IEL Commercial and Economic Law in Australia, 2nd edition [POD] [2 ed.] 9041160647, 9789041160645

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Commercial and Economic Law in Australia

Commercial and Economic Law in Australia Second Edition

Eugene Clark Lynden Griggs George Cho Arthur Hoyle John McLaren This book was originally published as a monograph in the International Encyclopaedia of Laws/Commercial and Economic Law. General Editors: Roger Blanpain, Frank Hendrickx Volume Editors: Jules Stuyck, Evelyne Terryn

Published by: Kluwer Law International PO Box 316 2400 AH Alphen aan den Rijn The Netherlands Website: www.kluwerlaw.com Sold and distributed in North, Central and South America by: Aspen Publishers, Inc. 7201 McKinney Circle Frederick, MD 21704 United States of America Email: [email protected] Sold and distributed in all other countries by: Turpin Distribution Services Ltd. Stratton Business Park Pegasus Drive, Biggleswade Bedfordshire SG18 8TQ United Kingdom Email: [email protected]

DISCLAIMER: The material in this volume is in the nature of general comment only. It is not offered as advice on any particular matter and should not be taken as such. The editor and the contributing authors expressly disclaim all liability to any person with regard to anything done or omitted to be done, and with respect to the consequences of anything done or omitted to be done wholly or partly in reliance upon the whole or any part of the contents of this volume. No reader should act or refrain from acting on the basis of any matter contained in this volume without first obtaining professional advice regarding the particular facts and circumstances at issue. Any and all opinions expressed herein are those of the particular author and are not necessarily those of the editor or publisher of this volume.

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The Authors

Prof. Dr Eugene Clark is a Distinguished Professor, China University of Political Science and Law. He is also the Foundation Dean at Charlotte School of Law. His first law degree was from Washburn University in the United States where he was admitted to practice before the Kansas and United States District Courts. He also holds a PhD in law from the University of Tasmania and two Master’s Degrees in Education. Formerly he was Pro Vice-Chancellor, University of Canberra and Dean, Faculty of Law, Business and Arts, Charles Darwin University. He has written, co-authored or edited more than twenty books and over 100 journal articles, including: Managers and the Law (2nd ed.) (with Griggs et al.), and Australian Financial Institutions Law (1993, 2nd ed. 1996, with Blay) and Australian Marketing Law 1994, with Livermore). He is on the editorial boards of The Australian Business Law Review, Journal of

Contemporary Issues in Business and Government and Journal of Law and Information Science. He was also a member of the Business Law Committee of the Law Council of Australia In this edition, Eugene served as a general editor and coordinator and authored Chapter 1: General Background of the Country; Part I, Chapter 1: Concepts and Sources of Commercial Law, Chapter 3: Economic Institutions, Chapter 7 on Negotiable Instruments, and Chapter 10 on Commercial Securities

Mr Lynden Griggs is a Senior Lecturer in Law at the University of Tasmania. He has an Honours and Masters degree in law from the University of Tasmania. He is admitted as a barrister and solicitor of the Supreme Court of Tasmania and the Federal Courts of Australia. He is the Associate Editor of the Competition and Consumer Law Journal. His principle areas of interest are competition law, consumer law and property law. He has numerous publications in these areas, including the third edition of Managers and the Law (2009) and the second edition of Property Law in Principle (2008). Lynden contributed the following material: Part 1, Chapters 2 (The Economic Operators), 4 (General Obligations and Economic Operators), 6 (Bankruptcy and Related Institutions), 8 (Stock and Commodity Exchanges) and section 4 of Chapter 9 (Commercial Services). He also contributed Part II, Chapters 4 (The Law of Competition) & 5 (State Regulations of the Conditions of Commercial Transactions).

Prof. George Cho AM is a Professor of Geographic Information Systems and the Law, University of Canberra. He has an Honours Degree in Arts from the University of Malaya, a Masters Degree from the University of British Columbia and a PhD from the Australian National University (ANU). He also holds a Graduate Certificate in Higher Education from University of Canberra and an LLB from the ANU and is admitted as a Barrister and Solicitor of the Supreme Court of the ACT and NSW and the High Court of Australia. He has published numerous books and journal articles on law and geography topics, including Geographic Information Science: Managing the Legal Issues (London: John Wiley & Sons, 2005); Cyber Law: Australia. International Encyclopaedia of Laws (with E. Clark and A. Hoyle), The Hague: Kluwer Law International 2004; E-Business Law and Management for the 21st Century (with E. Clark and A. Hoyle), Canberra: Info-Sys Law International Publications 2001; Marketers and the Law (with E. Clark and A. Hoyle), Sydney: Law Book Coy. Information Services 2000); Y2K: Avoiding the Legal Byte. A Guide for Managers and Legal Assessors (with E. Clark and A. Hoyle), Sydney: Prospect Publications 1999; Geographic Information Systems and the Law, London: John Wiley & Sons, 1998. In this present Supplement on Commercial and Economic Law, George updated the material in Chapter 9 on commercial contracts, electronic contracting, and sale of goods.

Mr Arthur Hoyle ASM is a Senior Lecturer in Law and Technology at the University of Canberra. He holds a bachelor’s degree from the Australian National University, an LLB (Hons) and Master of Laws from the University of Canberra and a Graduate Diploma in Legal Practice. He is an admitted Barrister and Solicitor of the Supreme Court of the ACT and the High Court of Australia. He has over twenty years of government and legal related experience. He has published many conference papers and in several books including: Y2K: Avoiding the Legal Byte (Prospect Publishing 1999), An Introduction to Electronic Legal Research (three editions) (ILRT), Managers and the Law‚ 2nd edition (Thompson), E-Business Law and Management (Info-Sys Law 2000) and Marketers and the Law (Thompson). Arthur contributed the material on intellectual property.

John McLaren is a Senior Lecturer at James Cook University in Singapore and was formerly a senior lecturer in the Faculty of Business at the University of Wollongong, Australia. He has also been an Assistant Professor at the University and a lecturer at RMIT University in Melbourne. His first law degree was from the University of Tasmania and he practiced law in the ACT and NSW having been admitted to practice in both jurisdictions. He is also admitted as a Barrister and Solicitor of the High Court of Australia. He also holds a PhD in law from RMIT University and two Master’s Degrees from Monash University. He has written, edited, or co-authored fifteen books, twelve book chapters, and over fifteen journal articles mainly in the area of Taxation Law. Among his co-authored books are: Principles of taxation Law (Thomson Reuters), Law of Investment (Thomson Reuters). In addition to this second edition of Cyber Law, he has also been a contributor to the Australian Kluwer IEL title on Commercial Law. He has served as the joint editor of The Journal of Australian Taxation, and is now a member of the editorial board. John wrote the sections on commercial securities and the first three chapters of Part II.

Table of Contents

The Authors Preface Australian Commercial Law in a Global Context Acknowledgements List of Abbreviations General Introduction §1.

GEOGRAPHY

§2.

CULTURAL COMPOSITION

§3.

POLITICAL SYSTEM I. The Constitution and the Three Powers II. Reform of the Constitution III. States and Territories IV. Judicial Power V. Political Parties

§4.

POPULATION AND EMPLOYMENT STATISTICS

§5.

ECONOMY

§6.

SOCIAL AND CULTURAL VALUES

§7.

AUSTRALIAN LAW IN A GLOBAL CONTEXT I. Introduction: Australian Law and the Value of a Comparative Perspective II. Historical Roots III. Increasing Influence of US Law in Particular and Comparative Law Generally IV. Federal System of Government V. Growth of Federal Power VI. Australia as a National Economy VII. Role of Australia’s Geography in Commerce VIII. Australian/New Zealand Market IX. Australia as an Asian Country X. Internationalization/Globalization XI. More Competitive System XII. Enforcement of Commercial Law XIII. Increasing Focus on Prevention XIV. Law as Competitive Advantage XV. Role of Government in Commerce XVI. Outsourcing Contracting Out/Partnership Alliance Contracting XVII. Information Economy/Role of Technology and Increasing Importance of Intellectual Property XVIII. A Balanced Approach to Regulation XIX. Role of ‘Softlaw’: Standards, Codes of Practice and Private Regulation XX. Corporate Social Responsibility and Sustainability XXI. Consumerism and Consumer Law Reform XXII. Citizen Participation

§8. Part I.

CONCLUSION Commercial Law

Chapter 1. Concepts and Sources of Commercial Law §1.

HISTORICAL DEVELOPMENT

§2.

MAJOR SOURCES OF LAW

Chapter 2. The Economic Operators §1.

PERSONAL STATUS OF MERCHANTS I. Minors A. B. C. D.

II. III. IV. V. VI. §2.

Valid Contracts Voidable Contracts Void Contracts Other Matters

Bankrupts Crown Persons of Unsound Mind and the Intoxicated Married Women Corporations

PARTNERSHIPS AND CORPORATIONS I. Partnerships A. B.

Source of Law Definition and Characteristics of Partnerships

1. 2. 3. C. D. E.

Carrying on a Business Carrying on a Business in Common With a View of Profit

Creation of a Partnership Relations of Partners to Each Other Relations of Partners to Persons Dealing with Them

F.

II.

Dissolution

Partnerships and Corporations A. B. C. D. E.

Source of Law Incorporation and Its Consequences Constitution of a Company Types of Companies Company Capital

1. 2. F. G.

§3.

Share Capital Loan Capital

Management of Companies Winding Up a Company

AUSTRALIAN ECONOMIC OPERATORS IN A GLOBAL CONTEXT

Chapter 3. The Economic Institutions §1.

PROFESSIONAL ORGANIZATIONS AND CHAMBERS OF COMMERCE

§2.

ADVISORY BODIES AND COMMITTEES

§3.

COMMERCIAL COURTS AND COMMERCIAL ARBITRATION I. State Courts A. B. C. D.

II. III. IV.

Federal Courts High Court of Australia Tribunals A. B.

V. VI. §4.

Inferior Courts and Specialized Courts Intermediate Courts Supreme Courts and Intermediate Appeal Courts Commercial Lists

National or Federal Tribunals State and Territory Tribunals

Commercial Arbitration Commercial Arbitration Facilities

MISCELLANEOUS

I. II.

Public Ombudsmen Private Industry Ombudsmen

Chapter 4. General Obligations and Economic Operators §1.

IN GENERAL

§2.

REGISTRATION OF BUSINESS NAMES AND DOMAIN NAMES

§3.

CORPORATIONS

§4.

PARTNERSHIPS

§5.

LIMITED PARTNERSHIPS/INCORPORATED LIMITED PARTNERSHIPS

§6.

ASSOCIATIONS

§7.

EMPLOYERS’ SOCIAL SECURITY OBLIGATIONS

§8.

EMPLOYEES’ TAXATION OBLIGATIONS

§9.

OTHER WORK-RELATED OBLIGATIONS

§10. BANKING OBLIGATIONS §11. AUSTRALIAN GENERAL OBLIGATIONS AND ECONOMIC OPERATORS IN A GLOBAL CONTEXT Chapter 5. Business Assets, Goodwill and Commercial Property Rights §1.

IN GENERAL I. Classification of Property II. Registration of Personal Property III. Acquisition/Transfer of Business Assets

§2.

PROTECTION OF BUSINESS NAMES

§3.

INTELLECTUAL PROPERTY I. Patents A. B. C. D.

Introduction Definition What May Be Patented Two Types of Patents

1. 2. E.

Patent Procedures

1. 2. 3. 4. 5. 6. F.

II.

Extension of Term of Standard Patents Revocation of Patents Remedies for Patent Infringement Effect of a Patent Registration of Patent Interests International Registration

Patent Attorneys

Copyright A. B. C. D. E. F. G. H. I. J.

III.

Standard Patents Innovation Patents

Introduction Copyright Amendment Act 1989 Amendments since 1998 What May Be Protected by Copyright Extent of Copyright Protection Ownership and Duration of Copyright Infringement Remedies under the Copyright Act Other Remedies: Section 18 of the Australian Consumer Law International Copyright Protection

Designs A. B. C.

Introduction Design Registration Overlap with Copyright Protection

D. E.

IV.

Trademarks A. B. C. D. E. F. G. H. I.

§4.

Infringement Reform of Designs Legislation Introduction Registration of Trademarks Restrictions against Use of Certain Words Opposition to Application for Registration Effect of Registration, Infringement and Remedies Defences: Acts Not Constituting an Infringement Removal of a Trademark International Protection of Trademarks Trademark Reform

OTHER ELEMENTS OF INTELLECTUAL PROPERTY PROTECTION: COMMON LAW AND TRADE PRACTICES LEGISLATION REMEDIES I. Introduction II. Breach of Confidence III. The Tort of Passing Off IV. Intellectual Property Rights and the Trade Practices Act V. Criminal Law and Intellectual Property Rights

Chapter 6. Bankruptcy and Related Institutions §1.

BANKRUPTCY I. Introduction II. Administration and Courts III. Bankruptcy Proceedings A. B. C. D.

IV.

Debtor’s Petition Creditor’s Petition Act of Bankruptcy Position of Secured Creditors

Effect of Bankruptcy A.

Effect of Bankruptcy on the Debtor

B. C.

V.

Effect of Bankruptcy on Creditors Effect of Bankruptcy on the Debtor’s Property

Property Recoverable Pursuant to the Law Governing Antecedent Transactions A.

Provisions Protecting Third Parties

1. 2. 3. B.

Section 122: Avoidance of Preferences

1. 2. 3. 4. 5. 6. C. D. E. F.

VI. VII.

Good Faith Ordinary Course of Business Without Negligence Type of Payment In Favour of a Creditor Effect of Transaction Within Six Months Insolvency Defences

Section 121. Transfers to Defeat Creditors Section 120. Undervalued Transactions Section 12B–128C. Recovery of Superannuation Recovery of Money or Property Transferred Pursuant to a Voidable Transaction

Realization and Distribution of the Estate Termination of Bankruptcy

§2.

RELATED INSTITUTIONS I. Part IX Arrangements II. Part X Arrangements

§3.

AUSTRALIAN BANKRUPTCY LAW IN A GLOBAL CONTEXT

Chapter 7. Negotiable Instruments §1.

CHEQUES I. Introduction II. Definitions

A. B.

Drawer, Drawee, Payee, Holder, Collecting Institution, Negotiable Instrument Definition of a Cheque

1.

III. IV. V.

Requirement that a Financial Institution Pay on Demand 2. A Sum Certain in Money 3. Signatures Required on Cheques 4. Special Problems with Signatures Financial Institution Cheques and Drafts Concept of Negotiability Classification of Cheques A. B. C.

VI.

Introduction Order Cheques Bearer Cheques

Liability of Parties and Holders A. B. C.

Importance of Delivery Liability of Drawer Liability of Indorser

1. 2. 3. D. E.

In General Estoppels against Indorser Lack of Capacity of Drawer or Indorser

Liability of Transferor by Delivery Holders and Holders in Due Course

1. 2. 3. 4. 5.

VII.

Holders Possessor Holder for Value Holder in Due Course Person Taking from a Holder in Due Course Crossings A. B. C.

Open Cheque: Purpose of Crossings General or Blank Crossing Not Negotiable Crossing

D. E.

Account Payee and Other Special Crossings Multiple Crossings

VIII. Duties and Liabilities of the Drawee Institution A. B. C. D. E. F. G. H. I.

Introduction Financial Institution-Customer Contract The Financial Institution Must Observe the Mandate of Its Customer Presentment or Dishonour within a Reasonable Time Cheque as Conditional Payment Stale Cheques Countermand of Payment Estoppel of Customer Statutory Defences

1. 2. 3. 4. 5. J. K.

IX.

In General Statutory Protection Negligence of the Collecting Financial Institution Agents for Collection Collecting Institution as a Holder in Due Course

Cheques Which Are Lost or Paid Out by Mistake A. B.

XI.

Notice of Drawer’s Mental Incapacity or Death Bankruptcy or Winding Up

Duties and Defences of the Collecting Financial Institution A. B. C. D. E.

X.

Section 91 Payment of Crossed Cheques: Section 92 Payment Contrary to the Crossing: Section 93 Faulty Indorsements: Section 94 Good Faith and without Negligence

Lost Cheques Mistake

Discharge of Liabilities A. B.

In General Payment in Due Course by the Drawee Financial

C. D. E. F. G.

Institution Holder’s Renunciation of Rights Cancellation Alterations Forgery Contracting Out of Certain Provisions of the Cheques Act

1. 2. §2.

Provisions Which May Be Excluded Exclusions Which Are Not Allowed

BILLS OF EXCHANGE I. Introduction A. B. C. D.

II.

How Bills of Exchange Work A. B. C. D.

III.

Example of a Simple Trade Bill Parties to a Bill of Exchange Holders for Value Holder in Due Course

Definition and Requirements of a Bill of Exchange A. B. C. D. E. F.

IV.

Bill of Exchange Distinguished from a Cheque and Other Instruments Advantages of Bills of Exchange Source of Law Types of Bills of Exchange

In General Problems with Signatures Forged Signatures Payable on Demand or at a Fixed or Determinable Future Time A Sum Certain in Money To the Order of a Specified Person or Bearer

Negotiation A. B.

Concept of Negotiability Order Bills

1. 2.

Indorsement of Order Bills Order Bill Transferred without

3. C. D. E. F.

V.

In General Liability of Acceptor Liability of Drawer Liability of Indorser Transferor by Delivery Accommodation Party Referee in Case of Need Backers of a Bill Holder Holder in Due Course

Acceptance A. B. C. D. E. F.

VII.

Bearer Bills Duration of Negotiability Negotiation of an Overdue Bill Forged Indorsement

Liability of the Parties to a Bill of Exchange A. B. C. D. E. F. G. H. I. J.

VI.

Indorsement Forms of Indorsement

In General Types of Acceptances Examples of Qualified Acceptances Presentation for Acceptance Rules Regarding Presentation for Acceptance When Dishonour Occurs

Payment A. B. C. D. E.

In General Presentment for Payment Excuses for Delay or Non-presentment for Payment Presentment for Payment Dispensed With Time for Payment

VIII. Dishonour A. B. C. D.

In General Form of the Dishonour Noting and Protesting Payment by Bill as Conditional

E. F.

IX.

Discharge A. B. C. D. E. F. G.

X. §3.

Suing on a Bill of Exchange Damages In General Discharge by Payment Acceptor Becoming a Holder Waiver or Renunciation Cancellation Material Alteration Lost Bills

Conflict of Laws

PROMISSORY NOTES I. Definition II. Promissory Note Distinguished from a Bill of Exchange, source of Law III. Example of a Promissory Note IV. Types of Notes V. Liability of the Maker, Joint, or Joint and Several Notes

Chapter 8. Stock and Commodity Exchanges §1.

GENERAL I. Securities Market: Historical Background II. Types of Listed Securities A. B.

§2.

Securities Listed Companies

FINANCIAL MARKETS AND THEIR REGULATIONS I. Financial Markets II. Listing Rules III. Enforceability of Rules of the Exchange

§3.

GENERAL LAW APPLICABLE TO STOCK EXCHANGE TRANSACTIONS I. The Broker/Client Relationship II. Securities Trading

§4.

MARKETABLE SECURITIES LEGISLATION I. Licences II. Maintenance of Licences

§5.

CONDUCT IN RELATION TO SECURITIES I. Liability II. Insider Trading

§6.

AUSTRALIAN STOCK AND COMMODITY EXCHANGES IN A GLOBAL CONTEXT

Chapter 9. Commercial Contracts §1.

GENERAL PRINCIPLES OF CONTRACT LAW I. Definition of Contract II. Sources of Contract Law III. Principles of Contractual Formation A. B. C. D. E.

IV.

Scope of the Contract A. B.

V.

Agreement: Offer and Acceptance Consideration Intention to Create Legal Relations Formal Requirements Contractual Capacity Principles of Construction Privity: The Ambit of the Contract

Terms of the Contract A. B. C. D.

Contractual Representations and Terms Incorporation of Contractual Terms Categories of Contractual Terms Implied Terms

E. F.

VI.

Uncertain Terms Exclusion Clauses

Vitiation of Contract: Matters Affecting Contractual Assent A.

Mistake

1. 2. B. C.

Misrepresentation Inequality between the Parties

1. 2. 3. 4. 5.

VII.

6. Illegality A. B. C. D.

At Common Law In Equity General Duress Undue Influence Unconscionability: Case Law Unconscionability: Australian Consumer Law Provisions Unfair Contract Terms

Illegal as Formed and Illegal in Effect Illegality at Common Law Statutory Illegality Effect of Illegality

VIII. Termination of the Contract A. B. C. D. E. F.

IX.

In General Rescission Performance Termination by Agreement Frustration Termination of Indefinite Agreement

Remedies for Breach of Contract A. B. C.

Anticipatory Breach/Repudiation Election Damages

1. 2.

In General Causation

3. D.

Equitable Remedies

1. 2. 3. 4. E.

§2.

Types of Loss Recoverable Specific Performance Injunction Equitable Damages Other Equitable Remedies

Non-contractual Remedies

ELECTRONIC CONTRACTING I. Background to the Electronic Environment A.

II.

E-commerce: Infrastructure A. B.

III.

Contract Interpretation: Certainty Jurisdiction

Electronic Contract Formalities A. B. C.

VII.

Offer and Acceptance Consideration Intention to Create Legal Relations Formal Requirements: Notice Contractual Capacity: Minors

Scope of Electronic Contracts and Electronic Contract Interpretation A. B.

VI.

Definition Nature of the Problems

Principles of Electronic Contract Formation A. B. C. D. E.

V.

Infrastructure Consumer Issues

E-commerce and Electronic Contracting A. B.

IV.

General Electronic Contracting Issues

In General The Statute of Frauds: Signatures and Writings Encryption and Digital Signatures

Agency as it Relates to Electronic Contracting A. B.

Agency as it Relates to Electronic Contracts Electronic Auctions – eBay

C. D. E.

Trading Partner Agreements Electronic Funds Transfer Debit Cards, Charge Cards and Credit Cards

VIII. Terms of Electronic Contracts A. B. C. D.

IX. X. XI. XII. §3.

Express Terms Implied Terms Remote Terms Mandatory and Prohibitory Terms

Termination of Electronic Contracts Warranties and Remedies for Breach of Electronic Contracts E-Commerce Laws: Australia Agreements and Treaties

SALE OF GOODS I. The Sale of Goods Acts A. B. C. D. E. F.

State Sale of Goods Legislation Definition of Goods under Sale of Goods Legislation Existing Goods versus After-Acquired Goods Transfer of Title in Goods Risk of Loss Transfer of Title by a Non-owner

1. 2. 3. 4. 5. 6. 7.

Estoppel Agency Sale under a Power of Sale or Pursuant to a Court Order Unauthorized Sale by Mercantile Agent or Factor Sale by Person with Voidable Title in the Goods Seller or Buyer Retains Possession of the Goods after Contract of Sale Sale of Goods in Overt Market

G. H.

Formalities Terms Implied into Contracts for the Sale of Goods

1. 2. 3. 4.

II.

In General Implied Undertakings as to Title Sale by Description Fitness of Purpose and Merchantable Quality 5. Fitness of Goods for a Particular Purpose 6. Merchantable Quality 7. Sale by Sample Performance of Contracts under the Sale of Goods Acts A. B. C.

III.

Duties of Seller and Buyer under the Contract Rules as to Delivery of Goods Acceptance of the Goods

Remedies for Breach of Contract under the Sale of Goods Legislation A.

Rights of the Unpaid Seller

1. 2. 3. 4. 5. B.

IV.

B. C.

§4.

Remedies of the Buyer

Fair Trading Acts, the Sale of Goods Acts and the Competition and Consumer Act 2010 (CCA) A.

V.

Lien over the Goods Stopping Goods In Transitu Right of Resale Action in Debt for the Price of Goods Action in Damages for Non-acceptance

Development and Origin of a Doctrine of Unconscionability Scope of Unconscionability Broad versus Specific Regulation

International Sale of Goods

COMMERCIAL SERVICES

I.

Contracts of Distribution A. B.

In General The Restraint of Trade Doctrine at Common Law

1. 2. C. D.

The Restraint of Trade Act 1976 (NSW) Part IV of the Competition and Consumer Act 2010 (Cth)

1. 2. 3. 4. E.

II.

Nature of the Doctrine Extent of Restriction

In General Contracts Restricting Dealings or Lessening Competition Exclusive Dealing Resale Price Maintenance

Franchising

Contracts with Middlemen (Commercial Agency, Commission, Brokerage) A.

Basic Principles of Agency Law

1. 2. 3. 4. 5. 6. 7. B.

Nature of the Agency Relationship Agency Distinguished from Other Relationships Means of Creating Agency Relationships Scope of the Agency Relationship Duties of the Agent Rights and Liabilities of the Agent Termination of the Agency

Particular Kinds of Agency Relationship

1. 2. 3. 4. 5. 6.

Factors or Mercantile Agents Brokers Del Credere Agents Auctioneers Bankers Sub-agents

III.

7. Confirming Houses 8. Exclusive Agents Insurance A. B. C. D.

Nature of Insurance Indemnity Insurable Interest Formation of Contract of Insurance

1. 2. 3. E. F. G.

Construction of Insurance Contracts Privity and Insurance Contracts Duty of Disclosure

1. 2. 3. 4. H.

J.

IV.

At Common Law Basis of Contract Clauses Insurance Contracts Act 1984 (Cth)

Statutory Remedies for Misrepresentation and Failure to Disclose Industry Codes of Practice and Alternative Dispute Resolution Procedures

1. K.

At Common Law Under the Insurance Contracts Act 1984 (Cth): In General Insured’s Duty of Disclosure Insurer’s Duty to Inform

Misrepresentation

1. 2. 3. I.

The Proposal The Cover Note The Policy

Insurance Codes of Practice

The Financial Institution and Customer Relationship

Code of Banking Practice A. B.

Non-bank Financial Institutions Electronic Funds Transfer Systems (EFTs)

1. 2.

Credit and Bank Cards Debit Cards

3. 4. C.

V.

Other Electronic Financial Services

Carriage by Land, Sea and Air A. B. C. D. E. F.

In General Legislative Regulation of Common Carriers Private Carriers Federal Regulation Carriage by Railway Carriage of Goods by Sea

1. 2. G.

VI. Chapter 10.

EFT’s Code of Conduct Unsolicited Cards

Contracts of Affreightment Liability of Carriers

Carriage of Goods by Air

1. In General Australian Commercial Services in a Global Context Commercial Securities

§1.

DEFINITION OF SECURITY

§2.

CREATION OF SECURITY INTERESTS I. The Legal Mortgage: Real Property II. The Equitable Mortgage: Real Property III. The National Consumer Credit Protection Act 2009 (Cth) (National Credit Code) and the Personal Property Securities Act 2009 (Cth) IV. Company Charges V. Possessory Security Interests A. B. C.

Pledge Pawn Lien

VI.

1. General Possessory Liens 2. Particular Possessory Liens 3. Equitable Non-possessory Lien 4. Statutory Liens 5. Extinction of Lien Guarantees A. B. C.

VII. VIII. IX. X.

Negative Pledge Hire Purchase Bills of Sale Security Interests and Third Parties A.

Part II.

Definition Formalities Rights and Duties

Validity of Security Interests against Third Parties

Economic Law

Chapter 1. State Intervention in Economic Activities §1.

INSTITUTIONAL FRAMEWORK

§2.

GOVERNMENT ROLE IN THE ECONOMY

§3.

THE BANKING AND FINANCE SECTOR

§4.

FOREIGN INVESTMENT

§5.

MEDIA

§6.

FOREIGN TRADE

§7.

REGULATION OF BUSINESS I. Registration II. Occupational Health and Safety

III. IV.

Labour Regulation Competition and Consumer Regulation

§8.

TRENDS IN REFORMING THE REGULATORY FRAMEWORK I. In General II. Privatization of Government Enterprises

§9.

AUSTRALIAN ECONOMIC LAW IN A GLOBAL CONTEXT

Chapter 2. Law of Establishment and Supervision of Commercial Activities §1.

PROFESSIONAL AND TRADE REGULATION

§2.

STATE REGULATION OF THE INSURANCE INDUSTRY I. In General II. Authorization to Carry on Insurance Business III. Ongoing Prudential Requirements A. B. C. D. E.

Life Insurance Businesses General Insurance Businesses Supervision by the Australian Prudential Regulation Authority Health Insurance State Insurance

§3.

GOVERNMENT REGULATION OF THE BANKING SECTOR I. In General II. The Reserve Bank III. Prudential Supervision under the Banking Act 1959 IV. Foreign Exchange Dealings

§4.

AUSTRALIAN ESTABLISHMENT AND SUPERVISION OF COMMERCIAL ACTIVITIES IN A GLOBAL CONTEXT

Chapter 3. Commonwealth of Australia and State Incentives for Economic Activity §1.

INTRODUCTION

§2.

GENERAL INVESTMENT INCENTIVES

§3.

TRADE DEVELOPMENT ZONE

§4.

EXPORT FINANCE

§5.

EXPORT INSURANCE

§6.

RESEARCH AND DEVELOPMENT

§7.

TARIFFS

§8.

INCENTIVES PROVIDED AS PART OF DECENTRALIZATION PROGRAMMES

§9.

TAXATION INCENTIVES I. Research and Development Expenditure II. Pooled Development Funds (PDFs) III. Offshore Banking Units IV. Taxation Incentives Applicable to Specific Sectors V. Import Duty Exemptions

Chapter 4. The Law of Competition §1.

COMPETITION OR ANTITRUST LAW I. Restrictive Practices A. B. C. D. E.

Introduction Sources of Competition Law Scope of the CCA: Exemptions from Competition Law National Competition Council Australian Competition and Consumer Commission

F. G. H.

II. III.

1. In General 2. Definition of Market 3. Competition Conduct Regulated by Part IV of the Competition and Consumer Act 2010 Monopolies and Abuse of Dominant Position: Section 46: Misuse of Market Power A. B. C. D.

IV.

Australian Competition Tribunal Jurisdiction over Competition Law Matters Theoretical Underpinning of the Competition and Consumer Act 2010

Proscribed Conduct under Section 46 Substantial Degree of Market Power ‘Take Advantage’ Misuse of Market Power in the Trans-Tasman Market

Mergers and Acquisitions

§2.

LAW OF UNFAIR COMPETITION AND TRADE PRACTICES I. Section 45: Contracts, Agreements or Understandings regarding Dealings or Affecting Competition II. Section 47: Exclusive Dealing III. Section 48: Resale Price Maintenance

§3.

AUTHORIZATIONS AND NOTIFICATIONS I. Authorizations II. Notifications

§4.

ENFORCEMENT AND REMEDIES

§5.

ACCESS TO ESSENTIAL FACILITIES

§6.

PRINCIPLE OF COMPETITIVE NEUTRALITY

§7.

AUSTRALIAN COMPETITION LAW IN A GLOBAL CONTEXT

Chapter 5. State Regulation of the Conditions of Commercial Transactions §1.

PRICE AND SUPPLY REGULATION I. Price Regulation A. B. C.

II. §2.

In General Prices Surveillance Authority 1983–1996 Australian Competition and Consumer Council Takes over for the PSA

Competition and Consumer Act 2010 (Cth) (CCA) and Price Regulation

CONSUMER LAW 357 I. General Principles II. Representation of Consumer Interest and Consumer Information III. Safety of Goods and Services A. B. C. D. E. F. G.

IV.

Product Safety Standards and Product Information Product/Manufacturer’s Liability under the Competition and Consumer Act 2010 The Competition and Consumer Act 2010 – Consumer Guarantees General Contractual Remedies Tortious Remedies Enforcement and Remedies under the Australian Consumer Law Other Consumer Provisions of the CCA

Sales Promotion and Commercial Practices A. B. C.

ACL, Section 18 ACL, Sections 29–50 Unconscionability under the Competition and Consumer Act 2010

D. E.

V.

Exclusion Clauses Unfair Contracts

Consumer Credit A. B. C.

National Credit Code Application of the NCC Formalities of Credit Document

1. 2. 3. D. E.

VI. VII.

Variation of Obligations Ending and Enforcement of Obligations

Consumer Redress Miscellaneous A. B.

Environmental Rules Affecting Economic Output Consumers and Privacy

1. 2. §3.

Introduction The Principles behind Information Privacy

AUSTRALIAN STATE REGULATION OF THE CONDITIONS OF COMMERCIAL TRANSACTIONS IN A GLOBAL CONTEXT

Selected Bibliography Index

Writing Pre-contractual Disclosure and Relief from Harsh and Unconscionable Contracts Responsible Lending

Preface

This work begins with an introduction that provides readers with some background about Australia, the Australian legal system, Australia’s information and communications technology market, the extent of ecommerce activities, and government initiatives to promote e-commerce.

Australian Commercial Law in a Global Context

This book, written by five senior academics from three Australian universities, was in response to a greater realization of the importance and need for comparative law. Its main target is readers from outside Australia. I am confident that they will greatly appreciate a work, which is distinctive for its ability to present a detailed statement of Australian law that is at the same time easily comprehensible to those who come from other legal systems in other countries. At the same time, Australian readers will benefit from its concise presentation of the intricacies of Australian commercial law. The world today is a small place. Our reality is complex and multifaceted. We share many similarities but also important differences. Our societies, our laws, we ourselves are changing at an ever-faster pace. It is evident that Comparative Law and the comparative method have never been more accessible, more important, and yet more needed. By making Australian commercial law more acceptable to those outside of Australia, this work advances the study of comparative law. Each of the chapters presented in this work constitutes an exchange of ideas, insights and experiences of the Australian legal systems has it has evolved historically from the UK but also as it has been shaped by historical, social and economic forces over the past two centuries. Through such exchanges readers may learn about important differences that help to free us from wrong assumptions and enlighten readers to new ways of doing things and a richer and more diverse reality. Through the scholarship contained in this work, readers will realize that law and the study of comparative law is not about a set of rules operating in isolation. Law is a system that is deeply intertwined with the

culture, history, politics, economics, language, philosophy and all other aspects of the society in which law operates. On a broader scale, this work also raises important questions about the appropriate degree of integration and the need to balance global and local perspectives, to preserve values while finding new ways forward. More than that, we need an ongoing dialogue that uses modern technology (blogs, discussion groups, websites, databases, and all that web 2.0 and eventually the semantic web has to offer) to create smaller groups which will continue and further develop the thought and perspectives conveyed in this work. This book is a reminder of the important role that legal scholarship plays in documenting, assessing and articulating the ‘cannon of the law’. While legislators, governments and the judiciary are busy making, administering and judging the law, it is primarily, and sometimes only, the scholar who has the skills, the values and time required to investigate and reflect deeply about the nature, role and future of law in society. As the world becomes more interconnected, academics from various disciplines should focus more on comparative law and comparative research methods with the results of our research shared with governments, the profession, the judiciary and other decision makers as well as the community at large so that our efforts can make a real difference in the world. This work is thoroughly referenced and indexed and with a detailed table of contents so that readers may quickly and efficiently find what they are looking for and references to further reading. Our lives are like a landscape. We live in the midst of it, but can best take of it all in only from the vantage point of distance. By engaging with people holding different values from ourselves we learn not only about other people and their culture and laws, but just as importantly we learn about ourselves. A study of comparative law provides us with that new set of lenses through which we discover new ways of seeing the world. Similarly, this work, written for readers outside of Australia, will provide those readers with insights and perspectives gained from the legal journey Australia has made as it has increasingly sought to operate in a regional and global economy. All dollar values are in Euros and are only notional approximations for the equivalent amount in Australia. Readers should check the relevant legislation for the exact amount in Australian dollars.

Acknowledgements

The Authors acknowledge Harcourt Brace (Australia) for permission to use material originally prepared for Australian Law of Financial Institutions by Blay and Clark (1st edition, 1993, 2nd edition, 1996).

List of Abbreviations

ABIO ABC ABLR A.C. ACL ACCC ACLC ACLR ACN ACSR ACTR ADR AJR ALJ ALJR All ER ALR ALRC App APO ASIC ASLR ATC ATR

Australian Banking Industry Ombudsman Australian Bankruptcy Cases Australian Business Law Review Appeal Cases Australian Consumer Law Australian Competition and Consumer Commission Australian Company Law Cases Australian Company Law Reports Australian Company Number Australian Corporate and Security Reports Australian Capital Territory Reports Alternative dispute resolution Australian Jurist Reports Australian Law Journal Australian Law Journal Reports All England Law Reports Australian Law Reports Australian Law Reform Commission Cas Hare Appeal Cases Australian Patent Office Decisions Australian Securities and Investments Commission Australian Securities Law Reporter Australian Tax Cases Australian Tax Review

ATPR AUSTRAC ASC ATM AUSTLII BITS Ch CJ Cl.D CLR CoRep CP DLR EDI Ex Ch FCR FLR IPR ISP JBFLP JBL KB LIJ LJKB LR LR HL LR P.C. MVR NBFI NOIE NSWLR NSWR NTR

Australian Trade Practices Reports Australian Transactions Reports and Analysis Centre Australian Securities Commission Automated Teller Machine Australasian Legal Information Institute Bank Interchange and Transfer Systems Chancery Chief Justice Chancery Division Commonwealth Law Reports Coke’s Reports (UK) Common Pleas Division Dominion Law Reports Electronic Data Interchange Exchequer Reports, Chancery Division Federal Court Reports Federal Law Reports Intellectual Property Reports Internet Service Provider Journal of Banking and Finance Law and Practice Journal of Business Law Kings Bench Law Institute Journal Law Journal Reports Kings Bench Division Exch Law Reports Exchequer Law Reports House of Lords Privy Council Appeals Motor Vehicle Reports Non-banking Financial Institution National Office for the Information Economy New South Wales Law Reports New South Wales Reports Northern Territory Reports

OR

Ontario Reports

PC PIN POS QB QBD Qd R QSR SALR SASR SR (NSW) SR (NSW) St R (QD) SWIFT

British and Colonial Prize Cases Personal Identification Number Point of Sale Queens Bench Reports Law Reports, Queens Bench Division Queensland Reports Queensland State Reports South Australian Law Reports South Australian State Reports State Reports (New South Wales) EQ State Reports, New South Wales, Equity Division Queensland State Reports Society for the Worldwide Interbank Financial Telecommunications Tasmanian Law Reports Taxation in Australia Tasmanian Law Reports Trade Practices Act Trading Partner Agreement Trade Practices Commission UN Trade Data Elements Directory Victorian Law Reports Victorian Reports Western Australia Reports Western Australia Law Reports Weekly Law Reports World Wide Web

Tas LR TIA TLR TPA TPA TPC UNTDED VLR VR WAR WALR WLR WWW

General Introduction

§1.

GEOGRAPHY

1. Australia is an island continent situated in the Southern Hemisphere between the Indian Ocean and the South Pacific. Except for the coastal areas, much of Australia is dry and arid. Australia’s nearest neighbours are Papua New Guinea and Indonesia to the north, New Zealand to the southeast and the Melanesian and Polynesian Islands to the east.

§2.

CULTURAL COMPOSITION

2. Although recent migrants are more likely to be from Asia, the majority of Australians continue to be of Anglo-Saxon origin, and the dominant culture, language, manners and customs remain similar to those found in other Anglo-Saxon countries such as England, Canada and the United States (US). Australia, today, is thus a multicultural country that is home to significant numbers of migrants from many other countries, including Italy, Greece, China and Vietnam. One of the most significant of Australia’s minority groups are its approximately 200,000 indigenous inhabitants, the Aborigines, who continue to struggle for recognition, a rightful share of Australia’s considerable wealth, and educational, health and other outcomes enjoyed by the majority of Australians

§3.

POLITICAL SYSTEM

I.

The Constitution and the Three Powers

3. The Australian political system is one of democratically elected governments – general elections must be held at least once every three years. The governmental framework in Australia draws on features from both the British parliamentary system and the American checks and balances system. Like the US, Australia is a federation, comprised of a central government (the Commonwealth), six state governments and two territories. However, like Britain, Australia is a constitutional monarchy with allegiance to the Queen who maintains a representative at Commonwealth and state levels. Although generally regarded as a mere figurehead, the Queen’s representative in the Australian Commonwealth Parliament, Sir John Kerr, in 1975 dismissed then Prime Minister Gough Whitlam and called for a general election. By virtue of the Australia Acts 1986, however, Australia terminated all British control over the former colonies, which would in any way be inconsistent with Australian sovereignty. As Australia approaches the next century, there is much debate about whether Australia should become a republic and have a president. Like Britain, government is formed by the majority party in the lower house of Parliament, the leader of which serves as Prime Minister assisted by a cabinet comprised of other members of Parliament drawn from both the House of Representatives (lower house) and Senate (upper house). Like the US, membership in the House of Representatives is based upon proportion of population while the Senate is comprised of an equal number of senators (ten) from each state. 4. Australia became a federation in 1901 with the formation of the Australian Constitution,1 which gives limited powers to the commonwealth government. These powers include: foreign policy, defence, immigrations, customs, currency, weights and measures, interstate commerce, foreign and financial corporations, post and telegraphic and telephonic communications.2 All powers not specifically granted by the commonwealth constitution to the central government are reserved to the states. Thus, states continue to have power over such matters as education, justice, intrastate travel, and so on. If there is an inconsistency between state and commonwealth law, the commonwealth legislation prevails.3

Since WWII, the balance of political power has shifted markedly in favour of the federal government. This is especially so since 1942, when the Commonwealth government began collecting income tax revenue that was then re-apportioned to the states on an agreed formula. The Commonwealth government, supported by the Australian High Court, has also used its ‘external affairs’ powers to commit Australia to various treaty obligations, which have enabled the Commonwealth government in turn to override any inconsistent state laws.4 While Australia has a commendable record of economic reform over the past twenty years, the present government and many scholars5 have called for a review of Australia’s federation, tax system and overall global competitive position.6 Among the concerns is the substantially weakening of the power of the states and corresponding creeping centralism of the national government, the difficulty of amending the constitution, the constraints against greater state involvement in the federation process, the fiscal imbalance both between states and the unworkability of Australia’s present tax system, unnecessary duplication and an absence of sufficient checks and balances.

II.

Reform of the Constitution

5. The Australian Constitution can be amended only by a referendum that gains the approval of a majority of electors as a whole plus a majority of four of the six states. Despite numerous calls for reform, especially after the dismissal of Prime Minister Whitlam in 1975, Australia’s Constitution has proven to be extremely difficult to amend, with the vast majority of referendums failing to gain the required vote. Voting in Australia is compulsory, with the eligible voting age being 18 years.

III.

States and Territories

6. Australia has six states and two territories. The six states (and their capitals) are New South Wales (Sydney), Victoria (Melbourne), Queensland (Brisbane), South Australia (Adelaide), Western Australia (Perth) and Tasmania (Hobart). The Northern Territory (Darwin) and A.C.T. (Canberra) are the two territories. The state governments derive from the former British

Colonies established by British Act of Parliament. However, today, all Australian states have their own constitutions and complete political independence from Britain. All states, except Queensland, have a bicameral legislature with an upper house serving some type of review function. Queensland employs a unicameral parliament. See generally, Prime Minister of Australia, ‘White Paper on the Reform of the Federation’, Media Announcement, 28 June 2014: https://www.pm.gov.au/media/2014-0628/white-paper-reform-federation.

IV.

Judicial Power

7. The highest court in Australia is the High Court, which consists of seven justices, though it is unusual for the court to sit en banc.7 The High Court hears appeals from the state Supreme Courts, and is the final Court of Appeal in the Australian legal system. It also acts as the guardian and interpreter of the Australian Constitution. The High Court has original jurisdiction in a number of matters, such as indictable Commonwealth offences. Also on the federal level is the Family Court of Australia, which governs marriage disputes as per the Family Law Act 1975 (Cth). The Federal Court of Australia was created by the Federal Court of Australia Act 1976 and began to exercise its jurisdiction on 1 February 1977. The Federal Court of Australia has original jurisdiction in other federal matters, such as industrial law, patents, trademarks, bankruptcy and competition law or antitrust. The Federal Court sits in all capital cities as well as other locations from time to time throughout Australia. The Federal Court’s original jurisdiction is conferred by over 150 statutes of the Parliament. The Federal Court also has a broad range of appellate jurisdiction. When created the court’s jurisdiction comprised that formerly exercised in part by the High Court of Australia and the whole of the Australian Industrial Court and the Federal Court of Bankruptcy. It now hears appeals from decisions of single judges of the court and from the Federal Circuit Court of Australia (previously the Federal Magistrates Court) in nonfamily law matters. The court’s jurisdiction covers almost all civil matters arising under Australian federal law and some summary and indictable

criminal matters. It also has jurisdiction to hear and determine any matter arising under the Constitution through the operation of section 39B of the Judiciary Act 1903. The court also exercises general appellate jurisdiction in criminal and civil matters on appeal from the Supreme Court of Norfolk Island. Especially significant to contract law is the fact that the Federal Court hears cases under Australia’s Competition and Consumer Act (CCA) 2010 (Cth) as well as a broad range of cases under the Corporations Act 2001 and Australian Securities and Investments Commission Act 2001. The Federal Court shares first instance jurisdiction with the Supreme Courts of the States and Territories in the complex area of intellectual property (copyright, patents, trademarks, designs and circuit layouts).8 Appeal from the Federal Court is to the Full Court of the Federal Court and possibly to the High Court. Each of the states and territories has its own court system that is comprised of various administrative tribunals, inferior courts, a court of general jurisdiction and a Court of Appeal.

V.

Political Parties

8. Australia today has two major political parties: the Labour Party, which on most matters is further to the political left than the more conservative Liberal-National Party coalition, which ruled Australia from the 1950s through the 1970s, and again during much of the past decade. During the 1980s, the Labour Party was in the majority, led for most of that time by Robert Hawke and by Paul Keating. From 1996 through 2007, Australia was led by the Liberal-National party coalition under the leadership of John Howard. Kevin Rudd was elected Prime Minister in 2007 and replaced in June 2010 by Julia Guillard, who became Australia’s twenty-seventh Prime Minister and the first woman to win that position. In June of 2013, Mr Rudd’s party returned him to the leadership and he once again became Prime Minister. The 2013 election saw the return to government of the Liberal/National Party Coalition and the election of Tony Abbott as Australia’s Prime Minister. Three other parties attract significant but small numbers. The Democratic Party for a time had controlled the balance of power in the Federal Senate by agreeing to cast its votes with either Labour or Liberal in order to give them a

majority. The Country National party represents agricultural interests and usually forms a coalition with the conservative Liberal party. The Green party and independents supported the Labour party and enabled it to retain power in the 2010 national elections. The most recent national election also saw the emergence of the Palmer United Party led by Clive Palmer, a mining business person.9 Given the fact that the government does not control the Senate, the role of the independents has assumed increased importance as government is forced to negotiate with independents in order to gain passage of its budget and other legislative reforms,10 for example, the recent appeal of the carbon tax.

§4.

POPULATION AND EMPLOYMENT STATISTICS

9. Though occupying a land mass almost the size of the continental US, much of Australia is sparsely populated desert. Most of the population of approximately 22.4 millions dwell in the fertile coastal regions, and approximately half of the population resides in the seven capital cities. Of these capital cities, Sydney has approximately 4.6 million people, Melbourne 4.2 million, Brisbane 2.1 million, Perth 1.8 million and Adelaide 1.2 million people. Ironically, despite its large land mass and small population, Australia thus has a population density that makes it one of the most urbanized countries in the world. At the time of writing, Australia’s unemployment rate was 5.2%. Workforce participation has been stable, but needs to improve, especially in relation to the participation of older workers given Australia’s ageing population: According to published data, Australia’s overall workforce participation rate has increased over the last 25 years — from 61.3 per cent in 1980 to 64.4 per cent in 2005. While Australia’s participation rate in 2005 (the latest year for which international data are available) exceeded the average for OECD countries (60.2 per cent), it fell below that of nine other OECD countries, including Iceland, Norway, Sweden, New Zealand, Canada, Switzerland, Finland, the US and Denmark.11

Accordingly, the government has enacted a number of measures to encourage a higher participation rate and incentives to hire older workers.12

§5.

ECONOMY

10. Australia is a developed country and rich in natural resources. Farming and mining continue to be major exports along with a rapidly growing service industry and minor manufacturing. Overall, in 2013, Australia enjoys the twelfth largest economy in the world as of 2013 with an annual GDP of over a USD 1.5 trillion. Australia ranked nineteenth both in terms of exports and imports. The largest sector of the economy is the service sector (especially tourism, health and education) and followed by mining and agriculture, both of which have major impacts on national economic growth.13 On the negative side, the present Australian government is committed to reducing the debt (now AUD 60 billion), improving infrastructure and re-positioning Australia for continued success in what has been termed the ‘Asian Century’.14 According to the Heritage Economic Freedom Index, Australia ranks fourth of all countries behind Hong Kong (first),Singapore (second) and New Zealand (third). Inflation rate has been low (1.8%) and Australia attracts approximately USD 60 billion a year in direct foreign investment.15 Over the twenty years the Index has been in existence, Australia has been among the top ten in terms of overall improvement—a testament to its long-term commitment and achievements in economic reform.16 Australia’s leading farm products are cattle, wheat and wool, followed by dairy products. Australia’s major sources of economic activity include: agriculture (including forestry and fishing), mining and quarrying, manufacturing, tourism, and education and financial services (including insurance, real estate and business).17 Australia is the world’s largest exporter of wool and a major exporter of sugar, beef and wheat, rice, eggs, cotton, potatoes and vegetables. Major mining exports are bauxite, industrial diamonds, lead, copper, gold, iron ore, manganese, silver, aluminium, zinc, and nickel. Major service industries include: financial services, tourism, transport, communication, and education.

Manufacturing exports include: cars, processed foods, clothing, shoes, and household appliances. Australia also has a significant fishing industry, exporting lobsters, abalone, oysters, prawns, scallops, salmon, and tuna. Australia’s major two-way trading partners are China followed by Japan. Approximately 70% of Australia’s trade is conducted with APEC nation members.18 Australia has recently signed free trade agreements with Japan and South Korea and is well advanced in free trade negotiations with China.19 Other free trade agreements have been secured with ASEAN, New Zealand, the US, and Chile. Australia has been an active player in the G-20 and internationally through its participation in WTO and other international organizations.20 In addition it has multiple bilateral and other free trade agreements with other countries.21 As an advanced economy, Australia has also been among the leading countries in its promotion of both e-government and e-commerce. For example, Australia ranked second on the 2014 United Nations (UN) Egovernment Survey.22 It consequently has introduced and continues to work on providing the necessary legal infrastructure to promote these developments. This infrastructure includes the general promotion of egovernment as well as legislation that permits electronic contracting, public key encryption infrastructure, reforms to privacy laws, significant protection of intellectual property rights, approved National Broadband Network and government encouragement of e-health, e-commerce, moves towards electronic conveyancing, growth in electronic banking, and more. Australia is also active in various international fora related to the promotion of paperless trade and is a signatory to international agreements such as the International Cyber-Crime Treaty.23

§6.

SOCIAL AND CULTURAL VALUES

11. Australia has a mixed free enterprise economy and, as Australia has joined the world economy, it has significantly deregulated a number of industries, such as banking and aviation. Similar to many Western democracies, Australia has increasingly moved to a view of government as a

guide for general policy, as opposed to a primary deliverer of services. This has led to significant outsourcing of traditional government activities to the private sector and to a blurring of public and private sector economic activity. 12. The social and cultural values that shape and form the foundation of Australia’s legal system are found in the traditional freedoms of a free enterprise economy. These include private ownership of property and the right to make a profit from it, freedom of contract, commerce and industry to engage in any pursuit one chooses; freedom of association, whereby one is free to join with others in a commercial venture and freedom of labour, whereby one is free to contract to work in any position as mutually agreed between employer and employee. Australia’s cultural values are increasingly shaped by a global economy, as trade barriers have come down, and Australian businesses have operated on an international scale. Economic and social values have also been impacted by Australia’s rapid uptake of information technology, such as the Internet. The growth of electronic commerce has further accelerated Australia’s more global outlook and presents significant challenges to existing commercial laws, which are premised in a world of paper commerce.

§7.

AUSTRALIAN LAW IN A GLOBAL CONTEXT

I.

Introduction: Australian Law and the Value of a Comparative Perspective

13. As legal systems go, each country has got to where it is in different ways and the legal system of any particular country reflects its own unique historical cultural, social, political and economic history. While it is important to be cautious in making comparisons between laws in different countries, such comparative work is nevertheless significant and useful as a way of helping ‘outsiders’ understand both their own system as well as the one under study. In a similar way, we as individuals each select that to which we pay attention, but different people select different things. We each have blind spots but by talking with one another, collaborating and exchanging insights, we discover important things that we have missed and come closer

to grasping complex reality. By such exchanges we discover more about the ‘other’, about ourselves, and about the world in general.

II.

Historical Roots

14. Australia is a common law country and thus legal developments historically have been heavily influenced by legal reform in the United Kingdom (UK) and in more recent times by developments in the US. For example, Australian Sale of Goods legislation was heavily derived from the UK Act passed in the nineteenth century. Australia is, thus, in the common law family as distinct from the civil law systems, religious-based systems, socialist legal systems or systems based on customary law.24

III.

Increasing Influence of US Law in Particular and Comparative Law Generally

15. As Australia sought to have a more competitive economy and introduced competition law in the form of the Trade Practices Act 1974 (Cth), that legislation was heavily influenced by the US in terms of substantive provisions and to a lesser extent by the European Union (EU) in terms of its administrative framework for dealing with competition law issues. In the past decade, European competition law decisions have had a growing importance, reflecting greater attention by the EU of competition law enforcement. In a global economy a country’s legal system can be a major source of competitive advantage. Accordingly, Australia, like other countries, increasingly has taken into account legal reforms elsewhere in the world in order to try to devise the best possible legal framework to meet its needs.

IV.

Federal System of Government

16. Australia has a federal system of government. Federal systems were particularly encouraged after WWII and typically divide political power between a national government and state and local subdivisions. The US, Canada, Malaysia, Brazil, Germany, Belgium, Switzerland, Italy,

Luxembourg, Bosnia, Herzegovina, Argentina, and India each have federal systems of government. The EU itself is also a type of federal system of government. The exact form which federalism takes in a particular country depends upon its historical, social, cultural and economic context. Some countries, such as Germany and the US are strongly federalist, while in other countries, such as Venezuela, the system is ‘federal’ in its historical roots, but today is highly centralist.25 17. Australian federalism was deeply influenced in its formation by the US form of federalism. As in the US enumerated powers are given to the federal government via a constitution. Australia’s case of this division of powers occurred via the 1901 Constitution with all reserved power left to the states. Australia, however, has much weaker local government than does the US. Also, in Australia the taxing power is predominantly in the hands of the federal government thus giving it greater power than in the US. The Australian High Court and its decisions are binding on all other courts in Australia. This is different from the US where each state Supreme Court creates the common law for that state with the US Supreme Court dominant only in relation to federal or national matters. 18. While a federal system has advantages it can also lead to significant confusion as those powers enumerated in a constitution must be constantly refined and even redefined in light of new and modern developments. A federal system also means that there can be gaps and considerable overlap where powers are concurrent. There can also be considerable fragmentation and a tendency of state governments to look inward to protect their more narrow interests as opposed to outward in facilitating and strengthening Australia’s role in a global economy.26 19. The Council of Australian Governments (COAG) was established in 1992 to help promote greater cooperation among the states, territories and federal governments.27 The role of COAG is to: initiate, develop and monitor the implementation of policy reforms that are of national significance and which require cooperative action by Australian governments (for example, health, education and training, Indigenous reform, early childhood development, housing, microeconomic reform, climate change and energy,

water reform and natural disaster arrangements). Issues may arise from, among other things: Ministerial Council deliberations; international treaties which affect the States and Territories; or major initiatives of one government (particularly the Australian Government) which impact on other governments or require the cooperation of other governments.28

V.

Growth of Federal Power

20. As in the US and other federal systems, federal power has grown at the expense of lesser political divisions, for example, the states.29 Needing to respond to forces of globalization and internationalization, Australia has tended to expand federal or national power in relation to commercial matters. In many cases, this expansion has come via liberal interpretation and use of the Commonwealth foreign affairs/treating making power as well as interstate commerce power. Australia has been a signatory to most major international treaties. When an international obligation is undertaken by the federal government (e.g., Australia’s adoption of the Convention on the International Sale of Goods),30 this new obligation must be complied with by Australia’s states and territories (typically by identical legislation adopted in every Australian jurisdiction).31

VI.

Australia as a National Economy

21. The growth of the Australian economy has seen markets evolve from a state and regional basis to one that is increasingly national and international. The move to a national market in turn has led to the need to harmonize Australia’s laws among the states in order to facilitate commerce and trade. An example is Mutual Recognition legislation32 which means that a lawyer meeting the qualifications for registration in one Australian jurisdiction will have the right to register for practice in another jurisdiction.33

VII. Role of Australia’s Geography in Commerce 22. Australia is the only nation-continent whose land mass is roughly the size of the continental US. It is also a highly urbanized country with over half

of its 22+ million people living in the six capital cities all located along the coast. Accordingly, there is a significant divide between rural/country interests and those of Australia’s major capital cities. Australian commercial realities are further complicated by the fact that Western Australia and its capital city of Perth is at the extreme West and most of the other capital cities are in the East. The eastern part of Australia is home to the majority of Australia’s service and financial industries. Also in the East is Australia’s capital city, Canberra, the centre of Australia’s political and economic policies. Sydney is the largest city with approximately 5 million people followed by Melbourne with approximately 4 million. Western Australia, however, dominates the majority of Australia’s natural resources, including iron ore, gold, oil, and natural gas.34 23. The contrasting interests created by these geographic differences have led to significant debate and differences regarding Australia’s future plans for development. This in turn has often led to disagreements within the Australian Government over developmental plans. While Australia’s GDP is still dominated by its service and financial industries, the mining sector has enjoyed a sustained boom and become increasingly dependent upon exports to China. Another concern is that the smaller states like, Tasmania and South Australia are subsidized by taxes paid for by residents of the larger jurisdictions, that is, Sydney in the state of New South Wales and Melbourne in the state of Victoria.

VIII. Australian/New Zealand Market 24. The Australian and New Zealand markets have grown increasingly interdependent and linked. To facilitate this development the two countries in 1983 signed the Australia-New Zealand Closer Economic Relations Trade Agreement which promotes harmonization of the commercial laws of the two countries.35

IX.

Australia as an Asian Country

25. In 2009, China became Australia’s largest export market, exceeding

Japan. China is also Australia’s largest single country source of imports.36 Australia has thus increasingly seen itself as an Asian country and both politically and economically has expanded its trade with other Asian countries, most notably China.37 Australia is also a signatory to various regional agreements including the Asia-Pacific and Economic Co-operation Forum, South Pacific Regional Trade and Economic Co-operation Agreement. Australia has several bilateral trade agreements including agreements with Japan, Papua New Guinea.38

X.

Internationalization/Globalization

26. Australia has been an active player in the G-20 and internationally through its participation in WTO and other international organizations.39 In addition it has multiple bilateral and other free trade agreements with other countries.40

XI.

More Competitive System

27. Prior to the mid-1970s, Australian industries were often protected or sheltered from international competition. Moreover, with well over half of the population located in the six capital cities, there was tendency to monopolies and oligopolies with most industries being dominated by only a few players.41 With the introduction of competition laws which reflect most of the same provisions as US law, Australia has sought to promote a more competitive environment. This has also been achieved by the allowance of foreign competitors in industries such as aviation and banking.42

XII. Enforcement of Commercial Law 28. Australia is not as aggressive as the US in enforcing its commercial legislation. For example, in comparison to the US, Australia is far less likely to use criminal laws and sanctions/penalties in relation to economic laws. Regulatory agencies in Australia also tend to be less adversarial in relation to enforcement of commercial laws than their more aggressive US counterparts.

XIII. Increasing Focus on Prevention 29. In recent times, Australia has also focused more on prevention rather than reacting to breaches of the law. Examples of this are various guidelines43 to industry issued by the Australian Competition and Consumer Commission (ACCC: www.accc.gov.au/) and the Australian Securities and Investments Commission (ASIC: www.asic.gov.au/)

XIV. Law as Competitive Advantage 30. As mentioned above, Australia has also increasingly seen law as part of its competitive advantage.44 Policies over the last couple of decades have recognized the importance of legal regulation facilitating trade and commerce and government partnering with private sector to ensure a more competitive economy.45 In some cases, Australia has leveraged its highly regarded legal reforms in order to export legal services and expertise to other countries, for example, land title reform to other countries.46

XV. Role of Government in Commerce 31. Another important aspect of Australian commercial law is the fact that the purchase of goods and services by Australian governments accounts for approximately 25% of all commerce in Australia. Thus, government contracts and outsourcing arrangements play a major role in the Australian economy.47

XVI. Outsourcing Contracting Out/Partnership Alliance Contracting 32. With the Australian governments playing such a significant role in the economy and at the same time seeking to empower the private sector, the role of outsourcing and government-private sector partnerships are both well developed.48 For example, Australia has recently adopted detailed policies and practice guidelines for the advancement of ‘alliance contracting’ involving public-private partnership for major projects.49

XVII. Information Economy/Role of Technology and Increasing Importance of Intellectual Property 33. As an advanced economy, Australia has also been among the leading countries in its promotion of both e-government and e-commerce. It consequently has introduced and continues to work on providing the necessary legal infrastructure to promote these developments. This infrastructure includes the general promotion of e-government as well as legislation that permits electronic contracting, public key encryption infrastructure, reforms to privacy laws, significant protection of intellectual property rights, approved National Broadband Network and government encouragement of e-health, e-commerce, moves towards electronic conveyancing, growth in electronic banking, and more. Australia is also active in various international forums related to the promotion of paperless trade and is a signatory to international agreements such as the International Cybercrime Treaty,50 34. Australia’s growth in e-commerce has been substantial.51 Unfortunately, businesses in Australia have lagged somewhat behind their US and UK counterparts in initiating online shopping. The result is that many have lost significant market share to international web-based competition: The online spend that is directed towards international purchases varies between 3%-50% of the total spend in 2010, with overall estimates of online spending by households at 3%. Meanwhile in early 2011 about 25% of mobile users are shopping online with their mobile, with eBay reporting that an item is bought from a mobile every 15 seconds. The online economy is booming for some online markets with revenues increasing by up to 40% during 2010.52

XVIII.A Balanced Approach to Regulation 35. In terms of regulation Australia generally adopts a mixed approach. Government typically provides the overarching legislative framework with delegated bodies left to draft detailed regulation. Australia has also in recent

times encouraged industry self-regulation or co-regulation (public and private partnership).53 The challenge has been to achieve an optimal regulatory mix and best possible economic and political outcomes.54 36. Australia has also increasingly moved to what has been termed ‘Principles-based regulation in which the legislation provides the guiding principles with the details left to regulatory guidance documents which spell out good or best practice and the application left to the application of these general principles to specific circumstances with a focus on desired outcomes. The focus is on providing guidance to ensure compliance with given models of best practice’.55

XIX. Role of ‘Softlaw’: Standards, Codes of Practice and Private Regulation 37. The establishment and constant adaptation of standards have also played an important role in Australian commercial law. Standards – published specifications – are an invaluable worldwide resource and the process that leads to standardization is big business. Globally there are well over half a million published Standards. These are the products of over 1,000 recognized Standards development organizations worldwide. These figures do not take into account the innumerable internal Standards, which underpin any successful business. Standards Australia is an independent, not-for-profit organization, recognized by the Australian Government as the peak nongovernment Standards body in Australia. Standards Australia develops internationally aligned Australian Standards® that deliver Net Benefit to Australia and is the Australian member of ISO and IEC.56 38. There are Codes that are referenced in legislation, that adopt Australian Standards. These include the Building Code of Australia and the Food Standards Code. Please refer to these bodies responsible for these codes for further detail. Australia has been innovative, for example, in the adoption of performance standards in building codes which encourage the use of new technologies and a mix of methods as long as the specified performance standards are met. This system is far superior to and more flexible than a

traditional input’s standard that locks the industry into yesterday’s technology and adds rigidity to the system. Increasingly, too, these standards are international in nature with Australian bodies working closely with their counterparts in other advanced countries.57

XX. Corporate Social Responsibility and Sustainability58 39. Corporate responsibility and sustainability are also significant trends in contemporary Australian commercial law with the Australian Government and the private sector itself stressing the role of the corporation in society and its responsibility to multiple stakeholders such as the public and employees. This represents a slow but distinct move away from a strict view of shareholder primacy which advocates that the sole responsibility of the board of directors is to maximize returns to shareholders. An example of this new and growing emphasis on corporate responsibility is the passage in 2008 of a motion in the Australian Senate which emphasized the government’s responsibility to ‘foster a corporate culture respectful of human rights at home and abroad’.59 The concept of sustainability and legislative reforms giving greater protection to employees in the event of liquidation are also aspects of this greater emphasis on corporate responsibility.60 Various regulators such as those provided by ASIC have also been instrumental in encouraging corporate responsibility. Standards Australia also has a separate standard dealing with corporate responsibility.61 40. Sustainability, in some ways a subset of corporate responsibility, is also a commercial law theme that is gaining strength in Australia. The most obvious example of this focus on sustainability is the Gillard Government’s passage of the carbon tax.62 Corporate sustainability refers to responsible economic development that not only is environmentally responsible but committed to economic development that meets not only our present needs but also the long-term needs of generations to come.63 Sustainability reporting standards and guides have also emerged to assist corporations in Australia in reporting on their efforts to achieve sustainability.64

XXI. Consumerism and Consumer Law Reform65

41. Australia is a consumer society with consumption levels that rank it highly as such.66 As Australia’s economy has become more national and international in scope, consumer laws have moved from a patchwork of various state consumer protection laws that varied greatly to a more national regime with greater consistency among jurisdictions, though a patchwork of common law and state and federal consumer laws remains.67 Dominating this patchwork and establishing a base level of protection is Australia’s new Consumer Law. As of 1 January 2011, Australia has a single, national consumer law: Australian Consumer Law (ACL).68 The ACL includes unfair contract terms law, law guaranteeing consumer rights when buying goods and services, product safety law, law for unsolicited consumer agreements, rules for lay-by agreements and new penalties, enforcement powers and consumer redress options. The ACL applies nationally and in all states and territories.69 42. Australia’s high level of consumer consumption has been facilitated by a high level of consumer debt. Australia now has a national regime of consumer credit protection. This comes via agreement from the COAG to the passage in each jurisdiction of National Credit Code (NCC) which came into effect in various stages as of 1 July 2010. This new legislation provides for increased disclosure, relief from economic hardship, improved information and greater protection against unfair terms and enforcement related to credit contracts.70 43. In terms of regulation and consumer protection, Australia is constantly balancing the role of public versus private or self-regulation. It should also be stressed that a major goal of competition law is also to promote consumer welfare. Consumer protection is also assisted by a range of procedural remedies that enhance access to dispute resolutions related to small, often consumer related disputes. These include special streamlined and inexpensive procedures in each jurisdiction to deal with small claims, the availability of various industry ombudsmen to deal with complaints, the establishment of specialized offices in each jurisdiction71 to deal with consumer complaints, provide consumer education, procedural reform in terms of class actions/grouped proceedings and more substantial penalties for breach of consumer laws.72

XXII. Citizen Participation 44. Another dimension of Australian Government and commercial regulation is degree of citizen participation. A related issue is the degree to which information is open and available for public scrutiny. Australia’s 2010 Declaration of Open Government73 and reforms to its Freedom of Information Act74 all point to a move towards greater involvement by citizens. Similarly, Australia’s relatively advanced state of e-government also facilitates greater citizen involvement. Citizen involvement is sought on many if not most regulatory boards. Private rule-making also tends to encourage citizen participation and public comment compared with overseas counterparts is the role of citizens or other non-governmental actors in the regulatory process. For example, an important stage in the development of a standard is the Draft for Public Comment period—usually six to nine weeks. All comments of the public are considered in detail by the relevant Committee and, if necessary, further drafting is undertaken.75

§8.

CONCLUSION

45. Today, Australia operates within a global context. The world is an increasingly interconnected place, and Australia as a G-20 economic power plays a significant role in and is in turn greatly impacted by developments around the world. Australia’s legal system is a vital part of the infrastructure that enables Australia to respond to these and other changes. The above discussion will hopefully be of help to a foreign observer of the Australian legal system and enable them to contextualize the detailed discussion of Australian commercial law which follows. 46. Looking at the Australian commercial scene in a global context impacting Australian law and commerce developments, most commentators predict that Australia is comparatively in very good shape and will continue to grow. Over the past decade it has managed the Global Financial Crisis well and laid the foundations for successfully move towards a ‘Knowledge Economy’. The education system rates well on international standards and provides the foundation skills required by industry. Australia’s higher

education system also ranks highly and the safety net enjoyed by Australian residents is among the most generous and cost-effective in world. Australia has also developed a highly competitive financial, insurance and banking system. It has been successful in cultivating links with other countries and playing a significant role internationally. At time when other countries have seen their credit rating going down, Australia’s economy has seen its rating improve. The superannuation system in Australia is regarded as one of the best in the world and Australian taxes are generally low compared to most other countries. Australian Government debt is low, with the Government promising a return to surplus in the next budget. 47. While the case is strong for optimism about Australia’s commercial future there are many challenges that must be dealt with. These challenges will in most cases require a legal infrastructure and, in some cases legal reform, to deal with them. Looking into the authors’ crystal ball, below is a list of concerns interrelated legal, political and economic challenges that will be on Australia’s agenda: –

–

–

–

The challenge of government lacking a majority in the Senate. Lacking a majority in the Senate, the national government has encountered difficulty in moving ahead with clear and consistent policies. In other cases, the lack of a majority has resulted in a stalemate in which little of substance is able to be done. While Commonwealth Government debt is low by OECD standards it must be carefully watched and gradually reduced. Also the economic status of some of the poorer state governments is not nearly so rosy. Also of concern is the continual growth of consumer debt. The mining boom has resulted in a two speed or even a multi-speed economy. Those areas of economic activity connected with mining (about 20% of the economy) have been growing at 15%. Other sectors of the economy (e.g., tourism) have had very little growth at all. Compared to other countries Australia is a high-cost economy. The cost of labour is very high. Energy prices, especially, have gone up substantially. This in turn adds to the cost of our products and services and makes Australian goods and service less competitive on global markets. Australia has also gone way out in front of most other nations

–

–

–

–

– –

–

–

with the passage of its carbon tax and there is concern about possible negative economic impacts. Australia is very concerned about contagion risks. Sovereign debt in Europe and US is likely to have a significant impact on Australia. There is also concern that Australia relies too much on one country, that is, China. Should China experience a hard landing and its economy slows down substantially, Australia will be deeply impacted given our heavy reliance on our exports to China. Australia needs more investment. Few international companies have their headquarters here and major research and development efforts are unlikely to be carried out too far away from a company’s central headquarters. While Australia has made a good start, there is much work yet to be done to ramp up Australia’s knowledge economy and enable it to play a leading role in this area. It is promising that Australia is rolling out its broadband network, but it was a long-time coming and the uptake has been disappointingly slow so far and with cost overruns. E-conveyancing has been over five years in development but uncooperative federalism and divides between the larger and smaller states have made progress slow and difficult. Another challenge to the national broadband network is its relation to Telstra which has been the dominant player in Australia and whose market power is threatened by the existence of a national broadband network. Productivity performance in Australia remains too low, both in terms of productivity and efficiency of the industry as well as its workforce. Notwithstanding low productivity gains, labour costs are growing, industrial unrest threatening – all factors making it difficult for Australia to compete. Australia will need to find a way to develop a labour force that is flexible and responsive. Australia is a large and yet fragile environment. Especially serious is its shortage of water and consequent conflicts between urban and agricultural uses for both immediate and long-term sustainable needs. Indigenous Australians continue to do poorly by world standards and Australia has yet to find a successful model to enable this important group to share in the abundance and prosperity enjoyed by the majority of Australians.

– – –

–

– –

–

Key industries like education and tourism are facing growing competition, especially from other Asian countries. An over-valued Australian dollar also contributes to the international uncompetitiveness of Australian goods and services. Federal-State Relations are headed in wrong direction with special concern about the East-West divide. Australia’s ‘federal’ system of government must continue to reform so that cooperative federalism does not result in increased political conflict and division. Australia’s manufacturing sector as a whole continues to decline. A recent example is the announcement by Holden/General Motors, Ford and Toyota that they will phase out manufacturing in Australia. There has been a slump in residential/commercial construction. Australia needs to build innovation/entrepreneurship: related capacities. It has to become more facilitative of small business and work to increase foreign investment. There has been much talk of taxation reform through the Henry Commission, but as of yet not much action on this important front. Further financial reform is also required, especially in relation to how best to reduce government deficits incurred over the last ten years and how to best position the Australian economy so that it will remain competitive in the 21st Century. The Australian Government has established the Financial System Inquiry, chaired by Mr David Murray AO, and charged with: examining how the financial system could be positioned to best meet Australia’s evolving needs and support Australia’s economic growth. Recommendations will be made that foster an effıcient, competitive and flexible financial system, consistent with financial stability, prudence, public confidence and capacity to meet the needs of users.76

–

–

Australia needs to build business capabilities/workforce training/participation generally and especially to meet the needs of an Information Economy. Given that Australia is now allowing more competition, including

–

–

– –

–

– –

electronic share trading, into its public share market, government regulation needs to come to grips with and properly regulate electronic share trading in order to take advantage of the efficiencies which come from new technological developments while at the same time making sure Australia avoids the potential problems that occurred with the US flash crash. The role of financial institutions continues to be an issue. While the high profitability of the major banks is a sign of sound economic stability, consumers have been frustrated by the banks’ failure to pass on gains to consumers, whose total debt is at worrying levels. Australia needs to be more assertive in relation to WTO Anti-dumping arrangements. In contrast the Chinese, Brazilians and other countries have been more aggressive in such international trade matters. Manufacturing and service industry promotion needs greater focus in our Free Trade Agreements with other countries. When the government budget makes it back to surplus it will be important for Australia to build a sovereign wealth fund which will provides a hedge while also enabling Australia to play a more substantial economic role internationally. Effective commercial relationships also are impacted by and dependent upon a sound military presence and capability in the region. While Australia is strengthening ties with the US following a recent visit by President Obama, Australia’s Navy especially needs to enhance its capacity and increase its efficiency and effectiveness. Australia will need continuing engagement with the Asia-Pacific region and play a key leadership role in development of the region as a whole. At the same time, Australia must find a balance between its traditional strategic ties with the US and its growing economic ties, especially with China. Australia has also had underdeveloped economic relations with India, and given India’s growing strategic and economic importance, it is in Australia’s interest to strengthen economic and political ties with India and other Asian and Pacific neighbours.

In summary, every country faces challenges and the world is presently going through a particularly difficult period. At the same time, relative to most other countries, Australia remains the ‘Lucky Country’ and there is

good cause for optimism about its future prospects.

1. 2. 3. 4.

5. 6.

7. 8. 9. 10. 11.

Commonwealth of Australia Constitution Act 1900 (Imp) 63 and 64 Vic, c 12 (Imp). See Part V, s. 51 of the Australian Constitution. Australian Constitution, s. 92. See, e.g., Commonwealth of Australia v. State of Tasmania (1983) 158 CLR 1, in which the commonwealth government relied on its obligations pursuant to a world heritage area designation to block the construction of a dam. See, e.g., George Williams (2013) Australia’s Federal Future: https://app.griffith.edu.au/news/2013/10/31/broken-federal-system-needs-leadership/. See A. Malley, ‘Time to Bring Australia’s Future into Focus’ Australian Financial Review (18 Jun. 2013): http://www.afr.com/p/australia20/time_to_bring_australia_future_into_6cY65aeYIzd0kucfmr0YHL Up until 1986 it was possible to have an appeal from a state Supreme Court to the Privy Council in England. This avenue of appeal ended with the passage of the Australia Act 1986 (Cth). http://www.fedcourt.gov.au/about/jurisdiction. http://palmerunited.com/. See e.g., http://www.abc.net.au/news/2014-07-07/matthewson-how-far-will-abbott-bend-tosalvage-the-budget/5576148. J. Abhayaratna &R. Lattimore, (December 2006), ‘Workforce Participation Rates—How Does Australia Compare?’ http://search.conduit.com/ResultsExt.aspx? ctid=CT3297964&CUI=UN36756856851627772&UM=1&SearchSource=3&q=Workforce+participation+rates-how+does+Australia+compare&sspv=SLT1_NO_LOGIN_201307281317.

12. 13.

14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetRe See Australian Bureau of Statistics, Key Economic Indicators: http://www.abs.gov.au/ausstats/[email protected]/mf/1345.0. See also Measures of Australian Progress: http://www.abs.gov.au/AUSSTATS/[email protected]/mf/1370.0?opendocument#from-banner=LN. See: https://asiancentury.dpmc.gov.au/. http://www.heritage.org/index. http://www.heritage.org/index/. Economy Watch: available at www.economywatch.com/world_economy/australia/?page=full. Department of Foreign Affairs and Trade: Composition of Trade Australia. www.dfat.gov.au/publications/stats-pubs/cot-cy-2010.pdf. See http://www.dfat.gov.au/fta/. J.R. Wiseman, Global Nation: Australia? Australia and the Politics of Globalisation (Cambridge University Press 1998). T. Ciro, B. Maacitelli & S. Muthaly, Australia and the Global Economy (Connor Court Publg. 2009). http://unpan3.un.org/egovkb/Reports/UN-E-Government-Survey-2014. See generally, B. Fitzgerald et al., Internet and E-commerce Law, Business and Policy (Thomson Reuters 2010); E-government Resource Centre: www.egov.vic.gov.au/focus-on-

24. 25. 26. 27. 28. 29. 30. 31. 32.

33. 34. 35. 36. 37. 38.

39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49.

countries/australia/trends-and-issues-australia/e-government-australia.html. U. Mattei, Comparative Law and Economics (Michigan: University of Michigan Press, 1997). J. Merryman & R. Perez-Perdrmo, The Civil Law Tradition: An Introduction to the Legal Systems of Europe and Latin America (Stanford University Press 2007). D. Kozlowski & J. Weber, Federalism (Infobase Publishing, 2010). See . Ibid. P. Zavodnyik, The Rise of the Federal Colossus: The Growth of Federal Power from Lincoln to FDR (ABC-CLIO, 2011). . L. Zines, The High Court and the Constitution (Sydney: Federation Press, 2008). See ; Council of Australian Governments – Mutual Recognition Agreement: . A. Beer & A. Maude, Developing Australia’s Regions: Theory and Practice (Kensington: UNSW Press, 2003). K. O’Connor, R. Stimson & M. Daly, Australia’s Changing Economic Geography: A Society Dividing (Melbourne: Oxford University Press, 2001). This replaced an earlier New Zealand-Australia Free Trade Agreement of 1965. This new agreement also meets the requirements of a free-trade area under Art. XXIV of the GATT. Y. Huang & A. Bocchi, Reshaping Economic Geography in East Asia, (Washington DC: World Bank Publications, 2009). M. Connors, R. Davison & J. Dosch, The New Global Politics of the Asia-Pacific (Canada: Psychology Press, 2004). See generally, P. Keating, Australia, Asia and the New Regionalism (Institute of Southeast Asian Studies, 1997); B. Taylor, Australia as an Asian-Pacific Regional Power: friendships influx? (New York: Routledge, 2007). J.R. Wiseman, Global Nation: Australia? Australia and the Politics of Globalisation (Cambridge: Cambridge University Press, 1998). T. Ciro, B. Maacitelli & S. Muthaly, Australia and the Global Economy (Ballan, Vic.: Connor Court Publishing, 2009). A. Sing, Australia: Benefitting from Economic Reform (Switzerland: International Monetary Fund, 1998). G. Brennan & G. Castles, Australia Reshaped: 200 Years of Institutional Transformation (Cambridge: Cambridge University Press, 2002). See, e.g., . R. Cullen & D. Cushman, Transitions to Competitive Government (New York: SUNY Press, 2000). See generally, Porter, Michael, The Competitive Advantage of Nations (New York: Free Press, 1990). See https://dtl.unimelb.edu.au/researchfile66388.pdf. J. Aldous, M. Bini, G. Grach, M. Hill & A. Wharton, Money, Markets and Citizenship (Australia: Macmillan Education, 2006). B. Ungar, Procurement Reform (New York: Diane Publishing, 1999). See . State governments also have

50.

51.

52. 53. 54.

55. 56.

57. 58. 59. 60. 61. 62. 63.

64. 65. 66. 67. 68. 69. 70. 71. 72. 73.

policies in relation to such public-private partnerships. See, e.g., Queensland: . See generally, B. Fitzgerald, A. Fitzgerald, E. Clark, et al., Internet and E-commerce Law, Business and Policy, (Sydney: Thomson Reuters, 2010); E-government Resource Centre: . Australia – Digital Economy – E-Commerce – Trends and Statistics: . Ibid. B. Head & E. McCoy, Deregulation or Better Regulation (Melbourne: Macmillan Education, 1991). S. Arjoon, ‘Striking a Balance between Rules and Principles-Based Approaches for Effective Governance: A Risks-Based Approach’, Journal of Business Ethics 68 (2006): 53, 58; J. Black, Principles-Based Regulation: Risks, Challenges and Opportunities (London School of Economics and Political Science, 2007), 7. T. Padoa-Schippa, Regulating Finance: Balancing Freedom and Risk (New York: Oxford University Press 2004). History of Standards: . See also ‘Why Standards Matter’ available at: . In general see Standards Australia: . See generally, A. Siddique & M. Quaddas, Handbook of Corporate Sustainability: Frameworks, Strategies and Tools (UK: Edward Elgar, 2004). Australian Human Rights Commission, Business and Human Rights: . S. Tully, Research Handbook on Corporate Responsibility (UK: Edward Elgar, 2007). S. Idowu & W. Filho, Professionals’ Perspectives of Social Responsibility (Springer, 2009). . See, e.g., J. Elkington, ‘Towards the Sustainable Corporation: Win-Win-Win Strategies for Sustainable Development’, California Management Review 36, No. 2(1994): 90–100. See generally, A. Crane & D. Matten, Business Ethics (Oxford: Oxford University Press, 2004); J. Andriof & M. McIntosh (eds), Perspectives of Corporate Citizenship. (London: Greenleaf, 2001). See R. Hogarth, Sustainability Performance, . . J. Healey, Consumerism (Thirroul: The Spinney Press, 2007). See generally, S. Corones, The Australian Consumer Law (Law Book Company, 2011). See generally . Australian-Attorney-General’s Department, An Australian Consumer Law: Fair Markets— Confident Consumers, Attorney-General’s Dept., 2009. G. Pearson & R. Batten, Understanding Australian Consumer Credit Law (CCH, 2010). See, e.g., . . . Freedom of Information (Reform) Act 2010 . . http://fsi.gov.au/.

(Cth):

Part I.

Commercial Law

Chapter 1.

§1.

Concepts and Sources of Commercial Law

HISTORICAL DEVELOPMENT

48. Prior to British settlement in 1788, Aboriginal customary law existed for over 40,000 years. However, the British settlers did not recognize Aboriginal customary laws and regarded the Australian continent as land unowned by any prior group or government. It is only in the last few years that Australian governments, courts and society have recognized Aboriginal land ownership claims.77 49. The first government of the newly settled British colony of New South Wales was a military one. By 1823, however, the economic activity and the increasing arrival of ‘free’ (as opposed to convict) settlers encouraged the British government to gradually grant a democratically representative form of government to the new colony. Thus, the New South Wales Act created a form of legislature appointed by the King. However, only the Governor could propose laws and all laws had, as far as practical, to be consistent with the laws of England. By the Australian Courts Act of 1828 it was also made clear that English common law would also be applicable to the colony as far as conditions allowed. 50. As settlement spread throughout the continent, representative government was demanded and conferred as various colonies formed their own constitution and established their own legislatures (New South Wales in 1842; Victoria in 1850; Tasmania and South Australia in 1856; Queensland in 1867 and Western Australia in 1870). In 1856, England passed the Colonial Laws Validity Act which made it clear that the colonies were free to pass their own laws and were only subject to an English law specifically

passed in regard to the colonies. 51. By 1900 Australia, driven by the need for a common defence, and unified policies on such matters as immigration, customs and interstate commerce, formed a federation, the Commonwealth of Australia which came into being on 1 January 1901. The federation was comprised of a national or Commonwealth Government, situated to Canberra and six states, that is, the former colonies. Because the states had so recently won their independence from England, the founders of Australia’s Constitution were adamant that the Commonwealth Government have limited power and with traditional state powers reserved to the states. 52. As chronicled in the introduction, however, since WWII, the power of the Commonwealth Government has grown steadily. In the commercial area, particularly, there have been many that have advocated greater Commonwealth involvement and the need for harmonization of diverse, fragmentary and often conflicting state laws. Thus, aided by several key High Court constitutional interpretations, and the cooperation of the states, the Commonwealth has continued to expand its role in the regulation of business. Examples include: the Trade Practices Act 1974 (Cth), the Crimes (Taxation Offences Act 1980 (Cth), the Cash Transactions Reports Act 1988 (Cth), and the Proceeds of Crime Act 1987 (Cth). 53. Finally, with the passage of the Australia Acts 1986 Australia proclaimed its legal independence from Great Britain and removed the last vestiges of doubt concerning the power of Great Britain to pass laws in regard to its former colonies.

§2.

MAJOR SOURCES OF LAW

54. There are two major sources of law in Australia: legislation and case law or the common law. Legislation is comprised of the enacted laws of Commonwealth, state and territory parliaments. Examples of such enactments in the commercial law area include: at the federal or Commonwealth level, the CCA 2010 (Cth) and the (Cheques Act 1986 (Cth), and, at the state level,

Consumer Credit legislation which has been enacted in each Australian state and territory. Some legislation, such as the Sale of Goods Act in the various states, is enacted specifically for merchants and incorporates many of the principles from the Law Merchant, especially as it evolved in England up to the nineteenth century. Traditionally, Australian courts tended to take a ‘literal’ approach to the interpretation of statutes. However, since the 1980s, many of the states and the Commonwealth have amended their Acts Interpretation Acts to require courts to interpret statutes in such a way as to carry out the purpose for which the legislation was passed. In ascertaining the legislative purpose, courts may have regard to extrinsic material, including: reports of Royal commissions, Law Reform Commissions and Government Inquiries, reports of parliamentary proceedings, explanatory memoranda, headings, marginal notes and end notes as printed by the government printer and so on. 55. Another major facet of legislation is delegated legislation – laws made not by Parliament, but by bodies whom Parliament has delegated the authority to make laws. Delegated legislation includes the regulations of various government departments and instrumentalities and by-laws of local government. 56. Case law or common law includes the vast body of common law which originated from England as well as law created by Australian judges, both in deciding new cases and in the interpretation of statutes made by Parliament. All jurisdictions have an Acts Interpretation Act that guides the courts in this process. While Parliament, representing the electorate, is the supreme law making body in Australia, Australian courts are given the power to determine the constitutionality of legislation and interpret statutes of parliament as they apply to a particular case in controversy. In particular areas of the law, such as contract law and banking law, Australian courts give considerable weight to business custom and practice. As a common law country, Australian courts follow a system of precedent that requires a court to follow the past decisions made by higher courts in similar cases.

77.

Mabo v. Queensland (No. 2) (1992) 175 CLR 1; 66 ALR 408. See also, F. Brennan, ‘The Implications of the Mabo Decision, Reform, Issue 65, Autumn 1993. See also Wik Peoples v. State of Queensland (1996) 141 ALR 129 (Held that native title was not extinguished by legislation which granted or authorized the granting of pastoral leases which did not confer on the grantee rights exclusive of indigenous peoples.).

Chapter 2. §1.

The Economic Operators

PERSONAL STATUS OF MERCHANTS

57. Under both common law and statute law in Australia there are certain classes of people who lack full legal capacity. As a result they are incapable, wholly or in part, of entering enforceable contracts.

I.

Minors

58. At common law a person was considered an infant until the age of 21 years. Today, all jurisdictions in Australia have enacted legislation which confers full contractual capacity at the age of 18 years.78 ‘The legislation is matched by other legislation which gives 18-year-olds the right to vote, buy liquor, become a company director, marry, divorce, and make a will’.79 People under the age of 18 years, called minors, are considered to require the protection of the law. The basis for this intervention is a deemed view that minors lack the necessary experience or understanding to appropriately enter into contracts. 59. Minor’s contracts can be classified as valid, voidable, or void.

A.

Valid Contracts

60. At common law two types of contracts with minors are enforceable, those for the supply of necessaries and employment contracts.80 The term necessaries refer to goods reasonably necessary for the station in life of the particular minor and his/her actual requirements at the time of sale or delivery.81 These items will vary according to the minor, but include goods such as food, clothing, accommodation, medical services and education.

Necessaries have been held not to include fancy waistcoats, an antique goblet. 61. Beneficial contracts of service are contracts to supply the minor with a service, such as an apprenticeship, which taken as a whole are for the minor’s benefit.82 An example of a beneficial contract of service includes a contract by an infant billiards professional to go on a joint tour with a more experienced professional.83 Another example is where Michael Chaplin (the son of Charlie) entered into a contract to publish Michael’s autobiography. This was enforceable against Michael.84

B.

Voidable Contracts

62. Voidable contracts are valid and binding upon the minor unless he/she repudiates them during his/her minority or within a reasonable time of attaining his/her majority.85 The other party is bound by the contract if the minor wishes to continue with it. The effect of repudiation is to relieve the minor of future liability.86 Money paid under the contract can only be recovered if there is a total failure of consideration.87 Voidable contracts are restricted to those through which the minor acquires an interest of a permanent nature such as purchase and lease of land, purchase of shares in a company, marriage settlements and partnerships.88

C.

Void Contracts

63. Legislation in some Australian states amends the common law relating to void minor’s contracts. The common law provides that these will not be binding unless ratified. In New South Wales, the contract is binding if seen to be for the benefit of the minor at the time of participation.89 In South Australia, the Minors Contracts (Miscellaneous Provisions) Act 1979 the common law prevails (i.e., the contract is not enforceable unless for necessaries or employment) unless: (1) (2)

the contract is ratified by the minor upon turning 18 years; a guarantor to a minor contract can be held liable;

(3) (4) (5)

a minor can seek to approve a contract that would otherwise be unenforceable; property may be returned to the minor; and an agent can be appointed to act as an agent of a minor.

64. In Tasmania, guarantors of a minor’s contract can be held liable even though the minor’s contract is void.90 In Victoria, contracts for the payments of goods supplied, for the repayment of money lent and liability on accounts stated cannot be enforced against a minor.91 In Western Australia, the Northern Territory and the Australian Capital Territory, ratification of a minor’s contract upon turning 18 years will be effective.92

D.

Other Matters

65. In relation to partnerships it should be noted that whilst a minor may enter into a partnership agreement, during his/her minority a minor may avoid any liability incurred in the ordinary course of the partnership business.93 The co-partners would be personally liable to the firm’s creditors without any right of contribution from the minor.94 66. Also, the Sale of Goods Acts of the various states provide that capacity to buy and sell is regulated by the general law of capacity.95

II.

Bankrupts

67. A bankrupt is able to contract. However, any third party contracting with the bankrupt is at a serious disadvantage. As title to the property once owned by the bankrupt is vested in the Official Trustee in Bankruptcy, the bankrupt has no assets against which a judgment could be enforced.96

III.

Crown

68. Legislation provides that the Crown can sue and be sued.97 This overcomes the common law position.

IV.

Persons of Unsound Mind and the Intoxicated

69. The contract of a lunatic or a person intoxicated by alcohol or drugs is binding upon him/her unless he/she can prove that he/she did not understand the nature of the contract, and that the other party was aware, or ought to have been aware, of his/her impaired condition.98 If these matters are proved the contract is voidable at the option of the lunatic or drunken person provided he/she repudiates the contract within a reasonable time of regaining his/her sanity or sobriety.99 If the contract is made during a lucid period, or is affirmed after a period of mental instability or drunkenness, it will be valid.100 Under the Sale of Goods Acts a lunatic or drunken person is liable to pay a reasonable price for necessaries purchased by him/her.101 However, if because of the unsoundness of mind or intoxication, the person cannot give consent to the contract, then the contract is voidable.102

V.

Married Women

70. In the past at common law the contract of a married woman was void. A married woman had no legal personality separate from her husband and therefore she had no contractual capacity. Today, there is legislation in force in all states which gives a married woman full contractual capacity.103 The acts provide that a married woman may render herself liable in respect of her separate estate, that is, property held by her in her own right.

VI.

Corporations

71. A corporation has a legal existence separate from its members and hence has the capacity to contract.104 A corporation can sue, be sued, and hold property.105 The fact that a contract is outside of the objects of the company does not render it invalid.106 72. Prior to incorporation promoters of a company may enter into contracts, purportedly on behalf of the company to be formed. The ratification of preincorporation contracts is governed by sections 131–133 of the Corporations Act 2001.

§2.

PARTNERSHIPS AND CORPORATIONS

I.

Partnerships

A.

Source of Law

73. The law relating to partnerships in Australia is contained in the practically uniform Partnership Acts in each state.107 These acts largely codify judicial decisions. Further, they expressly preserve the rules of equity and of common law, applicable to partnerships, in so far as they are not inconsistent with the Act.108

B.

Definition and Characteristics of Partnerships

74. Partnerships are a common form of business organization in Australia, and they are particularly suited to small family enterprises and associations of professionals. Compared with corporations, they have the advantages of informality and inexpensiveness of creation, plus an absence of formal public registration of documents. The major disadvantage is that each partner may face an unlimited liability for the debts and obligations of the firm. Australian states and territories also permit the use of limited partnerships and incorporated limited partnerships as an alternative to partnerships or incorporations.109 75. According to the Partnership Acts a partnership is ‘the relation which subsists between persons carrying on business in common with a view of profit’.110 To satisfy this definition: (1) (2) (3)

a business must be carried on; it must be carried on by persons in common; and there must be a view to profit.

All three elements must exist for a partnership to be established.111

1.

Carrying on a Business

76. The Act defines business as ‘every trade, occupation or profession’.112 This is so defined to exclude the sale of jointly owned house or a joint investment in a unit trust from the definition of partnership. The words ‘carrying on business’ suggest an active occupation or profession continuously carried on.113 Normally, an isolated act or undertaking (such as a single purchase or sale of property) is insufficient, unless there is some intention of repetition.114 However, under certain circumstances a single joint venture may involve the carrying on of a business.115 An agreement to carry on a business is generally not sufficient.116

2.

Carrying on a Business in Common

77. It is not necessary that all the partners take an active role in the running of the business, provided that the business is being carried on by, or on behalf of, all the partners. The essential characteristic of a partnership is the mutuality of rights and obligations amongst partners. Each partner is both a principal and agent for all the other partners.117

3.

With a View of Profit

78. This requirement excludes organizations such as sporting clubs and cultural societies from the concept of partnership because their objects are not directed to the acquisition of financial gain.118 If a profit is made it is incidental and no member has a right to demand a share in the profits, nor are they liable for the losses of the club beyond their subscription.119 79. In addition, the Partnership Acts set out other rules to which regard shall be had in determining whether or not a partnership exists.120 First, coownership does not of itself create a partnership. This reiterates the requirement of ‘carrying on a business’. Second, sharing of gross returns does not of itself create a partnership. Co-owners of property sharing rent are not partners by reason alone of receipt and division of the profits.121 Third, sharing of net profits is prima facie evidence of a partnership. Although sharing of profits creates a strong presumption that a partnership exists it is not conclusive evidence. The court will look at the real intention of the

parties and the contract between them.122 The Act specifies five circumstances where a receipt of part of the profits of a business will not constitute a partnership: payment of a debt out of profits; payment of an employee or agent by a share of the profits; receipt of part of the profits from a deceased partner’s estate; protection of a bona fide creditor that is, without powers of discretion and control; and purchase of a business being financed by the vendor out of goodwill.123

C.

Creation of a Partnership

80. There are no formal requirements for the creation of a partnership. Any two or more persons may become partners provided they have legal capacity. A partnership may be created by express agreement, whether in the form of a deed, a written document, or orally, or it may be implied from the conduct or dealings of the parties. The stated intention of the parties is not conclusive. A court may, upon examination of all the circumstances, declare a relationship to be a partnership even though this is contrary to the declared intentions of the parties.124 Likewise, the parties may call themselves a partnership but a court may hold that they do not satisfy the legal criteria. 81. There are a number of limitations on the formation of a partnership. It may be necessary to register the business name under the national business names legislation125 if the names of all the partners are not to be used. The partnership must be legal. It must comply with restrictions as to size of membership, it must not carry on a business which is illegal or contrary to public policy, and no partner must be an enemy alien.

D.

Relations of Partners to Each Other

82. It is common, and indeed advisable, for partners to have a written agreement which stipulates the rights, liabilities and duties of the partners. In the absence of an agreement, or subject to any agreement to the contrary, the Partnership Acts set out the rules to be followed in determining the rights of the partners.126 These include: an equal sharing of profits and losses; a right to indemnity for costs arising out of the ordinary course of the business; an

entitlement to take part in management; no entitlement to wages; the introduction of new partners must be unanimous; dispute settlement may be decided by a majority; and the right of access to partnership books and records.127 In addition, expulsion of a partner by the majority is only possible if there is an express term to that effect in the partnership agreement.128 Also, the variation of a partnership agreement requires the unanimous consent of the partners.129 83. A partnership is a fiduciary relationship which is governed by mutual trust and confidence. The rules of equity and the common law are preserved by the Partnership Acts. In addition, the acts specify the fiduciary duties of a partner. First, there is a duty to render accounts.130 Every partner must keep an accurate account of his/her dealings on behalf of the firm and supply full information to all the partners on any matter which could affect the partnership.131 Second, there is a duty to account for private profits.132 A partner must account to his/her co-partners for profits he/she makes without their knowledge and consent, or as a result of information gained during the course of the partnership.133 Third, a partner must refrain from competition with his/her firm.134 He/she must not set up a business of the same kind as the firm, nor is he/she entitled to make a secret profit from his/her position as a partner.135 84. Finally, partnership property must be held and applied exclusively for the partnership.136 The distinction between partnership property and private property is relevant in the case of death, bankruptcy, insolvency or dissolution. Whether property is partnership property is a question of the intention of the parties.137 The Partnership Acts suggest that partnership property is property originally brought into the partnership, or acquired for the purposes of the firm, or property acquired with the firm’s money.138

E.

Relations of Partners to Persons Dealing with Them

85. Every partner is an agent of the firm and his/her co-partners.139 Whether a partner has implied authority to bind the firm will depend upon whether he/she acted within the scope of the kind of business carried on by

the firm, and whether he/she carried out the transaction in the usual manner.140 An example of the type of act which will normally bind the firm is the purchasing, on the firm’s behalf, of merchandise of the kind usually employed in the firm’s business. A partner will not bind the firm if he/she has no authority to act in the particular matter and the person with whom he/she is dealing knows that he/she has no authority or does not know or believe him/her to be a partner.141 Public notification of the limitations of the authority of a partner, such as in the Government Gazette, will be considered sufficient warning. In short, all partners are entitled to sue and are liable to be sued on contracts entered into for the purpose of carrying on the business of the firm.142 86. Liability of partners to third parties may result from contracts, tort or holding out. In the case of contracts each partner is liable jointly with the other partners for all debts and obligations of the firm.143 The partners are sued jointly and the creditor has only one right of action. In the case of tort, liability extends only to those acts carried on in the ordinary course of the firm’s business.144 Liability is joint and several, which means that a plaintiff is entitled to sue a firm or any of its partners and is not limited to one action as in the case of contract. Money or property which is misapplied by a partner must be made good by the firm.145 In the case of a person holding themselves out as an apparent partner they may incur liability to a third party on their own behalf without binding the partnership.146 Retiring partners remain liable for debts incurred while a partner can be liable for debts incurred after retirement, unless specific notice of retirement is communicated to the firm’s customers.147 Incoming partners are generally not liable for debts incurred by the partnership before they join, but this right may be waived.148

F.

Dissolution

87. The Partnership Acts cover dissolution of partners with or without a court order. A partnership may be dissolved without a court order by expiration or notice, death or bankruptcy, or illegality.149 Circumstances in which the court will order dissolution include the insanity or permanent

incapacity of a partner, where a partner engages in conduct prejudicial to the firm or wilfully and persistently breaches the partnership agreement, where business can only be carried on at a loss, and where it is just and equitable to do so.150 88. The main consequence of dissolution is the loss of power to act as agents, although partners may retain their authority for the purposes of winding up.151 Notice of the dissolution must be made public.152 The Partnership Acts set out the rules for distribution of assets.153 The format to follow is payment of expenses and debts, repayment of special advances and capital, and distribution of any profits.154

II.

Partnerships and Corporations

A.

Source of Law

89. The Corporations Act 2001 has established a national scheme of corporate regulation. The regulatory authority is the ASIC. To facilitate this scheme, each company is given an Australian Company Number (ACN).155

B.

Incorporation and Its Consequences

90. The word ‘company’ is applied to various kinds of association in which a number of persons finance a business enterprise or joint undertaking. Any one person may incorporate.156 The chief method of incorporation is registration under the Corporations Act 2001. To obtain registration a person lodges a completed application form with the ASIC and the company comes into existence when ASIC registers it.157 On incorporation a company acquires a separate legal personality.158 It has the powers of an individual plus some extra corporate powers.159 The concept of a separate legal personality for companies was judicially recognized and accepted in Salomon v. Salomon & Co.160 This doctrine has been accepted in Australia.161 As noted by Windeyer J. in Peate v. FCT:162 If a company is duly incorporated and registered under the Act and

the proper records are kept in due form and the prescribed returns are made, it continues to exist as a legal entity, in that sense it is a reality and not a sham. Being a separate legal entity a corporation can enter into its own contracts, sue and be sued, have perpetual succession, acquire, hold and dispose of property and so on. 91. Apart from the fact of separate legal existence, the other major differences between corporations and partnerships are the formality and publicity involved in company law. The Corporations Act 2001 is a comprehensive piece of legislation which provides for compulsory meetings, compulsory audit of accounts, reporting of financial information, and maintenance of registers.163 In addition for corporations an annual return containing such information as the names and addresses of each director and secretary, the address of its registered office and a statement of solvency must be lodged, the accounts and documents of a company must be open for public inspection.164 92. Although incorporation confers on the company a legal existence separate from its members it should be noted that the court will, in certain circumstances, lift the veil of incorporation. The effect is to attach liabilities or rights to members which would otherwise be those of the company. The justification for lifting the veil of incorporation includes agency, trust and fraud or improper conduct.165 In addition, corporate law imposes liability on members in certain situations. The most important of these provisions deals with insolvent trading. Section 588(G) makes liable company directors who allow a company to continue trading when aware the company is unable to pay its debts as they fall due.

C.

Constitution of a Company

93. The Corporations Act 2001 contains a basic set of rules for the internal management of companies. While some of the rules are mandatory most are what are known as replaceable rules. These replaceable rules do not

apply to single shareholder/single director corporations nor to a company that had a constitution prior to the introduction of the replaceable rules regime166 and have not repealed it. A corporation need not have a constitution unless it intends to displace, add or modify the replaceable rules.167 The replaceable rules govern such activities as the appointment, powers, remuneration and removal of directors; the calling of director’s meetings; the meeting of members; the inspection of books; issues concerning the payment of dividends; and the transfer of shares.168

D.

Types of Companies

94. The principal way that companies are classified is according to the liability of members. Companies limited by shares can be public or private, companies limited by guarantee can be public only, there can be a public no liability mining company and unlimited company, public or private.169 Proprietary companies are further classified into small or large.170 A small proprietary company has reduced financial reporting requirements.171 The Corporations Act 2001 requires a small proprietary company to prepare an annual profit and loss statement, a balance sheet, a statement of cash flows and a directors’ report if shareholders with a least 5% of the votes in the company direct it to, or if the ASIC directs it to do so.172 In a company limited by shares the shareholder is only liable for the amount remaining unpaid on the shares.173 In a company limited by guarantee the amount that the shareholder must contribute in the event of liquidation will be stated in the constitution.174 In the case of a no liability company the member can either choose to pay the call when requested by the company or they can forfeit the shares.175 As its name would suggest in the case of an unlimited liability company there is no limit placed on the liability of members.176

E.

Company Capital

95. A company obtains its capital from two sources, share (equity) capital and loan capital.

1.

Share Capital

96. A person may become a shareholder of a company by being listed as a shareholder in the application for registration of the company, by the company issuing shares to the individual or the person buying shares from an existing shareholder and the company registering the transfer. A person will cease to be a shareholder when the person sells all of their shares and the company registers the transfer, the company buys back the person’s shares or the ASIC cancels the company’s registration.177 Shares may be issued in different classes with different entitlements as to voting, dividends, repayment of capital and share of surplus in a winding up.178 A shareholder or shareholders with 5% of the votes which may be cast at a meeting of the company, or at least 100 members entitled to vote can require the directors to hold a meeting.179 It is a replaceable rule that on a show of hands, each shareholder has one vote; on a poll, each shareholder has one vote for each share held.180 Directors may have within the constitution a discretion to refuse to register any transfer of shares.181

2.

Loan Capital

97. Companies have the capacity to borrow money.182 A company when it borrows money for a length of time may issue a debenture.183 The registration and priority of charges given by, or to a company in respect of personal property is governed by the Personal Property Securities Act 2009. Security over realty is governed by state-based legislation relating to land.184

F.

Management of Companies

98. Directors of the company are responsible for managing its business. The Corporations Act 2001 sets out the rules for the calling and conduct of directors’ meetings and it is a replaceable rule185 that the directors may all exercise all of the powers of the corporation except a power that the Corporations Act 2001, the constitution or a replaceable rule requires the company to exercise in a general meeting. Directors may pass resolutions at a meeting or by having all of the directors record and sign their decision. If the company only has one director that person may pass a resolution by recording and signing their decision.186 Shareholders can pass a resolution at

a meeting or by having all of the shareholders record and sign their decision. On an ordinary resolution, the matter must be passed by a majority of votes of those voting, on a special resolution (required for more fundamental matters); at least 75% of the votes cast must be in favour of the resolution.187 Any person doing business with the company is entitled to make a number of assumptions – these include that the person shown in a notice lodged with ASIC to be a director or secretary has in fact been properly appointed and is authorized to act; and that a person held out to be a director, secretary or agent of the company has been properly appointed and is authorized to act.188 In managing the corporation, directors are required to act honestly, to exercise care and diligence, to act in the best interests of the company, to avoid conflicts of interest, to prevent the company trading whilst insolvent and should the company be wound up, to assist the liquidator.189 99. A failure to perform these duties can result in criminal and civil sanctions.190 A company must also appoint a company secretary – though the same person can be both a director and secretary. This person has specific responsibilities under the legislation including notifying ASIC about changes to the names and addresses of directors and secretaries as well as ensuring that the annual return is lodged.191 100. Shareholders have a wide range of statutory remedies available in cases of maladministration. These include the oppression remedy,192 the seeking of a winding up order,193 the rectification of procedural irregularities,194 the obtaining of an injunction or damages195 as well as an order seeking the inspection of books, the rectification of the register or a challenge to the variation of shares.196 Members may also argue on the basis of the statutory contract.197 At common law, shareholders may also argue that their personal rights have been infringed, the company failed to obtain a special resolution when one was required, that there was a fraud on the minority or that the interests of justice dictate that a remedy should be available.198

G.

Winding Up a Company199

101. Winding up involves the company voluntarily resolving to be wound up or the court ordering the company to be wound up.200 A liquidator will be appointed who will take control of the company’s assets which will be realized and then distributed to the company’s creditors in the order of priority laid down in the legislation. If any surplus remains this will be distributed in accordance with the company’s constitution. The company will then be dissolved and struck of the register. 102. The grounds for the winding up of a company are set out in sections 459(A)–461 of the Corporations Act 2001 and include the company being unable to pay its debts, default being made in the lodging of statutory reports, or the holding of statutory meetings, the company not commencing business for a year or suspending business for a year, the company having no members, the directors acting in the affairs of the company in their own interests rather than in the interests of members as a whole, the affairs of the company being conducted in an oppressive or unfairly prejudicial manner or where it is just and equitable that the company be wound up. 103. Other options for the company in financial difficulty include schemes of arrangement, voluntary administration and receivership. Schemes of arrangement may provide for the compromise of debts due to creditors by an agreement between the company and its creditors. Voluntary administration has, as its aim, the saving of the business, or if that cannot be achieved, the maximization of return to creditors. Receivership generally involves a secured creditor appointing a receiver to take control of the assets of the corporation, (which are subject to security), to realize those assets and repay the lender.201

§3.

AUSTRALIAN ECONOMIC OPERATORS IN A GLOBAL CONTEXT

104. Australian economic operators share much with its trading partners. With a view that the corporate entity is the primary economic vehicle for growth in societal wealth, regulation has focused on how this vehicle will

achieve the economic stimulus that the country will need, whilst still providing the protection for consumer welfare.

78.

79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92.

93. 94. 95. 96. 97.

98. 99. 100. 101. 102. 103.

104.

Age of Majority Act 1977 (Vic), Minors (Property and Contracts) Act 1970 (NSW), Age of Majority Act 1974 (Qld), Age of Majority (Reduction) Act 1970 (SA), Age of Majority Act 1972 (WA), Age of Majority Act 1973 (Tas), Age of Majority Ordinance 1974 (ACT), Age of Majority Act 1974 (NT). P. Latimer, Australian Business Law, 30th edn (Sydney: CCH, 2011), 361. R.B. Vermeesch & K.D. Lindgren, Business Law of Australia, 12th edn. (Sydney: LexisNexis, 2011), pp 215–216. R.B. Vermeesch & K.D. Lindgren, Business Law of Australia, 12th edn, pp 215–216. Roberts v. Gray (1913) 1 KB 520. Supra. Chaplin v. Leslie Frewin (Publishers) Ltd [1966] Ch. 71. Sellin v. Scott (1901) 1 SR (NSW) Eq 64. Steinberg v. Scala (Leeds) Ltd. (1923) 2 CH 452. Pearce v. Brain (1929) 2 KB 310; Steinberg v. Scala (Leeds) Ltd. (1923) 2 Ch. 452. R.B. Vermeesch & K.D. Lindgren, Business Law of Australia, 12th edn, p. 217–218. Minor (Property and Contracts) Act 1970 (NSW), s. 19. Minor Contracts Act 1988 (Tas), s. 4. Supreme Court Act 1986 (Vic), s. 49. Statute of Frauds (Amendment Act) 1828 (Imp) 9 Geo IV c 14 – applying in Western Australian and the Northern Territory as part of the inherited common law; Mercantile Law Ac 1962 (ACT), s. 15. Whundo Copper Syndicate v. Ferrari (1962) WAR 24. Lovell and Christmas v. Beauchamp (1894) AC 607. NSW s. 7, Vic s. 7, Qld s. 5, SA s. 2, WA s. 2, Tas s. 7, ACT s. 7, NT s. 2. See generally Bankruptcy Act 1966 (Cth). Judiciary Act 1903 Parts IX, IXA (Cth); Crown Proceedings Act 1992 (ACT); Crown Proceedings Act 1993 (NT); Crown Proceedings Act 1988 (NSW); Crown Proceedings Act 1980 (Qld); Crown Proceedings Act 1992 (SA); Crown Proceedings Act 1993 (Tas); Crown Proceedings Act 1958 (Vic); Crown Suits Act 1947 (WA). Molton v. Camroux (1848) 2 Ex. Ch. 487; 154 ER 584. R.B. Vermeesch & K.D. Lindgren, Business Law of Australia, 12th edn, supra, 221–222. Matthews v. Baxter (1873) LR 8 Exch 132. Sale of Goods Acts: NSW s. 7, Vic s. 7, Qld s. 5, SA s. 2, WA s. 2, Tas s. 7, ACT s. 7, NT s. 7. R.B. Vermeesch & K.D. Lindgren, Business Law of Australia, 12th edn, supra, 222. Married Persons’ Property Act 1986 (ACT); Married Persons (Equality of Status) Act 1996 (NSW);); Married Persons (Equality of Status) Act 1989 (NT); Law Reform Act 1995 (Qld); Law of Property Act 1936 (SA); Married Women’s Property Act 1935 (Tas); Marriage Act 1958 (Vic); Married Women’s Property Act 1892 (WA). Corporations Act 2001 (Cth) ss 124–125.

105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144.

Corporations Act 2001 (Cth) ss 119, 124–125. Corporations Act 2001 (Cth) ss 125(2). Partnership Acts: 1891 (Tas), 1891 (SA), 1891 (Qld), 1982 (NSW), 1997 (NT); 1895 (WA), 1958 (Vic), 1963 (ACT). Vic s. 4, NSW s. 46, NT s. 4; Qld s. 48, SA s. 46, Tas s. 5, WA s. 6, ACT s. 5. Vic Part 5, NSW Part 3, NT Part 3; Qld Ch. 3 & 4, SA Part 3, Tas Part 5, Limited Partnerships Act 1909 (WA), ACT Part 6. Vic s. 5, NSW s. 1, NT s. 5, Qld s. 5, SA s. 1, Tas s. 6, WA s. 7, ACT s. 6. Hitchens v. Hitchins (1998) 47 NSWLR 35. Vic s. 3, NSW s. 4 5, NT s. 3, Qld s. 3, SA s. 45, Tas s. 4, WA s. 3, ACT s. 4. Smith v. Anderson (1880) 15 Ch D 247. Turnbull v. Ah Mouy (1871) 2 AJR 40. Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd. (1974) 131 CLR 321. Krizaic v. Robini Pty Ltd (1990) 102 FLR 8. Lang v. James Morrison & Co. Ltd. (1911) 13 CLR 11. Bohemians Club v. Acting Federal Commissioner of Taxation (1918) 24 CLR 334. Wise v. Perpetual Trustee Company (1903) AC 139. Vic s. 6, NSW s. 2, NT s. 6, Qld s. 6, SA s. 2, Tas s. 7, WA s. 8, ACT s. 7. Cribb v. Korn (1911) 12 CLR 205. Cox v. Hickman (1860) 11 ER 431. NSW s. 2(11), NT s. 6; Qld s. 6(3), SA s. 2(11), Tas s. 7(c), Vic s. 6(3), WA s. 8(3), ACT s. 7. Re Ruddock (1879) 5 VLR 51. Business Names Registration Act 2011 (Cth). Tas s. 29, NSW s. 24, NT s. 28; Qld s. 27, SA s. 24, Vic. s. 28, WA s. 34, ACT s. 29. Tas s. 29, NSW s. 24, NT s. 28; Qld s. 27, SA s. 24, Vic s. 28, WA s. 34, ACT s. 29. Vic s. 29, NSW s. 25, NT s. 29; Qld s. 28, SA s. 25, Tas s. 30, WA s. 35, ACT s. 30. Public Trustee v. Schulz (1964) 38 ALJR 128, Vic s. 23, NSW s. 19, Qld s. 22, SA s. 19, Tas s. 24, WA s. 29, ACT s. 23. Vic s. 31, NSW s. 27, NT s. 32, Qld s. 30, SA s. 27, Tas s. 33, WA s. 38, ACT s. 32. Law v. Law (1905) 1 Ch. 140. Vic s. 33, NSW s. 29, NT s. 33, Qld s. 32, SA s. 29, Tas s. 34, WA s. 40, ACT s. 34. Pathirana v. Pathirana (1967) AC 233. Vic s. 24, NSW s. 30, NT s. 34, Qld s. 33, SA s. 30, Tas s. 35, WA s. 41, ACT s. 35. Birtchell v. Equity Trustee (1929) 42 CLR 384. Vic s. 24, NSW s. 20, Qld s. 23, SA s. 20, Tas s. 25, WA s. 30, ACT s. 24. Harvey v. Harvey (1970) 120 CLR 529, Kelly v. Kelly (1990) 64 ALJR 234. Vic s. 25, NSW s. 21, NT s. 24, Qld s. 24, SA s. 21, Tas s. 26, WA s. 31, ACT s. 26. Vic s. 9, NSW s. 5, NT s. 9; Qld s. 8, SA s. 5, Tas s. 10, WA s. 26, ACT s. 9. Mercantile Credit v. Garrod (1962) 3 All ER 1103, Goldberg v. Jenkins (1889) 15 VLR 36. See Construction Engineering (Aust) Pty. Ltd. v. Hexyl Pty. Ltd. (1985) 155 CLR 541, Vic s. 9, NSW s. 5, NT s. 10, Qld s. 8, SA s. 5, Tas s. 10, WA s. 26, ACT s. 9. Mann v. D’Arcy (1968) 2 All ER 172. Vic s. 13, NSW s. 9, NT s. 13, Qld s. 12, SA s. 9, Tas s. 14, WA s. 16, ACT s. 13. Polkinghorne v. Holland (1934) 51 CLR 143, Vic s. 13, NSW s. 9, NT s. 13, Qld s. 12, SA s. 9,

145. 146. 147. 148.

149. 150. 151. 152. 153. 154. 155. 156. 157. 158. 159. 160. 161. 162. 163. 164. 165.

166. 167. 168. 169. 170.

171. 172. 173. 174. 175.

Tas s. 14, WA s. 16, ACT s. 13. Vic s. 125, NSW s. 11, NT s. 15, Qld s. 14, SA s. 11, Tas s. 16, WA s. 18, ACT s. 15. Re Harvey; ex parte Chapman (1964) 11 FLR 485. Sobell v. Boston (1975) 2 All ER 282, liability of incoming and outgoing partners is governed by the Act NSW s. 17, NT s. 21, Qld s. 20, SA s. 17, Tas s. 22, Vic s. 21, WA s. 24, ACT s. 21. Rolfe & Bank of Australasia v. Flower Salting & Co. (1865) LR 1 PC 27, liability of incoming and outgoing partners is governed by the Act NSW s. 17, NT s. 21, Qld s. 20, SA s. 17, Tas s. 22, Vic s. 21, WA s. 24, ACT s. 21. NSW ss 32–34, NT ss 36–39, Qld ss 35–37, SA ss 32–34, Tas ss 37–39, Vic ss 36–38, WA ss 43–45, ACT ss 37–39. Vic s. 39, NSW s. 35, NT s. 39, Qld s. 38, SA s. 35, Tas s. 40, WA s. 46, ACT s. 40. NSW s. 38, NT s. 42, Qld s. 41, SA s. 38, Tas s. 43, VIC s. 42, WA s. 49, ACT s. 44. NSW s. 37, NT s. 41, Qld s. 40, SA s. 37, Tas s. 42, Vic s. 41, WA s. 48, ACT s. 42. Vic s. 48, NSW s. 44, NT s. 48, Qld s. 47, SA s. 44, Tas s. 49, WA s. 57, ACT s. 50. Vic s. 48, NSW s. 44, NT s. 48, Qld s. 47, SA s. 44, Tas s. 49, WA s. 57, ACT s. 50. Corporations Act 2001, s. 118. Corporations Act 2001, s. 114. Corporations Act 2001, ss 117–123. Ibid., s. 119. Ibid., s. 124. (1897) AC 22. See Industrial Equity Ltd v. Blackburn (1977) 137 CLR 567. (1964) 111 CLR 443, 480. See Corporations Act 2001, Ch. 2C. See Corporations Act 2001, Ch. 2M. See Smith, Stone & Knight v. Birmingham Corp (1939) 4 All ER 116 (though contrast ACN 007 528 207 Pty. Ltd. (in liq) v. Bird Cameron (Reg) [2005] SASC 204, Gilford Motor Co. v. Horne (1933) Ch. 935. See generally R.P. Austin & I.M. Ramsay, Ford’s Principles of Corporations Law, 15th edn (Sydney: LexisNexis, 2013), Ch. 4; I.M. Ramsay & D.B. Noakes, ‘Piercing the Corporate Veil in Australia’, C&SLJ 19 (2001): 250; M. Whincup, ‘Inequitable Incorporation – the Abuse of a Privilege’, Co Lawyer 2 (1981): 158. 1 Jul. 1998, Company Law Review Act 1998, Sch. 2, item 159. Corporations Act 2001, ss 134–141. See Corporations Act 2001, s. 141 for a summary of the provisions. See generally, ss 112–113 of the Corporations Act 2001. See Corporations Act 2001, s. 45(A)(2)–(6) as to the criteria to determine whether a proprietary company is small or large. The principal criteria turns on whether the gross operating revenue is less than EUR 17.2625, whether the value of the assets is less than EUR 8.63125 million and whether the company has fewer than fifty employees at the end of the financial year. A company that does not satisfy two of these requirements is classified as large. Corporations Act 2001, s. 292(2). Corporations Act 2001, ss 286–301, 319–320. Ibid., ss 9, 516. Ibid., ss 9, 517. Ibid., s. 254(Q).

176. 177. 178. 179. 180. 181. 182. 183. 184.

185. 186. 187. 188. 189. 190. 191. 192. 193. 194. 195. 196. 197. 198.

199. 200. 201.

Ibid., s. 9. Ibid., ss 117, 120. Ibid., s. 254(A)–254(B). Ibid., s. 249(D) (though the regulations can specify a higher number). Ibid., Ch. 2G. Corporations Act 2001, s. 1071(F). Corporations Act 2001, s. 124. See s. 9 of the Corporations Act 2001 for the definition. Real Property Act 1900 (NSW); Transfer of Land Act 1958 (Vic); Land Title Act 1994 (Qld); Real Property Act 1886 (SA); Land Titles Act 1980 (Tas); Transfer of Land Act 1893 (WA); Land Titles Act 1925 (ACT); Land Title Act (NT). See s. 141 of the Corporations Act, 2001. Corporations Act, 2001, s. 248(A)–248(B). Ibid., s. 9. Ibid., ss 128–130. See generally ibid., ss 180–184, 588G. Sanctions for breach are detailed in Part 9.4 of the Corporations Act 2001. See generally, s. 188. Ibid., s. 232. Ibid., s. 461. Ibid., s. 1322. Ibid., s. 1324. Ibid., ss 247(A)–247(D), 1071(F), 246(B)–246(G). Ibid., s. 140. All as exceptions to the Rule in Foss v. Harbottle (1843) 67 ER 189. See generally R.P. Austin & I.M. Ramsay, Ford’s Principles of Corporations Law, 15th edn (Sydney: LexisNexis, 2013), Ch. 10. See generally R.P. Austin & I.M. Ramsay, Ford’s Principles of Corporations Law, 15th edn (Sydney: LexisNexis, 2013), Chs 25–28. See Corporations Act 2001, Ch. 5. In a cross-border context Ch. 5 is applied by reason of the Cross-Border Insolvency Act 2008 (Cth). Corporations Act 2001, Ch. 5. See generally R.P. Austin & I.M. Ramsay, Ford’s Principles of Corporations Law, 13th edn (Sydney: LexisNexis, 2007), Ch. 27.

Chapter 3. §1.

The Economic Institutions

PROFESSIONAL ORGANIZATIONS AND CHAMBERS OF COMMERCE

105. In Australia, there are many professional organizations; serving most spheres of commercial activity. For example, Chambers of commerce (associations of persons, firms, and companies engaged in commerce and industry), represent business collectively and operate at both state and national levels.202 They provide such services as assistance in industrial court work, industrial advisory services, tariff and trade development services, economic advice and industry surveys. Other groups representing employer interests include the Business Council of Australia; (an industry association conducting research and advocacy in pursuit of public policy conducive to economic development in Australia, the membership of which includes most major Australian companies) and the Chamber of Manufacturers. Small business is represented by the Council of Small Business Organisations of Australia (COSBOA).203 In addition to business organizations focusing on a particular industry or business size, others focus on the facilitation of trade between specific countries. Examples are the Australia China Business Council204 and the Australia India Business Council.205 106. Employee interests are represented primarily by the Australian Council of Trade Unions (ACTU). Until 1979, there were three national bodies which represented trade unions as a whole. These were the ACTU, the Australian Council of Salaried and Professional Associations (ACSPA), and the Council of Australian Government Employee Associations (CAGEO). In 1979, the ACSPA and in 1981, the CAGEO merged with the ACTU forming the one national organization.206 The lead national government agency dealing with employment matters is the Department of Education,

Employment and Workplace Relations (DEEWR).207 107. In 2009, the Commonwealth Parliament repealed the existing industrial relations law, the Workplace Relations Act 1996 and replaced it with a new principal industrial relations statute called the Fair Work Act 2009 (‘the FW Act’). The FW Act establishes statutory minimal conditions of employment. These are called national employment standards. As set out in the Fair Work Act 2009 and other workplace legislation, the key elements of Australia’s workplace relations laws are characterized by: – – –

– –

–

An emphasis on enterprise-level collective bargaining underpinned by bargaining obligations and rules governing industrial action. A safety net of minimum terms and conditions of employment. Provision for Individual Flexibility Arrangements as a way to allow workers and a business to agree on conditions that are best suited to their individual circumstances. Provisions preventing unfair or unlawful termination of employment. Protection of the freedom of both employers and employees to choose whether or not to be represented by a third party in workplace matters and the provision of rules governing the rights and responsibilities of employer and employee representatives. Promotion of safer working arrangements.208

In 2007, under the Rudd Labour Government, the Australian Industrial Relations Commission (AIRC) was abolished and its functions were transferred to a division within Fair Work Australia in January 2010 with disputes heard at the federal level by the newly formed Australian Fair Pay Commission. In 2014, the current Coalition Government has announced its intention to limit some aspects of the Fair Work Amendment. Among the proposed changes relate to putting limits on what are known as greenfields enterprise agreements (which are agreements between an employer and a union before any employees are recruited), limiting rights to protected industrial action and right of entry laws. There will also be greater employer latitude in relation to annual leave loading and transfer of business and unfair dismissal laws

§2.

ADVISORY BODIES AND COMMITTEES

108. There are a number of bodies involved in advising government on commercial matters. One of the most important advisory bodies is the Productivity Commission which is the Australian Government’s independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians. Its role is to help governments make better policies in the long-term interest of the Australian community.209 As of November 2011, the Productivity Commission was working on a number of projects, including: early childhood development, airport regulation, climate change adaptations, regulatory reform, export credit arrangements and the role of local governments.210 109. In the area of housing, the Australian Housing Industry Development Council comprises representatives of industry, unions, manufacturers and the three levels of government. The Indicative Planning Council (IPC) for the Housing Industry is comprised of government and industry representatives and has state and territory committees. It provides a forum to promote informed discussion between industry and government on such matters as short-term prospects for the industry, its supply of resources, projections of underlying demand for housing, and other issues affecting the industry.211 The National Housing Supply Council (the Council) was established in 2008 by the Treasurer and the Minister for Housing to monitor housing demand, supply and affordability in Australia, and to highlight current and potential gaps between housing supply and demand from households. The inaugural State of Supply Report 2008 was released in March 2009, outlining the Council’s demand and supply projections to 2028. Research on the cost and affordability of housing is being conducted by the National Housing Supply Council.212 110. The Housing Industry Association (HIA) is an association of over 42,000 businesses. HIA is the peak industry association for businesses in the residential, building, renovation and development industry in Australia. HIA members include builders and building contractors (residential and commercial), consultants, developers, manufacturers and suppliers. HIA is

familiar with the range of compliance and other business issues stemming from the treatment of occupational health and safety under Commonwealth and state legislation. The Property Council of Australia is the leading advocate for Australia’s AUD 600 billion-property industry. It counts the bulk of the nation’s major investors, property owners and developers – as well as the industry’s professional service and trade providers – amongst its members. The organization is governed by a board comprising key leaders from the industry.213 National Strategy on Energy Efficiency is also a force in the Australian housing industry and move to more sustainable models of living.214 111. The Export Meat Industry Advisory Committee (EMIAC) was created in the 1960s as a consultative body between the export meat industry and the predecessor of AQIS. EMIAC still retains the same role today. EMIAC’s terms of reference are broad but its main function is to consider technical issues affecting the export meat sector. It also provides policy advice on many major issues such as residues, pathogens, international requirements including market access and food safety issues affecting meat. EMIAC is not a statutory body but it has a high profile within the industry. Its prime relationship is with AQIS but it often refers matters to other bodies such as SAFEMEAT, the Agriculture and Resource Management Council of Australia and New Zealand, state meat industry authorities and others as required. 112. Tourism is also a major Australian industry and advisory bodies exist at local, regional, state and national levels.215 Also, the National Indigenous Tourism Task Force (formally Indigenous Tourism Advisory Panel) was formed to boost indigenous opportunities in the tourism industry and giving people the chance to grow their own sustainable indigenous tourism businesses. NITTF seeks to drive an industry-wide effort to both encourage Indigenous people to make a career in tourism and to facilitate the development and growth of ‘Indigenous tourism experiences’ owned and managed by the employees themselves.216 113. Agriculture, forestry and fisheries are regulated at the Commonwealth Government level by the Department of Agriculture,

Fisheries and Forestry.217 A goal of the Australian Government Department of Agriculture, Fisheries and Forestry is to assist our forestry industry to grow, improve and capitalize on new opportunities while protecting the environment and contributing to the prosperity and quality of life in rural and regional Australia. While forests will continue to provide sustainably produced wood products, they will increasingly provide other benefits such as carbon sequestration, salinity control and biodiversity conservation. Australian states and territories also have state counterparts that deal with state regulation of these industries.218 114. The minerals and mining industry are regulated at the state and territory level. Each state or territory has its own legislation relating to minerals found onshore and offshore within coastal waters. At the same time, some Commonwealth laws may affect the mining industry because the Commonwealth legislates over areas such as corporations, competition and trade practices, interstate and overseas trade, taxation, and defence and foreign affairs. Mining companies listed on the Australian Securities Exchange (ASX) must also comply with the ASX Listing Rules.219 115. As for electricity, each jurisdiction has its own regulations while at the federal or national level, the Australian Energy Regulator (AER) performs economic regulation of the wholesale electricity market and electricity transmission networks in the National Electricity Market (NEM), and enforcement of the National Electricity Law and National Electricity Rules.220 116. The Office of the Renewable Energy Regulator (ORER) oversees the implementation of the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES) to encourage additional generation of electricity from renewable energy sources by providing a mechanism by which small-scale systems and renewable energy power stations can create and sell certificates based on how much renewable electricity they generate or displace.221

§3.

COMMERCIAL COURTS AND COMMERCIAL

ARBITRATION 117. As Australia is a federation, courts exist at both state and federal level.

I.

State Courts

A.

Inferior Courts and Specialized Courts

118. State courts are organized in a hierarchy and take a variety of forms and names among Australia’s states and territories. In general, the more serious crimes and civil disputes (by value of the amount of money involved) are adjudicated at the highest level by ‘superior’ courts. Minor crimes and less serious civil matters are heard by ‘inferior’ courts. 119. The Magistrates’ Courts in Victoria and Queensland, Courts of Petty Sessions; in NSW and the ACT, Local Courts of limited jurisdiction in SA and NT, Local Courts in WA and the Tasmanian Court of Requests, (subject to a range of exceptions), have jurisdiction over personal actions up to a maximum monetary limit. These include the majority of small debt claims and contractual disputes. In these courts, the ordinary law, including the law of evidence, applies although the procedure is generally summary.222. Procedures in Australian courts are adversarial as opposed to inquisitorial. Juries are utilized for the trial of more serious criminal offences. Some courts may also function as specialized courts. For example, a Magistrates Court may, in some jurisdictions, function as a Coroner’s Court or a Drug Court or Alcohol Court.

B.

Intermediate Courts

120. These courts rank between the Supreme Court (discussed below) and the inferior courts. Courts at this intermediate level are termed District Courts,223 County Courts,224 or Local Courts225 and exist in the more populated jurisdictions, that is, in jurisdictions other than Tasmania, NT and the ACT. The original jurisdiction of intermediate courts extends to personal

actions in which damages or liquidated sums are claimed. Intermediate courts also may hear appeals from the lower or inferior courts.

C.

Supreme Courts and Intermediate Appeal Courts

121. The highest state court in each state is the Supreme Court. Each state Supreme Court is a single superior court of general or unlimited jurisdiction. The Supreme Court is the body primarily entrusted with the supervision of state law, legal institutions and the local legal profession. 122. Each Supreme Court consists of a Chief Justice and a number of other judges, called puisne judges. Each Supreme Court also has a number of officers who help in the running of the court. The most important of these is the Master, who, apart from his/her administrative duties, decides minor judicial matters, such as interlocutory applications. 123. Every matter is within the original jurisdiction of the Supreme Court unless expressly excluded.226 The only restrictions on suing for small amounts in the Supreme Court are the power to remit cases to lower courts, penalties in costs and the power to prevent an abuse of the court’s process. Appeals from Supreme Courts go to intermediate appellate courts usually with three judges. 124. The appellate jurisdiction of the state Supreme Courts varies widely. In all states there is an appeal to most decisions of a single judge of the Supreme Court in civil cases. Appeals from other state courts vary, however. There is ordinarily a general right of appeal from decisions of the ordinary inferior courts but the form of appeal may vary and may, in some cases, be by leave only. In the case of specialist appeals and tribunals, appeal may be restricted to questions of law only.

D.

Commercial Lists

125. Some states have a separate commercial causes list of cases involving ‘ordinary transactions of merchants and traders’. The purpose of such a list is to speed the trial and reduce costs. Ordinarily these cases are

tried without juries. The court has a general power to give directions for the ‘speedy determination of the real questions between the parties’ and to dispense with pleadings or even the rules of evidence.227 The parties may agree that the decision of the court is to be final.

II.

Federal Courts

126. Under Chapter 3 of the Australian Constitution, the Commonwealth was granted the power to establish federal courts other than the High Court. The federal court system consists of the Federal Magistrate Court, the Administrative Appeals Tribunal, Australian Fair Pay Commission, Federal Courts and Family Court. In addition, other federal courts are found in the two territories of the ACT and Northern Territory, the By the Federal Court of Australia Act 1976 (Cth), matters of traditional federal jurisdiction, such as industrial law, intellectual property law, bankruptcy and trade matters) were vested in the Federal Court. The court consists of the General Division and the Industrial Division. In the General Division, the court can hear appeals from a single judge of the Federal Court, the Supreme Court of the federal territories in both their civil and criminal jurisdictions; and the Supreme Courts of the states in bankruptcy, patents, trademarks and taxation. 127. Cross-Vesting of Jurisdiction. Australian Federal and state courts until 1997 had cross-vesting jurisdiction. State and territory Supreme Courts could exercise the same civil jurisdiction as the Federal Court and the Family Court with the exception of certain matters arising under the Workplace Relations Act 1996 (Cth) and section 45(D) (industrial boycotts) of the Competition and Consumer Act 2010 (Cth). Also, the Supreme Court of one state could exercise the original and appellate jurisdiction with respect to state civil matters. The Federal Court and Family Court could exercise original and appellate jurisdiction in respect of state and territory civil matters.228 Unfortunately, recent court decisions raised doubts about the constitution’s validity of such legislation. These constitutional doubts were resolved by the agreement of the states to refer their powers over corporations (section 51(xx) of Federal Constitution) to the Commonwealth via section 51(xxxvii) of the Constitution.

III.

High Court of Australia

128. This Court was created by the Federal Constitution. The High Court has seven judges. The High Court is the final Court of Appeal within the Australian legal system and the final arbiter of all disputes involving the Australian Constitution. The original jurisdiction of the High Court may be either conferred by section 75 of the Constitution or invested (i.e., that conferred by legislation under section 76 of the Constitution).229 The High Court can sit in all state capitals, though most cases are heard in Canberra, the national capital though increasing use is being made of video conferencing. The High Court has original jurisdiction to hear a wide range of matters, including indictable offences under the laws of the Commonwealth. It has exclusive jurisdiction to determine disputes between the states or between the Commonwealth and the states. It also has jurisdiction when the matter involves residents of different states. 129. In its appellate jurisdiction, the High Court can hear appeals from single judges of the courts with special leave to appeal in cases from state Supreme Courts, appeals from the Federal Court of Australia in certain circumstances; appeals from territory Supreme Courts via the Federal Court and appeals from the Family Court of Australia by special leave of the High Court or upon certification of the Full Family Court.230

IV.

Tribunals

A.

National or Federal Tribunals

130. Specialized tribunals investigate and make decisions in a wide variety of areas and administrative matters. At the national level such tribunals include: the Administrative Appeals Tribunal, the Taxation Board of Review, Australian Competition Tribunal, Social Security Appeals Tribunal, Copyright Tribunal, Superannuation Complaints Tribunal, Veterans’ Review Board, the Australian Broadcasting Tribunal, the Film Censorship Board, the National Native Title Tribunal and the Small Taxation Claims Tribunal. The exact composition and powers of each of these tribunals vary greatly.

B.

State and Territory Tribunals

131. At state level, tribunals have been established to determine administrative disputes over such matters such as planning and land use, the preservation of historic buildings, provision of health care, residency tenancies, credit, liquor licensing, retirement villages, motor accidents, native title issues, and workers’ compensation are subject to specialist tribunals. Every jurisdiction also has a special tribunal or court to deal with small (mostly consumer) claims. These Small Claims Courts/Tribunals are discussed below. State and territory tribunals operate in a similar way to the courts, but more informally in that formal rules of evidence normally do not apply and legal representation may not be permitted. There is some degree of supervision of these tribunals by the traditional court system through the prerogative writs of certiorari and mandamus and the rules of natural justice. 132. Small Claims Courts or Tribunals exist in all states and territories. These aim to provide a simplified, inexpensive and uncomplicated procedure for remedying consumer (and other) small claims.231 To this end they are characterized by flexibility and informality. The actions which Small Claims Courts/Tribunals may hear are determined largely by monetary limit. 133. The Small Claims Tribunals are characterized by the following features: –

– – – – –

Proceedings are final and in most jurisdictions there is no right of appeal unless the Tribunal has acted in excess of jurisdiction or there has been a denial of natural justice. Each party conducts his/her own case. Lawyers can only appear in some jurisdictions by agreement among the parties and the referee. Costs cannot be awarded against the loser. Proceedings are private. Parties cannot exclude the jurisdiction of the Tribunal by their contract. There are no technical limits on admissible evidence and opinions. Hearsay and any relevant information are admissible.

V.

Commercial Arbitration

134. Legal costs, time and effort make litigation an unattractive means of resolving commercial disputes in many cases. In addition, many courts are not conversant with commercial practices and even where a judge does have some such knowledge, he/she may not appreciate the nuances of different businesses. Arbitration is the process of referring a dispute to an arbitrator as an unofficial judge to make a decision which the parties have agreed to accept as binding and final upon them. Only disputes triable civilly can be arbitrated. In Australia, arbitration is regulated by essentially uniform legislation in each jurisdiction.232 Prior to 2010, domestic commercial arbitration in Australia was governed by legislation based on the English Arbitration Act 1979. Seeking to modernize its laws and take greater advantage of arbitration, the Standing Committee of Attorneys-General (SCAG) in 2009 agreed to adopt in each state a new arbitration model based upon the 2006 UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’). New South Wales became the first to enact the new regime on 1 October 2010 as the Commercial Arbitration Act 2010 (NSW). The other states have since followed suit or will soon do so. International arbitration and the enforcement of foreign awards are governed by the International Arbitration Act 1974 (Cth).233 135. In general, the commercial arbitration legislation of the states provides that: – –

–

Reference shall be to a single arbitrator and this arbitrator is to be jointly appointed by the parties to an agreement. Although court intervention is kept to a minimum, the court may appoint an arbitrator(s) where the arbitration agreement is silent or where the appointed person dies or otherwise ceases or fails to act. The power to appoint an arbitrator includes the power to appoint a replacement arbitrator. If an even number of arbitrators is appointed, an umpire may be appointed in order to resolve a deadlock or the failure of the arbitrators to determine a matter. The Supreme Court generally has jurisdiction in matters of commercial arbitration but in an arbitration agreement, the parties may nominate an

– –

– –

–

–

VI.

intermediate court as having jurisdiction over that particular agreement (section 4). The arbitrator has a wide discretion as to the manner in which arbitration is conducted but proceedings must be according to law (section 14). Any person must attend for examination, answer questions and produce such documents as are called for. Witnesses are to attend personally (but may obtain the leave of the arbitrator to be legally represented). Issues are to be determined according to law and considerations of natural justice and fairness. The arbitrator may make an interim award and has the same power as the Supreme Court to order equitable relief unless an arbitration agreement provides otherwise. The arbitrator also has power to order the parties to take steps to achieve a settlement without proceeding to arbitration. Awards are final and binding upon the parties unless the agreement or legislation provides otherwise. The arbitrator can award costs (generally this is discretionary unless the agreement provides otherwise) and interest. The court has powers to deal with such problems as deliberate delay by a party or bias on the part of the arbitrator.

Commercial Arbitration Facilities

136. NSW and Victoria have established centres each with interstate facilities for settlement of commercial disputes. The Australian Centre for International Commercial Arbitration (ACICA) was opened in Melbourne in 1985 and the Australian Commercial Disputes Centre (ACDC) opened in Sydney in 1986. ACDC focuses on alternative dispute resolution and ACICA focuses on domestic and international arbitration. ACICA is available for arbitration held under the United Nations Committee on International Trade Law (UNICITRAL) Rules, the Rules of London Court of International Arbitration; and other rules of the parties’ choice such as those set out in the commercial arbitration legislation. In other jurisdictions, ACICA operates through the facilities of the Institute of Arbitrators of Australia.

§4.

MISCELLANEOUS

I.

Public Ombudsmen

137. Both the Commonwealth and the states have ombudsmen234 who receive complaints concerning administrative actions, investigate them, establish the facts, express an opinion and recommend the appropriate action. The ombudsman, however, has no direct power to order rectification of the wrong.

II.

Private Industry Ombudsmen

138. Some private organizations have also established industry-wide ombudsmen. The Australian Banking and Financial Services Ombudsman (BFSO) was merged with the Financial Industry Complaints Service (FICS) and Insurance Ombudsman Service (IOS) to form the national Financial Ombudsman Service (FOS) on 1 July 2008. The FOS takes complaints on a wide range of financial services and consolidates a number of financial services ombudsman and dispute resolution schemes to provide a single national service for banking, insurance and investment disputes in Australia.235 Other state-based ombudsman schemes can be found in relation to transportation, telecommunications and energy and water.236

202. 203. 204. 205. 206. 207. 208. 209. 210. 211. 212. 213. 214. 215.

See, e.g., Australia Chamber of Commerce and Industry: . See generally: . . . See Fair Work Act 2009 (Cth). See generally, . . https://employment.gov.au/australias-national-workplace-relations-system. . . ABS, Year Book of Australia, 1994, 633. . . . See, e.g., ; .

216. 217. 218. 219. 220. 221. 222. 223. 224. 225. 226. 227. 228. 229. 230. 231.

232. 233. 234.

. . See, e.g., . . . . James Crawford, Australian Courts of Law, 2nd edn (Melbourne: Oxford University Press, 1988), p. 119. District Court Act 1973 (NSW); District Courts Act 1967(Qld); District Court of Western Australia Act 1969 (WA). County Court Act 1958 (Vic). Local and District Criminal Courts Act 1926 (SA). James Crawford, Australian Courts of Law, 2nd edn (Melbourne: Oxford University Press, 1988), p. 119. Supreme Court Act 1970–1980 (NSW); ss 56, 89(1)(b); Commercial Causes Act 1910–1972 (Qld); Supreme Court (Commercial Causes) Rules 1978 (Vic). Crawford, p. 118. Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) and counterpart legislation in each of the states. James Crawford, Australian Courts of Law, 2nd edn (Melbourne: Oxford University Press, 1988), p. 126. James Crawford, Australian Courts of Law, 2nd edn (Melbourne: Oxford University Press, 1988), p. 119. See, e.g., Victoria Civil and Administrative Tribunal Act 1998 (Vic), Small Claims Tribunals Act 1973 (Vic); Consumer Claims Tribunals Act 1987 (NSW); Small Claims Tribunals Act 1974 (WA); Magistrates and Court Act 1991 (SA) Magistrates Court (Small Claims Division) Act (1989); Small Claims Ordinance 1974 (ACT); Small Claims Act 1974 (NT); Magistrates Court (Small Claims Division) Act 1989 (Tas). See generally: . Commercial Arbitration Act 1984 (NSW); 1984 (Vic); 1986 (SA); 1985 (WA); 1986 (Tas); 1985 (NT); 1986 (ACT); See Arbitration Act 1990(Qld). See TCL Air Conditioner (Zhongshan) Co Ltd v. The Judges of the Federal Court of Australia [2013] HCA 5. (High Court of Australia unanimously upheld the arbitration legislation). Ombudsman Act 1976 (Cth); Ombudsman Act 1974 (NSW); Ombudsman Act 1973 (Vic); Parliamentary Commissioner Act 1974 (Qld); Ombudsman Act 1972 (SA); Parliamentary Commissioner Act 1971 (WA).

235. 236.