e): 18.90 Convention on the Rights of the Child Art 32(1): 18.90 ILO Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour (No 182): 18.90 International Convention on the Elimination of All Forms of Racial Discrimination Art 2(e): 18.90 International Covenant on Economic, Social and Cultural Rights Art 10(3): 18.90 UN Convention on the use of Electronic Communications in International Contracts paras 177 to 178: 3.660 UN Convention Against Corruption: 18.60 Art 12(1): 18.60 Art 12(2)(b): 18.60 Art 12(2)(f): 18.60 Art 12(3): 18.60 Arts 21 to 22: 18.60

Table of Abbreviations ABC … Australian Bankruptcy Cases. 1929-1964. ABC (ns) … Australian Bankruptcy Cases (New Series). 1999 onwards. AC …Law Reports, Appeal Cases. 1891 onwards. ACLC … Australian Company Law Cases. 1971 onwards. ACLR … Australian Company Law Reports. 1974-1989. ACSR … Australian Corporations and Securities Reports. 1990 onwards. ACTLR … Australian Capital Territory Law Reports. 2007 onwards. ACTR … Australian Capital Territory Reports. 1973 onwards. AILR … Australian Industrial Law Reports. 1997 onwards. AILR … Australian Industrial Law Review. 1961-1996. AIPC … Australian Intellectual Property Cases. 1982 onwards. AJR … Australian Jurist Reports. 1870-1874. ALJ … Australian Law Journal. 1927 onwards. ALJR … Australian Law Journal Reports. 1958 onwards. ALLR … Australian Labour Law Reporter. 1977 onwards. Argus LR … Argus Law Reports. 1895-1973. ALR … Australian Law Reports. 1973 onwards. ALT … Australian Law Times. 1879-1928. ANZ Insurance Cases … Australian and New Zealand Insurance Cases. 1979 onwards. All ER … All England Law Reports. 1936 onwards. App Cas … Law Reports. Appeal Cases. 1876-1890. AR (NSW) … Industrial Arbitration Reports (New South Wales). 1902-1989. ASC … Australian Consumer Sales and Credit Law Reporter. 1997 onwards. ASTLR … Australian Succession and Trusts Law Reports. 2006 onwards. ATPR … Australian Trade Practices Reports. 1974 onwards. Aust Torts Reports … Australian Torts Reports. 1984 onwards. BCL … Building and Construction Law. 1985 onwards. BPR … Butterworths Property Reports. 1950 onwards. CAR … Commonwealth Arbitration Reports. 1905-1993. CLR … Commonwealth Law Reports. 1903 onwards. CPD … Common Pleas Division. 1875-1880. Ch … Law Reports. Chancery. 1891 onwards. Ch D … Law Reports. Chancery Division. 1876-1890. Ch App … Chancery Appeal Cases. 1865-1875.

DCR (NSW) … New South Wales District Court Reports. 1963-1976. DLR … Dominion Law Reports. 1912 onwards. ER … English Reports. 1220-1865. Ex … Exchequer Reports. 1848-1856. Ex D … Exchequer Division. 1875-1880. F 3d … Federal Reporter, Third Series. 1993 onwards. FCR … Federal Court Reports. 1984 onwards. Fed Appx … Federal Appendix. 2001 onwards. FLR … Federal Law Reports. 1956 onwards. FSR … Fleet Street Reports. 1975 onwards. F Supp … Federal Supplement. 1932 onwards. HLC … House of Lords Cases (Clark). 1847-1866. IPR … Intellectual Property Reports. 1982 onwards. IR … Industrial Reports. 1982 onwards. KB … Law Reports. King’s Bench. 1901 onwards. LJ Ch … Law Journal Reports. Chancery. 1831-1946. LJ Ex … Law Journal Reports. Exchequer. LJKB … Law Journal Reports. King’s Bench. 1831-1946. LJPC … Law Journal Reports. Privy Council. 1865-1946. LJQB … Law Journal Reports. Queen’s Bench. 18311946. LR (NSW) Eq … Law Reports. NSW Equity. 1880-1900. LR App Cas … Law Reports. Appeal Cases. 1876-1890. LRCP … Law Reports. Common Pleas. 1865-1875. LR Eq … Law Reports. Equity. 1865-1875. LR Ex … Law Reports. Exchequer. 1865-1875. LR Ex D … Law Reports. Exchequer Div. 1876-1880. LRPC … Law Reports. Privy Council, Appeal Cases. 1865-1875. LRQB … Law Reports. Queen’s Bench. 1865-1876. LT … Law Times. 1859-1947. Lloyd’s Rep … Lloyd’s List Law Reports. 1951 onwards. NSW Conv R … New South Wales Conveyancing Reports. 1980 onwards. NSWLR … New South Wales Law Reports. 1800-1900, 1971 onwards. NTLR … Northern Territory Law Reports. 1992 onwards. NTR … Northern Territory Reports. 1978 onwards. NZLR … New Zealand Law Reports. 1883 onwards. P … Law Reports. Probate Division. 1891-1971. PD … Probate Division. 1875-1890.

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QB … Queen’s Bench Reports. 1841-1852. QB … Law Reports. Queen’s Bench. 1891 onwards. QBD … Law Reports. Queen’s Bench. 1876-1890. QGIG … Queensland Government Industrial Gazette. 1916 onwards. QSR … State Reports (Queensland). 1902-1957. Qd R … Queensland Reports. 1958 onwards.

SR (NSW) … New South Wales State Reports. 19011970.

RPC … Reports of Patent Cases. 1884 onwards.

US … United States Reports. 1790 onwards.

SALR … South Australian Law Reports. 1865-1892, 1899-1920. SASR … South Australian State Reports. 1921 onwards. SCR (NSW) … Supreme Court Reports, New South Wales. 1862-1876.

VLR … Victorian Law Reports. 1875-1956. VR … Victorian Reports. 1957 onwards.

TLR … Times Law Reports. 1855-1952. Tas LR … Tasmanian Law Reports. 1905-1940. Tas R … Tasmanian Reports. 1979 onwards. Tas SR … Tasmanian State Reports. 1941-1978.

WALR … Western Australian Law Reports. 1898-1959. WAR … Western Australian Reports. 1960 onwards.

Glossary Actual authority In agency law, actual authority refers to the authority that an agent has been given by a principal. May be express or implied, oral or written. Compare Apparent (ostensible) authority. Adversarial Often used to describe the common law procedure used in litigation. The central feature of an adversarial litigation process is that the parties are (generally) responsible for the conduct of their case with the judge ensuring the procedural rules are followed but not actively involved in the case. Compare the inquisitorial process of civil law jurisdictions. Affirm 1. When the innocent party elects to proceed with a contract that could have been rescinded (a voidable contract) for misrepresentation or unconscionable conduct; 2. to confirm the judgment of a lower court. Ambiguity Where a word or a phrase has more than one meaning. Often used in relation to the interpretation of a contractual term, especially an exclusion clause (where any ambiguity is interpreted against the party relying on the clause). Apparent (ostensible) authority In agency law, apparent authority refers to the power that an agent appears to have. There is no actual authority but merely the appearance of authority. Where a principal represents (“holds out”) either by words or conduct that an agent has authority to contract on the principal’s behalf, the principal will be bound by those acts of the agent that fall within that apparent authority. Appeal Refers to a review the decision of a lower court by a higher court. Appellant The person who appeals against a decision. Appellate Authority to hear appeals, eg appellate court. Balance of probabilities The standard of proof required in a civil case – plaintiff has the onus (responsibility) to prove his story is “more likely than not” to be true. Barrister A lawyer whose main function is to provide specialist advice and/or represent (advocate for) persons in court. Beneficiary A person who benefits from a will or trust. Bilateral contract A contract where each of the parties exchange promises – sometimes called an executory contract. An example is the typical contract for the sale of goods where A promises to buy and B promises to sell. Compare to Unilateral contract. Binding Legally enforceable. Often refers to an enforceable contract (as in “the contract is binding on X”). Bona fide In good faith. Breach To break one or more of the terms of the contract or not to reach the required standard of care (tort of negligence). Burden of proof The obligation imposed on a party in a court case to produce sufficient evidence to prove their case to the required standard. Capacity In contract law, the legal ability to enter a into contract. Individuals may lack capacity because, for example, of age or mental impairment. Caveat emptor “Let the buyer beware”. It was common in the pre-consumer protection era to put the onus or responsibly onto the consumer to make his or her own enquiries about the goods being acquired. Now there are statutory guarantees and implied terms that have shifted the onus onto the vendor or supplier. Civil action A legal action other than a criminal proceeding that typically involves the enforcement of an individual’s (including a corporation’s) rights under a contract or in tort or under certain legislation such as the Australian Consumer Law, the Corporations Act or the Partnership Act.

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A civil action differs in a number of ways from a criminal action – for example, the parties, the remedies, the procedures and the standard of proof are different. Codify A form of legislation that involves taking accepted common law and equitable principles and putting them into a statutory form. The Queensland Criminal Code is an example. More common in the civil law countries of mainland Europe. Collateral In contract law, an agreement entered into alongside the main agreement. May also mean security for a loan. Committal proceedings Where serious (indictable) offences, the proceedings held to inquire whether the prosecutor can establish a prima facie case against the defendant. If so, the case will proceed to a jury. Common law The part of English law that is derived from judicial precedent rather than statutes. Common law is often contrasted with civil law systems that require all laws to be written in a code. Company See Corporation. Concurrent At the same time, eg concurrent powers of State and Federal Parliament. Condition An important promise in a contract, a breach of which may allow termination and damages. Consensus ad idem A meeting of minds. In contract law, where the parties are in agreement. Consideration Consideration is the price paid for the promise of the other party. The price must be something of value (but need not be money). Consideration may be some right, interest or benefit going to one party or some detriment or loss given, suffered by the other party. Required for every simple contract. Contingent Dependent upon something. Contra proferentum Against the person who alleges it. In contract law, it is a maxim of contractual interpretation often used when interpretation of an exclusion clause is required. Contract An agreement that the law will enforce. Contributory negligence A defence that a plaintiff in a negligence claim contributed to their own losses/injuries through their own negligence. Corporation A corporation is a separate legal entity and able to act as such. It can sue or be sued, own property, borrow money, pay tax, break the law. A corporation is established through a formal registration process. Damages The main civil remedy for breach of contract, tort and breach of the Australian Consumer Law. Debenture A document issued by a corporation securing a loan. Debtor A party who owes money or some form of obligation to another. Deed A written document signed, sealed and delivered or expressed to be a deed. Deemed Treated as, even if not, in fact. Defendant The person against whom a civil or criminal action is brought. Distinguish To argue that the material facts of one case are different from another. In terms of the doctrine of precedent, if an earlier case in a higher court can be “distinguished” it is no longer binding on the later court. Dividend A distribution of a company’s profits to shareholders. Duress Any unreasonable or unlawful pressure on another person or the person’s property. In relation to the formation of a contract, duress vitiates the consent and has the effect of making any contract voidable. Duty of care In relation to the law of torts, a duty of care is a legal obligation that is imposed on an individual to avoid acts or omissions that can be reasonably foreseen as likely to cause loss or damage to another. It is the first element in a negligence claim: a duty of care must be established to proceed with an action in negligence. Its modern formulation around the “neighbour test” began in Donoghue v Stevenson (1932) AC 562. Equity Legal rules, originally developed in courts of equity, based on fairness and justice developed in England to overcome the pedantic and hard edge of the common law. Examples of equitable

Glossary

concepts include the concept of a mortgage, the obligations of fiduciary, the doctrine of estoppel, the contractual remedies of specific performance and injunction. There are no longer separate common law and equity courts. Exclusion clause A term in a contract designed to limit or exclude one party’s liability for loss or damage caused by a breach of contract, negligence or breach of a statutory duty. Exclusive Available only to one party/group. In constitutional terms, the Commonwealth has certain exclusive law-making powers. Executed Carried out, performed. In contract, executed consideration is where one party has performed his or her obligations. Executory Yet to be carried out or performed. In contract, executory consideration is where the promises are not yet performed. Extrinsic Outside, eg extrinsic material to assist interpretation of statute (material outside the Act itself). Fiduciary relationship A fiduciary relationship is a relationship of trust and confidence where one person (the fiduciary) promises to act for another (the principal), and in doing so, must act in good faith and must place the principal’s interests ahead of his or her own interests. Agent-principal, solicitor-client, partner-partner and director-corporation are examples of fiduciary relationships. Formal contract A contract written in a recognised form, usually called a deed. A deed must be signed, dated and witnessed. It is different from a simple contract in that no consideration is required. Frustration In contract law, a contract that is impossible or very difficult to perform because of the occurrence of an event such as war or flood (and where there is no provision in the contract) is said to be frustrated. Has the effect of automatically terminating the contract. Goods All chattels personal other than money, emblements and fixtures. Very broad definition of “goods” in the Competition and Consumer Act 2010: s 2. Goodwill The intangible value that a business has because of its clientele or location or reputation of the owner. Gratuitous Free. In contract law, a gratuitous promise is generally not enforceable because the promisee has not provided consideration. Guarantee A promise made by a person to meet the obligation of another if that person does not. Guarantor The person who promises to meet the obligations of another if the other does not. Hold out To “represent” that a person has a certain capacity, status or power. Often used in relation to agency law (“the company held out X as being the CEO or having the power of a CEO”). Imply To suggest. In contract, an implied term is not express. A term may be implied for a number of reasons including the prior dealings between the parties or because of a legal requirement or because it is necessary to make the contract work. Incorporated Limited Partnership A relatively new form of partnership agreement to pursue, in particular, joint ventures. Incorporation In relation to corporations law, it is the act of registration of a corporation under the Corporations Act. In relation to contract law, it refers to the process of inclusion of a statement (written or oral) into the contract. Often discussed in relation to exclusion clauses where the first question may be whether the clause has been “incorporated” into the contract. Injunction An order by a court to someone not to do something or to cease doing something. Insolvent trading Occurs when a director of a company allows the company to continue trading when he or she knows or should know the company cannot pay its debts or will be unable to pay its debts if a contract is entered into. Inter alia “Among other things”. Joint liability Where parties have joint liability, they must be sued together for the whole amount. Compare several liability where the parties may be sued separately. Joint venture Contract between two or more parties to develop a project. The parties remain separate and distinct entities. Compare a partnership arrangement.

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Judgment A decision of a court. Jurisdiction An area or the limit of a court’s powers. For instance, the Magistrate’s Courts civil jurisdiction is limited to hearing disputes worth less than $100,000. Lawyers A general term used to describe members of the legal profession. Generally refers to solicitors and barristers. Limited partnership Legislation allows for the formation of a partnership in which there is at least one general partner with unlimited liability and one or more partners whose liability for debts and obligations of the partnership is limited. A limited partner cannot take part in the management of the business of the firm. Liquidated damages A fixed sum that is agreed upon in the contract as a means of compensation following a breach of a contract. Most commonly they occur as a result of breach to deliver a good or service on time (eg late performance). Litigation Legal proceedings in court. Magistrate A legal officer in charge of local courts. Mere puff A statement not to be taken seriously, of no contractual significance, much loved by advertisers. Minor A person under the age of 18 years. Mitigate In contract law, the duty on a plaintiff to do what is reasonable to reduce the loss that he or she suffers as a result of the breach. Negligence A failure to meet the standard of care expected of a reasonable person in circumstances where a duty of care is owed. Non est factum “It is not my deed” – a form of mistake that, if proven, allows a person to escape performance of an agreement that is fundamentally different from what he or she intended to execute or sign (eg the person may have reasonably thought the document he or she was signing was a receipt when in fact it was an option contract). A claim of non est factum means that the signature on the contract was signed by mistake – this would make the contract void ab initio. Notice The knowledge of something. A person may have actual notice (the person is actually aware of a fact) or notice may be deemed or constructive (the person is considered to have notice because he or she should have known it). Most commonly, if certain notification procedures have been followed (eg advertisements placed in newspapers), the law will deem the person to have received notice, even if in fact they did not. Obiter dictum A statement by a judge that is not necessary to decide a particular case. May be persuasive but is not binding on a later court. Compare Ratio decidendi. Obligation A legal duty. Onus of proof The obligation to prove any allegations in court. In a civil action the onus is on the plaintiff; in a criminal case, the onus is (generally) on the Crown. Option In contract, an option contract is an enforceable agreement (ie consideration must be provided for the option) between a buyer and seller that gives the option-holder the right to buy or sell goods or real property at a later date at an agreed price. The option-holder is under no obligation to take up the option. Option See Apparent authority. Parol “Other”. Hence the parol evidence rule in contract law refers to the rule that when the contract is entirely in writing no parol (other) evidence is admissible to add to vary or contradict the written contract. Partnership Two or more persons carrying on a business in common with a view to profit. Precedent (Judicial) precedent refers to the process whereby judges follow previously decided cases where the facts are similar. The doctrine involves an application of the principle of stare decisis (ie, to stand by what has been decided). It is the foundation principle of common law legal systems. Presumption An assumption. In contract law, it is often used in relation to the question of whether there was an intention to enter into a legal relationship. Two presumptions apply – if the agreement is of a private or domestic or social nature, there is a presumption that there is no intention. On the

Glossary

other hand, if the agreement is of a commercial nature, there is a presumption that there is an intention to enter into a contractual relationship. Both presumptions are rebuttable (can be overturned) if there is evidence to the contrary. Prima facie As it looks apparently from the first view. Privity of contract The principle that limits rights and obligations to the parties who enter into the contract. Third parties cannot (generally) enjoy the benefits or suffer the obligations of the contract. Promissory estoppel Where a person makes a promise that is intended to be acted upon and it is acted upon in a reasonable way, the promisor cannot resile from that promise where it would be unfair on the promisee to do so. Estoppel is relied upon where the promisee has not provided consideration for the promise. Property Property can mean something that can be owned (eg “those goods, shares etc are my property”) or it can refer to ownership (or title) itself (“I have property in those goods”). Proprietary company A proprietary company is a company that is usually limited by shares (pty ltd) or be an unlimited company with a share capital; it must have no more than 50 non-employee shareholders; and have at least 1 director. A proprietary company has the advantage of privacy – it does not have the same disclosure as public companies but cannot go to the public to raise capital. Public company The most common public company is one that is limited by shares. What distinguishes public from proprietary companies is that public companies may offer their shares and other securities to the general public. A public company may be listed on the stock exchange. Pure economic loss Pure economic loss is financial damage suffered as the result of the negligent act of another party that is not accompanied by any physical or property damage. Often used in the context of loss suffered as a result of negligent misstatement. Ratify To approve or consent in retrospect. Ratio decidendi “The reasons for a decision” – the legal principle that is the basis for the decision. The ratio is binding on a later court lower in the same hierarchy where the facts are similar. Compare Obiter dictum. Rebuttable presumption A presumption that may be overturned or defeated by evidence to the contrary, eg the presumption of innocence in criminal law. Representation In relation to the law of contract, a representation is a statement of fact made by one party to the other, before or at the time of making the contract that induces (is influential) the other party to enter into the agreement. Compare Term and Mere puff. Repudiate To renounce, cancel. In contract law, it refers to an action by one of the parties that indicates the party cannot or will not perform, or will not complete, the contract. Res ipsa loquitur “Things speak for themselves”. Often used in negligence actions when there is no direct evidence about what happened. Rescind Terminate, revoke, cancel. Often used in contract law when the consent that is required for a contract to be formed is not genuine because of misrepresentation, mistake duress or unconscionable conduct. The innocent party may be able to rescind the contract (put the parties back in their original, pre-contractual positions). Residual “That which remains”. The States have jurisdiction over those policy areas that are not exclusively given to the Commonwealth or are not concurrent powers, shared with the Commonwealth. Examples are health and police. Respondent A party against whom an appeal is filed. Restitution Generally means the act of restoring. In contract law, restitution may be required where one party has conferred a benefit on another (eg built a house or part of a house) but cannot claim the contract price because the contract is not enforceable (because, for example, it is not in the required form). Restitution (eg providing a reasonable price for what has been done) prevents the owner from being unjustly enriched. Right An interest or benefit recognised by law. The law of torts is based on rights – the right not to be injured by careless conduct (negligence), the right to a good reputation (defamation), the right to quiet enjoyment (trespass/nuisance).

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Rule of law The legal principle that is the basis of democratic rule – that law, not individuals acting arbitrarily, should govern a nation and every person is subject to the same law and has access to the same legal and judicial processes. Sanction A legal penalty or punishment. Seal A formal signature. Secret commission Receiving a secret benefit from a third party in breach of the law. Often used in principal-agent relationship. Separation of powers Under this principle, the power to govern is distributed between the Parliament, the Executive and the Judiciary. Each group is “separated” and should work within constitutionally defined areas of responsibility in order that there are checks and balances. Australia does not have a complete separation of powers because, in a Westminster system, some of the roles of the parliament and the executive and, to a lesser extent, the judiciary overlap. Settlor A person who makes a settlement, especially of property, in setting up a trust to be administered by a trustee for the benefit of beneficiaries. Simple contract Any contract that is not a formal contract. All simple contracts require consideration. Sole trader A person carrying on a business as an individual. Solicitor A lawyer who handles general legal matters and provides legal advice or legal services (such as conveyancing). The first stop for people seeking legal advice or considering initiating legal action. Sovereignty The power of a governing body (such as the parliament) to govern, without any interference or control from outside sources or bodies. Specific performance An order compelling a party to do something. In contract law, an order for specific performance is usually reserved for contracts for the sale of land. Courts do not generally order parties to perform their obligations. Courts prefer to order compensation where the breach causes loss. Standard of proof The amount of proof required in a court case, eg in a criminal trial the standard of proof is “beyond reasonable doubt” and in civil matters, the proof required is “on the balance of probabilities”. Statute An Act of Parliament. Strict liability Where fault does not have to be proved in the party accused of wrongdoing. Sue To commence legal action in a civil matter. Summary offence A less serious offence tried by a magistrate. Term A promise that forms part of the contract. A term may be a condition or a warranty or an innominate term. Terra nullius Land belonging to no-one. Refers to the concept that (incorrectly) underpinned the “settlement” of the colony of NSW by the British in 1788. It was overruled by the High Court in Mabo’s case in 1992. Third party A stranger to a transaction, legal proceeding or relationship. In a contractual sense, it means someone who is not a party to the contract. Tort A tort is a civil wrong. The law of torts is based on protecting certain rights that people have been given by the courts – examples include the right not to be injured by careless conduct (tort of negligence), the right to a good reputation (tort of defamation), the right to quiet enjoyment (torts of trespass and nuisance). Trust An equitable entity involving a relationship where a person holds property or income on behalf of another. Trustee A person holding assets or receiving income on behalf of another under a trust or will. Trust property Property that is the subject of a trust. Uberrimae fidei Utmost good faith. Ultra vires Beyond the powers (of).

Glossary

Unconscionable Generally means conduct that is unfair, harsh or oppressive, taking into account the circumstances or the condition of the other person. In contract law, it has both a common law and a statutory meaning. Unenforceable An unenforceable contract is one which is, prima facie, a valid contract but which by reason of some technical defect is not capable of being enforced by action by one or both of the parties, for example, a contract made verbally which is required by statute to be evidenced in writing and which has not been so evidenced. Compare valid, void and voidable. Unilateral contracts A “one-sided” contract – one side (the offeror) makes a promise to do something in exchange for an act by another person (the offeree). If the offeree performs the act, the offeror must fulfill the promise. An offeree is not obliged to perform the act but if he or she does perform only one enforceable promise exists – the offeror’s promise. Reward cases are good examples: “I will pay $500 for the return of my dog”. Compare Bilateral contracts. Valid In respect of a contract, valid means a contract recognised by law and enforceable in the courts. Compare Valid, Void and Unenforceable. Valuable In contract law, refers to the fact that the consideration provided by the promisee must be of some value to the promisor. The consideration need only be sufficient, not adequate. Vicarious liability Liability is vicarious when a person is regarded by the law as responsible for the acts or omissions of another person. Vicarious liability arises where a particular relationship exists between the person held responsible and the wrongdoer (eg the relationship of employer and employee). It is a form of strict liability where a person is held responsible for the acts or defaults of another even though they may not themselves have been personally at fault. Void A void contract (or a contract that is void ab initio (“from the beginning”)) is of no legal effect and thus does not create legal rights or obligations. For instance, a void contract (for the sale of goods) cannot pass title from the seller to the buyer. Examples of void contracts include ones that are illegal or affected by a fundamental common mistake. Compare Valid, Voidable and Unenforceable. Voidable A voidable contract is one that a party may avoid, that is, get out of, if that party wishes to do so. For example, a person who was induced to enter into a contract by the other party’s fraud may (depending on a number of factors including whether the parties can be substantially returned to their original pre-contractual positions) be able to avoid (“rescind”) the contract. Compare Valid, Void and Unenforceable.

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AN INTRODUCTION TO STUDYING LAW UNITS HOW TO APPROACH THE STUDY OF LAW For the non-law student studying law for the first time, the broad learning objectives are to ensure students develop an understanding of, (a) the political-legal framework within which business operates, and (b) many of the essential commercial laws that facilitate and regulate business activities in Australia. For these students, law can be a challenge. The legal language and legal reasoning, the unusual legal and equitable concepts, the case-based teaching method, the analysis of hypothetical problems as a dominant form of assessment – and the lack of a “right” answer to these problems – are all genuine obstacles on the path to legal enlightenment. Nonetheless, the study of law should be seen as much more than a “necessary evil” to be endured in order to satisfy course requirements. The knowledge and skills gained from studying a law unit equips students with the ability to analyse, to argue and to communicate clearly on commercial issues. In the future the most successful commercial professionals will be those who can approach complex challenges flexibly and with a sound knowledge base understand a range of options and perspectives. Business professionals who are able to work in interdisciplinary teams and understand the language and needs of professionals from other disciplines will be at a distinct advantage. In this text, each of the topics has been selected because of its commercial relevance and has been written with the non-law student in mind. This is not “law-lite”: it is law that will equip students to play a significant role in the commercial world. The first chapter provides an introduction and an overview of the Australian legal system. Thereafter, we consider a broad range of substantive commercial laws beginning with the basic building block of commercial life – law of contract. We then examine consumer protection laws (the rights and responsibilities of retailers, manufacturers and importers), the law of torts (especially the law of negligence), agency law (particularly the concept of fiduciary responsibilities) and a range of issues in relation to business organisations (particularly with respect to partners’ and directors’ responsibilities). The final chapter is concerned with legal ethics. In short, the primary objective is to open students’ minds to the way law affects the commercial environment of today and to ensure that the material gives students the opportunity to understand the language and perspectives of both the legal professionals with whom they will work and the regulators and others, with whom increasingly they will be required to interact.

HOW TO APPROACH ASSESSMENT TASKS 1. Approaching the hypothetical legal problem One of the most common forms of assessment of law units is the hypothetical legal problem. This is the way it works. Students are given a story to read. The story always ends badly for one or more of the parties who invariably seek your legal advice. Your task is (usually) to “advise” (provide that advice to one or more of the parties) or “discuss” the rights and obligations of one or more of the parties. You need to pay attention and frame your answer according to what you have been asked to do. Please note that if you are asked to “advise” X, this advice must be objective, hard-nosed advice – you are not expected to provide advice that X will necessarily welcome. Please also note that your advice or discussion must be based on your understanding of the law (supported by primary sources (cases or legislation)), not on your opinion. First, read the story carefully. Be clear about what has happened. Identify what you consider to be the legal issues raised in the story. Being familiar with the facts of key cases is helpful because these cases often inspire the hypothetical problems. Having identified the legal issue(s), you should discuss/ analyse/explain the relevant law or legal principles referring, wherever possible, to the source (cases and legislation). Finally, apply that legal analysis to the facts and come to a conclusion.

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NB - Provided you identify the issues, discuss the law and apply the law to the facts, the precise structure of your answer is not important. You may choose to start at the beginning (“There are three relevant issues to discuss. The first is…”), or you may prefer to start at the end (“I believe that X is liable for breach of contract for the following reasons…”). As long as you argue clearly and logically, we encourage you to find a process or a structure with which you are comfortable.

2. Writing tips 1.

Plan your answer. If your answer lacks planning and a proper structure, it is likely to be repetitive, irrelevant and illogical. A well-planned, well-structured answer will always do better than the one that is all over the place.

2.

Canvas all the relevant issues, not simply the first major one. If you don’t, you sacrifice marks because marks are allocated for each issue. At the same time, you need to think carefully about staying relevant.

3.

Don’t repeat or rewrite the question. This is a waste of time for which no marks are given. Instead, a brief introduction setting the scene is a useful device – it gets you off to a good start and indicates to the examiner where you are heading. It need only be brief. For example, “I am asked to advise P whether he has any rights against the partnership. In order to do this it is necessary to (a) decide when the partnership began; (b) identify the partnership property; (c) decide when the partnership came to an end; and (d) decide whether appropriate notice of dissolution was given”.

4.

Stay relevant. Students may not answer the question because they select the wrong issues (not much to be said about this) or select the correct issues but do not accurately explain the law or get the issues and law correct but do not apply the rules to the facts in a way that complies with the instructions in the question.

5.

Explain yourself. Too often, students become very propositional at the application stage. For example, “this action is a breach of contract” or “there is a breach of the duty of care”. To think “why” or insert the conjunction “because…” is a useful strategy which ensures you explain yourself if you have made a bold assertion.

6.

Don’t include too much information. In particular, when discussing relevant precedents do not include a summary of the facts of the cases. If there is a critical fact or two, state it concisely and move on to the argument or analysis. There is never a need for a case summary.

7.

Objective advice. In most hypothetical problem questions, you are asked to “advise”. This should be done “objectively”: you are not usually being asked to be an advocate. Provide an answer that considers both sides and comes to a reasoned conclusion, even if it is not what your client would like to hear!

8.

Write good English. Be clear and concise. Do not overwrite and do not use words just because you think they sound mary of the facts of the cases. If there is a critical fact or two, state it concisely.

3. Examples “Discere Faciendo” – “to learn by doing” The following examples involve a range of hypotheticals, including multi-issue and single-issue questions. We provide an answer guide so that (a) you can see what the issues are and (b) you can see what a good answer looks like. However, the answer guide is not a good piece of formative

An Introduction to Studying Law Units

assessment unless you appreciate the underlying structure of the answer and, more importantly, write an answer yourself, have it critiqued by a tutor, attempt another answer (to a different question, have it critiqued and monitor your improvement. Question 1 Norman Peeters Pty Ltd, a vendor of electronic equipment, dropped brochures in mail-boxes advertising in bold print NEVER TO BE REPEATED OFFERS ON FAMOUS HUGE PLASMA TELEVISIONS WITH SURROUND SOUND SYSTEM. BUY NOW FOR $3500. On Wednesday, Ben, a famous footballer, saw one of the brochures and decided he would purchase one of the plasma televisions. He immediately went down to the store and told Mary, the sales manager, that he accepted the store’s offer and would bring his car around the back to pick it up. However, Mary told him to slow down. “Unfortunately, we are out of stock”, she said. She then said, “The only plasma left is the demonstration model, and you can have that for $2,000. Not a bad price as they usually sell for around $3000”. Ben was annoyed believing that he had already made a contract. Nevertheless, he said that he would think about her offer to sell the demonstration model. Then Mary said, “Look, you’re my son’s favourite footballer … I’ll hold it for you for two days. Here’s my business card – just ring me with your decision before Friday at noon.” Ben agreed and left the shop. The next day (Thursday), Jessie walked into the store and, when told the set it was “on hold”, offered to buy it for $3,000. Mary decided that it was better (for her) to get a certain sale and sold it to Jessie. On Friday morning well before noon, Ben emailed Mary advising her that he would buy the demonstration set. “I’ll pay for it and pick it up after training” he wrote. Mary immediately rang him and told him that the set had been sold. Ben seeks your advice as to whether he had a contract with Norman Peeters Pty Ltd either on the Wednesday when he first visited the store or on the Friday. Please advise him. Include in your advice any remedies that may be available, including whether he is entitled to extra damages designed to punish the store for its deliberate breach. Suggested answer guide The main issue in this question is whether Ben and Mary (as the agent of NP) have made an enforceable agreement either on Wednesday (when Ben visited the store) or Friday (when he rang and “accepted” the offer). For an agreement to occur, there must be an offer and an acceptance of that offer. Wednesday – whether or not a contract was made on Wednesday depends on the status of the advertisement that appeared in the brochure. Not all proposals are offers; some are invitations to treat. To be an offer, there must be an indication on the part of the offeror that, if the person to whom the offer is directed (offeree) accepts; an enforceable contract will be made at the moment the acceptance is received. An invitation to treat, on the other hand, is an invitation to others to make an offer; it is part of a negotiation where one party indicates that he or she is open to receiving an offer on particular terms: Harvey v Facey. The general common law position has been to treat advertisements – whether in brochures or in the media – as invitations to treat: see Partridge v Crittenden. For an advertisement to be characterised as an offer, there must be a clear intention on the part of the offeror to be bound if the offeree accepts. This occurs more often where the advertisement contains a unilateral offer; see Carlill v Carbolic Smoke Ball Co. This is not the case here. It is likely that this particular advertisement would be regarded as an invitation to treat because there is no evidence that indicates that NP intended to be contractually bound to anyone who accepted the “offer” in the brochure. Ben’s “acceptance” is therefore an offer to purchase. He has indicated that he intends to enter into an agreement with Mary if she accepts his offer to buy the TV for $3500. The response from Mary, however, is not a rejection nor an acceptance of the offer. It is a counter-offer – an offer from the original offeree (see Harvey v Facey) – where she offers to sell him a demo model for $2000.

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Seeing that Ben is undecided about whether to accept or not, Mary promises to keep her offer open until Friday at noon. The legal question is whether Mary’s promise is enforceable (as an option) or is an unenforceable gratuitous promise? An option gives the option holder a right to purchase at a later time. In order for her promise to be an option, Ben must have provided consideration – that is, given something of value in exchange for the promise. This is a requirement of every simple contract, including an option contract: Goldsborough Mort. Unfortunately for Ben, he has not provided consideration for the offer to keep the offer open. Mary is, therefore, not in breach of the option when she sells the TV to Jessie. Friday – However, the issue in this particular instance is whether Ben has legally accepted the offer when he rings Mary on Friday. An offer can be revoked (withdrawn) at any time before acceptance: Byrne v Van Tienhoven. Although Mary had sold the TV to Jessie, her offer to Ben was still on the table. She had not revoked – nor did Ben know that she had sold the TV. Ben, therefore, could accept the offer and he did so before Mary could tell him that the TV had been sold. Mary has, therefore, breached the contract. Ben is entitled to damages. He is entitled to be restored to the position he would have been in if the contract had been performed: Robinson v Harman. In order to claim the loss, one must show the breach is caused by the loss (no problem) and that it is a reasonably foreseeable loss: Hadley v Baxendale. In this case, the reasonably foreseeable loss is the difference between market price of a similar plasma (perhaps $3000) and the contract price ($2000). Also note that contractual damages are compensatory not punitive (Addis Gramophone) so Ben is not entitled to extra damages. Question 2 Abdul runs the Incredible Edibles Organic Restaurant. He grew disenchanted with the quality of vegetables supplied by Han Yu so contacted George. George gave him his standard contract that contained a term which promised that the fruit and vegetables supplied would be “fresh”. It says nothing about it being “organic” (grown without chemical fertilisers or pesticides). Abdul questions George about this and stresses that the vegetables must be organic or his business will suffer. When George assures him that his vegetables will be organic, Abdul signs the contract. There is no term in the contract about the vegetables being organic. George begins well enough but three deliveries in a row include vegetables that are not organically grown. As a consequence, Abdul loses $7000 per week because those customers who only eat organic food go elsewhere. Advise Abdul of the remedies, if any, he may have for breach of contract. Do not refer to the Australian Consumer Law. Suggested answer guide The main legal issue is to determine whether the oral statement is a term of the contract, a collateral contract or a representation. A term is part of the contract. A collateral contract (or warranty) is an oral promise that is made (usually about something in the main contract) the consideration for which is the promisee entering into the main written contract. A representation is a statement that is intended to induce or influence the other party to enter the contract but is not itself part of the contract: Oscar Chess v Williams. In this question, students are asked about contractual remedies; so we need to determine if the statement is a term of the contract or a collateral warranty. As noted above, a term is a contractual promise, a breach of which allows an innocent party to terminate the contract and/or seek damages: Associated Newspapers v Banks. It may be oral or written. The status of an oral statement such as the one made by George is affected by the parol evidence rule. This rule establishes the primacy of the written over the oral word. It says that where the written agreement appears to be the whole agreement between the parties, no other (parol) evidence can be admitted into evidence that would add to, vary or contradict the written agreement: Mercantile Bank of Sydney v Taylor. In other words, if the written agreement between Abdul and George looks to be the whole agreement – that is, there are no references to other terms, oral or written, elsewhere - the parol evidence rule would prevent Abdul

An Introduction to Studying Law Units

from being able to rely on the oral statement concerning the organic nature of the food. It would not be a part of the contract and, therefore, no contractual remedy would be available for its breach. Two lines of argument remain. First, the parol evidence rule cannot be used to exclude evidence of a misrepresentation. So Abdul may be able to introduce evidence that he was induced into signing the written contract by a misrepresentation. Second, he may argue the oral statement was a collateral warranty. In order to do this, three criteria must be met. First, it must be promissory; second, it must not be inconsistent with a term in the main contract; and third, the promisee must have given consideration for the collateral promise. There is no question that the first two criteria have been met – there is no inconsistency between the collateral statement and the main contract and, in entering into the main contract, Abdul has provided consideration for the collateral statement made by George. However, we must examine the third requirement for a collateral contract – the statement must have been a promise (that is, it was intended to have contractual effect). If it is a statement of opinion, it is not promissory and cannot be a collateral contract: JJ Savage v Blakeney. An objective test is used here: would a reasonable person say the statement was promissory and intended to have contractual effect? There is no doubt Abdul made it clear how important it was to him that the vegetables be organic. After all, he said he would lose business if the vegetables weren’t organic. In these circumstances a reasonable person would think that the statement was intended to be contractual. It is, therefore, possible for Abdul could sue for a breach of the collateral contract. As the breach would be of a warranty (a term that does not go to the heart of the contract), Abdul is entitled to damages only: see Tramways Advertising. However he would be compensated for the lost business he suffered ($7000) under the first limb of Hadley v Baxendale (losses which naturally arise from the breach (Koufos)) as long as he could show there is a causal connection between the breach and the loss: Alexander v Cambridge Credit. (Thecurrent position is that the statement could constitute misleading or deceptive conduct under s 18 of the Australian Consumer Law. Students were not, however, asked to discuss any rights under the ACL.) Question 3 Sally Bowles owns and operates a very successful song and dance club called the Kit Kat Klub. One evening, her sophisticated sound system breaks down. She contracts with a sound technician, Cliff Bradshaw, to repair it. The faulty parts of the system have to be taken to his workshop but he promises that he will return the next day and have the system up and running so she will not have to close the club. Unfortunately, because of Cliff’s carelessness, and lack of respect for punctuality, the sound system is not returned for three days. Sally looks but is unable to find a substitute system so she has no choice but to close the club for those three nights. She now seeks compensation for the lost profits (approximately $6500) for the first two nights she had to close the club. On the third night she had contracted with Cosmo Brown, a famous American tap dancer, to perform and expected to earn an additional $15,000 profit from his appearance. Cliff was not aware that Cosmo was appearing at the Kit Kat Klub. Sally is also seeking damages to compensate her for the embarrassment she has suffered as a result of having to cancel the contract with Cosmo and disappoint his many fans. Please advise Sally whether you believe she would succeed in her claims for damages against Cliff. Suggested answer guide The issue in this question concerns whether Sally is entitled to claim damages from Cliff. First, we should note that the aim of contractual damages is to put the parties in the position they would have been in if the contract had been performed. These are called expectation losses: Robinson v Harman. In order to receive damages, Sally has to establish if (a) there is a causal link between the actions of Cliff and her loss and (b) that the damages are not too remote from the breach. Here causation is not an issue: it is clear that “but for” the breach the loss would not have occurred. In terms of remoteness,

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Sally must prove that the damages are a reasonably foreseeable result of the breach. Reasonable forseeability is usually considered under the two limbs of Hadley v Baxendale. The first limb concerns losses that are reasonably foreseeable because they are losses that “arise naturally” or “in the ordinary course of things”: see Victoria Laundry and Parsons. The $6500 loss of profit would come under this limb. The claim for $15,000 (regarding losses arising from Cosmo not appearing) is not a “first limb” claim (a reasonable person would not expect such a famous person to be appearing on that night), so it would only be recoverable if it comes within the second limb that requires actual notice to be given. As Sally did not give Cliff notice, it is unlikely she would be able to recover the $15000. The next question is whether she can recover damages for her embarrassment/disappointment? Damages are not usually recoverable for disappointment or embarrassment. Only when the contract itself is for entertainment or enjoyment (such as a cruise (Dillon) or a ski holiday (Jarvis) is the law likely to compensate a plaintiff in such circumstances. The contract between Cosmo and Sally was a strictly commercial deal (one that gave pleasure or enjoyment to others.) A plaintiff must try to reduce or mitigate loss or the damages will be reduced: Payzu. Only need to do what is reasonable. Here, we are told that Sally did looks for a substitute system. In this sense, she probably did enough. Her damages would not be reduced. Question 4 Soon after the same Kit Kat Club re-opens, there are more than 200 patrons out on the dance floor. Don Lockwood is one of them. It is his first night at the Kit Kat Klub. He enters the club the same way everybody does – walks in the main entrance door and pays $20 to the cashier in the foyer and receives his ticket. He does not notice the sign above the entrance door that says in very large, clear print, “Neither the Kit Kat Club nor its owners, employees or agents will be liable for any loss or damage to patrons, or their property, howsoever caused, including negligence and/or breach of contract”. Don is having the time of his life when all of a sudden, without warning, the floorboards give way and Don falls 3 metres to the ground below. He breaks his leg and several ribs and is severely concussed. Sally is aware that the regulations stated that there should be no more than 100 patrons on the dance floor at any one time but has long ignored that regulation. As a matter of fact, Sally recently noticed that the boards were wearing dangerously thin in the central area but decided to delay putting in a new floor until winter (a slow period for the Club). When Don sues Sally for damages, she seeks your advice about whether she is liable under the common law. Please do not refer to the Australian Consumer Law. Cite relevant case authorities. Suggested answer guide The main issue in this question concerns the effect of the exclusion clause. There are two issues here – one is whether the clause is in fact part of the contract; the other is the question of the interpretation of the clause. First issue – is the clause included in the contract. As this is not a signed contract, the issue is whether reasonable notice has been given. To determine whether reasonable notice has been given, we should consider when the contract was entered into (in the foyer) and whether notice was provided at or before this time: Thornton and Olley. Since the exclusion clause was above the entrance door and was in large clear print (and did not contain unusual or onerous terms that would have required something special by way of notice: Interfoto), it is likely that reasonable notice was given. Second issue - assuming that the clause is included by reasonable notice, the next issue is whether, as a matter of construction, the clause protects Sally. Bearing in mind the courts are hostile to such clauses (at least in consumer-type transactions) and interpret any ambiguity contra proferentum, we

An Introduction to Studying Law Units

need to carefully consider the words and their meaning. The relevant principles here are that the words used are to given their natural meaning…not twisted so as to reach a desired outcome. Here, it is clear that the clause clearly excludes loss that arises as a result of breach of contract and negligence. Therefore, on the face of it the clause protects Sally. However, we can go further and ask whether the actions of Sally – in breaking the building regulations (by over-crowding the dance floor) and ignoring the state of the floorboards (in what might be described as a reckless manner) has gone beyond the four corners or the natural scope of the contract…or committed a fundamental breach of contract that is not covered. In this context, Sydney CC v West and/or Photo Productions are relevant. It is unlikely that her actions are protected by the exclusion clause. Question 5 Joanna’s boyfriend is into rock-climbing and he asks Joanna to come with him on a rock-climbing expedition run by Rock and Roll Safaris to the Arapiles in the Grampians in the West of Victoria. The cost is $500 for 5 nights. As Joanna does not have appropriate shoes, she goes to Boots 4 U. After explaining her intention to climb in the Arapiles, the sales assistant recommends a pair of “Matterhorn” boots for the expedition. Joanna takes note of the advice, examines the boots, sees that on the box they are called the “Matterhorn – the best Swiss rock-grippers”, and buys a pair for $300. However, unfortunately for Joanna, the boots do not grip well on the granite rocks of the Arapiles and she is forced to abandon the rock climbing. She spends her time on the ground reading a book. Advise Joanna of any remedies she may have against Boots 4 U under Part 3-2 of the Australian Consumer Law. Suggested answer guide The legal issue is whether remedies under Part 3-2 (consumer guarantees) of the ACL are available to Joanna. This involves a discussion of the relevant criteria (as there is no “issue” that the boots are “goods”, that have been “supplied” in “trade or commerce” and that Joanna is a “consumer” under s 3(1) (students are not expected to discuss these definitions). First, we need to consider the relevant law and apply that law to the facts (where there are a number of issues to be addressed it makes sense to discuss the law and apply it to each issue before moving on). Under the ACL, if a person supplies goods to a consumer in trade or commerce the goods must satisfy a number of consumer guarantees. Three of these guarantees are of most relevance: (a) the goods be of “acceptable quality” (s 54(1)). Discuss meaning of “acceptable quality”: s 54(2). On the facts, it is unlikely that the boots are “fit for all the purposes for which goods of that kind are commonly supplied” (first criteria) - the goods are not of acceptable quality particularly having regard to the statements made about the goods on any packaging or label (s 54(3)); (b)

the goods must be “reasonably fit” for (i) a purpose which the supplier represents they are for; or (ii) a purpose the consumer makes known to the supplier that they will use the goods (s 55(1)). The meaning of a disclosed purpose is discussed in s 55(2) but it is clear that there has been a breach of this consumer guarantee in respect of (i) and (ii) above: the boots are not fit for the purpose represented by the supplier and for the purpose disclosed by Joanna; and

(c)

where the goods are sold by description, the goods must correspond the description: s 56. The statements on the box – the “best Swiss rock-grippers” – are part of the description. As the boots do not correspond to that description, there would appear to be a breach of that guarantee.

Having established that one or more of the guarantees have been breached we must next consider any remedies that may be available to Joanna. The remedies depend on whether the breach is considered to

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be a major or minor failure. A major failure is defined in s 260 as a situation where the goods would not have been acquired by a reasonable consumer who was fully acquainted with the nature and extent of the failure, or where the goods differ in significant respects from their description or are substantially unfit for a common purpose and cannot easily be remedied or where goods are not fit for a disclosed purpose. Joanna would successfully argue that there has been a major failure on each of these counts. Therefore, she may reject the goods or recover compensation for any reduction in the value of the goods below the price paid: s 259(3). Joanna may also recover damages for any reasonably foreseeable loss or damage caused by the failure to comply with the guarantee: s 259(4). It is likely that she could claim (from Boots 4 U) at least part of the $500 cost of the expedition as compensation for her inability to climb. Question 6 Giorgio experiences a heart murmur, so he consults with his GP, Dr Kee. Dr Kee tells Giorgio not to worry and decides not to send Giorgio for further tests. Shortly thereafter, Giorgio suffers a cardiac arrest and as a result is brain damaged. Giorgio now intends to claim damages for negligence, arguing that Dr Kee should have taken a possible cardiac problem into account when the heart murmur was detected and arranged an ECG and referral to a cardiologist. Dr Kee admits he owes Georgio a duty of care. Please advise Giorgio whether his claim is likely to succeed. Suggested answer guide Issue: As you have been instructed that a duty of care is admitted the issue is whether there has been a breach of a duty of care. This depends on whether the defendant met the standard of care required by the law of negligence. The standard expected is that of the “reasonable person”. The reasonable person is equipped with the same skills and expertise expected of a person exercising a particular trade or profession. For example, in an action against a doctor for professional negligence, the relevant standard is that of an ordinary, competent doctor exercising ordinary professional skill: Chin Keow v Government of Malaysia. Where the plaintiff proves that the defendant professional has not exercised reasonable care in the discharge of their professional duties, the defendant is liable unless it can be shown by way of defence that the defendant acted in a manner that satisfies the test in s 59 of the Wrongs Act 1958 (Vic) which states: A professional is not negligent in providing a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by a significant number of respected practitioners in the field (peer professional opinion) as competent professional practice in the circumstances. Thus, the question is whether Dr Kee acted in a reasonable way. If the heart condition would have been revealed had Dr Kee referred Giorgio for an ECG or to a cardiologist, Dr Kee may be found to have breached the duty of care unless he can show by way of defence that he acted in a manner that satisfies the “peer professional opinion” test in s 59 of the Wrongs Act 1958 (Vic). Section 59 provides a defence if it is established that Dr Kee “acted in a manner that was widely accepted in Australia by peer professional opinion as competent professional practice.”: s 59(1). Question 7 Jacob Farook’s company, JF Solar Panels Pty Ltd., has been running a solar panel business for many years. Jacob is the sole director and the sole shareholder. In July 2016, Jacob ordered glass panels to the value of $1m from Glass Makers Pty Ltd, a glass wholesaler, as he had done on many occasions. At around the time the order was placed, the company was experiencing serious cash-flow problems and was unable to pay its debts. Jacob, who was immersed in the research and development side of the business, did not pay sufficient attention to the company’s accounts and only realised it was in serious

An Introduction to Studying Law Units

trouble a month later. When the glass was delivered in September, the company could not pay the account and it has remained unpaid. The manufacturer is now suing both the company and Jacob. Advise Jacob of the extent (if any) of his liability. Suggested answer guide In this answer, each issue is approached in the same way – identify the issue, explain the law and apply to the facts. Once an issue is finalised, we move to the next one. First issue: The first question concerns Jacob’s possible liability as a director of the company – this involves an understanding of the nature of a corporation as a separate legal entity, the concept of the “corporate veil” and the circumstances when it may be lifted. Since the company was registered as a company, it exists as a separate legal entity capable of entering into contracts (in the same way that a natural person) does and it can sue or be sued on those contracts. This concept of the separate legal entity was established in Salomon v Salomon & Co Ltd and recognised by s 124(1) of the Corporations Act, which gives every registered company the full legal capacity of natural person. For Jacob, this means that the company had the legal capacity to form the contract with the manufacturer, and it is the company that is legally responsible to perform the contract or pay damages for breach. Jacob may be the sole director and sole owner of the shares in the company, but, in the eyes of the law, the company is a separate legal person and Jacob is not responsible for its debts. Second issue: As a director of the company, Jacob is also not personally liable for the debts of the company. An exception under the Corporations Act is where the corporation has been trading whilst insolvent. Section 588G prohibits company directors from allowing the company to incur new debts at a time when the company is unable to pay existing debts as they fall due (this is the statutory definition of insolvency: see s 95A), or if incurring such new debt(s) would make the company insolvent. On the facts, we are told that the company was experiencing difficulty paying its debts when it placed the order. It is, therefore, likely that it was insolvent according to the definition in s 95A. If so, Jacob would be personally liable for the debt under s 588J, K and M and as held in ASIC v Plymin, Elliott & Harrison unless his ignorance is an excuse. Third issue: Is ignorance of the cash-flow position a defence to the offence in s 588G? Jacob would have to establish that he had reasonable grounds to expect, and did expect, that the company was solvent. The defences to s 588G are set out in s 588H. As Jacob appears to be running the business himself and not relying on a “competent and reliable person” (s 588H(3), the only relevant defence is s 588H(2). Under this sub-section it is a defence if it is proved that the defendant had reasonable grounds to expect, and did expect, that the company was solvent and would remain solvent even if it incurred that debt. In ASIC v Plyman, the Court said that in order to escape liability using 588(2), directors must show they made sufficient enquiries and sought external advice to allow them to reasonably conclude the company was not insolvent. On the available facts, it is unlikely that this would be the case. Jacob was simply unaware of the state of the company. Ignorance is not enough, so it is likely that he would be liable for a breach of s 588G.

APPROACHING THE RESEARCH QUESTION 1. Introduction As with any other piece of writing, a research paper must be logically structured and present a coherent answer to the question. The answer must not be a simple summary of the material you have assembled – you must demonstrate an understanding of the material and answer the question in a confident and individual way. To do this, you must follow the following steps: Carefully consider and interpret the question – what is it I am expected to do? Research the topic and assemble relevant materials (some of which will be used but much of which will not).

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Write a coherent and well-structured paper that shows to the reader/examiner that you have understood the question and conducted your research thoroughly.

2. Consider and interpret the question It is obviously a vital part of any essay to answer the question you have been asked. You need to be rigorous here – assess precisely what the question is about and answer it accordingly. Don’t simply identify the general area of law (eg, negligence) and summarise the relevant material. Sometimes, it helps to clarify the topic if you re-form the question in your own words under the heading “what the question asks me to do”, noting: Any statements or propositions in the question. Any implicit approach or angle that is express or implied in the question itself (eg, there has been a suggestion that s 18 of the Australian Consumer Law has gone too far …). What the question asks you to do (eg, examine, explain, analyse, interpret …). These instructional words will assist you in defining your task. Any restrictions on where you should go (eg, “in Australian case law…”).

3. Research Once you have a clear idea of what the question means, your research begins. This is not an invitation to collect everything on a topic – in this era of readily available internet searches of law databases (and even general databases like Google Scholar) the need for relevance is even more acute. You need to: Find material that is on the general topic (eg from table of contents or internet search of key words). Skim read to see if it relevant to the key issues – in particular whether it takes your argument further. Filter in and out – taking brief notes only if it the material is relevant

4. Writing Planning: Planning is critical – it will save you time because you will have a structure and direction from the start. The plan itself should break your essay into parts, usually under headings and sub-headings. Once you have a “roadmap” of your essay in front of you, you can push and pull it into shape. Writing: Good writing of any kind is not easy. There are many general books on the subject and they have one thing in common: writing is best when it is direct, active, concrete and verb filled. If you wish to do well in your legal research paper please follow that advice! Of course, structure is important. As with any other essay, you need a short introduction, telling the examiner what the question is about and how you are going to answer it. Then follows the main body of the essay that sets out your arguments in a logical and coherent way (using headings or paragraphs). Remember your assertions or propositions should be supported by authority (eg, case authority, legislation, scholarly writing). Many students have trouble with this – but you must try not to make statements that are unsupported by either primary or secondary authority. Of course, your conclusion is your own but must be a logical conclusion – one that is consistent with the arguments in the body of the essay.

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7 April: Y returns and reads X’s e-mail. Which of the following statements is most correct?

3.

4.

5.

(A)

A contract is made on 3 April.

(B)

A contract is made on 6 April.

(C)

No contract is made because the revocation is effective on 5 April.

(D)

No contract is made because the revocation is effective on 7 April.

According to the rule in Hadley v Baxendale (1854), for which types of loss can a plaintiff seek compensation in an action for damages? (A)

All losses arising from and caused by the breach of contract.

(B)

Losses arising from special circumstances where such circumstances were made known to the other party at the time the contract was formed.

(C)

All losses arising from the breach of contract that could be considered to be in the usual or normal course of things.

(D)

Those losses that were provided for in the contract provided they are not in the nature of a penalty. (A)

A

(B)

C

(C)

B and C

(D)

B and D

Which of the following is the best description of apparent or ostensible authority? (A)

A has authority to do anything which is incidental to or necessary for the carrying out of acts within A’s actual authority.

(B)

Authority is conferred by P on A in writing.

(C)

Authority is conferred by P on A under seal.

(D)

P creates the appearance of authority by words or conduct but, in fact, that authority does not exist.

Considering the High Court decision in Esanda v Peat Marwick Hungerfords (PMH), which of the following is NOT correct? (A)

Auditors, like PMH, have statutory and contractual duties to act with due care and skill to the company audited.

(B)

PMH owed Esanda a duty of care because it was reasonable to foresee that parties other than Excel might rely on the accounts when deciding whether to provide finance to Excel.

(C)

There is a significant difference between establishing a duty of care owed to a third party and a duty of care owed to a person who requests information.

(D)

The High Court held that a duty was not owed by PMH to Esanda because Esanda was an unknown and unintended user and mere foreseeability that someone like Esanda might rely on the information was not enough.

An Introduction to Studying Law Units

Referencing is crucial: familiarise yourself with the style that is expected and follow it precisely.

5. Reviewing The review stage is a critical part of the writing task – it is the time when you edit, eliminating errors of style (how you have written – grammar, spelling, structure and flow) and substance (what you have written – weaknesses in the arguments, the analysis etc). It is worth spending some time on this because it makes a substantial and tangible difference to your essay (and therefore your marks).

APPROACHING MULTIPLE-CHOICE QUESTIONS 1. Introduction A multiple-choice exam is quite different from either an assignment (research or problem-based) or a problem-based exam. In a multiple choice exam, a student is typically asked to recognise a correct (or incorrect) answer among a set of options that include 3 or 4 wrong answers (called distractors), rather than analysing a hypothetical problem or producing an argumentative essay. Students often consider that multiple-choice exams are easier than the problem-based exams or research essay because the right answer is before their very eyes (somewhere) and, if the worst comes to the worst, the student can, as the joke goes, turn it into a multiple-guess exam. Furthermore, the nature of the multiple-choice exam militates against analytical questions so that many multiple-choice questions consist of basic definitions or simple comprehension questions. Finally, students may prefer this form of question because the stakes on each question are lower – each question will be worth a single mark so there is always the chance of redemption with the very next question. The truth, however, is that multiple-choice exams are difficult. With so many questions, the student must be familiar with the entire course; there is a need to be familiar with case and statutory details and, because the multiple-choice exam is a closed book exam, there is nothing to prompt the student.

2. A sample multiple-choice exam 1.

2.

Which of the following is the best definition of “ratio decidendi”? (A)

It refers to that part of the judgment that was not strictly necessary in order to reach a decision.

(B)

It refers to that part of the judgment that cannot be appealed to a higher court.

(C)

It refers to that part of the judgment that is binding on all courts lower in the same hierarchy when the facts are similar.

(D)

It refers to the decided law.

Consider the following facts: 1 April: X telephones Y and offers to sell his or her piano. They swap postal addresses and e-mail addresses for further communication. 3 April: Y sends a letter of acceptance. 5 April: X sends an e-mail revoking his offer. Y is away and doesn’t have access to his computer for two days. 6 April: X receives Y’s letter of acceptance.

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6.

7.

8.

9.

Considering Thornton v Shoe Lane Parking Co Ltd [1971] 2 QB 163, which one of the following is NOT true? (A)

The court decided that Shoe Lane could not rely on the exclusion clause on the ticket/signs inside the car park because it had not done what was reasonably necessary to bring the exclusion clause to the attention of the plaintiff.

(B)

The exclusion clause on the post outside the carpark entrance was incorporated into the contract but was not broad enough to protect the defendant in relation to the personal injury suffered by Thornton.

(C)

In injuring Thornton so carelessly, Shoe Lane had committed a fundamental breach of the contract and no exclusion can protect against a fundamental breach.

(D)

The contract was formed when Thornton “accepted” Shoe Lane’s “offer” by taking the ticket from the machine and thereafter it was too late to bring the exclusion to Thornton’s notice.

Felicity and Julie run a chain of women’s fashion clothing stores in partnership. Their agreement prohibits either partner spending more than $10,000 of business funds without the consent of the other. The business has been experiencing financial difficulties, and so Julie decided to buy a new line of exclusive cocktail dresses from Swish Manufacturing (in the hope of improving sales). Without Felicity’s knowledge, she ordered $200,000 of dresses. The strategy was unsuccessful and the business is now unable to pay the debt. Who is liable for the $200,000 debt to Swish Manufacturing? (Swish was unaware of the cap on spending contained in the partnership agreement between Felicity and Julie.) (A)

Julie is solely liable for the debt.

(B)

Felicity is solely liable for the debt.

(C)

Julie and Felicity are jointly liable for the debt.

(D)

Julie and Felicity are jointly and severally liable for the debt.

In Leaf v International Galleries [1950] 2 KB 86: (A)

As the painting was a forgery of a John Constable painting, the contract was voidable at Leaf’s option.

(B)

The mistake that was made was a mutual mistake and therefore the parties were at cross-purposes so there could be no binding contract.

(C)

As the misrepresentation concerned one of the most important aspects of the painting – that the artist was John Constable – the contract could be rescinded by Leaf.

(D)

Leaf was unable to rescind the contract because rescission for a common mistake is not available for a mistake about the quality of the subject matter).

Henny decides to sell his restaurant, El Bambino. It is licensed to seat 84 people at 26 tables. However, H, in breach of the licence, has always placed 120 chairs at 39 tables. The restaurant was sold to Colin, whose solicitor also did not enquire about the terms of the license. During the negotiations and during the four-week trial period, Colin did not enquire about the license and Henny did not disclose any information about it. After the settlement Colin was notified by the Licensing Court that El Bambino was only licensed

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to seat 84 patrons. He sued Henny for misleading or deceptive conduct under s 18 of the Australian Consumer Law. Which of the following is correct?

10.

11.

12.

(A)

Henny is under no duty to disclose information unless asked by the prospective buyer.

(B)

Henny is only under a duty to disclose information if he is an expert in the area and would be expected by a reasonable person to disclose any relevant information.

(C)

For conduct to be misleading or deceptive there must be some action or representation on the part of the defendant: mere silence is not “conduct” under s 18.

(D)

Silence or failure to disclose can be misleading or deceptive if, in all the circumstances, there is a reasonable expectation that disclosure would be made.

Which of the following statements about the rights of partners in a partnership (subject to agreement to the contrary) is NOT true? (A)

A majority of the partners can expel a partner.

(B)

The consent of all existing partners is needed to introduce new partners.

(C)

Partners may be both jointly and severally liable for the acts of a partner.

(D)

Any partner may access the partnership books in order to inspect and copy them.

In Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225, where the plaintiff property developers made inquiries of their local council, which one is correct: (A)

The plaintiffs were not owed a duty of care by the Council as the Council did not profess to possess skill or competence in that area.

(B)

The court found no distinction between the giving of advice and merely providing information.

(C)

As the loss was pure economic loss, it was not recoverable by the plaintiffs without evidence of the loss being reasonably forseeable.

(D)

The Council could not have known that the plaintiffs intended to rely on the information or advice it provided.

Abe lives on a large cattle station in the Northern Territory. In order to take his children to school (200 kms away) and to do other personal and domestic tasks, he buys a helicopter from Whirlybirds Pty Ltd. The helicopter costs $75,000. Which of the following is not correct? (A)

For the purposes of the s 54 consumer guarantee (acceptable quality) in the Australian Consumer Law, Abe would not be a “consumer”.

(B)

For the purposes of the unfair contract terms provisions of the Australian Consumer Law, Abe would be a “consumer”.

(C)

A term in the contract that clearly indicated that the seller was not bound by the consumer guarantees provided in the Australian Consumer Law would be valid, provided Abe consented.

An Introduction to Studying Law Units

(D) 13.

14.

15.

16.

17.

18.

A term in the contract that is not reasonably necessary to protect the interests of the seller would be invalid.

The legislative powers listed in s 51 of the Australian Constitution: (A)

may only be relied upon by the federal parliament.

(B)

may be relied upon by the states but are subject to appeal in the High Court.

(C)

are concurrent powers able to be used by the states and federal parliaments.

(D)

may be relied upon by the federal parliament as long as there is no conflict with the states.

A breach of a warranty entitles: (A)

The innocent party to sue for all damages that were caused by the breach.

(B)

The innocent party to terminate where the damage is serious.

(C)

The party in breach to remedy the breach and pay damages for any loss suffered.

(D)

The innocent party to sue for damages for losses that were caused by the breach and were reasonably foreseeable.

Which of the following is NOT true? In Taylor v Johnson, the High Court said: (A)

A contract affected by a unilateral mistake is void.

(B)

A contract affected by a unilateral mistake is voidable only.

(C)

There must be an element of unconscionable conduct before a court would declare a contract voidable because of a unilateral mistake.

(D)

The purchaser had behaved unconscionably in endeavouring to ensure the vendor remained unaware of the mistake.

To succeed in a claim for damages under s 18 of the ACL, which of the following is NOT true: (A)

The misleading conduct must have caused the damage.

(B)

There must be reliance on the misleading conduct.

(C)

The damage must be pure economic loss.

(D)

The plaintiff need not show that the defendant intended to mislead.

Alex the business broker fraudulently misrepresents that a business is worth $20,000. In fact, it is worth $10,000. Bob pays $12,000 for it. If he were successful in a claim under s 18 of the ACL, he would be entitled to receive: (A)

$6000

(B)

$14,000

(C)

$8,000

(D)

$20,000

Which of the following is NOT true? Where there is a “major failure” of a consumer guarantee under the ACL: (A)

The consumer cannot get a refund but must accept a replacement of the goods from the supplier.

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19.

20.

21.

22.

23.

(B)

Where the failure can be fixed the consumer can request that the supplier remedy the failure within a reasonable time.

(C)

It must be shown that a reasonable consumer, fully acquainted with the facts, would not have bought the goods.

(D)

The goods need not be valued at under $40,000.

An agent’s authority can be: (A)

Nominal

(B)

Express actual

(C)

Implied actual

(D)

Apparent

Which of the following is NOT true? To be guilty of insolvent trading under s 588 of the Corporations Act, it must be proven that: (A)

The defendant was a director at the time when it incurs a debt.

(B)

The company is insolvent at that time or becomes insolvent by incurring the debt.

(C)

The director must have known that the company was insolvent or would become so when it took on the debt.

(D)

A reasonable person would have been aware that the company was insolvent.

Which of the following is the least likely to be regarded as an invitation to treat? (A)

An auctioneer’s call for bids at a house auction.

(B)

Goods on a supermarket shelf.

(C)

Goods advertised in a catalogue.

(D)

Apple Air laptops that are advertised as being “for sale for $19.00 to the first sixty people through the doors at the Apple shop on Boxing Day 2014”.

Which of the following is NOT correct in relation to an action in negligence? (A)

In Wagon Mound No 1, the loss was foreseeable because a reasonable person would have expected the wharf to be damaged in the particular circumstances.

(B)

If damages are too remote, they will not be recoverable.

(C)

The remoteness test will be more easily satisfied where the damage is of the same type or kind as the damage that has occurred in the case at hand.

(D)

Damages that are reasonably foreseeable are not too remote.

In which case did the High Court of Australia decide that contract damages are recoverable for disappointment or distress provided the object of the contract itself was to provide pleasure and enjoyment: (A)

Hadley v Baxendale (1854).

(B)

Waltons Stores v Maher (1983).

(C)

Baltic Shipping v Dillon (1993).

(D)

Jarvis v Swans Tours (1973).

An Introduction to Studying Law Units

24.

25.

26.

27.

28.

29.

Which of the following would NOT overcome a defect in an agent’s actual authority: (A)

Implied actual authority.

(B)

Apparent authority.

(C)

A properly executed deed.

(D)

Ratification.

Bob the builder signs a construction contract with the City of Manningham to build a library. A clause in the contract states: “In the event that Bob does not complete on the due date, he will pay a sum of $50,000 to the City”. Bob fails to complete on time. Which of the following would give him the best chance to avoid paying the $50,000? (A)

The $50,000 are unliquidated damages.

(B)

The $50,000 are liquidated damages.

(C)

The $50,000 is a penalty clause.

(D)

The $50,000 is an unconscionable amount considering the relative bargaining power of the parties.

In Mabo v State of Queensland, the High Court: (A)

Recognised a form of native title to land based on a concept of continuous possession.

(B)

Recognised a form of native title that depended on an overriding concept of fairness and justice.

(C)

Recognised a form of native title based on a concept of prior rights.

(D)

Recognised a form of native title that was limited to the Miriam Islands.

Which of the following is NOT true? (A)

A company can sue and be sued in its own name.

(B)

Directors, but not members/shareholders, are personally liable for the debts of the company.

(C)

Directors may be personally liable for a breach of the insolvent trading provisions of the Corporations Act.

(D)

Section 184 applies where the director has committed the ss 181–183 offences recklessly or dishonestly.

Which of the following is NOT a requirement of a partnership? (A)

The partners aim to make a profit.

(B)

There is a mutuality of obligations.

(C)

They carry on a business.

(D)

They each contribute equally to partnership property.

Which of the following statements about the consumer guarantees provisions in the ACL is NOT true? (A)

The guarantees are non-excludable.

(B)

The guarantee provisions only apply to “consumers” as defined in s 3.

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30.

31.

32.

(C)

The definition of “consumers” in s 3 is limited to purchases of goods or services under $40,000.

(D)

The remedies available for breach of the guarantee as to acceptable quality depend on whether the breach constitutes a major failure.

Which of the following statements is NOT true? (A)

Unless the partnership agreement provides otherwise, each partner has a right to participate in management.

(B)

The maximum number of partners in a partnership is usually 20.

(C)

Unless the partnership agreement says otherwise, a partnership of between 3 and 20 would continue on the death of a partner.

(D)

Partners are both agents and principals of one another.

Which of the following statements is correct? In Associated Newspapers Ltd v Bancks (1951): (A)

The court held that the term was not a condition but a warranty, which meant that Bancks was entitled to damages only.

(B)

The court decided that the contract to draw the cartoon character “Ginger Meggs” was void for uncertainty as there was no specification as to how many drawings would be produced each year.

(C)

The court decided that the promise to publish the cartoon on page one of the newspaper was a condition of the contract. Bancks could therefore terminate the agreement.

(D)

The court decided that the promise to publish the cartoon on page one was an innominate term which meant that the court had to assess the impact of the breach.

Where a person gives advice, that advice is relied upon and the advice is incorrect, the person giving the advice may be liable in negligence. Which of the following is NOT correct? (A)

The “special relationship” described in Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) has been accepted as the test for determining the existence of a duty of care with respect to negligent misstatements.

(B)

The duty of care only arises with respect to the giving of advice in a serious commercial context. It does not arise where only information is provided.

(C)

The duty of care is more difficult to establish where the adviser provides negligent advice to a client and a third person relies on that advice and as a result suffers reasonably foreseeable loss.

(D)

Once an adviser has been found to have breached the duty of care s 59 of the Wrongs Act (Vic) offers a complete defence if the adviser can prove that he acted in a manner that was widely (but not universally) accepted by peer professional opinion as competent professional advice.

PART 1: INTRODUCTION

Chapter 1: An Introduction to Law and the Australian Legal System

4

Part 1: Introduction

The nature and concept of law [1.20] We begin our study of business law by briefly considering the nature of “law” itself. What is “law”? Since the ancient Greeks in the Classical period, almost 2500 years ago, legal writers and philosophers have debated this question. Their responses would be enough to fill this book and would merely confirm that there is not a simple answer. When we refer to “law”, we may refer to “natural law” (a universal understanding of what was right and wrong, fair and unfair, just and unjust — one that underpins universal human rights law today), “religious law” (codes of conduct often recorded in holy texts that are followed by believers), “customary law” (rules of conduct widely observed as part of the tradition of a particular race or culture) and “positive law” (those rules that the government recognises as “laws” because they have been properly made). It is this positivist definition of “law” that we use in this book — “law” as the body of rules of conduct, made by parliaments and/or the courts, that regulates or controls the behavior or relations between individuals or groups. Accepting this “positivist” definition of “law”, we can then ask what is the role of law? What is the “law” supposed to do? Generally speaking, the role of law is to regulate the way we live: laws inform us what we may do and, if we do, how we should do it (eg, make contracts, own and transfer property, get married or divorced, adopt children, register a company), what we cannot do without incurring sanctions (break contracts, take someone else’s property without consent, kill or injure another person without lawful excuse, marry more than one person at a time, practice law or medicine or accounting without a licence or certificate), and what we must do, if we wish to avoid sanctions (pay our taxes, educate our children, vote in general elections). In making laws that the community endorses (or, at least, respects) as being the product of a fair and proper process, untainted by corruption or improper interference, the law and the legal system facilitates peace, order and social cohesion. This is reinforced to the extent that it provides fair, prompt and equal access to justice when a dispute or violation of the law occurs, and adequate sanctions and remedies designed to properly punish offenders and/or compensate victims. One essential feature of a democratic, law-abiding, cohesive and functioning society is the adherence to the “rule of law”. This is the idea that no person or institution — not the Crown, not the Prime Minister or Cabinet Ministers, not Members of Parliament, not the judiciary — is above the law. As Thomas Fuller a British churchman and historian famously put in the early 17th century: “Be ye so ever high, still the law is above you”. The World Justice Project, an independent organisation working to advance the rule of law around the world, has defined the rule of law as a system in which the following four universal principles are upheld: 1.

The government and its officials, including Heads of Government and Ministers, as well as individuals and private entities, are accountable under the law.

2.

The laws are clear, publicised, stable and just and applied evenly.

3.

The process by which the laws are enacted, administered and enforced is accessible, fair, and efficient.

4.

Justice is delivered in a timely manner by competent, ethical, and, above all, judges who are free from interference, particularly from government.

The “rule of law” should not be considered as an abstract concept: each of the above principles has particular relevance to commercial life. The truth is that without adherence to the rule of law, commercial life becomes dysfunctional. Systemic bribery and corruption in a society, particularly in its commercial sector, erodes the certainty and stability, confidence and trust that is essential for a flourishing commercial environment. Where the rule of law exists, proper processes are followed, laws and regulations are

chapter 1 An Introduction to Law and the Australian Legal System

accessible and transparent, the bureaucracy implements those laws and regulations in a fair and efficient manner and, in the event of a dispute or infraction, the wheels of justice turn equally for all parties.

The Australian constitutional system Pre-European history [1.30] Aboriginal and Torres Strait Islander peoples have inhabited most areas of the Australian continent for approximately 50,000 years. They spoke one or more of hundreds of separate languages and dialects, and their lives and cultural traditions differed from region to region. They each occupied and hunted a recognised tract of land where sacred sites were protected, and boundaries, designed in the Dreamtime, were crossed only by invitation. Their complex social systems and highly developed traditions reflected a deep connection with the land. They had their own laws — a customary system — with “laws” passed down orally from one generation to the next. The classification of this body of customary rules, values and traditions as “law” has caused difficulty, in part because most systems of customary laws include customs or rules that may appear to be more like social or cultural norms or religious beliefs (as well as other more conventional rules and procedures that would be regarded as “laws”). It is significant that in Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141, one of the first cases to consider the status of customary law, Blackburn J had no difficulty in treating the institutions and traditions of the indigenous plaintiffs as a system of law. It had been argued (by positivist thinkers) that for a legal system to exist, there must be a definable community of people and some recognised authority that gave the “law” a capacity to be enforced. Justice Blackburn disagreed: Where, it was asked (by the defendant company), was there any indication of authority over all the clans, and where, beyond the influence of the elders, was the authority within each clan? Feuds were admitted to be common: did not this show that law was absent? None of these objections is in my opinion convincing...The specialization of the functions performed by the officers of an advanced society is no proof that the same functions are not performed in primitive societies, though by less specially responsible officers. Law may be more effective in some fields to reduce conflict than in others, as evidently it is more effective among the plaintiff clans in the field of land relationships than in some other fields ... the same is patently true of our system of law. Not every rule of law in an advanced society has its sanction.

European colonisation [1.40] The first recorded European contact with Australia was in March 1606, when a Dutch explorer arrived at the coastline of the continent. Over the next 200 years, European explorers and traders continued to explore and chart the coastline of “New Holland”. It was not until 1770, when another Englishman, Captain James Cook claimed it for King George III of England. Cook reached the southern coast of New South Wales on 20 April 1770. He sailed north, landing at Botany Bay one week later, before continuing to chart the Australian coast all the way north to the tip of Queensland. There, just before sunset on Wednesday 22 August 1770, he declared the entire eastern half of New Holland a British possession. By 1786, Britain had decided on a use for its far-flung colony. At home, it had lost the US as a potential dumping ground and with its own prisons, hulks and poor houses full, Britain was desperate to find a new destination for its convicts. It decided to use its new colony as a penal colony and, by January of the following year, the First Fleet of 11 ships under the command of Arthur Philip, set sail, carrying about 1,500 people — half of them convicts. The fleet arrived in Botany Bay between the 18th and 20th of

5

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Part 1: Introduction

In Australia, the Commonwealth Constitution (s 61) provides that the executive power of the Commonwealth is vested in the Queen and exercisable by the Governor-General. Accordingly, the executive arm of government in Australia is referred to as “the Crown”. The same term is used to describe the State executive governments.

The constitutional development of the Australian States [1.110] Although the three separate branches of government (legislative, executive and judicial) are clearly apparent today, such a separation of powers was only gradually achieved in the Australian colonies (as the States were called prior to Federation in 1901). In broad terms, the basic pattern of legal development in each of the Australian colonies was to initially vest authority in the Governor, then as the colony developed, to set up a Legislative Council consisting of persons nominated by the Governor to advise him in the performance of his official functions. The next stage was the introduction of representative government, where the members of the legislature were elected by the colonists rather than nominated by the Governor. The final stage was the introduction of responsible government, under which the executive branch of government was made responsible to the legislature.

The Federation movement [1.120] The mid-19th century onwards saw the constitutional development of Australia into six independent colonies, each with their own system of government and legal system. In the last decade of the 19th century, the question of federation of the Australian colonies became an increasingly real issue as it was gradually realised that a federal body could deal more effectively with issues such as national defence and intercolonial customs barriers. A convention of representatives from each of the colonies to consider a scheme for a federal Constitution was held in 1891. A second convention was held in 1897 and 1898. The product of these conventions was the drafting of the Commonwealth Constitution Bill. This was ultimately accepted by the majority of electors in each of the colonies (with the exception of Western Australia) at a referendum held in 1899. The Constitution Bill was enacted by the Imperial Parliament in 1900 as the Commonwealth of Australia Constitution Act 1900 (IMP). At this point, a majority of electors in Western Australia also voted in favour of joining the federation. Pursuant to royal proclamation, the Commonwealth of Australia came into being on 1 January 1901.

The Commonwealth Constitution [1.130] The UK Parliament passed the Constitution Bill in 1900 in the Commonwealth of Australia Constitution Act 1900 and the Commonwealth of Australia came into being on 1 January 1901. The Australian Constitution is a very pragmatic document. It created a federal Parliament, called the Commonwealth Parliament, consisting of the Queen, the Senate and the House of Representatives: Constitution, s 1. Provision was also made for a Governor-General to be the Queen’s representative in Australia: s 61. The Constitution gave the Commonwealth Parliament certain defined legislative powers but left the Australian States (as the former colonies were now called) as self-governing political units each with its own Constitution, Parliament, and courts: Commonwealth of Australia Constitution Act 1900, ss 51, 106, 107.

chapter 1 An Introduction to Law and the Australian Legal System

There is no grandiloquent preamble in the Australian Constitution and no recognition or acknowledgement of Aboriginal and Torres Strait Islander peoples. 3 Far from it. The first words of the Australian Constitution read as follows: “WHEREAS the people of New South Wales, Victoria, South Australia, Queensland, and Tasmania, humbly relying on the blessing of Almighty God, have agreed to unite in one indissoluble Federal Commonwealth under the Crown of the United Kingdom of Great Britain and Ireland, and under the Constitution hereby established: … Be it therefore enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows: …” According to Lowitja O’Donoghue, former Chair of the Aboriginal and Torres Strait Islander Commission: “The Constitution says very little about what it is to be Australian. It says practically nothing about how we find ourselves here — save being an amalgamation of former colonies. It says nothing of how we should behave towards each other as human beings and as Australians.” 4 It is bland and functional in comparison to the famous “We the people… ”preamble to the US Constitution (1789): “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.” There is nothing to match the idealistic Preamble to the Indian Constitution (1947): WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure all its citizens: JUSTICE, social, economic and political; LIBERTY of thought , expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all; FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation; IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day of November, 1949, do HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION. Or the healing and aspirational rhetoric in the Preamble to the South African Constitution (1996): We, the people of South Africa, Recognise the injustices of our past; Honour those who suffered for justice and freedom in our land; Respect those who have worked to build and develop our country; and Believe that South Africa belongs to all who live in it, united in our diversity. We therefore, through our freely elected representatives, adopt this Constitution as the supreme law of the Republic so as to — Heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights; Lay the foundations for a democratic and open society in which government is based on the will of the people and every citizen is equally protected by law; 3

4

Although the Australian Government has subsequently honoured Aboriginal and Torres Strait Islander peoples as the “the oldest continuing cultures in human history” in the National Apology to the Stolen Generations, Australia’s First Peoples are not yet mentioned in the nation’s founding document. L O’Donoghue in F Brennan, Securing Bountiful Place for Aborigines and Torres Strait Islanders in a Modern Free and Tolerant Australia, (Constitutional Centenary Foundation, 1994), p 18.

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chapter 1 An Introduction to Law and the Australian Legal System

The executive [1.140] Under the Constitution, the executive power of the Commonwealth is vested in the Queen and is exercisable by the Governor-General as the Queen’s representative: Commonwealth of Australia Constution Act 1900, s 61. The Governor-General has an Executive Council (comprising two or three government Ministers) to advise on matters concerning the government of the country: s 62. The Governor-General is also empowered to appoint Ministers to administer the Commonwealth departments of state. The Constitution further provides that no person can be a Minister of state unless he or she is a member of the Senate or House of Representatives: s 64. In other words, a government Minister must be a Member of Parliament. By convention, the Governor-General invites the leader of the political party having the majority of members in the House of Representatives to form a government. The leader (or in the case of the Labor Party, its Caucus) selects the members who are to be Ministers and they are then appointed by the Governor-General. The Prime Minister allocates portfolios to the Ministers so appointed, that is, each Minister becomes responsible for one or more government departments. An important constituent of modern parliamentary government is the Cabinet. The Cabinet comprises those members of the ministry responsible for determining the policy and objectives of the government. The government is made responsible to the electorate through Parliament in that: (a)

Ministers must be Members of Parliament and accordingly may be questioned in Parliament about their running of the country;

(b)

where the government loses the confidence of Parliament it must resign; and

(c)

an individual Minister who loses the confidence of Parliament must resign.

[1.150] As a matter of convention the Governor-General will almost invariably act as advised by the Prime Minister. However, there are certain situations where the Governor-General may exercise her or his powers, for example to dismiss a government, without or against the advice of Ministers, such as where the government of the day has lost the confidence of Parliament but refuses to resign, or to prevent an illegality occurring. It is constitutionally permissible for the Parliament to delegate part of its legislative power to the Executive: Attorney-General (Cth) v The Queen; Ex parte Boilermakers Society of Australia (1957) 95 CLR 529 at 83-84, 86, 101, 117. An example of such a law is where a statute confers upon the Governor-General the power to make regulations for specified purposes.

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chapter 1 An Introduction to Law and the Australian Legal System

(i)

copyright, patents, designs and trade marks (s 51(xviii));

(j)

foreign corporations and trading or financial corporations (s 51(xx));

(k)

external affairs (s 51(xxix)); and

(l)

conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State: s 51(xxxv).

In addition to its concurrent powers, the Commonwealth Parliament also has a limited number of exclusive powers (or matters upon which it alone can legislate to the exclusion of the State Parliaments). These exclusive powers include the power to impose customs and excise duties: s 90. Power to make laws on all other matters resides exclusively in the State Parliaments. These are called residual powers. In this way the States are responsible for important areas of law-making including education and health, water policy, transport tourism, police and the courts. However, as the Federal Government controls the purse-strings a significant measure of control is often ceded to the Federal Parliament.

The judiciary [1.180] The Commonwealth Constitution provided for the setting up of the High Court of Australia: Constitution, Ch III, ss 71 – 80. The principal functions of the High Court are to interpret the Constitution, act as an appellate court from other courts exercising federal jurisdiction, hear appeals from the Supreme Courts of the States, and in certain cases act as a court of original jurisdiction. The High Court occupies a unique position of considerable constitutional importance. As the court responsible for interpreting the Constitution, the High Court determines the constitutionality of legislation (that is, whether a particular Commonwealth or State statute was a valid exercise of legislative power). The High Court is the highest court of appeal from decisions of the highest State and Territory courts and the Federal Court. The Court’s judgments are authoritative statements of law which constitute binding precedents for all other Australian courts. The binding nature of decisions of the High Court on all other Australian courts enables the maintenance of the unity of the common law across Australia.

Amending the Constitution [1.190] A referendum is a vote by Australians over the age of 18 to change the Constitution. Section 128 of the Constitution provides the mechanism for amending the Constitution. It is a complex process that involves the Parliament and the electorate. Once both Houses of Parliament have passed the proposed amendment to the Constitution, there is a referendum of all eligible voters who are asked to vote “yes”” or “no”. If the proposal is approved of by a majority of voters in a majority of States, the Constitution is amended. It is difficult to amend the Constitution: of the 44 referenda put to the people since 1901 only eight have passed. The most significant amendment to the Constitution occurred in the 1967 referendum when over 90% of Australian voters agreed to change s 51(xxvi) of the Constitution (Cth) to give the federal parliament the power to make laws in relation to Aboriginal and Torres Strait Islander people (previously people of “the Aboriginal race in any State” were excluded) and to allow for Aboriginal and Torres Strait Islander people to be fully included in the census (formerly, indigenous people had not been included in the census for the purposes of Commonwealth funding grants to the states or territories. From 1967, indigenous people were counted in the census and included in base figures for Commonwealth funding granted to the states and territories on a per capita basis).

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chapter 1 An Introduction to Law and the Australian Legal System

In the federal arena alone there are now over 1,400 statutes and 600 regulations. Each year the number of Acts passed by the Federal Parliament is around 180. In the middle of the 20th century the figure was around 60 per year. 6 In addition State legislators are active law-makers. Parliament passes Bills which, on receipt of the royal assent, are called “statutes”, or Acts of Parliament. These statutes become part of the body of law known as “statute law”. Statutes may: (a)

bring new laws into existence;

(b)

repeal old laws created either by earlier statutes, or by decisions of the courts, which have ceased to be appropriate to present social needs; or

(c)

codify the law, that is, include not only previous statutory provisions but also common law principles derived from decisions of the courts.

Two of the best known examples of codifying statutes are the United Kingdom Sale of Goods Act 1893 and the Bills of Exchange Act 1882 (UK) (both Acts being later adopted in Australia). These Acts gathered together in statutory form principles based originally on the customs of merchants as developed by numerous decisions of the common law courts. Mention should also be made of what is known as a “consolidating statute”, the object of which is to assemble and re-enact a number of previous statutory provisions. For example, the legislation on a particular subject may have been subject to numerous amendments and it becomes desirable to bring them together into one statute, or a “consolidating Act”.

6

http://www.aph.gov.au/Parliamentary_Business/Statistics.

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chapter 1 An Introduction to Law and the Australian Legal System

[1.220] Where it is intended to make a new law on a particular matter or amend an existing law, a Bill will be drafted, usually by parliamentary counsel. Bills may be introduced in either House but will normally be introduced into the particular House of Parliament in which the Minister in charge of the Bill sits. Most Bills tend to be introduced in the Lower House, that is, the House of Representatives of the Commonwealth Parliament, or the Legislative Assembly in the case of the State Parliaments. After introduction of a Bill to the House, it will have to pass what are called three readings. The first reading is generally a formality involving stating the name of the Bill and moving that it be read a first time. If this is agreed to, the Bill will be printed and distributed to members of the House. The second reading of the Bill involves the Minister moving that the Bill be read a second time and the members will then debate the broad principles of the Bill. On the passing of the motion for a second reading, the Bill then moves on to the next stage, known as the committee stage. The committee may be a select or standing committee of the House, or the whole House sitting as a committee. At this point each clause of the Bill may be debated and amendments made; in practice only the controversial parts of the Bill will be objected to and debated. Once all the clauses of the Bill have been considered the Bill, if approved, is reported to the House as having passed the committee stage. A motion is then proposed that the Bill be read a third time. The third reading simply involves the House voting on the Bill as it stands after the committee stage. Once passed, the Bill is then sent to the other House, usually the Upper House (that is, the Senate of the Commonwealth Parliament or the Legislative Council in the states other than Queensland), and the same process is repeated. If the Bill is passed by the Upper House unamended, it is sent to the Governor-General of the Commonwealth, or the Governor of the State, for assent. After assent the Bill becomes an Act of Parliament. An Act which is to be proclaimed to come into operation has no legal effect until such date has been proclaimed and has arrived. The Act will commence from the date specified, or it may provide that it is to operate from a date to be proclaimed by the Governor-General or Governor and published in the Government Gazette. Where a Commonwealth Act is silent as to its commencement, it commences 28 days after the Governor-General’s assent was given. 7 Problems may arise where an Upper House refuses to pass a Bill that has been passed by a Lower House. With respect to the Commonwealth Parliament, this situation is provided for in s 57 of the Constitution, which sets down the following procedure for resolving such “deadlock”: (a)

If the Senate rejects a Bill, fails to pass it or passes it with amendments unacceptable to the House of Representatives, then after three months the Bill can be reintroduced in the House of Representatives.

(b)

If the House of Representatives again passes the Bill but the Senate still rejects it, etc, then the Governor-General may dissolve both Houses (known as a “double dissolution”) and call an election.

(c)

If, after the election, the House of Representatives passes the Bill and the Senate still rejects it, etc, the Governor-General may convene a joint sitting of both Houses and if there is a majority vote in favour of the Bill then it goes to the Governor-General for assent.

7

Acts Interpretation Act 1901 (Cth), s 3A(2).

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Parts of a statute Example: the Corporations Act 2001 [1.230] The various parts of a statute are illustrated here with reference to the Corporations Act 2001 (Cth) (Corps Act) or the Australian Consumer Law which is a Schedule to the Competition and Consumer Act 2010 (Cth). We discuss the Corps Act and the duties and liabilities of the directors and officers of a company in Chapter 18. We have used s 180 of the Corps Act as an example. Section 180 imposes a duty on directors and officers of companies to take reasonable care and act with reasonable diligence. We will also discuss similar concepts of reasonable care when considering the tort of negligence in Chapter 14. The following examples are drawn from the Corporations Act 2001 (Cth).

Act number [1.240] “Act No 50 of 2001” Each statute enacted in a year is assigned an Act Number. This Act was the 50th statute enacted by the Commonwealth Parliament in the year 2001.

Long title [1.250] “An Act to make provision in relation to corporations and financial products and services, and for other purposes.” The long title is a broad statement of the subject matter of the Act. It is a part of the statute.

Short title [1.260] s 1. “This Act may be cited as the Corporations Act 2001.” The short title provides a more concise statement of the subject of the Act than is provided by the long title. Acts are customarily cited by their short title.

Commencement date [1.270] s 2. “This Act commences on a day to be fixed by Proclamation.” This provision states the date on which the Act enters into force. In this example, that date is to be fixed by Proclamation of the Governor-General, that is, on the advice of the executive government.

Object or purpose [1.280] The Corporations Act 2001 does not contain an objects clause. However, many modern statutes contain a statement of the objects which the Act seeks to achieve. For example, s 2 of the Competition and Consumer Act 2010 (Cth) states: “The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection”.

Definitions [1.290] The meaning of many words in a statute are not self-evident. Most statutes contain a provision defining certain words the meaning of which may be ambiguous or which will have a specialist or technical meaning when used in the Act. This provision may be entitled “definitions”, “interpretation” or “dictionary”.

chapter 1 An Introduction to Law and the Australian Legal System

Sometimes a statute may have a number of definition sections, with particular definition provisions applying only to specific parts of the Act. In some statutes, definitions are included in a separate schedule to the Act. For example, see s 3 of the Australian Consumer Law: 3 Meaning of consumer Acquiring goods as a consumer (1) A person is taken to have acquired particular goods as a consumer if, and only if: (a) the amount paid or payable for the goods, as worked out under subsections (4) to (9), did not exceed: (i)

$40,000; or

(ii)

if a greater amount is prescribed for the purposes of this paragraph—that greater amount; or

(b)

the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or

(c)

the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.

Sections [1.300] 57 Classes of shares or interests in managed investment schemes (1) The shares in a body corporate, if not divided into 2 or more classes, constitute a class. (2)

If the interests in a managed investment scheme to which an undertaking relates are not divided into 2 or more classes, they constitute a class.

Each statute is divided into consecutively numbered sections. A section number is abbreviated by the letter “s”, multiple section numbers are abbreviated by the letters “ss”. Individual sections of an Act are often further subdivided into subsections. In the example above, the section number is s 57. This section is subdivided into two subsections, abbreviated as s 57(1) and s 57(2). Within the section these subsections are identified by the numbers “(1)” and “(2)”.

Chapters, Parts or Divisions [1.320] An Act with a large number of provisions is generally divided into Chapters, Parts and Divisions, each composed of a number of individual provisions. Each Chapter, Part and Division has an individual heading which describes its subject matter. The division of the Act into Chapters, Parts or Divisions assists comprehension of the scheme of the Act.

Schedules: [1.330] Matters of detail are often incorporated into one or more Schedules that appear at the end of the Act. The Australian Consumer Law is contained in Schedule 2 of the Competition and Consumer Act 2010.

Interpretation of statutes [1.340] All statutes consist of words, which, as we all know, may mean different things to different people. There are frequently conflicting views as to the precise meaning of a particular clause or section of an Act that may ultimately have to be resolved by the courts. The decisions that the courts make in relation to the meaning will, consistent with the doctrine of precedent, bind or guide courts in the future.

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Example Section 3 of the Immigration Restriction Act 1901 – one of the first pieces of legislation passed by the first Federal Parliament was an Act that established the racist White Australia Policy. It provided: The immigration into the Commonwealth of (certain) persons is prohibited: (a) any person who fails to pass the dictation test: that is to say, who when an officer dictates to him not less than fifty words in any prescribed language, fails to write them out in the presence of the officer. In Potter v Minahan (1908) 7 CLR 277 the respondent had entered into Australia from China. His mother was British, his father was Chinese. He had lived in Victoria until he was five when his father left Australia with him and returned to China. Many years later, after his father died, he decided to return to Australia. When given the dictation test he could not do it. The Immigration Department then prevented him from entering Australia. The issue to be decided by the court was whether he was an “immigrant”. Minahan argued he was not an ‘immigrant’ within the meaning of s 3. He argued that an immigrant is one who is leaving an old home to settle in a new one. He argued he was “returning home” after a considerable stay in China. He argued his “domicile” was always Victoria, never China. The High Court agreed and, in so deciding, interpreted the word “immigrant” in a way that did not include people of British parentage who had physically left Australia but had continued to call Australia “home”. There are a number of aids to assist a court when it is called upon to interpret a statute. The principal ones are the Commonwealth and State Acts Interpretation Acts, and certain rules and maxims of statutory interpretation developed by the courts.

The Acts Interpretation Acts [1.350] The Commonwealth, State and Territory Parliaments have passed Acts Interpretation Acts 8 that set down some basic rules or presumptions of interpretation, define some common terms, and deal with a number of other matters relating to form, content and operation of statutes. For example, most of the Acts have provisions stating that the male gender includes the female gender, singular includes plural and vice versa, and defining commonly occurring terms such as “document”, “person”, “Minister”, “service by post” and so on.

A “purposive” construction [1.360] The Commonwealth Acts Interpretation Act 1901 (Cth) contains a provision which, in effect, directs a court to have regard to the objects and purposes of an Act in interpreting its provisions. Thus, s 15AA provides: “In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.” There are purposive construction provisions in all of the State Acts Interpretation Acts. 9 It has been said that the corresponding provision in the New South Wales Interpretation Act 1987 (NSW), s 33 requires a 8

9

Acts Interpretation Act 1901 (Cth); Interpretation Act 1987 (NSW); Interpretation of Legislation Act 1984 (Vic); Acts Interpretation Act 1954 (Qld); Acts Interpretation Act 1915 (SA); Interpretation Act 1984 (WA); Acts Interpretation Act 1983 (Tas); Legislation Act 2001 (ACT); Interpretation Act 1978 (NT). Interpretation Act 1987 (NSW), s 33; Interpretation of Legislation Act 1984 (Vic), s 35; Acts Interpretation Act 1954 (Qld), s 15AA; Acts Interpretation Act 1915 (SA), s 22; Interpretation Act 1984 (WA), s 18; Acts Interpretation Act 1931 (Tas), s 8A; Legislation Act 2001 (ACT), s 139; Interpretation Act 1978 (NT), s 62A.

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“purposive” approach to statutory interpretation, that is, giving meaning to the words to effect their intended purpose, rather than a strict or literalist approach: National Employers Mutual General Insurance Association Ltd v Manufacturers Mutual Insurance Ltd (1989) 17 NSWLR 223 at 225 per Kirby P. In applying a “purposive” construction: “[T]he grammatical meaning of a provision is not to be taken to represent Parliament’s intention as to its meaning when the context or the purpose of the provision raises a real doubt about the applicability of the grammatical meaning. If purpose or context does raise a real doubt as to whether Parliament intended the grammatical meaning to apply, a court is entitled to depart from that meaning. Moreover, if the grammatical meaning gives rise to injustice or anomaly, it may strengthen the conclusion that the Parliament did not intend the grammatical or literal meaning to apply”: Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 at 302 per McHugh JA. For example, the Queensland Court of Appeal invoked a common law maxim of interpretation in adopting an interpretation that limited the operation of the broad words of a statute. It was unlikely that Parliament intended that the provision should allow a person to take advantage of their own wrong. The provision was thus not to be interpreted to allow a purchaser who refuses to settle to escape the consequences of their breach of contract: Meridien AB Pty Ltd v Jackson [2014] 1 Qd R 142 at [31], [40]. Furthermore, to give effect to the purpose of the legislation, a court may read words into a legislative provision if by inadvertence Parliament has failed to deal with an eventuality required to be dealt with if the purpose of the Act is to be achieved, provided the following three conditions are fulfilled: “First, the court must know the mischief with which the Act was dealing. Secondly, the court must be satisfied that by inadvertence Parliament has overlooked an eventuality which must be dealt with if the purpose of the Act is to be achieved. Thirdly, the court must be able to state with certainty what words Parliament would have used to overcome the omission if its attention had been drawn to the defect”: Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292. However, where Parliament has failed to make provision for something because it has not considered the matter, the deficiency in the statute goes beyond reading in “some necessary words”. Other than in “extremely limited circumstances”, the judiciary may thus not “fill a gap” in legislation: Director of Public Prosecutions v Walters [2015] VSCA 303. Where the words of a statute are clear, effect must be given to them notwithstanding that Parliament appeared to have legislated “in an exceedingly odd manner”, since: “When statutory words are clear, even if the purpose informing them is not immediately apparent, the courts are not at liberty to mangle them to the point where they no longer mean what they say”: Turner v Morlend Finance Corp (Vic) Pty Ltd [1990] ASC 56-006 at 59,128 per Meagher JA. The method of purposive construction does not permit a court to redraft legislation to give effect to a presumed legislative intent: Comcare v Thompson (2000) 100 FCR 375 at [40].

Extrinsic materials [1.370] The Commonwealth Acts Interpretation Act 1901 (Cth) (s 15AB) now allows the court to take into consideration certain extrinsic material in interpreting, for example, an ambiguous or obscure provision in an Act. Section 15AB(1) provides, in part, that: [I]n the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:

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Furthermore, the range of extrinsic materials to which one may have regard is more extensive under the amended provisions: see [1.370]. Accordingly, much of the scope for the operation of the common law mischief rule would now appear to have been superseded by the statutory provisions.

Maxims of interpretation [1.420] The courts apply a number of principles or “maxims” of statutory interpretation. However, these principles are aids to construction, rather than inflexible rules. Under the “ejusdem generis” maxim, where particular words are followed by a general word, the general word may be interpreted as restricted to the same class as the particular words. For example, in the absence of some contrary intention, in the phrase “dogs, cats, guinea pigs and other animals”, the general words “other animals” would be construed as restricted to domestic animals, and would not be interpreted as including elephants or whales. Ejusdem generis is merely a “guide to interpretation” rather than a rule, and it “must be used cautiously”: Chief Executive Officer of Customs v Biocontrol Ltd (2006) 150 FCR 64 at [46]; see also Pepper v Attorney-General [2008] 2 Qd R 353 at [1], [23], [34]. This rule does not apply where the particular words do not constitute a class. In that case, the general word will not be subject to that restrictive interpretation: Cody v JH Nelson Pty Ltd (1947) 74 CLR 629 at 639–640, 648; R v Regos (1947) 74 CLR 613 at 623–624. According to the “expressio unius est exclusio alterius” maxim, express mention of one matter suggests that other matters are excluded. The maxim will not apply unless the provision concerned is intended as an exhaustive statement of some matter. The courts emphasise that this maxim is to be applied with care, for “whilst [it is] a valuable servant, it is apt to be a dangerous master”: Balog v Independent Commission Against Corruption (1990) 169 CLR 625 at 632. Under the maxim “generalia specialbus non derogant”, where there is a conflict between a specific provision and a general provision in a statute, the specific provision will usually be applied in preference to the general provision: Smith v The Queen (1994) 181 CLR 338 at 348. The courts also make certain presumptions in construing legislation. For example, “common law rights should be taken to have been cut down by statute only where there is a clear legislative expression of an unmistakable and unambiguous intention to do so”: Daly v Thiering (2013) 249 CLR 381 at [32].

Delegated legislation [1.430] Delegated legislation is legislation made under the authority of an Act of Parliament. It is also known as subordinate legislation. It is not uncommon for an Act of Parliament to set out the law on a particular matter in general terms and go on to delegate or empower some person or body to make the detailed rules or regulations necessary to give effect to the legislation. Examples of the persons and bodies to whom such power is commonly given include the Governor-General or Governor in Council, government Ministers and local authorities. The reasons for conferring power on others to make delegated legislation are that: (a)

Parliament does not have the time to deal in detail with the many matters that claim its attention; and

(b)

much of the legislation that is passed is of a highly technical, specialised or essentially local nature so that the details are better left to experts or local bodies.

The power given by the particular Act may be quite specific as to the regulations which may be made under it, or it may confer a broad power to make delegated legislation. An example of the latter is the power given

chapter 1 An Introduction to Law and the Australian Legal System

to local governments by the Queensland Local Government Act 2009 (Qld), s 28(1): “A local government may make … any local law that is necessary or convenient for the good rule and local government of its local government area.” This situation has the appearance of a considerable violation of the principle of the separation of powers, the principle that laws should be made by the elected representatives of the people in Parliament and not by the executive government. The principle has been largely preserved, however, by a system for the parliamentary control of executive law-making. Parliament maintains some control over delegated legislation through the requirement that regulations be tabled or laid before the Parliament 12 and by retaining the option of disallowing such regulations within specified periods after their tabling. 13 In both the Commonwealth and State Parliaments, committees have been set up to examine delegated legislation tabled before the Parliament with a view to maintaining some general supervisory control over its content. There are thousands of legislative instruments (as delegated legislation is called) currently in force in Australia, covering a wide range of subject matter, including laws about food standards, fisheries, civil aviation, corporations, superannuation, taxation and migration, to name only a few subjects. For example s 65 of the Atomic Energy Act 1953 (Cth) says: The Governor-General may make regulations, not inconsistent with this Act, prescribing matters: (a) required or permitted by this Act to be prescribed; or (b)

necessary or convenient to be prescribed for carrying out or giving effect to this Act.

Judge-made law [1.440] Another important source of law is judge-made law which comprises the principles of law propounded by judges in deciding particular cases. The term “common law” is in fact used in a number of different ways. It may refer to: (a)

the law as declared by judges as distinct from statutory law (the laws made by Parliament);

(b)

common law as distinct from equity; and

(c)

common law as distinct from civil law (to distinguish between a common law system of law as practised in the UK and those countries which inherited that system (for example, Australia), from a civil law system as practised in most European and Asian countries).

The term “common law” in the present work will generally be used to refer to the principles of law arising from the decisions of judges in deciding particular cases, as distinct from statutory law. Thus, the term “common law” will generally refer to the principles of both the common law and equity. However, in some cases it will be necessary to distinguish between common law and equity. An Act of Parliament may abrogate or modify the rules of the common law and equity. The judicial law-making function is thus subordinate to the legislative power of Parliament. To appreciate the essential nature of judge-made law, and particularly to understand the reasons for the distinction between common law and equitable principles, it is useful to have some familiarity with the historical development of judge-made law. In this context we distinguish between common law and equity.

Development of the common law and equity [1.450] In medieval England, the development of the Royal or Common Law Courts saw the gradual decline of local courts governed by archaic procedures. It was in these central courts that a law common to 12

Legislation Act 2003 (Cth), s 38.

13

Legislation Act 2003 (Cth), s 42.

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all of England gradually evolved. All actions in the Royal Courts had to be commenced by obtaining the appropriate writ from Chancery, the department responsible for issuing writs. By the 14th century, the Royal Courts had become firmly established. However, the legal system during this period suffered from a number of serious deficiencies. Only certain types of writ were available and if the wrong complained of could not be framed so as to fit within one of the existing writs, then the complainant had no cause of action and hence no remedy. Furthermore, the procedure involved in proving a case became increasingly complex and very strict. A case could be lost for non-compliance with the merest technicality. These deficiencies in the common law led to the rise of equity as a source of law. [1.460] Equity developed to soften the harsh consequences that often flowed from strict application of the common law rules. Where persons were unable to obtain a remedy for their grievances in the Common Law courts because of the deficiencies in the common law, they would petition the King for relief. The increase in the number of these petitions asking the King as a matter of conscience or justice to redress the petitioners’ grievances led to them being dealt with by the Chancellor, one of the King’s principal advisers. Eventually, aggrieved petitioners would send their petitions directly to the Chancellor. The Chancellor was also the head of the Chancery, the body responsible for issuing writs to those seeking a remedy in one of the Common Law courts. The hearing of petitions by the Chancellor led to the emergence during the 15th century of the separate jurisdiction of the Chancery as a court of equity, later known as the Court of Chancery. The system of law administered by the court, which came to be known as equity, was not seen as a rival system to the common law but as supplementing the common law by providing remedies that the common law could not supply and by acknowledging rights not recognised by the Common Law courts. For example, the recognition and enforcement of trusts was exclusively a development of equity since the common law made no provision for the legal owner of property holding it on behalf of another. Further, the remedy of the Common Law courts was to award monetary compensation called “damages” to a person who had suffered injury, whereas the Court of Chancery could grant specific performance (that is, compel a person to do what he or she had promised) or an injunction (that is, order a person to abstain from doing something). Equitable remedies were (and remain today) discretionary. There gradually evolved two systems of law – common law and equity – but all the Australian States have followed the United Kingdom Judicature Act 1873 model, so that both common law and equitable principles are applied in the one proceeding.

The doctrine of precedent and the hierarchy of Australian courts The doctrine of precedent [1.540] The principles of the common law are to be found in the decisions of the various courts. Justice requires that like cases should be decided alike (stare decisis) or, to put it another way, that the legal principles applied in similar situations should be consistent. The common law gives effect to this notion by what is called the doctrine of binding precedent. In simple terms, the doctrine requires that the decision of a court in a decided case binds judges lower in the same court hierarchy in deciding cases of a similar nature. For example, a decision of the High Court of Australia on a particular issue is binding on State Supreme Courts and the Federal Court should they have to decide the same issue in a later case. The rationale for the doctrine was explained in the High Court in this way:

chapter 1 An Introduction to Law and the Australian Legal System

arising under this Constitution, or involving its interpretation; (ii) arising under any laws made by the Parliament: s 76 of the Constitution. One justice can hear cases before the court in its original jurisdiction. The High Court is the final appeal court in Australia. Its appellate jurisdiction stems from s 73 of the Constitution which provides that the court can hear and determine appeals from: (a)

any justice/s exercising the original jurisdiction of the court;

(b)

any federal court or court exercising federal jurisdiction; and

(c)

the Supreme Court of any state.

Litigants generally need to obtain special leave to appeal to the High Court: Judiciary Act 1903 (Cth), ss 35–35A; Federal Court of Australia Act 1976 (Cth), s 33. What this means is that the High Court will hear an application to appeal and decide whether or not to hear the appeal. Special leave to appeal will normally only be granted where the case involves some important question of law, or in a criminal case, a serious miscarriage of justice.

Federal Court of Australia [1.580] The Federal Court was established under the Federal Court of Australia Act 1976 (Cth). It comprises a Chief Judge and over 40 other judges. The court has both an original and appellate jurisdiction. The court enforces federal legislation such as the Competition and Consumer Act 2010 (Cth). It has concurrent jurisdiction over bankruptcy and intellectual property matters. In its appellate jurisdiction, where the court sits as a Full Court comprised of three judges, the Federal Court hears appeals from: (a)

a single judge of the court; and

(b)

a single judge of a State Supreme Court which is exercising federal jurisdiction in regard to intellectual property matters (that is, patents, trade marks, copyright and designs).

Application for special leave to appeal may be made to the High Court from a decision of the Full Court of the Federal Court.

Federal Circuit Court [1.590] A new federal court was established by the Federal Circuit Court of Australia Act 1999 (Cth). Prior to 2012 the court was called the Federal Magistrates Court. It has a concurrent jurisdiction over minor cases concerning consumer protection under the Competition and Consumer Act 2010 (Cth) and bankruptcy. This court has reduced the workload of the Federal Court.

State courts [1.600] Each of the Australian states and territories has its own separate hierarchy of courts. The basic structure in most of the states comprises: (a)

Supreme Court;

(b)

District or County Courts; and

(c)

Local or Magistrates Courts.

Supreme Court [1.610] The highest court in each state and territory is the Supreme Court which exercises both civil and criminal jurisdiction. The Supreme Court has unlimited civil jurisdiction in all matters not expressly excluded by statute and vested in, for example, the Federal Court or the High Court.

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The original jurisdiction of the Supreme Court is exercised by a single judge. A decision of a single judge may be appealed to the Court of Appeal (in New South Wales, Victoria, Queensland and Western Australia, Australian Capital Territory and Northern Territory) or Full Court of the State (in South Australia and Tasmania).

District or County Courts [1.620] Most States have established intermediate courts called District Courts (in New South Wales, Queensland, South Australia, and Western Australia) or County Courts (in Victoria) which have a statutory jurisdiction. This jurisdiction is limited with respect to subject matter and value of money or property in dispute. The maximum monetary limitations on the civil jurisdiction of these courts are: New South Wales ($750,000; and unlimited jurisdiction in respect of motor accident claims and work injury damages claims); Victoria (unlimited jurisdiction); Queensland ($750,000); and Western Australia ($750,000; and unlimited jurisdiction in personal injury cases). Where higher amounts are involved proceedings must be taken in the Supreme Court.

Local or Magistrates Courts [1.630] The lowest courts in the hierarchy of State courts are those presided over by magistrates. These courts are variously known as Local Courts (in New South Wales; and also in South Australia, when exercising civil jurisdiction); Magistrates Courts (in Victoria, Queensland, Western Australia and Tasmania); Courts of Petty Sessions (when exercising criminal jurisdiction in Tasmania); and Courts of Summary Jurisdiction (when exercising criminal jurisdiction in South Australia). In civil cases the jurisdiction of the courts is generally limited to claims up to a certain monetary value (usually approximately $100,000).

Other courts and tribunals [1.650] In addition to the principal courts discussed above, there are a number of other courts and tribunals in Australia both at federal and state level.

Federal tribunals and commissions [1.660] A number of quasi-judicial bodies, tribunals and commissions have been established under federal legislation, the most significant of which for our purposes are: the Australian Competition and Consumer Commission and the Australian Competition Tribunal.

Australian Competition and Consumer Commission and Australian Competition Tribunal [1.670] The Australian Competition and Consumer Commission (ACCC) has general responsibility for initiating proceedings for contravention of the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly, the Trade Practices Act 1974 (Cth)) in restrictive trade practices cases and for instituting prosecutions for offences against the consumer protection provisions of the Act.

Specialist state courts and tribunals [1.680] There are a considerable number of specialist state courts and tribunals. Some of the more important of these are outlined below.

chapter 1 An Introduction to Law and the Australian Legal System

Small Claims Tribunals [1.690] All states and territories have instituted Small Claims Tribunals or procedures to provide a cheaper, speedier and more informal method of resolving disputes, particularly between consumers and traders, involving comparatively small sums of money. 15 The parties normally present their own case and the dispute is heard before a referee.

Law reports [1.720] The common law comprises the decisions of judges in deciding particular cases. Those decisions are published in law reports. For the High Court the authorised law reports are the Commonwealth Law Reports (published since 1903) and for the Federal Court, the Federal Court Reports (since 1984). In the States and Territories the authorised law reports are the New South Wales Law Reports, Victorian Reports, Queensland Reports, South Australian State Reports, Western Australian Reports, Tasmanian Reports, Australian Capital Territory Law Reports and the Northern Territory Law Reports. The Australian Law Reports contain decisions of the High Court, Federal Court, Territory courts and other courts exercising federal jurisdiction and decisions of the Territory courts. The Federal Law Reports contain decisions of Commonwealth and State courts on matters of federal law. In addition, there are many specialist series of reports containing decisions on particular aspects of the law such as intellectual property, trade practices, torts, insurance, consumer credit, industrial law, trusts and so on.

Form of a law report [1.730] Modern law reports present cases in a similar way. On turning to the report of a case, at the top of the page will usually be found the names of the parties followed by the name of the court (although in some reports this order is reversed). This will be followed by the name of the judge/s and the dates on which the case was heard. Immediately below are a number of words which very briefly indicate the subject matter of the case and relevant legislation: these words are called “catchwords”. Then will follow a fuller summary of the facts, the decision in the case and reference to cases that were applied, overruled, distinguished, discussed or referred to in the judgment: this part is called the “headnote”. The catchwords and the headnote do not form part of the judgment. Their object is to provide readers with a short summary of the case to decide whether it is relevant for their purposes. After the headnote there will be words indicating how the case came before the court, for example by statement of claim, summons, appeal, etc. This will be followed by the names of the legal representatives of the respective parties (usually barristers). In some law reports there will then be a brief summary of the arguments put to the court by counsel. Where the court does not give judgment immediately after hearing argument but gives it later, it is called a reserved judgment: this is indicated in the law report by the words cur adv vult (the short form of the Latin expression curia advisari vult — “the court wishes to be advised”). The law report will then set out, usually in full, the judgment/s given in the case. Judgments tend to follow a similar basic pattern, namely a statement of the material facts; identification of the issues involved; 15

Local Court Act 2007 (NSW), s 29 (in Local Court); Fair Trading Act 1987 (NSW), Pt 6A and s 79S(7) (in Civil and Administrative Tribunal); Australian Consumer Law and Fair Trading Act 2012 (Vic), ss 182-192; Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 11, Sch 3; Magistrates Court Act 1991 (SA), ss 3, 38; Magistrates Court (Civil Proceedings) Act 2004 (WA), ss 3, 26; Magistrates Court (Civil Division) Act 1992 (Tas), ss 3, 7(2); ACT Civil and Administrative Tribunal Act 2008 (ACT), s 18; Small Claims Act 2016 (NT), s 5.

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discussion of the relevant law and its application to the particular facts; the decision reached and a statement of the orders flowing from the decision. At the end of the report appear the names of the firms of solicitors representing the respective parties and the initials or name of the reporter who wrote the catchwords and headnote. The following example of a case reported in the Commonwealth Law Reports illustrates the various features of a law report: Figure 1.7: Example of a Law Report

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Citation of cases [1.740] A case in support of a legal principle is cited by quoting the names of the parties and giving a reference to the law report where the case can be found. For example: Norwich Winterthur Insurance (Australia) Ltd v Con-Stan Industries of Australia Pty Ltd [1981] 2 NSWLR 879 This means that the case of Norwich Winterthur Insurance (Australia) Ltd (the plaintiff) against Con-Stan Industries of Australia Pty Ltd (the defendant), decided in the Supreme Court of New South Wales, is reported in the New South Wales Law Reports of 1981, volume two of that year, at page 879. In that case, the judge at first instance decided in favour of the defendant, Con-Stan Industries of Australia Pty Ltd. Accordingly, the plaintiff in the original action, Norwich Winterthur Insurance (Australia) Ltd, appealed to the New South Wales Court of Appeal. The Court of Appeal reversed the decision of the trial judge and held in favour of Norwich Winterthur Insurance (Australia) Ltd (now called “the appellant”) and against Con-Stan Industries of Australia Pty Ltd (now called “the respondent”). The report of the decision of the New South Wales Court of Appeal is cited as follows: Norwich Winterthur Insurance (Australia) Ltd v Con-Stan Industries of Australia Pty Ltd [1983] 1 NSWLR 461 As in the example above, this means that the report of the decision of the New South Wales Court of Appeal in the case can be found in the New South Wales Law Reports for the year 1983, in volume one of that year, at page 461. Subsequently, Con-Stan Industries of Australia Pty Ltd, the unsuccessful respondent in the New South Wales Court of Appeal, appealed against that court’s decision to the High Court. The decision of the High Court is cited as follows: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 The case citation given means that the decision of the High Court in the appeal of Con-Stan Industries of Australia Pty Ltd (now called the appellant) against Norwich Winterthur Insurance (Australia) Ltd (now called the respondent) is reported in the Commonwealth Law Reports, volume 160, at page 226, the judgment being delivered in the year 1986. The following points may be noted from the above explanation: 1.

In connection with the case at first instance (that is, at the original trial of the action), Norwich Winterthur Insurance (Australia) Ltd was the party who brought the action and is therefore called the plaintiff. The plaintiff’s name appears first in the citation of the case. The party against whom the action is brought, here Con-Stan Industries of Australia Pty Ltd, is called the defendant. Although the reference to the case is written Norwich etc v Con-Stan Industries etc it is referred to verbally as Norwich and Con-Stan Industries. The reason for this is that the full title of the action is “between N, plaintiff and C, defendant”.

2.

In the appeal to the New South Wales Court of Appeal, Norwich was the party who appealed and is therefore called the appellant. Con-Stan Industries, who responded to the appeal, is called the respondent.

3.

In the appeal to the High Court, Con-Stan Industries was the party who appealed and who now, therefore, is called the appellant. Norwich this time is the respondent, and in the citation the

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appellant’s name appears first. Accordingly, in this instance, the names of the parties are in reverse order in the citation of the appeal to the High Court to that in which they appeared in the citation to the report of the original action, and also in the report of the appeal to the New South Wales Court of Appeal. [1.750] Sometimes the parties are referred to by other names, for example applicant, petitioner, etc, depending on the particular court in which the case is to be heard and the nature of the proceedings. In criminal proceedings, the citation of a case dealing with the prosecution of a person for an indictable offence usually takes the following form: R v Dillon [1982] VR 434 The citation indicates that the case is reported in the Victorian Reports for the year 1982, at page 434. Here, R is an abbreviation for Regina or Reg (the Queen), or Rex (the King). Sometimes the words “the Queen” (or “the King”) are used instead of the abbreviation R. In the above citation the Crown is taking action against Dillon and the citation is expressed verbally as “the Queen against Dillon”. It will be observed that in the citations to the New South Wales Reports and the Victorian Reports above, the year is contained in square brackets. This indicates that the year was an integral part of the reference to the particular series of reports at that time. On the other hand, the Commonwealth Law Reports, the other series of law reports cited in the examples above, is cited by volume number (in the example given, volume 160) and the year in which the case was decided is not a necessary part of the citation. However, it is common practice to include in the citation in round brackets the year in which the case was decided. More recent volumes of the New South Wales Law Reports and Victorian Reports are now also cited by volume number. [1.760] With the ready availability of judgments in electronic form on the Internet, often long before their publication in the printed law reports, “medium-neutral” citations have now been adopted for the citation of judgments. Each case is given a citation which identifies the year the case was decided and the court which decided the case, together with a unique number for that case. For example, the following medium-neutral citation is that of the 16th High Court decision handed down in 2011: Insight Vacations Pty Ltd v Young [2011] HCA 16. Each judgment is divided into numbered paragraphs. These individual paragraphs are cited as follows: Insight Vacations Pty Ltd v Young [2011] HCA 16 at [20]. It is thus possible to cite to a particular point in an electronic version of a judgment with the same precision as a page number in a printed law report.

Classification of law and legal proceedings Public law and private law [1.775] Law can be classified as either public law or private law. Public law is concerned with the organisation of government and with the relationship between the government and the people. It includes constitutional law, administrative law and criminal law. Constitutional law defines the structure of government and the rights of individuals under that government. Administrative law regulates the exercise of powers and duties by government administrative officers and authorities. Criminal law defines offences against the State and provides punishment for their commission.

chapter 1 An Introduction to Law and the Australian Legal System

Whereas public law is concerned with matters affecting the State and its relationship with individuals, private law deals with the relationships between private persons or organisations. There are many branches of private law, some of the more important of which include the following: 1.

The law of contract which is concerned with the rights and duties arising out of those agreements between individuals the law regards as legally binding.

2.

The law of tort which requires a person who has committed a civil wrong, other than a breach of contract, to compensate the person against whom or whose property the wrong was committed.

3.

The law of property which deals with the ownership, possession, use, and disposition of both real property (for example, land) and personal property (for example, goods).

4.

Corporations law which regulates the incorporation, administration, winding up and dissolution of companies, and the responsibilities of directors and other officers of the company.

5.

The law of trusts which determines the circumstances in which and the conditions on which a person (called “the trustee”) holds property on behalf of another person (that is, “the beneficiary”).

Sometimes an area of law may have both private and public law aspects, so many areas of law cannot be regarded as exclusively one or the other. Figure 1.8: Public Law and Private Law

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Substantive law and procedural law [1.780] A distinction is made between substantive law and procedural law. Substantive law refers to actual rights and duties under the law. Procedural law refers to the formal steps to be followed in the enforcement of those rights and duties, in particular, the rules of procedure and evidence.

Civil law and criminal law [1.790] The civil law is that law under which a person (the plaintiff) may sue another (the defendant) to obtain redress for a wrong committed by the defendant. The usual purpose of a civil action is to obtain monetary compensation or damages for the loss suffered by the plaintiff as a result of the defendant’s wrongful act, for example, for a breach of contract or the commission of a tort. In some cases damages are an inadequate remedy and the plaintiff might seek specific performance of a contract or an injunction to restrain some unlawful act or threatened act. In civil proceedings, the plaintiff has a lesser standard of proof than in criminal proceedings and so in order to succeed must prove their case on the balance of probabilities. The criminal law defines offences against the State and provides punishment for their commission. Crimes are defined by statute, delegated legislation or the common law and are prosecuted in the name of the Crown on behalf of the State. Criminal offences are of two types, namely summary offences and indictable offences. Summary offences are criminal offences triable summarily, that is, offences which are heard and determined by a magistrate without a jury; they usually comprise minor offences. Indictable offences are criminal offences triable before a judge and jury; they are generally the more serious offences. In the case of indictable offences, there is a preliminary or committal hearing before a magistrate who conducts an inquiry to see if there is sufficient evidence to put the defendant on trial. The magistrate must determine whether a prima facie case has been made out and, if he or she so decides, the defendant is committed for trial before a judge and jury. In criminal law, the prosecution must prove their case beyond reasonable doubt.

Commercial law [1.795] The present work is primarily concerned with a particular aspect of legal regulation — commercial or business law. In other words, it is concerned with those parts of the law most commonly associated with ordinary business activities. These include the law of contract, agency, sale, credit, bills of exchange and cheques, partnership, companies, bankruptcy, and insurance. In recent times there has been a considerable body of statute law enacted to regulate particular aspects of commercial law. These statutes include the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly, the Trade Practices Act 1974 (Cth)) which, inter alia, proscribes certain restrictive and unfair trading practices; and the Corporations Act 2001 (Cth) which regulates the formation and general operation of companies. On the other hand, there are still areas of commercial law that are not regulated by statute but are determined by the principles of the common law, that is, the law developed by judicial decision-making in particular cases over a long period of time. For example, much of the law of contract is still largely based on common law principles.

The legal profession [1.810] The legal profession is basically composed of solicitors and barristers.

chapter 1 An Introduction to Law and the Australian Legal System

Solicitors [1.820] A solicitor is a general practitioner of the law. Where a member of the public has a dispute which has legal implications, requires legal documents to be drawn up in respect of a particular transaction or matter, or needs advice on some aspect of the law then they will generally consult a solicitor. The work of a solicitor includes, for example, drawing up contracts regarding commercial dealings, following through the legal technicalities of forming a company and advising on taxation matters. In relation to litigation, that is, cases to be heard before the court, the solicitor’s function is to ascertain the facts and procure the necessary documents and other evidence required by the barrister who has been briefed to conduct the case.

Barristers [1.830] Barristers are generally responsible for actually conducting cases in court. They also provide solicitors with legal opinions on difficult points of law. Barristers tend to specialise in a particular branch of the law. Whereas a person can see a solicitor for the first time simply by going to the solicitor’s office, or phoning up to make an appointment, a barrister cannot usually deal directly with a client in this way but must first have been instructed in the matter by a solicitor. That is to say, the client will have gone to a solicitor with their problem and if the problem involves litigation the solicitor will usually “brief” or instruct a barrister in the matter. Alternatively, the issue in question may be one of some legal complexity requiring specialist advice and the solicitor may well seek an opinion from a barrister who is an expert in that particular area of law. Leading barristers in each State may apply to “take silk”, that is, be appointed a Senior Counsel (or SC).

Alternative methods of dispute resolution [1.840] The delay and ever-increasing cost of litigation has led in recent years to a growing emphasis on alternative methods of settling disputes outside formal court proceedings. Federal legislation now allows the Federal Court and the Federal Circuit Court to impose a penalty in costs where a party does not take “genuine steps” to resolve a dispute before civil proceedings are brought. It is proposed to outline the system of commercial arbitration and then to consider other alternative methods of dispute resolution.

Commercial arbitration [1.850] Arbitration is the reference of a dispute to an independent third party selected by the parties or by their nominee instead of litigating the matter in the courts. Parties to a commercial dispute may agree to submit it to arbitration either by an arbitration clause in an agreement or at the time the dispute arises. The advantages of arbitration are seen as avoidance of publicity (since the proceedings are in private); avoidance of delay in having the dispute settled; the procedure is simpler and less formal than that in a court of law; reduction of expense; and, should the matter be of a technical nature such as a building dispute or involve a complex accounting or commercial matter, a person having the required technical qualifications and expertise may be appointed arbitrator.

Alternative dispute resolution [1.870] The expression “alternative dispute resolution” (or ADR) refers to methods of dispute management that offer an alternative to litigation. Methods of alternative dispute resolution can be classified as facilitative, advisory, or determinative processes. Facilitative processes include negotiation, mediation and

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facilitation. Advisory processes include conciliation and independent expert appraisal. Determinative processes include arbitration and private judging. A range of ADR processes are described in the next section. The processes appear in order of the level of third party neutral intervention in the particular process.

Negotiation [1.880] Negotiation between the parties with a view to seeking a mutually acceptable outcome through discussion, either with or without the assistance of a third party, is the most commonly used method of resolving disputes. The majority of commercial disputes are resolved by negotiation between the parties.

Mediation [1.890] Where the parties are unable to negotiate a settlement between them they may seek mediation of the dispute. Mediation is a voluntary negotiation process in which a neutral third party, the mediator, assists disputing parties to find their own solution to their dispute by helping them to isolate the issues in dispute, to develop options for their resolution and to reach an agreement that accommodates the interests and needs of all the parties.

Conciliation [1.900] In conciliation, a neutral third person assists the parties to negotiate as in mediation but exercises greater influence over the outcome than is the case with mediation. The conciliator may suggest options and possible solutions and is generally much more directive than a mediator. In Australia conciliations often take place within a statutory framework, for example, complaints of discrimination under federal and State anti-discrimination legislation. 16

Further reading Australian Legal Development R Hinchy, The Australian Legal System: History, Institutions and Method (2nd ed, Thomson Reuters, Sydney, 2015). Australian Constitutional System G Williams, S Brennan and A Lynch, Blackshield and Williams Australian Constitutional Law and Theory: Commentary and Materials (6th ed, Federation Press, Sydney, 2014). GA Moens and J Trone, Lumb, Moens and Trone, Constitution of the Commonwealth of Australia Annotated (9th ed, LexisNexis Butterworths, Sydney, 2016). Sources of Law K Hall and C Macken, Legislation and Statutory Interpretation (3rd ed, LexisNexis Butterworths, Sydney, 2012). 16

Australian Human Rights Commission Act 1986 (Cth), ss 46P – 46PN; Anti-Discrimination Act 1977 (NSW), s 91A; Equal Opportunity Act 2010 (Vic), s 112; Anti-Discrimination Act 1991 (Qld), ss 158 – 164AA; Equal Opportunity Act 1984 (SA), ss 27, 95; Equal Opportunity Act 1984 (WA), ss 91 – 92; Anti-Discrimination Act 1998 (Tas), ss 75 – 77; Human Rights Commission Act 2005, ss 54 – 67 (ACT); Anti-Discrimination Act 1992 (NT), ss 78 – 81.

chapter 1 An Introduction to Law and the Australian Legal System

P Herzfeld, T Prince and S Tully, Statutory Interpretation Principles (Thomson Reuters, Sydney, 2014). Legal Research and Writing C Cook et al, Laying Down the Law (9th ed, LexisNexis Butterworths, Sydney, 2015). Doctrine of Precedent and Hierarchy of the Courts J Carvan, Understanding the Australian Legal System (7th ed, Thomson Reuters, Sydney, 2015). Legal Profession A Lamb, J Littrich, K Murray, Lawyers in Australia (3rd ed, Federation Press, Sydney, 2015).

Internet sites Legislation and Case Law Australasian Legal Information Institute (AustLII) http://www.austlii.edu.au (decisions of federal, State and Territory courts and tribunals; Commonwealth, State and Territory consolidated statutes)

Tutorial activities 1.

2.

3.

Consider these introductory questions: (a)

What do you understand by “the rule of law”?

(b)

What was the significance of the British view that Australia was “settled” rather than “conquered”? On what basis was it possible for the British to characterise the colony as “terra nullius”?

(c)

What was the effect of the High Court’s decision in Mabo?

(d)

When and how did Australia become a federation? What is the structure of federation?

(e)

Explain the difference between the government, the cabinet and the parliament.

(f)

What is the separation of powers?

(g)

What are the two main sources of law in Australia? Which is “sovereign”? Why?

(h)

What is a judicial precedent? Why are reliable law reports and a hierarchy of courts required for a system of precedent to work well?

(i)

What is a binding precedent? What is a persuasive precedent?

(j)

What is the difference between public and private law and, criminal and civil law?

Review the meaning of statutory interpretation and answer the following questions: (a)

Why is a statute interpreted and who does it?

(b)

What is the main objective of the court when it interprets a statute?

(c)

What are the maxims and presumptions of statutory interpretation and what are they designed to do?

Uber is an app-based on-demand car hire service. It uses a smartphone app to receive ride-requests and then sends these trip requests to their drivers. It is a controversial service currently involved in nearly 200 separate court actions. Taxi drivers argue that

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Part 1: Introduction

Uber is really a taxi service and should have to comply with the same regulations as they do. Uber argues it is just providing a mechanism that connects people who would like to travel with people who are prepared to take them where they wish to go, for a fee. In London, Transport for London, the transport regulator, has prosecuted Uber under s 11 of the Private Vehicles Act 1998. Private Hire Vehicles Act 1998 11 Prohibition of taximeters (1)

No vehicle to which a London Private Hire Vehicle licence relates shall be equipped with a taximeter.

(2)

If such a vehicle is equipped with a taximeter, the owner of that vehicle is guilty of an offence and liable on summary conviction to a fine.

(3)

In this section “taximeter” means a device for calculating the fare to be charged in respect of any journey by reference to the distance travelled or time elapsed since the start of the journey (or a combination of both).

The UK transport regulator has claimed that the Uber app is being used as a taximeter. The taximeter is a privilege afforded only to black-cab drivers in return for the extensive training they undergo to learn London’s streets. Uber argues that that while the smartphone using the driver’s app may be essential to enable the calculation of fares, that did not make it a device “for” calculating fares, which would breach the taximeter prohibition. By applying the principles of statutory interpretation, indicate what you believe s 11 means for Uber? 4.

Consider the differing roles of the courts (in Victoria) and the parliament (in NSW) in regulating Uber. Which do you think is the more effective and efficient? Why? Common law approach — Victoria On May 6, 2014, the Taxi Service Commission in Victoria, Australia, issued a number of infringement notices to Uber drivers with a fine of A$1,723, after a public warning discouraging people using ridesharing apps like UberX. On the 4th of December, 2015, an Uber driver was found guilty of driving a hire car without license or registration; this case is the first of twelve brought against Uber drivers by the Victorian Taxi Services Commission. On the 18th of May 2016 the judgement was overturned on appeal, effectively legalizing Uber in Victoria. Legislative approach — NSW On 17 December 2015, legislation was passed by the NSW Parliament. Uber was regulated in NSW with over $200 million of compensation to taxi and hire car plate owners and operators. It also means ride-sharing drivers will have to pay a one-off driver authority fee of $45 and an annual registration payment of between $120 and $200, depending on the size of their vehicle. Incumbent taxi operators will still have sole access to ranks and the ability to pick up passengers who hail them.

5.

Two brothers aged 18 and 20 and a 16 year old boy conducted terrorism-themed pranks

chapter 1 An Introduction to Law and the Australian Legal System

that were captured on video: see https://www.youtube.com/watch?v=888lU_6_rQY The group, dressed in white robes and beards, “fire” a replica semi-automatic gun out of a car window, “terrorise” people (the “victims” were friends and family of the “terrorists”) by leaving fake bomb bags and conducting fake abductions in public, causing community concern and anxiety. There is no suggestion that these actions were anything other than pranks. Police charged the three brothers under the Summary Offences Act 1966 (Vic) with public nuisance, possessing a prohibited weapon and behaving in an offensive manner in a public place. These are the relevant sections of the Summary Offences Act 1966 (Vic): Section 27 A person must not, without reasonable excuse (proof of which lies on the person), have in his or her possession an offensive weapon or instrument in a place of detention. Section 6 (1)

(a)

A person must not commit a public nuisance offence. A public nuisance is committed if the person's behaviour interferes, or is likely to interfere, with the peaceful passage through, or enjoyment of, a public place by a member of the public.

What are the respective roles of: (i)

the legislature; and

(ii)

the courts in relation to this matter?

(b)

Please revise the two main common law approaches to statutory interpretation (the literal rule and the purposive rule) and the effect of s 15AA of the Commonwealth Acts Interpretation Act.

(c)

Which words in each of s 27 and s 6 may a court need to interpret?

(d)

What do you think is the likely outcome of the case? Why?

(e)

If the defendants were convicted in the Magistrates Court and appealed to the Supreme Court and that court made a decision and explained its reasons (ratio decidendi) what would be the effect of the decision on any future cases: (i)

in Victoria;

(ii)

in other states; or

(iii)

in the High Court of Australia?

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PART 2: LAW OF CONTRACT

Chapter 2: Introduction to the Law of Contract Chapter 3: Offer and Acceptance Chapter 4: Intention to Create Legal Relations Chapter 5: Consideration, Promissory Estoppel and Formalities Chapter 6: Contractual Capacity Chapter 7: Genuine Consent Chapter 8: Legality of Object Chapter 9: Contents and Interpretation of the Contract Chapter 10: Operation of the Contract Chapter 11: Termination of a Contract Chapter 12: Remedies

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some involve international trade (for example, contracts to purchase tractors from Germany); some contracts are controlled or subject to statutes (for example, residential tenancy agreements) whereas others are a mix of common law and statute (for example, a contract for supply of consumer goods or services); some have no requirements as to the form in which they must be expressed (for example, most sales of goods may be oral or written) whereas others have strict requirements as to form of the contract (for example, a contract for the sale of land which must be evidenced in writing or a transfer of shares which must be in writing). The original source of the principles that make up the law of contract was the English common law courts. Even today, many of the early English cases are still cited as authority for one principle or another. Of course we now have a substantial body of Australian case law and in addition, over the past 50 years or so, both state and federal parliaments have passed statutes that affect a wide spectrum of commercial agreements.

chapter 2 Introduction to the Law of Contract

The evolution of the law of contract [2.15] In the 19th century, as industrial capitalism and the market economy came to dominate the economic and political landscape, the emerging law of contract became the main tool that facilitated and concluded market transactions. George Jessel MR, in Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462 at 465 captured the prevailing political and economic mood in England in the mid-19th century when he said: “If there is one thing more than another which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty in contracting and their contracts, when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts … therefore you have this paramount public policy to consider in that you are not lightly to interfere with this freedom of contract.” The law of contract that emerged in the 19th century reflected the individualistic, self-reliant ethic of the times. The courts stressed the virtues of freedom and sanctity of contract: parties had the freedom to negotiate and consent to the terms of their contract and, once this was done the courts ensured the sanctity of the contract by strictly enforcing the terms of the contract (except where there was no genuine consent (such as where the agreement was affected by vitiating elements, for example, mistake, fraud, duress or misrepresentation). The mass production of goods in the 20th century signalled a growing gap between those with bargaining power, and those without such power. The complex nature of many consumer goods inevitably produced means that there is an information gap between sellers and buyers which affects a buyer’s ability to meaningfully assess the quality of the goods. Responding to the demands for protection of the vulnerable, the courts and legislatures have made laws designed to protect individuals (eg employees, tenants, consumers, borrowers) and small businesses from conduct that is, for example, unfair, misleading or unconscionable. The Competition and Consumer Act 2010 (Cth) is an excellent example. There are other examples of statutes that affect specific kinds of contracts: Insurance Contracts Act 1984 (Cth), Credit Act 1984 (Vic) and Residential Tenancies Act 1997 (Vic).

Definition of a contract [2.17] The terms “contract” and “agreement” are frequently used interchangeably. Every contract involves an element of agreement; however, not every agreement is a contract. For this reason it is necessary to define what constitutes a “contract”. [2.20] A contract is an agreement between two or more parties under which legal rights and obligations are created which are enforceable in the courts. More succinctly, a contract is a promise or a set of promises that the law will enforce. It is the possibility of enforcement that distinguishes a contract from other kinds of agreements. The law of contract is concerned with the principles applicable to the formation, performance, interpretation and breach of contracts.

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chapter 2 Introduction to the Law of Contract

In the event of a dispute as to whether a contract has come into existence, the court considers whether a reasonable person looking objectively at what the parties have said and looking at their conduct would say that there was an agreement. As the High Court has recently said: “Regardless of the subjective intentions of the parties, the question of whether the parties had made contracts of the kinds described was to be determined by taking an objective view of the agreements”: Forrest v ASIC [2012] HCA 39 at [34]. However, not all agreements are enforceable at law. For example, a social agreement (say, where A agrees with B to play cards at B’s house on a certain night) does not give rise to contractual rights since the parties do not intend their agreement to be legally binding. Hence, the requirement (in (b) above) that for a contract to come into existence, the parties must intend their agreement to create legal relations. A further essential element in the formation of a contract is that some value must have been given in exchange for the other party’s promise. That is, in a simple contract the agreement must be supported by valuable consideration: see (c) above. This requirement means that the law will not enforce a gratuitous promise. For example, a promise by A to give something to B is not legally enforceable. An exception is where the promise is made under seal, that is, contained in a formal deed, in which case valuable consideration is not necessary for the promise to be enforceable. The parties to a contract must be legally capable of reaching a binding agreement, that is, have the legal capacity to enter into a contract: (see (d) above). To be enforceable, the agreement must have been the product of a genuine consent by each of the parties. Factors affecting genuine consent such as mistake, misrepresentation, duress and undue influence may affect the enforceability of the agreement: (see (e) above). The subject matter of the agreement must be legal: (see (f) above). Each of these essential elements of a contract are discussed in further detail in the following chapters. If one of these essential elements is lacking, then the courts will not enforce the agreement between the parties. Assuming that the court is satisfied that there is a valid contract, its next task in the event of dispute is to determine the nature and extent of what the parties have agreed by interpreting the terms of the contract. The court is then in a position to determine whether a party is in breach of their obligations under the contract and, if so, decide the appropriate remedy available to the other party.

Classification of contracts [2.50] Some of the common types of contract and their basic characteristics are outlined below.

Simple contracts [2.60] All contracts (other than contracts under seal) are termed “simple contracts”. In general, a simple contract may be oral, wholly or partly in writing, or may even be implied by the conduct of the parties. However, some simple contracts are required by statutory provision to be in writing, and others are required to be evidenced in writing. Every simple contract, irrespective of how it is formed, must be supported by consideration: see Chapter 5([5.10]).

Contracts under seal [2.70] A contract under seal (or formal contract) is referred to as a deed. It derives its validity from its particular form. A contract under seal must be in writing and signed, sealed and delivered. The basic distinction between a simple contract and a contract under seal is that the latter does not require consideration: see Chapter 5 ([5.10]).

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Express and implied contracts [2.80] Where the intentions of the parties are stated in explicit terms, either orally or in writing, they constitute an express contract. This is the usual type of contract. For example, an agreement is signed to buy a car and the price is to be paid by instalments over the next 12 months. All the terms of the contract are agreed upon and expressed in the written contract. An implied contract is one in which the terms of the contract are inferred from the conduct of the parties and the surrounding circumstances. An example of this type of contract is where you hail and enter a taxi. By this act the law implies that you promise to pay the fare to your destination and the taxi driver impliedly agrees to transport you.

Bilateral and unilateral contracts [2.90] Most contracts consist of the exchange of mutual promises, the actual performance of which is to occur at some future time. For example, where a steel manufacturer enters into a contract with a coal supplier in February for the delivery of coal during August at a specified price, each party has made a promise to the other to do something at a future date. Such a contract, consisting of a “promise for a promise”, is a bilateral contract. A unilateral contract is one in which an offer is made inviting acceptance by actual performance rather than by a promise. For example, the offer of a reward for the return of a lost dog is accepted by the return of the dog. A unilateral contract “comes into existence when one party promises to do something in return for acts performed by the other party, with the intention of being contractually bound if those acts are performed, and the other party accepts that promise by performing his or her side of the bargain”: Gippsreal Ltd v Registrar of Titles (2007) 20 VR 127 at [42].

Valid, voidable, void and unenforceable contracts [2.100] A valid contract is one in which all the essential elements are present. As a result it is enforceable against both parties. The usual remedy for breach of the contract is a judgment for damages. Sometimes an equitable remedy such as specific performance may be available. A voidable contract is one which a party may avoid, that is, get out of, if that party wishes to do so. For example, a person who was induced to enter into a contract by the other party’s fraud may avoid the contract. A void contract is one which, as far as the law is concerned, never existed at all. It is of no legal effect between the parties and thus does not create legal rights or obligations. For example, where the purpose of the contract is totally illegal, such as a contract to commit a crime, the contract would be void. An unenforceable contract is one which is prima facie a valid contract but which by reason of some technical defect is not capable of being enforced by action by one or both of the parties. For example, a contract made verbally which is required by statute to be evidenced in writing and which has not been so evidenced.

Further reading for Chapters 2–12 JW Carter, Contract Law in Australia (6th ed, LexisNexis Butterworths, Sydney, 2013).

chapter 2 Introduction to the Law of Contract

J Gooley, P Radan and I Vickovich, Principles of Australian Contract Law (3rd ed, LexisNexis Butterworths, Sydney, 2014). S Graw, An Introduction to the Law of Contract (7th ed, Thomson Reuters, Sydney, 2012). J Paterson, R Robertson and A Duke, Principles of Contract Law (5th ed, Thomson Reuters, Sydney, 2015).

Tutorial activities Contract of Employment (Sales Representative in the computer industry) This agreement is made and takes effect on the date of this agreement between ………. , (“Company”) and …….., (“Employee”). 1. The Company hereby employs Employee commencing on the date of this agreement and Employee hereby accepts such employment. 2.

3.

During the Employee’s employment he/she will: 2.1

Devote such time and effort as may be reasonably required by the Company to perform his/her duties.

2.2

Not engage in any other employment or business activity without the Company’s written consent.

2.3

Perform such duties as may reasonably be requires of him/her by the Company.

For services rendered by the Employee, the Company shall pay him/her as follows: 3.1

The annual sum of $................calculated as follows ………………….

3.2

An annual bonus of $... shall be paid provided Employee has achieved the following performance goals ……………….. ……………………… ……………………… ……………………………………………………………………………………..

4.

Employee agrees that during his/her term of employment by the Company and for a period of three years after termination of such employment, he/she will not act as an employee or agent or otherwise engage in any business selling products similar to those customarily sold by the Company within ……………………….(specify area).

5.

Employee understands that he/she will acquire confidential information of business value to the Company during the course of his/her employment. Employee hereby agrees not to disclose such confidential information to any other party, or to use such information for his/her own profit except in performance of employment activities beneficial to the Company.

6.

The Company may, at any time, with or without cause, terminate the contract of employment by giving Employee written notice of such termination. Employee must provide one month’s notice in writing of his/her intention to terminate the employment.

7.

Following termination of employment, all obligations under this agreement shall end except for the provisions of items 4 and 5, and any causes of action that may arise from the circumstances of the termination.

9.

This agreement constitutes the entire agreement between Company and Employee. No representations made by the Company’s directors or other agents will have any effect unless they are included in this agreement.

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10.

This agreement shall be interpreted and, if necessary, adjudicated in accordance with the laws of Victoria.

11.

Until written notice of other email address(es) are exchanged between the parties, all notices legally required shall be deemed delivered by emailing to the following email addresses and shall be deemed to have been communicated when the email is sent: Company address…………………………………………………………………………………… Employee address………………………………………………………………………………….. In witness to their agreement to these terms, Company’s representative and Employee affix their signatures below: …………………………………… ………………………………………… Dated ……. day of ……. 20..

1.

With a partner read the contract carefully. Make sure you understand the terms of the contract. Now, with one partner acting for Ibis and the other as acting as the prospective Employee, negotiate the terms that have not been completed.

2.

Is this a simple contract or a formal contract? Explain.

3.

Is this a unilateral or a bilateral contract? Explain.

4.

Is this a “standard form” contract? Explain.

5.

Are clauses 2.1, 2.2, 2.3 and 6 reasonable terms for an Employee to sign? If not, renegotiate them.

6.

What is the effect of clauses 4 and 5?

7.

Assume the Company orally agrees to a fixed term contract of one year. What should the Employee do? Consider the effect of Clause 9.

8.

What is the effect of clause 11?

9.

Drafting exercise – draft a clause that gives the Employee reasonable compassionate leave entitlements for particular events.

chapter 3 Offer and Acceptance

Electronic Transactions Acts — Main Features Validity of electronic transactions [3.610] The Electronic Transaction Acts provide that a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications. 3 To be acceptable, it must be reasonable to expect that the information will continue to be accessible for future reference and the method for storing the information must comply with any requirements of the regulations under the Act as to the kind of data storage device on which the information is to be stored. In the case of a document that is required to be retained, additional information as to the origin and destination of the communication, and as to the time that the electronic communication was sent and received, are to be retained and the method for retaining information must provide a reliable means of assuring that the integrity of the information is maintained.

Writing [3.620] Where a law permits or requires a person to give information in writing, that permission or requirement is taken to have been met if the person gives the information by means of an electronic communication. 4 Generally, for information given by means of an electronic communication to be acceptable, it must be reasonable to expect that the information will continue to be accessible for future reference, and the recipient of the information must consent to being given the information by means of an electronic communication. For example, legislation requires that certain contracts must be in writing or evidenced in writing, such as depositions or assurances with respect to real property.

Signatures [3.630] Where a law requires a person to provide a signature, that requirement is taken to have been met if a method is used to identify that person and to indicate the person’s intention in respect of the information communicated. 5 Additionally, the method must be as reliable as is appropriate for the purposes for which the information is communicated in the light of all the circumstances. Finally the recipient must consent to the use of this method.

3

4

5

Electronic Transactions Act 1999 (Cth), s 8; Electronic Transactions Act 2000 (NSW), s 7; Electronic Transactions (Victoria) Act 2000 (Vic), s 7; Electronic Transactions (Queensland) Act 2001 (Qld), s 8; Electronic Transactions Act 2000 (SA), s 7; Electronic Transactions Act 2011 (WA), s 8; Electronic Transactions Act 2000 (Tas), s 5; Electronic Transactions Act 2001 (ACT), s 7; Electronic Transactions (Northern Territory) Act 2000 (NT), s 7. Electronic Transactions Act 1999 (Cth), s 9; Electronic Transactions Act 2000 (NSW), s 8; Electronic Transactions (Victoria) Act 2000 (Vic), s 8; Electronic Transactions (Queensland) Act 2001 (Qld), ss 9–13; Electronic Transactions Act 2000 (SA), s 8; Electronic Transactions Act 2011 (WA), s 9; Electronic Transactions Act 2000 (Tas), s 8; Electronic Transactions Act 2001 (ACT), s 8; Electronic Transactions (Northern Territory) Act 2000 (NT), s 8. Electronic Transactions Act 1999 (Cth), s 10; Electronic Transactions Act 2000 (NSW), s 9; Electronic Transactions (Victoria) Act 2000 (Vic), s 9; Electronic Transactions (Queensland) Act 2001 (Qld), ss 14–15; Electronic Transactions Act 2000 (SA), s 9; Electronic Transactions Act 2011 (WA), s 10; Electronic Transactions Act 2000 (Tas), s 7; Electronic Transactions Act 2001 (ACT), s 9; Electronic Transactions (Northern Territory) Act 2000 (NT), s 9. See generally, Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1.

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Production of documents [3.640] A person who is required or permitted by law to produce a document in hard copy may instead produce the document in electronic form. 6 Generally, for information given by means of an electronic communication to be acceptable, it must be reasonable to expect that the information will continue to be accessible for future reference, and the recipient of the information must consent to being given the information by means of an electronic communication. For example, legislation requires that certain contracts must be in writing or evidenced in writing, such as depositions or assurances with respect to real property.

Consent [3.650] The inclusion of a consent provision for electronic writing, signature and production provisions has been regarded as a serious weakness. Parties must reach an agreement in advance as to the use of the particular electronic communication. Consent includes consent that can reasonably be inferred from the conduct of the person concerned.

Retention of information and documents [3.655] The requirement to record information in writing, to retain a document in hard copy or to retain information the subject of an electronic communication may be met by recording or retaining the information in electronic form. 7 To be acceptable, it must be reasonable to expect that the information will continue to be accessible for future reference and the method for storing the information must comply with any requirements of the regulations under the Act as to the kind of data storage device on which the information is to be stored. In the case of a document that is required to be retained, additional information as to the origin and destination of the communication, and as to the time that the electronic communication was sent and received, are to be retained and the method for retaining information must provide a reliable means of assuring that the integrity of the information is maintained.

Time of dispatch of electronic communications [3.660] An electronic communication is taken to have been dispatched by the sender when the electronic communication “leaves an information system under the control” of the sender. However, where the electronic communication has not left an information system under the control of the sender, the time of dispatch is when the electronic communication is received by the addressee. This second circumstance was included in the recent amendments to the Electronic Transactions Acts, and deals with the position where, in certain email systems, the sender retains the ability to recall an email from the recipient; hence it is dispatched when “received”. 8 6

7

8

Electronic Transactions Act 1999 (Cth), s 11; Electronic Transactions Act 2000 (NSW), s 10; Electronic Transactions (Victoria) Act 2000 (Vic), s 10; Electronic Transactions (Queensland) Act 2001 (Qld), ss 16–18; Electronic Transactions Act 2000 (SA), s 10; Electronic Transactions Act 2011 (WA), s 11; Electronic Transactions Act 2000 (Tas), s 8; Electronic Transactions Act 2001 (ACT), s 10; Electronic Transactions (Northern Territory) Act 2000 (NT), s 10. Electronic Transactions Act 1999 (Cth), s 12; Electronic Transactions Act 2000 (NSW), s 11; Electronic Transactions (Victoria) Act 2000 (Vic), s 11; Electronic Transactions (Queensland) Act 2001 (Qld), ss 19–21; Electronic Transactions Act 2000 (SA), s 11; Electronic Transactions Act 2011 (WA), s 11; Electronic Transactions Act 2000 (Tas), s 9; Electronic Transactions Act 2001 (ACT), s 11; Electronic Transactions (Northern Territory) Act 2000 (NT), s 11. Electronic Transactions Act 1999 (Cth), s 14; Electronic Transactions Act 2000 (NSW), s 13; Electronic Transactions (Victoria) Act 2000 (Vic), s 13; Electronic Transactions (Queensland) Act 2001 (Qld), s 23; Electronic Transactions Act 2000 (SA), s 13; Electronic Transactions Act 2011 (WA), s 13; Electronic Transactions Act 2000 (Tas), s 11; Electronic Transactions Act 2001 (ACT), s 13; Electronic Transactions (Northern Territory) Act 2000 (NT), s 13. See Explanatory Note to the UN Convention on the use of Electronic Communications in International Contracts (INT) paras 177–178.

chapter 3 Offer and Acceptance

“I accept the offer on the plasma 3D TV – here is my card – please deliver it as soon as possible.” Mary told him to slow down. “Unfortunately, there has been a rush and we've sold out”, she said. “Look” said Ben, “I know my business law – we've got a contract”. Mary told him he was a young fool but went on to say: “The only 3D plasma left is the demonstration model, and you can have that for $6,000. Not a bad price as they usually sell for around $7,500. That should make you happy.” Ben was not sure and said that he would think about it and let her know by noon the next day (Friday). Mary said she would definitely keep it for him until then. However, at 9.00 am on Friday Jin Tao walked into the store, saw the demonstration model, and offered Mary $6,500 for it. Mary sold it to her. At 10.00 am Friday Ben rang Mary and told her that he would buy the demonstration set at the price she offered. Mary then told him the bad news – the set had been sold. Ben comes to your law offices and seeks your advice as to whether he and Hardly Normal Pty Ltd had a contract on either Thursday or Friday. Advise him. 5.

6.

David wanted to purchase a car. He found a 1988 Volvo station-wagon and decided that it would be perfect. David rang the number in the advertisement and spoke to Sarah, the Volvo's owner. Consider the following separate and unrelated scenarios: (a)

After some negotiations, Sarah offers to sell David the car for $14,500 and says she will keep her offer open for the next 30 minutes. Five minutes later, while David was considering the offer, Sarah receives a call from Angelo who offers $15,500 for the car. She immediately accepts Angelo’s offer. David calls a few minutes later (within the 30-minute limit) and he informs Sarah that he accepts the offer, wants the car and will sue her for breach of contract.

(b)

After some negotiations, Sarah offers to sell David the car for $14,500. In response, David says “I need some time to think about it. I'll call you back soon.” David calls back and offers Sarah $14,000 for the car. Sarah says it is not enough. David then says “Ok. I was just seeing if I could knock you down a bit. I’ll take it for $14,500.” Sarah says, “No, you won’t, you creep” and refuses to sell. Advise David whether he has a contract with Sarah.

(c)

After some negotiations, Sarah offers to sell David the car for $14,500. David hesitates and says he will contact her by 5.00pm Friday. She agrees to keep the offer open until that time. At 4.00pm on Friday, David sends an email accepting the offer. Sarah does not open her emails until the following morning and it is only then that she sees David’s acceptance. Unfortunately she sold the car the previous day at 6.00pm. Advise David.

Reginald decided he no longer wanted to keep the holiday house he owns at Lorne on Victoria's south-west coast. He agrees to sell it to his brother, Tom. They agree on a purchase price of $280,000 and sign a document dated 10 June by which Tom agreed to buy and Reginald agreed to sell “subject to a proper contract being prepared on these same terms by the purchaser's solicitors”. The settlement date was named as 10 September, on

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which date the purchase money was to be paid and possession given to Tom. A contract of sale, prepared by Tom's solicitors, was sent to Reginald for signature on 20 June. However, Reginald refused to sign, saying he had changed his mind. Advise Tom of any rights he may have. Please cite relevant case authorities 7.

Watch this youtube video that was central to Leonard v PepsiCo (see [3.60]) https://youtu.be/U_n5SNrMaL8. Explain: (a) the nature of a unilateral offer and; (b) why this advertisement was regarded as “puffery” whereas the Carbolic Smoke Ball advertisement was regarded as an offer.

8.

On 1 June Rita sends Penelope a letter in which she offers to buy Penelope’s yacht for $1,000,000. This letter also states that if she hears nothing from Penelope within 7 days, she will consider the offer to have been accepted. Penelope receives the letter and decides to do nothing. On 9 June, Rita telephones Penelope and states that since Penelope has obviously accepted her offer, she would like to settle the contract as soon as possible. Penelope replies that she is currently negotiating to sell her yacht to Paul. Rita is furious and insists that they have a binding agreement. Will Penelope be breaching a valid contract with Rita if she sells her yacht to Paul?

9.

In an advertisement by “Regrowth”, the company claims its tablets, if taken as directed over a 12 month period, will “make hair grow on a bald man’s head.” “We could make a billiard ball hairy” is the claim. The advertisement further promises to pay $1,000 to any “bald head” that is not “lush” at the end of the 12 months. Jack sees the advertisement and buys the tablets for $2000, payable monthly. He takes them as directed for 12 months but is as bald as ever at the end. He contacts “Regrowth”, shows them the “before and after” photos and makes a claim for the $1000.In reply, “Regrowth” refuses to pay, arguing that: (a)

advertisements are not offers;

(b) (c)

anyway, this particular advertisement was clearly a jokey thing; and as Jack had never accepted the “offer” there could not be a contract.

Advise Jack.

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walk from the box to the betting ring to place bets. They agree that each will place a bet of $100 per race. On the third race of the day George places a bet of $100 for a win and a place on a long-shot called Trust and Loyalty and wins $24,500. He then refuses to share the proceeds with Michael, saying it was just the luck of the draw and Michael would have done the same. Advise Michael if he has contractual rights against his (ex-) best friend. 3.

Mac Investments Pty Ltd (MI) received a call from Como Bank Ltd (Como). It was concerned about lending a substantial sum of money to Bankers Trust Pty Ltd (BT), a subsidiary company of MI. In the wake of the 2009 Global Financial Crisis, the parent company was aware that BT needed to borrow funds to continue trading in the securities and futures market and wrote a letter to Como in the following terms: MI supports the loan to BT and undertakes to ensure that it remains in a position to repay the loan. BT subsequently defaults on the loan and Como looks to MI to compensate it for its losses. Advise Como of its rights in this matter and explain how it might better protect itself in the future.

4.

Promises made by governments that are of a political nature (for example, the promise to pay a subsidy to woolgrowers or to build a National Broadband Network or to rebuild infrastructure after floods or bushfires) are not legally enforceable. Can you justify this position?

5.

In 2001 Jimmy and four of his high school friends decided to form a band and have some fun. They called themselves Cold Spanner. After a few years of playing the pubs and clubs they made a successful CD and were becoming well known. One member of the band, Jaz, was writing songs for Cold Spanner and other artists and one of his songs was picked up by Freddy and the Dreamers. At this point, the group had a meeting about future directions. It was attended by the band's accountant/lawyer. At this meeting, when asked about the proceeds and royalties from his song writing, Jaz said he would share his income from his song writing with the group. This happened for several years but after Cold Spanner broke up in 2008 Jaz stopped sharing the proceeds. Jimmy and the rest of the band said this was a breach of the contract. Jaz said he never intended to make a contract in the first place. Advise Jaz.

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Consideration The requirement of consideration [5.20] Broadly speaking, the requirement of consideration means that a promise can only be legally enforced by the promisee (the person to whom the promise is made) if the promisee can show that he or she has given or promised to give something of value in return for the promise. For example a promise by A to give B her car is not enforceable because nothing of value (for example, a promise to pay A $10,000 or a promise to allow A to use his holiday house) has been given or promised by B.

The definition of consideration [5.30] In Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, Lord Dunedin adopted the following definition of consideration: “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable”: at 855. Consideration was described in the New South Wales Court of Appeal as follows: “Without consideration, a promise is unenforceable at law. The modern theory of consideration has arisen from the notion that a contract is a bargain struck between the parties by an exchange. By that modern theory, consideration must be satisfied in the form of a price in return for the promisor’s promise. The price can be in the form of an act, forbearance or promise”: Beaton v McDevitt (1987) 13 NSWLR 162, 168 per Kirby P. The following rules have been developed by the courts in cases where the dispute concerned whether the promisee had provided value (in one form or another) for the promise he or she was seeking to enforce.

chapter 5 Consideration, Promissory Estoppel and Formalities

agreement or some memorandum of it is in writing signed by the party to be charged or by some person authorised by that party to contract on their behalf. The statute has been repealed in its application to most Australian States and Territories but a number of its provisions have been re-enacted by State legislation in similar terms. 2 The main types of contract required to be evidenced by a written memorandum by s 4 of the Statute or local re-enactment of its provisions are: (a) contracts dealing with an interest in land; and (b) contracts of guarantee.

(a) Contracts dealing with an interest in land [5.330] A contract for the sale or other disposition of land or any interest in land is required to be evidenced in writing. This part of s 4 of the Statute of Frauds 1677 (IMP) has been replaced in most States and Territories by local enactments in substantially similar terms. 3 Agreements to buy, sell or lease land fall within the provision, and a contract to assign a lease has been held to be an interest in land and therefore required to be evidenced in writing. Case law provides examples of what constitutes a sale or other disposition of land or any interest in land. The New South Wales Court of Appeal held that a contract for the declaration of a trust over land was a disposition of an interest in land: Khoury v Khouri (2006) 66 NSWLR 241 at [3], [15], [47]. An option for the sale of land also falls within the provision: Todrell Pty Ltd v Finch (No 1) [2008] 1 Qd R 540 at [86]. A profit à prendre gives a right to remove something from the land of another person. In Duff v Blinco (No 2) [2007] 1 Qd R 407, the profit à prendre gave a right to take timber from the plaintiff’s land. The Queensland Court of Appeal held that a profit à prendre was not a contract for the sale or other disposition of land, so it did not fall under the writing requirement of this section of the Statute.

(b) Contracts of guarantee [5.340] A further important category of contract covered by the Statute of Frauds 1677 (IMP) was a “promise to answer for the debt, default or miscarriage of another person”. This expression has been held to cover a contract of guarantee or suretyship: Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488 at [61]–[63]. It does not apply to a contract of indemnity. The provision does not apply in New South Wales, South Australia, or the Australian Capital Territory. 4 2

3

4

The Statute no longer applies in the following States and Territories: Imperial Acts Application Act 1969 (NSW), s 8(1); Statute of Frauds 1972 (Qld), s 3(1); Statutes Amendment (Enforcement of Contracts) Act 1982 (SA), s 3; Imperial Acts (Substituted Provisions) Act 1986 (ACT), s 3(1), relocated by Law Reform (Miscellaneous Provisions) Act 1999 (ACT), Sch 3 and relocation repealed by Civil Law (Property) Act 2006 (ACT), s 507 and Sch 3; Law of Property Act 2000 (NT), s 221 & Sch 4. In Victoria the Statute of Frauds 1677 (IMP), s 4 was replaced by local enactment in the same terms by the Instruments Act 1958 (Vic), s 126, but the latter section only applies, in effect, to guarantees and contracts for the sale of land since the commencement of the Sale of Goods (Vienna Convention) Act 1987 (Vic), s 8. In Tasmania, the Statute of Frauds 1677 (IMP), s 4 has been replaced by a local enactment in the same terms: Mercantile Law Act 1935 (Tas), s 6. The Statute of Frauds 1677 (IMP), s 4 still applies in Western Australia but is limited, in effect, to guarantees and contracts for the sale of land: Law Reform (Statute of Frauds) Act 1962 (WA), s 2. Conveyancing Act 1919 (NSW), s 54A; Instruments Act 1958 (Vic), s 126; Property Law Act 1974 (Qld), s 59; Law of Property Act 1936 (SA), s 26; Mercantile Law Act 1935 (Tas), s 6 and Conveyancing and Law of Property Act 1884 (Tas), s 36; Law of Property Act 2000 (NT), s 62; Civil Law (Property) Act 2006 (ACT), s 204. The Statute of Frauds 1677 (IMP), s 4 still applies in Western Australia but is limited, in effect, to guarantees and contracts for the sale of land (Law Reform (Statute of Frauds) Act 1962 (WA), s 2) and the Property Law Act 1969 (WA), s 34(1) also contains a provision to similar effect. The Statute no longer applies in the following States and Territories: Imperial Acts Application Act 1969 (NSW), s 8(1); Statutes Amendment (Enforcement of Contracts) Act 1982 (SA), s 3; Imperial Acts (Substituted Provisions) Act 1986 (ACT),

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2.

Peter, an accountant, lives in an apartment that he leases from Sally for $2,000 per month. In August 2008 Peter invested most of his money in the booming share market only to see his investment halve in the space of four weeks. By December 2008, with his income slashed, Peter was unable to pay his rent and so went to see Sally. She agreed to accept half the rent until December 2010. However, in September 2009 Peter was promoted and the market had improved. Sally wrote and told him he would have to resume paying $2,000 per month in October 2009. His reaction was so negative that she also claimed the rental she had foregone from December 2008 to October 2009. (a)

Please advise Peter whether he has to resume paying the original rental immediately.

(b)

Advise Sally whether she could claim the rent foregone (that is, $10,000).

3.

Jonathon and his family were negotiating a lease for commercial premises to be used for their Italian restaurant. Part of the negotiation concerned the ability of Jonathon to demolish a wall in order to remodel the interior and build a pizza oven. The landlord shook Jonathon’s hand and told him they had a deal and that he could go ahead and get started. Jonathon took out a large bank loan to finance the remodelling. Four weeks later, Jonathon received a letter from the landlord indicating that he did not intend to proceed with the lease. Jonathon has already spent $100,000 on the remodelling but he has not received a signed a lease as yet. Since there is no breach of contract, does Jonathon have any other recourse in equity?

4.

Judy runs an antique jewellery store. One evening a hooded man stormed into her store and robbed $100,000 from the register. One month later, Judy decides to run a stocktake sale from 5pm to midnight, but is still afraid of being robbed. She asks a police officer she knows, Peter, if he will attend her store while the stocktake sale is on and provide her with personal protection from any potential robbers. She offers to pay him $1000 for his effort. Peter agrees, even though it is normally his night off duty. During the sale, Peter stays by Judy’s side and protects her. The next day, Peter attends the store to collect his payment and Judy refuses to pay him for “doing his duty”. Can Peter sue Judy to enforce their verbal agreement?

5.

Mike enters into a contract with his tax accountant, Andrew, to prepare his business tax return within four weeks of the end of the tax year. The contract provides that Andrew is to receive $1,500 for his work and specifies that time is of the essence. Three weeks after the end of the tax year, Andrew calls Mike saying that there may be delays in processing the tax return. He demands an extra $500 to make sure that the return is finished on time. Mike is hesitant but agrees. The tax return is finished on time and Mike receives his tax refund. He sends Andrew a cheque for $1,500. Andrew rings Mike to remind him about the extra $500 “as agreed” and says that if Mike refuses to pay, he will take legal action. Can Andrew insist on the $500?

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Minors [6.20] Formerly, a minor 1 was a person who had not reached the age of 21 years. However, in all States and Territories the age of majority has been reduced to 18 years. 2 In New South Wales and South Australia the legal position of minors differs markedly from that in the other States. The position in these States will be considered separately at the end of this section. With the exception of New South Wales and South Australia, contracts with minors may be considered under three headings depending on their legal effect. Such contracts may be: (a)

valid;

(b)

voidable; or

(c)

void.

Valid contracts [6.30] Two classes of contracts with minors are binding, namely: (a)

a contract for the supply of “necessaries”; and

(b)

a beneficial contract of service, such as a contract of apprenticeship.

A minor is liable under a contract for “necessaries” [6.40] The word “necessaries” is not confined to articles necessary for the maintenance of life but includes goods and services fit to maintain the person in question at the standard of living and in the position in life which he or she enjoys. So far as goods are concerned, necessaries have been defined as “goods suitable to the condition in life of such minor and … to his actual requirements at the time of the sale and delivery”. 3 In any given case there are two questions involved: (a)

are the goods or services within the classes of goods which can be classed as “necessaries” for a person in the circumstances of the minor in question?; and

(b)

were the goods or services in fact necessary to the minor at the time?

It follows that no hard and fast rules can be laid down as to what a minor will be made liable to pay for, as the position must vary in every case. Thus, in Scarborough v Sturzaker (1905) 1 Tas LR 117, it was held that a minor who was accustomed to cycle a distance of some 12 miles to his daily employment was liable to pay for a new bicycle. By contrast, in Bojczuk v Gregorcewicz [1961] SASR 128, a minor who lived in Poland and had a permanent job there, but who wished to emigrate to Australia, was held not to be liable to repay to a relative, who had paid for her passage to Australia, the cost of the passage. If the court finds that the goods or services are not within the classes of necessaries, or were not in fact necessary, then the minor is not liable to pay nor, unless he or she obtained them by fraud, to return the goods. Even where the goods are found to be necessaries, the minor is not bound to pay the contract price but only a reasonable price. 1 2

3

The earlier cases and legislation used the expression “infant” when referring to a person below the age of majority. However, the modern legislative trend is to use the more appropriate term “minor”. Minors (Property and Contracts) Act 1970 (NSW), s 6(1); Age of Majority Act 1977 (Vic), s 3(1); Law Reform Act 1995 (Qld), s 17; Age of Majority (Reduction) Act 1971 (SA), s 3(1); Age of Majority Act 1972 (WA), s 5(1); Age of Majority Act 1973 (Tas), s 3(1); Age of Majority Act 1974 (ACT), s 5; Age of Majority Act (NT), s 4. Goods Act 1958 (Vic), s 7; Sale of Goods Act 1896 (Qld), s 5; Sale of Goods Act 1895 (SA), s 2; Sale of Goods Act 1895 (WA), s 2; Sale of Goods Act 1896 (Tas), s 7; Sale of Goods Act 1954 (ACT), s 7; Sale of Goods Act 1972 (NT), s 7. In New South Wales the position is now governed by the Minors (Property and Contracts) Act 1970 (NSW).

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(a)

Those binding unless repudiated by the minor during their minority or within a reasonable time after attaining their majority

(b)

Those not binding unless ratified within a reasonable time after attaining the age of majority:

Those binding unless repudiated by the minor during their minority or within a reasonable time after attaining their majority [6.110] This applies to contracts which are of a permanent nature – those which involve a continuing obligation, for example: (a)

shares in a company;

(b)

leases;

(c)

partnerships; or

(d)

marriage settlements.

A minor is bound by such contracts unless he or she takes steps to repudiate them within a reasonable time after attaining majority. If the minor has received no benefit under the contract he or she may repudiate it and also secure a return of any money paid on the contract. If, however, the minor had the benefit or the use of goods, he or she, while able to renounce the contract, cannot obtain a refund of the money paid for them: Pearce v Brain [1929] 2 KB 310. In other words, rescission avoids future liability only.

Those not binding unless ratified within a reasonable time after attaining the age of majority [6.120] These are contracts which are not of a continuing nature, for example the purchase of goods which are not necessaries. These contracts require the express ratification of the minor after coming of age to make them binding. In Victoria these contracts, that is those not binding unless ratified within a reasonable time after attaining the age of majority, are not effective, as in that State legislation makes such contracts absolutely void and incapable of ratification by the minor after attaining majority. 4

Void contracts [6.130] In Victoria all contracts whether simple or made under a deed are void: (a)

for the repayment of money lent or to be lent;

(b)

for the payment of goods supplied or to be supplied (other than contracts for necessaries); or

(c)

all accounts stated (that is, an account acknowledged by the parties to be correct): Supreme Court Act 1986 (Vic), s 49.

In all states a minor is not liable on a bill of exchange (or cheque) even if given for the price of necessaries: Re Soltykoff; Ex parte Margrett [1891] 1 QB 413. A minor cannot give a valid security to repay advances even if made to enable her or him to purchase necessaries: Martin v Gale (1876) 4 Ch D 428. In Victoria a contract made by a minor, after he or she comes of age, to repay a loan contracted during minority is void. 5 4

Supreme Court Act 1986 (Vic), s 49.

5

Supreme Court Act 1986 (Vic), s 51.

chapter 6 Contractual Capacity

Misrepresentation by minors [6.140] Minors are not liable for a tort 6 directly connected with any contract upon which no action will lie against them. It is impossible indirectly to enforce such a contract by changing the form of action to one in tort. Thus an action of deceit does not lie against minors who, by falsely representing themselves to be of full age, have fraudulently induced another to contract with them, since to enable a plaintiff to convert a breach of contract into a tort would destroy the protection that the law affords to minors: Leslie v Sheill [1914] 3 KB 607. 7

Corporations [6.170] Corporations are created by the Corporations Act 2001 (Cth) and are referred to as “bodies corporate”. Many businesses are conducted through corporations. However, it is to be noted that the Corporations Act 2001 gives corporations all of the legal capacity of a natural person: s 124. This legal capacity allows a corporation to enter contracts, own assets, and sue and be sued (for example, for negligence or breach of contract). In some respects, a company has greater capacity than a natural person as it also has the capacity to issue shares in itself: s 124. A corporation is able to enter a contract either directly (by using the company seal, or by the directors signing) or by using an agent: ss 126 and 127. Most people would be familiar with corporations through the transactions they engage in with businesses in daily life, for example, banking, purchasing food in a supermarket, education services. In most of these routine, everyday interactions, the corporation often acts through an agent (usually an employee) rather than acting directly itself. Although the Corporations Act 2001 gives corporations full legal capacity, a corporation may specify in its company constitution that its legal capacity is restricted in certain ways. For example, a corporation may state in its constitution that it will not borrow money, or, that it will not sell off its main business venture, or, that contracts must be signed by all of the members of the board. Such statements in the constitution will not affect the corporation’s capacity to contract with third parties and the corporation will be bound (providing the contract is valid in other respects): s 125. Under the revisions to the Corporations Act 2001, such restrictions in the corporation’s constitution will be binding internally on the members and directors and officers of the corporation. The constitutional restrictions will not be binding on third parties dealing with the corporation – unless the third party is aware of the restriction: s 128.

Mentally incapacitated and intoxicated persons [6.180] Mentally incapacitated and intoxicated persons may be made liable under contracts for the provision of necessaries. However, all other contracts entered into by them will be voidable provided: (a)

they were incapable of understanding the nature of what they were agreeing to at the time they contracted; and

(b)

the other party was aware, or should have been aware, of their incapacity.

Accordingly, a person of unsound mind will not be able to avoid a contract where the other party was unaware of their mental incapacity: Hart v O’Connor [1985] AC 1000. The onus of proving the existence of both incapacity and the knowledge of the other party of that incapacity rests with the mentally incapacitated or intoxicated person. 6

A tort is a civil wrong, committed by one person against another, consisting in the infringement of a right created independent of contract, giving the injured party a right to claim damages or compensation.

7

This is no longer the position in New South Wales: see Minors (Property and Contracts) Act 1970 (NSW), s 48.

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The effect of mental incapacity or intoxication is to make the contract voidable at the option of the person suffering the disability and does not entitle the other party to set aside the contract: Gibbons v Wright (1954) 91 CLR 423. A voidable contract can be ratified on the intoxicated person regaining sobriety, or the mentally incapacitated person recovering their sanity, and the ratified contract will then become binding: McLaughlin v City Bank of Sydney (1912) 14 CLR 684. Both mentally incapacitated and intoxicated persons are bound to pay a reasonable price for necessaries obtained while incapable of knowing what they were doing. 8

Married women [6.190] Formerly, married women lacked legal capacity. Women were regarded as losing their legal capacity on marriage when the “very being or legal existence of the women is suspended during the marriage and … consolidated into that of the husband”. 9 This concept was known as “coverture” and theoretically provided the woman, upon marriage, with the protection of her husband. The position of married women is now much the same as that of a single woman or a man and this is enshrined in legislation throughout Australia. 10

Bankrupts [6.200] A bankrupt is not deprived of their general capacity to contract. However, there are certain provisions of the Bankruptcy Act 1966 (Cth) which relate to dealings by bankrupts. If an undischarged bankrupt, or a debtor who is party to a debt agreement, obtains credit or enters into a contract for goods and services involving an obligation to pay $3,000 or more (indexed in accordance with the Consumer Price Index) without disclosing they are an undischarged bankrupt, they are liable to imprisonment for up to three years: s 269. An undischarged bankrupt is liable to the same penalty if they carry on business under an assumed or firm name without disclosing the bankrupt’s true identity and the fact that they are an undischarged bankrupt. Certain transactions by a bankrupt in relation to property acquired after the date of the sequestration order are valid against their trustee provided they are completed before any intervention by the trustee: s 126.

Further reading See contract texts listed at the end of Chapter 2.

8

9 10

Sale of Goods Act 1923 (NSW), s 7; Goods Act 1958 (Vic), s 7; Sale of Goods Act 1896 (Qld), s 5; Sale of Goods Act 1895 (SA), s 2; Sale of Goods Act 1895 (WA), s 2; Sale of Goods Act 1896 (Tas), s 7; Sale of Goods Act 1954 (ACT), s 7; Sale of Goods Act 1972 (NT), s 7. Sir William Blackstone, Commentaries on Laws of England (Chapter 15), (1765-1769), Co Lit 112. Married Persons (Equality of Status) Act 1996 (NSW), s 4; Marriage Act 1958 (Vic), ss 156 – 161; Law Reform Act 1995 (Qld), s 18; Law of Property Act 1936 (SA), ss 92 – 111; Law Reform (Miscellaneous Provisions) Act 1941 (WA), ss 2 – 3; Married Women’s Property Act 1935 (Tas), ss 3, 7, 11; Married Persons (Equality of Status) Act 1989 (NT), s 3.

chapter 6 Contractual Capacity

Tutorial activities 1.

Joshua, a 15-year-old boy, signed a contract for a mobile phone service. The contract obliges him to pay $29.95 a month for a year. After the first month he refuses to pay. His parents also refuse to take over the contract on his behalf. Please advise the mobile phone company whether it can sue Joshua (or his parents).

2.

James Marsden, who owned $280,000 worth of shares in a mining company, was an alcoholic. His fondness for alcohol was well known. On one occasion, when he was under the influence, the local bank manager got Marsden to transfer the shares to the bank as security for an unsecured loan it had given to Marsden three months earlier. When he sobered up and learned what had happened he wanted to have the agreement declared void. Advise him.

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Mere puffs – these are exaggerated statements that a reasonable person would not take seriously. Bert’s statement that the cottage is “an absolute gem…” is an example of a “mere puff”. Representations – a representation is a statement of fact made during pre-contractual negotiations with the intention to induce the other party to enter into the contract. Bert’s statements about river flows, fish in the dam and permits automatically issued by the Department are likely to be regarded as representations. The statement that “I really think the venture will succeed” is a statement of opinion and, unless Bert did not actually hold that opinion, it is unlikely to be a misrepresentation. These statements may also constitute misleading or deceptive conduct: see Chapter 13. Terms are the legally binding promises that become part of the contract. In the above example, the names of the parties to the contract, the price, the settlement date, the standard conditions and the promise regarding the permit may all be regarded as express terms. We consider the terms of the contract in Chapter 9. In this chapter we consider each of the categories of representations – fraudulent, innocent, and negligent.

Fraudulent misrepresentation [7.490] Fraud exists “when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false”: Derry v Peek (1889) 14 App Cas 337. Fraud may also exist where there is a partial statement of fact in such a manner that the withholding of what is not stated “makes that which is stated absolutely false”: Peek v Gurney (1873) LR 6 HL 377 at 403. For an action for fraud to succeed, or for the other party to have the remedies given to a person induced to enter into a contract by means of fraudulent misrepresentation, the following six elements must be established: 1.

The representation must be one of fact.

2.

The representation must be false.

3.

The party who makes such representation must know that what they are stating is false, or they must have no belief in its truth, or be reckless about whether it is true or false.

4.

The party who makes the representation must intend the other party to the contract to act upon such representation.

5.

The representation must, in fact, have been acted upon by the other party.

6.

The person claiming must have suffered damage.

The presence of each element is necessary in order to constitute the grounds for an action for fraud, or to afford those remedies to the other party to the contract.

1. Statement of fact [7.500] To be a misrepresentation, a person must make a representation of a past or present fact. For example, “we have a contract with Chinese investors to build a railway and a port”. That is a statement of fact that is either true or false when made. A statement of opinion or intention or a prediction about the future cannot be true or false at the time the statement is made. However, they may be misrepresentations if the representor does not, in fact, hold that opinion or have that intention or does not have reasonable grounds for making the prediction. In our earlier example, if Bert did not hold the opinion that the venture would succeed, the statement could be a statement of fact.

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Although a misrepresentation will generally consist of a statement or some overt conduct, silence (or inaction) may also constitute a misrepresentation. In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 the Federal Court summed up the position in relation to silence or non-disclosure: “[T]here is no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed”: at 32. Thus, although there is in general no duty to disclose information or facts known by one side but not known to the other, there are two recognised situations where there is a positive duty to disclose: (1)

Where the statement may be literally true but, left alone, creates a false impression. For example, a statement that “the shopping centre is fully let” may be true but if, in fact, one-third of the tenants have given notices of intention to terminate their leases because of a dispute with the landlord, the statement may be a misrepresentation. (However, if the matter had not arisen during the negotiations, the landlord would not have had a duty to disclose.)

(2)

Where the statement is true at the time it is made but circumstances change so that it becomes untrue. For example, in With v O’Flanagan [1936] Ch 575, a doctor made a true statement about the number of patients he had but, before the contract was signed, there was a significant decline in the numbers. Similarly, where the representor believes the statement to be true at the time it is made but subsequently discovers it is false, he or she may be guilty of fraudulent misrepresentation unless the true facts are disclosed.

2. Falsity [7.510] This is obviously a necessary ingredient of liability. It is a question of fact in each case whether the representation is false or not. If the representation is true when made but becomes false to the knowledge of the representor before the contract is concluded, and the representor concludes the contract without disclosing the falsity of the representation, they are just as liable as if the representation had been false to their knowledge when originally made: Jones v Dumbrell [1981] VR 199.

3. Known to be false, or without belief in its truth, or recklessly careless whether it be true or false [7.520] This is a further element of fraud. The representor need not actually know that what they are representing is in fact untrue. The representor is liable if they make the false statement when they have no knowledge whether it is true or false, and also when they do not trouble to verify the truth of what is said. If, on the other hand, the person making the representation genuinely believed the statement to be true, there is no fraud even though their belief was formed negligently. The High Court has stated that: “In order to succeed in fraud, a representee must prove, inter alia, that the representor had no honest belief in the truth of the representation in the sense in which the representor intended it to be understood”: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 578.

4. Intended to be relied upon [7.530] This means, for example, intending that the other party enter into a contract or do any other act in reliance on the statement.

5. In fact relied upon [7.535] The misrepresentation must have induced the other party to enter into the contract. Accordingly, if the party to whom the representation is made is fully aware of the falsity of the statement, they will be

chapter 7 Genuine Consent

unable to show that it induced them to enter into the contract. However, even where the person to whom the representation was made did not believe the representation to be entirely true, they will still have a remedy for fraudulent misrepresentation so long as they were not aware at the relevant time of the extent of the fraud: Gipps v Gipps [1978] 1 NSWLR 454. In Redgrave v Hurd (1881) 20 Ch D 1, Hurd, the purchaser of a legal practice, relied on a misrepresentation concerning the takings of the practice. The vendor argued that as the purchaser could have discovered the correct earnings figure he should not be able to say the misrepresentation induced the contract. The court held that the fact that Hurd had an opportunity to investigate whether a representation was true or false but did not do so was insufficient to prevent reliance upon that misrepresentation.

6. Resulting in damage [7.550] If no damage is suffered from the false representation, no action lies.

Remedies for fraudulent misrepresentation [7.560] A person who has been induced to enter into a contract by reason of fraudulent misrepresentation is in the following position: 1.

They may refuse to be bound by the contract and bring an action for its rescission where such a course is necessary, for example in the case of contracts under which the defrauded party has given some benefit before the fraud was discovered.

2.

They may take advantage of the contract to the extent of retaining what benefits they may have received and sue for fraud, claiming such damages or loss as they have sustained.

3.

They may successfully defend any attempts to enforce the contract against them.

In cases 1. and 3. the representee is treating the contract as at an end. In case 2. the representee is affirming the contract, that is allowing the contract to stand, but is claiming damages for the loss they have suffered through the misrepresentation. Where the latter approach is adopted, the general principle in assessing damages is that the plaintiff is to be put, so far as possible, in the position they would have been in if they had not acted on the fraudulent inducement. For example, where a person complains that they have been induced by fraud to buy something and pay more for it than it was worth, the measure of damages which that person is entitled to recover is, prima facie, the amount by which the price paid exceeds the value of the thing purchased at the time of sale. Consequential loss is also recoverable in an appropriate case: Gould v Vaggelas (1984) 157 CLR 215. Where fraud is present the contract is not void but merely voidable. However, where the fraudulent misrepresentation has been of such a nature that it has resulted in no true agreement between the parties, then the contract may be void on the grounds of mistake.

Innocent misrepresentation [7.570] An innocent misrepresentation occurs when a person makes an untrue statement of fact which was intended to, and did in fact, induce the other party to enter into the contract but without any fault on the part of the speaker. There are many instances of innocent misrepresentations in commercial life. The following is a classic example:

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Misrepresentation under the Australian Consumer Law [7.680] The Australian Consumer Law 2 provides civil remedies where misrepresentations by a person constitute misleading or deceptive conduct. Section 18(1) provides that: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. The Act also provides civil remedies, as well as penal sanctions, where misrepresentations are made in connection with the supply of goods or services. Section 29(1) provides: A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services make a false or misleading representation: (a) that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; (b)

that services are of a particular standard, quality, value or grade;

(c)

that goods are new;

(d)

that a particular person has agreed to acquire goods or services;

(e)

that purports to be a testimonial by any person relating to goods or services;

(f)

concerning: (i)

a testimonial by any person; or

(ii)

a representation that purports to be such a testimonial; relating to goods or services;

(g)

that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits;

(h)

that the person making the representation has a sponsorship, approval or affiliation;

(i)

with respect to the price of goods or services;

(j)

concerning the availability of facilities for the repair of goods or of spare parts for goods;

(k)

concerning the place of origin of goods;

(l)

concerning the need for any goods or services;

(m)

concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy;

(n)

concerning a requirement to pay for a contractual right that: (i)

is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy; and

(ii)

a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).

The Australian Consumer Law also prohibits misrepresentations made in relation to the sale or grant of an interest in land. In this context s 30(1) provides: A person must not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land make a false or misleading representation: (a) that the person making the representation has a sponsorship, approval or affiliation; 2

The Australian Consumer Law is Sch 2 to the Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)): see Chapter 13.

chapter 7 Genuine Consent

Under the National Credit Code [7.970] The National Credit Code (set out in Sch 1 of the National Consumer Credit Protection Act 2009 (Cth)) provides for the reopening of a credit transaction where the court is satisfied that in the circumstances relating to the credit contract, mortgage or guarantee at the time it was entered into, it was unjust: National Credit Code, s 76(1). “Unjust” includes “unconscionable, harsh or oppressive”: National Credit Code, s 7(8). The provisions apply to all personal (that is, non-business credit).

Further reading See contract texts listed at the end of Chapter 2.

Tutorial activities 1.

Why are courts reluctant to say that a contract is affected by a mistake?

2.

In what circumstances might a statement of opinion be a representation?

3.

Imogen sells her unit to Clare. It overlooks a beautiful park. In their conversations about the unit and the environment Clare is obviously very attracted by the park and by the fact that she could walk her three dogs there. She does not ask whether any changes to the park were planned so Imogen does not mention the fact that the Council has approved a 12 storey multi-unit dwelling that includes a car park and skate-boarding rink that will reduce the size of the park by half and alter the ambience dramatically. Shortly after Clare moves in, so do the bulldozers. She is very upset and seeks your advice as to whether she can rescind the contract for misrepresentation.

4.

Eddie purchases a Persian carpet from Khali the Rug Dealer in High St, Prahran. On the back of the rug is an authentication certificate that says the rug is from Baluchistan in Iran, a region noted for its fine carpets. Khali assures Eddie that this is true, and Khali believes it to be so. On the basis of Khali’s assurances Eddie pays $25,000 for the carpet. Three years later when Eddie tries to sell the carpet, a prospective buyer brings Ali Khan, a rug valuer, to inspect it. Ali says it is not a Baluchistan carpet — “the knots are tight but the silk is not of the finest quality. This one is from a small village near Herat in Afghanistan — it's nice but worth only $4,000.” Eddie packs it up and heads off to see Khali. Please advise Eddie on whether he has any rights under the law of mistake or misrepresentation.

5.

Mr and Mrs Sarnath migrated to Australia from Sri Lanka in 2005. They are dependent on their only son, Jayantha, for advice and support. They have limited education, no business acumen, poor language skills and their only income is the aged pension. They own their own home which is valued at around $400,000. Jayantha is a charming but feckless businessman, who is always on the verge of something great. In June 2012 he needs $150,000 to pursue a dot com opportunity that will make him rich. He is able to borrow money from the West Bank but only after he persuades his parent to act as guarantors. He misleads his parents as to the extent and purpose of the loan. The bank is unaware of this. After investigating their financial position, the bank manager meets with Mr and Mrs Sarnath and goes over the guarantee contract. He asks whether they have any questions

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and, when they do not, they sign the documents as required. Jayantha uses the money to invest in an internet company. The company is worthless and Jayantha loses his entire investment. When he is unable to repay the loan West Bank looks to the parents to honour their obligations as guarantors. Advise Mr and Mrs Sarnath. 6.

Jack gifted his land and cottage to Bonny, a woman he had known for many years and for whom he had a strong affection. Jack had had a very limited education – he could not read or write, had limited exposure to the commercial world and, in relation to the gift to Bonny, did not realise that it would be “forever”. Bonny had handled his affairs since his wife died and was aware of Jack's deficiencies. She did not, however, encourage Jack to make the gift. After Jack died, his son, Bob, who was the executor of his father's estate, sought to have the gift rescinded for undue influence. Please advise Bob of his rights, if any. What could Bonny have done to ensure the gift from Jack could not be undone?

7.

In ACCC v Coles (2014) why was Coles’ conduct regarded as unconscionable? Isn’t this kind of conduct just the “hard bargaining” that characterises the market place?

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Legislation in most Australian States provides that contracts or agreements by way of gaming or wagering are void and such contracts cannot be enforced in the courts. 1 Exception is made in respect of lawful forms of gambling such as a bet or wager made on a licensed racecourse with a bookmaker. 2 A contract will be void if it undermines a statutory purpose under which statutory rights are conferred in the public interest. The High Court has thus indicated that: “contractual arrangements will not be enforced where they operate to defeat or circumvent a statutory purpose or policy according to which statutory rights are conferred in the public interest, rather than for the benefit of an individual alone. The courts will treat such arrangements as ineffective or void, even in the absence of a breach of a norm of conduct or other requirement expressed or necessarily implicit in the statutory text”: Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 at [46] per French CJ, Crennan, Kiefel and Bell J.

Illegality at common law [8.170] The courts refuse to enforce agreements that are “contrary to public policy”. These contracts fall into two basic categories: 1.

contracts described as illegal because of their more reprehensible character; and

2.

those simply described as void, rather than illegal, because of their less serious nature.

A contract which is illegal will also be void and unenforceable in the courts. The rationale for the distinction between contracts which are illegal, and those which are simply void, on grounds of public policy is said to be justified because of the more severe consequences which may ensue where the contract is illegal.

Contracts illegal at common law [8.180] Contracts that are illegal at common law on grounds of public policy are: (a)

contracts to commit a crime, a tort or a fraud on a third party;

(b)

contracts promoting sexual immorality;

(c)

contracts prejudicial to the administration of justice;

(d)

contracts tending to promote corruption in public life;

(e)

contracts prejudicial to the public safety; and

(f)

contracts to defraud the revenue.

Contracts to commit a crime, a tort or a fraud on a third party [8.190] A contract involving the commission of a crime, a tort or a fraud on third parties is illegal at common law and will not be enforced. 1

2

Unlawful Gambling Act 1998 (NSW), s 56 (“has no effect”); Gambling Regulation Act 2003 (Vic), s 2.4.1; Racing Act 2002 (Qld), s 341; Lottery and Gaming Act 1936 (SA), ss 50 and 50A; Racing Regulation Act 2004 (Tas), s 103; Unlawful Gambling Act 2009 (ACT), s 47; Racing and Betting Act (NT), s 135; Gaming and Betting (Contracts and Securities) Act 1985 (WA), s 4. Unlawful Gambling Act 1998 (NSW), s 56(2); Gambling Regulation Act 2003 (Vic), s 2.4.2; Racing Act 2002 (Qld), s 342; Lottery and Gaming Act 1936 (SA), s 50; Racing Regulation Act 2004 (Tas), s 103(2); Unlawful Gambling Act 2009 (ACT), s 47; Racing and Betting Act (NT), s 135(1); Gaming and Betting (Contracts and Securities) Act 1985 (WA), s 5; Betting Control Act 1954 (WA).

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that some issues occur commonly in the course of business activities, that these issues have thus been subject to much negotiation amongst many parties and through this process, over time, some “standard” or usual contract clauses have developed. The development of such clauses tends to show that the clauses “have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary, so that instead of being regarded as restrictive they are accepted as part of the structure of a trading society”: at 335. Accordingly, such clauses will not be in restraint of trade and thus invalid. The High Court also pointed out that the approach of the common law has been to strike down a restraint unless justification for the restraint is shown. Citing s 4M of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)), as permitting the independent development of the common law of restraint of trade, the Court indicated that a restraint which does not contravene Pt IV of the Trade Practices Act 1974 (Cth) (now Pt IV of the Competition and Consumer Act 2010 (Cth)) may nonetheless constitute an invalid restraint at common law: Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at [32]. The Commonwealth Competition and Consumer Act 2010 (Cth) does not apply to the kinds of agreements discussed above under the headings “Contracts for the sale of a business” and “Contracts of employment” which are accordingly governed by the common law restraint of trade doctrine: s 51(2)(b), (d), (e).

Consequences of illegal contracts and void contracts [8.520] A distinction has been drawn between those contracts which are categorised as illegal in the strict or narrow sense and those which are regarded as simply void (rather than illegal). This distinction is maintained in the following discussion which considers the consequences of illegal and void contracts.

Consequences of illegal contracts [8.530] The consequences of illegality under either statute law or common law are basically the same. The general position is as follows:

The contract is totally void [8.540] The general effect of illegality in the formation of a contract is that the contract is void and neither party can sue on it.

Money paid cannot generally be recovered [8.550] Money paid or property transferred under an illegal contract is not generally recoverable. Should one of the parties seek to recover money paid under the contract, the defendant is in the stronger position where there is equal culpability. This means that a party cannot recover moneys paid under the illegal contract to the other if they are equally blameworthy. For example, in Parkinson v College of Ambulance Ltd [1925] 2 KB 1 (discussed at [8.290]) the plaintiff was unable to recover the £3,000 donation he had paid to a charity for a knighthood which did not eventuate.

Exceptions [8.560] A party can recover money paid or property transferred if that party was not “in pari delicto”, that is, not equally to blame. This will apply where, under a contract prohibited by statute, money is paid by the person whom the statute was designed to protect: Kiriri Cotton Co Ltd v Dewani [1960] AC 192.

chapter 8 Legality of Object

Further reading See contract texts listed at the end of Chapter 2.

Tutorial activities 1.

Andrew is a currency trader with Grabbit and Partners. He has a friend, Jessica, who is on the Board of the Reserve Bank. Andrew hands Jessica $40,000 for information about Reserve Bank decisions on interest rates when it meets on the first Tuesday of November. She agrees to provide the information. This is, of course, illegal under the Reserve Bank charter. Jessica takes the money but never provides information. Please advise Andrew whether he can recover the money from Jessica.

2.

Padmapalasaki and Chandrakantha purchase an Indian restaurant from Priya. It is located in Glen Waverly, south east of Melbourne. In order to ensure he does not establish a similar restaurant in the same vicinity they include a term in the contract that prohibits Priya “owning or managing” a restaurant within a 20 km radius of the restaurant for five years. Advise them whether this term would be an illegal restraint.

3.

Elders Ltd lent Tongo Ltd $2 million, repayment of which was secured by a mortgage and personal covenants. Tongo defaulted so Elders sued on the personal covenants in the mortgage. Tongo contended that the mortgage (including the guarantee) was illegal and void on the ground that Elders had been carrying on the business of banking without authorisation under the Banking Act 1959 (Cth) which provides that “a corporation is not to carry on a banking business unless it is authorised to do so” and provided a penalty of $10,000 per day for contravention of this provision. It was clear that the lender had in fact been carrying on the business of banking in contravention of the Act. Elders seeks your advice as to whether the contract between the parties is illegal and unenforceable.

4.

A Victorian statute provides that “a person was not to buy or sell or otherwise deal in genetically modified canola oil without a licence”. George Mahout informs GM Oils that he has the necessary licence and contracts to purchase a quantity of canola oil from GM. He does not in fact have the necessary licence. George later refuses to take delivery and GM Oils sues him for damages for breach of contract. Advise GM Oils of its position in relation to the contract.

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Australia [9.500] The expressions “clickwrap” and “browsewrap” have not been used in any Australian case to date. However in eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450 the Federal Court accepted the position that contracts are binding when the user clicks the appropriate icon. In this case, users entered into contracts by clicking a series of icons to purchase tickets for the concert. The position in Australia with respect to browsewrap agreements is yet to be determined. Until the position is clarified, it would be prudent for websites to expressly indicate that terms and conditions will apply. The user should not be able to proceed without reading or being given the clear opportunity to read the terms and conditions. It would be prudent to include a mechanism which requires the user to actually scroll through the terms before giving assent.

Implied terms [9.510] In addition to the express terms agreed upon by the parties, other terms may be implied in the contract. In appropriate circumstances terms may be implied by: (a)

the court;

(b)

custom or trade usage; or

(c)

statute.

Terms implied by the court [9.520] Terms which may be implied by the court can be subdivided into two categories: (a) those implied to give “business efficacy” to the contract, and (b) those implied in specific kinds of contract.

Terms implied to give “business efficacy” to the contract [9.530] The courts will “readily imply” a term that the parties must cooperate to “ensure the performance of their bargain”: Famestock Pty Ltd v Body Corporate for No 9 Port Douglas Road Community Title Scheme 24368 [2013] QCA 354 [13]. Occasionally, the parties, through inadvertence or poor drafting, may have failed to incorporate terms to cover a situation which had they thought about it, they would certainly have provided for. In such a case, the court may imply appropriate terms so as to give “business efficacy” to the contract in accordance with the presumed intention of the parties. This principle was recognised in the case of The Moorcock (1889) 14 PD 64.

The Moorcock [9.540] The Moorcock (1889) 14 PD 64. The defendant wharfingers contracted to allow the plaintiff to use their jetty to unload his ship. The ship was damaged at low tide by settling on a ridge of hard ground which lay beneath the river mud. It was held that the defendants were liable for the damage since the parties must have intended to contract on the basis that the berth would be safe for the plaintiff’s ship at low tide. The defendants were thus in breach of an implied term that they would take reasonable care to see that the berth was safe for the vessel. In the words of Bowen LJ: “[I]n business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are businessmen”: at 68.

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“a little piece of paradise – you'll think you've died and woken up in heaven”; “all the appliances throughout the house, in the lounge, kitchen and laundry, will be European brands”. Purchasers are often keen to buy “off the plan” (that is, to sign a contract to purchase before the house is built) because of the significant savings on stamp duty. Daniel and Hannah negotiate with Max, the managing director of Dolphin Estates Pty Ltd. During the negotiations Max confirms the statements about the appliances. Daniel and Hannah are thrilled and immediately sign a contract of sale. The contract contains no reference to the European appliances. The house is completed in January 2013 and Daniel and Hannah conduct the final inspection before moving in. They are disappointed to discover the appliances are cheap imports. They seek your advice as to whether they have any contractual rights in respect of the statements referred to in the brochure. (Do not refer to any claims that may be made under the Australian Consumer Law). 3.

Tennis Oz owns a tennis shop that sells tennis equipment, including tennis racquets. It has a half-court at the back where, for $2 an hour, customers can try out the racquets and choose one that suits them. Leyton goes with a friend to choose a racquet. He chooses a couple of racquets, pays his $2 and he and his friend head out through a back door to the court. They have been playing for a few minutes when Leyton slips over on patch of wet Astroturf and tears a ligament in his knee. When they complain about the condition of the surface, the manager of the shop points them to a notice on the door out to the court (that Leyton had seen but not read). It said: “Customers using the half-court do so at their own risk. Oz Tennis will not be responsible for any damage, injury or loss to any customer no matter how the injury or damage is caused”. Advise Leyton whether he can sue Oz Tennis.

4.

Jill is off to the opera at the State Theatre. She drives her Mercedes to the underground car park owned and operated by Bilsons Ltd. Outside the car park is a large sign that says “Take ticket from machine. Ticket contains terms. Pay when leaving. No liability accepted”. Jill does not read the sign. As she approaches the boom gate an automatic ticket machine issues her with a ticket with these words printed on it: CONDITIONS OF PARKING It is a condition of the issue of this ticket that vehicles are parked on these premises at the car owner's risk. The car park proprietors accept no responsibility for loss or damage to vehicles in the parking area whether caused by negligence or in any way whatsoever. When she returns to get her car, it is missing. An hour later it is found in the Yarra River. The police confirm that an employee of the car park broke into the car, somehow managed to start the engine and drove off. When he had had enough he abandoned it in the river. Not only is the car beyond repair but Jill's laptop, valued at $5,000, is also destroyed. Jill seeks your advice as to whether the exclusion clause will prevent her from claiming damages from Bilsons Ltd.

5.

Why is it necessary to imply terms into contracts?

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6.

A court will not imply a term into a contract unless business efficacy demands it. Explain the concept using The Moorcock to illustrate your answer.

7.

An international contract involved the sale of iron ore by ERA, an Australian mining company, to MRI, a Chinese SOE. The contract was for a period of five years. ERA argued that three clauses of this sale contract were so uncertain as to be agreements to agree, rendering the entire contract void. In effect these clauses stipulated that the shipping schedule and the amount of two deductions (the Treatment charge and the Refining Charge) were to be agreed during negotiations that normally took place between the parties annually. The question is whether the contract is an agreement to agree.

8.

Research task – examine the contractual formation process used by Apple when signing up iTunes consumers. Discuss whether you believe reasonable notice of the terms has been provided or whether the consumer has indicated that he or she consents.

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Other than this manner of assignment of liabilities, there exists the method of “novation”, whereby obligations under a contract may be assigned by a party to the contract to another person not a party, so that “a new contract takes the place of the old”: ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338 at [12]: “Novation is a transaction by which all parties to a contract agree that a new contract is substituted for one that has already been made; it involves the extinguishment of one obligation and the creation of a substituted obligation in its place…intention is crucial to show a novation, although intention may be express or implied from the circumstances”: Goodridge v Macquarie Bank Ltd (2010) 265 ALR 170 at [112] per Rares J. 5

Assignment of rights [10.150] Although at one time at common law debts and other choses in action were not assignable in the true legal sense (unless they were represented by negotiable instruments) they are now made assignable by virtue of special statutory provisions in force in each State. A cause of action may be assigned where the assignee has a genuine commercial interest in the enforcing the assignor’s claim: Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd (2013) 101 IPR 484 at [27].

Assignments by statute [10.160] These provisions 6 allow an assignee of a debt or other legal chose in action to take action against the debtor in the assignee’s own name provided that: (a)

the assignment is absolute and not merely by way of charge;

(b)

the assignment is in writing; or

(c)

express notice of the assignment is given in writing to the debtor.

In order for notice of an assignment to be effective, it is necessary that the debtor actually receive such notice. Accordingly, where notice of an assignment of a margin loan was sent by post by a bank but not received by the debtor, there was no effective notice of the assignment. Further, a generalised message on the bank’s website that the majority of its margin loans were transferred was not effective notice to the debtor of assignment of his loan to a third party: Goodridge v Macquarie Bank Ltd (2010) 265 ALR 170 at [148]–[149]. The assignee takes their rights “subject to equities” and cannot obtain a better title than that of the transferor. Provision is also made whereby a person liable can, if there is a dispute between the assignor and assignee, pay the money into court.

Assignments in equity [10.170] Courts of equity apply different rules from those of the common law relating to assignment and, accordingly, assignments of choses in action are recognised and enforced by them. This applies not only to equitable but also to legal choses in action.

Legal chose in action [10.180] A legal chose in action is a right of action that can be enforced in a court of law, for example action on a bill of exchange or to recover a debt due under a contract. 5 6

See J Bailey, “Novation” (1999) 14 Journal of Contract Law 189. Conveyancing Act 1919 (NSW), s 12; Property Law Act 1958 (Vic), s 134; Property Law Act 1974 (Qld), s 199; Law of Property Act 1936 (SA), s 15; Property Law Act 1969 (WA), s 20; Conveyancing and Law of Property Act 1884 (Tas), s 86; Civil Law (Property) Act 2006 (ACT), s 205; Law of Property Act 2000 (NT), s 182.

chapter 10 Operation of the Contract

Equitable chose in action [10.190] An equitable chose in action is a right of action that can only be enforced in a court of equity, for example an interest in a trust fund or legacy. An equitable assignment of a chose in action (which may be itself either a legal chose or an equitable chose) may be effected without writing, no particular form of words being necessary, so long as the intention is shown that the chose in action is to be transferred or appropriated to the use of the assignee. The following points concerning an equitable assignment should be noted: 1.

Notice is not necessary to complete the assignee’s equitable right as against the original creditor or the latter’s representatives, including assignees in bankruptcy, but the claims of competing assignees rank as between themselves not according to the order in date of the assignments, but according to the dates at which they have respectively given notice to the debtor: Dearle v Hall (1828) 3 Russ 1; 38 ER 475. This rule applies to give priority over the assignee in bankruptcy of the assignor even though the bankruptcy of the assignor occurred before the date of the assignment: Australian Mutual Provident Society v Gregory (1908) 5 CLR 615 at 626–627, 635. It applies even though an assignee knew of the earlier assignment when he or she gave notice but not if he or she knew of the earlier assignment when he took his assignment. Verbal notice is sufficient but it is advisable for it to be in writing.

2.

The assignee takes “subject to equities”, that is, subject to such defences that the debtor might have raised against the assignor. In other words, the assignee can only receive such title as the assignor is able to give and cannot be in a better position.

Assignment by operation of law [10.200] Another form of assignment occurs in the transfer of the rights under a contract by operation of law. The most common examples are:

Death [10.210] The estate of a deceased person passes to their executor or administrator on a grant of probate or letters of administration and with it rights under contracts. The liabilities of a deceased person under contracts made by her or him also devolve on the executors or administrators but the extent of the liability is limited to the assets that come into their hands as such executors or administrators. There is an exception to the rule that the rights and liabilities of a person under contract devolve on their personal representative in the case of contracts requiring the personal skill or services of the deceased. On the death of one of the persons by whom a joint promise has been made, the liability devolves on the survivors, the representatives of the deceased being under no liability. In the case of a promise by partners, equity construes the promise as joint and several. On the death of one of the several joint promisees the right of action on the promise vests in the survivors.

Bankruptcy [10.220] The estate of a bankrupt passes to the Official Trustee in Bankruptcy, unless and until a registered trustee is appointed in which event the bankrupt’s estate will vest in the registered trustee.

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Contracts for personal services not assignable [10.230] A contract with a person having special qualification is of a personal nature and probably would not be able to be performed by another person to the satisfaction of the other original party and for this reason it is not assignable; for example a contract between publisher and author is not assignable.

Further reading A Guest, Guest on the Law of Assignment (Sweet & Maxwell, London, 2012). M Smith and N Leslie, The Law of Assignment (2nd ed, Oxford University Press, Oxford, 2013). G Tolhurst, The Assignment of Contractual Rights (Hart, Oxford, 2006). See also contract texts listed at the end of Chapter 2.

Tutorial activities 1.

A Ltd, an insurance company, and B Ltd, an insured, agree that the insurance policy taken out by B Ltd will cover B’s employees/agents/contractors. C, a contractor of B, is injured and makes a claim under the policy. Advise C whether the doctrine of privity will prevent him or her from making a claim under the policy.

2.

Explain the connection between the need for consideration and the doctrine of privity.

3.

Harry assigns to Kerry his right to receive $1,000 from Bruce. For this to be a valid assignment, is it necessary for him to notify Bruce What if Kerry has not provided consideration?

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Termination by agreement Termination under the original contract Express power to terminate [11.30] A contract may be terminated through the happening of an event as provided for in the original agreement itself. For example, a contract of loan with a bank may provide that the bank can terminate its contractual arrangements with the borrower in the “Event of Default” by the borrower and declare that the moneys lent are immediately due and payable. A further common illustration is a stipulation in the contract that it will terminate at the expiration of a specified period, for example a contract for a lease for a specified number of years. At the end of the time stipulated, the lease will automatically come to an end.

Implied right to terminate [11.40] Where a contract does not contain a provision as to its duration, the court may imply a right to terminate on giving reasonable notice to the other party. For example, where a distributorship agreement was silent as to its duration, the New South Wales Court of Appeal held that a period of six months’ notice prior to terminating the contract was appropriate. The contract would otherwise have been of indefinite duration: Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438.

Termination by subsequent agreement [11.50] A contract is the result of agreement and by means of a further agreement, the contract may be terminated. A subsequent agreement must be valid in order to modify a prior contract. A subsequent agreement may be: (a)

to cancel the original contract; or

(b)

to vary the terms of the original contract through substitution.

Cancellation of original contract Mutual termination [11.60] This occurs where both parties agree to cancel the original contract. However, such an agreement can only operate as a termination of the original contract where there is still something to be done by each party under the original contract. In such a case, the promise by one party to abandon their rights under the original contract would be given in consideration of the other party’s promise to do likewise.

Release [11.70] If one party has completed their undertaking and the other has not, then the only method of cancelling the contract is by agreement under seal to release the defaulting party or by the giving of some further consideration for the release by the party still under an obligation. This consideration must not be something that the party is already legally bound to do.

Accord and satisfaction [11.80] In the case of cancellation of the contract by agreement to release, where the release involves the giving of some further consideration, the principle is often referred to as that of accord and satisfaction.

chapter 11 Termination and Breach of a Contract

Termination by operation of law [11.510] A contract may be terminated independently of the wishes of the parties by operation of law.

Bankruptcy [11.520] If a party liable under a contract becomes bankrupt they are personally relieved of the contract and the other party may prove in the bankrupt’s estate. There are also other provisions in the Bankruptcy Act 1966 (Cth) under which a trustee in bankruptcy may adopt or rescind certain contracts into which the bankrupt has entered. When the affairs of the bankrupt have been wound up, the bankrupt is given a certificate of discharge by the court, which releases the bankrupt from all debts provable in bankruptcy but the bankrupt is not released from liability in respect of certain types of debts, such as liability for fraud.

Merger [11.530] A deed may, in certain cases, displace a simple contract (which is then terminated) and the relations and rights of the parties are governed by the deed. When that happens the simple contract becomes merged in, and is extinguished by, the deed. The first agreement is terminated because the rights in the lesser contract merge by the operation of law into the greater. In order that merger of a simple contract in a deed may take place, the following conditions must be fulfilled: (a)

the parties to the two agreements must be the same;

(b)

the subject matter must be the same; and

(c)

the second security must be of a higher value than the first.

Another but different type of merger is that which takes place when a party recovers judgment upon a cause of action for breach of contract. Here the cause of action merges in the judgment.

Further reading See contract texts listed at the end of Chapter 2.

Tutorial activities 1.

In each of the contracts mentioned below there has been a termination. Explain how this has occurred in each of the following separate and unrelated scenarios: (a)

Becks agrees to play soccer for Melbourne Victory in 2016 but before the season commences he signs with Rovers. What can Victory do?

(b)

After race riots and terrorist attacks the 2016 season is abandoned in week 3. What can you advise Becks about his right to be paid for the balance of the season?

(c)

Becks’ agreement specifies that in the event that Becks does not kick at least six goals in the first eight games, the contract may be terminated. What is this kind of condition called?

(d)

Mid-season, Becks informs Rovers he has grown tired of soccer and will not play any more games. What kind of breach is this? Advise Victory if it can get an order for specific performance.

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2.

Eunice has a successful printing and copying business. She goes through a lot of paper each day and relies heavily on the prompt, daily delivery of quality paper from her supplier, Alex. A term of the contract of delivery states that delivery of paper to Eunice is to occur each day at 7am. On Wednesday, Alex telephones Eunice to inform her that he is changing his delivery route and will be delivering paper to her premises every second day at 4pm. This does not suit Eunice at all and she would like to change suppliers. Alex insists that time is not of the essence and that the contract is binding. Discuss Eunice’s termination options.

3.

George, a logger, and Andrew, a farmer, entered into a logging contract on 1 January 2016. Under the contract George would pay Andrew a fee of $10,000 on signing the contract for the sole rights to log a specified amount of Australian old-growth hardwood for a three year period. George paid the fee and commenced logging. In March of 2016, the Government banned the logging of old-growth timber. Advise George.

4.

Priyantha enters into a contract with Jay for Jay to build him a house. Unfortunately things do not go according to plan: (a)

Jay contacts Priyantha a month before the building is too commence and says he is too busy to build the house.

(b)

Jay eventually agrees to build Priyantha’s house. The contract provides for the house to be built out of mud-brick. When Priyantha visits the house after a couple of months he sees that Jay has used weatherboards.

(c)

Jay walks off the job after the lock-up stage complaining that the weather is too cold.

Advise Priyantha of his rights in respect of each of these breaches (at the time when they occurred).

chapter 12 Remedies

Damages and contributory negligence [12.250] Under the apportionment legislation of the various States, the damages awarded to a successful plaintiff suing in tort are reduced by the extent of any contributory negligence on the part of the plaintiff. However, in Astley v Austrust Ltd (1999) 197 CLR 1 the High Court held that the apportionment legislation of South Australia required apportionment for contributory negligence only in a tort action, not in an action for breach of contract. The Court held that the South Australian apportionment legislation was directed only to claims in tort, and not to claims in contract. The apportionment legislation of the other States was in similar terms. Consequently, the case would have been of application throughout Australia. However, all jurisdictions have now amended their apportionment legislation to permit the apportionment of damages for breach of contractual duty of care in cases of contributory negligence. 1

Ordinary, nominal and exemplary damages Ordinary damages [12.260] The damages we have so far considered in this chapter are variously referred to as ordinary, actual or compensatory damages, that is, the damages flowing from the breach of contract to compensate the innocent party for the actual loss suffered. These are by far the most important kind of damages. To be distinguished from such damages are two other kinds of damages, namely, nominal damages and exemplary damages.

Nominal damages [12.270] Where there has been an infringement of a legal right, for example a breach of contract, but the plaintiff is unable to establish that they have suffered any actual loss, only nominal damages will be awarded, that is a token sum of, say, $1: Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286.

Exemplary damages [12.280] Exemplary damages are not only awarded as a means of compensation but to punish the party in default in view of the intentional or flagrant nature of the breach. They are only awarded in exceptional circumstances.

Penalties and liquidated damages [12.290] Normally, in a breach of contract case, damages are “unliquidated”, that is, no amount is specified in the contract - the matter is left for the court to determine, according to accepted principles. It is possible, however, for the contracting parties to insert a clause in the contract that specifies the amount of damages that will be paid to the innocent party in the event of a breach. For example, in a house building contract, the parties may agree that in the event the builder does not finish the house on or before the date in the contract, the builder will pay the home owners $1000 per week. In such a case, damages are said to 1

See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 9; Wrongs Act 1958 (Vic), s 26; Law Reform Act 1995 (Qld), s 10; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA); Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Amendment Act 1947 (WA), s 4; Wrongs Act 1954 (Tas), s 4; Civil Law (Wrongs) Act 2002 (ACT), s 102; Law Reform (Miscellaneous Provisions) Act (NT), s 16.

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Tutorial activities 1.

In what ways may a contract be terminated?

2.

What does “repudiation” mean and how does it differ from “termination”?

3.

When is a victim of a contractual breach entitled to terminate the contract?

4.

What is the objective of an award of damages for breach of contract?

5.

What are two limbs of Hadley v Baxendale?

6.

Raymond has a successful take-away shop that specialises in roasting free range chicken. Customers come from far and wide to buy his free range roasted chicken and chip combination. Peter is Raymond’s supplier of fresh chicken. The contract of supply between the parties’ states that only free range chicken is to be supplied to Raymond. On Tuesday morning Raymond receives a delivery from Peter, but the packaging indicates that the chicken is not free range. Raymond telephones Peter and tells him that he will not pay for the delivery since it is not what he ordered. Peter replies that he has supplied chicken and that Raymond has no right to withhold payment. Is Raymond or Peter correct?

7.

Nancy is in her final year at university. In order to graduate in November, she must submit her final folio of work to her supervisor by October. Nancy takes her work to Casey to be professionally bound. She explains to Casey the importance of having the work completed by 1 October, and Casey assures her that this can be done. The binding process is delayed due to technical issues and the bound folio is not delivered to Nancy until late October. As a result, she is unable to graduate until February. Her parents then have to cancel their flight from Perth to Melbourne and lose a deposit of $500. Nancy telephones Casey and tells him that he has ruined her life and that he owes her parents $500 for their lost deposit. Advise Casey of his liabilities.

8.

Jerry opens a delicatessen specialising in selling sandwiches and rolls to health-conscious university students. He signs a one-year contract with Vogel Breads to supply him with bread made from organic wheat. On 1 April 2016, an outbreak of a virus contaminates much of the organic wheat crop. Supplies cannot resume for a month. Jerry tries to find another supplier but is unable to do so. As a result, Jerry has to close the business for the month, losing $25,000 in profit. He is also unable to fulfil a contract to supply the bread at a national scout jamboree that coincidentally is scheduled for that week. Jerry loses $120,000 on that contract. Jerry wishes to terminate the contract with Vogel Breads and sue for damages. (a)

Advise the parties whether Vogel has committed a breach of the contract allowing Jerry to terminate and sue for damages, and

(b)

assuming there is a breach what damages would Jerry be entitled to?

chapter 12 Remedies

9.

Jiang and Li are on their honeymoon, cruising in the South Pacific. On the third night the ship sinks because the captain did not see an island coming up. They lose all their belongings. The cruise company offers compensation for the cost of the trip but they seek your advice as to whether they can seek damages: (a)

for their loss of enjoyment, and

(b)

to punish the cruise company for its negligence.

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Chapter 13: Consumer Protection

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for the first time, all Australian consumers to enjoy the benefits of consistent rights wherever they may be, and will allow all Australian businesses to obtain greater efficiencies through a single, simplified national law.” 1 We will now examine the ACL in detail.

1

Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 Second reading.

chapter 13 Consumer Protection

Overview of the Australian Consumer Law Objectives [13.20] The Australian Consumer Law has benefitted the Australian community by: (a)

giving Australian consumers the same rights and protections wherever they are in Australia;

(b)

simplifying the law and reducing business compliance burdens by replacing provisions set out in 20 existing national, State and Territory laws with a single national consumer law; and

(c)

creating a national enforcement regime, with consistent enforcement powers for Australia’s consumer protection agencies.

The main reforms introduced in the Australian Consumer Law were: a new single set of definitions and interpretive provisions; a new, national law on unfair contract terms; a new single set of provisions about unfair practices and fair trading, including amendments and additions which reflect existing provisions in State and Territory consumer laws; a new set of national consumer guarantees provisions; a new national regime for unsolicited consumer agreements, which will replace existing State and Territory laws on door-to-door sales and other direct marketing; a simple national set of rules for lay-by agreements; a new national product safety legislative regime; and national provisions on information standards.

Legislative framework [13.30] The Australian Consumer Law is a law of the Commonwealth. 2 It replaced the consumer protection provisions of the former Trade Practices Act 1974 and State and Territory consumer protection legislation, such as the Fair Trading Acts and the door-to-door sales legislation. It is administered by the Australian Competition and Consumer Commission (ACCC) and the State and Territory consumer law agencies 3 and enforced by all Federal, State and Territory courts and tribunals. 4 It has very broad application: it applies to conduct engaged in and outside Australia by Australian citizens or persons who are ordinarily resident in Australia, 5 to natural persons engaged in conduct involving postal, telegraphic or telephonic service, including the internet, 6 and to corporations. 7 2

5

Competition and Consumer Act 2010 (Cth), s 131. The section is in Part XI – Application of the Australian Consumer Law as a law of the Commonwealth. Pursuant to an intergovernmental agreement each State and Territory applies the Australian Consumer Law as the law of its jurisdiction. Competition and Consumer Act 2010 (Cth), ss 140 – 140K; Fair Trading Act 1987 (NSW), s 28(1); Australian Consumer Law and Fair Trading Act 2012 (Vic), s 11(1); Fair Trading Act 1989 (Qld), s 16(1); Fair Trading Act 1987 (SA), s 14(1); Fair Trading Act 2010 (WA), s 19(2); Australian Consumer Law (Tasmania) Act 2010 (Tas), s 6(1); Fair Trading (Australian Consumer Law) Act 1992 (ACT), s 7(1); Consumer Affairs and Fair Trading Act 1990 (NT), s 27(1). NSW: Fair Trading; Victoria: Consumer Affairs Victoria; Queensland: Office of Fair Trading; Western Australia: Department of Commerce – Consumer Protection; South Australia: Office of Consumer and Business Affairs: Tasmania: Consumer Affairs and Fair Trading Tasmania; ACT: Office of Regulatory Services; Northern Territory: Consumer Affairs. Competition and Consumer Act 2010 (Cth), ss 138 – 138B. The sections are in Part XI – Application of the Australian Consumer Law as a law of the Commonwealth. Ibid.

6

Competition and Consumer Act 2010 (Cth), s 6(3).

3

4

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(4)

(a)

the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and

(b)

the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

It is the intention of the Parliament that: (a)

this section is not limited by the unwritten law relating to unconscionable conduct; and

(b)

this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c)

in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of: (i)

the terms of the contract; and

(ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. The term “unconscionable” is not defined. Section 22(1) provides that in determining whether there has been unconscionable conduct by a supplier of goods and services in connection with the supply of goods or services to a customer, the court may have regard to the following matters: (a)

the relative strengths of the bargaining positions of the parties;

(b)

whether conditions imposed upon a customer were not reasonably necessary for the protection of the legitimate interests of the supplier;

(c)

whether the customer was able to understand any documents relating to the supply of the goods or services;

(d)

whether any undue influence or pressure was exerted upon the customer or any unfair tactics used against the customer;

(e)

the amount and terms for which the customer could have acquired equivalent goods or services from another supplier;

(f)

the extent to which the supplier’s conduct was consistent with their conduct towards other customers in similar transactions;

(g)

the requirements of any applicable industry code;

(h)

the requirements of any other industry code where the customer acted on the reasonable belief that the supplier would comply with that code;

(i)

the extent to which the supplier unreasonably failed to disclose intended conduct that might affect the customer or any risks to the customer arising from the supplier’s intended conduct;

(j)

the extent to which the supplier was willing to negotiate with the customer the terms and conditions of the contract; the terms and conditions of the contract; the conduct of the supplier and customer in complying with the contract; and any conduct of the supplier or customer in connection with their commercial relationship after entry into the contract;

(k)

whether the supplier had a contractual right to vary unilaterally a term or condition of a contract with the customer for the supply of the goods or services; and

(l)

the extent to which the supplier and the customer acted in good faith.

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contract. In general terms, a standard form contract is one that has been prepared by one party to the contract and where the other party has little or no opportunity to negotiate the terms – that is, it is effectively offered on a “take it or leave it” basis. It is assumed that an agreement is a standard form contract unless the party that prepared the contract is able to prove that it is not. A court can declare a term of a standard form consumer contract to be unfair. Once a term is declared to be unfair, it will be void (of no effect). However, the remainder of the contract will continue to apply, provided that it the contract makes sense without the term that has been declared void. Individuals or the ACCC may apply to a court to have a term of a standard form contract they entered into declared unfair. If it is so declared, the term will be void in that particular contract and in all standard form contracts entered into by the business that contain that term. No fines may be imposed on a business that includes or seeks to rely on an unfair contract but consumers and the ACCC can seek compensation for any loss that is incurred as a result of a term of a standard form contract that is declared to be unfair.

Who is a “consumer”? [13.295] A consumer contract is one for the supply of goods or services or the sale of land to an individual who acquires them wholly or predominantly for personal, domestic or household use or consumption: s 23(3). The contracts affected by the “small business” amendments are those where: at least one party is a business that employs less than 20 people; the upfront price payable under the contract is: – $300,000 or less; or – $1,000,000 or less, if the contract is for more than 12 months; and the contract is a standard form contract for the supply of goods or services or grant of an interest in land: s 23(4).

The “small business” amendments [13.296] As noted above, from 12 November 2016, s 23 has been amended to protect small businesses from unfair terms in contracts. If a particular term in a standard-form contract to which a small business is a signatory is found to be unfair by a court or tribunal, then that clause will be void and the small business will no longer be required to comply with it. In the lead-up to the new law taking effect, the ACCC examined standard form contracts in the advertising, telecommunications, retail leasing, independent contracting, franchising, waste management, and agriculture industries. However, any standard form contract must comply with the new law. The most common problems in standard form contracts were terms that gave one of the parties: (a)

a right to unilaterally or unreasonably vary all or some of the terms or terminate the agreement; and/or

(b)

broad and unreasonable powers to protect themselves against loss or damage at the expense of the small business by imposing broad indemnities or excessive exclusions or limitations on that party’s liabilities

Such clauses are likely to go beyond what is reasonably necessary to protect a business’s legitimate interests and are likely to raise concerns under the unfair contract terms law. Unfair terms – such as, terms that provide for termination at the convenience of one party; variations to the contract price or the scope of works or completion dates; substitution of materials; exclusion or limitation of liability that benefit only one party – will be void and of no effect. As an example of a standard form contract in the telecommunications sector, in 2015, the ACCC investigated the standard form consumer contracts offered by internet provider Exetel Pty Ltd to its small

chapter 13 Consumer Protection

business customers. The contract allowed Exetel to “vary any part of the agreement for any reason”. This broad term was unfair to the small business consumer and likely to contravene the ACL. After concerns were raised with Exetel, the company agreed to remove the term from its broadband standard form contract and compensate affected customers. As an example of a standard form contract in the retail leasing sector, the ACCC cited an instance where one lease provided that the landlord was entitled to immediately terminate a lease if the tenant failed to comply with an obligation under the lease. Following the review by the ACCC, the lease was amended so that the landlord would only be entitled to terminate after first notifying the tenant of its intention to terminate and then providing the tenant with a reasonable period to remedy the breach. Another lease that was used by a landlord/franchisor provided that if a tenant/franchisee left property on the premises at the end of a lease, it would become the property of landlord and that the landlord would be entitled to deal with the property at the tenant’s expense. After working with the ACCC, the landlord agreed to amend its agreement to introduce the following limitations on this power: provide the franchisee with 14 days’ notice before taking possession of the property or arranging for its removal, and limiting the costs that the landlord is entitled to recover from the franchisee for removal to reasonable costs. One final example cited by the ACCC of a standard for contract, this time in the independent contracting sector. A vending services agreement reviewed by the ACCC provided that the business was entitled to immediately terminate a contract if the contractor engaged in any conduct that, in its view, had an adverse impact on the company. After discussions with the ACCC, the business amended its agreement so that it can only terminate an agreement where it had reasonable grounds to consider the ongoing agreement detrimental to its best interests, and where the conduct was incapable of being remedied.

Meaning of “unfair” [13.300] A term is unfair if it: (a)

would cause a significant imbalance in the parties’ rights and obligations;

(b)

is not reasonably necessary to protect the legitimate interests of the advantaged party; and

(c)

would cause detriment to a party if it was applied: Australian Consumer Law, s 24(1).

A term is presumed to be not reasonably necessary to protect the advantaged party’s legitimate interests unless that party proves the contrary: s 24(4). In determining unfairness, the court may take into account any matters it considers to be relevant. However, it must take into account the transparency of the term and the contract as a whole: s 24(2). A term is “transparent” if it is expressed in reasonably plain language, legible, presented clearly and readily available to the affected party: s 24(3).

Examples of unfair terms [13.310] The following are given as examples of potentially unfair terms, namely, a term that: (a)

only one party to avoid performing the contract;

(b)

permits only one party to terminate the contract;

(c)

penalises only one party for breach or termination of the contract;

(d)

permits only one party to vary the terms of the contract;

(e)

permits only one party to renew the contract;

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Goods and services [13.340] The prohibition against the making of false or misleading representations in connection with the promotion and supply of goods and services is to be found in s 29(1) of the Australian Consumer Law. The section provides that a person must not, in trade or commerce, in connection with the supply 14 or possible supply of goods 15 or services 16 or in connection with the promotion by any means of the supply or use of goods or services make a false or misleading representation: (a)

that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use;

(b)

that services are of a particular standard, quality, value or grade;

(c)

that goods are new;

(d)

that a particular person has agreed to acquire goods or services;

(e)

that purports to be a testimonial by any person relating to goods or services;

(f)

concerning: i.

a testimonial by any person; or

ii.

a representation that purports to be such a testimonial; relating to goods or services;

(g)

that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits;

(h)

that the person making the representation has a sponsorship, approval or affiliation;

(i)

with respect to the price of goods or services;

(j)

concerning the availability of facilities for the repair of goods or of spare parts for goods;

(k)

concerning the place of origin of goods;

(l)

concerning the need for any goods or services;

(m)

concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2);

(n)

concerning a requirement to pay for a contractual right that:

(i)

is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy; and

(ii)

a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).

14

Supply is defined as follows: “(a) in relation to goods – supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and (b) in relation to services – provide, grant or confer”: Australian Consumer Law, s 2(1).

15

Goods are defined as including: “(a) ships, aircraft and other vehicles; and (b) animals, including fish; and (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity; and (e) computer software; and (f) second-hand goods; and (g) any component part of, or accessory to, goods”: Australian Consumer Law, s 2(1). Services are defined as including: “(a) any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and (b) without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under: (i) a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods; or (ii) a contract for or in relation to the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or (iii) a contract for or in relation to the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or (iv) a contract of insurance; or (v) a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or (vi) any contract for or in relation to the lending of money; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service”: Australian Consumer Law, s 2(1).

16

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them) unless the person has reasonable cause to believe that there is a right to payment, the burden of proof of which lies on the person: Australian Consumer Law s 40(1)–(2), (4). A person is taken to have asserted a right to payment if the person: (a)

makes a demand for the payment or asserts a present or prospective right to the payment;

(b)

threatens to bring legal proceedings with a view to obtaining the payment;

(c)

places or causes to be placed the name of the person on a list of defaulters or debtors, or threatens to do so, with a view to obtaining the payment;

(d)

invokes or causes to be invoked any other collection procedure, or threatens to do so, with a view to obtaining the payment; or

(e)

sends any invoice or other document stating the amount of the payment or setting out the price of the goods or services and not stating that no claim is made to the payment that complies with any requirement prescribed by the regulations: s 10(1).

The penalty for asserting a right to payment for unsolicited goods is $1,100,000 for corporations or $220,000 for other parties: s 162(1).

Recipient not liable to pay for unsolicited goods or services [13.590] The recipient of unsolicited goods is not liable to pay for them, nor for the loss of or damage to the goods other than loss or damage resulting from some wilful and unlawful act by the recipient: Australian Consumer Law, s 41(1). Furthermore, the recipient of unsolicited goods becomes the owner of them either: (a)

one month after notifying the sender in writing of the receipt of the goods, or

(b)

in the absence of such notice, after three months of receiving the goods, subject to the following exceptions: s 41(2), (4).

The recipient will not become the owner of the unsolicited goods if, during the one- or three-month periods just mentioned: (a)

the recipient unreasonably refused to permit the sender or owner of the goods to take possession of them; or

(b)

the sender or owner took possession of the goods during the relevant period; or

(c)

the goods were received in circumstances in which the recipient knew, or might reasonably be expected to have known, that the goods were not intended for her or him: s 41(3).

The recipient of unsolicited services is not liable to pay for them, nor for any loss of or damage as a result of the supply of the services: s 42. The penalty for asserting a right to payment for unsolicited services is $1,100,000 for corporations or $220,000 for other parties: s 162(2).

Assertion of right to payment for unauthorised entries or advertisements [13.600] The Australian Consumer Law makes it an offence for a person to assert a right to payment from any person of a charge for making an entry or advertisement in a publication relating to the person or to their profession, business, trade or occupation unless the person knows or has reasonable cause to believe

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[13.627] The penalty for multiple pricing is $5,000 for corporations or $1,000 for other parties: s 165(1). The penalty for the single price offence is $1,100,000 for corporations or $220,000 for other persons: s 166(1).

Referral selling [13.630] This is a method of selling whereby a person persuades a consumer to buy its goods or services by representing that after the consumer has paid over money, he or she will receive a rebate, commission or some other benefit in return for giving the person names of other customers or otherwise assisting the person in selling their goods or services. The practice has been proscribed because consumers who paid in the expectation that they would receive some future benefit and recoup what they paid received nothing, either because they found it almost impossible to obtain referrals or the companies did not honour their promises to pay. A person must not, in trade or commerce, induce a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for giving the person the names of prospective customers or otherwise assisting the person to supply goods or services to other consumers, if receipt of the rebate, commission or other benefit is contingent on an event occurring after the contract is made. The penalty for referral selling is $1,100,000 for corporations or $220,000 for other parties: s 167(1).

Harassment and coercion [13.640] A person must not use physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer: Australian Consumer Law, s 50(1). In Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8, French J held that when a creditor makes repeated demands for payment and points out that legal proceedings may be brought to recover the debt, such conduct will not constitute undue harassment. However, a creditor will engage in undue harassment where the “frequency, nature or content” of the creditor’s demands “is such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor”: at [48]. The penalty for harassment or coercion is $1,100,000 for corporations or $220,000 for other parties: s 168(1).

Enforcement and remedies for unfair practices [13.650] Contravention of the “unfair practices” provisions of the may give rise to an action for: (a)

a criminal penalty: ss 151–168;

(b)

a pecuniary penalty: s 224(1);

(c)

an injunction: s 232;

(d)

damages: s 236; and

(e)

other orders (for example, rescission or variation of contracts): ss 237, 243.

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Criminal penalties [13.660] Contravention of the unfair practices provisions of the Australian Consumer Law is an offence. Basically, ss 151–168 repeat the unfair practices provisions, and set down the penalty for breach of each provision. The maximum penalty stipulated for contravention of each unfair practice provision by a corporation is a penalty of $1,100,000. The maximum penalty for an individual is a penalty of $220,000. Prosecutions must be commenced within three years of the commission of the offence: s 212. Criminal proceedings may not be brought for contravention of the general prohibition of misleading or deceptive conduct (s 18); the prohibition on unconscionable conduct (ss 20 – 22) or the provisions concerning unfair contract terms (ss 23 – 27): s 217.

Liability of a corporation for the conduct of its employees [13.670] A corporation can only act through its officers, employees and agents. Accordingly, the Competition and Consumer Act 2010 (Cth) makes a corporation responsible for the conduct of such persons. Section 139B(2) of the Act 17 provides that: Any conduct engaged in on behalf of a body corporate – is taken, for the purposes of … the Australian Consumer Law, to have been engaged in also by the body corporate. Certain provisions of the Australian Consumer Law proscribing specific types of unfair conduct require proof of intention (for example, offering “free” gifts with the intention of not providing them as offered (s 32); and accepting payment for goods or services which the corporation intends not to supply (s 36). Where in proceedings for contravention of the Australian Consumer Law arising from conduct engaged in by a corporation, it is necessary to establish the “state of mind” of the corporation, it is sufficient to show a director, employee or agent of the corporation by whom the conduct was engaged in within the scope of the person’s actual or apparent authority, had that state of mind: s 139B(1). These provisions imposing responsibility on a corporation for the acts and intention of its employees and agents apply generally to the other remedies for contravention of the Australian Consumer Law. For example, a company will be liable in damages for the loss suffered by another for a false representation as to the company’s intention made by one of its directors in pre-contractual negotiations where the representation, although not within the director’s actual authority, is within their apparent authority: Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431. On the other hand, where an employee is acting only in their own interest, and hence not “on behalf of” the company, the latter will not be liable for the employee’s misconduct.

Defences [13.680] Certain defences are available to a defendant prosecuted for contravention of the unfair practices provisions. It is a defence if the defendant establishes “that the contravention was caused by a reasonable mistake of fact, including a mistake of fact caused by reasonable reliance on information supplied by another person”: Australian Consumer Law, s 207(1). The defence does not apply in relation to information supplied by an employee or agent of the defendant, or if the defendant is a corporation, to information supplied by a director, employee or agent of the corporation: s 207(2).

17

Section 139B(2) is contained in the Competition and Consumer Act 2010 (Cth), Part XI — Application of the Australian Consumer Law as a law of the Commonwealth.

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Consumer Law is based upon a criminal standard of liability. By contrast, a corporation may be liable under s 18 though it acted honestly: Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 at [8].

Limitation of actions [13.860] An action for damages must be commenced within six years of the date when the cause of action accrued: Australian Consumer Law, s 236(2). A cause of action does not accrue until actual loss or damage has been sustained, which might not be until some time after the agreement was entered into: Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35. Where the loss is a contingent loss or liability, the time does not begin to run until the contingency is fulfilled, that is, when the loss or damage is actually sustained: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.

Other orders [13.870] In addition to its power to grant injunctive relief and award damages, the court is empowered to make further orders to compensate for the damage suffered or likely to be suffered by a person as a result of another’s contravention of the Australian Consumer Law.

Compensation orders [13.880] On the application of a person who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that contravened the provisions of the Australian Consumer Law or relied on an unfair term, the court may make such orders as it thinks appropriate against the person who engaged in the conduct to compensate the applicant in whole or in part for their loss or damage: s 237. The ACCC may make an application on behalf of those who have suffered, or are likely to suffer loss or damage. An application for such an order must be made within six years of the date when the cause of action arose: s 237(3).

Orders for non-party consumers [13.890] Orders may be made in respect of non-party consumers on the application of the ACCC. If a person contravened the consumer protection provisions or was advantaged by an unfair contract term, causing loss or damage to a class of persons, the court may make such orders as it thinks appropriate against that person (excepting an award of damages): Australian Consumer Law, s 239(1). The order must redress the loss or damage in whole or part or prevent or reduce the loss or damage: s 239(3). An application for such an order must be made within six years of the date when the cause of action arose or the contract term was declared to be unfair: s 239(4).

Kinds of orders that may be made [13.900] The orders which can be made against the person who has contravened the Australian Consumer Law under a compensation order (s 237) or an order for non-party consumers (s 239) referred to above include: (a)

declaring the whole or any part of a contract void;

(b)

varying the terms of a contract;

(c)

refusing to enforce any or all of the terms of a contract;

(d)

directing the refund of money or return of property;

(e)

directing the payment of the amount of loss or damage suffered;

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Substantiation notice [13.950] The ACCC may issue a notice requiring a person to substantiate a claim promoting the supply of goods or services, the sale of land, or employment opportunities: Australian Consumer Law, s 219. Non-compliance with a substantiation notice is an offence punishable by a penalty of $16,500 for a corporation or $3,300 for another party: s 205(1).

Public warning notice [13.960] The ACCC may issue a public warning notice about the conduct of a person if it has reasonable grounds to suspect that their conduct contravenes the consumer protection provisions; is satisfied that persons are likely to suffer detriment as a result of the conduct; and that it is in the public interest to issue the notice: Australian Consumer Law, s 223.

Non-punitive orders [13.970] On application by the ACCC, the court has the power to make a number of non-punitive orders for contravention of the consumer protection provisions. These include a community service order, a probation order for a period up to three years, a disclosure order and an order requiring publication of an advertisement in specified terms: Australian Consumer Law, s 246(2). A community service order is an order requiring a person to perform for the benefit of the community a service that relates to the contravening conduct. A probation order seeks to ensure that a person does not engage in the contravening conduct or similar conduct during the period of the order. The order may direct the person to establish a compliance, education or training program for employees or to revise the internal operations of the person’s business that led to the contravening conduct.

Adverse publicity order [13.980] On application by the ACCC, the court may make an adverse publicity order in relation to a person who has contravened provisions of the Australian Consumer Law (excluding the general prohibition on misleading and deceptive conduct in s 18). An adverse publicity order requires the person to disclose specified information and requires the person to publish, at their own expense, an advertisement in the terms specified in the order: s 247. See for example Australian Competition and Consumer Commission v Turi Foods Pty Ltd [2012] FCA 19 at [13.65].

Order disqualifying a person from managing corporations [13.990] If a person has contravened, the consumer protection provisions (excluding the general prohibition on misleading and deceptive conduct in s 18 of the Australian Consumer Law), the court may disqualify that person from managing corporations for a period of time the court considers appropriate: s 248(1). 20 The court considers the seriousness of the contravention, the likelihood that the person will act in a similar manner in the future, the potential for harm to the public and the person’s potential for reformation: Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) (2013) ATPR 42-454; [2013] FCA 1267 at [172]. An undischarged bankrupt is disqualified from managing a corporation. 21 Where a promoter of a pyramid scheme was an undischarged bankrupt, the Federal Court made a disqualification order against 20

Corporations Act 2001 (Cth), s 206B(3).

21

Ibid.

chapter 13 Consumer Protection

The consumer guarantees re supply of goods [13.1002] Sections 18 to 37 of the Australian Consumer Law set out the following nine consumer guarantees that apply to goods supplied to a consumer: Guarantee as to title: The supplier of the goods has the right to dispose of the property in the goods when the goods pass to the consumer (s 51). Guarantee as to undisturbed possession: The consumer has the right to undisturbed possession of the goods (s 52). Guarantee as to undisclosed securities: The goods are free of any undisclosed security, charge or encumbrance (s 53). Guarantee as to acceptable quality: The goods are of “acceptable quality” (s 54). Guarantee as to fitness for any disclosed purpose: The goods are reasonably fit for: (i) a purpose for which the supplier represents they are fit; or (ii) a purpose the consumer makes known to the supplier or manufacturer that they will use the goods for (s 55). Guarantee relating to supply by description: If goods are sold by description, they correspond to that description (s 56). Guarantee relating to supply by sample or demonstration model: If goods are sold by sample or demonstration model, they correspond to that sample or model (s 57). Guarantee as to repairs and spare parts: The manufacturer of the goods will ensure that spare parts and facilities for repair of the goods are reasonably available (s 58). Guarantee as to express warranties: The manufacturer will comply with any express warranty given by the manufacturer in relation to the goods (s 59(1)) and the supplier will comply with any express warranty given by the supplier (s 59(2)). The manufacturer’s 22 liability is as follows: Guarantee of acceptable quality of goods (s 54), except where the breach is caused by someone other than the manufacturer, or where the breach is caused by something beyond human control, which occurred after the goods left the control of the manufacturer, or where the breach is because the supplier charged more than the manufacturer’s recommended retail price (s 54, ss s 271(1) – (2)); Guarantee that goods sold by description will comply with that description, except where the breach is caused by someone other than the manufacturer, or where the breach is caused by something beyond human control, which occurred after the goods left the control of the manufacturer (s 56, ss s 271(3) – (4)); Guarantee that the manufacturer will take reasonable action to ensure facilities for repair of goods, and spare parts, are available (s 58, s 271(5)); 22

Section 7: A “manufacturer” includes the following: (a) a person who grows, extracts, produces, processes or assembles goods; (b) a person who holds himself or herself out to the public as the manufacturer of goods; (c) a person who causes or permits the name of the person, a name by which the person carries on business or a brand or mark of the person to be applied to goods supplied by the person; (d) a person who imports goods into Australia if the person is not the manufacturer of the goods and at the time of the importation, the manufacturer of the goods does not have a place of business in Australia. (e) a person who imports goods into Australia if: (i) the person is not the manufacturer of the goods; and (ii) at the time of the importation, the manufacturer of the goods does not have a place of business in Australia.

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Guarantee that the manufacturer will comply with any express warranty given (s 59 or s 271(5)), except where the person affected has relied on an express warranty to require the manufacturer to repair or replace the goods, and the manufacturer has not refused or failed to repair or replace it within a reasonable time (s 271(6)).

The consumer guarantees re supply of services [13.1004] Sections 60 to 64 of the Australian Consumer Law set out four consumer guarantees that apply to services supplied to a consumer: Guarantee as to due care and skill: the service must be rendered with due care and skill (s 60). Guarantee as to fit for a particular purpose: the service must be reasonably fit for a purpose that a consumer, expressly or impliedly, makes known to the supplier (where it is reasonable for the consumer to rely on the supplier). Services must also be of a nature, quality, state or condition that they can be expected to achieve the purpose that the consumer has made known (s 61). Guarantee as to reasonable time for supply: the service must be provided to consumers within a reasonable time if the time is not otherwise fixed in a contract or agreed to between the consumer and supplier (s 62). Guarantees not to be excluded by contract: a person may not exclude any of the guarantees set out in the ACL (s 64). Before examining some of these guarantees in detail some explanation is required of the terms “supply” and “consumer”.

“Supply” [13.1010] The guarantees are not confined to contracts for the sale of goods since they apply to contracts for the supply of goods, the expression “supply” being defined to include not only contracts of sale but also contracts for the “exchange, lease, hire or hire-purchase” of goods: Australian Consumer Law, s 2(1).

“Consumer” [13.1020] The guarantees apply to contracts for the supply of goods and services to a consumer. A person acquires goods as a consumer only if: (a)

the amount payable for the goods does not exceed is $40,000; or

(b)

the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption; or

(c)

the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads: Australian Consumer Law, s 3(1).

A person does not acquire goods as a consumer if they acquired them for the purpose of resupply, or for the purpose of using them in the course of production, or in the repair of other goods or fixtures on land: s 3(2). A farm worker who acquired a tyre for the purpose of using it on his tractor was held to be a consumer because the goods were not used up as part of a process of production or manufacture or of repairing or treating other goods or fixtures: Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53 at [142]–[143]. A person acquires services as a consumer only if the amount payable for the services does not exceed $40,000 or the services were of a kind ordinarily acquired for personal, domestic or household use or consumption: s 3(3).

chapter 13 Consumer Protection

The statutory guarantees applied by the to “consumer” contracts for the supply of goods follows:

23

are as

As to title [13.1030] In every contract for the supply of goods by a person to a consumer, there is: (a)

a guarantee that the supplier has a right to dispose of the property in the goods; (Australian Consumer Law, s 51(1));

(b)

a guarantee that the consumer has the right to undisturbed possession of the goods except so far as it may lawfully be disturbed by the supplier or by another person who is entitled to the benefit of any security, charge or encumbrance disclosed to the consumer before the contract is made (s 52); and

(c)

in the case of a contract for the supply of goods under which the property is to pass to the consumer – a guarantee that the goods are free, and will remain free until the time when the property passes, from any security, charge or encumbrance not disclosed or known to the consumer before the contract is made (s 53(1)).

However, a supplier is not in breach of the guarantee in (c) above by reason only of the existence of a floating charge over assets of the supplier unless and until the charge becomes fixed and enforceable by the person to whom the charge is given: s 53(2). Where the supplier supplies a limited title to goods there is a guarantee that all encumbrances on the title known to the supplier have been disclosed to the consumer: s 53(3).

Acceptable quality [13.1040] Where a person supplies goods to a consumer in trade or commerce (other than a sale by auction), there is a guarantee that the goods are of acceptable quality: Australian Consumer Law, s 54(1). 24

Meaning of acceptable quality [13.1050] Goods are of acceptable quality if they are as: (a)

fit for all the purposes for which goods of that kind are commonly supplied;

(b)

acceptable in appearance and finish;

(c)

free from defects;

(d)

safe; and

(e)

durable.

As a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods) would regard as acceptable having regard to the following matters (Australian Consumer Law, s 54(2)): (a)

the nature of the goods;

(b)

the price of the goods (if relevant);

23

24

Goods are defined as including: “(a) ships, aircraft and other vehicles; and (b) animals, including fish; and (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity; and (e) computer software; and (f) second-hand goods; and (g) any component part of, or accessory to, goods”: Australian Consumer Law, s 2(1). Under the former Trade Practices Act 1974 (Cth) the implied condition was that the goods were of merchantable quality, the term used in the State and Territory Sale of Goods Acts.

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Furthermore, if a person supplies services to a consumer in trade or commerce and the consumer, expressly or by implication, makes known to the person any particular purpose for which the services are being acquired, there is a guarantee that the services and any product resulting from the services, will be reasonably fit for that purpose: s 61(1). If a person supplies services to a consumer in trade or commerce and the consumer makes known, expressly or by implication, to the person, or a person by whom any prior negotiations were conducted, the result that the consumer wishes the services to achieve, there is a guarantee that the services, and any product resulting from the services, will be of such a nature and quality, state or condition that they might reasonably be expected to achieve that result: s 61(2). However, there are no such guarantees if the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the supplier’s skill or judgment: s 61(3). Significantly, the section does not apply to a supply of services of a professional nature by a qualified architect or engineer. If a person supplies services to a consumer in trade or commerce and the time for the provision of the services is not fixed by the contract, there is a guarantee that the services will be supplied within a reasonable time: s 62. These guarantees apply in contracts for the provision of “services” as defined in s 2(1) of the Australian Consumer Law, 25 with the exception of: (a)

a contract for the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on by the person for whom the goods are transported or stored; or

(b)

a contract of insurance: s 63.

Where s 63 applies, it will do so unaffected by limitations on the liability of, for example, carriers of goods under State legislation, since to the extent that such legislation is inconsistent with s 63 it would be invalid by reason of s 109 of the Constitution: Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388.

Limitation of liability [13.1150] The general rule is that the guarantees imposed by the Australian Consumer Law in contracts for the supply of goods and services cannot be excluded. A term of a contract is void to the extent that it purports to exclude, restrict or modify the application of the statutory guarantees discussed earlier: s 64(1). Importantly, that general rule is subject to the qualification that where the goods are not of a kind

25

Services are defined as including: “(a) any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and (b) without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under: (i) a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods; or (ii) a contract for or in relation to the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or (iii) a contract for or in relation to the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or (iv) a contract of insurance; or (v) a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or (vi) any contract for or in relation to the lending of money; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service”: Australian Consumer Law, s 2(1).

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ordinarily acquired for personal, domestic or household use or consumption, a term of the contract will not be void merely because it limits the supplier’s liability for failure to comply with a statutory guarantee to one or more of the following: 26 (a)

in the case of goods: to the replacement or repair of the goods, or payment of the cost of such replacement or repair; and

(b)

in the case of services: supplying the services again, or payment of the cost of having them supplied again: s 64A(1) – (2).

However, a term in the contract so limiting liability cannot be relied on where the person to whom the goods or services were supplied establishes that it is not “fair or reasonable” for the supplier to rely on such term: s 64A(3). In determining whether or not reliance on a term limiting the liability of the supplier is fair or reasonable, a court is to have regard to all the circumstances of the case and, in particular, to the following: (a)

the relative strength of the bargaining positions between the supplier and the person to whom the goods or services were supplied (referred to as the “buyer”) taking into account, among other things, the availability of equivalent goods or services and suitable alternative sources of supply;

(b)

whether the buyer received an inducement to agree to the term or, in agreeing to the term, had an opportunity of acquiring the goods or services or equivalent goods or services from any source of supply under a contract that did not include that term;

(c)

whether the buyer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); and

(d)

in the case of the supply of goods, whether the goods were manufactured, processed or adapted to the special order of the buyer: s 64A(4).

It needs to be emphasised that the limitation on the liability of a supplier for, for example, defects in the goods supplied permitted by the above provisions does not apply where the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption: no exclusion of liability is permitted where the goods supplied are of such a kind. The purpose of the limited form of exclusion from liability permitted by the Australian Consumer Law is essentially to enable suppliers to exclude liability for consequential losses which may result from a defect in goods supplied to another company, where the goods supplied are not of a kind ordinarily acquired for personal, domestic or household use or consumption but to which the statutory guarantees may still apply because of the Australian Consumer Law’s broad definition of consumer: s 3. That definition includes purchases by companies in certain instances (for example, where the price did not exceed $40,000 and the goods were not purchased for the purpose of resupply, or to be used up in a process of production or manufacture, or for repairing or treating other goods). There is a second qualification to the general rule that the consumer guarantees cannot be excluded or modified by agreement. A contractual term for the supply of recreational services is not void by reason only that it limits liability for death or personal injury in relation to those recreational services: Competition and Consumer Act 2010 (Cth), s 139A(1), (3). 27 Recreational services are services that consist of participation 26 27

This does not apply to the guarantees as to title (s 51), undisturbed possession (s 52) and undisclosed securities (s 53) (see [13.1000]–[13.1030]). Section 139A(1), (3) is contained in the Competition and Consumer Act 2010 (Cth), Part XI–Application of the Australian Consumer Law as a law of the Commonwealth.

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in sporting activities, similar leisure-time pursuits, or other recreational activities that involve a significant degree of physical exertion or physical risk: s 139A(2). 28

Remedies for non-compliance with consumer guarantees [13.1160] Part 5-4 of the ACL sets out the remedies to which a consumer is entitled when a guarantee has been breached. In many cases, a consumer will have a choice of enforcing remedies against either the manufacturer of the goods (which includes the importer) or the retailer. The only guarantees that cannot be enforced against a retailer are the guarantee relating to the availability of a repair network and spare parts, and the guarantee that the manufacturer will comply with its own express warranty. Retailers have a right of indemnification against manufacturers where the retailer has incurred loss honouring a consumer guarantee that could have been directly enforced against the manufacturer: s 274. Where the failure to comply with a consumer guarantee in a contract for the supply of goods is not a major failure, the consumer may require the supplier to remedy the failure within a reasonable time or (if the supplier refuses to do so) reject the goods or recover all reasonable costs incurred in remedying the failure: Australian Consumer Law, s 259(1) – (2). A major failure is defined as a situation where: (a)

the goods would not have been acquired by a reasonable consumer who was fully acquainted with the nature and extent of the failure;

(b)

in the case of a supply by description, or reference to a sample or demonstration model, the goods depart in significant respects from their description, sample or demonstration model;

(c)

the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot be easily and within a reasonable time be remedied to make them fit for such a purpose;

(d)

the goods are unfit for a disclosed purpose and cannot be easily remedied to fit that purpose; or

(e)

the goods are not of acceptable quality because they are unsafe: s 260.

If the failure is a major failure or the failure cannot be remedied, the consumer may choose whether to reject the goods or recover compensation for any reduction in the value of the goods below the price paid: s 259(3). In addition, the consumer may recover damages for any reasonably foreseeable loss or damage caused by the failure to comply with the guarantee (s 259(4)), unless the failure occurred only due to a cause independent of human control that occurred after the goods left the control of the supplier: s 259(5). There are limitations upon the consumer’s right to reject the goods, for example where the rejection period has ended or where the goods have been lost, destroyed or disposed of by the consumer, or were damaged after being delivered to the consumer: s 262(1). The rejection period is the time within which it would be reasonable to expect that the failure would become apparent, having regard to factors such as the type of goods and the use to which it is likely that they would be put: s 262(2). A consumer who rejects the goods must return them to the supplier, unless doing so would impose significant cost, in which case the supplier must collect the goods: s 263(2) – (3). The supplier must refund the money paid or replace the goods: s 263(4). If the failure to comply with the consumer guarantee is not “major”, the supplier can choose what remedy is provided. The remedy the supplier may choose depends on the type of failure, but for a defective product the supplier can choose to repair, replace or refund the product. If the consumer gives the goods to another person as a gift, that person has the same rights and remedies that would have been available if he or she had acquired the goods from the supplier: s 266. 28

Section 139A(2) is contained in the Competition and Consumer Act 2010 (Cth), Part XI–Application of the Australian Consumer Law as a law of the Commonwealth.

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Broadly similar remedies apply in relation to failure to comply with guarantees in relation to the supply of services: ss 267 – 268. Although s 260 lists five grounds for categorising a failure as “major”, the “reasonable consumer” test ((a) above), the “unfit for purpose” test ((c) above) and the “unsafe goods” test ((e) above) are likely to be the grounds most commonly relied on to establish a major failure. The “reasonable consumer” test - s260(a): The “reasonable consumer test” may often be used to determine whether a failure is “major”. Section 260(a) provides that a failure will be major if a reasonable consumer who knew of the failure in advance would not have acquired the goods. The fact that an individual consumer, whose sensitivities may differ from those of the reasonable consumer, may not have purchased a product, does not necessarily mean that a defect is “major”. For example, imagine that a consumer is unhappy with defects in the paintwork on a boat she has purchased and she wishes to replace it. The expert evidence is that the defect is easy to remedy and covered by the manufacturer’s express warranty that came with the boat. In those circumstances, a reasonable consumer, having regard to the existence of the express warranty, would probably still have made the purchase. In this instance, the failure is not “major” and the consumer would not have the right to return the vehicle. Again, considering the cost of fixing the defect may provide an insight into whether it is “major”. Thus, if the consumer has to spend 20% of the value of the goods on repairs this is more likely to suggest a major failure where spending 2% may not. Many consumer items are complex and reliant on sophisticated technology so a “reasonable consumer” may expect that things (such as a vehicle) may develop faults at one time or another over the several years that a vehicle is usually owned. Provided the fault will be remedied under the manufacturer’s warranty, faults of this nature are unlikely to cause a reasonable consumer “not to acquire” the goods. Therefore it would not constitute a “major” failure. By contrast, most dishwashers can be expected to operate without fault for some years. Therefore, a reasonable consumer who knew that a dishwasher would experience faults requiring it to be taken away (or repaired on site), is likely to choose another brand. Thus, a fault that can be quite easily remedied may be a “major” failure and give rise to a right of refund if it causes considerable inconvenience to the consumer. Unsafe goods – s 260(e): Section 260(e) of the ACL provides that goods have a major failure if they are “not of acceptable quality because they are unsafe”. This means that any failure of the guarantee of acceptable quality that arises as a result of a safety defect is automatically a major failure allowing the consumer to claim a refund. However, before a safety defect can be deemed to be a “major” failure, it must be serious enough to breach the guarantee of acceptable quality in the first place. In practice, this means that the defect must result in the product not being as free from defects or as safe as a reasonable consumer would regard as acceptable. A tractor that has a defect that results in an increased risk of brake failure or an electric kettle with a fault that creates a risk of electrocution, will breach the guarantee of acceptable quality on the basis that these products would not be as safe as a reasonable consumer would regard as being acceptable. This has serious implications for manufacturers conducting safety recalls. Where products have a potential safety issue, the normal approach is for the manufacturer to issue a recall for a specified range (such as a serial number range), have each product inspected and take the necessary action (such as a repair or replacement) for products that are found to be affected by the fault.

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The provisions of the Australian Consumer Law imposing liability on manufacturers for defective goods are discussed under the following headings: 1.

Liability of manufacturer for goods with safety defects: Pt 3-5 (ss 138 – 150).

2.

Liability of manufacturer to consumer for non-compliance with statutory guarantees: s 271.

3.

Liability of manufacturer to seller of defective goods: s 274.

This is followed by consideration of the product safety and information provisions of the Australian Consumer Law.

Liability of manufacturer for goods with safety defects Circumstances in which liability arises [13.1180] The effect of the Australian Consumer Law is to make the manufacturer of goods containing a “safety defect” liable to compensate a person who is injured, or whose property is damaged, because of the safety defect. More specifically, it is provided that: (1)

A manufacturer is liable to compensate an individual if: (a)

the manufacturer supplies the goods in trade or commerce; and

(b)

the goods have a safety defect; and

(c)

the individual suffers injuries because of the defect: s 138(1).

Where these conditions are satisfied, the individual may recover from the manufacturer the amount of the loss or damage suffered by them: s 138(2). The meaning of “safety defect” is considered separately at [13.1190]. It will be observed that liability in the section set out above is not restricted to where the person injured had, for example, bought or hired the defective goods but applies generally whenever a person is injured by goods having a safety defect. Furthermore, where, in effect, the dependents of an individual suffer loss as a result of the injuries sustained or the death of that individual because of a safety defect in the goods, such loss is recoverable from the manufacturer: s 139. Liability extends to loss resulting from other goods of a kind ordinarily acquired for personal, domestic or household use being destroyed or damaged because of the defective goods: s 140. A person who suffers loss or damage because land, buildings or fixtures (for private use) are destroyed or damaged because other goods of a kind ordinarily acquired for personal, domestic or household use or consumption are destroyed or damaged because of the safety defect: s 141. Damage to commercial property is outside the scope of the provisions. Basically, the provisions impose liability on a manufacturer for the loss or damage suffered as a result of the supply of goods that have a safety defect. The meaning of “safety defect”, “goods” and “manufacturer” in this context require further explanation.

Meaning of “safety defect” [13.1190] Goods have a safety defect “if their safety is not such as persons generally are entitled to expect”: Australian Consumer Law, s 9(1). This is an objective standard based upon what the public at large, rather than any particular individual, is entitled to expect. In determining the extent of the safety of goods, regard is to be given to all relevant circumstances including:

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(a)

the manner in which, and the purposes for which, they have been marketed;

(b)

their packaging;

(c)

the use of any mark in relation to them;

(d)

any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to the goods;

(e)

what might reasonably be expected to be done with or in relation to them; and

(f)

the time when they were supplied by their manufacturer: s 9(2).

An inference that goods have a safety defect is not to be made only because of the fact that, after they were supplied by their manufacturer, safer goods of the same kind were supplied: s 9(3). An inference that goods have a safety defect is not to be made only because: (a)

there was compliance with a Commonwealth mandatory standard for them; and

(b)

that standard was not the safest possible standard having regard to the latest state of scientific or technical knowledge when they were supplied by their manufacturer: s 9(4).

A pharmaceutical drug that increased the risk of a heart attack in some patients and carried no warning to that effect had a safety defect: Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145 284 ALR 1 at [201].

Meaning of “goods” [13.1200] The term “goods” in the present context is not limited to goods of a kind ordinarily acquired for personal, domestic or household use or consumption. The wide meaning of “goods” as defined generally by the Australian Consumer Law applies. 29

Meaning of “manufacturer” [13.1210] A manufacturer includes a person who: (a)

grows, extracts, produces, processes or assembles goods;

(b)

hold themselves out to the public as the manufacturer of the goods;

(c)

causes or permits their name, business name or brand name to be applied to the goods;

(d)

causes or permits another person to hold them out to the public as the manufacturer of the goods; or

(e)

imports the goods and the actual manufacturer does not have a place of business in Australia: Australian Consumer Law, s 7(1).

Defences [13.1220] It is a defence to an action for compensation for the loss suffered as a result of the supply of defective goods to establish that: (a)

the safety defect in the goods that is alleged to have caused the loss or damage did not exist at the time they were supplied by their actual manufacturer (or, in relation to electricity, at the time at which it was generated). In other words, the manufacturer is not liable for safety defects occurring later in the distribution chain;

(b)

the goods had the safety defect only because there was compliance with a mandatory standard;

29

Goods are defined as including: “(a) ships, aircraft and other vehicles; and (b) animals, including fish; and (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity; and (e) computer software; and (f) second-hand goods; and (g) any component part of, or accessory to, goods”: Australian Consumer Law, s 2(1).

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(c)

the state of scientific or technical knowledge at the time the goods were supplied by their manufacturer was not such as to enable that safety defect to be discovered (this is a “state of the art” defence: Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145 284 ALR 1 [203]); or

(d)

if the goods were, in effect, component parts of other goods, the defect is attributable only to the design of the finished goods; the markings on or accompanying the finished goods; or the instructions or warnings given by the manufacturer of the finished goods: Australian Consumer Law, s 142.

If the court finds that the goods had a safety defect only because there was compliance with a Commonwealth mandatory standard for the goods, the Commonwealth is liable to pay the plaintiff for the amount of the loss or damage caused by the safety defect and not the manufacturer: s 148.

Contributory negligence [13.1230] Where in proceedings to recover the loss or damage suffered in respect of goods with a safety defect, the loss was partly due to the contributory negligence of the individual who suffered injury, the damages recoverable are to be reduced to the extent to which the court thinks fit having regard to the individual’s share in the responsibility for the loss or damage: Competition and Consumer Act 2010 (Cth), s 137A. 30

Limitation period [13.1240] An action for compensation for the loss suffered in respect of the supply of defective goods must be brought within three years after the time the person became aware, or ought reasonably to have become aware, of the alleged loss or damage, the safety defect and the identity of the manufacturer of the goods. No action may be brought after 10 years of the supply of the goods by the manufacturer: Australian Consumer Law, s 143.

Non-exclusion [13.1250] The provisions concerning the right to recover from a manufacturer the loss or damage suffered in consequence of a safety defect in goods cannot be excluded, restricted or modified. Any term of a contract which purports to do so is void: Australian Consumer Law, s 150(1).

Work-related injuries [13.1260] The provisions do not apply to a loss recoverable under Commonwealth, State or Territory law relating to workers’ compensation, that is, loss caused by work-related injuries is excluded: Australian Consumer Law, s 146.

Representative action [13.1270] The ACCC and the State and Territory consumer protection agencies are empowered to commence a defective goods action on behalf of persons who have suffered loss or damage provided the written consent of each person has been obtained: Australian Consumer Law, s 149. 30

Section 137A is contained in the Competition and Consumer Act 2010 (Cth), Part XI–Application of the Australian Consumer Law as a law of the Commonwealth.

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Liability of manufacturer to consumer for non-compliance with statutory guarantees [13.1280] Under the Australian Consumer Law, a manufacturer incurs liability to a consumer for non-compliance with certain of the guarantees imposed on a seller on the supply of goods to a consumer discussed earlier in this chapter: s 271. The broad effect of the latter section is to enable a consumer to recover damages from the manufacturer of goods which do not comply with the statutory guarantees for the following reasons: (a)

the goods are not of acceptable quality (ss 54, 271(1));

(b)

the goods do not correspond with a description which the manufacturer has applied, or allowed to be applied to the goods (ss 56, 271(3));

(c)

there is a failure to ensure that facilities for the repair of the goods or spare parts are available (ss 58, 271(5)); or

(d)

there is a breach of express warranties, for example in guarantees or advertising matter (ss 59, 271(5)).

In an action against the manufacturer, an “affected person” is entitled to recover damages for: (a)

(b)

any reduction in value of the goods below (i)

the price paid for the goods; or

(ii)

their average retail price at the time of supply (whichever is the lower); and

any loss or damage that was reasonably foreseeable as a result of the failure to comply with the particular guarantee: s 272.

An “affected person” is defined broadly to mean: (a)

a consumer who acquires the goods;

(b)

a person who acquires the goods from the consumer (other than for the purpose of resupply); or

(c)

a person who derives title to the goods through the consumer: s 2(1).

An action for damages may be commenced within three years of the day when the affected person first became aware, or ought reasonably to have become aware, that the guarantee was not complied with: s 273.

Liability of manufacturer to seller of defective goods [13.1290] As a result of the guarantees provided by the Australian Consumer Law in contracts for the supply of goods by a seller to a consumer (see [13.1000]) and the liability imposed on a manufacturer of the goods to a consumer for non-compliance with the statutory guarantees (see [13.1280]), a consumer will often have a choice of whether to sue their immediate supplier (for example, the seller) or sue the manufacturer directly where the goods supplied do not comply with the statutory guarantees. If in such a case the consumer elects to sue their immediate supplier (that is, the “seller”), the Australian Consumer Law requires the manufacturer to indemnify the supplier in respect of the costs incurred by the supplier because of the failure of the goods to comply with certain of the statutory guarantees: s 274. The manufacturer’s liability is to indemnify the supplier for the costs incurred by the supplier because of the failure of the goods to comply with the guarantees as to acceptable quality (s 54); fitness for a disclosed purpose (s 55); and the description applied to the goods (s 56): s 274(2). The supplier may commence an action against the manufacturer at any time within three years after the earliest of the following:

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The mandatory recall power is only intended to be exercised where the supplier has not already taken satisfactory remedial action. A supplier must comply with the requirements of a recall notice, and not supply goods in which a defect or dangerous characteristic has been identified in the notice: s 127(1), (2). Where a supplier contravenes the latter provision, and a person suffers loss or damage by reason of a defect in the goods, or as a result of not having information about the unsafe characteristics of the goods, the person is deemed to have suffered loss or damage as a result of the failure of the supplier to comply with the provision: s 127(3). Failure to comply with a recall notice is an offence: s 199(1). The Minister is empowered to publish a notice on the Internet warning of possible risks of using particular goods, or alerting the public that certain goods are under investigation as to their safety: s 129. Suppliers are required to report deaths, serious injuries or illnesses associated with the use or foreseeable misuse of consumer goods: s 131(1). Non-compliance is an offence punishable by a penalty of $16,650 for a corporation and $3,330 for other parties: s 202(1). The Minister may make information standards related to goods or services of a particular kind: s 134. A person must not supply goods that do not comply with an information standard: s 136(1). The supply of goods or services that do not comply with an information standard is an offence subject to penalty of $1,100,000 for a corporation and $220,000 for another party: ss 203(1), 204(1). A defence is provided in relation to a contravention committed by the supplying of goods that did not comply with a safety or information standard. In such a case, it is a defence if the defendant (for example, a retailer) establishes: (a)

that the goods were acquired by the defendant for the purpose of resupply and were so acquired from a person who carried on in Australia a business of supplying such goods otherwise than as the agent of a person outside Australia; and

(b)

that the defendant did not know, and could not with reasonable diligence have ascertained, that the goods did not comply with the standard, or the defendant relied in good faith on a representation by the person from whom the goods were acquired that no safety or information standard had been prescribed in respect of the goods: ss 210(1), 252.

Further reading Books A Bruce, Consumer Protection Law in Australia (2nd ed, LexisNexis Butterworths, Sydney, 2014). S Corones, The Australian Consumer Law (5th ed, Lawbook Co, Sydney, 2015). C Lockhart, The Law of Misleading or Deceptive Conduct (3rd ed, LexisNexis Butterworths, Sydney, 2011). R Miller, Miller's Australian Competition and Consumer Law, Annotated (38th ed, Thomson Reuters, Sydney, 2016). J Paterson, Unfair Contract Terms in Australia (Thomson Reuters, Sydney, 2012).

Journals Competition and Consumer Law Journal (formerly Trade Practices Law Journal)

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Internet sites Australian Competition and Consumer Commission http://www.accc.gov.au/consumers Australian Consumer Law http://www.consumerlaw.gov.au SCAMwatch http://www.scamwatch.gov.au Competition and Consumer Law Education Programs http://www.ccaeducationprograms.org

Tutorial activities 1.

The definition of a consumer is very important to understanding the extent to which consumers are protected under the ACL. What is the definition of a “consumer” for the purposes of the consumer guarantees and the unfair contract terms provisions? How do the two definitions differ?

2.

Is it necessary that a person intend to mislead or deceive?

3.

Is it possible to limit or exclude liability for a breach of (a) s 18 and (b) the consumer guarantees? If your answer to (a) is “no”, please explain Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. If your answer to (b) is “no”, please explain the effect of s 64A(1) – (2) and s 139A.

4.

What are the remedies for a breach of (a) s 18 (b) s 29 and (c) the unfair contract provisions?

5.

What is a “civil penalty”? Is it available for a breach of s 18?

6.

Trinco manufactures and sells outdoor furniture. Included in their range of outdoor furniture are sun lounges and deck chairs, which belong to Trinco’s “Comfi” range and are sold under Trinco’s name. Another manufacturer, Contour, also sells outdoor furniture, including sun lounges and deck chairs as part of its “Funtimes” range. The sun lounges and deck chairs in Trinco’s “Comfi” range and Contour’s “Funtimes” range are almost identical in shape, design and general appearance, although on close inspection, differences can be observed. Has the manufacturer of the “Funtimes” range contravened s 18(1) of the ACL?

7.

Lucy Jordan intends to go bushwalking in the Grampians (rugged bushland of western Victoria) but does not have the appropriate boots. She goes to Catmandoo and, after explaining her situation to Nathan, the shop’s manager and most experienced bushwalker, she buys a pair of Evergrips, the boots he recommends. The boots are industrial strength steel-tipped boots. However, they prove to be unsuitable. They do not grip well and the stitching begins to fall apart after a couple of days walking. When she returns to Melbourne she takes the boots to Catmandoo and demands a refund. Nathan points to the clause above the front door: “the Consumer Guarantees do not apply in this store.” And, he says, “these are industrial boots, used by tradies – you’re not even a consumer under the law”. Advise Lucy of her rights under the ACL.

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8.

In October 2016, after a number of its phones exploded or caught fire when the batteries were being recharged, Samsung offered store credit for the Galaxy Note 7 owners willing to exchange their handsets and is urging all customers to turn off their devices immediately and indefinitely. Samsung has warned users against using their Galaxy Note 7 smartphones, asking customers to power down the handsets and “stop using” them for the foreseeable future. The decision comes after a number of users reported that their new or replaced Galaxy Note 7 handsets were catching fire: (a)

Is the offer of store credit sufficient under the consumer guarantees provisions of the Australian Consumer Law?

(b)

Assume Abigail was severely injured when her Samsung phone exploded. Is she entitled to claim damages under the Australian Consumer Law as compensation for her injuries?

9.

Tenzin and Lobtse are Mongolian students studying at an Australian university in Melbourne. Under the terms of a student visa they are allowed to work for 40 hours a fortnight. They both sign a contract with Kleen Cleaners and begin work cleaning toilets in a 10 story office block in the CBD. Two months go by. They have not been paid at all. They speak to the manager who informs them that under the contract they signed, they agreed that the first three months was a “training period” for which there was no payment. Tenzin amd Lobtse consult you. It is true that the contract does in fact contain this term but (a) they did not read it (b) they received no training during that period. Please advise them.

10.

Paul recently purchased Henry’s shop. Henry claimed the business was thriving with an annual income of $95,000. On closer inspection of Henry’s books, Paul discovers that the business has never turned over $95,000 per annum, as Henry claimed. Advise Paul. Would it make a difference if it was accepted that Henry genuinely believed the business did in fact turn over $95,000?

11.

The German drug company Chemie Grunenthal developed and sold Thalidomide that was used against to alleviate morning sickness in pregnant women. Shortly after the drug was sold between 5,000 and 7,000 infants were born with malformation of the limbs. Throughout the world, about 10,000 cases were reported. Those subjected to thalidomide while in the womb experienced limb deficiencies in a way that the long limbs either were not developed or presented themselves as stumps. Other effects included deformed eyes and hearts, deformed alimentary and urinary tracts, blindness and deafness. What would the company have to prove in order to take advantage of the state of the art defence in s 142? Should it be able to use the state of the art defence? If it can use the defence, on whom does the loss fall? Is that fair?

12.

Net Pty Ltd (Net) provided internet access services throughout Australia under standard form contracts that included a list of “Terms and Conditions”. One of the terms stated: Net reserves the right to change prices or services at any time without prior notice to customers or the public, except when the service is an Australian Broadband Guarantee Service. Price changes will not be retroactive for existing prepaid customers. It is the User’s responsibility to check this online.

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Advise whether this term is likely to breach the ACL. If it does, what is the likely consequence?

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Chapter 14: Law of Torts

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Overview Liability in tort and criminal liability [14.20] As the criminal law is also concerned with wrongful interference with an individual’s person or property, it is not surprising that there is an overlap between criminal liability and liability in tort. In some cases, the conduct may be both a tort and a crime. However, there is an important difference between the two forms of liability. A crime is considered to be an offence against the state, and therefore, criminal proceedings are conducted in the name of the state. For instance, in the case of a sexual assault of a woman, the culprit may be prosecuted and, if found guilty beyond a reasonable doubt, will receive a criminal sanction (a fine or imprisonment or some other penalty). The victim is not involved in the prosecution (except as a witness) and will not generally receive any compensation from the defendant. On the other hand, the law of torts is concerned with the individual’s right to compensation for the loss or injury caused by the wrongful conduct. In the case of the assault, it is the victim who is responsible for bringing the action and, provided she can prove her case on the balance of probabilities, she will receive a remedy (usually damages). So we can see that the object or purpose of tort and criminal law are quite distinct: the primary object of tort law is compensation for victims whereas the primary object of the criminal law is to deter crime and punish the culprits.

The law of torts and contract law [14.30] As in the case of the commission of a tort, a breach of contract can also give rise to a civil action for damages. However, there are important differences between the rights protected by the law of torts and the law of contract. Contract law is concerned with vindicating a party’s right to have a contractual promise performed. This right arises because the parties voluntarily agreed to mutual obligations. On the other hand, the law of torts protects general rights enjoyed by all individuals that derive not from specific agreement but are imposed by the law itself. In some cases, conduct that amounts to a breach of contract may also constitute a tort. For example, a contract for the provision of services between a professional person, such as a solicitor or an accountant and their client, includes an implied term that the services will be performed with reasonable care. A failure to do so gives rise to an action not only for a breach of contract but also a claim based on the tort of negligence.

Negligence Scope of the tort of negligence [14.40] Negligence emerged as an independent tort following the landmark decision of the House of Lords in Donoghue v Stevenson [1932] AC 562. In the years following the decision, the tort of negligence has assumed prime importance in the law of tort. Unlike other torts, for example trespass, nuisance and defamation, negligence does not involve a specific form of conduct: an action for negligence is about careless behaviour and can, therefore, be applied to any form of human activity. Successful claims have been brought in a wide variety of circumstances including traffic accidents, actions against retailers and manufacturers for loss or injury incurred as a result of the supply of defective products, and against those who fail to exercise reasonable care in carrying on a profession such as doctors, solicitors, accountants and financial advisers. Damages are now recoverable not only for the negligent infliction of physical and psychological injury but also for economic loss.

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(a)

By modifying the common law principles governing the general ingredients of the cause of action in negligence such as breach and causation as well as the circumstances in which a defendant can raise a defence to a plaintiff’s negligence claim; and

(b)

By restricting the plaintiff’s right to recover in a number of particular categories of negligence action. For instance, liability is limited in circumstances where the plaintiff’s injury arises from having been engaged in a “recreational activity”. 3 Other examples include cases involving defendants who are professionals, 4 public authorities, 5 volunteers 6 and food donors. 7

Another important objective of this legislation is to reduce the amount of damages that can be awarded to a plaintiff for personal injuries in a negligence action. The common law principle that aims to provide the plaintiff with full compensation has been abandoned and replaced with a new system. For example, the Civil Liability Act 2002 (NSW) places a cap on the amount that can be awarded to a plaintiff for general or non-economic damages. 8 Other measures include the abolition of exemplary, punitive and aggravated damages for personal injury 9 and a limitation on damages for past or future economic loss due to loss of earnings or impairment of earning capacity. 10 Despite these legislative reforms, the basic common law principles still underpin the law of negligence. For this reason, the common law principles will now be considered and, where relevant, reference will be made to the operation of the legislation.

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5

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7 8

9 10

Civil Liability Act 2002 (NSW), Pt 1A, Div 5; Civil Liability Act 2003 (Qld), Pt 1, Div 4 and Civil Liability Act 2002 (WA), Pt 1A, Div 4; Civil Liability Act 2002 (Tas), Pt 6, Div 5. In South Australia, see the Recreational Services (Limitation of Liability) Act 2002 (SA). Compare Wrongs Act 1958 (Vic); Civil Law (Wrongs) Act 2002 (ACT), and Personal Injuries (Liabilities and Damages) Act 2003 (NT), which do not deal with this issue. Civil Liability Act 2002 (NSW), ss 5O, 5P; Wrongs Act 1958 (Vic), ss 59, 60; Civil Liability Act 2003 (Qld), s 22; Civil Liability Act 1936 (SA), s 41 and Civil Liability Act 2002 (Tas), s 22. There is no corresponding provision in the legislation enacted in Western Australia, the Northern Territory or the Australian Capital Territory. Civil Liability Act 2002 (NSW), Pt 5; Wrongs Act 1958 (Vic), Pt XXII; Civil Liability Act 2003 (Qld), Pt 3; Civil Liability Act 2002 (WA), Pt 1C; Civil Liability Act 2002 (Tas), Pt 9 and Civil Law (Wrongs) Act 2002 (ACT), Ch 8. Compare the Northern Territory and South Australian laws which are silent on the matter. Civil Liability Act 2002 (NSW), Pt 9; Wrongs Act 1958 (Vic), ss 34 – 37; Civil Liability Act 2003 (Qld), Pt 3, Div 2; Civil Liability Act 2002 (Tas), Pt 10; Civil Law (Wrongs) Act 2002 (ACT), Pt 2.2. In Western Australia, see the Volunteers (Protection from Liability) Act 2002 (WA) and in South Australia the Volunteers Protection Act 2001 (SA). There is no corresponding legislation in the Northern Territory but see the Volunteers Protection Act 2003 (Cth). Civil Liability Act 2002 (Tas), Pt 8B; Civil Liability Act 1936 (SA), Pt 9, Div 11A; Civil Law (Wrongs) Act 2002 (ACT), Pt 2.2A. Civil Liability Act 2002 (NSW), s 16; Wrongs Act 1958 (Vic), ss 28G, 28H and Pt VBA; Civil Liability Act 2003 (Qld), s 62; Civil Liability Act 1936 (SA), s 52; Civil Liability Act 2002 (WA), ss 9 – 10A; Civil Liability Act 2002 (Tas), ss 27 – 28; Civil Law (Wrongs) Act 2002 (ACT), s 99; Personal Injuries (Liabilities and Damages) Act 2003 (NT), ss 24 – 28. But note Perisher Blue Pty Ltd v Nair Smith (2015) 295 FLR 153 at [195] where the New South Wales Court of Appeal upheld a decision that Pt 2 of the Civil Liability Act 2002 (NSW) is invalid to the extent of its inconsistency with the former s 74(1) of the Trade Practices Act 1974 (Cth) (see now, the Australian Consumer Law, s 60 (Sch 2 to the Competition and Consumer Act 2010 (Cth)). This means that damages recoverable under s 60 are determined by common law principles and not subject to the limitations imposed by the Civil Liability Act. Civil Liability Act 2002 (NSW), s 21 and Civil Liability Act 2003 (Qld), s 52. These provisions are not replicated in the other States or Territories. Civil Liability Act 2002 (NSW), s 12; Wrongs Act 1958 (Vic), s 28F; Civil Liability Act 2003 (Qld), s 54; Civil Liability Act 1936 (SA), s 54; Civil Liability Act 2002 (WA), s 11; Civil Liability Act 2002 (Tas), s 26; Civil Law (Wrongs) Act 2002 (ACT), s 98; Personal Injuries (Liabilities and Damages) Act 2003 (NT), s 20. In Queensland, these provisions must also be read in conjunction with Personal Injuries Proceedings Act 2002 (Qld) which aims to minimise the cost of claims. See also Civil Law (Wrongs) Act 2002 (ACT); and Legal Profession Act 1987 (NSW). The Personal Injuries Proceedings Act 2002 (Qld) and Civil Law (Wrongs) Act 2002 (ACT) also place restrictions on the commencement of actions. See also Personal Injuries (Civil Claims) Act 2003 (NT).

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harm will prima facie determine the existence of a duty of care, although McHugh J opined that “policy issues may be relevant to the issue of reasonable foresight because reasonableness requires a value judgment.” Liability for what is now called “mental harm” is now, in some Australian jurisdictions, limited by the reform legislation. 11 Under the statutory reforms, only claimants who suffer a recognised psychiatric illness or disorder can recover damages for negligently occasioned mental harm. In the following two cases, the High Court has had an opportunity to consider the statutory reforms. For example, in King v Philcox (2015) 255 CLR 304, the High Court recently considered the operation of s 53(1) of the Civil Liability Act 1936 (SA) which provides that damages may only be awarded for mental harm if the injured person was “present at the scene of the accident when the accident occurred” and “is a parent, spouse or child of a person killed, injured or endangered in the accident”. It was held that the plaintiff (the brother of a person killed as a result of the defendant’s negligent driving) could not recover damages for a major depressive illness in circumstances where he heard of his deceased brother’s accident a few hours after it happened and realised that he had driven past the location of the accident earlier in the day when his brother had been trapped and was dying in the car. By contrast, in Wicks v State Rail Authority of New South Wales (2010) 241 CLR 60, the High Court held that s 30(2) of the Civil Liability Act 2002 (NSW) did not operate to prevent recovery by two police officers who were among the first upon the scene of a train derailment. Section 30(2) provides that a plaintiff who suffers nervous shock in connection with another person being killed, injured or put in peril by the defendant’s negligence is not entitled to recover damages “unless the plaintiff witnessed, at the scene, the victim being killed, injured or put in peril”. The High Court took the view that in this case the injuries of the derailment victims and their being put in peril continued for an extended period during which these events were witnessed by the plaintiff rescuers.

3. Liability for omissions [14.110] Generally, the common law imposes no liability for omissions or failing to act. The classic example concerns the child drowning in a shallow swimming pool. As morally confronting as it may be, unless the onlooker is a parent or a lifeguard or has some close relationship with the child, the common law imposes no duty to rescue the child. The reason for the reluctance to impose liability for an omission is that such liability involves the imposition of a duty to take positive action and the courts see this as a more serious interference with a person’s liberty than imposing an obligation to take care when acting. The only circumstance in which a person may be liable for omissions is where a person has a positive duty to act. Positive duties may be imposed where the parties are in a pre-existing relationship that contains elements of reliance or dependence or where the defendant is in a position of control. Examples include parent and child, doctor and patient, school authority or teacher and student, employer and employee and occupier and visitor. We will look at three cases where the issue was whether a duty of care arose in circumstances where the defendant did not act. Two are classic “failure to warn” cases and, in the third, the issue was whether a publican had a duty of care to prevent a drunk customer from driving his bike home.

11

Liability for mental harm is dealt with by legislation in all States except Queensland and the Northern Territory: Civil Liability Act 2002 (NSW), Pt 3; Wrongs Act 1958 (Vic), Pt XI; Civil Liability Act 2002 (WA), s 1B; Civil Liability Act 1936 (SA), s 53; Civil Liability Act 2002 (Tas), s 34 and the Civil Law (Wrongs) Act (ACT), Pt 3.2.

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install and can be done very easily and quickly. On 8 June 2015, Wang Li was travelling home to Geelong on a VicRail train when the brakes failed approaching the main level-crossing. The “piston-breaks” were activated but because the train stopped suddenly on a bend, several carriages were derailed. Wang Li was in one of those carriages. He was seated near an open window and was thrown from the train onto the embankment. He suffered horrific injuries. Many other passengers were also injured. Police, ambulances and television crews were on the scene in minutes. Wang Li’s old friend, Jerry Guo, was watching the disaster as it unfolded on the television. The television camera focused on a badly-injured person being rescued from the embankment. Jerry recognized Wang Li and saw the horrific injuries he had suffered. Jerry was traumatised and continues to suffer from post-traumatic stress disorder. After things settled down, both Wang Li and Jerry seek your advice about whether to sue VicRail in negligence. Please advise: (a)

whether VicRail owes Wang Li and/or Jerry Guo a duty of care; and

(b)

assume for the purposes of part (b) only that VicRail owes a duty of care, whether VicRail breached its duty of care?

6.

Pauline graduated from the KL Horticultural College with a major in floristry. Immediately after graduating, she set up her own cut flower business (“Blossoms”). In early 2015, things were going well and she was thinking about expanding the business. She met Daniel Sloan, an accountant and financial adviser. They discussed Pauline's expansion plans and Daniel agreed to review her financial situation and prepare a business plan. A month later they met again. After Daniel had prepared some financials for Pauline and had researched the cut flower market, he advised Pauline that she was in a sound position to expand and recommended that she borrow money to set up a store in a trendy part of town. Pauline relied on him and decided to act on the advice. In January 2016, she borrowed $30,000 from Eastpac Credit, a small credit union that provided a loan and overdraft facilities. Eastpac relied on the financial statements prepared by Daniel. She then signed a five-year lease, bought some equipment and hired a firm to design a web page. Then things went sour. Daniel admitted he had not adequately factored in her pre-existing debts, had underestimated the significant establishment costs associated with setting up a business in the area and the extent to which online florists had eroded the traditional retail market. Pauline has to terminate the lease (and pay six months rental) and default on the Eastpac loan. She has already spent $7500 of her own money on the webpage and other costs. Eastpac is faced with significant losses on the loan as much of the loan was unsecured. Advise Pauline and Eastpac about their prospects of success in an action against Daniel in the tort of negligence.

7.

Jack is using a grader to excavate his backyard in preparation for a tennis court when he slices through an electrical cable. This affects the electricity supply to Kevin's factory located nearby. Jack is aware of the factory but had no idea the cable ran through his block. As a result of the disruption, Kevin suffers a financial loss until the cable is repaired. Advise Jack whether he owes a duty of care to Jack.

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8.

You are an accountant and financial planner. You owe a duty of care to your client and, in this particular instance, you have breached that duty and your client has suffered financial loss. However you argue that you were only doing what every other accountant and financial planner does. What protection does the “peer professional opinion” defence offer you? What do you need to prove in order for the defence to be accepted? What role does the court have in determining whether the defence is valid?

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PART 5: BUSINESS RELATIONSHIPS

An Introduction to Business Relationships and Organisations

Chapter 15: Law of Agency Chapter 16: Law of Partnerships Chapter 17: Corporations Law

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Agency [PT5.20] Virtually, all commercial activity relies on agency. In fact, it is not an exaggeration to say that agency is one of the genuine cornerstones of business activity. So what is an agent? An agent is simply a person who acts in the name of and on behalf of another. As such, agency covers a vast range of activity and relationships. It includes the real estate agent acting for a vendor, a sports or theatrical agent acting for sportspeople or actors, a person who buys goods or services on behalf of another person and a sales assistant in McDonalds who sells burgers to customers. The list is endless. We will examine the general concept in Chapter 9 but with a particular eye on how agency principles affect the two business organisations that we study in Chapters 10 and 11 – partnerships and corporations. The key questions in agency law – often occurring both in relation to corporations and partnerships – include whether an “agent” is actually an agent, what the scope of the agent’s authority is and the rights and duties among the parties. To answer these questions, we must look to the general law of agency including the relevant cases and, in relation to corporations and partnerships, specific sections of the Corporations Act and the Partnership Act respectively. In relation to partnerships, agency principles are so much a part of the way partnerships work that they are actually regarded as a branch of agency law. With one significant difference: each partner is both an agent and a principal of the others. Partners can bind each other (as agents do) and be bound by the actions of their partners (as principals are). In this sense, the fiduciary obligations that characterise the duty an agent owes to a principal (a duty of good faith) flow both ways. As we will see, a corporation, unlike a partnership, is a legal entity. But, because it is only a legal entity – it is a creation of the law, a fiction, not a natural person – it inevitably has to work through agents such as its directors, officers and employees. A range of factors will determine the most appropriate organisation. They include the size of the business, the degree of risk associated with the business, the need for capital or loans, the need for privacy, the intended longevity of the business, the establishment costs and regulatory requirements, the taxation implications, management and control issues, ease of change in ownership and individual lifestyle concerns. In this introduction, we can only present a brief comparative overview.

Sole trader [PT5.30] A sole trader is the simplest form of business organisation: one individual doing business on his or her own. Despite the sole trader being the most common form of business organisation, they do not generate the revenue of the other organisations. Advantages: Setting up as a sole trader can be as simple and inexpensive as hanging out a shingle and setting up as a private tutor, plumber or solicitor (subject to the necessary licences or certificates being granted). It is also easy to dissolve the business – simply pay the debts and bring in the shingle. There are usually lower compliance costs and regulatory considerations. Taxation is personal – the income of the business is the income of the trader (which may be an advantage for lower incomes). The other advantage is that the sole trader has total control and management rights and is entitled to all the net profits. Disadvantages: The greatest disadvantage is that sole traders have unlimited personal liability for the debts of the business. This risk can be reduced by adequate insurance but the sole trader is nevertheless exposed. There is no inherent continuity or succession. If the sole trader dies or cannot carry on the business because of death or injury the business cannot carry on (in that form). In the absence of security, it is often difficult for a sole trader to borrow money.

chapter An Introduction to Business Relationships and Organisations

Trust [PT5.40] A trust is created when one person (the settlor) transfers the legal ownership of property to another person (the trustee) with instructions that the property is to be administered for the benefit of another (the beneficiary). There are a number of different kinds of trusts but the essence of a trust is constant - that of a person holding property for the benefit of another. For the purpose of running a business, the trading trust is most relevant. In a trading trust, the property of the trust is used in the conduct of a business. The trustee of a trading trust is often a limited liability private company, the effect of which is to afford the advantages of limited liability protection to the trading trust. The trustee distributes income generated by the business to the beneficiaries and because the trustee has a discretion, it can distribute the income in a way that creates taxation advantages. Advantages: A trust, like a partnership, is not a separate legal entity. However the use of a corporate trustee enables the business to trade under conditions of limited liability. In other words, the beneficiaries will not be personally liable for the debts of the business. The creditors can look only to the corporate trustee that has limited liability. In this way, the risk (for the beneficiaries and the trustee) is minimised. Disadvantages: It can be a complex structure that requires considerable work when created and there are ongoing accounting and taxation complexities. The trust is taxed if the profits generated by the business are not distributed. The trustee has significant responsibilities and can be held to account by the beneficiaries.

Partnership [PT5.50] A partnership consists of two or more individuals in business together. Partnerships may be as small as a family café business or as large as some of the big legal or accounting firms. Advantages: There is the advantage that comes from two or more individuals combining strengths and assets. Partnerships can be inexpensive to establish and dissolve. However, more complex professional partnerships inevitably have partnership agreements. Partnerships have less regulatory and compliance costs than corporations. Depending on the partnership, there is greater potential to obtain loans. Disadvantages: Some of the disadvantages are similar to those experienced by sole traders: partners are at risk of personal liability for the debts of the firm and the life of a partnership (absent a partnership agreement) is limited.

Corporation [PT5.60] Corporations are the most powerful and valuable form of business organisation. There are many forms of corporate entities with a vast range in value and complexity, from private $2 shelf corporations to publicly listed corporations worth over a trillion dollars. In this part of the book, we are only concerned with limited liability public and private corporations. Advantages: Limited liability of the owners (shareholders). This is the biggest advantage to incorporation and has been responsible for the rise and rise of the corporation. Perpetual succession is another advantage: the ownership of the (public) company can change but the corporation goes on until it is deregistered. There is far greater opportunity to raise capital, particularly with a public corporation. Disadvantages: Corporations are typically more closely regulated with much greater disclosure rules greater organisational responsibilities. The management has significant statutory duties with serious sanctions for a failure to comply.

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receive information, perform work, buy and sell real estate or other property, make representations – as if the principal were acting in person. However, the foundational principle of the law of agency is that the principal, who has chosen to conduct his or her business through an agent, must bear the consequences of that decision (and, naturally, the principal is entitled to the benefits created by the relationship). Agency is a consensual relationship. Therefore, the use of an agent by a principal will always be voluntary, even if a particular act by the agent is not authorised. In other words, a principal will not be bound by the acts of his or her agent, unless the principal has given authority to the agent to act on his or her behalf. If it were not so, we would all be vulnerable because we might be bound by the acts of a person who simply claimed to be acting on our behalf. This immediately raises the issue of the authority that an agent has to act on the principal’s behalf. This authority may be actual or apparent. Actual authority is the authority actually conferred on the agent (either express or implied) by the principal. Obviously, the principal is responsible for any contracts made by an agent acting within his or her actual authority. For example, a principal may instruct her agent (a stock broker) to enter into a contract to purchase shares up to a value of $1 million. The agent binds the principal if and when he does so. More problematically, the principal may be bound by the acts of an agent acting within his or her apparent authority. This is the authority that the agent appears to have but which, in fact, he or she does not have. The principal is responsible for the foreseeable consequences of the agent who acts outside of his or her actual authority but within his or her apparent authority. In the above example, if the agent purchases shares worth $1.3 million, the question will be whether the agent (who clearly does not have actual authority) has apparent authority to do what he did. If so, the principal will be bound by the acts of the agent. The principal may also be liable in tort for the actions of his or her agent. For instance, the partners in an accounting firm are both principals and agents for one another. So if, for instance, if a partner were to provide negligent advice to a client or steal the client’s funds, the other partners may be liable (as principals) for the conduct of the partner (who was acting as an agent of the firm). A final introductory concept: an agency relationship is a fiduciary relationship, one in which the agent must always act in good faith towards the principal, putting the principal’s interests above his or her own interests and act under the control and direction of the principal at all times. In this chapter, we compare agency with other relationships and then examine various types of agency, look at how an agency relationship may be created and how it may be ended, explore in some detail the power and authority an agent may have and the various rights and responsibilities of each of the parties – principal, agent and third parties.

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An agent should also be distinguished from a trustee. Both act in a similar manner, that is, on behalf of other persons. However, although a trustee exercises their powers on behalf of beneficiaries, a trustee is not the agent of the beneficiaries. Thus, a trustee does not bring the beneficiaries of the trust into a contractual relationship with third parties that is the normal function of an agent. In dealing with matters relating to the trust, the trustee is considered a principal not an agent.

Capacity to act as principal and agent [15.40] There is a marked distinction between a person’s capacity to act as a principal and their capacity to act as an agent. Generally speaking, only those persons with full contractual capacity may employ an agent. Any person can be employed as an agent and can exercise any of the rights and powers conferred by the contract of agency, even though they may not have the necessary contractual capacity to bind themselves in similar negotiations. For example, although a minor is not able to bind herself or himself to certain contracts, a minor may be employed as an agent, and consequently may bind the principal to contracts he or she has entered into as agent. In respect of contracts to which a minor is able by law to bind herself or himself, it is permissible for the minor to appoint an agent for such purpose. A minor’s capacity to act through an agent is coextensive with the minor’s capacity to do the act that he or she purports to delegate. An agent cannot have greater powers conferred upon them than the principal has; and, if the principal is under some disability, the powers of the agent are equally limited according to the nature of such disability. Where the alleged principal is in fact incapable of giving authority to an agent to act on their behalf, an agent who represents that he or she has such authority is liable to the third party for breach of warranty of authority.

Classification of agents [15.50] A general classification of agents is as follows: (a)

special agents;

(b)

general agents; and

(c)

universal agents.

These classifications have no special legal significance apart from illustrating the varying authorities of the agents mentioned. The real problem is the actual extent of the agent’s authority.

Special agents [15.60] A special agent is one who is appointed for the performance of some special act, or to represent the principal in some particular transaction, such act or transaction not being in the ordinary course of the agent’s trade, profession, or business as an agent. For example, P appoints A his agent for the purpose of procuring a truck suitable for towing; the only authority given to A as agent, is that necessary to procure the type of truck mentioned.

General agents [15.70] A general agent is an agent who has authority: (a)

to act for the principal in all matters, or in all matters concerning a particular trade or business, or of a particular nature; or

(b)

to do some act in the ordinary course of their trade, profession or business as an agent on behalf of the principal, for example where a solicitor or broker is employed as such.

chapter 15 Law of Agency

Universal agents [15.80] A universal agent is one whose authority is unlimited to do such things which the principal may do through the instrumentality of another. Such types of agents are rare in practice and, when they do exist, they are appointed by extensive powers of attorney. The only limits which are imposed upon the authority of a universal agent are those which the law imposes with regard to the legality of the objects and the capacity of the parties in relation to contracts in general.

Creation of agency [15.90] The relationship of principal and agent may be created in the following ways: (a)

expressly (that is, by agreement) (i)

by deed;

(ii)

by writing;

(iii)

by word of mouth;

(b)

“holding out” or estoppel;

(c)

ratification; or

(d)

operation of law (i)

agency of necessity;

(ii)

agency arising by cohabitation.

Expressly By deed [15.100] The appointment of an agent by deed (that is, instrument under seal) is necessary where the agent is required to execute any instrument under seal on behalf of their principal, in which case the document creating the power is termed a power of attorney. 1 A power of attorney is often given where a principal is going abroad and desires to leave another in charge of their affairs.

By writing [15.110] An agent is often appointed in writing. In some cases, the appointment is required by statute to be in writing. For example, in most States agents employed to sell or buy land and agents employed to sell or buy businesses cannot sue for remuneration, that is, commission, unless the appointment of the agent is in writing.

By word of mouth [15.120] A verbal offer followed by acceptance in writing or verbally is sufficient to conclude a contract of agency for most purposes other than those mentioned above. In practice, it is usually desirable that the appointment of an agent be in writing. 1

Powers of attorney to enable attorneys to deal with land under the Torrens system of registration in force in the various States require registration or deposit of copy. See Transfer of Land Act 1958 (Vic), s 94; Real Property Act 1886 (SA), s 156; Transfer of Land Act 1893 (WA), ss 143, 144. The corresponding provision in the Real Property Act 1900 (NSW), s 88 was repealed by the Real Property (Amendment) Act 1970 (NSW), s 13. As to dealings with land under the general law by attorneys, see Conveyancing Act 1919 (NSW), s 163; Instruments Act 1958 (Vic), Pt XI; Land Title Act 1994 (Qld), ss 132 – 135; Registration of Deeds Act 1935 (SA), s 35; Property Law Act 1969 (WA), s 85; Powers of Attorney Act 2000 (Tas), requiring registration of powers to validate such dealings.

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Holding out or estoppel [15.130] The relationship of principal and agent may arise between two persons by virtue of one, by words or conduct “holding out” that the other is their agent or permitting the latter to do so. That is, where P, either by words or conduct, leads others to believe that A is P’s agent, then P will not be allowed to subsequently deny the authority of A to act as P’s agent where a third person has entered into an agreement with A on the faith of the representation that A was the agent of P: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. The question whether one person has led third parties to believe that another person is their agent is a question of fact to be decided upon the circumstances of each particular case: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72.

Ratification [15.140] The relationship of agency may also arise as a result of “ratification”. Where one person acts on behalf of another, without having authority to do the particular act, the person on whose behalf the act is done may, by “ratifying” it, render the act as valid and effectual as if it had been done by their duly authorised agent. This may arise where an agent has exceeded their authority. For example, where an estate agent enters into a contract for a lease for a term longer than the principal has stipulated, the principal may adopt the transaction and thus bind themselves to the unauthorised act of the agent. In order that the ratification may be effectual, the following rules should be observed: 1.

The acts must have been done as agent for and on behalf of the supposed principal: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68. For the legal position where an agent does not disclose to the third party that he or she is acting as an agent, see [15.550].

2.

The ratification may only be by a principal who was in existence at the time of the making of the contract. However, s 131 of the Corporations Act 2001 (Cth) provides that where a nonexistent company purports to contract and the company is within a reasonable time subsequently formed, the company may then ratify the contract.

3.

The principal must have the capacity to make the contract both at the date of the contract and at the date of ratification.

4.

Ratification must be of the whole contract. A principal cannot ratify that which is beneficial and reject the remainder: Cox v Mosman [1909] QSR 45.

5.

Ratification must be with full knowledge of what has been done so that the inference may properly be drawn that the principal intended to take upon themselves the responsibility for such acts: Marsh v Joseph [1897] 1 Ch 213.

Where the rules set out above are satisfied, ratification operates retrospectively to validate a previously unauthorised act. The position is the same as if the agent had been vested with authority at the outset.

Operation of law [15.150] An agency can arise by operation of law, that is, irrespective of assent or intent, in two main situations; namely, in cases of: (a)

necessity; and

(b)

arising out of cohabitation.

chapter 15 Law of Agency

Richard Thomson Pty Ltd was not acting within its authority when its employee signed the contract. If not, the Conditions of Contract that included the exclusion clause would not bind Alphapharm. The High Court rejected the argument and concluded that Thomson was acting as an agent for Alphapharm and acting within its authority. The Court said: “In contracting to obtain the supply of those services, Richard Thomson was acting for the benefit of Alphapharm. As Dixon AJ said in Press v Mathers [1927] VLR 326” ’in any ordinary case the question whether one person authorized another to do an act or series of acts on his behalf is best answered by considering for whose benefit or in whose interest it was intended it should be done. Such a consideration may not be conclusive, but it is a useful practical starting point’ [at 70]. The evidence compels the conclusion that Alphapharm authorised Thomson to contract with Finemores and to agree upon rates of freight, terms of payment, and such other standard terms and conditions of the contract of storage and transportation as were required by Finemores. So long as the terms and conditions to which Richard Thomson agreed were Finemores’ standard terms and conditions then Richard Thomson was acting within its authority: at [81]–[82]. The authority of an agent may be: (a)

actual authority; or

(b)

apparent or ostensible authority.

Actual authority [15.210] Actual authority arises out of an agreement between the principal and the agent. The general nature and effect of the actual authority of an agent was explained by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502-503 as follows: “An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the ‘actual’ authority, it does create contractual rights and liabilities between the principal and the contractor” (emphasis added.) The actual authority of an agent can be express or implied. That is to say, the actual authority of an agent is either: (a)

actual express authority; or

(b)

actual implied authority.

Actual express authority [15.220] The express authority of an agent is the authority the principal has expressly given the agent in words or writing, for example, where the principal gives the agent specific instructions to enter into a contract on the principal’s behalf or to purchase a particular piece of land at a stipulated price, or to sell a specific item. In other words, the agent’s authority may be specifically created and limited by the terms of the agreement which gives rise to the agency relationship.

Actual implied authority [15.230] In addition to the express authority contained in the agency agreement, the agent may have a further implied authority to do whatever is necessarily incidental to carrying out the principal’s express

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Right of lien [15.460] An agent has what is called a particular lien on such property of the principal as comes into the agent’s hands for the due payment of all expenses and remuneration lawfully incurred by the agent in transacting the principal’s affairs. However, the transactions must relate to the property over which the agent desires to exercise a lien. The agent may have a general lien extending to all claims arising out of the agency either by express contract or by usage.

Liabilities of agents [15.470] An agent may incur liability: (a)

to the principal; and

(b)

to third parties.

Liability of agent to principal [15.480] The general position is that the agent is an intermediary who is employed to negotiate some transaction on behalf of one person with another in order to effect the completion of a contract between them. Generally the agent incurs no liability to the principal in regard to the contract. However, where the agent disobeys the principal’s instructions, the agent will be liable for the loss suffered by the principal as a result of the breach of the contract of agency. Furthermore, where the agent is negligent in carrying out their duties, the agent will be liable to make good the damage suffered by the principal as a consequence of the agent’s negligence: Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365. Any confidential knowledge acquired by an agent during the course of the agency should not be used by the agent or made available to third parties, and should the agent do so, he or she may be liable in an action for damages.

chapter 15 Law of Agency

the third party sues and recovers judgment against the agent on the contract, the third party is conclusively deemed to have elected to hold the agent liable and cannot thereafter sue the undisclosed principal. Where the third party has not sued the agent to judgment the question whether the third party has so elected or not is a question of fact depending on the circumstances of the particular case; the mere fact that the third party has commenced an action against the agent is not of itself conclusive although it may be some evidence of an election. [15.570] The undisclosed principal may intervene and sue on the contract unless the contract is such as to be entirely inconsistent with agency. The undisclosed principal may be met with any right of set-off which the third party has acquired against the agent before the third party discovered the existence of the principal. Where an agent contracts in such a manner as to make themselves personally responsible, the agent will be liable whether the principal was or was not known at the time of the contract, for example, where the agent signs a bill of exchange in their own name instead of on behalf of the principal.

Breach of warranty of authority [15.580] So long as the agent does not exceed their authority the agent will not be personally liable to persons with whom he or she deals. It is a complete answer for the agent to show that he or she acted only as an agent as the other party well knew, and that everything they did was within the scope of their authority. Where an agent represents, either expressly or impliedly, that he or she has authority to enter into a particular transaction and a third party relies on that representation of authority, the agent is taken to warrant that such representation is true. If it is in fact untrue, the agent is liable in damages for breach of warranty of authority. The measure of damages is the actual loss sustained by the third party. It will be no defence that the agent acted innocently or in mistake as to the precise extent of the authority conferred upon her or him. A person who purports to act as an agent impliedly warrants that they have authority and is liable for breach of that warranty even though their authority has come to an end by reason of facts of which they have no knowledge or means of knowledge: Yonge v Toynbee [1910] 1 KB 215. However, the agent is not liable where the other party knew of the agent’s lack of authority: Weigall & Co v Runciman & Co (1916) 85 LJKB 1187.

Liability of principal and agent for misrepresentations [15.590] Where an agent is engaged to sell property, it will normally fall within the scope of the agent’s ostensible authority to describe the nature and quality of the property the agent is selling on behalf of the principal. Accordingly, if the agent’s representations are untrue, the vendor will be liable to the purchaser for the loss suffered by the purchaser as a result of relying on the agent’s representations: Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40-873 at 49,445. Where the agent made a negligent misrepresentation that was relied on by the purchaser, the agent will be liable in damages to the purchaser for the loss suffered. For example, a real estate agent for the vendor of a business was held liable to the purchaser for negligent misrepresentations made by the agent as to earnings of the business: Roots v Oentory Pty Ltd [1983] 2 Qd R 745; cf Norris v Sibberas [1990] VR 161. A principal is vicariously liable for a tort committed by an agent where the agent has acted within the scope of his or her actual or apparent authority. The liability of the principal includes liability for the negligent misrepresentations of their agent. For example, the vendor of a building was held vicariously liable to the purchaser for damages because of the negligent misrepresentation made by the vendor’s agent

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The right of the principal to revoke the agent’s authority may be limited or affected by the rights of: (a)

third parties; and

(b)

the agent.

Rights of third parties [15.720] The principal may be liable to third parties even after the principal has validly revoked the authority of the agent, where such parties have had previous dealings with the agent and continue to deal with the agent without notice of the withdrawal of the agent’s authority. An example would be where a commercial traveller had authority to collect the debts of their firm and was dismissed without the firm notifying the customers of the termination of the traveller’s authority. The traveller continues to call and receive from the old customers, payment of their accounts supposedly for the firm. The traveller’s action would bind the firm as payment to the traveller would be held as good payment to the firm as regards customers unaware of the traveller’s dismissal.

Rights of the agent [15.730] The right of the principal to revoke the authority of their agent may be limited by the principal’s obligation to indemnify the agent against any loss or damage the agent may have suffered as a result of their employment, for example, expenses in advertising, etc, connected with the agency. Further, the agent may be entitled to claim for loss of commission in certain cases depending upon the nature of the agency, the terms upon which commission is payable and the circumstances existing at the time the principal revoked the agent’s authority. For instance, the principal cannot capriciously or without reasonable grounds refuse to enter into a contract and determine the agency when the agent has found and introduced a purchaser ready, willing and able to buy at the stipulated price: Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436.

By death [15.740] The death (or in the case of a corporation, the liquidation) of either principal or agent immediately puts an end to the agency. Accordingly, an agent’s authority to draw on the principal’s bank account terminates on the principal’s death: Noonan v Martin (1987) 10 NSWLR 402. The general rule is that the death of the principal terminates the authority of the agent even though the agent is unaware of and had no means of ascertaining the fact. Consequently the agent becomes personally liable to third parties for having made any contract entered into by the agent after the death of the principal and on behalf of the deceased principal, and may be sued by such party for breach of warranty of authority even though the agent was ignorant of the principal’s death. The estate of the principal is not liable under such a contract though the personal representative (for example, the executor) may confirm the contract. In some States, every act done in good faith within the scope of a power of attorney after the death of the donor and before the receipt of notice thereof is valid and the donee of such power is not liable. 5

By insanity [15.750] Once insanity has overtaken either principal or agent, the contract of agency, with its attendant rights and liabilities, is at an end: Yonge v Toynbee [1910] 1 KB 215. However, a third party is entitled to 5

Powers of Attorney and Agency Act 1984 (SA), s 12; Property Law Act 1969 (WA), s 85(2); Powers of Attorney Act 2000 (Tas), s 52; Powers of Attorney Act 1956 (ACT).

chapter 15 Law of Agency

treat the authority of the agent as subsisting until they receive notice of the insanity in cases where the principal, before becoming insane, had held out the agent as having authority.

Bankruptcy Of the agent [15.760] The bankruptcy of the agent determines their authority, except where the bankruptcy does not affect their capacity to contract as agent. Thus where the duties of the agent are merely formal, the agent’s bankruptcy would not necessarily affect their authority.

Of the principal [15.770] The bankruptcy of the principal also determines the relationship of principal and agent. However, an agent, even after notice of the principal’s bankruptcy, may do such acts as are necessary to complete some transaction which was already binding on the principal before the bankruptcy.

Renunciation by the agent [15.780] The agent may renounce the agency at any time but must compensate the principal for any loss occasioned by such renunciation.

Particular types of agents Factors and mercantile agents [15.790] A factor is considered at common law to be an agent employed to sell goods, the possession or control of which has been entrusted to the factor’s care by the principal. A factor has been generally recognised as possessing certain powers which apply in the absence of any special instructions from the principal to the contrary. Thus a factor may sell goods in their own name as though he or she was the principal. In the various States, there exist Acts 6 relating to factors and mercantile agents. They define a mercantile agent as “an agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purpose of sale or to buy goods, or to raise money on the security of goods”.

Brokers [15.810] A broker is a general agent who buys and sells goods for a principal without being entrusted either with the possession or control of the goods or of their documents of title. Often, a broker does little more than bring the parties together, and when a contract is concluded takes their commission and entirely drops out of the transaction. The general practice of brokerage is for the broker, upon making the contract, to enter a note in their book signed by the broker, and send a note or memorandum to both parties. The one sent to the purchaser is called the “bought note”, that to the vendor is the “sold note”. 6

Factors (Mercantile Agents) Act 1923 (NSW); Goods Act 1958 (Vic), ss 65 – 72; Factors Act 1892 (Qld); Mercantile Law Act 1936 (SA); Imperial Act 5 & 6 Vict, c 39 (WA); Factors’ Acts Amendment Act 1878 (WA); Factors Act 1891 (Tas).

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Partners [15.820] Each partner is a general agent of the other with regard to partnership matters, and the partnership is bound by any act done by one of its members in the course of the firm’s business, unless the partner so acting has in fact no authority to act for the firm in the particular matter and the person with whom the partner is dealing either knows that he or she has no authority or does not know or believe her or him to be a partner.

Directors [15.830] Subject to the qualification that they must act together as a board, directors are agents for their company, and a company is liable in respect of all contracts made on its behalf by directors acting within the scope of the authority given to them by the rules of the company.

Estate agents [15.840] Generally the term “estate agent” is used in statutes to include agents entrusted with the duty of buying or selling land, or of buying or selling businesses, on behalf of principals. Sometimes, however, the statutes differentiate between “land agents” or “real estate agents” and “business agents”. An auctioneer is an agent for the sale of property at a public auction.

Statutory regulation of agents [15.860] There is considerable regulation by State statutory law of auctioneers and “estate agents”. Thus, in most States, auctioneers and estate agents have to be licensed. 7 In most States, repossession and debt collecting agents (referred to as “commercial agents”) are subject to licensing requirements. 8 Finance brokers (that is, agents who negotiate loans for other persons) are required to be licensed and are subject to certain obligations in the conduct of their business under the national scheme established by the Commonwealth National Consumer Credit Protection Act 2009 (Cth). In all States and Territories “uniform” legislation formerly required the licensing of travel agents and regulated their operations. One of the conditions to be satisfied before a licence would be granted was that the applicant be a participant in the Travel Compensation Fund which was established to compensate travellers who suffer loss as a result of misappropriations by travel agents. However, it is intended that these licensing requirements will be repealed in all jurisdictions and the Compensation Fund will be closed. 7

8

In New South Wales, the Married Persons (Equality of Status) Act 1996 (NSW), s 7 provides: “A married person does not, by reason only of the person’s status as a spouse, have authority to pledge the credit of the other spouse for necessaries or to act as agent for the other spouse for the purchase of necessaries.” See similarly, Law of Property Act 1936 (SA), s 104; Married Persons’ Property Act 1986 (ACT), s 5; Married Persons (Equality of Status) Act 1989 (NT), s 5. See also Estate Agents Act 1980 (Vic), ss 49A, 50; Property Agents and Motor Dealers Act 2000 (Qld), ss 117, 140, 217, 288, 346; Land Agents Act 1994 (SA), s 6(2); Real Estate and Business Agents Act 1978 (WA), s 60; Property Agents and Land Transactions Act 2005 (Tas), s 18. The following statutes should also be considered: Auction Sales Act 1973 (WA); Agents Act 2003 (ACT); Auctioneers Act 1935 (NT); Agents Licensing Act 1979 (NT). The National Competition Review “concluded that the benefits of licensing auctioneers of goods are outweighed by the costs”: Victorian Hansard (Assembly), 5 April 2001, p 761. As a result of this recommendation, the Victorian Auction Sales Act 1958 (Vic) was repealed: Auction Sales (Repeal) Act 2001 (Vic), s 3. Commercial Agents and Private Inquiry Agents Act 2004 (NSW); Property Agents and Motor Dealers Act 2000 (Qld), s 45; Security and Investigation Agents Act 1995 (SA); Debt Collectors Licensing Act 1964 (WA); Security and Investigations Agents Act 2002 (Tas); Commercial and Private Agents Licensing Act 1979 (NT).

chapter 15 Law of Agency

See Victorian Legislative Assembly Hansard, 13 November 2013, p 4024. The legislation has already been repealed in New South Wales, Queensland, Victoria, South Australia Northern Territory and the Australian Capital Territory. 9 Employment agents may also be subject to licensing requirements. 10

Further reading G Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, Sydney, 2014). S Fisher, Agency Law (Butterworths, Sydney, 2000).

Tutorial activities

9

10

1.

What is the essential idea that is at the heart of the law of agency?

2.

Distinguish between express and implied actual authority.

3.

Distinguish between actual and apparent authority.

4.

When can an agent exercise apparent authority?

5.

When is ratification of an agent's action possible?

Travel Agents Act 1985 (WA); Travel Agents Act 1987 (Tas). The Travel Agents Act 1986 (NSW) was repealed by the Travel Agents Appeal Act 2014 (NSW). The Travel Agents Act 1986 (Vic) was repealed by the Travel Agents Appeal Act 2014 (Vic). The Travel Agents Act 1988 (Qld) was repealed by the Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Act 2014 (Qld) , s 52. The Travel Agents Act 1986 (SA) was repealed by the Travel Agents Repeal Act 2014 (SA). The Consumer Affairs and Fair Trading Act 1990 (NT), Pt 11 was repealed by the Consumer Affairs and Fair Trading Amendment Act 2014 (NT), s 6. Agents Act 2003 (ACT), s 21 was repealed by the Justice and Community Safety Legislation Amendment Act 2014 (ACT), Sch 1 Pt 1.1 Item 1.3. Employment Agents Registration Act 1993 (SA), s 6; Employment Agents Act 1976 (WA), s 12; Agents Act 2003 (ACT), s 22.

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6.

Anwar was appointed to the stationery purchasing agent position during his time at Awesome Accountants. He regularly purchased stationery on Awesome Accountant’s account from Stationery Express Ltd with Awesome Accountant’s knowledge and acquiescence. Anwar’s purchasing limit was $500 per week, although he never needed to order stationery worth more than $300 at a time. After the end of his internship with Awesome Accountants, he placed a $250 stationery order with Stationery Express. Anwar picked up this stationery and took it home for his own use. Awesome Accountants has received the invoice for the stationery and does not wish to pay. (a)

Is there an agency relationship between Awesome Accountants and Anwar?

(b)

Assuming there is, is the purchase within Anwar’s authority?

7.

Ricardo is the senior curator and ground manager at Noora Norra Golf Club Resort, a luxury facility in north Queensland owned by Gabba Pty Ltd. Noora Noora has been under financial pressure since the Global Financial Crisis affected the flow of Japanese tourists. The Board cut budgets and informed Ricardo that he could not enter into any contracts valued at over $10,000. Despite this instruction he proceeded to negotiate a landscaping contract with Willow Landscaping that was valued at $13,000. An associated water feature cost an extra $4000. When work commenced the CEO asked Ricardo what was happening. Ricardo informed him of the landscaping project but did not mention the water feature. After considering the circumstances, the CEO tells Willow to proceed. Soon after the Board understands the totality of the commitment. Advise the Board of its rights and obligations.

8.

Jeremy is an estate agent in the Melbourne inner city area of Docklands. He is selling high-rise units “off the plan” for Aspirational Developments Pty Ltd. He has friends who work for other developers and becomes aware that a competing high-rise that is also selling “off the plan” has run into difficulties and is unlikely to go ahead. The result is that the units he is selling are likely to be more valuable than previously thought. Being an opportunist, Jeremy assists a friend to arrange finance so she can buy three of the units with a view to selling later at a profit that they will split 50–50. Furthermore, in return for a small payment, he informs several people who have expressed an interest in purchasing a unit of the news. Aspirational Developments learns of Jeremy's conduct and seeks your advice.

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Introduction to partnerships [16.10] Although the use of partnerships has been eclipsed by the rise of the limited liability company, it is still an important form of business association. It is the chosen (or only) permitted form of joint activity allowed in many professions – for example, many firms of public accountants are partnerships, and it is a way of gathering resources and expertise for major projects. There are other reasons for forming a partnership: partners may not wish to take on the formality and expense that is a necessary part of the incorporation of a company; they may complement each other by bringing new or different skills to the business and new partners may bring new capital or broader funding options. It is also a default entity: many small or family businesses are partnerships in law without the partners being aware of that fact. Unlike the formal incorporation process required for the creation of a company, a partnership requires no formalities. Simply put, a partnership exists when two or more persons are carrying on business together with a view of making a profit. So whilst the law and accounting firms have detailed and complex partnership agreements that cover every aspect of the relationship, the extended family that opens a café or fruit shop, with no written agreement of any kind, may, in law, also be regarded as a partnership. And, as seen throughout this chapter, there are important reasons why it may be necessary to decide whether or not a partnership relationship exists: a number of significant rights and obligations – of both the parties involved in the relationship, as well as third parties – turn on the decision. The legal relationship arising out of a partnership is similar to the relationship between principal and agent, except that a partner is both a principal to and agent for the other partners, able to bind the other partners (as an agent) and be bound by the actions of the other partners (as a principal). It is, therefore, above all, a fiduciary relationship: “Ordinary partnerships are by the law assumed and presumed to be based on the mutual trust and confidence of each partner in the skill, knowledge and integrity of every other partner. As between the partners and the outside world (whatever may be their private arrangements between themselves), each partner is the unlimited agent of every other in every manner connected with the partnership business, and not being in its nature beyond the scope of the partnership”: Re Agriculturist Cattle Insurance Co (1870) LR 5 Ch App 725, 733 per James LJ. The legislation in each State is basically uniform and will be referred to in this chapter as the “Partnership Act”. 1 However, in New South Wales, Victoria, Queensland, South Australia, Western Australia and Tasmania provision is also made for limited partnerships. 2 The Australian Capital Territory, Northern Territory, New South Wales, Queensland, South Australia, Tasmania and Victoria have also introduced incorporated limited partnerships. 3 These specialised partnership forms are discussed separately at the end of this chapter. The principles of partnership law contained in the Partnership Act are essentially declaratory of the pre-existing common law and are not to be taken as an exhaustive exposition of the law on the topic. Most

1

2 3

The various Partnership Acts are: Partnership Act 1892 (NSW); Partnership Act 1958 (Vic); Partnership Act 1891 (Qld); Partnership Act 1891 (SA); Partnership Act 1895 (WA); Partnership Act 1891 (Tas); Partnership Act 1963 (ACT); Partnership Act 1997 (NT). Partnership Act 1892 (NSW), Pt 3; Partnership Act 1958 (Vic), Pt 3; Partnership Act 1891 (Qld), Ch; Partnership Act 1891 (SA), Pt 3; Limited Partnerships Act 1909 (WA); Partnership Act 1891 (Tas), Pt 3. Partnership Act 1963 (ACT), Pt 6; Partnership Act 1997 (NT), Pt 3; Partnership Act 1892 (NSW), Pt 3; Partnership Act 1958 (Vic), Pt 5; Partnership Act 1891 (Qld), Ch 4; Partnership Act 1891 (SA), Pt 6; Partnership Act 1891 (Tas), Pt 3.

chapter 16 Law of Partnerships

provisions of the Partnership Act may be supplemented, amended or excluded by agreement, and the Act provides that the rules of the common law and equity are to continue in force except insofar as they are inconsistent with the Act. 4

Formation of partnership [16.20] A partnership is created by agreement. The agreement may be oral, written, under seal or inferred from a course of dealing adopted or agreed upon by all the partners. 5 Capacity to enter into a contract of partnership is governed by the general law of contract but minors are in a special position: see [16.90].

Number in partnership [16.40] Under the Corporations Act 2001 (Cth), s 115, the maximum number of persons who may form a partnership for the acquisition of gain is 20, except where partnerships are formed to carry on certain professions or callings, 6 or are incorporated or formed under another Australian law. A person who takes part in the formation of a business association with more than the allowed number of members, known as an “outsize partnership”, becomes liable to a criminal penalty ($500) but the agreement is not invalid and does not affect the enforceability of contracts or other arrangements made. 7 Both partners and outsiders should be able to implement the transactions of outsize partnerships to the same extent as those of ordinary partnerships.

Capacity to be a partner [16.60] Certain types of persons have restricted capacity to enter into partnership. The most important of these are persons of unsound mind and minors.

Persons of unsound mind as partners [16.80] A person of unsound mind is capable of entering into partnership during a period of sanity. To escape liability as a partner, it must be proved that they were of unsound mind when they entered the partnership, and the party with whom they entered the partnership knew this. Otherwise, the partner who is of unsound mind is both capable of binding the firm as a partner and of being bound by their co-partners.

Minors as partners [16.90] A minor (that is, a person under 18 years of age) may be a partner although generally it is not a satisfactory arrangement for the other partners. If a partner who is a minor enters into contracts with third parties on behalf of the firm, such contracts bind the adult partners but the minor is not liable for partnership debts so far as their private assets are 4

5

6

7

Partnership Act 1892 (NSW), s 46; Partnership Act 1958 (Vic), s 4; Partnership Act 1891 (Qld), s 48; Partnership Act 1891 (SA), s 46; Partnership Act 1895 (WA), s 6; Partnership Act 1891 (Tas), s 5; Partnership Act 1963 (ACT), s 5; Partnership Act 1997 (NT), s 4. Considered in Cameron v Murdoch (1986) 60 ALJR 280 at 286. Formerly, if the partnership was to continue for more than one year, the agreement had to be evidenced in writing to be enforceable under the Statute of Frauds 1677 (IMP). However, this particular requirement of the Statute of Frauds 1677 has been repealed in all States and Territories with the exception of Tasmania: see Mercantile Law Act 1935 (Tas), s 6. The Corporations Regulations 2001 (Cth), reg 2A.1.01 sets maxima of 50 for actuaries, medical practitioners, patent attorneys, sharebrokers and stockbrokers, and trademark attorneys; 100 for architects, pharmaceutical chemists and veterinary surgeons; 400 for legal practitioners and 1,000 for accountants. Corporations Act 2001 (Cth), s 103.

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concerned. The adult partners, however, have the right to apply the whole of the partnership assets (including the capital contributed by the minor) to pay all partnership debts. A creditor who has obtained judgment against the firm may seize all partnership property but not the minor’s separate property. On or before attaining majority, the minor may repudiate the partnership agreement but unless the minor repudiates it within a reasonable time after attaining majority, he or she will become liable as an ordinary partner. 8

Firm name [16.100] Those who have entered into partnership with one another are called collectively a firm, and the name under which their business is carried on is called the firm name. 9 The firm name may be the name of one or more members of the partnership or may be an assumed name, for example, Excelsior Estate Agency. A partnership may include the word “company” in its name, for example, Weir & Co but must not use the word “limited” as the last word in its name. There is separate legislation which controls the actual registration of the firm name. 10 Registration of the firm name as a business name is required, unless the firm name consists only of the full names or surnames and initials of all partners. For instance, it would be necessary to register the firm name of the following partnerships: Brown & Co

Wilson & Smith

Apex Motor Garage

The particulars requiring registration include the business name, the general nature and principal place of the business, and in respect of every individual partner there must be disclosed: (a)

their given names and surnames;

(b)

their usual residence; and

(c)

any other business occupation that they follow.

A change or alteration in the constitution of the firm must also be registered. The legislation also prohibits the inclusion of certain words in a trade or business name, for example, Royal, Crown, etc.

8

9

10

However, in New South Wales the legal position of minors differs markedly from that in the other States as a result of the Minors (Property and Contracts) Act 1970 (NSW) while, in South Australia, the Minors Contracts (Miscellaneous Provisions) Act 1979 (SA) provides both a way of validating minors’ contracts and the possibility of minors avoiding some common law liabilities. Partnership Act 1892 (NSW), s 4; Partnership Act 1958 (Vic), s 8; Partnership Act 1891 (Qld), s 3; Partnership Act 1891 (SA), s 4; Partnership Act 1895 (WA), s 10; Partnership Act 1891 (Tas), s 9; Partnership Act 1963 (ACT), s 8; Partnership Act 1997 (NT), s 8. Business Names Registration Act 2011 (Cth) replaced State and Territorial Acts on 28 May 2012.

chapter 16 Law of Partnerships

(d)

the capital to be introduced by each partner;

(e)

provisions for proper accounts and their audit;

(f)

the authority of partners;

(g)

provision as to the division of the profits;

(h)

arrangements as to partners’ drawings;

(i)

arrangements as to partners’ salaries;

(j)

provision regarding interest on capital;

(k)

arrangements as to interest on advances;

(l)

arrangements as to interest on drawings;

(m)

provisions regarding the death or bankruptcy of a partner;

(n)

details regarding the retirement of a partner;

(o)

the amount to be paid to an outgoing partner;

(p)

method of valuing goodwill upon death or retirement of a partner; and

(q)

any special restraints to be observed by partners.

The rights and duties of partners may be varied during the partnership with the consent of all partners (such consent being either express or implied), or in any manner specially provided by the partnership agreement. For instance, it may be provided in the agreement that the senior partner is solely responsible for hiring and firing the practice manager. Further, because the law of contract applies, there may be terms implied into the agreement provided there is no agreement on the matter in the agreement itself.

2. The Partnership Act [16.211] The partnership agreement may be silent on a particular issue (eg how are profits and losses to be shared? can a partner be paid a wage? can a majority of partners expel a partner? can a partner be excluded from management?), or it may be an issue that has arisen since the partnership began. When the partnership agreement does not cover the issue, then the Partnership Act determines the rights, duties and interests of partners. 15 1.

All the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses, whether of capital or otherwise, sustained by the firm. The Act provides for equality of profits notwithstanding that capital has been contributed unequally. This recognises the fact that partners may contribute a personal value to the firm apart from the monetary value of any capital paid in.

2.

The firm must indemnify every partner in respect of payments made and personal liabilities incurred by those partners: (a)

in the ordinary and proper conduct of the business of the firm; or

(b)

in or about anything necessarily done for the preservation of the business or property of the firm.

3.

A partner making for the purpose of the partnership any actual payment or advance beyond the amount of capital which they have agreed to subscribe is entitled to interest at the rate of 7 per cent

15

Partnership Act 1892 (NSW), s 24; Partnership Act 1958 (Vic), s 28; Partnership Act 1891 (Qld), s 27; Partnership Act 1891 (SA), s 24; Partnership Act 1895 (WA), s 34; Partnership Act 1891 (Tas), s 29; Partnership Act 1963 (ACT), s 29; Partnership Act 1997 (NT), s 28.

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Revocation of guarantee by change in firm [16.250] A continuing guarantee given by or to a partnership, subject to any agreement to the contrary, is revoked as to future transactions by any change in the constitution of the partnership. 22 Should one partnership give such a guarantee for another partnership the guarantee would be revoked by a change in the construction of either partnership.

Continuance of business after expiration of term [16.260] Where a partnership which has been entered into for a fixed term is continued after the term has expired, and without any express new agreement, the rights and duties of the partners remain the same as they were at the expiration of the term, but the partnership becomes a partnership at will. 23

Partnership property [16.270] Partnership property must be used exclusively for the purposes of the partnership and in the manner set out in the partnership agreement. 24 Partnership property consists of: (a)

property originally brought into the partnership;

(b)

property acquired whether by purchase or otherwise on account of the firm or for the purposes and in the course of the partnership business;

(c)

property acquired with the firm’s money unless the contrary intention of the parties appears from the transactions; and

(d)

the goodwill of the business.

The right of a partner in a trading partnership to sell the property of the partnership cannot be limited by stipulation between the partners, unless the purchaser has express notice of the limitation: Montefiore v Smith (1876) 14 SCR (NSW) 245. The Partnership Act also provides that, in the absence of any agreement to the contrary, where co-owners of land share the profits resulting from the land (say, from the sale of wheat or cattle) and they purchase additional lands out of those profits to be used in a similar way (buying more farm land), they also own the new property as co-owners in the same shares as they owned the original land. So if the original land purchase was made as co-owners, this position flows through to any subsequent purchase made with funds from the sale of the original land. 25 Whether the separate property of one partner used in a partnership becomes part of the assets of the partnership or remains the separate property of the partner ultimately depends upon the agreement between the partners. Where no express agreement has been reached between the partners, agreement may be inferred from the manner in which the affairs of the partnership have been conducted. However, to 22

Partnership Act 1892 (NSW) s 18; Partnership Act 1958 (Vic) s 22; Partnership Act 1891 (Qld) s 21; Partnership Act 1891 (SA) s 18; Partnership Act 1895 (WA) s 25; Partnership Act 1891 (Tas) s 23; Partnership Act 1963 (ACT) s 22; Partnership Act 1997 (NT) s 22.

23

Partnership Act 1892 (NSW) s 27; Partnership Act 1958 (Vic) s 31; Partnership Act 1891 (Qld) s 30; Partnership Act 1891 (SA) s 27; Partnership Act 1895 (WA) s 38; Partnership Act 1891 (Tas) s 32; Partnership Act 1963 (ACT) s 32; Partnership Act 1997 (NT) s 31. Partnership Act 1892 (NSW) s 20; Partnership Act 1958 (Vic) s 24; Partnership Act 1891 (Qld) s 23; Partnership Act 1891 (SA) s 20; Partnership Act 1895 (WA) s 30; Partnership Act 1891 (Tas) s 25; Partnership Act 1963 (ACT) s 24; Partnership Act 1997 (NT) s 24. Partnership Act 1892 (NSW) s 20; Partnership Act 1958 (Vic) s 24; Partnership Act 1891 (Qld) s 23; Partnership Act 1891 (SA) s 20; Partnership Act 1895 (WA) s 30; Partnership Act 1891 (Tas) s 25; Partnership Act 1963 (ACT) s 24; Partnership Act 1997 (NT) s 24.

24

25

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“Often it happens that the goodwill is the very sap and life of the business, without which the business would yield little or no fruit. It is the whole advantage, whatever it may be, of the reputation and connection of the firm, which may have been built up by years of honest work or gained by lavish expenditure of money”: at 23. The goodwill of a partnership business, like any other partnership asset is, in the absence of any agreement to the contrary, to be sold upon the dissolution of a partnership for the benefit of all the partners.

Provisions in partnership agreement [16.310] A deceased partner’s representative or a retiring partner is entitled to a share of the goodwill at the date of death or retirement. To avoid disputes or the necessity of selling the business to determine the value of goodwill, provision should be contained in the agreement as to the basis upon which the value of the goodwill is to be estimated. The agreement, for instance, may provide that the goodwill upon the death or retirement of a partner is to be calculated as worth, say, two years’ purchase of the average profits over the last five preceding years, and that the retiring or deceased partner is to be entitled to their share of the total value of the goodwill according to the proportion in which they shared profits. In some agreements, it is provided that the goodwill is to be valued as at the date of death or retirement by a public accountant.

Charging a partner's share [16.320] Partnership property is not liable to be seized for the private debt of a partner and may only be made liable on a judgment against the partnership. A creditor who has obtained judgment in respect of the separate debt of a partner, however, may obtain an order charging that partner’s interest in the partnership property and profits with the amount of the debt and interest. In addition, the creditor may obtain by the same or a subsequent order the appointment of a receiver of that partner’s share of profits and of any other money which may be coming to the partner in respect of the partnership. The other partner or partners may at any time redeem the interest charged, or, in the case of a sale being directed, purchase the same. 26 If a partner allows their share of a partnership to be so charged for their separate debt the other partners may dissolve the partnership.

26

Partnership Act 1892 (NSW) s 23; Partnership Act 1958 (Vic) s 27; Partnership Act 1891 (Qld) s 26; Partnership Act 1891 (SA) s 23; Civil Judgments Enforcement Act 2004 (WA) s 14(4); Partnership Act 1891 (Tas) s 28; Civil Procedure Rules 2006 (ACT); Partnership Act 1997 (NT) s 27.

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(a)

to sell any goods or personal chattels of the firm;

(b)

to purchase on account of the firm any goods of a kind necessary for or usually employed in the business carried on by it. For example, a member of a partnership conducting the business of farming was deemed to have implied authority to purchase farming machinery on time payment (Molinas v Smith [1932] QSR 77);

(c)

to receive payment of debts due to the firm, and give receipts or releases for them;

(d)

to engage employees for the partnership business.

If the partnership is a trading one (for example, is engaged in the buying and selling of goods), every partner may also bind the firm by any of the following acts: (e)

accept, make, and issue bills and other negotiable instruments in the name of the firm;

(f)

borrow money on the credit of the firm;

(g)

for that purpose, pledge any goods or personal chattels belonging to the firm; and

(h)

for the like purpose, give an equitable mortgage, by deposit of deeds or otherwise, of real estate or chattels real belonging to the firm but he or she cannot give a legal mortgage of land.

Authority not implied [16.350] A partner has no implied authority to bind the firm by deed for such authority must be given to that partner by deed. Furthermore, a partner has no implied authority to give a guarantee in the name of the firm or to bind the firm by a submission to arbitration. A partner cannot pledge the firm’s credit for a purpose not apparently connected with its ordinary course of business without express authority, 28 nor can he or she pledge the firm’s assets for private debts where the other party knows they are not that partner’s own assets. However, where the party is unaware that the assets are not the partner’s private property, the charge is effective. If it has been agreed between the partners that any restrictions be placed upon the power of any one or more of them to bind the firm, an act done in contravention of the agreement is not binding on the firm with respect to persons having notice of the agreement. 29

Apparent authority [16.360] This authority only extends to transactions in the usual course of the partnership business, and carried out in the usual way, otherwise the firm will not be liable even though the partnership derives a benefit from the act: Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509 (VSCA) at [45]-[56].

Liability of partners to third parties [16.370] As we have seen, a partnership is not a separate legal person. It is nothing more than individual partners and it is those partners who are (a) jointly liable for the debts of the partnership (b) jointly and 28

29

Partnership Act 1892 (NSW) s 7; Partnership Act 1958 (Vic) s 11; Partnership Act 1891 (Qld) s 10; Partnership Act 1891 (SA) s 7; Partnership Act 1895 (WA) s 14; Partnership Act 1891 (Tas) s 12; Partnership Act 1963 (ACT) s 11; Partnership Act 1997 (NT) s 11. Partnership Act 1892 (NSW) s 8; Partnership Act 1958 (Vic) s 12; Partnership Act 1891 (Qld) s 11; Partnership Act 1891 (SA) s 8; Partnership Act 1895 (WA) s 15; Partnership Act 1891 (Tas) s 13; Partnership Act 1963 (ACT) s 12; Partnership Act 1997 (NT) s 12.

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severally liable for the wrongful acts of the partner(s) and (c) jointly and severally liable for misapplication of money or property. We will look at each in some detail.

(a) Liability for debts and obligations [16.380] The Partnership Act explains that: “[E]very partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners unless the partner so acting has in fact no authority to act for the firm in the particular matter and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.” 30 Thus partners may be bound by the actions of a partner: when the partners have authorised a partner to enter into a transaction on their behalf with the outsider. Here the normal rules of agency apply so that if the agent has acted within his or her actual or apparent authority, the partners will be bound to the transaction; when one of the partners has acted, without express authorisation, in circumstances where the four requirements of the Partnership Act have been met: (i)

the act or transaction was entered into by a partner;

(ii)

the act or transaction entered into must be within the scope of the kind of business carried on by the firm;

(iii)

the act or transaction must be carried out in the usual way; unless,

(iv)

the other party to the transaction must either know or believe that the person lacks authority or do not believe him or her to be a partner.

We will consider each element. But first we should note that in a commercial partnership, the following acts come within the scope of a partners normal authority: he or she may pledge or sell the partnership property, may buy goods on account of the partnership, may borrow money, incur and pay debts on account of the partnership, sign cheques and hire employees: see Bank of Australasia v Breillat (1847) 13 ER 642 at 657–658.

(i) The act or transaction was entered into by a partner [16.381] The partners will only be bound to a transaction made with a third party when that transaction was made by one or more of their partners. If the person entering into the contract was not a partner, the other partners would not be liable under this section of the Partnership Act and the situation would then have to be analysed in accordance with normal agency rules.

(ii) The act or transaction entered into must be within the scope of the kind of business carried on by the firm [16.382] Whether an act or transaction is within the scope of the kind of business that is carried on by the firm is a question of fact. Although the following case involves the liability of the partners for a civil wrong, the issue concerning the scope of the partnership’s business is relevant here. 30

Partnership Act 1892 (NSW) s 5; Partnership Act 1958 (Vic) s 9; Partnership Act 1891 (Qld) s 8; Partnership Act 1891 (SA) s 5; Partnership Act 1895 (WA) s 26; Partnership Act 1891 (Tas) s 10; Partnership Act 1963 (ACT) s 9; Partnership Act 1997 (NT) s 9.

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Liability for “holding out” as a partner [16.460] A person who represents themselves, or who knowingly allows themselves to be represented, as a partner, is liable as a partner to anyone who has on the faith of any such representation given credit to the firm, that is the “partner” is estopped from denying to third parties that he or she is a partner and liable as such. 36 This section makes it clear that it is the person who is represented as a partner or who represents themselves as a partner that is liable to outsiders who have on the faith of the representation given credit to the firm. This operates in cases where: (a)

a person has by words or by conduct represented themselves or knowingly allowed themselves to be represented as a partner in a firm; and

(b)

another person has given credit to the firm; and

(c)

the person has so given credit on the faith of the representation: Lynch v Stiff (1944) 68 CLR 428.

It is not necessary for the person who has given credit to the firm on the faith of the representation to show that, apart from the holding out, they would not have given credit. A representation may be made indirectly but must identify a particular person(s) as partners; liability of other members of the partnership is not incurred by a representation that a local firm is part of a national partnership: Duke Group Ltd v Pilmer (1999) 73 SASR 64 at 287. That case, also, suggested that the giving of credit involves a commercial arrangement and requires more than continuing to deal with the firm after a change in its membership.

Liability for crimes or civil wrongs [16.470] Partners are liable jointly and severally for the wrongful act or omission of any partner acting in the ordinary course of business of the firm, or with the authority of their co-partners. 37 This means that the plaintiff can sue one, some or all of the partners. A wrongful act or omission may be a tort (such as a negligent act, such as negligent driving when engaged in the usual course of business), negligent misrepresentation or defamation, engaging in misleading or deceptive conduct under s 18 of the Australian Consumer Law and Fair Trading Act 2012, breach of fiduciary duty (such as acting in a way that involves a conflict of interest) or a crime (such as fraudulent misappropriation of funds) but it does not include breach of contract. In order for liability to be established, it must be shown that the wrongful act or omission of the partner: (a) occurred in the ordinary course of the business of the firm; or (b) was authorized by the co-partners. In deciding whether the wrongful act or omission was committed while the partner was acting in the ordinary

36

37

Partnership Act 1892 (NSW) s 14; Partnership Act 1963 (Vic) s 18; Partnership Act 1891 (Qld) s 17; Partnership Act 1891 (SA) s 14; Partnership Act 1895 (WA) s 21; Partnership Act 1891 (Tas) s 19; Partnership Act 1963 (ACT) s 18; Partnership Act 1997 (NT) s 18. Partnership Act 1892 (NSW) ss 10, 12; Partnership Act 1958 (Vic) ss 14, 16; Partnership Act 1891 (Qld) ss 13, 15; Partnership Act 1891 (SA) ss 10, 12; Partnership Act 1895 (WA) ss 17, 19; Partnership Act 1891 (Tas) ss 15, 17; Partnership Act 1963 (ACT) ss 14, 16; Partnership Act 1997 (NT) ss 14, 16.

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[16.540] If a partner, being a trustee, improperly employs trust property in the business or on account of the partnership, the other partners are not liable to the persons beneficially interested therein unless they were aware of the breach of trust. This relates only to the private affairs of the partner, that is where the partner is a trustee in a personal capacity and not as a member of the partnership. The trust money may be followed and recovered from the firm if still in its possession or under its control. 40

Dissolution of partnership [16.550] Partnership is a fragile entity. Any change in membership effects a dissolution of the existing partnership since it destroys the identity of the firm. “It is a fundamental principle of the law of partnership that any change in the membership of the partnership, whether occurring as a result of the retirement, expulsion, death or otherwise of a partner, effects a dissolution of the partnership”: Atwell v Roberts (2013) 43 WAR 507 at [122] per Buss JA and similarly at [11] per Pullen JA. The addition of a new partner also effects the dissolution of the former partnership and the creation of a new partnership: “[T]he transfer of a share to a non-partner inevitably breaks the continuity of the firm, thus constituting a new firm or partnership of those members of the former partnership who remain, together with the newcomer”: SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87 at 90 per McPherson J. In the absence of other arrangements, the dissolution of a partnership should be followed by a winding up and final settlement of accounts. However, many partnership agreements contain provisions to enable the transition from one firm to another to be effected without the disruption of a formal winding up. A term is frequently included in the agreement to the effect that the other partners have the right to purchase the retiring or deceased partner’s interest at a valuation, calculated according to an agreed formula. These are essential in large firms, such as many accounting and legal practices, where there are regular changes in membership. A partnership may be dissolved by operation of law, by agreement of the partners, in accordance with the provisions of the partnership agreement or by the court upon application. If the partnership agreement contains any provisions for the dissolution, these must be followed. The Partnership Act, however, sets out certain specific circumstances which are grounds for dissolution.

Operation of law [16.560] Apart from any agreement between the partners or any decision of the court, a partnership is dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on, or for the members of the firm to carry on in partnership, for example where one member becomes – by outbreak of war – a resident in an alien territory. 41 40

41

Partnership Act 1892 (NSW) s 13; Partnership Act 1958 (Vic) s 17; Partnership Act 1891 (Qld) s 16; Partnership Act 1891 (SA) s 13; Partnership Act 1895 (WA) s 20; Partnership Act 1891 (Tas) s 18; Partnership Act 1963 (ACT) s 17; Partnership Act 1997 (NT) s 17. Partnership Act 1892 (NSW) s 34; Partnership Act 1958 (Vic) s 38; Partnership Act 1891 (Qld) s 37; Partnership Act 1891 (SA) s 34; Partnership Act 1895 (WA) s 45; Partnership Act 1891 (Tas) s 39; Partnership Act 1963 (ACT) s 39; Partnership Act 1997 (NT) s 38.

chapter 16 Law of Partnerships

By partners [16.570] Subject to any agreement between the partners, a partnership is dissolved: (a)

if entered into for a fixed term, by the expiration of that term;

(b)

if entered into for a single adventure or undertaking by the termination of that adventure or undertaking, for example a partnership entered into for the purpose of salvaging a shipwreck would be terminated by the recovery and disposal of the wreck;

(c)

if entered into for an undefined time (that is, a partnership at will), by any partner giving notice to the other or others of their intention to dissolve the partnership. The partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is mentioned, as from the date of the communication of the notice. A valid notice of dissolution once given cannot be withdrawn except by consent of all parties. However, in a partnership where the agreement provided that the partnership could be terminated by “mutual agreement only” the court held that one of the partners could not determine the partnership by notice against the will of the other: Moss v Elphick [1910] 1 KB 846;

(d)

by the death, bankruptcy or insolvency of any partner. If a partner gives a valid notice of dissolution but dies before the expiration of the notice, the partnership is dissolved by death and not by the notice; or

(e)

at the option of the other partners, if any partner allows their share of the partnership property to be charged for their separate debt.

In Hurst v Bryk [2002] 1 AC 185, the House of Lords was asked to consider whether a partnership could be terminated by one partner accepting a repudiatory breach of contract by the others, a doctrine not known to the law when the Partnership Act was enacted. Lord Millett declared that, by subjecting themselves to the principles of equity, partners renounced the right to take unilateral action to terminate their relationship and submitted themselves to the discretion of the court.

By the court [16.580] On application by a partner, the court may order a dissolution of the partnership in any of the following cases: 1.

When a partner has been declared to be of unsound mind and incapable of managing their affairs, or is shown to the satisfaction of the court to be of permanently unsound mind.

2.

When a partner, other than the partner suing, 42 becomes in any other way permanently incapable of performing their part of the partnership contract.

3.

When a partner, other than the partner suing, has been guilty of such conduct as in the opinion of the court, regard being had to the nature of the business, is calculated to prejudicially affect the carrying on of the business.

4.

When a partner, other than the party suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts themselves in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with them. For example, the following have been held to be grounds for dissolution: continuous quarrelling or consistently keeping the accounts incorrectly, or such mutual

42

In 2, 3 and 4 it will be noticed the partner who has committed the breach upon which the court may order the dissolution is not entitled to bring an application to the court on these grounds for such dissolution.

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Rights of outgoing partner to share profits made after dissolution [16.620] Where a partnership is dissolved (for example, by the death or retirement of one of its members), and there is no final settlement of accounts, and the remaining partners continue the business without finalising matters with the outgoing partner or their estate, then the outgoing partner, or their personal representative, is entitled at their option to such share of the profits made since dissolution as the court may find to be attributable to the use of their share of the partnership assets or he or she may elect to have interest on their share of the partnership assets at 6 per cent per annum in New South Wales, Western Australia and Tasmania, at 7 per cent in Victoria, South Australia, Australian Capital Territory and Northern Territory and at 5 per cent in Queensland. 46 In the past when courts took a strict approach to ascertaining the profits attributable to the use of a deceased partner’s share and often attributed profits to the personal skills of the continuing partners, it was usual to claim interest on the deceased partner’s share but more recently courts have assumed that profits were earned from the application of partnership assets, unless the continuing partners were able to demonstrate that it arose from some other source. [16.630] A partner who retired from a legal firm was not paid out until two years later. He sued for his payment and was allowed one-ninth of the profits of the firm for that period, after an allowance of $130,000 per year had been made for the profit contributions of each continuing partner: Fry v Oddy [1999] 1 VR 557.

Final settlement of accounts on dissolution [16.640] The Partnership Act provides a number of rules on the final settlement of accounts between partners in the event of dissolution. Subject to any agreement between the partners as to their rights and liabilities inter se, the following rules must be observed: 1.

Losses, including losses and deficiencies of capital, must be met first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits.

2.

The assets of the firm, including the sums, if any, contributed by the partners to make up any losses or deficiencies of capital, must be applied in the following manner and order:

46

47

(a)

in paying the debts and liabilities of the firm to persons who are not partners in the firm;

(b)

in paying to each partner rateably what is due by the firm to her or him for advances as distinguished from capital;

(c)

in paying to each partner rateably what is due from the firm to them in respect of capital; and

(d)

the ultimate residue, if any, is to be divided among the partners in the proportion in which profits are divisible. 47

Partnership Act 1892 (NSW) s 42; Partnership Act 1958 (Vic) s 46; Partnership Act 1891 (Qld) s 45; Partnership Act 1891 (SA) s 42; Partnership Act 1895 (WA) s 55; Partnership Act 1891 (Tas) s 47; Partnership Act 1963 (ACT) s 48; Partnership Act 1997 (NT) s 46. Partnership Act 1892 (NSW) s 44; Partnership Act 1958 (Vic) s 48; Partnership Act 1891 (Qld) s 47; Partnership Act 1891 (SA) s 44; Partnership Act 1895 (WA) s 57; Partnership Act 1891 (Tas) s 49; Partnership Act 1963 (ACT) s 50; Partnership Act 1997 (NT) s 48.

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Bankruptcy of partners [16.650] In bankruptcy, the joint estate of the partners is, in the first instance, applied to the payment of their joint debts, and the separate estate of each partner is, in the first instance, applied to payment of their separate debts. If there is a surplus in the separate account, it is dealt with as part of the joint estate so far as is necessary to meet the joint debts; if there is a surplus in the joint account, it is dealt with as part of the respective separate estates in proportion to the interest of each partner in the partnership. Where a sequestration order 48 is made against one partner, a creditor of the firm if, or to the extent, that he or she is not paid by the solvent partners cannot receive a dividend out of the bankrupt’s separate property until all separate creditors of the bankrupt partner have been paid in full. The Bankruptcy Act 1966 (Cth) 49 also provides that any creditor, whose debt is sufficient to entitle them to present a bankruptcy petition against all the partners of a firm, may present a petition against any one or more partners of the firm without including the others. A creditor of a partnership may present a bankruptcy petition against it if the creditor would be entitled to present such a petition against any one of the members of such partnership in respect of a partnership debt. 50

Limited partnerships [16.660] In the states, but not the territories, provision is made for limited partnerships. 51 The basic scheme of the legislation is to enable the formation of a partnership in which there is at least one general partner with unlimited liability and one or more limited partners whose liability for the debts and obligations of the partnership is limited. Limited partnerships thus allow firms to bring in partners who provide capital for the firm effectively as investors in the firm. Like other passive investors, limited partners do not participate in management. If a limited partner takes part in the management of the business of the firm, they will be liable as if the partner was a general partner. The advantages, in certain circumstances, of a limited partnership for commercial purposes over an ordinary partnership, corporation or trust are seen to include: (a)

the comparative simplicity of the formal requirements for the formation of a limited partnership;

(b)

the advantage of conferring limited liability on a limited partner without having to achieve this via a limited liability company under the Corporations Act 2001 (Cth);

(c)

in New South Wales, Victoria, Queensland, South Australia and Tasmania, the absence of a limit on the maximum number of limited partners; and

(d)

the ability of the partners to utilise income tax losses incurred by the partnership.

Incidents of limited partnerships [16.670] The limited partnership legislation in all states provides that a limited partner must not take part in the management of the business and does not have power to bind the firm. If a limited partner does take part in the management of the business, he or she will be liable as a general partner. A limited partner has the right to inspect the books of the firm at any time. 48 49 50 51

A sequestration order is the order by which a debtor becomes a bankrupt and which vests the property of a bankrupt in the trustee of their estate for division among the creditors of the bankrupt. Bankruptcy Act 1966 (Cth) s 45(2). Bankruptcy Act 1966 (Cth) s 45(1). Partnership Act 1892 (NSW) Pt 3; Partnership Act 1958 (Vic) Pt 3; Partnership Act 1891 (Qld) Ch 3; Partnership Act 1891 (SA) Pt 3; Limited Partnerships Act 1909 (WA); Partnership Act 1891 (Tas) Pt 3.

chapter 16 Law of Partnerships

Subject to the terms of any agreement to the contrary between the partners in a limited partnership: (a)

any differences arising as to ordinary matters connected with the firm’s business are to be decided by a majority of the general partners;

(b)

a limited partner may assign their share in the partnership with the consent of the general partners;

(c)

a person may be admitted as a partner without the consent of any limited partner;

(d)

the other partners are not entitled to dissolve the partnership by reason that a limited partner has suffered their share of the partnership property to be charged for their separate debt; and

(e)

a limited partner is not entitled to dissolve the partnership by notice.

In New South Wales, Victoria, Queensland, South Australia and Tasmania, any document (for example, letters, notices, contracts and cheques etc) issued on behalf of a limited partnership in connection with the conduct of the partnership’s business, must contain in legible letters the words “A Limited Partnership” immediately adjacent to its firm name. A partnership ceases to be a limited partnership if none of the partners is a limited partner or the partners agree that they will carry on the business of the partnership otherwise than as a limited partnership. Subject to the provisions of the limited partnership legislation, the ordinary rules of partnership as set out in the Partnership Act apply.

Incorporated limited partnerships [16.680] The incorporated limited partnership is a further variant of the limited partnership found in New South Wales, Victoria, Queensland, South Australia, Tasmania, Australian Capital Territory and Northern Territory. 52 This category of limited partnership wraps a corporation around the basic limited partnership structure. In consequence, the general partner manages the business on behalf of the company and there is no risk that the limited partners will be vicariously liable for tortious or other breaches of duty by the general partner. Registration is limited to associations registered or registering under the Venture Capital Act 2002 (Cth).

Further reading K Fletcher, The Law of Partnership in Australia (Lawbook Co, 9th ed, 2007). S Graw, An Outline of the Law of Partnership (Thomson Reuters, 4th ed, 2011).

Tutorial activities

52

1.

What are the advantages and disadvantages of a partnership?

2.

What are the factors that determine whether a partnership exists?

3.

What does a retiring partner need to do to avoid liability for partnership debts after he or she retires?

4.

What is partnership property and why is it important to be able to identify it?

Partnership Act 1892 (NSW) Pt 3; Partnership Act 1958 (Vic) Pt 5; Partnership Act 1891 (Qld) Ch 4; Partnership Act 1891 (SA) Pt 6; Partnership Act 1891 (Tas) Pt 3; Partnership Act 1963 (ACT) Pt 6; Partnership Act 1997 (NT) Pt 3.

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5.

Bob, a property owner, gives Janine the right to use his premises to run a business. Janine pays Bob a weekly amount from the profits made in return for the right to use the premises. Bob is not involved in any of the activities related to running the business and he has no right of entry to the premises while Janine is conducting her business. Is Bob a partner of Janine? Discuss.

6.

Linda and Mary operate a hair salon as partners. To set up the business, Linda contributed 70% of the money. All ongoing costs were contributed to equally. In their written partnership agreement, it is stated that all profits, debts and liabilities are to be distributed equally between the partners. After operating the business for several years, Linda terminates the partnership. Linda claims that she is entitled to 70% of the profits from the sale of the business. Mary, however, argues that capital profits are to be shared equally. Discuss.

7.

Greg, Allan and George are partners in a small law firm specialising in family and property law, and share a large city office where they operate their business. Their partnership agreement states that all profits, debts and liabilities of the firm are to be shared equally amongst partners. Greg sometimes conducts client meetings from his home office in the evenings and on weekends. He also offers these clients additional legal services such as wills and estate planning. He does not share the profits from these transactions with his business partners. Is Greg required to account for these profits under the Partnership Act?

8.

Jamie and Greg are partners in a firm called Copythat, that leases photocopiers to commercial businesses. Their partnership agreement states that they are prohibited from selling toner to clients other than by arrangement with David's business, which sells toner. An important client asks Jamie to supply toner, which Jamie provides from a private supplier in India, and does not inform Greg or David. The toner is of poor quality and the firm sues Copythat for damages, arguing that it was in the scope of their business to supply toner. Greg argues that as a partner he is not jointly liable since James acted contrary to their agreement. Discuss the liability of partners to third parties

9.

John and Peter are partners in a firm of chartered accountants that specialises in tax management for wealthy clients. Without John's knowledge, Peter misappropriates millions of dollars from his clients over many years, secretly adding his name as a beneficiary to dividends. When the misappropriation is discovered, the clients sue both partners for damages. John argues that he is not jointly liable as a partner since Peter's conduct was not part of “the ordinary course of the firm's business”. Is John correct?

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Administration of the Corporations Act [17.40] The Australian Securities and Investments Commission (ASIC) has sole responsibility for the administration and enforcement of the Corporations Act 2001 (Cth) nationally. It is an independent statutory commission. In exercising its functions and powers, ASIC is subject only to a written direction by the responsible Commonwealth Minister about the policies it should pursue or priorities to be followed under the national scheme. As part of its administrative role, ASIC has established business centres in each capital city and in certain regional centres to deal with company registrations, document lodgment, registration of security interests, and to provide facilities for the public to search for information in the company registers.

Nature and formation of companies Registration of companies [17.45] To register a company, a person must lodge an application with ASIC and pay the required fees: Corporations Act 2001 (Cth), s 117(1). 1 The contents of the application are set out in s 117(2). The new company is entered in ASIC’s register of companies and an Australian Company Number (ACN) is issued: s 118(1). A company comes into existence as a body corporate at the beginning of the day on which it is registered: s 119.

Corporate personality [17.50] The House of Lords in Salomon v Salomon & Co Ltd [1897] AC 22 (see below) affirmed the legal principle that, upon incorporation, a company is generally considered to be a new legal entity, a legal person. This principle, and the concept of the limited liability of the owners of the company, is the cornerstone of modern corporate law. It has statutory force through s 124(1) of the Corporations Act 2001 (Cth) which provides that from the date of registration, a company has the full legal capacity of a natural person. It has an existence separate from its members (the shareholders) and its management (directors) and agents (such as employees). The acts of a company are its acts, not the acts of its members. It can sue and be sued. It can acquire, hold and dispose of property and its assets belong to the company, not to its members. The flip side is that shareholders are not liable for the company’s debts beyond their initial capital investment, and have no proprietary interest in the property of the company. The company has perpetual succession – it is not affected by changes to its members – and it remains a legal person until it is deregistered: s 601AD(1). Section 126 allows the authorized agents of a company to make, vary, ratify or discharge a contract on behalf of the company. Section 127 recognizes that the agents of a company are also liable to execute documents on its behalf by either using its common seal (a rubber stamp with company’s name and registration number) or through the signature of authorised officers.

1

The fee to register a new limited liability company with share is $457.00 as at 1 July 2014. The fees for the various steps in registering companies and lodging details and reports can be found on the ASIC website at www.asic.gov.au/for-business/ payments-fees-and-invoices/asic-fees/fees-for-commonly-lodged-documents/.

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[17.57] In a general sense, the decisions taken in Salomon v Salomon & Co Ltd [1897] AC 22 have been beneficial for the business world. However, the decision in Salomon has had some deleterious consequences. As discussed, the House of Lords confirmed that, upon registration, the company is a new and separate legal entity, separate from the shareholders, even where one person holds all, or nearly all, of the company’s issued shares. In so deciding, the Court permitted the corporate form to be (mis)used by those who set up companies that are under-capitalised, knowing that, in the event of failure, they can shield behind the veil created by the company’s separate personality and, in so doing, leave creditors to bear the losses. While some large creditors – banks and large financial lenders – can and do take securities in order to minimise their risk exposure, trade creditors and employees, in particular, are often left exposed.

The concept of limited liability [17.60] We have seen that incorporation can provide its owners with limited liability. Limited liability, traditionally associated with corporations, is the principal catalyst for incorporation. Sole proprietorships and general partnerships do not have this security. Limited liability means that the owner (shareholder) is not personally responsible for business debts and obligations of the company. In other words, if the corporation is sued, only the assets of the business are at risk, not the owners’ (shareholders’) personal assets, such as their houses or cars. Limited liability is especially desirable when dealing with insurance or high-risk ventures. For example, consider the misfortune that befell numerous high wealth private individuals amongst Lloyd’s Names that had unlimited liability related to insurance risk in return for pocketing profits from insurance premiums. In the late 1990s, hundreds of these names had to declare bankruptcy in the face of claims against their personal assets in relation to unexpectedly large and frequent claims related to diseases caused by exposure to asbestos. By comparison, although the losses incurred by shareholders in some of the biggest public companies to go bankrupt during the global financial crisis were considerable (and sometimes catastrophic), the principle of limited liability means the shareholders were not liable for the billions of dollars owed by these companies to their creditors when they went into bankruptcy. In an excellent article on the limited circumstances when shareholders may be personally liable, Ramsay and Noakes have note five advantages of limited liability. “First, limited liability decreases the need for shareholders to monitor the managers of companies in which they invest because the financial consequences of company failure are limited. Shareholders may have neither the incentive (particularly if they have only a small shareholding) nor the expertise to monitor the actions of managers. The potential costs of operating companies are reduced because limited liability makes shareholder diversification and passivity a more rational strategy. Secondly, limited liability provides incentives for managers to act efficiently and in the interests of shareholders by promoting the free transfer of shares. This argument has two parts to it. First, the free transfer of shares is promoted by limited liability because under this principle the wealth of other shareholders is irrelevant. If a principle of unlimited liability applied, the value of shares would be determined partly by the wealth of shareholders. In other words, the price at which an individual shareholder might purchase a share would be determined in part by the wealth of that shareholder which was now at risk because of unlimited liability. The second part of the argument (that limited liability provides managers with incentives to act efficiently and in the interests of shareholders) is derived from the fact that if a company is being managed inefficiently, shareholders can be expected to be selling their shares at a discount to the price which would exist

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if the company were being managed efficiently. This creates the possibility of a takeover of the company and the replacement of the incumbent management. Thirdly, limited liability assists the efficient operation of the securities markets because, as was observed in the preceding paragraph, the prices at which shares trade does not depend upon an evaluation of the wealth of individual shareholders. Fourthly, limited liability permits efficient diversification by shareholders, which in turn allows shareholders to reduce their individual risk. If a principle of unlimited liability applied and the shareholder could lose his or her entire wealth by reason of the failure of one company, shareholders would have an incentive to minimise the number of shares held in different companies and insist on a higher return from their investment because of the higher risk they face. Consequently, limited liability not only allows diversification but permits companies to raise capital at lower costs because of the reduced risk faced by shareholders. Fifthly, limited liability facilitates optimal investment decisions by managers. As we have seen, limited liability provides incentives for shareholders to hold diversified portfolios. Under such circumstances, managers should invest in projects with positive net present values, and can do so without exposing each shareholder to the loss of his or her personal wealth. However, if a principle of unlimited liability applies, managers may reject some investments with positive present values on the basis that the risk to shareholders is thereby reduced.” 2

Types of companies that may be registered [17.70] The most important method of company incorporation is that of formation under the Corporations Act 2001 (Cth). The types of company that may be registered under the Corporations Act 2001 are listed below. The first distinction between types of companies is whether they are proprietary or public. For this chapter, a brief overview of the characteristics is sufficient. Proprietary companies are limited to 50 members and are also limited as to how they may raise funds. Proprietary companies are not permitted to raise funds from the public (for example, by a public share offer). Public companies are not limited as to the number of members and may raise funds from the public subject to compliance with other rules about raising funds and issuing shares. Generally speaking, public companies have significantly higher levels of accounting, reporting and disclosure obligations. To list on the stock exchange a company must be a public company and comply with the additional rules imposed by the Australian Stock Exchange (ASX Listing Rules). Within each of the two broad categories of company – proprietary and public – it is the extent to which members are liable for the debts of the company that is the key distinguishing feature. For each type of company listed below, special rules may determine when such a type of company is allowed to be registered, depending on the membership and activities of the company. For example, no liability companies are only available to companies whose activities are strictly limited to mining. The types of companies are discussed below: proprietary companies

 liability limited by shares; or

 liability unlimited with share capital. public companies

 liability limited by shares;

 liability limited by guarantee;

 liability unlimited with share capital; or  no liability. 2

I Ramsay and D Noakes, “Piercing the Corporate Veil in Australia” (2001) 19 Company and Securities Law Journal 250, 256-257.

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Companies limited by shares [17.80] This means a company formed on the principle of having the liability of its members limited by the constitution or replaceable rules to the amount unpaid on their shares. It may be either one of the following: 1.

a public company; or

2.

a proprietary company.

Public companies are those that may offer their shares, and other securities to the general public for purchase, whilst proprietary companies are formed on the principle of limiting their numbers to fewer than 50 non-employee members and keeping their business affairs private.

Companies limited by guarantee [17.90] These public companies do not have share capital. It, therefore, has a restricted scope and is usually found in the non-profit sector (eg sporting clubs). The company is formed on the principle that the original guarantors of the company undertake to guarantee the payment of a certain sum to be used to pay the company’s debts in the event of the company being wound up: Corporations Act 2001 (Cth), s 9. Their liability is limited to extent of the amount guaranteed.

Unlimited companies [17.100] This means a company formed on the principle of having no limit placed on the liability of its members. The holders of shares have no limit on their liability to contribute to the assets of the company in the event of it being wound up and consequently they can be called upon to pay any amount necessary to discharge the liabilities of the company. Few companies of this type exist.

No liability companies [17.110] This class of company may be formed only for the purpose of mining, and on the principle of their members incurring no liability to pay calls, that is to say, the acceptance of a share does not constitute a contract to pay calls in respect of money unpaid on such shares. There are special provisions in the Corporations Act 2001 (Cth) relating to the liability of members, payment of calls and dividends.

Proprietary and public companies [17.130] A distinction is drawn between public and proprietary companies. The most popular type of company incorporated in Australia is the proprietary company, which is otherwise referred to as a private company. The legislature, recognising the fact that many companies are of a private nature and require a simple form of incorporation, has enacted special provisions giving proprietary companies rights, privileges and exemptions not enjoyed by other companies. A proprietary company must be a company limited by shares, or unlimited with a share capital, and have no more than 50 “members” (people who have been allocated shares excluding those who are employees). A proprietary company is not permitted to raise funds by offering or issuing shares to the general public.

Company name [17.135] When the company is registered, it must be given a name that distinguishes it from other companies and is not already registered as a business name on the Business Names register. A public company with limited liability must include the abbreviation “Ltd” at the end of the name. A limited

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[17.320] A company being an artificial body must of necessity act through its directors, officers and other agents. Accordingly, difficult questions may arise as to whether acts purported to have been done on behalf of the company by its directors and other agents are binding on the company. A company may enter into any contract that a natural person can and it is important to note that the actions of a company (through its agents) are not invalid because they contravene the company’s constitution (if it has one): s 125. Section 127 is the formal way in which a company may execute a document, including a contract: it may execute a document without using a common seal if the document is signed by two directors of the company; or a director and a company secretary of the company; or for a proprietary company that has a sole director who is also the sole company secretary – that director. If a company seal is fixed, two directors or a director and secretary witnessing the affixing of the company seal can execute the document. When the company executes in one of the ways set out in s 127 then, even if this is in contravention of the constitution, those people who have dealings with the company will be able to rely on the assumptions contained in ss 129(5) and 129(6) unless they were aware the assumption is incorrect: s 128(4).

The assumptions third parties are entitled to make [17.325] There are a number of assumptions that affect the substantive authority that the company’s agent has when contracting with a third party. Section 128 states that persons dealing with a company are entitled to make certain assumptions (specified in s 129) as to the powers of the company and the authority of the officers and agents with whom they deal. The policy objective is to increase the protection for third parties by limiting the circumstances in which a company may argue that it is not bound by contracts because its agent was not authorised to enter the contract. The assumptions are cumulative and may “cure” defects in the formal execution process (non-compliance with s 127) and any defects in the substantive authority of an agent who was ostensibly authorised to act on the company’s behalf. Section 128 – Entitlement to make assumptions 1.

A person is entitled to make the assumptions in s 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

2.

A person is entitled to make the assumptions in s 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

3.

The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings, as per s 128(3).

4.

A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect, as per s 128(4).

Section 129 – The assumptions that can be made under section 128 1.

That at all relevant times the constitution and replaceable rules of the company have been complied with (s 129(1));

2.

That a person who appears, from information provided by the company and available to the public from ASIC, to be a director or a secretary of the company: (a)

has been duly appointed; and

(b)

has authority to exercise the powers and perform the duties customarily exercised or performed by a director or secretary of a “similar” company (s 129(2));

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Membership Where membership exists [17.350] A person is a member of a company if he or she is identified as a member of the company on its application for registration: Corporations Act 2001 (Cth), s 120. Membership also extends to every other person who agrees to become a member of the company and whose name is entered in its register of members. The most usual ways by which persons become members are by the allotment of shares to them or the transfer to them of shares by a person who already is a member. A company must set up and maintain a register of its members (that is, its shareholders) containing details about the member and its shareholding. The register must be kept at the company’s registered office, an office at the company’s principal place of business, or the office where the register is maintained, unless another office has been approved by ASIC. The office must be in Australia: s 172.

Shares [17.375] Shares are an important source of capital for a company. A company may use the issue of shares as a means to raise capital throughout its life. There are a number of rules under the Corporations Act 2001 (Cth) and the ASX Listing Rules (for companies listed on the Stock exchange) that regulate share issues so as to protect existing members’ rights and the prospective investors in shares. Offering shares on the stock exchange for the first time (often referred to as “listing”) is an extremely complex and highly regulated event and the company will usually require advice from expert lawyers and corporate advisers. Shares are a form of property. The members who subscribed for shares on registration or acquire shares in subsequent issues may choose to sell their shares in the future. If a member sells their share, then the member retains the price they receive for the share.

Members' rights [17.380] Members do not have any rights over the company property. This is an important consequence of the separate legal identity of the company. The company owns the company property – not the members. We saw in the Salomon, discussed above, that Mr Salomon sold his business to the company, Salomon and Co Ltd, and under the contract, in exchange for the assets of the business, he received the price (paid partly in cash and partly in shares in the company and partly by a secured loan). When the company was not able to pay its debts, the creditors were able to access the assets of the company, although these assets were insufficient to pay the company’s debts, prompting the creditors to pursue Mr Salomon personally. They were unsuccessful in doing this because the company is a separate legal entity. The members have certain rights that attach to their share or membership in the company. As we have discussed above, directors have the control of the day-to-day management of the company and its business. Members’ rights in respect of the management of the company are essentially limited to voting for the directors. The general rights of members are: The right to vote – to appoint or remove directors; on directors’ remuneration (but this is limited); on any changes to the company constitution; for any matters that are specified in the company constitution as being matters for members to vote on; on financial benefits given by public companies to the directors and other related parties. The right to distribution – to receive a dividend if the company makes a profit and the directors declare a dividend; to receive a share of any surplus if the company is wound up or capital is returned.

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The right to information about the company – to inspect the company books and receive annual reports; to be notified about company meetings. The rights attached to their class of shares – class rights are special rights that are attached to a particular group of shares, for instance, a priority dividend, or a right to appoint a director, or to veto a major business decision.

Management and control Registered office [17.840] Every company must have a registered office to which all communications and notices may be addressed. A company would be liable to a penalty if it carried on business without such an office. Notice of the full address of the registered office and any change in address must be lodged with ASIC. A company must paint or affix its name in a conspicuous manner on the outside of every office or place in which its business is carried on, and in the case of the registered office of a public company must add the words “registered office”. The registered office of a public company must be open to the public for at least three hours in each business day: Corporations Act 2001 (Cth), ss 121, 142 – 145.

Directors [17.850] As a company is an artificial legal person, it must act through the agency of others. Directors carry out the day-to-day management of a company and s 198A provides the business of the company is managed “by or under the direction of the directors”. The directors are elected by the members (shareholders) or appointed according to the rules of the company. The number of directors depends on the size of the company – a proprietary company may have as few as one director; public companies must have at least three: Corporations Act 2001 (Cth), s 201A. If there is more than one director, they are collectively referred to as a “board of directors”. The board will usually appoint a managing director or chief executive officer who will run the company and report directly to the board. Directors who also are involved with managing the company (for example, the chief financial officer) are called executive directors; those not involved with management are called non-executive directors. A public company must also have a secretary who is responsible for “book-keeping”, drawing up agendas and providing notice of meetings, ensuring compliance with disclosure and reporting requirements, signing or authorising payments. All public companies must have a secretary. Personal details and particulars of the appointment and resignation of all directors must be filed with ASIC. A director must also give notice of contracts to which they are party: ss 191 – 192. A director of a listed public company must notify the relevant securities exchange of their interests in the company’s securities (as well as in the securities of any related company). Notice must be given within 14 days of appointment as a director or listing of the company: s 205G.

Company secretary [17.860] The secretary of a company is an important officer and the appointment of such an executive to handle the administrative affairs of the company has long been usual company practice. The Corporations Act 2001 (Cth) requires that every public company must have at least one secretary: s 204A. The directors appoint the secretary of a company: s 204D. A company of any magnitude requires a secretary. Quite apart from legal compulsion, it is essential that some officer of the company should be made responsible for attending to the requirements of the

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[17.890] There are many duties imposed on directors and other officers. These duties are owed to the company, not (except in unusual circumstances) to the shareholders as individuals. The statutory duties – each has a common law equivalent - include the following: Care and diligence - to act with the degree of care and diligence that a reasonable person might be expected to show in the role (s 180). The same duty is imposed on directors at common law. The business judgment rule provides a “safe harbour” for a director in relation to a claim at common law or under s 180; Good faith - to act in good faith in the best interests of the company and for a proper purpose (s 181). This is a ‘fiduciary duty’ imposed by general law and a duty required in legislation; Improper use of position - to not improperly use their position to gain an advantage for themselves or someone else or to the detriment to the company (s 182); Improper use of information - to not improperly use the information they gain in the course of their director duties to gain an advantage for themselves or someone else or to the detriment to the company (s 183). If the duties under ss 181 – 183 of the Corporations Act 2001 (Cth) are breached by a director or officer acting dishonestly or recklessly a criminal offence is committed: s 184. Section 180(1) – duty of care and diligence – attracts only civil penalties. Breach of these duties attracts the civil and/or criminal penalty provisions and are enforceable by ASIC. “Officers” is a broader term that includes directors, and also any persons who make or participate in the making of decisions that affect the whole or a substantial part of the company’s business, such as senior executive officers. 3

Duty of care and diligence: s 180 [17.895] Section 180 Care and diligence—directors and other officers (1)

A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a)

were a director or officer of a corporation in the corporation’s circumstances; and

(b)

occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Business judgment rule (2)

A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a)

make the judgment in good faith for a proper purpose; and

(b)

do not have a material personal interest in the subject matter of the judgment; and

(c)

inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

(d)

rationally believe that the judgment is in the best interests of the corporation.

The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. 3

See s 9 of the Corporations Act 2001 (Cth) which is the dictionary section of the Act.

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(b)

are intentionally dishonest;

and fail to exercise their powers and discharge their duties: (c)

in good faith in the best interests of the corporation; or

(d)

for a proper purpose.

Use of position – directors, other officers and employees (2)

A director, other officer or employee of a corporation commits an offence if they use their position dishonestly: (a)

with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

(b)

recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. Use of information – directors, other officers and employees (3)

A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly: (a)

with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or

(b)

recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.

There are three offences created by s 184. First, directors commit a criminal offence if they are reckless or intentionally dishonest, and if they fail to exercise their powers and discharge their duties in good faith, in the best interests of the corporation, or for a proper purpose: s 184(1). Second, directors may commit a criminal offence if they use their position dishonestly, with the intention of gaining an advantage for themselves or someone else; or by causing detriment to the corporation; or, if they use their position dishonestly or are reckless as to whether they or someone gains an advantage; or whether they or may cause detriment to the corporation: s 184(2). Third, equivalent offences lie for the misuse of company information: s 184(3). The central element in each offence is dishonesty and this may be established by showing the director intended to act dishonestly or was reckless.

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s 1317K. A court must not make a declaration of contravention or a pecuniary penalty order against a person if they have been convicted of an offence constituted by conduct that is substantially the same as the contravention: s 1317M. If a person has contravened a civil penalty provision, but it appears to the court that they acted honestly and ought fairly to be excused, the court may relieve them from liability: s 1317S.

Disclosure of interests by directors [17.1020] Subject to certain exceptions, a director who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of that interest: Corporations Act 2001 (Cth), s 191(1). Notice must be given at a directors’ meeting as soon as practicable after the director becomes aware of the interest: s 191(3). Contravention of this provision by a director does not affect the validity of any act, transaction, agreement, instrument or resolution: s 191(4). A director of a public company who has a material personal interest in a matter that is being considered at a director’s meeting must not vote on the matter and must not be present while the matter is being considered by the board: s 195(1). An exception is made where the board has passed a resolution stating that the directors are satisfied that the interested director should not be disqualified: s 195(2). ASIC may also exempt a director from the disqualification in certain circumstances: s 196. In contrast, the director of a proprietary company may participate in discussions, vote on a matter and keep any benefits that arise, provided they have declared their interest beforehand: s 194.

Director's duty to prevent insolvent trading [17.1030] Directors, including non-executive directors, are under a duty to prevent the company from incurring debts while it is insolvent. The relevant provision is Corporations Act 2001 (Cth), s 588G, which applies where: (a)

a person is a director of a company at the time when the company incurs a debt;

(b)

the company is insolvent at that time, or becomes insolvent by incurring that debt (or debts including that debt); and

(c)

at that time, there are reasonable grounds for suspecting that the company is insolvent, or would become insolvent: s 588G(1).

By failing to prevent the company from incurring the debt, the director contravenes the section if they were aware at that time that there were reasonable grounds for suspecting that the company was insolvent, or if a reasonable person in a like position in a company in the company’s circumstances would be so aware: s 588G(2). There are several defences available to a director in proceedings for contravention of the section. These are that, at the time the debt was incurred, the director: (a)

had reasonable grounds to expect, and did expect, that the company was solvent and would remain solvent even if it incurred the debt;

(b)

believed on reasonable grounds that a competent and reliable person was responsible for providing adequate information to the director about whether the company was solvent, and on the basis of that information the director expected that the company was solvent and would remain solvent even if it incurred the debt;

(c)

did not take part in the management of the company because of illness or some other good reason; or

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21 days’ notice of their intention to apply. On an application of ASIC, the court may at any time revoke leave which it had granted under these provisions: s 206G. In recent years, the court has been given wider powers to prohibit a person from taking part in the management of a company. Thus, a person may be prohibited from managing a corporation where they have at least twice been an officer of a corporation that has contravened the Corporations Act 2001 while they were an officer, and each time they failed to take reasonable steps to prevent the contravention. A person may also be disqualified where they have at least twice contravened the Corporations Act 2001 while an officer (s 206E), or they have been disqualified under the law of a foreign jurisdiction (s 206EAA), or have been banned from managing companies under Competition and Consumer Act 2010 (Cth) (s 206EA). On an application by ASIC, the court may disqualify a person from managing corporations for up to 20 years if within the last seven years that person has been an officer of two or more corporations when they have failed, and the management of the corporations was wholly or partly responsible for their failure: s 206D. ASIC may disqualify a person from managing corporations for up to five years if within the last seven years they have been an officer of two or more corporations which were wound up while they were an officer, or within 12 months after they ceased to be an officer. ASIC must give the person a notice requiring them to demonstrate why they should not be disqualified and must give them an opportunity to be heard: s 206F.

Further reading M Adams, J Harris and A Hargovan, Australian Corporate Law (LexisNexis, 4th ed, 2013) E Boros and J Duns, Corporate Law (Oxford University Press, 3rd ed, 2013) P Hanrahan, IM Ramsay and G Stapledon, Commercial Applications of Company Law (CCH, 15th ed, 2014) P Lipton, A Herzberg and M Welsh, Understanding Company Law (Thomson Reuters, 18th ed, 2016)

Tutorial activities 1.

What are the main features of a company?

2.

In a limited liability company whose liability is “limited”?

3.

What is the main advantage of limited liability?

4.

What are the principal differences between a proprietary and a public company?

5.

Explain the duty of skill, care and diligence at common law and under s 180(1) of the Corporations Act 2001 (Cth). What is the effect of the business judgment rule in s 180(2)?

6.

In relation to s 181 what does “acting in the best interests of the company” and acting “for a proper purpose” mean?

7.

Sections 182 – 183 both involve duties not to misuse the director's position. Explain.

8.

In terms of penalty what is the difference between (a)

s 180 and ss 181 – 183 and

(b)

ss 180 – 183 and s 184.

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9.

What is insolvent trading? What are the relevant defences to it? What are the penalties?

10.

Tim and Neil Finn are partners in the firm “Finn Homes”. They decide to incorporate the business. On incorporation, Tim and Neil become the directors and equal shareholders of Finn Homes Pty Ltd. At the time of the company's incorporation, each director had paid the company $50,000 to form its capital and each had been issued with 25,000 $2 fully-paid ordinary shares. Tim acts as the CEO, although he has not been formally appointed to that position. Under the company's constitution, both directors must agree to any purchases above $10,000 made on behalf of the company. One day, Tim saw that a building supplies business, ABC Timber, was having a sale on timber products. Tim and Neil had purchased timber from ABC many times in the past and, on many of those occasions, both Tim and Neil had referred to Tim as the CEO. On this occasion, Tim tried to contact Neil to discuss the purchase but his mobile phone was turned off. As the prices were so good, Tim didn't wait any further and purchased $20,000 worth of pre-fabricated house-frames on credit on behalf of the company. When the timber was delivered to the company's premises Neil was furious and refuses to accept delivery of the goods or to pay the invoice. Discuss whether Finn Homes Pty Ltd is required to pay for the frames.

11.

Clinton, Joseph and Elizabeth are the directors of BTN Pty Ltd, a mobile phone company. Joseph had known that the company was in financial difficulties in December 2009 but had assured his fellow directors it was just a temporary cash-flow issue and that the company could trade out of its difficulties and pay all of its creditors by February 2010. However it was unable to do so. Joseph admits that the company's difficulties began when the directors made a decision, after careful research and an independent consultant's report, to invest heavily in technology that was quickly rendered obsolete by the introduction of the “tablet” technology. In March 2010 Elizabeth and Clinton became concerned about the increasing number of “final demand” notices from suppliers and asked to see the actual accounts rather than continuing to rely on the assurances of Joseph. It was only then Elizabeth and Clinton realised that the company was insolvent and they immediately filed an application to wind-up the company. It went into liquidation in April 2010, owing large sums of money to its creditors. In early 2009, before the liquidity problems emerged, Elizabeth was appointed as a non-executive director of Otus Ltd. In fulfilling her duties as a director, she acquired information about the tender process that Otus was engaged in for the provision of mobile phone services in regional Australia. Without disclosure to BTN or Otus, she used this information to benefit BTN Pty Ltd, which submitted a successful tender. (a)

Advise Elizabeth, Clinton and Joseph whether any of them may have committed any civil or criminal offences under the Corporations Act 2001.

(b)

Advise Elizabeth, Clinton and Joseph of their liability under the Corporations Act 2001 for the debts of the company.

PART 6: BUSINESS ETHICS

Chapter 18: Business Ethics

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Part 6: Business Ethics

(f)

corporate ethics codes;

(g)

industry codes;

(h)

regulatory responses to ethical breaches; and

(i)

the emergence of socially responsible investment.

chapter 18 Business Ethics

Ethical issues in business [18.20] Business ethics must of course begin with obedience to the law. However, they cannot stop there. They must also incorporate a substantive moral content beyond what is required by the law. As the HIH Royal Commissioner wrote: “In an ideal world the protagonists would begin the process by asking: is this right? That would be the first question, rather than: how far can the prescriptive dictates be stretched? The end of the process must, of course, be in accord with the prescriptive dictates, but it will have been informed by a consideration of whether it is morally right. In corporate decision making, as elsewhere, we should at least aim for an ideal world”. 3 Judges have often complained about the lack of ethics of those appearing before them in cases of business misconduct. In proceedings regarding a failed property investment group, a Federal Court judge stated that some of the evidence suggested “a ruthless disregard … of the interests of investors and other creditors in the way in which funds invested and assets of companies within the Group have been dealt with”. 4 In another case, the Federal Court imposed pecuniary penalties totalling $38 million for price fixing and market sharing. The judge commented that “[t]he Visy Trade Practices Compliance Manual might have been written in Sanskrit for all the notice anybody took of it”. 5 Serious ethical issues may arise in relation to corporate governance, human rights, environmental protection and corruption. Major failures of corporate governance have become common. In recent years there has been a wave of huge corporate failures in which key participants had engaged in illegal or questionable business conduct. These practices have included accounting fraud, extravagant spending, 6 and the payment of large bonuses to senior personnel as insolvency neared. Through their failures these businesses acquired a dubious fame. Enron, World.com, HIH and Parmalat became household names throughout the world, not for their successes but for the manner of their demise. 7 James Hardie was the subject of considerable negative publicity for its substantial under-funding of a compensation foundation for those injured by its asbestos products despite its claims that the foundation was fully funded. Soon afterwards, the chief executive officer departed from the company with a payout of nearly $9 million. 8 Goldman Sachs sold an Australian hedge fund collateralised debt obligations that a Goldman internal email described as an excremental deal. 9 The Wall Street investment firm of Bernard Madoff defrauded investors of billions of dollars. 10 Numerous Australian investors lost heavily after a financial adviser at the Commonwealth Bank recommended that his clients invest in high risk financial

3 4

HIH Royal Commission, The Failure of HIH Insurance (Commonwealth of Australia, Canberra, 2003), Vol 1, p lxiii. Australian Securities and Investments Commission v Carey (No 3) (2006) 232 ALR 577 at [4].

5

Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673 at [319]. “Williams Faces HIH Royal Commission”, Business Breakfast, 8 August 2002, http://www.abc.net.au/businessbreakfast.

6 7

9

A Main, Other People’s Money (Harper Collins, Sydney, 2003); M Westfield, HIH: The Inside Story of Australia’s Biggest Corporate Collapse (John Wiley, Milton, 2003). G Haigh, Asbestos House: The Secret History of James Hardie Industries (Scribe Publications, Melbourne, 2006); Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199. “One Shitty Deal”, Four Corners, 14 June 2010, http://www.abc.net.au/4corners.

10

“The Madoff Affair”, Frontline, 12 May 2009, http://www.pbs.org/wgbh/pages/frontline/madoff.

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products for which he would be paid substantial commissions. 11 Some executives have artificially inflated profits to raise the stock market value of the shares to which their remuneration was tied. 12 The actions or omissions of businesses may sometimes violate the human rights of their workers or those in the broader community. In Australia thousands of deaths from mesothelioma were the consequence of the extensive use of asbestos as a building material. 13 In 1984 an industrial accident in Bhopal, India resulted in the deaths of thousands of people. 14 The labour conditions under which products are manufactured may be abusive or exploitative. 15 For example, it was reported that children were employed by the suppliers of a footwear manufacturer in breach of the manufacturer’s own corporate code. 16 There are numerous examples of the potential impact of business upon environmental protection. 17 In 2010 the leak of oil from an offshore drill site in Louisiana caused massive environmental damage. Timber which has been illegally logged may end up in products sold in developed countries, depleting forests in developing nations. 18 Media reports have suggested that some waste-producing industries have sought to shift responsibility for waste management from the producer to the consumer. 19 Lapses of business ethics may have serious economic and social effects. The extensive granting of “sub-prime” mortgages to persons with meagre incomes in the US has caused huge financial losses across the world including a staggering US$700 billion bailout by Congress. 20 Accounting misconduct undermines business confidence because investment decisions are made on the assumption that the reported figures are accurate. 21 Extreme disparities between executive salaries and those paid to other employees undermine public respect for the business sector. 22 The contrast is stark: “The phrase ‘internationally competitive’ has taken on conspicuously opposite meanings where top and bottom of the salary scale are concerned: while workers are enjoined to price their labour to compete with the cheapest rival, CEOs seek convergence with the highest common denominator”. 23 Bribery of public officials increases the operating costs of business, reduces investment and economic growth, offsets the benefits of competition since purchasing decisions which are not merit-based result in a misallocation of government expenditure and undermines the legitimacy of governments. 24 11 12 13

“Banking Bad”, 4 Corners, 6 May 2014, http://www.abc.net.au/4corners. P Krugman, The Great Unravelling (Allen Lane, London, 2003), pp 107–108, 125–127. M Peacock, Killer Company (ABC Books, Sydney, 2009).

14 15 16 17

Clouds of Injustice: Bhopal Disaster 20 Years On ASA 20/015/2004 (Amnesty International, London, 2004). “Corporate Social Responsibility”, Law Report, 5 February 2008, http://www.abc.net.au/rn/lawreport. “GAP Nike – No Sweat?”, Panorama, 15 October 2000, http://www.bbc.co.uk/panorama. See also “Globalising Justice”, Law Report, 1 December 2009, http://www.abc.net.au/rn/lawreport.

18 19 20

“The Timber Mafia”, Four Corners, 2 August 2002, http://www.abc.net.au/4corners. “The Waste Club”, Four Corners, 8 September 2003, http://www.abc.net.au/4corners. “Mortgage Meltdown”, Four Corners, 17 September 2007, http://www.abc.net.au/4corners; “Narvik: The Tip of the Iceberg”, Dateline, 14 May 2008, http://www.news.sbs.com.au/dateline. RD Francis, Business Ethics in Australia (Centre for Professional Development, Melbourne, 1994), p 39. Executive Remuneration. Position Paper (Business Council of Australia, Melbourne, 2004), pp 6, 13, http://www.bca.com.au; “Outrage over Extravagant Executive Salaries”, Lateline, 27 February 2009, http://www.abc.net.au/lateline. G Haigh, Bad Company: The Cult of the CEO (Black Inc, Melbourne, 2003), p 14. Joint Standing Committee on Treaties, OECD Convention on Combating Bribery and Draft Implementing Legislation. 16th Report (Commonwealth of Australia, Canberra, 1998), para 2.7; C Pacini et al, “The Role of the OECD and EU Conventions in Combating Bribery of Foreign Public Officials” (2002) 37 Journal of Business Ethics 385 at 385, 388–389.

21 22 23 24

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Ethical aspects of general commercial law principles [18.30] Throughout this book many legal rules which have ethical characteristics have been discussed. Much of the law relating to contractual assent has an ethical character: mistake, misrepresentation, duress, undue influence and unconscionable contracts: see Chapter 7. Good faith has become an important issue in contract law: see Chapter 9 ([9.540] – [9.545]). 25 The consumer protection provisions of the Australian Consumer Law 26 proscribe various unethical business practices. The legislation prohibits unfair contractual terms, unconscionable conduct, misleading and deceptive conduct, various false representations, bait advertising, coercion and harassment, pyramid selling, and asserting a right to payment for unsolicited goods: see Chapter 13. The restrictive trade practices provisions of the Competition and Consumer Act 2010 (Cth) also have ethical characteristics. Examples include the law relating to price fixing and misuse of market power. The Corporations Act 2001 (Cth) imposes upon companies and directors certain obligations which have an ethical dimension. A director’s duties include the duty to act in good faith, the duty not to make improper use of information and the duty to make disclosure of personal interests. Other provisions relate to disclosure documents, oppressive or unfair conduct, misleading or deceptive conduct, misstatements in prospectuses, and insider trading, as was discussed previously in Chapter 17.

Benefits of business ethics [18.40] It is now widely believed that over the long term ethical business methods are more profitable than unethical methods. A company which observes ethical business practices is likely to achieve an enhanced business reputation. Ronald Francis has well expressed the benefits of an ethical approach: “It takes many years to build up a good reputation, and is of enormous financial benefit to the companies that continue to maintain their good name. Although individual transactions may be foregone, other customers will continue to use such companies because they know that if a poor purchase has been made it is easy to exchange or get a refund. The basic issue here is whether or not one wishes to foster a continuing relationship; it would be as well to behave as if one had such a relationship in mind.” 27 What is beyond dispute is that poor business ethics are often very poor business. The single greatest cost of unethical behaviour remains a loss of confidence in an organisation and customer desertion is sure to follow widespread media exposure. The adverse publicity generated by poor quality products can be very damaging. For example, every year the Australian consumer magazine Choice presents “Shonky Awards” for especially bad products. 28 A company may also incur negative publicity if it is ordered to publish corrective advertisements to remedy prior misleading advertising. 29

25 26 27 28

29

See, for example, E Peden, Good Faith in the Performance of Contracts (LexisNexis Butterworths, Sydney, 2003). The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)): see Chapter 13. RD Francis, Ethics and Corporate Governance (UNSW Press, Sydney, 2000), p 9. “Consumer Group Names Shonky Products”, PM, 19 October 2006, http//www.abc.net.au/pm; “Shonky Awards Target Retail Christmas Season”, World Today, 4 December 2007; “The Shonky Awards”, World Today, 25 November 2008; “And the Shonky goes to ...”, World Today, 25 October 2011, http://www.abc.net.au/worldtoday. “Coca-Cola Ordered to Correct Record in New Ads”, World Today, 3 April 2009, http://www.abc.net.au/worldtoday.

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Furthermore, the poor business ethics of individual companies are injurious to the interests of the business sector as a whole. Unethical business conduct is likely to lead to more stringent government regulation. 30 For example, unethical conduct in the US financial sector prompted greater regulation of the sector. 31

Ethical duties of business [18.50] Scepticism about the ethics of business is not new. One of Charles Dickens’ characters said: “Here’s the rule for bargains – ‘Do other men, for they would do you.’ That’s the true business precept. All others are counterfeits”. 32 Today such views are unlikely to be publicly advanced by any business leader. The content and state of business ethics have become a constant topic for the media and academics alike. Businesses are well aware of the damage wrought by ethical lapses when publicly exposed. Ronald Francis defines ethics as “a highly explicit codified form of behaviour designed to produce particular ends and act[ion] in accordance with particular values”. 33 Business ethics concerns the application of ethical concepts to business. There are many theories regarding the content of business ethics. Two prominent theories which have found their way into popular discourse will be discussed here. Milton Friedman famously argued that the only social responsibility of a corporation was to maximise returns to shareholders. One of his essays was entitled, “The Social Responsibility of Business is to Increase its Profits”. He wrote: “[T]here is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”. 34 However, Friedman conceded that it was acceptable for managers to take into account environmental, social and other ethical considerations where doing so would protect the interests of shareholders. 35 For example, managers should seek to minimise pollution if that would avoid damaging adverse publicity or reduce the prospects of litigation. A contrasting view is taken by those who promote “corporate social responsibility”. The European Commission has defined corporate social responsibility as “the responsibility of enterprises for their impacts on society”. 36 Under this concept legal requirements are a minimum not a maximum level of corporate responsibility and corporations should strive to observe a higher level of behaviour. 37 Supporters of this concept argue that corporations bear social obligations in return for limited liability and the right to operate a business. 30 31 32 33 34 35 36

37

D Grace and S Cohen, Business Ethics: Australian Problems and Cases (2nd ed, Oxford University Press, Melbourne, 1998), pp 119, xiii, 54. Pub L 111-203, Dodd-Frank Wall Street Reform and Consumer Protection Act (21 July 2010), 124 Stat 1376. C Dickens, The Life and Adventures of Martin Chuzzlewit (Oxford University Press, London, 1951), p 181 (Ch 11). RD Francis, Business Ethics in Australia (Centre for Professional Development, Melbourne, 1994), p 7. M Friedman, “The Social Responsibility of Business is to Increase its Profits”, New York Times Magazine, 13 September 1970, p 124. MM Jennings and J Entine, “Business with a Soul: A Re-examination of what Counts in Business Ethics” (1998) 20 Hamline Journal of Public Law and Policy 1 at 26-27. Communication from the Commission: A Renewed EU Strategy 2011-14 for Corporate Social Responsibility, COM (2011) 681 final at [3.1]. See generally B Horrigan, Corporate Social Responsibility in the 21st Century (Edward Elgar, Cheltenham, 2010). R Sarre, “Responding to Corporate Collapses: Is There a Role for Corporate Social Responsibility?” (2002) 7(1) Deakin Law Review 1 at 7–8.

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The “triple bottom line” is another phrase which frequently arises in discussions of business ethics. These three “bottom lines” are financial, social and environmental. This concept emphasises that a corporation should consider not only the financial outcome of its activities but also the social and environmental consequences. Supporters argue that the financial bottom line is dependent upon social and environmental sustainability. 38 The influence of the notion of corporate social responsibility is apparent in the United Kingdom Companies Act 2006 (UK). That Act provides that company directors shall have regard to “the impact of the company’s operations on the community and the environment” and “the desirability of the company maintaining a reputation for high standards of business conduct”: s 171(1)(d) – (e). Of course, there have been many companies which have loudly proclaimed their adherence to ethical principles but which have fallen short of their declared ideals. 39 Such hypocrisy is not an argument against the desirability of business ethics but for closer monitoring of their observance.

International standards United Nations Convention Against Corruption [18.60] The most comprehensive international response to corruption is the United Nations Convention Against Corruption. 40 Australia ratified this treaty on 7 December 2005. The Commonwealth AttorneyGeneral’s Department has indicated that Australia’s obligations under the Convention will be implemented under existing legislation such as the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). 41 Several provisions of the Convention relate specifically to corruption in the private sector. Parties to this treaty are obligated to take measures to enhance accounting and auditing standards in the private sector, including the imposition of appropriate penalties for breaches of these standards: United Nations Convention Against Corruption, Article 12(1). These measures may include the development of codes of conduct designed to prevent conflicts of interest. They may also include measures which ensure that private enterprises have sufficient internal auditing controls to assist in preventing and detecting acts of corruption: Article 12(2)(b), (f). Parties must prohibit off-the-books accounts and transactions, recording of non-existent expenditure, incorrect identification of liabilities, use of false documents, and destruction of bookkeeping documents: Art 12(3). Parties to this treaty are to consider adopting legislation or other measures prohibiting bribery and embezzlement of property in the private sector: Articles 21 – 22.

United Nations Guiding Principles [18.65] In recent times international bodies have given increased attention to the human rights practices of business. In July 2011 the United Nations Human Rights Council endorsed the Guiding Principles on Business and Human Rights. National governments have a duty to protect against human rights abuses by 38 39 40 41

R Sarre, “Responding to Corporate Collapses: Is There a Role for Corporate Social Responsibility?” (2002) 7(1) Deakin Law Review 1 at 12. MM Jennings and J Entine, “Business with a Soul: A Re-examination of what Counts in Business Ethics” (1998) 20 Hamline Journal of Public Law and Policy 1 at 60. United Nations Convention Against Corruption (New York, 31 October 2003, 2349 UNTS 41, 43 ILM 37). Joint Standing Committee on Treaties, Report 66 (Commonwealth of Australia, Canberra, 2005), pp 14-15.

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OECD Guidelines [18.80] Some international instruments concerning business practice relate specifically to multinational business operations. 43 The Organisation for Economic Co-operation and Development has adopted a series of Guidelines for Multinational Enterprises. 44 The Guidelines are “standards of good practice” and are not legally binding: OECD Guidelines for Multinational Enterprises, Preface para (1). The Guidelines are quite numerous and only a selection can be dealt with here. Multinational enterprises are subject to the laws of the host state. The Guidelines emphasise that “[o]beying domestic law is the first obligation of enterprises”: para I(2). Enterprises should not seek or accept exemptions from human rights, environmental, health, safety, labour and taxation laws that are not provided for by those laws: para II(5). They should not engage in “improper involvement” in the political life of the host state: para II(15). The Guidelines include human rights standards. Enterprises should “Respect human rights, which means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved”: para IV(1). Enterprises are required to observe labour standards. Employers should respect the right of their employees to unionise and bargain collectively: paras V(1)(a), V(8). Enterprises should employ local workers “to the greatest extent practicable”: para V(5). When bargaining with employees, enterprises should not threaten to withdraw from the host state: para V(7). Environmental standards are also included. Enterprises should provide environmental impact assessments for business activities that have significant environmental costs: para VI(3). Companies should not use the lack of complete scientific certainty about a possible environmental hazard as an excuse to avoid taking cost-effective actions that will avert or reduce that risk: para VI(4). Companies should seek to develop products and services that do not have “undue environmental impacts”: para VI(6)(b). Consumer protection is another goal of the Guidelines. Products and services should satisfy the requirements of consumer health and safety laws: para VIII(1). Enterprises should not make deceptive, misleading or fraudulent representations to consumers: para VIII(4). The Guidelines express a strong disapproval of restrictive trade practices. Businesses should not enter into anti-competitive arrangements with their competitors, including price fixing, collusive tendering, restriction of supply, or dividing markets: para X(1). Finally, multinational enterprises must observe the “letter and spirit” of the taxation laws of the host state, and transfer pricing must observe the arm’s length principle: para XI(1). As of May 2011, 42 nations had adhered to these OECD principles. The implementation of the Guidelines is regulated by a decision taken by the OECD Council in June 2000. Each nation must set up a National Contact Point that will promote the observance of the Guidelines, answer questions regarding their application and undertake discussions with parties that consider that the Guidelines have been infringed: para I(1). 45 The interpretation of the Guidelines is undertaken by the International Investment Committee, though it has no power to “reach conclusions on the conduct of individual enterprises”: para II(4). 43

See also Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (as amended at Geneva, November 2000, 41 ILM 184).

44

OECD Guidelines for Multinational Enterprises (as revised at Paris, 25 May 2011). See generally, http://www.oecd.org/daf/ internationalinvestment/guidelinesformultinationalenterprises/; A Santer, “A Soft Law Mechanism for Corporate Responsibility: How the Updated OECD Guidelines for Multinational Enterprises Promote Business for the Future ” (2011) 43 George Washington International Law Review 375.

45

The website of the Australian National Contact Point is at http://www.ausncp.gov.au.

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Other international conventions concerning business practices [18.90] Some human rights treaties also contain provisions that are relevant to business practice both domestically and internationally. For example, several treaties obligate ratifying nations to prohibit discrimination by private persons. 46 These treaties are implemented by anti-discrimination legislation. Another treaty provides that children have the right to be protected from performing any work that is likely to interfere with their education. 47 Other treaties prohibit the employment of children in harmful forms of work. 48 These treaty rights should influence the conduct of corporations which are engaged in manufacturing in developing countries.

Corporate ethics codes [18.100] Many individual companies have ethics codes. 49 An ethics code may be defined as a “written, distinct, and formal document which consists of moral standards used to guide employee or corporate behaviour”. 50 An ethics code may adopt an aspirational or prescriptive approach. An aspirational code sets out ideals of best practice but is generally unenforceable. A prescriptive code is much more specific and breaches are subject to punishment. 51 An aspirational code may be criticised as an exercise in symbolism over substance. A prescriptive code may be criticised for encouraging employees and management to observe the letter of the code while breaching its spirit. Ronald Francis has set out a useful list of principles which may be appropriate for inclusion in a corporate ethics code. In summary, these principles include: (a)

observance of the law;

(b)

companies should consider the effect that their actions may have upon others;

(c)

accounts should follow conventional procedures so as to provide an accurate reflection of the financial position of the company;

(d)

respect for personal privacy;

(e)

non-discrimination against employees on grounds such as race, gender or marital status;

(f)

employees should not be subject to arbitrary dismissal;

(g)

employees must not use the employer’s time for personal gain;

(h)

staff and management should declare potential conflicts of interest;

(i)

companies must not exploit the disadvantaged;

(j)

companies should not engage in bribery;

46

47 48

49

International Convention on the Elimination of All Forms of Racial Discrimination, Article 2(e) (New York, 7 March 1966, 660 UNTS 195); Convention on the Elimination of All Forms of Discrimination Against Women, Article 2(e) (New York, 18 December 1979, 1249 UNTS 13). Convention on the Rights of the Child, Art 32(1) (New York, 20 November 1989, 1577 UNTS 3). International Covenant on Economic, Social and Cultural Rights, Article 10(3) (New York, 19 December 1966, 993 UNTS 3); ILO Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour (No 182) (Geneva, 17 June 1999, 2133 UNTS 161, 38 ILM 1207). Some groups of companies have also adopted ethics codes. See V Lee, “Enforcing the Equator Principles: An NGO’s Principled Effort to Stop the Financing of a Paper Pulp Mill in Uruguay” (2008) 6 Northwestern Journal of International Human Rights 354 at 358.

50

M Schwarz, “The Nature of the Relationship between Corporate Codes of Ethics and Behaviour” (2001) 32 Journal of Business Ethics 247, 248.

51

RD Francis, Business Ethics in Australia (Centre for Professional Development, Melbourne, 1994), p 13.

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(k)

staff should not engage in misrepresentation or other deceptive conduct;

(l)

staff should not employ high-pressure sales techniques;

(m)

companies should not enter into anti-competitive contracts;

(n)

respect for intellectual property rights;

(o)

bills should be paid promptly;

(p)

cost savings from tax changes should be passed on to consumers;

(q)

companies should strive to minimise pollution; and

(r)

unnecessary cruelty to animals should be avoided. 52

Some studies have suggested that codes have little direct influence upon the behaviour of employees and management. 53 Moreover, a code is no more than “window dressing” if it is not observed in practice. The failed energy corporation, Enron, had a strong ethics code – on paper. The lofty ideals of the code provided endless material for comedians following that firm’s accounting fraud. The code came to nothing because the board simply waived compliance when making a key decision.

Industry codes [18.110] Under Pt IVB of the Competition and Consumer Act 2010 (Cth), industry codes of conduct may be prescribed and enforced under the Act. 54 These codes regulate the conduct of industry participants towards consumers or other industry participants. Adherence to such codes may be mandatory or voluntary. The Code of Banking Practice is applicable to banking by individuals and certain small business customers: cl 1.1. Banks which subscribe to the Code are obliged to act fairly and reasonably toward their customers in a consistent and ethical manner: cl 2.2. Prospective guarantors are to be informed of the risks and obligations prior to entering into a guarantee. They are also entitled to be informed of certain matters relating to the debtor’s recent credit history: cl 28.4. Prospective borrowers are to be informed of the risks associated with foreign currency loans: cl 21.2. Other provisions concern disclosure and modification of fees and charges: cll 10.4, 18.3.

Regulatory responses [18.120] It has been well observed that in business today: “[E]thics is not an option. If a company or industry cares nothing for ethical requirements, it may expect from government a policy and legislative response which imposes standards and practices”. 55 Laws are frequently enacted in response to, rather than in anticipation of, ethical breaches or problems. 56 Regulatory responses may include criminal punishment or civil remedies. The use of the criminal law to enforce ethical standards may be illustrated by the law prohibiting the bribery of foreign public officials, contained in the Criminal Code Act 1995 (Cth), Sch, Div 70. A person 52 53 54

RD Francis, Ethics and Corporate Governance (UNSW Press, Sydney, 2000), pp 155–174. M Schwarz, “The Nature of the Relationship between Corporate Codes of Ethics and Behaviour” (2001) 32 Journal of Business Ethics 247 at 253. For Code texts, see http://www.asic.gov.au/asic/asic.nsf/byheadline/Codes-of-practice; R Mares (ed), Business and Human Rights: A Collection of Documents (Martinus Njjhoff, Dordrecht, 2004), pp 341ff.

55

D Grace and S Cohen, Business Ethics: Australian Problems and Cases (2nd ed, Oxford University Press, Melbourne, 1998), p xiii.

56

RT DeGeorge, Competing with Integrity in International Business (Oxford University Press, New York, 1993), p 26.

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commits an offence if he or she provides a benefit to a foreign public official which is not legitimately due, with the intention of influencing the official in the exercise of their duties, in order to obtain business or a business advantage that is not legitimately due. In determining whether a benefit or business advantage is not legitimately due, the following factors are to be disregarded: the fact that the benefit or advantage is customary, necessary or required in the situation; the value of the benefit or advantage; and official tolerance of the benefit or advantage: Sch, s 70.2(2), (3). It is not necessary for the prosecution to prove that business or a business advantage was obtained: Sch, s 70.2(1A). It is a defence that the conduct is lawful in the foreign official’s country: Sch, s 70.3. It is also a defence that the benefit was of minor value and was provided for the purpose of expediting or securing the performance of a minor and routine government action. (Such payments are known as “facilitation payments”.) The provider of the benefit must keep a record of the payment: Sch, s 70.4(1). To be punishable, the bribery must have taken place within Australia or, if it occurred outside Australia, the offender must be an Australian citizen, resident or corporation: Sch, s 70.5(1). The issue of bribery of foreign public officials is not a theoretical one: the Australian Wheat Board made extensive corrupt payments to the former Iraqi regime. 57 In 2012 the OECD expressed its disappointment at the Australian government’s record of enforcement of the foreign bribery offences: “That Australia has only one case that has led to foreign bribery prosecutions since it enacted its foreign bribery offence in 1999 is of serious concern. ... This level of enforcement is not commensurate with the size of its economy and the risk profile of Australian companies.” 58 An alternative regulatory response is to apply civil penalties for corporate breaches of legislative proscriptions of particular business practices. The Competition and Consumer Act 2010 (Cth) imposes civil penalties for breach of the restrictive trade practices provisions. The Corporate Code of Conduct Bill 2000 (Cth) proposed to apply environmental, labour, non-discrimination, consumer protection and restrictive trade practices standards to Australian corporations operating in other countries: cll 7–13. Civil penalties were to be imposed for breach of these standards: cl 16. This Senate Bill was not enacted. A recent ethical issue illustrates another regulatory response. In the famous “cash for comment” controversy, several talkback radio presenters had blurred the line between advertising and the editorial content of their programs by making favourable remarks about commercial sponsors without disclosing the existence of the sponsorship arrangement. 59 A former member of the Australian Broadcasting Authority Board expressed the ethical problem for both advertisers and broadcasters as follows: “[I]s the listener or the audience to be played for a mug? The audience is entitled to know whether what they are hearing is actually the opinion of someone they trust or whether that is actually material placed by a third party for money and being spoken by someone they trust”. 60 In the wake of this controversy, the Broadcasting Services (Commercial Radio Current Affairs Disclosure) Standard 2012 provides that sponsorship arrangements with presenters which may affect the content of a commercial radio current affairs program must be disclosed during the program: cl 7. 61 The Federal Court 57

58 59 60 61

J Tomaras, International Trade Integrity Bill 2007 (Bills Digest No 12, 2007-08, Commonwealth Parliamentary Library, Canberra, 2007), pp 5-6; C Overington, Kick Back: Inside the Australian Wheat Board Scandal (Allen and Unwin, Sydney, 2007). For another allegation, see “Dirty Money”, Four Corners, 24 May 2010, http//www.abc.net.au/4corners. OECD Working Group on Bribery, Phase 3 Report on Implementing the OECD Anti-Bribery Convention in Australia (2012), 19. See Australian Broadcasting Authority, Commercial Radio Inquiry. Report of the Hearing into Radio 2UE Sydney Pty Limited (Australian Broadcasting Authority, Sydney, 2000), http://www.acma.gov.au. K Henderson in “Laws, Jones Feud Boils Over”, Lateline, 28 April 2004, http://www.abc.net.au/lateline. The Standard was adopted by the Australian Communications and Media Authority under the Broadcasting Services Act 1992 (Cth), s 125.

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imposed a penalty of $360,000 for 13 breaches of the disclosure obligation by a prominent talkback radio presenter. The presenter resented the disclosure obligation and the breaches were neither careless nor an oversight. 62 In television factual programming there has also been a blurring of the line between advertising and content. The Commercial Television Industry Code of Practice requires that current affairs or documentary programmes must disclose the existence of any commercial arrangement with a party whose products or services are featured in the program: cl 1.20. 63 Advertisements should be clearly presented as such rather than as program material. Under the Broadcasting Services (Commercial Radio Advertising) Standard 2012, advertisements broadcast on commercial radio “must be presented in such a manner that the reasonable listener is able to distinguish them, at the time of broadcast, from other program material”: cl 7. See also Commercial Television Code of Practice, cl 1.18. Sometimes the regulatory response is outright prohibition of a particular commercial activity. For example, it is illegal to broadcast or publish a tobacco advertisement: Tobacco Advertising Prohibition Act 1992 (Cth), ss 13, 15. The government justified the ban on the ground that tobacco advertising had encouraged children to smoke: “removing tobacco advertising is primarily a prevention activity intended to reduce the number of children taking up smoking”. 64 The content of tobacco packaging has also been strictly regulated. Cigarettes may be sold only in generic packaging: Tobacco Plain Packaging Act 2011 (Cth). Similarly, federal legislation prohibits the advertising of prescription drugs to the public. 65 Some pharmaceutical companies have sought to circumvent this prohibition by persuading the media to run news stories that indirectly advertise their products. 66 There have also been proposals for the prohibition of advertisements for “junk food” during children’s television programs. 67 A large proportion of advertising for unhealthy foods appears to be targeted at children. 68 The Code for Advertising and Marketing Communications to Children adopted by the Australian Association of National Advertisers (AANA) provides that advertisements “must not promote an inactive lifestyle or unhealthy eating or drinking habits”: cl 2.14(a). 69 However, the Code does not proscribe “junk food” advertisements directed at children. The Sydney Principles adopted by the

62 63 64

Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (2009) 178 FCR 199 at [141]–[142], [185]. The text of the Code is available at http://www.freetv.com.au. House of Representatives Hansard, 16 December 1992, p 3884.

65

Therapeutic Goods Act 1989 (Cth), s 42DL(1)(f); Medicines Australia Code of Conduct (Edition 16), s 12.3, available at http://www.medicinesaustralia.com.au. “Gilding the Lily”, Media Watch, 19 May 2008, http://www.abc.net.au/mediawatch; “Spinning “Ageing Stress””, Media Watch, 23 June 2008. “SA Moves to Ban Junk Food Advertising”, PM, 8 February 2008, http://www.abc.net.au/pm; Senate Hansard, 4 September 2008, pp 4501-4503; A Magnus et al, “The Cost-Effectiveness of Removing Television Advertising of High-Fat and/or High-Sugar Food and Beverages to Australian Children” (2009) 33 International Journal of Obesity 1094; Senate Hansard, 21 November 2011, p 9013. K Chapman, P Nicholas and R Supramaniam, “How much Food Advertising is there on Australian Television?” (2006) 21 Health Promotion International 172. For a trenchant criticism of the marketing of “junk food” to children, see M Spurlock, Don’t Eat this Book (Penguin, Camberwell, 2005), pp 147-170.

66 67

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The Code is available at http://www.aana.com.au/pages/codes.html.

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International Obesity Taskforce argue that legislation prohibiting targeted marketing to children of unhealthy foods is necessary, since self-regulation is not designed to discourage the consumption of such foods by children: cl 3. 70 Television advertisers also often use popular fictional characters to promote their products to children. The Children’s Television Standards 2009 prohibit advertisements in which a product or service is promoted by a film or television character or popular celebrity: CTS 35(1). 71 However, the effectiveness of this prohibition may be questioned because it applies only to advertising during programs that carry the C (children’s) or P (preschool) classifications. Most children watch programs that carry different classifications, especially G (general) and PG (parental guidance). 72 Advertising techniques can also raise ethical issues. The use of subliminal advertising appears to contravene the Commercial Television Industry Code of Practice. The Code prohibits the use of “any technique which attempts to convey information to the viewer by transmitting messages below or near the threshold of normal awareness”: cl 1.9.4. 73 Product placement is a form of disguised advertising within the storylines of fictional movies or television programs without any clear disclosure of the commercial purpose for its inclusion. 74 The acceptability of the message promoted by some advertisements may also be very important. The Alcohol Beverages Advertising (and Packaging) Code provides that alcohol advertisements must not suggest that alcohol consumption contributes “to the achievement of personal, business, social, sporting, sexual or other success”: Pt 1(c)(i). 75 Television viewers are well aware that advertisements are frequently much louder than the remainder of the programs in which they appear. The US Federal Communications Commission requires that digital television and cable broadcasters observe a technical standard that is designed to ensure that advertisements are no louder than the surrounding programme content. 76 Advertising directed towards children requires especially careful regard for ethical considerations. 77 Some of these concerns are addressed by the AANA Code. For example, the Code provides that advertisements must not encourage children to pester their parents to purchase the product: Code for Advertising and Marketing Communications to Children, cl 2.7(b). Advertisements must not imply that children who own the product are better than other children: cl 2.7(c).

70

The Principles are available at http://www.iaso.org/iotf/obesity/childhoodobesity/sydneyprinciples/.

71

The Standards are available at http://www.comlaw.gov.au/Browse/ByTitle/LegislativeInstruments.

72 73

C Hughes, “We’re Getting Only Weasel Words on Junk Food Ads”, Sydney Morning Herald, 5 September 2008, p 17. For an example of its use, see “Flash Dance”, Media Watch, 5 November 2007, Flash Dance – Part 2, 13 October 2008, http://www.abc.net.au/mediawatch; Australian Communications and Media Authority, Investigations 1958, 1959, 1960 and 1961, http://www.acma.gov.au.

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S Clifford, “Product Placements Acquire a Life of their Own on Shows”, New York Times, 14 July 2008, p C1. Images of products may even be digitally inserted into completed programs: Branding Entertainment, Media Watch, 18 June 2012, http://www.abc.net.au/mediawatch. The Code is available at http://www.adstandards.com.au.

76

47 Code of Federal Regulations § 73.682 and 76.607; 77 Federal Register 40276 at [1] (2012).

77

See S G Thomas, Buy, Buy Baby: How Big Business Captures the Ultimate Consumer – Your Baby or Toddler (Harper Collins, London, 2007); and see S Beder et al, This Little Kiddy Went to Market: The Corporate Capture of Childhood (UNSW Press, Sydney, 2009).

chapter 18 Business Ethics

Socially responsible investing [18.130] Socially responsible investing is a recent investment trend where investment funds have regard to political, social, economic and environmental considerations when deciding what investments they will make. 78 Investment funds that follow this approach must adopt a method for screening possible investments for compatibility with ethical considerations. There are three basic types of screening method. First, some funds adopt a negative screening approach, so that companies are excluded from the investment portfolio because they are engaged in particular activities which are regarded as unethical. Secondly, some funds adopt a positive screening approach, so that companies are included within the investment portfolio due to their superior record in environmental, labour or human rights concerns. Thirdly, some funds adopt a best-of-sector approach, favouring the most ethical companies within each sector. In some sectors these companies may be viewed as “least worst”. Such an approach may be criticised because it is likely to include companies from controversial sectors such as alcohol, tobacco and gambling. 79 In Australia, the market for this type of investment is currently small. However, Commonwealth law has given statutory recognition to socially responsible investment through the introduction of disclosure requirements. 80 Under the disclosure requirements of the Corporations Act 2001 (Cth), a Product Disclosure Statement for superannuation, managed investment or investment life insurance products must state the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention or realisation of the investment: s 1013D(1)(l). The legislative history of these requirements provides an insight into the perspectives differing political philosophies bring to the concept of business ethics. The compulsory disclosure requirements originated as a proposal by an Opposition party in the Senate, the Australian Democrats. The Democrats emphasised that their proposal did not require that investments satisfy environmental, social or ethical criteria but would only impose a disclosure obligation. 81 The Liberal/National Party Government initially opposed the compulsory disclosure requirement. The Government argued that “market forces will deliver consumers the most transparent disclosure of socially responsible investment strategies by companies with a genuine commitment to applying them”. 82 Ultimately, the Government agreed to the Democrats’ proposal, acknowledging that the proposal was consistent with its own objective of requiring broader disclosure to potential investors. Advocates of socially responsible investment argue that it offers superior returns to the more traditional approach under which such matters were not considered. This claim remains unverified since there is no long-term experience of this investment method. There is more evidence for the proposition that very unethical companies tend to be risky investments. Whether such investment methods lead to superior returns has been questioned. Critics have argued that returns to investors will be reduced if investment funds avoid profitable but socially or environmentally harmful investments. Critics have also argued that the disclosure regime will impose costly compliance 78 79 80 81 82

Allen Consulting Group, Socially Responsible Investment in Australia (Allen Consulting Group, Melbourne, 2000), p 1. Allen Consulting Group, Socially Responsible Investment in Australia (Allen Consulting Group, Melbourne, 2000), pp 2–3. See generally, BJ Richardson, “Ethical Investment and the Commonwealth’s Financial Services Reform Act 2001” (2002) 2 National Environmental Law Review 47. Parliamentary Joint Statutory Committee on Corporations and Securities, Report on the Financial Services Reform Bill 2001 (Commonwealth of Australia, Canberra, 2001), p 118 (Supplementary Report). Parliamentary Joint Statutory Committee on Corporations and Securities, Report on the Financial Services Reform Bill 2001 (Commonwealth of Australia, Canberra, 2001), p 94 (Majority Report).

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requirements. While many consumers have regard to corporate social responsibility in making purchasing decisions, they give priority to functional considerations. 83

Further reading RD Francis, Business Ethics in Australia (Centre for Professional Development, Melbourne, 1994). RD Francis, Ethics and Corporate Governance (UNSW Press, Sydney, 2000). D Grace and S Cohen, Business Ethics (5th ed, Oxford University Press, Melbourne, 2013). J Harrison, Ethics for Australian Business (Prentice-Hall, Sydney, 2001). A Lagan and B Moran, 3D Ethics: Implementing Workplace Values: Personal, Organisational and Social Dimensions of Business Ethics (eContent Management, Sydney, 2006).

Internet sites Codes of Ethics Online http://ethics.iit.edu/research/codes-ethics-collection (full texts of corporate codes, bibliography) United Nations Global Compact http://www.unglobalcompact.org (detailed analysis of Compact) Business and Human Rights Resource Centre http://www.business-humanrights.org (large database of materials arranged by country and region)

83

T Devinney et al, “The Other CSR” (2006) 4, 3 Stanford Social Innovation Review 30 at 35.

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Chapter 1 Introduction 3 Meaning of consumer Acquiring goods as a consumer (1) A person is taken to have acquired particular goods as a consumer if, and only if: (a) the amount paid or payable for the goods, as worked out under subsections (4) to (9), did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of this paragraph—that greater amount; or (b) the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or (c) the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads. (2) [Not acquiring goods as a consumer] However, subsection (1) does not apply if the person acquired the goods, or held himself or herself out as acquiring the goods: (a) for the purpose of re-supply; or (b) for the purpose of using them up or transforming them, in trade or commerce: (i) in the course of a process of production or manufacture; or (ii) in the course of repairing or treating other goods or fixtures on land. Acquiring services as a consumer (3) A person is taken to have acquired particular services as a consumer if, and only if: (a) the amount paid or payable for the services, as worked out under subsections (4) to (9), did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of subsection (1)(a)—that greater amount; or (b) the services were of a kind ordinarily acquired for personal, domestic or household use or consumption. Amounts paid or payable for purchases (4) For the purposes of subsection (1) or (3), the amount paid or payable for goods or services purchased by a person is taken to be the price paid or payable by the person for the goods or services, unless subsection (5) applies. (5) [Deemed amount payable for purchases] For the purposes of subsection (1) or (3), if a person purchased goods or services by a mixed supply and a specified price was not allocated to the goods or services in the contract under which they were purchased, the amount paid or payable for goods or services is taken to be: (a) if, at the time of the acquisition, the person could have purchased from the supplier the goods or services other than by a mixed supply—the price at which they could have been purchased from the supplier; or (b) if: (i) paragraph (a) does not apply; but

s 3 Extracts from the Australian Consumer Law (Cth)

(ii)

at the time of the acquisition, goods or services of the kind acquired could have been purchased from another supplier other than by a mixed supply; the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (c) if, at the time of the acquisition, goods or services of the kind acquired could not have been purchased from any supplier except by a mixed supply—the value of the goods or services at that time. Amounts paid or payable for other acquisitions (6) For the purposes of subsection (1) or (3), the amount paid or payable for goods or services acquired by a person other than by way of purchase is taken to be the price at which, at the time of the acquisition, the person could have purchased the goods or services from the supplier, unless subsection (7) or (8) applies. (7) [Deemed amount payable for acquired goods or services] For the purposes of subsection (1) or (3), if: (a) goods or services acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from the supplier, or could have been purchased only by a mixed supply; but (b) at that time, goods or services of the kind acquired could have been purchased from another supplier other than by a mixed supply; the amount paid or payable for the goods or services is taken to be the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier. (8) [Deemed amount payable for goods purchased by mixed supply] For the purposes of subsection (1) or (3), if goods or services acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from any supplier other than by a mixed supply, the amount paid or payable for the goods or services is taken to be the value of the goods or services at that time. Amounts paid or payable for obtaining credit (9) If: (a) a person obtains credit in connection with the acquisition of goods or services by him or her; and (b) the amount paid or payable by him or her for the goods or services is increased because he or she so obtains credit; obtaining the credit is taken for the purposes of subsection (3) to be the acquisition of a service, and the amount paid or payable by him or her for the service of being provided with the credit is taken to include the amount of the increase. Presumption that persons are consumers (10) If it is alleged in any proceeding under this Schedule, or in any other proceeding in respect of a matter arising under this Schedule, that a person was a consumer in relation to particular goods or services, it is presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services. Mixed supplies (11) A purchase or other acquisition of goods or services is made by a mixed supply if the goods or services are purchased or acquired together with other property or services, or together with both other property and other services.

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Supplies to consumers (12) In this Schedule, a reference to a supply of goods or services to a consumer is a reference to a supply of goods or services to a person who is taken to have acquired them as a consumer. [S 3 subst Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011; insrt Act 44 of 2010, s 3 and Sch 1 item 1]

4 Misleading representations with respect to future matters (1) [No reasonable grounds for making representation] If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) [Defendant to adduce evidence of reasonable grounds] For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) [Effect of s 4(2)] To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) [Section 4(1) not limiting] Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation. [S 4 subst Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011; insrt Act 44 of 2010, s 3 and Sch 1 item 1. Cross-reference: s 51A Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 7 Extracts from the Australian Consumer Law (Cth)

7 Meaning of manufacturer (1) [Definition: manufacturer] A manufacturer includes the following: (a) a person who grows, extracts, produces, processes or assembles goods; (b) a person who holds himself or herself out to the public as the manufacturer of goods; (c) a person who causes or permits the name of the person, a name by which the person carries on business or a brand or mark of the person to be applied to goods supplied by the person; (d) a person (the first person) who causes or permits another person, in connection with: (i) the supply or possible supply of goods by that other person; or (ii) the promotion by that other person by any means of the supply or use of goods; to hold out the first person to the public as the manufacturer of the goods; (e) a person who imports goods into Australia if: (i) the person is not the manufacturer of the goods; and (ii) at the time of the importation, the manufacturer of the goods does not have a place of business in Australia. (2) [Associated name, brand or mark] For the purposes of subsection (1)(c): (a) a name, brand or mark is taken to be applied to goods if: (i) it is woven in, impressed on, worked into or annexed or affixed to the goods; or (ii) it is applied to a covering, label, reel or thing in or with which the goods are supplied; and (b) if the name of a person, a name by which a person carries on business or a brand or mark of a person is applied to goods, it is presumed, unless the contrary is established, that the person caused or permitted the name, brand or mark to be applied to the goods. (3) [Deemed importation of goods] If goods are imported into Australia on behalf of a person, the person is taken, for the purposes of paragraph (1)(e), to have imported the goods into Australia. [S 7 subst Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011; insrt Act 44 of 2010, s 3 and Sch 1 item 1. Cross-reference: ss 74A, 75AA and 75AB Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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9 Meaning of safety defect in relation to goods (1) [Safety defect test] For the purposes of this Schedule, goods have a safety defect if their safety is not such as persons generally are entitled to expect. (2) [Relevant matters] In determining the extent of the safety of goods, regard is to be given to all relevant circumstances, including: (a) the manner in which, and the purposes for which, they have been marketed; and (b) their packaging; and (c) the use of any mark in relation to them; and (d) any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer. (3) [Subsequent issue of safer goods] An inference that goods have a safety defect is not to be made only because of the fact that, after they were supplied by their manufacturer, safer goods of the same kind were supplied. (4) [State of scientific or technical knowledge] An inference that goods have a safety defect is not to be made only because: (a) there was compliance with a Commonwealth mandatory standard for them; and (b) that standard was not the safest possible standard having regard to the latest state of scientific or technical knowledge when they were supplied by their manufacturer. [S 9 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AC Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 21 Extracts from the Australian Consumer Law (Cth)

Chapter 2 General protections Part 2–1 Misleading or deceptive conduct 18 Misleading or deceptive conduct (1) [Misleading and deceptive conduct prohibited] A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) [Section 18(1) not limited by Pt 3–1] Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). Note: For rules relating to representations as to the country of origin of goods, see Part 5-3. [S 18 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 52 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Part 2–2 Unconscionable conduct 20 Unconscionable conduct within the meaning of the unwritten law (1) [Unconscionable conduct prohibited] A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Section does not apply to s 21 prohibited conduct] This section does not apply to conduct that is prohibited by section 21. [Subs (2) am Act 184 of 2011, s 3 and Sch 2 item 3, with effect from 1 Jan 2012] [S 20 am Act 184 of 2011; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 51AA Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

21 Unconscionable conduct in connection with goods or services (1) [Unconscionable conduct prohibited] A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. (2) [Application of section] This section does not apply to conduct that is engaged in only because the person engaging in the conduct: (a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or (b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition. (3) [Determining whether conduct is unconscionable] For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) [Parliamentary intention] It is the intention of the Parliament that:

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(a)

this section is not limited by the unwritten law relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. [S 21 subst Act 184 of 2011, s 3 and Sch 2 item 4, with effect from 1 Jan 2012; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: ss 51AB and 51AC Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

22 Matters the court may have regard to for the purposes of section 21 (1) [Relevant matters in determining whether supplier has contravened s 21] Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the customer; and (b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the customer: (i) any intended conduct of the supplier that might affect the interests of the customer; and (ii) any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and (j) if there is a contract between the supplier and the customer for the supply of the goods or services:

s 22 Extracts from the Australian Consumer Law (Cth)

(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and (ii) the terms and conditions of the contract; and (iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and (l) the extent to which the supplier and the customer acted in good faith. (2) [Relevant matters in determining whether acquirer has contravened s 21] Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and (c) whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and (e) the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and (f) the extent to which the acquirer’s conduct towards the supplier was consistent with the acquirer’s conduct in similar transactions between the acquirer and other like suppliers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and (i) the extent to which the acquirer unreasonably failed to disclose to the supplier: (i) any intended conduct of the acquirer that might affect the interests of the supplier; and (ii) any risks to the supplier arising from the acquirer’s intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and (j) if there is a contract between the acquirer and the supplier for the acquisition of the goods or services: (i) the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and (ii) the terms and conditions of the contract; and

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(iii)

the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and (iv) any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and (l) the extent to which the acquirer and the supplier acted in good faith. [S 22 subst Act 184 of 2011, s 3 and Sch 2 item 4, with effect from 1 Jan 2012; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: ss 51AB and 51AC Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Part 2–3 Unfair contract terms 23 Unfair terms of consumer contracts and small business contracts (1) [Void term] A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. (2) [Effect of unfair term on contract] The contract continues to bind the parties if it is capable of operating without the unfair term. (3) [Definition: consumer contract] A consumer contract is a contract for: (a) a supply of goods or services; or (b) a sale or grant of an interest in land; to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption. (4) A contract is a small business contract if: (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (c) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. (5) In counting the persons employed by a business for the purposes of paragraph (4)(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis. [S 23 am Act 147 of 2015, s 3 and Sch 1 items 29–31, with effect from 12 Nov 2016; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

24 Meaning of unfair (1) [Unfair term] A term of a consumer contract or small business contract is unfair if: (a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

s 25 Extracts from the Australian Consumer Law (Cth)

(c)

it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. (2) [Relevant matters] In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (a) the extent to which the term is transparent; (b) the contract as a whole. (3) [Transparent term] A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term. (4) [Rebuttable presumption] For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise. [S 24 am Act 147 of 2015, s 3 and Sch 1 items 32 and 33, with effect from 12 Nov 2016; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

25 Examples of unfair terms Without limiting section 24, the following are examples of the kinds of terms of a consumer contract or small business contract that may be unfair: (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract; (b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract; (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; (d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract; (e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract; (f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract; (g) a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract; (h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning; (i) a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents; (j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent; (k) a term that limits, or has the effect of limiting, one party’s right to sue another party; (l) a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract;

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(m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; (n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations. [S 25 am Act 147 of 2015, s 3 and Sch 1 items 34–36, with effect from 12 Nov 2016; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

26 Terms that define main subject matter of consumer contracts or small business contracts etc. are unaffected (1) [Terms unaffected by s 23] Section 23 does not apply to a term of a consumer contract or small business contract to the extent, but only to the extent, that the term: (a) defines the main subject matter of the contract; or (b) sets the upfront price payable under the contract; or (c) is a term required, or expressly permitted, by a law of the Commonwealth, a State or a Territory. (2) [Upfront price payable under contract] The upfront price payable under a contract is the consideration that: (a) is provided, or is to be provided, for the supply, sale or grant under the contract; and (b) is disclosed at or before the time the contract is entered into; but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event. [S 26 am Act 147 of 2015, s 3 and Sch 1 items 37–39, with effect from 12 Nov 2016; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

27 Standard form contracts (1) [Rebuttable presumption] If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise. (2) [Relevant matters] In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1); (e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction; (f) any other matter prescribed by the regulations. [S 27 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

s 29 Extracts from the Australian Consumer Law (Cth)

Chapter 3 Specific protections Part 3–1 Unfair practices Division 1 False or misleading representations etc 29 False or misleading representations about goods or services (1) [False or misleading representations prohibited] A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: (a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or (b) make a false or misleading representation that services are of a particular standard, quality, value or grade; or (c) make a false or misleading representation that goods are new; or (d) make a false or misleading representation that a particular person has agreed to acquire goods or services; or (e) make a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or (f) make a false or misleading representation concerning: (i) a testimonial by any person; or (ii) a representation that purports to be such a testimonial; relating to goods or services; or (g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or (h) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (i) make a false or misleading representation with respect to the price of goods or services; or (j) make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods; or (k) make a false or misleading representation concerning the place of origin of goods; or (l) make a false or misleading representation concerning the need for any goods or services; or (m) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); or (n) make a false or misleading representation concerning a requirement to pay for a contractual right that: (i) is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); and (ii) a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law). Note 1: A pecuniary penalty may be imposed for a contravention of this subsection. Note 2: For rules relating to representations as to the country of origin of goods, see Part 5-3.

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(2) [Accused must adduce evidence that representation is not misleading] For the purposes of applying subsection (1) in relation to a proceeding concerning a representation of a kind referred to in subsection (1)(e) or (f), the representation is taken to be misleading unless evidence is adduced to the contrary. (3) [Effect of s 29(2)] To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the representation is not misleading; or (b) have the effect of placing on any person an onus of proving that the representation is not misleading. [S 29 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 53 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

30 False or misleading representations about sale etc of land (1) [False or misleading representations in connection with sale or grant of land prohibited] A person must not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land: (a) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (b) make a false or misleading representation concerning the nature of the interest in the land; or (c) make a false or misleading representation concerning the price payable for the land; or (d) make a false or misleading representation concerning the location of the land; or (e) make a false or misleading representation concerning the characteristics of the land; or (f) make a false or misleading representation concerning the use to which the land is capable of being put or may lawfully be put; or (g) make a false or misleading representation concerning the existence or availability of facilities associated with the land. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Section 30 does not affect application of Pts 2–1 or 3–1] This section does not affect the application of any other provision of Part 2-1 or this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land. [S 30 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 53A Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

31 Misleading conduct relating to employment A person must not, in relation to employment that is to be, or may be, offered by the person or by another person, engage in conduct that is liable to mislead persons seeking the employment as to: (a) the availability, nature, terms or conditions of the employment; or (b) any other matter relating to the employment. Note: A pecuniary penalty may be imposed for a contravention of this section. [S 31 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 53B Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 33 Extracts from the Australian Consumer Law (Cth)

32 Offering rebates, gifts, prizes etc (1) [Offer of gifts, etc prohibited where no intention to provide as offered] A person must not, in trade or commerce, offer any rebate, gift, prize or other free item with the intention of not providing it, or of not providing it as offered, in connection with: (a) the supply or possible supply of goods or services; or (b) the promotion by any means of the supply or use of goods or services; or (c) the sale or grant, or the possible sale or grant, of an interest in land; or (d) the promotion by any means of the sale or grant of an interest in land. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Requirement to supply within specified or reasonable time] If a person offers any rebate, gift, prize or other free item in connection with: (a) the supply or possible supply of goods or services; or (b) the promotion by any means of the supply or use of goods or services; or (c) the sale or grant, or the possible sale or grant, of an interest in land; or (d) the promotion by any means of the sale or grant of an interest in land; the person must, within the time specified in the offer or (if no such time is specified) within a reasonable time after making the offer, provide the rebate, gift, prize or other free item in accordance with the offer. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(3) [Failure to provide gifts, etc beyond person’s control] Subsection (2) does not apply if: (a)

the person’s failure to provide the rebate, gift, prize or other free item in accordance with the offer was due to the act or omission of another person, or to some other cause beyond the person’s control; and (b) the person took reasonable precautions and exercised due diligence to avoid the failure. (4) [Exemption: replacement gifts, etc] Subsection (2) does not apply to an offer that the person makes to another person if: (a)

the person offers to the other person a different rebate, gift, prize or other free item as a replacement; and (b) the other person agrees to receive the different rebate, gift, prize or other free item. (5) [Section 32 does not affect application of Pts 2–1 or 3–1] This section does not affect the application of any other provision of Part 2-1 or this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land. [S 32 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 54 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

33 Misleading conduct as to the nature etc of goods A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods. Note: A pecuniary penalty may be imposed for a contravention of this section. [S 33 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 55 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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34 Misleading conduct as to the nature etc of services A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services. Note: A pecuniary penalty may be imposed for a contravention of this section. [S 34 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 55A Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

35 Bait advertising (1) [Bait advertising prohibited] A person must not, in trade or commerce, advertise goods or services for supply at a specified price if: (a) there are reasonable grounds for believing that the person will not be able to offer for supply those goods or services at that price for a period that is, and in quantities that are, reasonable, having regard to: (i) the nature of the market in which the person carries on business; and (ii) the nature of the advertisement; and (b) the person is aware or ought reasonably to be aware of those grounds. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Supply at specified price for reasonable period] A person who, in trade or commerce, advertises goods or services for supply at a specified price must offer such goods or services for supply at that price for a period that is, and in quantities that are, reasonable having regard to: (a) the nature of the market in which the person carries on business; and (b) the nature of the advertisement. Note: A pecuniary penalty may be imposed for a contravention of this subsection. [S 35 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 56 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

36 Wrongly accepting payment (1) [Intention not to supply goods or services] A person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of the acceptance, the person intends not to supply the goods or services. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Intention to supply materially different goods or services] A person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of the acceptance, the person intends to supply goods or services materially different from the goods or services in respect of which the payment or other consideration is accepted. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(3) [Reasonable grounds of which person is aware] A person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of the acceptance: (a) there are reasonable grounds for believing that the person will not be able to supply the goods or services: (i) within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or (ii) if no period is specified at or before that time—within a reasonable time; and (b) the person is aware or ought reasonably to be aware of those grounds. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

s 37 Extracts from the Australian Consumer Law (Cth)

(4) [Requirement to supply within specified or reasonable time] A person who, in trade or commerce, accepts payment or other consideration for goods or services must supply all the goods or services: (a) within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or (b) if no period is specified at or before that time—within a reasonable time. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(5) [Failure to supply goods or services beyond person’s control] Subsection (4) does not apply if: (a)

the person’s failure to supply all the goods or services within the period, or within a reasonable time, was due to the act or omission of another person, or to some other cause beyond the person’s control; and (b) the person took reasonable precautions and exercised due diligence to avoid the failure. (6) [Replacement goods or services] Subsection (4) does not apply if: (a)

the person offers to supply different goods or services as a replacement to the person (the customer) to whom the original supply was to be made; and (b) the customer agrees to receive the different goods or services. (7) [Application of s 36(1), (2), (3) and (4)] Subsections (1), (2), (3) and (4) apply whether or not the payment or other consideration that the person accepted represents the whole or a part of the payment or other consideration for the supply of the goods or services. [S 36 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 58 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

37 Misleading representations about certain business activities (1) [False and misleading representations about business activities prohibited] A person must not, in trade or commerce, make a representation that: (a) is false or misleading in a material particular; and (b) concerns the profitability, risk or any other material aspect of any business activity that the person has represented as one that can be, or can be to a considerable extent, carried on at or from a person’s place of residence. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Invitations to work or invest in business activities] A person must not, in trade or commerce, make a representation that: (a) is false or misleading in a material particular; and (b) concerns the profitability, risk or any other material aspect of any business activity: (i) that the person invites (whether by advertisement or otherwise) other persons to engage or participate in, or to offer or apply to engage or participate in; and (ii) that requires the performance of work by other persons, or the investment of money by other persons and the performance by them of work associated with the investment. Note: A pecuniary penalty may be imposed for a contravention of this subsection. [S 37 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 59 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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38 Application of provisions of this Division to information providers (1) [Exemption from ss 29, 30, 33, 34 and 37 prohibitions] Sections 29, 30, 33, 34 and 37 do not apply to a publication of matter by an information provider if: (a) in any case—the information provider made the publication in the course of carrying on a business of providing information; or (b) if the information provider is the Australian Broadcasting Corporation, the Special Broadcasting Service Corporation or the holder of a licence granted under the Broadcasting Services Act 1992—the publication was by way of a radio or television broadcast by the information provider. (2) [Exemption does not apply to advertisements] Subsection (1) does not apply to a publication of an advertisement. (3) [Exemption does not apply to publication in connection with supply of goods or services] Subsection (1) does not apply to a publication of matter in connection with the supply or possible supply of, or the promotion by any means of the supply or use of, goods or services (the publicised goods or services), if: (a) the publicised goods or services were goods or services of a kind supplied by the information provider or, if the information provider is a body corporate, by a body corporate that is related to the information provider; or (b) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a person who supplies goods or services of the same kind as the publicised goods or services; or (c) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a body corporate that is related to a body corporate that supplies goods or services of the same kind as the publicised goods or services. (4) [Exemption does not apply to publication in connection with sale of interest in land] Subsection (1) does not apply to a publication of matter in connection with the sale or grant, or possible sale or grant, of, or the promotion by any means of the sale or grant of, interests in land (the publicised interests in land), if: (a) the publicised interests in land were interests of a kind sold or granted by the information provider or, if the information provider is a body corporate, by a body corporate that is related to the information provider; or (b) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a person who sells or grants interests of the same kind as the publicised interests in land; or (c) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a body corporate that is related to a body corporate that sells or grants interests of the same kind as the publicised interests in land. [S 38 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 65A Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 45 Extracts from the Australian Consumer Law (Cth)

Division 3 Pyramid schemes 44 Participation in pyramid schemes (1) [Participation in pyramid schemes prohibited] A person must not participate in a pyramid scheme. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Inducements to participate prohibited] A person must not induce, or attempt to induce, another person to participate in a pyramid scheme. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(3) [Definition: participate] To participate in a pyramid scheme is: (a) to establish or promote the scheme (whether alone or together with another person); or (b) to take part in the scheme in any capacity (whether or not as an employee or agent of a person who establishes or promotes the scheme, or who otherwise takes part in the scheme). [S 44 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 65AAC Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

45 Meaning of pyramid scheme (1) [Pyramid scheme characteristics] A pyramid scheme is a scheme with both of the following characteristics: (a) to take part in the scheme, some or all new participants must provide, to another participant or participants in the scheme, either of the following (a participation payment): (i) a financial or non-financial benefit to, or for the benefit of, the other participant or participants; (ii) a financial or non-financial benefit partly to, or for the benefit of, the other participant or participants and partly to, or for the benefit of, other persons; (b) the participation payments are entirely or substantially induced by the prospect held out to new participants that they will be entitled, in relation to the introduction to the scheme of further new participants, to be provided with either of the following (a recruitment payment): (i) a financial or non-financial benefit to, or for the benefit of, new participants; (ii) a financial or non-financial benefit partly to, or for the benefit of, new participants and partly to, or for the benefit of, other persons. (2) [Definition: new participant] A new participant includes a person who has applied, or been invited, to participate in the scheme. (3) [Recruitment payments] A scheme may be a pyramid scheme: (a) no matter who holds out to new participants the prospect of entitlement to recruitment payments; and (b) no matter who is to make recruitment payments to new participants; and (c) no matter who is to make introductions to the scheme of further new participants. (4) [Participation payments] A scheme may be a pyramid scheme even if it has any or all of the following characteristics: (a) the participation payments may (or must) be made after the new participants begin to take part in the scheme; (b) making a participation payment is not the only requirement for taking part in the scheme;

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(c)

the holding out of the prospect of entitlement to recruitment payments does not give any new participant a legally enforceable right; (d) arrangements for the scheme are not recorded in writing (whether entirely or partly); (e) the scheme involves the marketing of goods or services (or both). [S 45 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: ss 65AAB and 65AAD Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

46 Marketing schemes as pyramid schemes (1) [Relevant matters] To decide, for the purpose of this Schedule, whether a scheme that involves the marketing of goods or services (or both) is a pyramid scheme, a court must have regard to the following matters in working out whether participation payments under the scheme are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments: (a) whether the participation payments bear a reasonable relationship to the value of the goods or services that participants are entitled to be supplied with under the scheme (as assessed, if appropriate, by reference to the price of comparable goods or services available elsewhere); (b) the emphasis given in the promotion of the scheme to the entitlement of participants to the supply of goods or services by comparison with the emphasis given to their entitlement to recruitment payments. (2) [Section 46(1) not limiting] Subsection (1) does not limit the matters to which the court may have regard in working out whether participation payments are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments. possible supply or acquisition, [S 46 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 65AAE Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Division 4 Pricing 47 Multiple pricing (1) [Selling for higher displayed price prohibited] A person must not, in trade or commerce, supply goods if: (a) the goods have more than one displayed price; and (b) the supply takes place for a price that is not the lower, or lowest, of the displayed prices. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Definition: displayed price] A displayed price for goods is a price for the goods, or any representation that may reasonably be inferred to be a representation of a price for the goods: (a) that is annexed or affixed to, or is written, printed, stamped or located on, or otherwise applied to, the goods or any covering, label, reel or thing used in connection with the goods; or (b) that is used in connection with the goods or anything on which the goods are mounted for display or exposed for supply; or (c) that is determined on the basis of anything encoded on or in relation to the goods; or

s 48 Extracts from the Australian Consumer Law (Cth)

(d) that is published in relation to the goods in a catalogue available to the public if: (i) a time is specified in the catalogue as the time after which the goods will not be sold at that price and that time has not passed; or (ii) in any other case—the catalogue may reasonably be regarded as not out-of-date; or (e) that is in any other way represented in a manner from which it may reasonably be inferred that the price or representation is applicable to the goods; and includes such a price or representation that is partly obscured by another such price or representation that is written, stamped or located partly over that price or representation. (3) [Goods supplied at specified location] If: (a) a price or representation is included in a catalogue; and (b) the catalogue is expressed to apply only to goods supplied at a specified location, or in a specified region; the price or representation is taken, for the purposes of subsection (2)(d), not to have been made in relation to supply of the goods at a different location, or in a different region, as the case may be. (4) [Not a displayed price] Despite subsection (2), a price or representation is not a displayed price for goods if: (a)

the price or representation is wholly obscured by another such price or representation that is written, stamped or located wholly over that price or representation; or (b) the price or representation: (i) is expressed as a price per unit of mass, volume, length or other unit of measure; and (ii) is presented as an alternative means of expressing the price for supply of the goods that is a displayed price for the goods; or (c) the price or representation is expressed as an amount in a currency other than Australian currency; or (d) the price or representation is expressed in a way that is unlikely to be interpreted as an amount of Australian currency. (5) [Retraction of displayed price] Despite subsection (2), a displayed price for goods that is a displayed price because it has been published in a catalogue or advertisement ceases to be a displayed price for the goods if: (a) the displayed price is retracted; and (b) the retraction is published in a manner that has at least a similar circulation or audience as the catalogue or advertisement. [S 47 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

48 Single price to be specified in certain circumstances (1) [Specification of single price for goods and services] A person must not, in trade or commerce, in connection with: (a) the supply, or possible supply, to another person of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; or

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(b) the promotion by any means of the supply to another person, or of the use by another person, of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the person also specifies, in a prominent way and as a single figure, the single price for the goods or services. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(2) [Inclusion of delivery charge in single price not required] A person is not required to include, in the single price for goods, a charge that is payable in relation to sending the goods from the supplier to the other person. (3) [Specification of minimum delivery charge amount] However, if: (a) the person does not include in the single price a charge that is payable in relation to sending the goods from the supplier to the other person; and (b) the person knows, at the time of the representation, the minimum amount of a charge in relation to sending the goods from the supplier to the other person that must be paid by the other person; the person must not make the representation referred to in subsection (1) unless the person also specifies that minimum amount. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

(4) [Where s 48(1) does not apply] Subsection (1) does not apply if the representation is made exclusively to a body corporate. (4A) [Where s 48(1) does not apply] Subsection (1) does not apply if: (a) the representation is in a class of representations prescribed by the regulations; and (b) the conditions (if any) prescribed by the regulations in relation to representations in that class have been complied with. Note: If the representation is in a class prescribed for paragraph (a) of this subsection and subsection (1) is complied with in relation to the representation, there is no need to also comply with any conditions prescribed for paragraph (b) of this subsection. [Subs (4A) insrt Act 104 of 2013, s 3 and Sch 1 item 1, with effect from 30 Jun 2013]

(5) [Prominence of single price] For the purposes of subsection (1), the person is taken not to have specified a single price for the goods or services in a prominent way unless the single price is at least as prominent as the most prominent of the parts of the consideration for the supply. (6) [Section 48(5) does not apply to certain services] Subsection (5) does not apply in relation to services to be supplied under a contract if: (a) the contract provides for the supply of the services for the term of the contract; and (b) the contract provides for periodic payments for the services to be made during the term of the contract; and (c) if the contract also provides for the supply of goods—the goods are directly related to the supply of the services. (7) [Definition: single price] The single price is the minimum quantifiable consideration for the supply of the goods or services at the time of the representation, including each of the following amounts (if any) that is quantifiable at that time:

s 50 Extracts from the Australian Consumer Law (Cth)

(a)

a charge of any description payable to the person making the representation by another person (other than a charge that is payable at the option of the other person); (b) the amount which reflects any tax, duty, fee, levy or charge imposed on the person making the representation in relation to the supply; (c) any amount paid or payable by the person making the representation in relation to the supply with respect to any tax, duty, fee, levy or charge if: (i) the amount is paid or payable under an agreement or arrangement made under a law of the Commonwealth, a State or a Territory; and (ii) the tax, duty, fee, levy or charge would have otherwise been payable by another person in relation to the supply. Example 1: A person advertises lounge suites for sale. Persons have the option of paying for fabric protection. The fabric protection charge does not form part of the single price because of the exception in paragraph (a). Example 2: The GST may be an example of an amount covered by paragraph (b). Example 3: The passenger movement charge imposed under the Passenger Movement Charge Act 1978 may be an example of an amount covered by paragraph (c). Under an arrangement under section 10 of the Passenger Movement Charge Collection Act 1978, airlines may pay an amount equal to the charge that would otherwise be payable by passengers departing Australia. [S 48 am Act 104 of 2013; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 53C Trade Practices Act 1974 (at 13 April 2010, pre-reform). Competition and Consumer Regulations 2010: reg 80A prescribes a class of representations and conditions in relation to a representation in the class for s 48(4A)(a) and (b).]

Division 5 Other unfair practices 49 Referral selling A person must not, in trade or commerce, induce a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for: (a) giving the person the names of prospective customers; or (b) otherwise assisting the person to supply goods or services to other consumers; if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made. Note: A pecuniary penalty may be imposed for a contravention of this section. [S 49 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 57 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

50 Harassment and coercion (1) [Undue harassment or coercion prohibited] A person must not use physical force, or undue harassment or coercion, in connection with: (a) the supply or possible supply of goods or services; or (b) the payment for goods or services; or (c) the sale or grant, or the possible sale or grant, of an interest in land; or (d) the payment for an interest in land. Note: A pecuniary penalty may be imposed for a contravention of this subsection.

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(2) [Section 50(1)(c) and (d) does not affect application of Pts 2–1 or 3–1] Subsections (1)(c) and (d) do not affect the application of any other provision of Part 2-1 or this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land. [S 50 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: ss 53A and 60 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Part 3–2 Consumer transactions Division 1 Consumer guarantees Subdivision A Guarantees relating to the supply of goods 51 Guarantee as to title (1) [Supplier’s right to sell goods] If a person (the supplier) supplies goods to a consumer, there is a guarantee that the supplier will have a right to dispose of the property in the goods when that property is to pass to the consumer. (2) [Guarantee does not apply to supply of limited title] Subsection (1) does not apply to a supply (a supply of limited title) if an intention that the supplier of the goods should transfer only such title as the supplier, or another person, may have: (a) appears from the contract for the supply; or (b) is to be inferred from the circumstances of that contract. (3) [Guarantee does not apply to hire or lease of goods] This section does not apply if the supply is a supply by way of hire or lease. [S 51 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 69 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

52 Guarantee as to undisturbed possession (1) [Consumer’s right to undisturbed possession of goods] If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is not a supply of limited title; there is a guarantee that the consumer has the right to undisturbed possession of the goods. (2) [Guarantee does not apply where pre-existing security, charge or encumberance] Subsection (1) does not apply to the extent that the consumer’s undisturbed possession of the goods may be lawfully disturbed by a person who is entitled to the benefit of any security, charge or encumbrance disclosed to the consumer before the consumer agreed to the supply. (3) [Guarantee restricted if supply is of limited title] If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is a supply of limited title; there is a guarantee that the following persons will not disturb the consumer’s possession of the goods: (c) the supplier; (d) if the parties to the contract for the supply intend that the supplier should transfer only such title as another person may have—that other person;

s 54 Extracts from the Australian Consumer Law (Cth)

(e)

anyone claiming through or under the supplier or that other person (otherwise than under a security, charge or encumbrance disclosed to the consumer before the consumer agreed to the supply). (4) [Guarantee restricted if hire or lease of goods] This section applies to a supply by way of hire or lease only for the period of the hire or lease. [S 52 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 69 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

53 Guarantee as to undisclosed securities etc (1) [Goods free from security, charge or encumbrance] If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is not a supply of limited title; there is a guarantee that: (c) the goods are free from any security, charge or encumbrance: (i) that was not disclosed to the consumer, in writing, before the consumer agreed to the supply; or (ii) that was not created by or with the express consent of the consumer; and (d) the goods will remain free from such a security, charge or encumbrance until the time when the property in the goods passes to the consumer. (2) [Floating charge over supplier’s assets] A supplier does not fail to comply with the guarantee only because of the existence of a floating charge over the supplier’s assets unless and until the charge becomes fixed and enforceable by the person to whom the charge is given. Note: Section 339 of the Personal Property Securities Act 2009 affects the meaning of the references in this subsection to a floating charge and a fixed charge.

(3) [Guarantee does not apply to supply of limited title] If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is a supply of limited title; there is a guarantee that all securities, charges or encumbrances known to the supplier, and not known to the consumer, were disclosed to the consumer before the consumer agreed to the supply. (4) [Guarantee does not apply to hire or lease of goods] This section does not apply if the supply is a supply by way of hire or lease. [S 53 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 69 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

54 Guarantee as to acceptable quality (1) [Guarantee that goods are of acceptable quality] If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) [Definition: acceptable quality] Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and

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(e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) [Relevant matters] The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. (4) [Drawing problems with goods to consumer’s attention] If: (a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer’s attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality. (5) [Displaying notice with goods] If: (a) goods are displayed for sale or hire; and (b) the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to a consumer’s attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent. (6) [Abnormal consumer use of goods] Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use. (7) [Examination of goods] Goods do not fail to be of acceptable quality if: (a) the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and (b) the examination ought reasonably to have revealed that the goods were not of acceptable quality. [S 54 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: ss 66, 71, 72, 74B, 74D and 74E Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

55 Guarantee as to fitness for any disclosed purpose etc (1) [Goods reasonably fit for disclosed purpose] If: (a) a person (the supplier) supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit. (2) [Definition: disclosed purpose] A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that: (a) the consumer makes known, expressly or by implication, to: (i) the supplier; or

s 58 Extracts from the Australian Consumer Law (Cth)

(ii)

a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; or (b) the consumer makes known to the manufacturer of the goods either directly or through the supplier or the person referred to in paragraph (a)(ii). (3) [Exception to guarantee of fitness for a disclosed purpose] This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the manufacturer, as the case may be. [S 55 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: ss 66 and 71 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

56 Guarantee relating to the supply of goods by description (1) [Goods match their description] If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods correspond with the description. (2) [Guarantee applies despite prior inspection of goods] A supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer. (3) [Application of ss 56 and 57 guarantees] If goods are supplied by description as well as by reference to a sample or demonstration model, the guarantees in this section and in section 57 both apply. [S 56 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 70 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

57 Guarantees relating to the supply of goods by sample or demonstration model (1) [Goods match sample or demonstration model] If: (a) a person supplies, in trade or commerce, goods to a consumer by reference to a sample or demonstration model; and (b) the supply does not occur by way of sale by auction; there is a guarantee that: (c) the goods correspond with the sample or demonstration model in quality, state or condition; and (d) if the goods are supplied by reference to a sample—the consumer will have a reasonable opportunity to compare the goods with the sample; and (e) the goods are free from any defect that: (i) would not be apparent on reasonable examination of the sample or demonstration model; and (ii) would cause the goods not to be of acceptable quality. (2) [Application of ss 56 and 57 guarantees] If goods are supplied by reference to a sample or demonstration model as well as by description, the guarantees in section 56 and in this section both apply. [S 57 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 72 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

58 Guarantee as to repairs and spare parts (1) [Spare parts and repair facilities available for reasonable period] If:

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(a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the manufacturer of the goods will take reasonable action to ensure that facilities for the repair of the goods, and parts for the goods, are reasonably available for a reasonable period after the goods are supplied. (2) [Exemption] This section does not apply if the manufacturer took reasonable action to ensure that the consumer would be given written notice, at or before the time when the consumer agrees to the supply of the goods, that: (a) facilities for the repair of the goods would not be available or would not be available after a specified period; or (b) parts for the goods would not be available or would not be available after a specified period. [S 58 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 74F Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

59 Guarantee as to express warranties (1) [Express warranty: manufacturer] If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the manufacturer of the goods will comply with any express warranty given or made by the manufacturer in relation to the goods. (2) [Express warranty: supplier] If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the supplier will comply with any express warranty given or made by the supplier in relation to the goods. [S 59 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 74G Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Subdivision B Guarantees relating to the supply of services 60 Guarantee as to due care and skill If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. [S 60 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 74 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

61 Guarantees as to fitness for a particular purpose etc (1) [Services reasonably fit for particular purpose] If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer; there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose. (2) [Guarantee that services will achieve desired result] If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to:

s 64 Extracts from the Australian Consumer Law (Cth)

(i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result. (3) [Exception to guarantee of fitness for a particular purpose] This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier. (4) [Exemption: supply by architect or engineer] This section does not apply to a supply of services of a professional nature by a qualified architect or engineer. [S 61 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 74 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

62 Guarantee as to reasonable time for supply If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the time within which the services are to be supplied: (i) is not fixed by the contract for the supply of the services; or (ii) is not to be determined in a manner agreed to by the consumer and supplier; there is a guarantee that the services will be supplied within a reasonable time. [S 62 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

63 Services to which this Subdivision does not apply This Subdivision does not apply to services that are, or are to be, supplied under: (a) a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored; or (b) a contract of insurance. [S 63 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

Subdivision C Guarantees not to be excluded etc by contract 64 Guarantees not to be excluded etc by contract (1) [Terms excluding guarantees are void] A term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) is void to the extent that the term purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying: (a) the application of all or any of the provisions of this Division; or (b) the exercise of a right conferred by such a provision; or (c) any liability of a person for a failure to comply with a guarantee that applies under this Division to a supply of goods or services.

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(2) [Terms inconsistent with guarantees] A term of a contract is not taken, for the purposes of this section, to exclude, restrict or modify the application of a provision of this Division unless the term does so expressly or is inconsistent with the provision. [S 64 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 68 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

64A Limitation of liability for failures to comply with guarantees (1) [Liability limited to replacement of goods, etc] A term of a contract for the supply by a person of goods other than goods of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person’s liability for failure to comply with a guarantee (other than a guarantee under section 51, 52 or 53) to one or more of the following: (a) the replacement of the goods or the supply of equivalent goods; (b) the repair of the goods; (c) the payment of the cost of replacing the goods or of acquiring equivalent goods; (d) the payment of the cost of having the goods repaired. (2) [Liability limited to cost of re-supply of services] A term of a contract for the supply by a person of services other than services of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person’s liability for failure to comply with a guarantee to: (a) the supplying of the services again; or (b) the payment of the cost of having the services supplied again. (3) [Fair or reasonable test] This section does not apply in relation to a term of a contract if the person to whom the goods or services were supplied establishes that it is not fair or reasonable for the person who supplied the goods or services to rely on that term of the contract. (4) [Relevant matters] In determining for the purposes of subsection (3) whether or not reliance on a term of a contract is fair or reasonable, a court is to have regard to all the circumstances of the case, and in particular to the following matters: (a) the strength of the bargaining positions of the person who supplied the goods or services and the person to whom the goods or services were supplied (the buyer) relative to each other, taking into account, among other things, the availability of equivalent goods or services and suitable alternative sources of supply; (b) whether the buyer received an inducement to agree to the term or, in agreeing to the term, had an opportunity of acquiring the goods or services or equivalent goods or services from any source of supply under a contract that did not include that term; (c) whether the buyer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); (d) in the case of the supply of goods, whether the goods were manufactured, processed or adapted to the special order of the buyer. [S 64A insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 68A Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 140 Extracts from the Australian Consumer Law (Cth)

Part 3–5 Liability of manufacturers for goods with safety defects Division 1 Actions against manufacturers for goods with safety defects 138 Liability for loss or damage suffered by an injured individual (1) [Manufacturer’s liability for injuring individual] A manufacturer of goods is liable to compensate an individual if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) the individual suffers injuries because of the safety defect. (2) [Recovery action] The individual may recover, by action against the manufacturer, the amount of the loss or damage suffered by the individual. (3) [State/Territory law on liability in respect of death] If the individual dies because of the injuries, a law of a State or a Territory about liability in respect of the death of individuals applies as if: (a) the action were an action under the law of the State or Territory for damages in respect of the injuries; and (b) the safety defect were the manufacturer’s wrongful act, neglect or default. [S 138 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AD Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

139 Liability for loss or damage suffered by a person other than an injured individual (1) [Manufacturer’s liability for injuring another individual] A manufacturer of goods is liable to compensate a person if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) an individual (other than the person) suffers injuries because of the safety defect; and (d) the person suffers loss or damage because of: (i) the injuries; or (ii) if the individual dies because of the injuries—the individual’s death; and (e) the loss or damage does not come about because of a business or professional relationship between the person and the individual. (2) [Recovery action] The person may recover, by action against the manufacturer, the amount of the loss or damage suffered by the person. [S 139 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AE Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

140 Liability for loss or damage suffered by a person if other goods are destroyed or damaged (1) [Manufacturer’s liability for damaging other goods] A manufacturer of goods is liable to compensate a person if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) other goods of a kind ordinarily acquired for personal, domestic or household use or consumption are destroyed or damaged because of the safety defect; and

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(d) the person used or consumed, or intended to use or consume, the destroyed or damaged goods for personal, domestic or household use or consumption; and (e) the person suffers loss or damage as a result of the destruction or damage. (2) [Recovery action] The person may recover, by action against the manufacturer, the amount of the loss or damage suffered by the person. [S 140 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AF Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

141 Liability for loss or damage suffered by a person if land, buildings or fixtures are destroyed or damaged (1) [Manufacturer’s liability for damaging land, buildings or fixtures] A manufacturer of goods is liable to compensate a person if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) land, buildings or fixtures are destroyed or damaged because of the safety defect; and (d) the land, buildings or fixtures are ordinarily acquired for private use; and (e) the person used, or intended to use, the land, buildings or fixtures for private use; and (f) the person suffers loss or damage as a result of the destruction or damage. (2) [Recovery action] The person may recover, by action against the manufacturer, the amount of the loss or damage suffered by the person. [S 141 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AG Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 145 Extracts from the Australian Consumer Law (Cth)

142 Defences to defective goods actions In a defective goods action, it is a defence if it is established that: (a) the safety defect in the goods that is alleged to have caused the loss or damage did not exist: (i) in the case of electricity—at the time at which the electricity was generated, being a time before it was transmitted or distributed; or (ii) in any other case—at the time when the goods were supplied by their actual manufacturer; or (b) the goods had that safety defect only because there was compliance with a mandatory standard for them; or (c) the state of scientific or technical knowledge at the time when the goods were supplied by their manufacturer was not such as to enable that safety defect to be discovered; or (d) if the goods that had that safety defect were comprised in other goods—that safety defect is attributable only to: (i) the design of the other goods; or (ii) the markings on or accompanying the other goods; or (iii) the instructions or warnings given by the manufacturer of the other goods. [S 142 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AK Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Division 2 Defective goods actions 143 Time for commencing defective goods actions (1) [3 years to commence action] Subject to subsection (2), a person may commence a defective goods action at any time within 3 years after the time the person became aware, or ought reasonably to have become aware, of all of the following: (a) the alleged loss or damage; (b) the safety defect of the goods; (c) the identity of the person who manufactured the goods. (2) [10 years to commence action] A defective goods action must be commenced within 10 years of the supply by the manufacturer of the goods to which the action relates. [S 143 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AO Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

144 Liability joint and several If 2 or more persons are liable under Division 1 for the same loss or damage, they are jointly and severally liable. [S 144 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AM Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

145 Survival of actions A law of a State or a Territory about the survival of causes of action vested in persons who die applies to actions under Division 1. [S 145 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AH Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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146 No defective goods action where workers’ compensation law etc applies Division 1 does not apply to a loss or damage in respect of which an amount has been, or could be, recovered under a law of the Commonwealth, a State or a Territory that: (a) relates to workers’ compensation; or (b) gives effect to an international agreement. [S 146 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AI Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

147 Unidentified manufacturer (1) [Supplier to provide manufacturer details] A person who: (a) wishes to institute a defective goods action; but (b) does not know who is the manufacturer of the goods to which the action would relate; may, by written notice given to a supplier, or each supplier, of the goods who is known to the person, request the supplier or suppliers to give the person particulars identifying the manufacturer of the goods, or the supplier of the goods to the supplier requested. (2) [Supplier deemed to be manufacturer] If, 30 days after the person made the request or requests, the person still does not know who is the manufacturer of the goods, then each supplier: (a) to whom the request was made; and (b) who did not comply with the request; is taken, for the purposes of the defective goods liability action (but not for the purposes of section 142(c)), to be the manufacturer of the goods. [S 147 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AJ Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

148 Commonwealth liability for goods that are defective only because of compliance with Commonwealth mandatory standard (1) [Notification of mandatory standard defence] If a person (however described) against whom a defective goods action is brought raises the defence that the goods had the alleged safety defect only because there was compliance with a Commonwealth mandatory standard for the goods, the person must, as soon as practicable after raising that defence, give the Commonwealth: (a) a prescribed notice of the action and of that defence; and (b) a copy of the person’s defence in the action. (2) [Commonwealth a defendant] The giving of the notice and defence makes the Commonwealth a defendant in the action. (3) [Commonwealth liable to pay plaintiff] If, in the action, the court finds that the person (the plaintiff) by whom the action is brought would, but for the defence referred to in subsection (1), have succeeded against the person (other than the Commonwealth) against which the action is brought, then: (a) the Commonwealth, and not the person (other than the Commonwealth) against which the action is brought, is liable to pay the plaintiff for the amount of the loss or damage caused by the safety defect; and (b) the court is to enter judgment against the Commonwealth for that amount; and (c) the court may make such orders for costs as the court considers just. [S 148 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AL Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

s 149 Extracts from the Australian Consumer Law (Cth)

149 Representative actions by the regulator (1) [Regulator application to commence action] The regulator may, by application, commence a defective goods action on behalf of one or more persons identified in the application who have suffered the loss or damage in relation to which the action is commenced. (2) [Written consent] The regulator may only make the application if it has obtained the written consent of the person, or each of the persons, on whose behalf the application is being made. [S 149 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AQ Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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Chapter 4 Offences Part 4–1 Offences relating to unfair practices Division 1 False or misleading representations etc 151 False or misleading representations about goods or services (1) [False or misleading representations prohibited] A person commits an offence if the person, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: (a) makes a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or (b) makes a false or misleading representation that services are of a particular standard, quality, value or grade; or (c) makes a false or misleading representation that goods are new; or (d) makes a false or misleading representation that a particular person has agreed to acquire goods or services; or (e) makes a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or (f) makes a false or misleading representation concerning: (i) a testimonial by any person; or (ii) a representation that purports to be such a testimonial; relating to goods or services; or (g) makes a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or (h) makes a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (i) makes a false or misleading representation with respect to the price of goods or services; or (j) makes a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods; or (k) makes a false or misleading representation concerning the place of origin of goods; or (l) makes a false or misleading representation concerning the need for any goods or services; or (m) makes a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); or (n) makes a false or misleading representation concerning a requirement to pay for a contractual right that: (i) is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); and (ii) a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).

s 152 Extracts from the Australian Consumer Law (Cth)

Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. Note: For rules relating to representations as to the country of origin of goods, see Part 5-3.

(2) [Accused must adduce evidence that representation is not misleading] For the purposes of applying subsection (1) in relation to a proceeding concerning a representation of a kind referred to in subsection (1)(e) or (f), the representation is taken to be misleading unless evidence is adduced to the contrary. (3) [Effect of s 151(2)] To avoid doubt, subsection (2) does not: (a)

have the effect that, merely because such evidence to the contrary is adduced, the representation is not misleading; or (b) have the effect of placing on any person an onus of proving that the representation is not misleading. (4) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 151 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZC Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

152 False or misleading representations about sale etc of land (1) [False or misleading representations in connection with sale or grant of land prohibited] A person commits an offence if the person, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land: (a) makes a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (b) makes a false or misleading representation concerning the nature of the interest in the land; or (c) makes a false or misleading representation concerning the price payable for the land; or (d) makes a false or misleading representation concerning the location of the land; or (e) makes a false or misleading representation concerning the characteristics of the land; or (f) makes a false or misleading representation concerning the use to which the land is capable of being put or may lawfully be put; or (g) makes a false or misleading representation concerning the existence or availability of facilities associated with the land. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. (3) [Section 30 does not affect application of Pt 4–1] This section does not affect the application of any other provision of this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land. [S 152 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZD Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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153 Misleading conduct relating to employment (1) [Misleading conduct in relation to employment prohibited] A person commits an offence if the person, in relation to employment that is to be, or may be, offered by the person or by another person, engages in conduct that is liable to mislead persons seeking the employment as to: (a) the availability, nature, terms or conditions of the employment; or (b) any other matter relating to the employment. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 153 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZE Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

154 Offering rebates, gifts, prizes etc (1) [Offer of gifts, etc prohibited where no intention to provide as offered] A person commits an offence if: (a) the person, in trade or commerce, offers any rebate, gift, prize or other free item; and (b) the offer is connected with: (i) the supply or possible supply of goods or services; or (ii) the promotion by any means of the supply or use of goods or services; or (iii) the sale or grant, or the possible sale or grant, of an interest in land; or (iv) the promotion by any means of the sale or grant of an interest in land; and (c) the offer is made with the intention of not providing the rebate, gift, prize or other free item, or of not providing it as offered. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Requirement to supply within specified or reasonable time] A person commits an offence if: (a) the person, in trade or commerce, offers any rebate, gift, prize or other free item; and (b) the offer is connected with: (i) the supply or possible supply of goods or services; or (ii) the promotion by any means of the supply or use of goods or services; or (iii) the sale or grant, or the possible sale or grant, of an interest in land; or (iv) the promotion by any means of the sale or grant of an interest in land; and (c) the person fails to provide the rebate, gift, prize or other free item, in accordance with the offer, within the time specified in the offer or (if no such time is specified) within a reasonable time after making the offer. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (3) [Failure to provide gifts, etc beyond person’s control] Subsection (2) does not apply if:

s 157 Extracts from the Australian Consumer Law (Cth)

(a)

the person’s failure to provide the rebate, gift, prize or other free item in accordance with the offer was due to the act or omission of another person, or to some other cause beyond the person’s control; and (b) the person took reasonable precautions and exercised due diligence to avoid the failure. (4) [Exemption: replacement gifts, etc] Subsection (2) does not apply to an offer that the person makes to another person if: (a) the person offers to the other person a different rebate, gift, prize or other free item as a replacement; and (b) the other person agrees to receive the different rebate, gift, prize or other free item. (5) [Strict liability offences] Strict liability applies to subsections (1)(b) and (2)(b). (6) [Section 154 does not affect application of Pt 4–1] This section does not affect the application of any other provision of this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land. [S 154 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZG Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

155 Misleading conduct as to the nature etc of goods (1) [Misleading conduct in relation to goods prohibited] A person commits an offence if the person, in trade or commerce, engages in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 155 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZH Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

156 Misleading conduct as to the nature etc of services (1) [Misleading conduct in relation to services prohibited] A person commits an offence if the person, in trade or commerce, engages in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 156 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZI Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

157 Bait advertising (1) [Bait advertising prohibited] A person commits an offence if: (a) the person, in trade or commerce, advertises goods or services for supply at a specified price; and (b) there are reasonable grounds for believing that the person will not be able to offer for supply those goods or services at that price for a period that is, and in quantities that are, reasonable, having regard to:

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(i) the nature of the market in which the person carries on business; and (ii) the nature of the advertisement. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Supply at specified price for reasonable period] A person commits an offence if: (a) the person, in trade or commerce, advertises goods or services for supply at a specified price; and (b) the person fails to offer such goods or services for supply at that price for a period that is, and in quantities that are, reasonable having regard to: (i) the nature of the market in which the person carries on business; and (ii) the nature of the advertisement. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. (4) [Defences] In a prosecution of a person (the defendant) under subsection (2), for failing to offer goods or services to another person (the customer), it is a defence if: (a) the defendant proves that: (i) he or she offered to supply, or to procure a third person to supply, goods or services of the kind advertised to the customer within a reasonable time, in a reasonable quantity and at the advertised price; or (ii) he or she offered to supply immediately, or to procure a third person to supply within a reasonable time, equivalent goods or services to the customer in a reasonable quantity and at the price at which the first-mentioned goods or services were advertised; and (b) in either case, if the offer was accepted by the customer, the defendant proves that he or she has so supplied, or procured a third person to supply, the goods or services. [S 157 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZJ Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

158 Wrongly accepting payment (1) [Intention not to supply goods or services] A person commits an offence if: (a) the person, in trade or commerce, accepts payment or other consideration for goods or services; and (b) at the time of the acceptance, the person intends not to supply the goods or services. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Strict liability applies to subsection (1)(a). (3) [Intention to supply materially different goods or services] A person commits an offence if: (a)

the person, in trade or commerce, accepts payment or other consideration for goods or services; and

s 158 Extracts from the Australian Consumer Law (Cth)

(b) at the time of the acceptance, the person intends to supply goods or services materially different from the goods or services in respect of which the payment or other consideration is accepted. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (4) [Strict liability offence] Strict liability applies to subsection (3)(a). (5) [Reckless acceptance of payment prohibited] A person commits an offence if: (a) the person, in trade or commerce, accepts payment or other consideration for goods or services; and (b) at the time of the acceptance, the person was reckless as to whether he or she would be able to supply the goods or services: (i) within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or (ii) if no period is specified at or before that time—within a reasonable time. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (6) [Strict liability offence] Strict liability applies to subsection (5)(a). (7) [Requirement to supply within specified or reasonable time] A person commits an offence if: (a)

the person, in trade or commerce, accepts payment or other consideration for goods or services; and (b) the person fails to supply all the goods or services: (i) within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or (ii) if no period is specified at or before that time—within a reasonable time. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (8) [Failure to supply goods or services beyond person’s control] Subsection (7) does not apply if: (a)

the person’s failure to supply all the goods or services within the period, or within a reasonable time, was due to the act or omission of another person, or to some other cause beyond the person’s control; and (b) the person took reasonable precautions and exercised due diligence to avoid the failure. (9) [Exemption: replacement goods or services] Subsection (7) does not apply if: (a) the person offers to supply different goods or services as a replacement to the person (the customer) to whom the original supply was to be made; and (b) the customer agrees to receive the different goods or services. (10) [Strict liability offence] Subsection (7) is an offence of strict liability.

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(11) [Application of s 158(1), (3), (5) and (7)] Subsections (1), (3), (5) and (7) apply whether or not the payment or other consideration that the person accepted represents the whole or a part of the payment or other consideration for the supply of the goods or services. [S 158 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZL Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

159 Misleading representations about certain business activities (1) [False and misleading representations about business activities prohibited] A person commits an offence if: (a) the person, in trade or commerce, makes a representation; and (b) the representation is false or misleading in a material particular; and (c) the representation concerns the profitability, risk or any other material aspect of any business activity that the person has represented as one that can be, or can be to a considerable extent, carried on at or from a person’s place of residence. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Invitations to work or invest in business activities] A person commits an offence if: (a) the person, in trade or commerce, makes a representation; and (b) the representation is false or misleading in a material particular; and (c) the representation concerns the profitability, risk or any other material aspect of any business activity: (i) that the person invites (whether by advertisement or otherwise) other persons to engage or participate in, or to offer or apply to engage or participate in; and (ii) that requires the performance of work by other persons, or the investment of money by other persons and the performance by them of work associated with the investment. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. [S 159 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZM Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Division 4 Pricing 165 Multiple pricing (1) [Selling for higher displayed price prohibited] A person commits an offence if: (a) the person, in trade or commerce, supplies goods; and (b) the goods have more than one displayed price; and (c) the supply takes place for a price that is not the lower, or lowest, of the displayed prices. Penalty: (a) if the person is a body corporate—$5,000; or (b) if the person is not a body corporate—$1,000.

s 168 Extracts from the Australian Consumer Law (Cth)

(2) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 165 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

Division 5 Other unfair practices 167 Referral selling (1) [Inducing consumers with promise of rebate etc prohibited] A person commits an offence if: (a) the person, in trade or commerce, induces a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for: (i) giving the person the names of prospective customers; or (ii) otherwise assisting the person to supply goods or services to other consumers; and (b) the receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 167 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZK Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

168 Harassment and coercion (1) [Undue harassment or coercion prohibited] A person commits an offence if: (a) the person uses physical force, or undue harassment or coercion; and (b) the physical force, or undue harassment or coercion is used in connection with: (i) the supply or possible supply of goods or services; or (ii) the payment for goods or services; or (iii) the sale or grant, or the possible sale or grant, of an interest in land; or (iv) the payment for an interest in land. Penalty: (a) if the person is a body corporate—$1,100,000; or (b) if the person is not a body corporate—$220,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. (3) [Section 168(1)(b)(iii) and (iv) does not affect application of Pt 4–1] Subsections (1)(b)(iii) and (iv) do not affect the application of any other provision of this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land. [S 168 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 75AZN Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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Part 4–2 Offences relating to consumer transactions Division 1 Consumer guarantees 169 Display notices (1) [Failure to display notice] A person commits an offence if: (a) the person makes a supply to a consumer to which: (i) guarantees apply under Division 1 of Part 3-2; and (ii) a determination under subsection 66(1) applies; and (b) a notice that meets the requirements of the determination is not, in accordance with the determination: (i) if the consumer takes delivery of the goods or services at the supplier’s premises—displayed at those premises; or (ii) otherwise—drawn to the consumer’s attention before the consumer agrees to the supply of the goods. Penalty: (a) if the person is a body corporate—$50,000; or (b) if the person is not a body corporate—$10,000. (2) [Strict liability offence] Subsection (1) is an offence of strict liability. [S 169 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

s 224 Extracts from the Australian Consumer Law (Cth)

Chapter 5 Enforcement and remedies Part 5–2 Remedies Division 1 Pecuniary penalties 224 Pecuniary penalties (1) [Appropriate penalty] If a court is satisfied that a person: (a) has contravened any of the following provisions: (i) a provision of Part 2-2 (which is about unconscionable conduct); (ii) a provision of Part 3-1 (which is about unfair practices); (iii) section 66(2) (which is about display notices); (iv) a provision (other than section 85) of Division 2 of Part 3-2 (which is about unsolicited consumer agreements); (v) a provision (other than section 96(2)) of Division 3 of Part 3-2 (which is about lay-by agreements); (vi) section 100(1) or (3) or 101(3) or (4) (which are about proof of transactions and itemised bills); (vii) section 102(2) or 103(2) (which are about prescribed requirements for warranties and repairers); (viii) section 106(1), (2), (3) or (5), 107(1) or (2), 118(1), (2), (3) or (5), 119(1) or (2), 125(4), 127(1) or (2), 128(2) or (6), 131(1) or 132(1) (which are about safety of consumer goods and product related services); (ix) section 136(1), (2) or (3) or 137(1) or (2) (which are about information standards); (x) section 221(1) or 222(1) (which are about substantiation notices); or (b) has attempted to contravene such a provision; or (c) has aided, abetted, counselled or procured a person to contravene such a provision; or (d) has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or (e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) has conspired with others to contravene such a provision; the court may order the person to pay to the Commonwealth, State or Territory, as the case may be, such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the court determines to be appropriate. [S 224 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 76E Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

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Division 2 Injunctions 232 Injunctions (1) [Power to grant injunction] A court may grant an injunction, in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of a provision of Chapter 2, 3 or 4; or (b) attempting to contravene such a provision; or (c) aiding, abetting, counselling or procuring a person to contravene such a provision; or (d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) conspiring with others to contravene such a provision. (2) [Application for injunction] The court may grant the injunction on application by the regulator or any other person. (3) [Injunction for reliance on unfair contract term] Subsection (1) applies in relation to conduct constituted by applying or relying on, or purporting to apply or rely on, a term of a contract that has been declared under section 250 to be an unfair term as if the conduct were a contravention of a provision of Chapter 2. (4) [Power to grant restraining injunction] The power of the court to grant an injunction under subsection (1) restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and (b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind. (5) [Restraint from carrying on business] Without limiting subsection (1), the court may grant an injunction under that subsection restraining a person from carrying on a business or supplying goods or services (whether or not as part of, or incidental to, the carrying on of another business): (a) for a specified period; or (b) except on specified terms and conditions. (6) [Types of performance injunctions] Without limiting subsection (1), the court may grant an injunction under that subsection requiring a person to do any of the following: (a) refund money; (b) transfer property; (c) honour a promise; (d) destroy or dispose of goods. (7) [Power to grant performing injunction] The power of the court to grant an injunction under subsection (1) requiring a person to do an act or thing may be exercised: (a) whether or not it appears to the court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; and

s 259 Extracts from the Australian Consumer Law (Cth)

(b)

whether or not the person has previously refused or failed to do that act or thing; and (c) whether or not there is an imminent danger of substantial damage to any other person if the person refuses or fails to do that act or thing.

[S 232 am Act 147 of 2015, s 3 and Sch 1 item 41, with effect from 12 Nov 2016; insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

Division 3 Damages 236 Actions for damages (1) [Recovery of loss or damage] If: (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) [6 years to commence action] An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. [S 236 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011. Cross-reference: s 82 Trade Practices Act 1974 (at 13 April 2010, pre-reform).]

Part 5–4 Remedies relating to guarantees Division 1 Action against suppliers Subdivision A Action against suppliers of goods 259 Action against suppliers of goods (1) [Failure to comply with supply guarantee] A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and (b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with. (2) [Failure is not major] If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time—the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or

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(ii)

subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection.

(3) [Failure is major] If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or (b) by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods. (4) [Reasonable foreseeability test] The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. (5) [Exemption: cause independent of human control] Subsection (4) does not apply if the failure to comply with the guarantee occurred only because of a cause independent of human control that occurred after the goods left the control of the supplier. (6) [Application of s 259(4)] To avoid doubt, subsection (4) applies in addition to subsections (2) and (3). (7) [Goods need not be in original packaging] The consumer may take action under this section whether or not the goods are in their original packaging. [S 259 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

260 When a failure to comply with a guarantee is a major failure A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods is a major failure if: (a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) the goods depart in one or more significant respects: (i) if they were supplied by description—from that description; or (ii) if they were supplied by reference to a sample or demonstration model—from that sample or demonstration model; or (c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (d) the goods are unfit for a disclosed purpose that was made known to: (i) the supplier of the goods; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (e) the goods are not of acceptable quality because they are unsafe. [S 260 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

261 How suppliers may remedy a failure to comply with a guarantee If, under section 259(2)(a), a consumer requires a supplier of goods to remedy a failure to comply with a guarantee referred to in section 259(1)(b), the supplier may comply with the requirement:

s 263 Extracts from the Australian Consumer Law (Cth)

(a) if the failure relates to title—by curing any defect in title; or (b) if the failure does not relate to title—by repairing the goods; or (c) by replacing the goods with goods of an identical type; or (d) by refunding: (i) any money paid by the consumer for the goods; and (ii) an amount that is equal to the value of any other consideration provided by the consumer for the goods. [S 261 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

262 When consumers are not entitled to reject goods (1) [Consumer not entitled to reject lost or destroyed goods, etc] A consumer is not entitled, under section 259, to notify a supplier of goods that the consumer rejects the goods if: (a) the rejection period for the goods has ended; or (b) the goods have been lost, destroyed or disposed of by the consumer; or (c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or (d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them. (2) [Definition: rejection period] The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to: (a) the type of goods; and (b) the use to which a consumer is likely to put them; and (c) the length of time for which it is reasonable for them to be used; and (d) the amount of use to which it is reasonable for them to be put before such a failure becomes apparent. [S 262 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

263 Consequences of rejecting goods (1) [Application] This section applies if, under section 259, a consumer notifies a supplier of goods that the consumer rejects the goods. (2) [Responsibility for returning goods to supplier] The consumer must return the goods to the supplier unless: (a) the goods have already been returned to, or retrieved by, the supplier; or (b) the goods cannot be returned, removed or transported without significant cost to the consumer because of: (i) the nature of the failure to comply with the guarantee to which the rejection relates; or (ii) the size or height, or method of attachment, of the goods. (3) [Supplier bears cost of collecting goods] If subsection (2)(b) applies, the supplier must, within a reasonable time, collect the goods at the supplier’s expense. (4) [Refund or replacement of goods] The supplier must, in accordance with an election made by the consumer: (a) refund: (i) any money paid by the consumer for the goods; and

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(ii)

an amount that is equal to the value of any other consideration provided by the consumer for the goods; or (b) replace the rejected goods with goods of the same type, and of similar value, if such goods are reasonably available to the supplier. (5) [Satisfaction of s 263(4)(a)] The supplier cannot satisfy subsection (4)(a) by permitting the consumer to acquire goods from the supplier. (6) [Revesting of property] If the property in the rejected goods had passed to the consumer before the rejection was notified, the property in those goods revests in the supplier on the notification of the rejection. [S 263 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

264 Replaced goods If the goods are replaced under section 261(c) or 263(4)(b): (a) the replacement goods are taken, for the purposes of Division 1 of Part 3-2 and this Part, to be supplied by the supplier; and (b) the provisions of Division 1 of Part 3-2 and this Part apply in relation to the replacement goods. [S 264 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

265 Termination of contracts for the supply of services that are connected with rejected goods (1) [Termination of contract] If: (a) under section 259, a consumer notifies a supplier of goods that the consumer rejects the goods; and (b) the supplier is required under section 263(4)(a) to give the consumer a refund; and (c) a person supplies, in trade or commerce, services to the consumer that are connected with the rejected goods; the consumer may terminate the contract for the supply of the services. (2) [Timing of termination] The termination takes effect: (a) at the time the termination is made known to the supplier of the services (whether by words or by conduct indicating the consumer’s intention to terminate the contract); or (b) if it is not reasonably practicable to communicate with the supplier of the services—at the time the consumer indicates, by means which are reasonable in the circumstances, his or her intention to terminate the contract. (3) [Entitlement to refund] The consumer is entitled to recover, by action against the supplier of the services, a refund of: (a) any money paid by the consumer for the services; and (b) an amount that is equal to the value of any other consideration provided by the consumer for the services; to the extent that the consumer has not already consumed the services at the time the termination takes effect. [S 265 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

266 Rights of gift recipients If a consumer acquires goods from a supplier and gives them to another person as a gift, the other person may, subject to any defence which would be available to the supplier against the consumer:

s 267 Extracts from the Australian Consumer Law (Cth)

(a)

exercise any rights or remedies under this Subdivision which would be available to the other person if he or she had acquired the goods from the supplier; and (b) any reference in this Subdivision to a consumer includes a reference to the other person accordingly. [S 266 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

Subdivision B Action against suppliers of services 267 Action against suppliers of services (1) [Failure to comply with supply guarantee] A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, services to the consumer; and (b) a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3-2 is not complied with; and (c) unless the guarantee is the guarantee under section 60—the failure to comply with the guarantee did not occur only because of: (i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or (ii) a cause independent of human control that occurred after the services were supplied. (2) [Failure is not major] If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time—the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or (ii) terminate the contract for the supply of the services. (3) [Failure is major] If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) terminate the contract for the supply of the services; or (b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services. (4) [Reasonable foreseeability test] The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. (5) [Application of s 267(4)] To avoid doubt, subsection (4) applies in addition to subsections (2) and (3). [S 267 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

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268 When a failure to comply with a guarantee is a major failure A failure to comply with a guarantee referred to in section 267(1)(b) that applies to a supply of services is a major failure if: (a) the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) the services are substantially unfit for a purpose for which services of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (c) both of the following apply: (i) the services, and any product resulting from the services, are unfit for a particular purpose for which the services were acquired by the consumer that was made known to the supplier of the services; (ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (d) both of the following apply: (i) the services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier; (ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or (e) the supply of the services creates an unsafe situation. [S 268 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

269 Termination of contracts for the supply of services (1) [Termination of contract] This section applies if, under section 267, a consumer terminates a contract for the supply of services. (2) [Timing of termination] The termination takes effect: (a) at the time the termination is made known to the supplier of the services (whether by words or by conduct indicating the consumer’s intention to terminate the contract); or (b) if it is not reasonably practicable to communicate with the supplier of the services—at the time the consumer indicates, by means which are reasonable in the circumstances, his or her intention to terminate the contract. (3) [Entitlement to refund] The consumer is entitled to recover, by action against the supplier of the services, a refund of: (a) any money paid by the consumer for the services; and (b) an amount that is equal to the value of any other consideration provided by the consumer for the services; to the extent that the consumer has not already consumed the services at the time the termination takes effect. [S 269 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

270 Termination of contracts for the supply of goods that are connected with terminated services (1) [Refund of money or consideration paid for services] If: (a) under section 267, a consumer terminates a contract for the supply of services; and

s 271 Extracts from the Australian Consumer Law (Cth)

(b) a person (the supplier) has supplied, in trade or commerce, goods to the consumer that are connected with the services; then: (c)

the consumer is taken to have rejected the goods at the time the termination of the contract takes effect; and (d) the consumer must return the goods to the supplier of the goods unless: (i) the goods have already been returned to, or retrieved by, the supplier; or (ii) the goods cannot be returned, removed or transported without significant cost to the consumer because of the nature of the failure to comply with the guarantee to which the rejection relates, or because of the size or height, or method of attachment, of the goods; and (e) the supplier must refund: (i) any money paid by the consumer for the goods; and (ii) an amount that is equal to the value of any other consideration provided by the consumer for the goods. (2) [Supplier bears cost of collecting goods] If subsection (1)(d)(ii) applies, the supplier must collect the goods at the supplier’s expense. [S 270 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

Division 2 Action for damages against manufacturers of goods 271 Action for damages against manufacturers of goods (1) [Non-compliance with acceptable quality guarantee] If: (a) the guarantee under section 54 applies to a supply of goods to a consumer; and (b) the guarantee is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. (2) [Exemptions: cause independent of human control, etc] Subsection (1) does not apply if the guarantee under section 54 is not complied with only because of: (a) an act, default or omission of, or any representation made by, any person other than the manufacturer or an employee or agent of the manufacturer; or (b) a cause independent of human control that occurred after the goods left the control of the manufacturer; or (c) the fact that the price charged by the supplier was higher than the manufacturer’s recommended retail price, or the average retail price, for the goods. (3) [Non-compliance with description guarantee] If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the description was applied to the goods by or on behalf of the manufacturer of the goods, or with express or implied consent of the manufacturer; and (c) the guarantee under section 56 applies to the supply and it is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. (4) [Exemptions: cause independent of human control, etc] Subsection (3) does not apply if the guarantee under section 56 is not complied with only because of:

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(a)

an act, default or omission of any person other than the manufacturer or an employee or agent of the manufacturer; or (b) a cause independent of human control that occurred after the goods left the control of the manufacturer. (5) [Non-compliance with spare part guarantees and express warranties] If: (a) the guarantee under section 58 or 59(1) applies to a supply of goods to a consumer; and (b) the guarantee is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. (6) [Manufacturer refusal to provide repair or replacement] If an affected person in relation to goods has, in accordance with an express warranty given or made by the manufacturer of the goods, required the manufacturer to remedy a failure to comply with a guarantee referred to in subsection (1), (3) or (5): (a) by repairing the goods; or (b) by replacing the goods with goods of an identical type; then, despite that subsection, the affected person is not entitled to commence an action under that subsection to recover damages of a kind referred to in section 272(1)(a) unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the failure within a reasonable time. (7) [Goods need not be in original packaging] The affected person in relation to the goods may commence an action under this section whether or not the goods are in their original packaging. [S 271 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

272 Damages that may be recovered by action against manufacturers of goods (1) [Recoverable damages] In an action for damages under this Division, an affected person in relation to goods is entitled to recover damages for: (a) any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following prices is lower: (i) the price paid or payable by the consumer for the goods; (ii) the average retail price of the goods at the time of supply; and (b) any loss or damage suffered by the affected person because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure. (2) [Reasonably foreseeable loss] Without limiting subsection (1)(b), the cost of inspecting and returning the goods to the manufacturer is taken to be a reasonably foreseeable loss suffered by the affected person as a result of the failure to comply with the guarantee. (3) [Application of s 272(1)(b)] Subsection (1)(b) does not apply to loss or damage suffered through a reduction in the value of the goods. [S 272 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

s 273 Extracts from the Australian Consumer Law (Cth)

273 Time limit for actions against manufacturers of goods An affected person may commence an action for damages under this Division at any time within 3 years after the day on which the affected person first became aware, or ought reasonably to have become aware, that the guarantee to which the action relates has not been complied with. [S 273 insrt Act 103 of 2010, s 3 and Sch 1 item 1, with effect from 1 Jan 2011]

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Chapter 2B Basic features of a company Part 2B.1 Company powers and how they are exercised 124 Legal capacity and powers of a company (1) [Company has powers of individual and body corporate] A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate, including the power to: (a) issue and cancel shares in the company; (b) issue debentures (despite any rule of law or equity to the contrary, this power includes a power to issue debentures that are irredeemable, redeemable only if a contingency, however remote, occurs, or redeemable only at the end of a period, however long); (c) grant options over unissued shares in the company; (d) distribute any of the company’s property among the members, in kind or otherwise; (e) grant a security interest in uncalled capital; (f) grant a circulating security interest over the company’s property; (g) arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction; (h) do anything that it is authorised to do by any other law (including a law of a foreign country). A company limited by guarantee does not have the power to issue shares. Note: For a company’s power to issue bonus, partly-paid, preference and redeemable preference shares, see section 254A. [Subs (1) am Act 96 of 2010, s 3 and Sch 1 items 86 and 103, with effect from 30 Jan 2012]

(2) [Capacity not diminished by non-beneficial action] A company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or would not be, served by doing it. (3) [Actions constrained by law] For the avoidance of doubt, this section does not: (a) authorise a company to do an act that is prohibited by a law of a State or Territory; or (b) give a company a right that a law of a State or Territory denies to the company. [S 124 am Act 96 of 2010]

125 Constitution may limit powers and set out objects (1) [Constitution may restrict capacity] If a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company’s constitution. (2) [Capacity not affected by constitutional objectives] If a company has a constitution, it may set out the company’s objects. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s constitution. 126 Agent exercising a company’s power to make contracts (1) [Power to contract] A company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company’s express or implied authority and on behalf of the company. The power may be exercised without using a common seal.

s 128 Extracts from the Corporations Act 2001 (Cth)

(2) [Contracts under law] This section does not affect the operation of a law that requires a particular procedure to be complied with in relation to the contract. 127 Execution of documents (including deeds) by the company itself (1) [Documents executed without seal] A company may execute a document without using a common seal if the document is signed by: (a) 2 directors of the company; or (b) a director and a company secretary of the company; or (c) for a proprietary company that has a sole director who is also the sole company secretary—that director. Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.

(2) [Witnessing the fixing of company seal] A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by: (a) 2 directors of the company; or (b) a director and a company secretary of the company; or (c) for a proprietary company that has a sole director who is also the sole company secretary—that director. Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.

(3) [Document executed as deed] A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2). (4) [Document execution not limited by section] This section does not limit the ways in which a company may execute a document (including a deed). [Cross-reference: ASIC: Form 5100: Application for registration of a managed investment scheme; RG 134: Managed investments: Constitutions.]

Part 2B.2 Assumptions people dealing with companies are entitled to make 128 Entitlement to make assumptions (1) [Assumptions in s 129] A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (2) [Entitlement to make assumptions] A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (3) [Assumptions entitled despite fraud] The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings. (4) [Assumption not valid if known to be incorrect] A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.

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129 Assumptions that can be made under section 128 Constitution and replaceable rules complied with (1) A person may assume that the company’s constitution (if any), and any provisions of this Act that apply to the company as replaceable rules, have been complied with. Director or company secretary (2) A person may assume that anyone who appears, from information provided by the company that is available to the public from ASIC, to be a director or a company secretary of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company. Offıcer or agent (3) A person may assume that anyone who is held out by the company to be an officer or agent of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company. Proper performance of duties (4) A person may assume that the officers and agents of the company properly perform their duties to the company. Document duly executed without seal (5) A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices. Document duly executed with seal (6) A person may assume that a document has been duly executed by the company if: (a) the company’s common seal appears to have been fixed to the document in accordance with subsection 127(2); and (b) the fixing of the common seal appears to have been witnessed in accordance with that subsection. For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices. Offıcer or agent with authority to warrant that document is genuine or true copy (7) A person may assume that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy. (8) [Applicable assumptions] Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section.

s 136 Extracts from the Corporations Act 2001 (Cth)

Part 2B.4 Replaceable rules and constitution 134 Internal management of companies A company’s internal management may be governed by provisions of this Act that apply to the company as replaceable rules, by a constitution or by a combination of both. Note: There are additional rules about internal management in ordinary provisions of this Act and also in the common law.

135 Replaceable rules Companies to which replaceable rules apply (1) A section or subsection (except subsection 129(1), this section and sections 140 and 141) whose heading contains the words: (a) replaceable rule—applies as a replaceable rule to: (i) each company that is or was registered after 1 July 1998; and (ii) any company registered before 1 July 1998 that repeals or repealed its constitution after that day; and (b) replaceable rule for proprietary companies and mandatory rule for public companies—applies: (i) as a replaceable rule to any proprietary company that is or was registered after 1 July 1998; and (ii) as a replaceable rule to any company that is or eas registered after 1 July 1998 and that changes or changed to a proprietary company (but only while it is a proprietary company); and (iii) as a replaceable rule to any proprietary company that is or was registered before 1 July 1998 that repeals or repealed its constitution after that day; and (iv) as an ordinary provision of this Act to any public company whenever registered. The section or subsection does not apply to a proprietary company while the same person is both its sole director and sole shareholder. Note 1: See sections 198E, 201F and 202C for the special provisions that apply to a proprietary company while the same person is both its sole director and sole shareholder. Note 2: A company may include in its constitution (by reference or otherwise) a replaceable rule that does not otherwise apply to it. [Editor’s Note: There appears to be a drafting error in s 135(1)(b)(ii). The reference to “is or eas registered” should probably read “is or was registered”.]

Company’s constitution can displace or modify replaceable rules (2) A provision of a section or subsection that applies to a company as a replaceable rule can be displaced or modified by the company’s constitution. Failure to comply with replaceable rules (3) A failure to comply with the replaceable rules as they apply to a company is not of itself a contravention of this Act (so the provisions about criminal liability, civil liability and injunctions do not apply). Note: Replaceable rules that apply to a company have effect as a contract (see section 140).

136 Constitution of a company (1) [When constitution adopted] A company adopts a constitution:

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(a)

on registration—if each person specified in the application for the company’s registration as a person who consents to become a member agrees in writing to the terms of a constitution before the application is lodged; or (b) after registration—if the company passes a special resolution adopting a constitution or a court order is made under section 233 that requires the company to adopt the constitution. Note: The Life Insurance Act 1995 has rules about how benefit fund rules become part of a company’s constitution and about amending those rules. They override this Act (see section 1348 of this Act). Consequential amendments to the rest of the company’s constitution can be made under that Act or this Act (see Subdivision 2 of Division 4 of Part 2A of that Act).

(2) [Modification or repeal of constitution] The company may modify or repeal its constitution, or a provision of its constitution, by special resolution. Note: The company may need leave of the Court to modify or repeal its constitution if it was adopted as the result of a Court order (see subsection 233(3)).

(3) [Requirements for modification] The company’s constitution may provide that the special resolution does not have any effect unless a further requirement specified in the constitution relating to that modification or repeal has been complied with. (4) [Further requirements] Unless the constitution provides otherwise, the company may modify or repeal a further requirement described in subsection (3) only if the further requirement is itself complied with. (5) [Public company must lodge resolution] A public company must lodge with ASIC a copy of a special resolution adopting, modifying or repealing its constitution within 14 days after it is passed. The company must also lodge with ASIC within that period: (a) if the company adopts a constitution—a copy of that constitution; or (b) if the company modifies its constitution—a copy of that modification. This also applies to a proprietary company that has applied under Part 2B.7 to change to a public company, while its application has not yet been determined. (6) [Strict liability for s 136(5) offence] An offence based on subsection (5) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [Subs (6) insrt Act 117 of 2001, s 3 and Sch 1 item 7, with effect from 15 Dec 2001] [S 136 am Act 117 of 2001. Cross-reference: Corps Regs: • reg 1.0.12 requires a resolution lodged under s 136(5) to be set out in a notice in accordance with the approved form. ASIC: • Form 205: Notification of resolution; • RG 60: Schemes of arrangement.]

Part 2B.5 Registered office and places of business 142 Registered office (1) [Registered office] A company must have a registered office in this jurisdiction. Communications and notices to the company may be addressed to its registered office. Note 1: A document may be served on a company by leaving it at, or posting it to, the company’s registered office (see subsection 109X(1)).

s 142 Extracts from the Corporations Act 2001 (Cth)

Note 2: Communications and notices from ASIC may also be addressed to the company’s contact address (see section 146A). [Subs (1) am Act 101 of 2007, s 3 and Sch 1 items 201 and 202, with effect from 1 Sep 2007]

(2) [Change of address notice] A company must lodge notice of a change of address of its registered office with ASIC not later than 28 days after the date on which the change occurs. The notice must be in the prescribed form. Note: If the company is not to be the occupier of premises at the address of its new registered office, the notice must state that the occupier has consented to the address being specified in the notice and has not withdrawn that consent (see section 100). [Subs (2) am Act 24 of 2003, s 3 and Sch 4 item 1, with effect from 1 Jul 2003]

(2A) [Strict liability for s 142(1) and (2) offences] An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [Subs (2A) insrt Act 117 of 2001, s 3 and Sch 1 item 9, with effect from 15 Dec 2001]

(3) [Effect of change notice] A notice of change of address takes effect from the later of: (a) the seventh day after the notice was lodged; or (b) a later day specified in the notice as the date from which the change is to take effect. [S 142 am Act 101 of 2007; Act 24 of 2003; Act 117 of 2001. Cross-reference: ASIC: Form 484: Company to change details; RG 64: Failure to lodge documents.]

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Chapter 2D Officers and employees Part 2D.1 Duties and powers Division 1 General duties 180 Care and diligence—civil obligation only Care and diligence—directors and other offıcers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation’s circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Note: This subsection is a civil penalty provision (see section 1317E).

Business judgment rule (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. Note: This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence)—it does not operate in relation to duties under any other provision of this Act or under any other laws.

(3) [Business judgment defined] In this section: business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation. [Cross-reference: ASIC: • Form EX01: Schedule B of Regulatory Guide 16 Report to ASIC under s 422, s 438D or s 533 of the Corporations Act 2001 or for statistical purposes; • RG 16: External administrators: Reporting and lodging; • RG 76: Related party transactions; • RG 94: Unit pricing: Guide to good practice; • RG 109: Assetless Administration Fund: Funding criteria and guidelines; • RG 186: External administration: Liquidator registration; • RG 217: Duty to prevent insolvent trading: Guide for directors.]

181 Good faith—civil obligations Good faith—directors and other offıcers (1) A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose.

s 183 Extracts from the Corporations Act 2001 (Cth)

Note 1: This subsection is a civil penalty provision (see section 1317E). Note 2: Section 187 deals with the situation of directors of wholly-owned subsidiaries.

(2) [Contravention] A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). [Cross-reference: ASIC: • Form EX01: Schedule B of Regulatory Guide 16 Report to ASIC under s 422, s 438D or s 533 of the Corporations Act 2001 or for statistical purposes; • RG 16: External administrators: Reporting and lodging; • RG 76: Related party transactions; • RG 94: Unit pricing: Guide to good practice; • RG 109: Assetless Administration Fund: Funding criteria and guidelines; • RG 128: Collective action by investors; • RG 186: External administration: Liquidator registration.]

182 Use of position—civil obligations Use of position—directors, other offıcers and employees (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note: This subsection is a civil penalty provision (see section 1317E).

(2) [Contravention] A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). [Cross-reference: ASIC: • Form EX01: Schedule B of Regulatory Guide 16 Report to ASIC under s 422, s 438D or s 533 of the Corporations Act 2001 or for statistical purposes; • RG 16: External administrators: Reporting and lodging; • RG 76: Related party transactions; • RG 109: Assetless Administration Fund: Funding criteria and guidelines; • RG 186: External administration: Liquidator registration.]

183 Use of information—civil obligations Use of information—directors, other offıcers and employees (1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note 1: This duty continues after the person stops being an officer or employee of the corporation. Note 2: This subsection is a civil penalty provision (see section 1317E).

(2) [Contravention] A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). [Cross-reference: ASIC:

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• Form EX01: Schedule B of Regulatory Guide 16 Report to ASIC under s 422, s 438D or s 533 of the Corporations Act 2001 or for statistical purposes; • RG 16: External administrators: Reporting and lodging; • RG 76: Related party transactions; • RG 109: Assetless Administration Fund: Funding criteria and guidelines; • RG 186: External administration: Liquidator registration.]

184 Good faith, use of position and use of information—criminal offences Good faith—directors and other offıcers (1) A director or other officer of a corporation commits an offence if they: (a) are reckless; or (b) are intentionally dishonest; and fail to exercise their powers and discharge their duties: (c) in good faith in the best interests of the corporation; or (d) for a proper purpose. Note: Section 187 deals with the situation of directors of wholly-owned subsidiaries.

Use of position—directors, other offıcers and employees (2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly: (a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or (b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. Use of information—directors, other offıcers and employees (3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly: (a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or (b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. [Cross-reference: ASIC: • RG 16: External administrators: Reporting and lodging; • RG 76: Related party transactions; • RG 109: Assetless Administration Fund: Funding criteria and guidelines; • RG 186: External administration: Liquidator registration.]

s 191 Extracts from the Corporations Act 2001 (Cth)

Division 2 Disclosure of, and voting on matters involving, material personal interests 191 Material personal interest—director’s duty to disclose Director’s duty to notify other directors of material personal interest when conflict arises (1) A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection (2) says otherwise. (1A) [Strict liability for s 191(1) offence] For an offence based on subsection (1), strict liability applies to the circumstance, that the director of a company has a material personal interest in a matter that relates to the affairs of the company. Note: For strict liability, see section 6.1 of the Criminal Code. [Subs (1A) insrt Act 117 of 2001, s 3 and Sch 1 item 36, with effect from 15 Dec 2001]

(2) [Where director does not need to give notice of interest] The director does not need to give notice of an interest under subsection (1) if: (a) the interest: (i) arises because the director is a member of the company and is held in common with the other members of the company; or (ii) arises in relation to the director’s remuneration as a director of the company; or (iii) relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members; or (iv) arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company; or (v) arises merely because the director has a right of subrogation in relation to a guarantee or indemnity referred to in subparagraph (iv); or (vi) relates to a contract that insures, or would insure, the director against liabilities the director incurs as an officer of the company (but only if the contract does not make the company or a related body corporate the insurer); or (vii) relates to any payment by the company or a related body corporate in respect of an indemnity permitted under section 199A or any contract relating to such an indemnity; or (viii) is in a contract, or proposed contract, with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the director is a director of the related body corporate; or (b) the company is a proprietary company and the other directors are aware of the nature and extent of the interest and its relation to the affairs of the company; or (c) all the following conditions are satisfied: (i) the director has already given notice of the nature and extent of the interest and its relation to the affairs of the company under subsection (1); (ii) if a person who was not a director of the company at the time when the notice under subsection (1) was given is appointed as a director of the company—the notice is given to that person;

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(iii)

the nature or extent of the interest has not materially increased above that disclosed in the notice; or (d) the director has given a standing notice of the nature and extent of the interest under section 192 and the notice is still effective in relation to the interest. Note: Subparagraph (c)(ii)—the notice may be given to the person referred to in this subparagraph by someone other than the director to whose interests it relates (for example, by the secretary).

(3) [Content of notice] The notice required by subsection (1) must: (a) give details of: (i) the nature and extent of the interest; and (ii) the relation of the interest to the affairs of the company; and (b) be given at a directors’ meeting as soon as practicable after the director becomes aware of their interest in the matter. The details must be recorded in the minutes of the meeting. Effect of contravention by director (4) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing. Section does not apply to single director proprietary company (5) This section does not apply to a proprietary company that has only 1 director. [S 191 am Act 117 of 2001. Cross-reference: ASIC: RG 76: Related party transactions.]

Division 4 Powers 198A Powers of directors (replaceable rule—see section 135) (1) [Management by directors] The business of a company is to be managed by or under the direction of the directors. Note: See section 198E for special rules about the powers of directors who are the single director/shareholder of proprietary companies.

(2) [Exercise of power limited by constitution] The directors may exercise all the powers of the company except any powers that this Act or the company’s constitution (if any) requires the company to exercise in general meeting. Note: For example, the directors may issue shares, borrow money and issue debentures.

s 201E Extracts from the Corporations Act 2001 (Cth)

Part 2D.3 Appointment, remuneration and cessation of appointment of directors Division 1 Appointment of directors Subdivision A General rules 201A Minimum number of directors Proprietary companies (1) A proprietary company must have at least 1 director. That director must ordinarily reside in Australia. Public companies (2) A public company must have at least 3 directors (not counting alternate directors). At least 2 directors must ordinarily reside in Australia. [Cross-reference: ASIC: RG 34: Auditor’s obligations: Reporting to ASIC.]

201B Who can be a director (1) [Minimum age requirement] Only an individual who is at least 18 may be appointed as a director of a company. (2) [Appointment of disqualified person] A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as director of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G. 201C

Directors of public companies, or subsidiaries, over 72 [Repealed]

[S 201C rep Act 24 of 2003, s 3 and Sch 5 item 7, with effect from 11 Apr 2003]

201D Consent to act as director (1) [Consent to appointment] A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed. (2) [Consent must be kept] The company must keep the consent. (3) [Strict liability for s 201D(1) or (2) offence] An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [Subs (3) insrt Act 117 of 2001, s 3 and Sch 1 item 43, with effect from 15 Dec 2001] [S 201D am Act 117 of 2001]

201E Special rules for the appointment of public company directors (1) [Requirements for appointment] A resolution passed at a general meeting of a public company appointing or confirming the appointment of 2 or more directors is void unless: (a) the meeting has resolved that the appointments or confirmations may be voted on together; and (b) no votes were cast against the resolution. (2) [Limitation of requirements] This section does not affect: (a) a resolution to appoint directors by an amendment to the company’s constitution (if any); or (b) a ballot or poll to elect 2 or more directors if the ballot or poll does not require members voting for 1 candidate to vote for another candidate.

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(3) [Voting requirements] For the purposes of paragraph (2)(b), a ballot or poll does not require a member to vote for a candidate merely because the member is required to express a preference among individual candidates in order to cast a valid vote. 201F Special rules for the appointment of directors for single director/single shareholder proprietary companies (1) [Appointment of director in sole-director company] The director of a proprietary company who is its only director and only shareholder may appoint another director by recording the appointment and signing the record. Appointment of new director on death, mental incapacity or bankruptcy (2) If a person who is the only director and the only shareholder of a proprietary company: (a) dies; or (b) cannot manage the company because of the person’s mental incapacity; and a personal representative or trustee is appointed to administer the person’s estate or property, the personal representative or trustee may appoint a person as the director of the company. (3) [Where trustee may appoint director] If: (a) the office of the director of a proprietary company is vacated under subsection 206B(3) or (4) because of the bankruptcy of the director; and (b) the person is the only director and the only shareholder of the company; and (c) a trustee in bankruptcy is appointed to the person’s property; the trustee may appoint a person as the director of the company. (4) [Where person may appoint self] A person who has a power of appointment under subsection (2) or (3) may appoint themselves as director. (5) [Appointments under s 201F] A person appointed as a director of a company under subsection (2), (3) or (4) holds office as if they had been appointed in the usual way. [Cross-reference: Corps Regs: reg 1.0.11 requires certain documents to which s 201F applies to be signed by a personal representative or trustee.]

201G Company may appoint a director (replaceable rule—see section 135) A company may appoint a person as a director by resolution passed in general meeting. 201H Directors may appoint other directors (replaceable rule—see section 135) Appointment by other directors (1) The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors’ meeting even if the total number of directors of the company is not enough to make up that quorum. Proprietary company—confirmation by meeting within 2 months (2) If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months.

s 201M Extracts from the Corporations Act 2001 (Cth)

Public company—confirmation by next AGM (3) If a person is appointed by the other directors as a director of a public company, the company must confirm the appointment by resolution at the company’s next AGM. If the appointment is not confirmed, the person ceases to be a director of the company at the end of the AGM. [Editor’s Note: There is no s 201I in this Act.]

201J Appointment of managing directors (replaceable rule—see section 135) The directors of a company may appoint 1 or more of themselves to the office of managing director of the company for the period, and on the terms (including as to remuneration), as the directors see fit. 201K Alternate directors (replaceable rule—see section 135) (1) [Appointment of alternate] With the other directors’ approval, a director may appoint an alternate to exercise some or all of the director’s powers for a specified period. (2) [Notice of meetings to alternate] If the appointing director requests the company to give the alternate notice of directors’ meetings, the company must do so. (3) [Alternate powers those of director] When an alternate exercises the director’s powers, the exercise of the powers is just as effective as if the powers were exercised by the director. (4) [Termination of alternate] The appointing director may terminate the alternate’s appointment at any time. (5) [Termination must be in writing] An appointment or its termination must be in writing. A copy must be given to the company. Note: ASIC must be given notice of the appointment and termination of appointment of an alternate (see subsections 205B(2) and (5)).

201L Signpost—ASIC to be notified of appointment Under section 205B, a company must notify ASIC within 28 days if a person is appointed as a director or as an alternate director. [S 201L am Act 103 of 2004, s 3 and Sch 11 item 6, with effect from 1 Jul 2004]

201M Effectiveness of acts by directors (1) [Act effective despite invalid appointment] An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company’s constitution (if any) or any provision of this Act. (2) [Limits on application] Subsection (1) does not deal with the question whether an effective act by a director: (a) binds the company in its dealings with other people; or (b) makes the company liable to another person. Note: The kinds of acts that this section validates are those that are only legally effective if the person doing them is a director (for example, calling a meeting of the company’s members or signing a document to be lodged with ASIC or minutes of a meeting). Sections 128–130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers.

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• • • • •

RG RG RG RG RG

16: External administrators: Reporting and lodging; 34: Auditor’s obligations: Reporting to ASIC; 109: Assetless Administration Fund: Funding criteria and guidelines; 115: Audit relief for proprietary companies; 217: Duty to prevent insolvent trading: Guide for directors.]

588H Defences (1) [Application] This section has effect for the purposes of proceedings for a contravention of subsection 588G(2) in relation to the incurring of a debt (including proceedings under section 588M in relation to the incurring of the debt). (2) [Defence of reasonable grounds that company solvent] It is a defence if it is proved that, at the time when the debt was incurred, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time. (3) [Defence of reasonable grounds that company solvent—competent and reliable person] Without limiting the generality of subsection (2), it is a defence if it is proved that, at the time when the debt was incurred, the person: (a) had reasonable grounds to believe, and did believe: (i) that a competent and reliable person (the other person) was responsible for providing to the first-mentioned person adequate information about whether the company was solvent; and (ii) that the other person was fulfilling that responsibility; and (b) expected, on the basis of information provided to the first-mentioned person by the other person, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time. (4) [Defence of non-participation in company management] If the person was a director of the company at the time when the debt was incurred, it is a defence if it is proved that, because of illness or for some other good reason, he or she did not take part at that time in the management of the company. (5) [Defence of reasonable steps] It is a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt. (6) [Matters in determining defence] In determining whether a defence under subsection (5) has been proved, the matters to which regard is to be had include, but are not limited to: (a) any action the person took with a view to appointing an administrator of the company; and (b) when that action was taken; and (c) the results of that action. [Editor’s Note: There is no s 588I in this Act.. Cross-reference: ASIC: • RG 16: External administrators: Reporting and lodging; • RG 109: Assetless Administration Fund: Funding criteria and guidelines; • RG 217: Duty to prevent insolvent trading: Guide for directors.]

s 588M Extracts from the Corporations Act 2001 (Cth)

Division 4 Director liable to compensate company Subdivision A Proceedings against director 588J On application for civil penalty order, Court may order compensation (1) [Where Court may award compensation] Where, on an application for a civil penalty order against a person in relation to a contravention of subsection 588G(2), the Court is satisfied that: (a) the person committed the contravention in relation to the incurring of a debt by a company; and (b) the debt is wholly or partly unsecured; and (c) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; the Court may (whether or not it makes a pecuniary penalty order under section 1317G or an order under section 206C disqualifying a person from managing corporations) order the first-mentioned person to pay to the company compensation equal to the amount of that loss or damage. (2) [Liquidator may intervene in proceedings] A company’s liquidator may intervene in an application for a civil penalty order against a person in relation to a contravention of subsection 588G(2). (3) [Liquidator entitled to be heard] A company’s liquidator who so intervenes is entitled to be heard: (a) only if the Court is satisfied that the person committed the contravention in relation to the incurring of a debt by that company; and (b) only on the question whether the Court should order the person to pay compensation to the company. [Cross-reference: ASIC: RG 217: Duty to prevent insolvent trading: Guide for directors.]

588K Criminal court may order compensation If: (a) a court finds a person guilty of an offence under subsection 588G(3) in relation to the incurring of a debt by a company; and (b) the court is satisfied that: (i) the debt is wholly or partly unsecured; and (ii) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; the court may (whether or not it imposes a penalty) order the first-mentioned person to pay to the company compensation equal to the amount of that loss or damage. Note: Section 73A defines when a court is taken to find a person guilty of an offence.

588L Enforcement of order under section 588J or 588K An order to pay compensation that a court makes under section 588J or 588K may be enforced as if it were a judgment of the court. 588M Recovery of compensation for loss resulting from insolvent trading (1) [Application] This section applies where:

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(a)

a person (in this section called the director) has contravened subsection 588G(2) or (3) in relation to the incurring of a debt by a company; and (b) the person (in this section called the creditor) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; and (c) the debt was wholly or partly unsecured when the loss or damage was suffered; and (d) the company is being wound up; whether or not: (e) the director has been convicted of an offence in relation to the contravention; or (f) a civil penalty order has been made against the director in relation to the contravention. (2) [Where liquidator may recover] The company’s liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage. (3) [Where creditor may recover] The creditor may, as provided in Subdivision B but not otherwise, recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage. (4) [When proceedings may begin] Proceedings under this section may only be begun within 6 years after the beginning of the winding up. Subdivision B Proceedings by creditor 588R Creditor may sue for compensation with liquidator’s consent (1) [Where creditor may commence proceedings] A creditor of a company that is being wound up may, with the written consent of the company’s liquidator, begin proceedings under section 588M in relation to the incurring by the company of a debt that is owed to the creditor. (2) [Effect] Subsection (1) has effect despite section 588T, but subject to section 588U.

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Part 1A Negligence Division 1 Preliminary 5 Definitions In this Part: harm means harm of any kind, including the following: (a) personal injury or death, (b) damage to property, (c) economic loss. negligence means failure to exercise reasonable care and skill. personal injury includes: (a) pre-natal injury, and (b) impairment of a person’s physical or mental condition, and (c) disease. [S 5 reinsrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002; rep Act 92 of 2002, s 3 and Sch 2[4], with effect from 6 Dec 2002]

5A Application of Part (1) This Part applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise. (2) This Part does not apply to civil liability that is excluded from the operation of this Part by section 3B. [S 5A insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Division 2 Duty of care 5B General principles (1) A person is not negligent in failing to take precautions against a risk of harm unless: (a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and (b) the risk was not insignificant, and (c) in the circumstances, a reasonable person in the person’s position would have taken those precautions. (2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): (a) the probability that the harm would occur if care were not taken, (b) the likely seriousness of the harm, (c) the burden of taking precautions to avoid the risk of harm, (d) the social utility of the activity that creates the risk of harm. [S 5B insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5C Other principles In proceedings relating to liability for negligence: (a) the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible, and

s 5F Extracts from the Civil Liability Act 2002 (NSW)

(b) the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done, and (c) the subsequent taking of action that would (had the action been taken earlier) have avoided a risk of harm does not of itself give rise to or affect liability in respect of the risk and does not of itself constitute an admission of liability in connection with the risk. [S 5C insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Division 3 Causation 5D General principles (1) A determination that negligence caused particular harm comprises the following elements: (a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and (b) that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused (scope of liability). (2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. [Subs (2) am Act 40 of 2003, s 3 and Sch 2.4, with effect from 22 Jul 2003]

(3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent: (a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and (b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. (4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. [S 5D am Act 40 of 2003; insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5E Onus of proof In proceedings relating to liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation. [S 5E am Act 42 of 2012, Sch 2.7, with effect from 6 Jul 2012; insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Division 4 Assumption of risk 5F Meaning of “obvious risk” (1) For the purposes of this Division, an obvious risk to a person who suffers harm is a risk that, in the circumstances, would have been obvious to a reasonable person in the position of that person. (2) Obvious risks include risks that are patent or a matter of common knowledge.

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(3) A risk of something occurring can be an obvious risk even though it has a low probability of occurring. (4) A risk can be an obvious risk even if the risk (or a condition or circumstance that gives rise to the risk) is not prominent, conspicuous or physically observable. [S 5F insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5G Injured persons presumed to be aware of obvious risks (1) In proceedings relating to liability for negligence, a person who suffers harm is presumed to have been aware of the risk of harm if it was an obvious risk, unless the person proves on the balance of probabilities that he or she was not aware of the risk. [Subs (1) am Act 42 of 2012, Sch 2.7, with effect from 6 Jul 2012]

(2) For the purposes of this section, a person is aware of a risk if the person is aware of the type or kind of risk, even if the person is not aware of the precise nature, extent or manner of occurrence of the risk. [S 5G am Act 42 of 2012; insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5H No proactive duty to warn of obvious risk (1) A person (the defendant) does not owe a duty of care to another person (the plaintiff) to warn of an obvious risk to the plaintiff. (2) This section does not apply if: (a) the plaintiff has requested advice or information about the risk from the defendant, or (b) the defendant is required by a written law to warn the plaintiff of the risk, or (c) the defendant is a professional and the risk is a risk of the death of or personal injury to the plaintiff from the provision of a professional service by the defendant. (3) Subsection (2) does not give rise to a presumption of a duty to warn of a risk in the circumstances referred to in that subsection. [S 5H insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5I

No liability for materialisation of inherent risk (1) A person is not liable in negligence for harm suffered by another person as a result of the materialisation of an inherent risk. (2) An inherent risk is a risk of something occurring that cannot be avoided by the exercise of reasonable care and skill. (3) This section does not operate to exclude liability in connection with a duty to warn of a risk. [S 5I insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Division 5 Recreational activities 5J Application of Division (1) This Division applies only in respect of liability in negligence for harm to a person (the plaintiff) resulting from a recreational activity engaged in by the plaintiff. (2) This Division does not limit the operation of Division 4 in respect of a recreational activity. [S 5J insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5K Definitions In this Division:

s 5M Extracts from the Civil Liability Act 2002 (NSW)

dangerous recreational activity means a recreational activity that involves a significant risk of physical harm. obvious risk has the same meaning as it has in Division 4. recreational activity includes: (a) any sport (whether or not the sport is an organised activity), and (b) any pursuit or activity engaged in for enjoyment, relaxation or leisure, and (c) any pursuit or activity engaged in at a place (such as a beach, park or other public open space) where people ordinarily engage in sport or in any pursuit or activity for enjoyment, relaxation or leisure. [S 5K insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5L No liability for harm suffered from obvious risks of dangerous recreational activities (1) A person (the defendant) is not liable in negligence for harm suffered by another person (the plaintiff) as a result of the materialisation of an obvious risk of a dangerous recreational activity engaged in by the plaintiff. (2) This section applies whether or not the plaintiff was aware of the risk. [S 5L insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5M No duty of care for recreational activity where risk warning (1) A person (the defendant) does not owe a duty of care to another person who engages in a recreational activity (the plaintiff) to take care in respect of a risk of the activity if the risk was the subject of a risk warning to the plaintiff. (2) If the person who suffers harm is an incapable person, the defendant may rely on a risk warning only if: (a) the incapable person was under the control of or accompanied by another person (who is not an incapable person and not the defendant) and the risk was the subject of a risk warning to that other person, or (b) the risk was the subject of a risk warning to a parent of the incapable person (whether or not the incapable person was under the control of or accompanied by the parent). (3) For the purposes of subsections (1) and (2), a risk warning to a person in relation to a recreational activity is a warning that is given in a manner that is reasonably likely to result in people being warned of the risk before engaging in the recreational activity. The defendant is not required to establish that the person received or understood the warning or was capable of receiving or understanding the warning. (4) A risk warning can be given orally or in writing (including by means of a sign or otherwise). (5) A risk warning need not be specific to the particular risk and can be a general warning of risks that include the particular risk concerned (so long as the risk warning warns of the general nature of the particular risk). (6) A defendant is not entitled to rely on a risk warning unless it is given by or on behalf of the defendant or by or on behalf of the occupier of the place where the recreational activity is engaged in.

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(7) A defendant is not entitled to rely on a risk warning if it is established (on the balance of probabilities) that the harm concerned resulted from a contravention of a provision of a written law of the State or Commonwealth that establishes specific practices or procedures for the protection of personal safety. (8) A defendant is not entitled to rely on a risk warning to a person to the extent that the warning was contradicted by any representation as to risk made by or on behalf of the defendant to the person. (9) A defendant is not entitled to rely on a risk warning if the plaintiff was required to engage in the recreational activity by the defendant. (10) The fact that a risk is the subject of a risk warning does not of itself mean: (a) that the risk is not an obvious or inherent risk of an activity, or (b) that a person who gives the risk warning owes a duty of care to a person who engages in an activity to take precautions to avoid the risk of harm from the activity. (11) This section does not limit or otherwise affect the effect of a risk warning in respect of a risk of an activity that is not a recreational activity. (12) In this section: incapable person means a person who, because of the person’s young age or a physical or mental disability, lacks the capacity to understand the risk warning. parent of an incapable person means any person (not being an incapable person) having parental responsibility for the incapable person. [S 5M insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5N Waiver of contractual duty of care for recreational activities (1) Despite any other written or unwritten law, a term of a contract for the supply of recreation services may exclude, restrict or modify any liability to which this Division applies that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill. (2) Nothing in the written law of New South Wales renders such a term of a contract void or unenforceable or authorises any court to refuse to enforce the term, to declare the term void or to vary the term. (3) A term of a contract for the supply of recreation services that is to the effect that a person to whom recreation services are supplied under the contract engages in any recreational activity concerned at his or her own risk operates to exclude any liability to which this Division applies that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill. (4) In this section, recreation services means services supplied to a person for the purposes of, in connection with or incidental to the pursuit by the person of any recreational activity. (5) This section applies in respect of a contract for the supply of services entered into before or after the commencement of this section but does not apply in respect of a breach of warranty that occurred before that commencement. (6) This section does not apply if it is established (on the balance of probabilities) that the harm concerned resulted from a contravention of a provision of a written law of the State or Commonwealth that establishes specific practices or procedures for the protection of personal safety. [S 5N insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 10 Jan 2003]

s 5R Extracts from the Civil Liability Act 2002 (NSW)

Division 6 Professional negligence 5O Standard of care for professionals (1) A person practising a profession (a professional) does not incur a liability in negligence arising from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice. (2) However, peer professional opinion cannot be relied on for the purposes of this section if the court considers that the opinion is irrational. (3) The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section. (4) Peer professional opinion does not have to be universally accepted to be considered widely accepted. [S 5O insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5P Division does not apply to duty to warn of risk This Division does not apply to liability arising in connection with the giving of (or the failure to give) a warning, advice or other information in respect of the risk of death of or injury to a person associated with the provision by a professional of a professional service. [S 5P insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Division 7 Non-delegable duties and vicarious liability 5Q Liability based on non-delegable duty (1) The extent of liability in tort of a person (the defendant) for breach of a non-delegable duty to ensure that reasonable care is taken by a person in the carrying out of any work or task delegated or otherwise entrusted to the person by the defendant is to be determined as if the liability were the vicarious liability of the defendant for the negligence of the person in connection with the performance of the work or task. (2) This section applies to an action in tort whether or not it is an action in negligence, despite anything to the contrary in section 5A. [S 5Q insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Division 8 Contributory negligence 5R Standard of contributory negligence (1) The principles that are applicable in determining whether a person has been negligent also apply in determining whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm. (2) For that purpose: (a) the standard of care required of the person who suffered harm is that of a reasonable person in the position of that person, and (b) the matter is to be determined on the basis of what that person knew or ought to have known at the time. [S 5R insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

595

596

Concise Australian Commercial Law

5S Contributory negligence can defeat claim In determining the extent of a reduction in damages by reason of contributory negligence, a court may determine a reduction of 100% if the court thinks it just and equitable to do so, with the result that the claim for damages is defeated. [S 5S insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

5T Contributory negligence—claims under the Compensation to Relatives Act 1897 (1) In a claim for damages brought under the Compensation to Relatives Act 1897, the court is entitled to have regard to the contributory negligence of the deceased person. (2) Section 13 of the Law Reform (Miscellaneous Provisions) Act 1965 does not apply so as to prevent the reduction of damages by the contributory negligence of a deceased person in respect of a claim for damages brought under the Compensation to Relatives Act 1897. [S 5T insrt Act 92 of 2002, s 3 and Sch 1[1], with effect from 6 Dec 2002]

Index A Aboriginal and Torrens Strait Islanders acknowledgement of, lack of, [1.130] customary law, [1.30] enforcement of, [1.30] land rights, [1.50] Mabo v Queensland, [1.70], [1.80], [1.90] native title, [1.90] compensation, [1.95] recognition of, lack of, [1.130] sovereignty, [1.50] terra nullius, [1.50], [1.70] Acceptance — see Offer and acceptance Acts — see Statutes Administrative Law public law, [1.775] regulation of government powers and duties, [1.775] Advertisements bait advertising — see Bait advertising ethics, [18.120] false or misleading representations, [13.340] misleading or deceptive conduct — see Misleading or deceptive conduct offer, whether, [3.115] offer to treat, [3.100], [3.110] online, [13.68] disclaimers, [13.68] online endorsements, [13.68] standards and practices, [18.120] television, [18.120] unauthorised, [13.600] Agency concept, [15.10] creation of, [15.90] expressly, [15.100]–[15.120] deed, by, [15.100] word of mouth, [15.120] writing, in, [15.110] holding out or estoppel, [15.130] operation of law, [15.150] agency by cohabitation, [15.190] agency of necessity, [15.160]–[15.180] ratification, by, [15.140] principle, [15.10] privity of contract exception, [10.40] relationship, [15.30] consensual, [15.10]

fiduciary, [15.10] termination of, [15.670] agreement for, [15.700] bankruptcy, [15.760], [15.770] agent, [15.760] principal, [15.770] death, by, [15.740] impossibility of performance, [15.690] insanity, by, [15.750] performance or completion, [15.680] renunciation by agent, [15.780] revocation, [15.710] rights of agent, [15.730] rights of third parties, [15.720] Agent appointment of, [15.10], [15.40] auctioneer, [15.840] authority of, [15.10], [15.40], [15.200] actual, [15.10], [15.200]–[15.235] express, [15.220] implied, [15.230]–[15.235], [15.263] apparent or ostensible, [15.10], [15.200], [15.240]–[15.264] ratification of, [15.265]–[15.267] scope of, [15.200] warranty of, breach of, [15.580] bankruptcy of, [15.760] broker — see Brokers business — see Estate agents capacity to act as, [15.40] classification of, [15.50] general, [15.70] special, [15.60] universal, [15.80] determination of, [15.37] director — see Directors duties of, [15.270], [15.380] act in good faith, [15.10], [15.300]–[15.320] act in person, [15.290] delegation of, [15.290] exercise reasonable care and skill, [15.350], [15.360] follow principal’s instructions, [15.280] full disclosure of personal interests, [15.330] not to make secret profit, [15.340], [15.345] employee — see Employee estate — see Estate agents factor — see Factor agent independent contractor — see Independent contractor

land — see Estate agents liability of, [15.200], [15.280], [15.470] breach of warranty of authority, [15.580] misrepresentation, for, [15.590] principal, to, [15.480] third parties, to, [15.490] existence but not name of principal disclosed, [15.540] existence of principal not disclosed, [15.550], [15.570] name of principal disclosed, [15.500], [15.510] wrongful acts, for, [15.600]–[15.660] mercantile, definition, [15.790] partner — see Partnership powers conferral of, [15.40] delegation of, [15.290] principal and, [15.10] real estate — see Real estate agent rights of indemnity and reimbursement, [15.450] remuneration, [15.390] entitlement to, [15.400], [15.410] right of lien, [15.460] statutory regulation of, [15.860] sub-agent, appointment of, [15.290] use of, [15.10] voluntary, [15.10] Agreements — see also Contracts commercial — see Commercial agreements competitions and lotteries, participation in, [4.90] contract, whether, [2.17], [2.20], [2.30] intent for, [4.10], [4.100] presumption of, [4.15] enforcement of, [2.30], [4.50] evidence of, [5.350] intent for, [4.10], [4.70], [4.90], [4.140] express exclusions, [4.180], [4.190], [4.200], [4.210] legally binding, [3.10], [4.90] letter of comfort — see Letter of comfort letter of commitment, legally binding, [4.220] offer and acceptance, [2.30] promise — see Promise

598

Concise Australian Commercial Law Agreements — cont restrictive trade agreements, [8.490] anti-competitive, [8.500] determination of, [8.510] franchises, [8.490]–[8.494] social and domestic agreements — see Social and domestic agreements Alternative dispute resolution (ADR) — see Dispute resolution Arbitration — see Dispute resolution ASIC — see Australian Securities and Investments Commission (ASIC) Assignment of contracts absolute, [10.160] assignee, [10.110] assignment, [10.110] assignor, [10.110] bankruptcy, for, [10.220] death, by, [10.210] equitable chose in action, [10.190] equity, in, [10.170], [10.190] express notice of, [10.160] legal chose in action, [10.180] liabilities, of, [10.140] novation, by, [10.140] obligations, of, [10.100], [10.140] operation of law, [10.200] personal services contract not assignable, [10.230] rights, of, [10.100], [10.150] subject to equities, [10.160] statute, by, [10.160] writing, in, [10.160] Auction sales bid, [3.130] internet, [3.150], [3.155] invitation to treat, [3.130] offer and acceptance, [3.130]–[3.155] withdrawal of reserve, [3.130] without reserve, [3.130] Auctioneer agent, [15.840] Australia federation, [1.100] legal independence, [1.97] legal system — see Australian legal system Australian colonies — see also States and Territories constitutional development, [1.120] federation of, [1.120] legal development, [1.110] separation of powers, [1.110] Australian Company Number (ACN) issue of, [17.45] Australian Competition and Consumer Commission (ACCC) consumer protection, [1.670] establishment of, [1.660] responsibilities, [1.670]

restrictive trade practices cases, [1.670] Australian Competition Tribunal establishment of, [1.660] Australian constitutional system branches of government, [1.100] executive, [1.100], [1.140]–[1.160] judiciary, [1.100], [1.180] legislature, [1.100] customary law, [1.30] European colonisation, [1.40], [1.50] federal system of government, [1.160] Mabo v Queensland, effect of, [1.70], [1.80], [1.90] native title, [1.90] pre-European history, [1.30] Australian Consumer Law consumer guarantees — see Consumer guarantees consumer protection, [13.10], [13.930], [18.30] enforcement of, [13.930] defective goods — see Defective goods duress, goods and services transactions — see Duress enactment of, [13.10] enforcement of, [13.35] false or misleading representation — see False or misleading representation legislative framework, [13.30] misleading or deceptive conduct — see Misleading or deceptive conduct misrepresentation — see Misrepresentation objectives, [13.20] organisation of, [13.35] penalties, [13.35] remedies, [13.35] civil, [7.680] penal sanctions, [7.680] unconscionable conduct — see Unconscionable conduct unfair practices — see Unfair practices unfair pressure, [7.795], [7.796] unfair terms of contracts — see Terms of contract Australian courts federal courts, [1.560] Federal Circuit Court, [1.590] Federal Court of Australia, [1.580] High Court of Australia, [1.570] hierarchy, [1.540], [1.557] State courts, [1.600] County Court, [1.620] District Court, [1.620] Local Court, [1.630] Magistrates Court, [1.630] specialist, [1.680] Supreme Court, [1.610]

Australian legal system Australian constitutional system — see Australian constitutional system basic features, [1.10] British common law and, [1.97] courts — see Australian courts doctrine of precedents — see Precedent federal legal system, [1.100] foundation of, [1.97] legal proceedings, classification, [1.780] nature and concept of law — see Law Australian Securities and Investments Commission (ASIC) functions administrative, [17.40] enforcement, [17.40] exercise of, [17.40] independent statutory commission, [17.40] powers, exercise of, [17.40] register of companies, [17.45]

B Bait advertising offer of special price, [13.530], [13.540] penalty, [13.550] Bankruptcy assignment of contract, [10.220] partners, of, [16.650] termination of agency, [15.760], [15.770] termination of contract, [11.520] Bankrupts certificate of discharge, [11.520] contractual capacity — see Contractual capacity disqualification from managing corporation, [13.990], [13.995] liability of, [11.520] undischarged, [13.990] Barristers application to “take silk”, [1.830] clients, [1.830] conduct court cases, [1.830] legal opinions, provision of, [1.830] Senior Counsel, [1.830] solicitor’s brief or instructions, [1.830] Breach of contract anticipatory breach, [11.180] breach of terms, [10.25], [10.30], [11.160] collateral contract, [9.70] conditions, of, [9.120], [9.130], [11.260], [11.270], [11.275] damages for — see Damages essential terms, of, [11.260] forfeiture of deposit, [12.332], [12.333]

C Index Breach of contract — cont injunction for — see Injunction innominate terms, [11.260], [11.300], [11.305], [12.60] liability for inducing, [10.80], [10.90] intentional, [10.80] without justification, [10.80], [10.90] misrepresentation, for, [7.475] penalties — see Penalties remedies, determination of, [2.30], [2.100], [9.160], [9.170] repudiation, by, [11.160] restitution for — see Restitution specific performance for — see Specific performance termination of contract for, [11.10], [11.160], [12.30] torts, in, [14.30] warranties, of, [9.120], [9.140], [9.150], [11.260], [11.270] Breach of duty of care circumstances for, [14.390] standard of care for professionals, [14.480], [14.485] statutory test, [14.480] statutory reforms, [14.410] test for, [14.390] burden of eliminating the risk, [14.438]–[14.450] gravity of the harm, [14.433]–[14.437] probability of risk of injury, [14.425], [14.428] “reasonable person”, [14.395]–[14.405] utility of defendant’s conduct, [14.460] Brokers brokerage, [15.810] general agent, [15.810] Business ethics advertisements, [18.120] benefits, [18.40] business conduct, [18.20], [18.30] company obligations, [18.30] director’s duties, [18.30] commercial law principles, [18.30] good faith, [18.30] content of, [18.50] corporate governance, [18.20] corruption, [18.20] environmental protection, [18.20] ethical duties of business, [18.50] good business practice, [18.10] human rights, [18.20] international standards Organisation of Economic Co-operation and Development (OECD) Guidelines, [18.80] United Nations Convention against Corruption, [18.60] United Nations Global Impact, [18.70] United Nations Guiding Principles, [18.65]

investments, socially responsible, [18.130] lack of, [18.20] consequences, [18.20] legal, [18.20] moral, [18.20] poor, [18.40] principle, [18.10], [18.50] regulation of, [18.120] standards and practices, [18.120] enforcement of, [18.120] Business organisations ethical duties, [18.50] social responsibility, [18.50] Business practices consumer protection, [18.30] ethics, [18.20] international conventions, [18.90] restrictive trade practices, [18.30] unethical, [18.30]

C Choses in action equitable, [10.170], [10.190] legal, [10.180] Civil law damages, [1.790] injunction, [1.790] monetary compensation, [1.790] redress of wrong, [1.790] specific performance, [1.790] standard of proof, [1.790] Code of Banking Practice application of, [18.110] obligations, [18.110] Code of ethics definition, [18.100] Collateral contracts breach of, [9.70] determination of, [9.70]–[9.110] Commercial agreements governments, by, [4.225] intent to create legal relations, [4.140]–[4.150], [4.225] Commercial law law of torts, application of, [14.30] regulation of business activities, [1.795] common law principles, [1.795] statutes, [1.795] Commissions — see Tribunals and commissions Common law development of, [1.450] doctrine of precedent — see Precedent judge-made law, [1.440] historical development, [1.440] subordinate, [1.440] principles, [1.540] rules of, abrogation or modification of, [1.440]

statutory interpretation rules — see Statutory interpretation Commonwealth central government, [1.100] executive power, [1.100], [1.140] exercise of, [1.100], [1.140] vesting of, [1.100], [1.140] government — see Commonwealth government — see Federal government law-making powers, [1.100] Commonwealth government — see also Federal government accountability, [1.140] executive, [1.140] legislative powers, [1.150] House of Representatives, [1.140] parliament, [1.140] delegation of legislative powers, [1.150] exclusive powers, [1.160] legislative powers, [1.160] powers, [1.100] Companies actions of, [17.280] agents, liability for, [17.320] express or implied restrictions on, [17.280] legal capacity for, [17.280] validity of, [17.280] Australian Company Number (ACN), issue of, [17.45] authorised agents, [17.50] body corporate, [17.45] company law, [17.10] company seal, [17.130] company secretary acts of, validity of, [17.880] appointment of, [17.860] authority of, [17.860] duties of, [17.860], [17.970] obligations of, [17.860] public company, [17.850], [17.860] constitution, [17.240]–[17.280] contracts with third parties, [17.320] assumptions, [17.325] holding out, [17.330]–[17.335] binding, [17.320] liability for, [17.320] contractual capacity — see Contractual capacity corporate personality, [17.50], [17.55] directors and officers — see Directors duties of, [17.20] incorporated entity, [17.10], [17.70] information on, public availability of, [17.280] internal management, [17.240]–[17.280] limited liability, [17.50], [17.57] concept of, [17.60] limited by guarantee, [17.90] limited by shares, [17.80]

599

600

Concise Australian Commercial Law Companies — cont management of, [17.20] disqualification from, [17.1060] membership of, [17.350] member’s rights, [17.380] shares, [17.375] register of members, [17.350] where membership exists, [17.350] memorandum and articles of association, [17.230] name of, [17.120] no liability company, [17.110] operation of, [17.20] ownership, [17.50] powers, exercise of, [17.280] private law, [1.775] proprietary company, [17.70], [17.130] limited by shares, [17.80] unlimited with share capital, [17.100] public company, [17.70], [17.130] company secretary, [17.850], [17.860] limited by guarantee, [17.90] limited by shares, [17.80] no liability, [17.110] registered office, [17.840] unlimited with share capital, [17.100] register of companies, [17.45] registered office, [17.840] notice of, [17.840] registration of, [17.10], [17.45], [17.70] proprietary companies, [17.70] public companies, [17.70] regulation of — see Corporations Act 2001 (Cth) replaceable rule, [17.240]–[17.270] separate legal entity, [17.57] shares, [17.375] acquisition of, [17.375] issue of, [17.375] members, of, [17.375] offering, [17.375] sale of, [17.375] small business, [17.57] sole trader, [17.57] unlimited company, [17.100] Compensation civil law remedy, [1.790] defective goods, for, [13.1220] limitation period, [13.1240] monetary — see Damages native title, [1.95] unfair practices, for, [13.870] non-party customers, [13.890] orders, [13.880]–[13.910] application for, [13.910] determination of, [13.920] work-related injuries, [13.1260] Competitions or lotteries participation, agreement for, [4.90] enforcement of, [4.90], [4.100]

intent for, express exclusions, [4.200], [4.210] Conciliation dispute resolution, [1.900] Consent contractual, [2.15], [7.10] duress, extracted under, [7.10] genuine, [2.30], [7.10] misrepresentation, induced by, [7.10] mistake, [7.10], [7.20] assumption, [7.20] operative, [7.20] quality of subject matter, [7.20] unconscionable conduct, use of, [7.10] undue influence, use of, [7.10] Consideration adequate, [5.40] contract, for, [5.10] deed, lack of for, [5.25] definition, [5.30] executed, [5.65] executory, [5.65], [5.70] intangible, [5.50], [5.55] past act or forbearance, [5.75] past rule, [5.65] exceptions, [5.75], [5.83] performance of existing obligation, [5.95], [5.100], [5.120] practical benefit test, [5.134], [5.135] promise, for, [3.210], [3.220], [5.10], [5.20], [5.115] promise to refrain from legal action, [5.85], [5.90] recognised legal value, [5.40], [5.45], [5.60] requirement of, [5.20] rules of, [5.40] simple contract, requirement for, [2.60], [5.20] something bargained for, [5.138], [5.140] substituted performance, [5.130], [5.132], [5.132A], [5.133] sufficient, [5.40], [5.45], [5.90], [5.140] valuable, [2.30], [5.134] Constitution Commonwealth, [1.100] Aboriginal and Torres Strait Islanders, and, [1.130] amendment of, [1.190] creation of, [1.130] interpretation of, [1.180] legislative powers, [1.130] separation of powers, [1.130] structure, [1.130] States, [1.100], [1.130] Constitutional law public law, [1.775] rights of individuals, [1.775] structure of governments, [1.775] Consumer contracts — see also Defective goods credit contracts, unjust, [7.970]

duty of good faith, [9.610]–[9.640] exclusion clause interpretation of, [9.360], [9.420], [9.430] use of, [9.350], [9.360] implied term, [9.610]–[9.640] online — see Online contracting sale of land, [13.296] small business, [13.296] standard form, [13.290], [13.295], [13.320] determination of, [13.290] supply of goods and services, [13.296] unfair terms — see Terms of contract Consumer guarantees — see also Consumer contracts auction sales exemptions, [13.1130] breach of, [13.1000] contravention of, [13.1000] limitation of liability, [13.1150] manufacturers’ liability under — see Manufacturers’ liability non-compliance, remedies for, [13.1160] reasonable customer test, [13.1160] unfit for purpose, [13.1160] unsafe goods, [13.1160] operation of, modification, exclude or restrict, [13.1000] product information requirements, [13.1310] defence, [13.1310] product recall, [13.1310] product safety, [13.1310] statutory, [13.1000] supply of goods, for, [13.1001], [13.1002], [13.1010] acceptable quality, [13.1002], [13.1040]–[13.1060] corresponds with description, [13.1002], [13.1090] customer, to, [13.1020] express warranties, [13.1002], [13.1120] fitness for disclosed purpose, [13.1002], [13.1070], [13.1080] repairs and spare parts, [13.1002], [13.1110] supply by sample or demonstration, [13.1002], [13.1100] title, to, [13.1002], [13.1030] undisclosed securities, [13.1002] undisturbed possession, [13.1002] supply of services, for, [13.1001], [13.1004], [13.1140], [13.1145] customer, to, [13.1020] due care and skill, [13.1004], [13.1140] exclusions prohibited, [13.1004] fit for purpose, [13.1004], [13.1140] reasonable time for, [13.1004], [13.1140]

C Index Consumer guarantees — cont trade or commerce, in, [13.1140] Consumer law — see also Australian Consumer Law judge-made law, [1.440] Consumer protection adverse publicity order, [13.980] Australian Consumer Law — see Australian Consumer Law disqualification from managing corporation, order for, [13.990], [13.995] legislation, [13.10] non-punitive orders, [13.970] public warning notice, [13.960] substantiation notice, [13.950] undertaking, [13.940] Contract law enforcement of, [2.15] evolution of, [2.15] freedom of contract, [2.15] principles, [2.20] private law, [1.775] protection of individuals, [2.15] rights and duties under, [1.775] sanctity of contract, [2.15] source of, [2.10] Contracts — see also Consumer contracts agreement, [2.17], [2.20], [2.30] intent for, [4.10], [4.15] legally binding, [3.10], [4.10] assignment of — see Assignment of contracts bilateral contract, [2.90] mutual promise, [2.90] promise for a promise, [2.90] binding, [2.30], [3.10], [3.20], [3.460] breach of — see Breach of contract capacity — see Contractual capacity classification of, [2.50] collateral contract — see Collateral contracts commercial relationship, [4.10] consensus for, [2.30] consent for — see Consent consideration, requirement of — see Consideration creation of, [2.10] credit contracts, unjust, [7.970] definition of contract, [2.17] discharge of — see Termination of contract disputes, [2.10], [2.30] employment — see Employment contracts enforceable, [3.20], [5.10] enforcement of, [2.15], [2.20], [2.30], [2.100], [4.100], [5.290] essential elements, [2.30] evidence of, [5.350] execution of, [2.10] express contract, [2.80] explicit terms, [2.80] oral, [2.80] writing, in, [2.10], [2.80]

family arrangement, [4.10] form of, [2.10] evidenced in writing, [5.290], [5.300], [5.310]–[5.340] oral, [5.290] formal contract, [2.30], [2.70] formation of, [2.30] functions of, [2.10] gaming or wagering, [8.160] guarantee — see Guarantee illegal — see Illegal contracts implied contract, [2.80] indemnifying party against loss, [5.540] inferred terms, [2.80] intent to create legal relationship, [2.30], [3.420], [3.430], [4.10], [4.100] presumption of, [4.15] internet sales, [3.150], [3.155] invalid — see Illegal contracts land — see Land liability, exclusion of, [9.180], [9.220], [9.230], [9.280] misleading or deceptive conduct, effect of, [8.100], [8.105] negotiations, [3.10] offer and acceptance, [2.30], [3.10], [3.20] online contracting — see Online contracting operation of, [10.10] part performance of — see Part performance party to estoppel, [5.25] performance of — see Performance of contract personal services — see Personal services contract privity of — see Privity of contract promise, [2.20], [2.30] gratuitous, [2.30] made under seal, [2.30] rectification of — see Rectification repudiation of — see Termination of contract requirements for, [2.10], [2.30] restraint of trade — see Restraint of trade — see Void contracts rights and obligations creation of, [2.20] determination of, [9.10] sanctity of, [2.15] simple contract, [2.30], [2.60], [5.20], [5.290] consideration for, [2.60], [5.20] enforcement of, [5.290] evidenced in writing, [2.60], [5.290], [5.300] implied, [2.60] oral, [2.60] writing, in, [2.60] subject of, [2.30] termination of — see Termination of contract terms of — see Terms of contract unconscionable — see Unconscionable contracts

under seal — see Contracts under seal unenforceable, [2.100], [5.360] illegality, for, [8.10] technical defect, [2.100] unilateral contract, [2.90] acceptance by performance, [2.90] valid, [2.30], [2.100], [8.10] legality of object, [8.10] valuable consideration, [2.30], [2.60] void — see Void contracts voidable, [2.100] what constitutes, [2.20], [2.30] objective determination, [3.410] Contracts under seal — see also Deeds binding, [5.25], [5.180] enforcement of, [2.30] formal deed, [2.30], [2.70] release from, [5.180] enforcement of, [5.180] right of action, time-limit for, [5.25] signed, sealed and delivered, [2.70], [5.25], [5.180] writing, in, [2.70], [5.25], [5.180] Contractual capacity bankrupts, [6.200] undischarged, [6.200] liability of, [6.200] valid against trustee, [6.200] classes of persons, [6.10] corporations, [6.170] restriction of, [6.170] intoxicated persons, [6.180] contracts for necessaries, [6.180] liability of, [6.180] ratification of contract, [6.180] voidable, [6.180] married women, [6.190] mentally incapacitated, [6.180] contracts for necessaries, [6.180] liability of, [6.180] ratification of contract, [6.180] voidable, [6.180] minors, [6.20], [15.40] age of majority, [6.20] binding contracts, [6.30], [6.90], [6.100], [6.110] ratification for, [6.100], [6.120] repudiation of, [6.100], [6.110] enforcement of, [6.70]–[6.90] liability, [6.140] misrepresentation by, [6.140] substantially detrimental to minor’s interests, [6.70], [6.80] trading contracts, [6.90] valid contracts, [6.30] beneficial contract of service, [6.30], [6.50], [6.60], [6.90] determination of, [6.90] liability under, [6.40], [6.50] supply of necessaries, [6.30], [6.40] void contracts, [6.130] accounts stated, [6.130] bill of exchange, [6.130]

601

602

Concise Australian Commercial Law Contractual capacity — cont payment of goods, [6.130] repayment of loan, [6.130] voidable contracts, [6.100] binding contracts repudiated during minority or reasonable time after attaining majority, [6.110] binding contracts unless ratified within reasonable time of attaining majority, [6.120] valid contract, requirement for, [2.30] Contributory negligence burden of proof, [14.460] damages, apportionment for — see Damages defective goods, for, [13.1230] defence, [13.1230], [14.55], [14.560] determination of, [14.460], [14.465] Corporate ethics code aspirational code, [18.100] ethics code, definition of, [18.100] prescriptive code, [18.100] principals, [18.100] Corporate governance failure, [18.20] Corporations — see Companies Corporations Act 2001 (Cth) administration of, [17.40] application of, [17.10] enforcement of, [17.40] operation of, [17.20] Country of origin imported goods, [13.390] Made in Australia, [13.390], [13.395] Produce of Australia, [13.390] Product of Australia, [13.390] representations, [13.390] County Courts jurisdiction, [1.620] civil, [1.620] limited, [1.620] statutory, [1.620] Court of Petty Sessions criminal jurisdiction, [1.630] Court of Summary Jurisdiction criminal jurisdiction, [1.630] Courts — see Australian courts Credit cards unsolicited, [13.570] Credit contracts unjust, [7.970] Criminal law indictable offences, [1.790] offences and punishment, [1.775], [1.790] prosecutions, [1.790] public law, [1.775] standard of proof, [1.790]

beyond reasonable doubt, [1.790] summary offences, [1.790] Criminal liability offence against the state, [14.20] Customary laws Aboriginal and Torres Strait Islander, [1.30] classification of, [1.30] enforcement of, [1.30]

D Damages assessment of, [12.80], [12.190], [12.200] award of, [12.70], [12.80] breach of Australian Consumer Laws, [13.35] breach of contract, [2.100], [9.30], [9.70], [9.120], [12.70] anticipatory breach, [11.180] assessment of, [12.80], [12.190], [12.200] award of, [12.80], [12.90] causation for, [12.120]–[12.140] disappointment or distress, for, [12.210]–[12.245] exemplary, [12.280] innominate terms, of, [12.60] liquidated, [12.290] measure of, [12.90]–[12.115] mitigation of loss, [12.150]–[12.180] nominal, [12.270] ordinary, [12.260] substantial, [12.80] breach of warranty, [12.60] causation for, [12.120]–[12.140], [14.500]–[14.508] “but for” test, [14.508]–[14.509A] civil law remedy, [1.790] consumer guarantees, non-compliance with, [13.1280] affected person, [13.1280] contributory negligence apportionment for, [12.250], [14.460] assessment of, [14.460], [14.465] disappointment or distress, for, [12.210]–[12.245] economic loss, for, [14.50], [14.320] exemplary, [12.280] false or misleading representations, [13.330] fraudulent misrepresentation, [7.560], [15.620] innocent misrepresentation, [7.610] liquidated, [12.290] measure of, [12.90]–[12.115] mitigation of loss, duty of, [12.150]–[12.180] monetary compensation, [1.790], [12.70], [12.190], [12.200] negligence, for, [14.50], [14.55], [16.520] causation for, [14.500]–[14.509A]

proof for, [14.490] remoteness of damages, [14.510]–[14.540] nominal, [12.270] ordinary, [12.260] personal injury, for, [14.50] psychiatric injury, [14.105] quantification of, [12.190], [12.200] reasonably foreseeable, [12.120]–[12.140] reinstatement, [12.110] remoteness of, [12.120], [12.123], [12.127], [14.55], [14.510]–[14.540] test for, [14.515], [14.520] repudiation of contract, [11.200] substantial, [12.80] torts, in, [14.10], [14.50] unfair practices, [13.780] assessment of, [13.790]–[13.820] liability for, [13.830]–[13.850] limitation of action, [13.860] Death assignment of contract, [10.210] frustration of contract, [11.340] lapse of offer, [3.310], [3.320] termination of agency, [15.740] Debit card unsolicited, [13.570] Deeds — see also Contract under seal attested to, [5.25], [5.180] binding, [5.25] discharge of, [5.180] expressed, [5.180] lack of consideration, [5.25] signed, sealed and delivered, [5.25], [5.180] writing, in, [5.25] Defamation damage to one’s reputation, [14.10] Defective goods compensation for — see Compensation contributory negligence, [13.1230] goods, meaning of, [13.1200] manufacturer, meaning of, [13.1210] manufacturers’ liability, [13.1170] defences, [13.1220], [13.1230] limitation of, [13.1300], [13.1305] non-exclusion, [13.1250] safety defects, [13.1180] seller of defective goods, to, [13.1290]–[13.1305] supplier, to, [13.1290]–[13.305] work-related injuries, [13.1260] representative action, [13.1270] safety defects, [13.1180] meaning of, [13.1190] work-related injuries, [13.1260] Definitions — see Words and phrases Delegated legislation legislative instrument, [1.430] making of, [1.350]

F Index Delegated legislation — cont authority of Act of Parliament, under, [1.430] conferral of power for, [1.430] subordinate legislation, [1.430] Deposit forfeiture of, [12.332], [12.333] Directors acts of, validity of, [17.880] agent of company, [15.840], [17.850] appointment of, [17.850] board of directors, [15.840], [17.850] criminal offences by, [17.1000] definition of, [17.880] disclosure of interests, [17.1020] dishonesty of, [17.1000] disqualification of, [17.1060] duties of, [17.850], [17.890] act for proper purpose, [17.960] act in good faith, [17.890], [17.930], [17.960], [17.1000] breach of, [17.890], [17.905]–[18.920], [17.1000] penalties, [17.1010] business judgment rule, [17.930]–[17.950] care and diligence, [17.890]–[17.900] not to misuse position to gain advantage or cause detriment, [17.890], [17.970]–[17.980] not to misuse position to obtain and use information, [17.890], [17.985], [17.990], [17.1000] prevent insolvent trading, [17.1030] defence, [17.1030], [17.1035] penalties, [17.1030] use of information, [17.890], [17.1000] use of position, [17.890], [17.1000] election of, [17.850] insider trading, prohibition of, [17.1040] managing director, [17.850] number of, [18.850] powers of, [17.885] removal of, [17.1050] resignation of, [17.850] responsibilities of, [1.775] retirement from office, payments for, [17.1055] Dispute resolution alternative dispute resolution (ADR), [1.840], [1.870] methods of, [1.870]–[1.900] commercial arbitration, [1.850] advantages, [1.850] conciliation, [1.900] dispute management, [1.870] mediation, [1.890] negotiation, [1.880] District Courts jurisdiction, [1.620] civil, [1.620]

limited, [1.620] statutory, [1.620] Doctrine of frustration — see Frustration Doctrine of precedent — see Precedent Documents production of, [3.640] retention of, [3.660] Duress action for, [7.795] actual deprivation of liberty, [7.740] violence, [7.740] coerce, [7.740] consent extracted under, [7.10] contract under, [7.750] voidable, [7.740] economic, [7.770] action for, [7.795] determination of, [7.770] voidable contract, [7.770], [7.780] goods and services transactions, [7.795], [7.796] threat of deprivation of liberty, [7.740] violence, [7.740] unfair pressure, [7.795], [7.796] Duty of care — see also Standard of care advice, for, [14.280]–[14.290] assumption of responsibility, [14.330] breach of — see Breach of duty of care economic loss, for, [14.180]–[14.185], [14.250]–[14.290], [14.320] failure to warn, [14.110] mental harm, for, [14.105] negligent misstatements, for, [14.320]–[14.335] nervous shock, for, [14.105], [14.106] psychiatric injury, [14.105], [14.106] reasonably foreseeable harm, [14.57], [14.60], [14.70], [14.100]–[14.102], [14.105], [14.155], [14.160], [14.280], [14.290] relationship proximity for, [14.57], [14.70], [14.270], [14.280], [14.295] test for, [14.90] acts causing physical harm, [14.100] liability for omissions, [14.110], [14.120], [14.150] negligent acts causing mental harm, [14.105], [14.106] negligent acts causing pure economic loss, [14.180]–[14.185] negligent statements causing pure economic loss, [14.250]–[14.335] voluntary assumption of risk — see Voluntary assumption of risk

E Economic loss damages — see Damages duty of care — see Duty of care future, [14.50] liability for, [14.180]–[14.185], [14.250]–[14.290], [14.320] reasonable foreseeable, [14.185], [14.290] past, [14.50] pure, [14.180] Electronic transactions acceptance of offer electronic, [3.620] writing, in, [3.620], [3.650] certainty for, [3.720]–[3.760] consent, [3.650] documents production of, [3.640], [3.650] retention of, [3.660] electronic communications authorisation for, [3.710] dispatch of place of, [3.700] time for, [3.660] receipt of, [3.690] place of, [3.700] time of, [3.670]–[3.680] information, retention of, [3.660] regulation of, [3.600] security protocols, [3.600] signatures, [3.630], [3.650] validity of, [3.610] Employee agent, [15.30], [15.37] contract of service, under, [15.30] Employment contracts contract of service, [15.30] inequality of bargaining power, [8.460], [8.470] restraint covenants, [8.400]–[8.450], [8.480] restraint of trade, [8.400], [8.440], [8.450] void, [8.400] circumstance for, [8.400]–[8.480] Environmental protection environmental damage, [18.20] Equitable estoppel — see Promissory estoppel Equity — see also Rectification — see also Restitution principles, development of, [1.460] rules of, abrogation or modification of, [1.440] Estate agents business, [15.840] land, [15.840] real estate — see Real estate agents Estoppel — see Promissory estoppel

F Factor agent employed to sell goods, [15.790]

603

604

Concise Australian Commercial Law reckless and careless, [7.520] reliance on, [7.535] without belief in its truth, [7.520]

Factor agent — cont powers, [15.790] False or misleading representation advertisements, [13.340] land, sale or grant of interest in, [13.400]–[13.420] penalties, [13.380], [13.455] predictions, [13.450], [13.452] profitability of business activities, [13.430], [13.440], [13.455] prohibition of, [13.340] promotion and supply of goods and services, [13.330]–[13.375] profitability of business, [13.455] remedies, [13.340] Federal Circuit Court concurrent jurisdiction, [1.590] establishment of, [1.590] Federal Court of Australia appeals to High Court of Australia, [1.580] compilation of, [1.580] establishment of, [1.580] Full Federal Court, [1.580] jurisdiction of, [1.580] appellate, [1.580] concurrent, [1.580] original, [1.580] Federal government — see also Commonwealth government powers, [1.100] States, legal relationship, [1.100] Federal legal system written constitution, [1.100] Federal parliament — see Commonwealth government — see Federal government

Frustration circumstances for common objective no longer available, [11.360], [11.370], [11.390] death or illness, [11.340] destruction of subject matter, [11.350], [11.355] government intervention, [11.400], [11.410] supervening circumstances, radical difference in performance, [11.420], [11.430] supervening illegality, [11.330] circumstances not resulting in frustration, [11.440]–[11.472] conditions for, [11.315] doctrine application of, [11.310], [11.320] limitation of, [11.475]–[11.478] effect of, [11.480], [11.482] automatic termination of contract, [11.480] discharge of rights and obligations, [11.480] recovery of monies, [11.480]–[11.485] mistake distinguished, [11.310] termination of contract for, [11.10], [11.310] automatic, [11.480] determination of, [11.310], [11.313] discharge of rights and obligations, [11.480] recovery of monies, [11.480]–[11.485]

Federal tribunals and commissions establishment of, [1.660] quasi-judicial bodies, [1.660]

G

Fiduciary relationship agent/principal, [15.10]

Good faith agent, acting in, [15.10], [15.300]–[15.320] consumer contracts, [9.610]–[9.640] contract law, [18.30] duty of, [9.610]–[9.640]

Franchises void contracts, [8.490]–[8.494] Fraudulent misrepresentation action for, [7.475], [7.490] damages for — see Damages determination of, [7.490] falsity, [7.510] knowledge of, [7.520] reckless and careless, [7.520] without belief in its truth, [7.520] grounds for, [7.490] partial statement of fact, [7.490] principal, liability for, [15.600]–[15.650] remedies, [7.560] damages, [7.560] resulting damage, [7.550] statement of fact, [7.500] falsity, [7.510], [7.520] intended to be relied on, [7.530]

Gaming or wagering contracts, void, [8.160]

Goods and services pricing — see Price supply of consumer guarantees — see Consumer guarantees harassment or coercion as to, [13.640] manufacturers’ liability — see Manufacturers’ liability unsolicited, [13.580] payment for assertion of, [13.580] liability for, [13.590] Goodwill intangible asset, [16.300] protection of, [8.370]

sale of, [16.300] value of, determination of, [16.310] Governor-General executive power, exercise of, [1.100] legislative powers, [1.150] Guarantee definition, [5.340] evidenced in writing, [5.320], [5.340] unjust, [7.970]

H Harassment and coercion physical force, [13.640] supply or possible supply of goods and services, [13.640] undue, [13.640] High Court of Australia establishment of, [1.180] functions of, [1.180] highest court of appeal, [1.180], [1.570] special leave to appeal, [1.570] highest court of Australia, [1.570] judgments authoritative statements, [1.180] binding precedents, [1.180] jurisdiction, [1.570] appellate, [1.570] original, [1.570] Human rights protection of, [1.130] violation of, [18.20] Husband and wife domestic arrangements, [4.30] legally enforceable obligations, whether, [4.30]–[4.50] marital/de facto relationship, [4.50], [4.60] married women’s contractual capacity, [6.190]

I Illegal contracts — see also Contracts — see also Void contracts administration of justice, prejudicial to, [8.220] maintenance of suit and champerty, [8.270] stifle a prosecution, [8.230]–[8.260] categories for, [8.10] commission of crime, for, [8.190] common law, at, [8.10], [8.170], [8.180] commission of crime, tort or fraud on third party, [8.190] contrary to public policy, [8.170], [8.360] corruption in public life, promotion of, [8.280]–[8.300] defraud the revenue, [8.320] prejudicial to administration of justice, [8.220]

L Index Illegal contracts — cont public safety, prejudicial to, [8.310] sexual immorality, promotion of, [8.200], [8.210] consequences of, [8.530] money paid under not generally recoverable, [8.550] exceptions, [8.560]–[8.580] related transaction void, [8.590] totally void, [8.540] corruption in public life, promotion of, [8.280]–[8.300] defraud the revenue, [8.320] form, as to, [8.110], [8.120] illegality of object, for, [8.10] invalid, [8.10] misleading or deceptive conduct, effect of, [8.100], [8.105] performance, as to, [8.110], [8.130]–[8.150] incidental, where, [8.150] public safety, prejudicial to, [8.310] severance of invalid terms and promises, [8.620] sexual immorality, promotion of, [8.200], [8.210] statute, under, [8.10], [8.20], [8.110], [8.160] express prohibition, [8.30], [8.40], [8.160] form, as to, [8.110] implied prohibition, [8.50], [8.60], [8.160] non-compliance, for, [8.20] performance, as to, [8.110] statutory interpretation, [8.70]–[8.105] void under, [8.160] unenforceable, [8.10], [8.160] common law, at, [8.170], [8.190] contrary to public policy, [8.170] express prohibition, for, [8.30], [8.40] implied prohibition, for, [8.50], [8.60] void — see Void contracts void contract distinguished, [8.520] Indemnity contract indemnifying party against loss, [5.540] Independent contractor agents, [15.37] contract for service, [15.30]

request for, [3.290], [3.300] retention of, [3.660] Injunction application for, [13.730] breach of contract, for, [12.400] civil remedy, [1.790] discretionary remedy, [12.400] grant of, [12.400] prohibition of conduct, [12.400] unfair practices, for, [13.720] Innocent misrepresentation examples, [7.580], [7.590] remedies, [7.475], damages, [7.610] rescission, [7.620]–[7.640] specific performance, [7.620] untrue statement of fact, [7.570] Insider trading penalties, [17.1040]–[17.1046] prohibition of, [17.1040] Insolvent trading defences, [17.1030], [17.1035] director’s duty to prevent, [17.1030] penalties, [17.1030] Insurance contracts privity of contract exceptions, [10.50]–[10.70] Internet sales, [3.160], [3.155] offer and acceptance, [3.150], [3.155] Intoxicated persons contractual capacity, [6.180] Investment considerations, [18.130] socially responsible investing, [18.130] methods for, [18.130] Invitation to treat advertisements, [3.100]–[3.110] auction sales, [3.130] misleading of deceptive conduct, [3.120] preparation for negotiation, [3.70]–[3.90] price list circulars, [3.100], [3.110] tenders, [3.160], [3.170] window displays, [3.100], [3.110]

Indigenous inhabitants — see Aboriginal and Torres Strait Islanders

J

Industry code of conduct adherence to, [18.110] mandatory, [18.110] voluntary, [18.110] enforcement of, [18.110] prescribed, [18.110] regulation of conduct, [18.110]

Judge-made law — see Common law

Information company director’s use of — see Directors

Judiciary — see also Australian courts law-making powers, [1.210]

L Land contracts disposition of land, [5.330], [5.360]

evidenced in writing, [5.330] interests in land, [5.320], [5.370] lease, assignment of, [5.330], [5.380] part performance, [5.360]–[5.390] privity of contract exceptions, [10.75] sale of land, [5.330], [5.360] invaded, [1.50] native title — see Native title occupied, [1.50] pastoral leases, [1.90] profit à prendre, [5.330] restrictive covenants, [10.75] right to remove something from, [5.330] settled, [1.50] terra nullius, [1.50], [1.70] unoccupied, [1.50] Law civil law, [1.790] classification of, [1.580] commercial law, [1.795] common law — see Common law Commonwealth/State inconsistencies, [1.160] contract law, [2.15] criminal law, [1.790] customary law, [1.20], [1.30] definition of, [1.20] enforcement of, [1.30] foundation of, [1.97] judge-made — see Common law making, [1.20] powers, [1.100], [1.160], [1.210] mistake of, recovery of money for, [7.390], [7.400] natural law, [1.20] nature and concept, [1.20] positive law, [1.20] private law, [1.775] procedural law, [1.780] public law, [1.775] religious law, [1.20] rule of law, [1.20] sources, [1.200] primary, [1.200] secondary, [1.200] statute — see Statutes substantive law, [1.780] Law Reports authorised, [1.557], [1.720] citation of cases, [1.740], [1.750] media neutral citations, [1.760] decisions of judges, [1.720] form of, [1.730] Lease assignment of, [5.330] evidenced in writing, [5.330] specific performance, [5.380] Legal proceedings classification of, [1.780] Legal profession barristers, [1.810], [1.830] solicitors, [1.810]

605

606

Concise Australian Commercial Law Legal profession — cont functions of, [1.820] Legislation — see Delegated legislation — see Statutes Legislative instrument — see Delegated legislation Legislature — see Commonwealth government — see Federal government

acceptable quality of goods, [13.1002], [13.1170] compliance with description, [13.1002] express warranties, compliance with, [13.1002] fitness for purpose, [13.1002], [13.1170] repair and spare parts facilities, [13.1002] work-related injuries, [13.1260]

Letter of commitment legally binding, [4.220]

Market sharing penalties, [18.20]

Letters of comfort contingent liability, [4.220] legally binding determination of, [4.220] intent for, [4.220] statement of commercial intent, [4.220] subsidiary loan, for, [4.220]

Marketing misleading or deceptive conduct — see Misleading or deceptive conduct online, [13.68] disclaimers, [13.68] online endorsements, [13.68]

Liability advice, for, [14.280]–[14.290] agent, of — see Agent criminal, [14.20] failure to warn, [14.110] manufacturer, of — see Manufacturers’ liability mental harm, for, [14.105] negligence, for — see Negligence negligent misstatements, [14.320]–[14.335] omissions, for, [14.110] partners, of — see Partnership principal, of — see Principal strict, [14.10] torts, in, [14.10], [14.50] vicarious, [14.10], [14.620]–[14.650] Limited companies — see Companies Local Courts New South Wales, [1.630] South Australia, [1.630] civil jurisdiction, [1.630] Lotteries and competitions — see Competitions or lotteries

M Mabo v Queensland Australian constitutional system and, [1.70], [1.80], [1.90] Magistrates Court Victoria, Queensland, Western Australia, Tasmania, [1.630] Manufacturers’ liability consumer guarantees, under, [13.1280] damages, for — see Damages non-compliance with, [13.1280] defective goods, for — see Defective goods supply of goods and services, [13.1002]

Married women contractual capacity, [6.190] Mediation dispute resolution, [1.890] Memorandum evidence of agreement, [5.350] requirements for, [5.350] Mental harm liability for, [14.105] Mentally incapacitated persons contractual capacity, [6.180] contracts for necessaries, [6.180] liability of, [6.180] ratification of contract, [6.180] voidable, [6.180] Mercantile agents definition of, [15.790] Merger circumstances for, [11.430] deed, by, [11.430] termination of contract by, [11.430] Minors act through agent, [15.40] age of majority, [6.20] contractual capacity — see Contractual capacity misrepresentation by, [6.140] partners, as, [16.90] Misleading or deceptive conduct — see also Misrepresentation — see also Mistake advertising, [3.120], [13.61]–[13.67] online, [13.68] disclaimers, [13.68] online endorsements, [13.68] conduct, concept of, [13.170] silence, [13.170A]–[13.173] what constitutes, [13.170]–[13.172] consent by, [7.10]

consumer protection, [7.680], [13.35], [13.90]–[13.100] contract, effect on, [8.100], [8.105] defence, [13.176] definition of, [13.40] disclosure of information, lack of, [13.173] exemption clause, [13.176], [13.177] fault, [13.174] innocent, [7.475] intent, [13.174] invitation to treat, [3.120] marketing, in, [13.61]–[13.68] online, [13.68] disclaimers, [13.68] online endorsements, [13.68] meaning of, [13.60] mere puff, [3.120] mere representation, [3.120] news media exemption, [13.190] news and information, [13.190] “passing off”, [13.110], [13.120] pre-contractual representations, [13.140]–[13.160] prohibition of, [13.40] conduct in trade or commerce, [13.50] engage in misleading or deceptive conduct, [13.51], [13.52] proof of, [13.174] remedies, [7.680] civil, [7.680] penal sanctions, [7.680] Misrepresentation breach of contract for, [7.475] consent, induced by, [7.10] fraudulent — see Fraudulent misrepresentation innocent — see Innocent misrepresentation interest in land, grant of, [7.680] liability for agent, [15.590] partner, [16.520] principal, [15.590] minor, by, [6.140] negligent — see Negligent misrepresentation pre-contractual, [13.140], [13.145] remedies, [7.475], [7.680] sale of land, [7.680] supply of goods and services, [7.680] Mistake assumption, [7.20] common, [7.20] rectification for — see Rectification consent by — see Consent fact, of — see Mistake of fact frustration distinguished, [11.310] law, of, [7.390], [7.400] mutual, [7.20] operative, [7.20] pre-contractual negotiations, [7.20] qualities of subject matter, [7.20] unilateral, [7.20], [7.30]

O Index principal, of, [15.660] property damage, [14.50] proof of, [14.55] relationship proximity, [14.57], [14.70], [14.270], [14.280], [14.295] scope of, [14.40] statutory reform, [14.50] voluntary assumption of risk — see Voluntary assumption of risk

Mistake — cont rectification for — see Rectification Mistake of fact common mistake, [7.40] assumption of facts, [7.70] fundamental facts, existence of, [7.70]–[7.120] contract, for, [7.20], [7.30] effect of, [7.360] mutual mistake, [7.50], [7.130], [7.140] nature of transaction, [7.300]–[7.330] recovery of money for, [3.370], [3.380] restitution for, [3.380] subject matter, [7.40] unilateral mistake, [7.60] identity, as to, [7.200]–[7.290] promise of one party, [7.150], [7.160] proof, requirement of, [7.170], [7.180] terms of contract, [7.190] void contract, [7.360]

Negligent misrepresentation determination of, [7.690] negligent advice or information, [7.690] Negligent misstatement liability for, [14.320]–[14.335] Negotiation contract, for, [3.10] dispute resolution, [1.880] invitation to treat, [3.70]–[3.90] New South Wales Local Court, [1.630]

Mistake of law recovery of money for, [7.390], [7.400]

News media misleading or deceptive conduct — see Misleading or deceptive conduct

Mortgage unjust, [7.970]

Northern Territory native title, [1.95]

N

Novation assignment of obligations under contract, [10.140]

National Credit Code unconscionable personal credit transactions, [7.970] Native title compensation, [1.95] extinguishment of, [1.90], [1.95] legislation, [1.90] pastoral leases and, [1.90] rights and interests, [1.95] Wik Peoples v State of Queensland, [1.90] Negligence causation for, [14.55] contributory — see Contributory negligence criteria, [14.55] damages — see Damages defence to action for, [14.550] contributory negligence — see Contributory negligence voluntary assumption of risk — see Voluntary assumption of risk duty of care — see Duty of care exclusion or exemption from, [9.390] foreseeable harm, [14.60]–[14.80] reasonable, [14.60]–[14.80], [14.100]–[14.102] liability for, [14.50] economic loss, [14.50] partner, of, [16.520] personal injury, [14.50]

Nuisance use and enjoyment of property, interference with, [14.10]

O Offer and acceptance agreement, for, [2.30], [3.10] auction sales, [3.130], [3.150], [3.155] bilateral, [3.330] communication of, [3.190] contract, for, [2.30], [3.10], [3.20] counter-offer, [3.290], [3.300], [3.410] internet sales, [3.150], [3.155] invitation to treat distinguished, [3.70]–[3.120] lapse of, [3.275], [3.280] circumstances for, [3.310], [3.320] death, by, [3.310], [3.320] mere puff distinguished, [3.30]–[3.60], [3.120] mere representation distinguished, [3.120] misleading or deceptive conduct, [3.120] options, [3.210], [3.220] enforcement of, [3.210], [3.220] persons to whom offer made, [3.180] promise to keep open, [3.210], [3.220]

enforcement of, [3.210] request for information distinguished, [3.290], [3.300] rules as to acceptance, [3.330], [3.340], [3.350] absolute, [3.330] clear, [3.330] communication of, [3.330], [3.510], [3.520] electronic, [3.430], [3.530], [3.580], [3.590] instantaneous, [3.580] postal, [3.530], [3.540]–[3.570] waiver of, [3.400] determination of acceptance, [3.440] electronic, [3.430], [5.530], [3.580], [3.590], [3.620] email, by, [3.430] form of, [3.300], [3.470] inaction, [3.360], [3.370] inferred, [3.360], [3.370] intent, [3.420], [3.450], [3.460] method of, [3.530] postal acceptance rule, [3.530], [3.540]–[3.570] revocation of, [3.490] silence, [3.360], [3.370] time for, [3.500] unaware of offer, where, [3.380], [3.390] unconditional, [3.330], [3.410] valid, [3.470] who may accept, [3.480] writing, in, [3.620] rules as to offer, [3.20] determination, [3.20] implied, [3.20] intent, [3.20] oral, [3.20] proposal, [3.20] revocation of, [3.200] communication of, [3.200], [3.230]–[3.250] notice of, [3.200], [3.230]–[3.250] time for, [3.250] terms of, [3.20] what constitutes, [3.115] writing, in, [3.20] statement of information distinguished, [3.70]–[3.115] tenders, [3.160], [3.170] unilateral, [3.330], [3.400] withdrawal of, [3.200] communication of, [3.200], [3.230]–[3.250] time for, 3.250] Online advertising, [13.68] disclaimers, [13.68] online endorsements, [13.68] Online contracting binding, [9.460], [9.500] browse wrap, [9.460], [9.470], [9.500] click wrap, [9.460], [9.500]

607

608

Concise Australian Commercial Law Online contracting — cont consent, [9.490] formation of, [9.460] incorporation of terms, [9.460] reasonable notice, [9.480], [9.490] Options enforcement of, [3.210], [3.220] promise to keep offer open, [3.210], [3.220] consideration for, [3.210], [3.220]

P Parliament — see also Commonwealth government — see also Federal government — see also States and Territories law-making powers, [1.210] Parol evidence rule application of, [9.20] express terms of contract, application to, [9.20] Part performance acceptance of, [11.26], [11.26A] acts of, [5.390] equitable doctrine, [5.360] application of, [5.360] basis for, [5.360] land contracts, [5.360], [5.390] restitution for, [12.430] termination of contract for, [11.26], [11.26A] Partnership agreement for, [16.20], [16.200] content of, [16.210] implied terms, [16.210] oral, [16.210] variation of, [16.210] writing, in, [16.210] assets, [16.270] intangible, [16.300] sale of, [16.270], [16.300] definition of, [16.110] dissolution of, [16.550] agreement for, [16.550] application of property, [16.610] court, by, [16.580] final settlement of accounts, [16.640] operation of law, [16.550], [16.560] partners, by, [16.570] profit sharing after dissolution, [16.620], [16.630] elements of, [16.110] carrying on a business, [16.115]–[16.140] in common, [16.145]–[16.155] mutuality of rights and obligations, [16.145] with a view to profit, [16.160] evidence of, [16.170]–[16.190] share of profits, [16.175]–[16.190] fiduciary relationship, [16.10]

firm name, [16.100] registration of, [16.100] fixed term, expiration of, [16.260] continuance of business, [16.260] formation of, [16.10], [16.20] capacity for, [16.20] goodwill, [16.300] sale of, [16.300] value of, determination of, [16.310] guarantee, revocation of, [16.250] legal relationship, [16.10] liability of, [16.330] misapplication of trust moneys, [16.520]–[16.540] limited, [16.660] advantages of, [16.660] cessation of, [16.680] incidents of, [16.670] incorporation of, [16.680] number of members, [16.30] partners, [15.820], [16.10] authority to act, [15.820] apparent, [16.360] deed, by, [16.350] express actual, [16.340] implied actual, [16.340] not implied, where, [16.350] winding-up of partnership, during, [16.590], [16.600] bankruptcy of, [16.650] capacity to be a partner, [16.60] death of, [16.310] expulsion of, [16.211] general agents, [15.820] liability to third parties, [16.330], [16.370] crimes and civil wrongs, for, [16.470], [16.500] debts and obligations, for, [16.380]–[16.400] “holding out” as a partner, [16.460] incoming partners, [16.410] joint liability, [16.400], [16.470], [16.510] misapplication of trust moneys, [16.520]–[16.540] misrepresentation, for, [16.520] retiring partners, [16.420]–[16.450] wrongful act or omission, [16.510] limited, [16.660] rights and obligations, [16.670] minors, [16.90] negligence of, [16.520] persons of unsound mind, [16.80] relationship with each other, [16.200] variation of, [16.210] retirement of, [16.240], [16.310] notice of, [16.420], [16.440], [16.450] notice of intent, [16.240] rights and obligations, [16.200]

accountability for private profits, [16.213] debts, for, [16.380]–[16.400] determination of, [16.210], [16.211] differences between members decided by majority, [16.211] equal share of capital and profits, [16.211], [16.212] expiration of fixed term of business, [16.260] fiduciary, [16.213]–[16.230] incoming partners, [16.410] indemnity, [16.211] limited partners, [16.670] majority rule, [16.211] new members, consent to, [16.211] not to compete with firm, [16.213] participation in management, [16.211] partnership books, location of, [16.211] payments or advances, interest on, [16.211] profit sharing after dissolution, [16.620], [16.630] remuneration, [16.211] render true accounts, [16.213] retiring partners, [16.420]–[16.450] winding-up of partnership, during, [16.590], [16.600] property of, [16.270] application of on dissolution, [16.610] charging a partner’s share, [16.320] interest in, [16.290] sale of, [16.270] separate property of partner, [16.270], [16.280] use of, [16.270] rules of common law and equity, application of, [16.10] statutory rules, [16.170]–[16.190] trading partnership, [16.270] winding-up authority of partners, [16.590], [16.600] rights and obligations of partners, [16.590], [16.600] Penalties accepting payment without intent or ability to supply, [13.560] assertion of right of payment for unsolicited goods, [13.580] bait advertising, [13.550] breach of Australian Consumer Laws, [13.35] breach of contract, [12.290]–[12.331B] criminal, [13.660] determination of, [12.330]–[12.331B] director’s breach of duties, [17.1010], [17.1030]

R Index Penalties — cont false or misleading representations, [13.380], [13.455] harassment or coercion, [13.640] misleading conduct as to nature or manufacturing process of goods, [13.490] misleading conduct in relation to services, [13.520] multiple pricing, [13.627] pecuniary, [13.280], [13.710] determination of, [13.710] pre-estimated damages, [12.290] price fixing, [1.20] pyramid selling, [13.610] referral selling, [13.630] sanctions, [7.680] sending unsolicited credit or debit cards, [13.570] unauthorised entries and advertisements, [13.600] unconscionable conduct, [13.280], [13.710]–[13.713] unfair practices, [13.650] unsolicited goods, assertion of payment for, [13.580], [13.590] Performance of contract contingent conditions for, [11.100] condition precedent, [11.100]–[11.140] condition subsequent, [11.100], [11.150] exact performance, [11.20], [11.23] condition precedent, [11.20], [11.21] divisible contract, [11.22] entire contract, [11.22] part — see Part performance substantial, [11.23], [11.24A], [11.24B] termination of contract by, [11.10], [11.20] exact performance, [11.20] condition precedent, [11.20], [11.21] divisible contract, [11.22] entire contract, [11.22] substantial performance, [11.23], [11.24A], [11.24B] time for, [11.28] Personal service contract not assignable, [10.230] specific performance for, [12.360] Postal acceptance rule acceptance of offer, [3.530]–[3.570] Precedent application of, [1.557] binding, [1.540] creation of, [1.550] ratio decidendi, [1.550] court hierarchy, [1.540], [1.557] doctrine, [1.540] obiter dictum, [1.550] statement of principle, [1.550]

government policy proposals, [4.225], [4.227] gratuitous, [5.20] keep offer open, [3.210], [3.220] mistake as to, [7.150], [7.160] reversion of, [5.245], [5.270] terms of contract distinguished, [9.30], [9.40], [9.90], [9.100], [9.110]

Pre-contractual statements mere puff, [7.475], [7.480], [7.485] promissory terms, [7.480], [7.485] representations, [7.480], [7.485] Price displayed, [13.620], [13.625] multiple pricing, [13.620], [13.627] Price fixing penalties, [1.20] Principal — see also Agent agent and, [15.10] bound by acts of, [15.10], [15.200], [15.263] bankruptcy of, [15.770] disabled, [15.40] capacity to act as, [15.40] liability of, [15.10] fraud, [15.600], [15.610] fraudulent misrepresentation, for, [15.590]–[15.650] negligence, for, [15.660] wrongful acts, for, [15.600]–[15.660] trustee, [15.37] Private companies — see Companies Private law contract law, [1.775] corporations law, [1.775] private persons or organisations relationships, [1.775] property law, [1.775] torts, [1.775] trusts, [1.775] Privity of contract acquisition of rights, [10.20] breach of contract — see Breach of contract enforcement of contract, [10.20], [10.22] exceptions, [10.40] agency, [10.40] insurance, [10.50]–[10.70] property law, [10.75] trust, [10.40] principles of, [10.20]–[10.30] rights and liabilities, [10.20] Product information consumer guarantee requirements, [13.1310] defence, [13.1310]

Promissory estoppel criteria for, [5.230] detrimental reliance, [5.280], [5,282] encouragement or inducement, [5.270] equitable doctrine, [5.10], [5.230], [5.243] application of, [5.245], [5.250], [5.280] expectation or assumption, reliance on, [5.230], [5.270], [5.287] nature of, [5.230] requirements for, [5.280] unconscionable conduct, [5.270], [5.280], [5.285] Property — see also Land personal property, [1.775] private law, [1.775] real property, [1.775] Property law privity of contract exceptions, [10.75] Proprietary companies — see Companies Public companies — see Companies Public law administrative law, [1.775] constitutional law, [1.775] criminal law, [1.775] organisation of government, [1.775] Publication unauthorised entries, [13.600] Pyramid selling prohibition of, [13.610]

Q Queensland Magistrates Court, [1.630] native title, [1.70], [1.80], [1.90]

R

Product recall consumer guarantees, [13.1310]

Real estate agents duty of, [15.840] right to remuneration, [15.410]

Product safety consumer guarantees, [13.1310]

Recovery condition precedent for, [11.20]

Promise bare, [5.20] consideration, requirement of — see Consideration enforcement of, [3.210], [5.10], [5.230], [5.243] evaluation of, [5.50]

Rectification common mistake, for, [7.410], [7.440] grant of, [7.410], [7.440], [7.450] proof for, [7.410], [7.440] unilateral mistake, for, [7.450], [7.460]

609

610

Concise Australian Commercial Law Referral selling prohibition of, [13.630] Remedies civil, [1.790], [7.680] compensation — see Compensation consumer law — see Australian Consumer Law damages — see Damages injunction — see Injunction innocent misrepresentation — see Innocent misrepresentation misleading or deceptive conduct — see Misleading or deceptive conduct penal — see Penalties restitution — see Restitution specific performance — see Specific performance Representation — see also Misrepresentation country of origin — see Country of origin false or misleading — see False or misleading representation future outcomes, [13.450], [13.452] mere puff, [7.475] misleading or deceptive conduct, [3.120] pre-contractual — see Pre-contractual statements predictions, [13.450], [13.452] Restitution action in, [12.20] award of, circumstances for, [12.448] basis for, [12.440] part performance, for, [12.430] unjust enrichment, where, [12.440]–[12.446] Restraint of trade contracts, [8.360] binding, circumstance for, [8.360] contrary to public policy, [8.360] determination of, [8.510] employment, [8.400] void, [8.360]–[8.390] severance of invalid terms, [8.610] Rule of law principles of, [1.20]

S Sale of goods — see also Goods and services internet, [3.150], [3.155] offer and acceptance, [3.150], [3.155] Sale of land — see Land — see Property Securities — see Shares Shares acquisition of, [17.375] issue of, [17.375] members of company, of, [17.375]

offering, [17.375] sale of, [17.375] Small Claims Tribunals dispute resolution, [1.690] Social and domestic agreements family arrangements, [4.70]–[4.80] legally enforceable obligations, whether, [4.70]–[4.75] husband and wife domestic arrangements, [4.30] legally enforceable obligations, whether, [4.30]–[4.50] marital/de facto relationship, [4.50], [4.60] intent to create legal relations, [4.20], [4.50], [4.70]–[4.80] social arrangements, [4.70], [4.80] Sole traders companies, [17.57] Solicitors brief or instruct barrister, [1.830] functions of, [1.820] general practitioner of law, [1.820] South Australia Court of Summary Jurisdiction, [1.630] criminal jurisdiction, [1.630] Local Court, [1.630] civil jurisdiction, [1.630] Specific performance application for, [12.340] grant of, [12.340] refusal of, [12.350]–[12.390] breach of contract, [2.100] application for, [12.340] grant of, [12.340] refusal of, [12.350]–[12.390] circumstances for refusal to grant constant supervision by court, [12.370], [12.380] damages adequate remedy, [12.350] order not mutually available, where, [12.390] personal services contract, [12.360] court decree for, [12.340] equitable remedy, [1.790], [12.340] innocent misrepresentation, for, [7.620] lease, for, [5.380] sale of land, for, [12.340] unique goods, [12.340] Standard of care professionals, for, [14.480], [14.485] statutory tests, [14.480] Standard of proof balance of probability, [1.790] beyond reasonable doubt, [1.790] civil law, under, [1.790] criminal law, under, [1.790]

Stare decisis — see Precedent State courts — see Australian courts Statement invitation to treat, [3.100], [3.110], [3.120] mere puff, [3.30]–[3.60], [3.120] mere representation, [3.120] misleading or deceptive conduct, [3.120] pre-contractual — see Pre-contractual statements supplying information, [3.50]–[3.115] tenders — see Tenders States and Territories — see also Australian colonies constitution, [1.100], [1.130] courts — see Australian courts Federal government, legal relationship, [1.100] law-making powers, [1.100] parliament, [1.130] legislative powers, [1.160] residual powers, [1.160] political self-government, [1.130] separation of powers, [1.110] Statutes Acts of Parliament, [1.210] amendment of, [1.220] body of law, [1.210] codify law, [1.210] commencement of, [1.220] consolidating statute, [1.210] interpretation of — see Statutory interpretation making of, [1.210], [1.220] new laws, [1.210], [1.220] repealing, [1.210] Royal Assent, [1.210] structure of, [1.230]–[1.330] Act number, [1.240] chapters, parts or divisions, [1.320] commencement date, [1.270] definitions, [1.290] long title, [1.250] object or purpose, [1.280] schedules, [1.330] sections, [1.300] short title, [1.260] Statutory interpretation common law rules, [1.380] golden rule, [1.400] literal rule, [1.390] mischief rule, [1.410] extrinsic material, consideration of, [1.380] judiciary, by, [1.340] maxims, [1.420] precedent — see Precedent “purposive” construction, [1.360] rules or presumptions for, [1.350] Subordinate legislation — see Delegated legislation Supreme Court appeals

U Index Supreme Court — cont Court of Appeal, to, [1.610] Full Court, to, [1.610] highest court of State or Territory, [1.610] jurisdiction, [1.610] civil, [1.610] criminal, [1.610] exercise of, [1.610] original, [1.610] Suretyship evidenced in writing, [5.340]

T Tasmania Court of Petty Session, [1.630] criminal jurisdiction, [1.630] Magistrates Court, [1.630] Tenders acceptance of, [3.160], [3.170] calling for, [3.160] invitation to treat, [3.160], [3.170] Termination of contract accord and satisfaction, by, [11.80] agreement, by, [11.10], [11.30]–[11.40] breach, by — see Breach of contract discharge, by, [11.10], [11.200] express power, [11.30] frustration, for — see Frustration implied right, [11.40] mutual agreement for, [11.60] operation of law, by, [11.10], [11.510] bankruptcy, [11.520] merger, [11.530] original contract, [11.30], [11.40] cancellation of, [11.60]–[11.80] part performance, by — see Part performance performance, by — see Performance of contract release, by, [11.70] repudiation, by, [11.170] acceptance of, [11.200] anticipatory breach of contract, [11.180] conduct amounting to, [11.190], [11.193], [11.195] damages for — see Damages determination of, [11.190] effect of, [11.200] non-performance, for, [11.190] renunciation, by, [11.190] subsequent agreement, by, [11.50]–[11.90] Terms of contract acceptance of, [2.30] agreement to agree, [9.320], [9.330] ambiguity, [9.300], [9.360] breach of — see Breach of contract conditions, [9.120], [9.130], [11.270] implied, [11.270] contractual, [9.220], [9.230]

determination of, [9.10], [9.30], [9.50], [9.160] exclusion clause, [9.180], [9.220], [9.230], [9.250] ambiguity, [9.360] function of, [9.350] interpretation of, [9.340], [9.360]–[9.450] liability for negligence, exclusion or exemption from, [9.390] limitation or exclusion of liability, [9.390]–[9.410], [9.440], [9.450] reasonable notice, [9.250], [9.260]–[9.290] regulation of, [9.350] use of, [9.350] express, [9.10], [9.20], [9.120], [9.340] determination of, [9.20], [9.30] oral, [9.20] parole evidence rule, application of, [9.20] writing, in, [9.20] future performance, for, [9.320] identification of, [9.30] implied, [9.10], [9.320], [9.510] business efficacy, for, [9.530], [9.540], [9.570] court, by, [9.520]–[9.570] custom or trade usage, [9.590] duty of good faith, [9.610]–[9.640] specific types of contracts, [9.580] statute, by, [9.600] test for, [9.550], [9.560] incorporation of, [9.180] exclusion clause, [9.220], [9.250], [9.260]–[9.290] online contracting, [9.460] reasonable notice for, [9.250], [9.260] signature, by, [9.190], [9.200], [9.210], [9.240] inferred, [2.80] innominate, [9.160] interpretation of, [2.30], [9.10], [9.300], [9.310] exclusion clause, [9.340], [9.360]–[9.450] principles, [9.300] mere puff distinguished, [9.30] mistake as to, [7.30] promise distinguished, [9.30], [9.40], [9.90], [9.100], [9.110] representations distinguished, [9.30], [9.60], [9.100], [9.110] standard form contract, [13.290] uncertainty, [9.300] unfair examples, [13.310]–[13.317] meaning of, [13.300] prohibition of, [13.290] warranties, [9.120], [9.140], [9.150] what constitutes, [9.30] writing, in, [5.290] Terra nullius land belonging to no-one, [1.50]

Mabo, [1.70], [1.80] Torts breach of contract, [14.30] compensation for civil wrong, [1.775], [14.10], [14.20] damages — see Damages defamation, [14.10] liability — see Liability negligence — see Negligence nuisance, [14.10] personal or property rights, [14.10] duties, [14.10] interference with, [14.10], [14.30] protection of, [14.30] private law, [1.775] Trade Practices Act — see Australian Consumer Law Tribunals and commissions federal, [1.660] Australian Competition and Consumer Commission (ACCC), [1,660], [1,670] Australian Competition Tribunal, [1.660] State, [1.680] Small Claims Tribunal, [1.680] Trustee principal, function as, [15.37] Trusts determination of, [1.775] private law, [1.775] privity of contract exceptions, [10.40]

U Unconscionable conduct concept, [13.200] consent induced by, [7.10] doctrine, [13.230] goods and services, supply of, [13.240]–[13.260] intentional breach, [13.270] prohibition of, [7.960], [13.200] remedies, [13.210], [13.280] small business, protection of, [13.265] statutory, [13.200] unwritten law, within, [13.210]–[13.225] Unconscionable contracts common law, at, [7.870] credit contracts, [7.970] guarantee, [7.970] mortgage, [7.970] setting aside, [7.880]–[7.925] Undue influence abuse of confidence, [7.800] consent induced by, [7.10] effect of, [7.860] grant of relief, [7.800] interpretation of, [7.800] onus of proof, [7.800], [7.820]–[7.840]

611

612

Concise Australian Commercial Law oust jurisdiction of court, [8.340] prejudicial to status of marriage, [8.350] restraint of trade, [8.360]–[8.390], [8.400] restrictive trade agreements, [8.490] declaration of, [8.160] definition, [2.100] employment contract, [8.400] circumstance for, [8.400] inequality of bargaining power, [8.460], [8.470] restraint covenants, [8.400]–[8.450], [8.480] gaming or wagering, [8.160] illegal contract distinguished, [8.520] illegality, for, [8.10] minors, [6.130] accounts stated, [6.130] bill of exchange, [6.130] payment of goods, [6.130] repayment of loan, [6.130] mistake of fact, for, [7.360] money paid under, recovery of, [8.630], [8.640] restraint of trade, [8.360], [8.440], [8.450] contrary to public policy, [8.360]–[8.390] determination of, [8.510] employment, [8.400] severance of invalid terms, [8.600] restrictive trade agreements, [8.490] anti-competitive, [8.500] determination of, [8.510] franchises, [8.490]–[8.494] severance of invalid terms and promises, [8.600] considerations, [8.600], [8.610] statute, under, [8.160] unenforceable, [8.600]

Undue influence — cont presumption of, [7.800] special relationships, [7.800], [7.810] voidable contract, [7.860] Unfair practices — see also Bait advertising — see also False and misleading representation — see also Misleading or deceptive conduct — see also Unconscionable conduct accepting payment without intent or ability to supply, [13.560] advertisements — see Advertisements compensation for — see Compensation corporation liable for actions of employees, [13.670] damages — see Damages defences, [13.680], [13.700] due diligence, [13.700] reasonable mistake of fact, [13.680] reasonable precautions, [13.700] harassment or coercion, [13.640] injunction for — see Injunction misleading conduct as to employment, [13.470] misleading conduct as to nature or manufacturing process of goods, [13.490] misleading conduct in relation to services, [13.500]–[13.520] offering rebates, gifts, prizes, free items with intent not to provide, [13.480] penalties — see Penalties pricing — see Price prohibition of, [13.460] publication entries, unauthorised, [13.600] pyramid selling, [13.610] referral selling, [13.630] remedies, enforcement of, [13.650] sending unsolicited credit or debit card, [13.570] unsolicited goods, assertion of payment for, [13.580], [13.590] Unfair pressure goods and services transactions, [7.795], [7.796] Unjust enrichment restitution where, [12.440]–[12.446]

V Victoria Magistrates Court, [1.630] Void contracts — see also Capacity to contract — see also Contracts — see also Illegal contracts common law, at, [8.170], [8.330] employment contract, [8.400]–[8.480]

Voluntary assumption of risk advice, for, [14.290] awareness of risk, [14.570] defence, [14.55], [14.550], [14.570] duty of care, for, [14.290]–[14.300] economic loss, for, [14.290] reasonable foreseeable harm, [14.290] vicarious liability, [14.620]–[14.650]

W Warranties agent’s authority, breach of, [15.580] breach of, [9.120], [9.150], [11.260], [12.60] damages for, [9.120], [12.60] consumer guarantee, [13.1002] definition, [11.270] express, [13.1002], [13.1120] implied, [11.270] manufacturers’ liability, [13.1002] Western Australia Magistrates Court, [1.630]

Wife — see Married women Words and phrases Acts of Parliament, [1.210] affected person, [13.1280] agreement, [2.17] aided and abetted, [13.830] alternative dispute resolution, [1.870] bare promise, [5.20] bodies corporate, [6.170] bottom line, [18.50] browse-wrap, [9.460] but for test, [14.508] carrying on a business, [16.115] click-wrap, [9.460] comfort, [4.220] conciliation, [1.900] conduct, [13.170] contract, [2.17] coverture, [6.190] customary law, [1.20] customer, [13.1020] economic duress, [7.770] engage in, [13.51] fair, [5.40] freedom of contract, [7.10] goods, [13.1200] gratuitous promise, [5.20] holding out, [16.460] illegal, [8.10] in trade or commerce, [13.50] inhabited by no-one, [1.50] insider trading, [17.1040] invaded, [1.50] junk food, [18.120] law, [1.20] legislative instrument, [1.430] manufacturers, [13.1210] marriage brokerage, [8.350] mediation, [1.890] mercantile agent, [15.790] natural law, [1.20] necessaries, [6.40] novation, [10.140] obiter dictum, [1.550] occupied, [1.50] occupier, [1.50] passing off, [13.120] peppercorn rental, [5.40] positive law, [1.20] practical benefit test, [5.134] presumption, [4.15] profit à prendre, [5.330] proper purpose, [17.960] purposive constructive, [1.360] ratio decidendi, [1.550] reasonable person, [14.395] received, [3.690] religious law, [1.20] Royal Assent, [1.210] rule of law, [1.20] safety defects, [13.1190] sanctity of contract, [7.10] separation of powers, [1.130] settled, [1.50] simple contract, [5.20] stare decisis, [1.540] subject to contract, [3.410] terra nullius, [1.50]

W Index Words and phrases — cont triple bottom line, [18.50] unconscionable, [13.200] unfair, [13.300]

unoccupied, [1.50] unwritten law, [13.210] value, [5.40] without reserve, [3.130]

Workers compensation defective goods, manufacturers’ liability, [13.1260]

613