1 LAWS20058 – AUSTRALIAN COMMERCIAL LAW MODULE 1 – The NATURE OF LAW and the AUSTRALIAN LEGAL SYSTEM Why societies need rules and the components of a modern legal system  It is possible for primitive societies to operate without a legal system, by having a group attitude towards standard modes of conduct.  Called primary rules of obligation.  2 main conditions for such societies:-  Some restrictions on individual freedom to act o Majority must abide by these restrictions.  Unofficial rules are only possible in a small community closely knit by ties of family and common belief and with a stable environment.  Such unofficial rules have 3 problems:-  Uncertainty o Unofficial rules are not systematic – i.e. unclear and possibly inconsistent  Static o Rule changes can only occur through slow growth and decay.  Inefficiency in resolving disputes o Rules are only maintained by social pressure with no central authority. o This leads to escalation of disputes, no final resolution, and vendettas.  In more sophisticated societies, primary rules are supplemented by secondary rules to give force to the primary rules and create a legal system.  The society is then called a state, which consists of:- o A set of individuals subject to a supreme third party who uses the threat of violence (either physical punishment or forced imprisonment) to enforce law; and o A territory where these individuals reside bounded by the reach of the enforcer’s power (i.e. borders). o The secondary rules needed to give binding force to the primary rules of behaviour are rules that recognise primary rules (and allow changes to primary rules) and rules to provide for adjudication of disputes. o Disputes may be about what the relevant law is and/or what the actual facts were (i.e. what happened).2 Professor Hart’s 3-Part Legal System The legal philosopher, Herbert Hart proposed that a legal system requires three types of secondary rules:- 1. Rules of Recognition – to prevent uncertainty about what the law is  Rules that stipulate how other rules come to have authority (i.e. validity) – E.g. enactment by Parliament or judicial precedent or customary practice. 2. Rules of Change – to overcome the static nature of primary rules  Rules that stipulate how rules can change or be replaced, added or deleted.  Rules of recognition may include provisions for recognition of changes. 3. Rules of Adjudication – to remedy inefficiency of social pressure  Rules that empower entities to authoritatively determine whether primary rules have been broken and provide the procedure to seek an adjudication.  For such a system to exist, it is also necessary to have some level of obedience and recognition of these rules amongst both officials and individuals. Application of Hart’s Analysis to the Legal System  In Australia, the secondary rules that establish our legal system are in the Constitution.  There are also conventions applying because our system is based on the English system. o Our courts apply the common law (made by judges) so long as it does not conflict with the law made by Parliament. o The branches of government apply Westminster conventions in the conduct of government – e.g: - the Governor-General does not reject a law passed by Parliament; - Government departments give independent advice to Ministers; - Government acts in ‘caretaker’ mode when an election has been called.  The Constitution of Australia of 1901 (“The Constitution”):-  established a federation of States known as the Commonwealth of Australia;  defined the scope of federal (i.e. Commonwealth) powers; and  established a set of Commonwealth institutions to exercise federal power. o Specific powers are vested in federal institutions, with the residue left to States. o Each State has its own Constitution that pre-dates the Constitution of Australia and comes from the time when each was a British colony.3 The Legislature, Executive and Judiciary  The Constitution separates federal legislative, executive and judicial powers.  The Legislature (Parliament) is given power to make law (legislative power).  Such law is called legislation, statutes or Acts of Parliament.  Courts can make law that does not conflict with legislation. o Called common law.  Federal Parliament has 2 Houses – the House of Representatives and the Senate. o Proposed laws (called Bills) require a majority vote in both Houses.  The Executive (i.e. the Ministers heading government departments) are given power to administer the law.  The Ministers as a whole are referred to as the Executive Council (or Cabinet).  The Judiciary (i.e. courts and judges) is given power to interpret the law.  It decides disputes by interpreting what the law is and whether facts fall within it. The Relationship between Parliament and the Courts  Parliament has supreme law-making power only if empowered by the Constitution.  The Constitution limits those powers and only the High Court has power to decide whether those laws are valid – i.e. constitutional or unconstitutional.  If a law is valid, the courts are bound by it and must interpret it, not rewrite it.  Called statutory interpretation. o There are judge-made AND statutory rules of interpretation. Separation of Powers and the Rule of Law  The doctrine of separation of powers requires that each branch of government (legislature, executive and judiciary) exercise their powers independently.  Separation of powers is a convention of Westminster System of government. o It is not laid down in any written law.  Separation of powers is imperfect in the Westminster System because Ministers are members of both the legislature and the executive.  Judges are independent in that they cannot be sacked once appointed.  The executive also does a lot of law-making in the form of regulations, but these must be authorised by Parliament.4 o Regulations are sometimes called subordinate or delegated legislation, because they must be authorised by Parliament. The Division of Legislative Power  The Constitution gives Federal Parliament power to make laws on specific areas.  There are 3 types of legislative powers provided to Parliament in the Constitution:-  Exclusive powers – Only Federal Parliament can legislate in these areas, NOT State Parliaments – e.g. customs and excise.  Concurrent powers – Both Federal and State Parliaments can legislate in these areas, but if there is inconsistency between the 2 laws, the federal law prevails. o Examples of the most common federal powers:- – trade and commerce with other countries and among the States (s. 51(i)); – taxation (s. 51(ii)); – postal and telecommunications (s. 51(v)); – interstate banking and insurance (ss. 51(xiii), 51 (xiv)); – bills of exchange and promissory notes (s. 51(xvi); – bankruptcy and insolvency (s. 51(xvii)); – copyright, patents, designs and trade marks (s. 51(xviii)); – corporations (s. 51(xx)); – external affairs (s. 51(xxix)); – interstate industrial disputes (sec 51(xxxv)).  Residual powers – Only State Parliaments can legislate in these areas. o These powers are not specified by the Constitution but they are what is left over. o The Constitution simply preserves the State powers except to the extent that they are specifically excluded or overridden by federal law. o The State Constitutions authorise these powers for State Parliaments. Amendment of the Constitution  The Constitution can only be amended by a referendum requiring:-  A majority of members of each House of Parliament;  A majority of voters in a majority of States; and  A majority of voters Australia-wide.5 Other Classifications of Law  We have seen that law is classified as statute law (or legislation) if made by Parliament, and common law if made by judges. There are other useful classifications. Criminal and civil law  Criminal law:-  The State, represented by a prosecutor, charges a citizen with a criminal offence.  The prosecutor must prove his/her case beyond reasonable doubt.  If found guilty, the accused receives a punishment, like imprisonment or fine.  Civil law:-  One citizen (the plaintiff) sues another (the defendant) for a wrong, such as breach of contract or negligence. o A citizen may include the government acting as a person – e.g. as owner of land. o Citizens may bring civil actions against the government for failing to administer statutes correctly (called administrative law).  The plaintiff must prove his/her case on the balance of probabilities.  If the plaintiff succeeds, the defendant is ordered to redress the wrong – e.g. by paying monetary compensation called damages. Public law and private law  Public law:-  Law relating to the organisation of government, such as constitutional law, administrative law and criminal law.  Private law  Law relating to the rights and obligations of citizens amongst each other. Substantive and procedural law  Substantive law:-  Law laying down actual rights and obligations.  Procedural law  Law laying down the procedures for enforcing those rights and obligations.