In our last blog, we spoke about the importance of business owners developing their legal literacy, which at its core involves gaining an understanding of the laws that apply to the operation of a particular business. A necessary foundation for learning about the law is understanding why laws exist and how they are made.

Laws exist to keep people safe and regulate the ways in which individuals, businesses and governments interact with each other. Everyone is bound by, and entitled to the benefit of, the law. Laws develop and change to reflect the values and morals of society, or where existing laws are no longer relevant or need to be updated to reflect current standards and ideals.

In this blog, we will give readers an overview of the Australian legal system. For many of us, our education about how laws are made is very limited and it’s really not something we turn our minds to, even if we do have to engage with the law in some capacity. But knowing why and how laws are made can enhance our understanding of why laws are administered and enforced in a particular way.

A trip down memory lane …

Our system of law in Australia has its origins in the English legal system, with English law having been “received” or automatically applied on colonisation. Australia was not a nation at the time of colonisation. Rather, with colonisation in 1788 came the gradual establishment of six separate colonies which were self-governing, each with its own independent parliament, executive government and judiciary.

Each colony had its Constitution and parliament had the power to make laws on any matter for the “peace, welfare and good government” of the people of the colony. However, this model led to great inefficiencies. It meant that things like the transport of goods and people, and the transaction of business across the colonies were difficult.

In the 1880s there was a growing belief that a national government in Australia was necessary to centralise the regulation of things common to all people in the colonies, such as trade, defence and immigration.

Following a number of conventions attended by politicians and the general public, each of the colonial parliaments elected delegates to a federation convention, the members of which then drafted our Constitution.

As part of the conventions that were held in relation to federation, it was decided which areas of law the federal parliament would have the power to regulate. A referendum was later held asking the people of the colonies to approve the draft Constitution.

Once the draft Constitution was agreed and approved, a representative from each of the colonies (with the exception of Western Australia) travelled to London and presented the Constitution to the British parliament which approved it on 5 July 1900.

Three weeks after the Constitution became law, a referendum was held in Western Australia in which an overwhelming majority of voters agreed to federate, realising that the other colonies could go ahead as a federation without it.

On 1 January 1901, in a ceremony at Centennial Park in Sydney, the Commonwealth of Australia was declared and the first Governor General, Lord Hopetoun, and Prime Minister, Edmund Barton, were appointed. The colonies became states in the new nation of Australia and the Constitution came into force. The first federal election was held in March of that year, and the first federal parliament opened in May. 

Why is this important?

The Constitution did not give the federal parliament the power to make laws for every aspect of life in the states. So on federation, the states remained as self-governing, and section 51 of the Constitution set out 39 areas in which the federal parliament has the power to make laws.  These areas are known as heads of power.  As a result, the power of the states to make laws on any matter “for the peace, welfare and good government” was somewhat diluted by the heads of power contained in the Constitution.

While the states and territories can still make laws in those 39 areas, the law of the Commonwealth will prevail to the extent there is any inconsistency between it and the law of the state or territory.

Wait! What about the territories?

The history of the territories is an interesting one.

Northern Territory

When South Australia became a colony, it occupied the entire middle of Australia from the Timor Sea down to the Great Australian Bight. It was established as a territory of South Australia in 1863, and was later transferred to the Commonwealth government in 1911. The transfer was said to be as a result of the Northern Territory being financially burdensome on South Australia, and to secure the northern defence of Australia as the Commonwealth parliament had the power to regulate defence under the Constitution.

Australian Capital Territory

The Constitution provided that a Commonwealth seat of government be established for the newly founded nation of Australia and the area of land of whichever state was allocated to be such would be transferred to the Commonwealth government by the state.

In 1909 an area within New South Wales was chosen to be that seat of government, and was transferred to the Commonwealth, thereby establishing the Australian Capital Territory.

Just like the states, each of the territories has its own constitution, parliament, executive and judiciary.

The Constitution

The Constitution contains 39 areas for which the Commowealth parliament has the power to make laws. The main areas that affect business owners are:

• Interstate trade and commerce.
• Corporations.
• External affairs (meaning Australia’s international relations).
• Taxation.
• Aged care.
• Defence.
• Currency.
• Intellectual property.
• Banking and insolvency.
• Postal services.
• Telecommunications.
• Banking.

State and territory governments commonly deal with matters including health, education, roads and traffic, building, local government and the environment.

Federation has worked well, but it has not been without its challenges. There are areas of law where the states have the power to make their own laws, for example environmental laws. This can lead to differing laws and regulations applying to businesses that trade nationally, which can in turn lead to an increased compliance burden on those businesses.

How are the laws created, administered and enforced?

Central to our system of government at a state, territory and federal level, is the existence of the separation of powers between parliament, the executive government and the judiciary. This principle ensures that the power to make and manage laws is divided equally between those three groups.

Each of these groups serves a unique function in the way in which Australia is governed. 

• • Parliament is responsible for making and changing statute law, and consists of the King (who is represented by the Governor-General in Federal parliament, and the Governor’s equivalents in the states and territories), and the houses or house of parliament in each jurisdiction. We say “house” or “houses” because in Queensland and the ACT, there is only one house of parliament being the house of representatives.
  • The Executive is responsible for putting laws into action and administering them and consists of the King, the Prime Minister and ministers in the Federal Parliament and their equivalents in each of the states and territories. The executive government is accountable to parliament. This is why we see parliamentary inquiries held in relation to the operation and conduct of government departments.  An example of this is the inquiry that was held into the Centrelink robodebt scheme.

• The Judiciary is made up of the courts, including the High Court, federal courts and the courts and tribunals in each of the states and territories. The judiciary is responsible for making judgments about the law as it applies to the particular facts and circumstances of a case. The judiciary can make laws, and also interprets statute law when its operation is challenged.

What are the different types of laws in Australia?

Laws can be categorised in different ways. For our purposes we are concerned with civil laws (as opposed to criminal law) and the laws that are made by both parliament and the judiciary.

Civil law is the law that deals with disputes between people or organisations. It primarily deals with the legal relationships between parties arising from everyday dealings. Civil laws are made up of both statute law and judge made law, also known as common law.

Laws made by the parliament are known as statute law, also known as legislation. These laws are administered by the executive government. The judiciary interprets legislation made by  parliament. This is known as statutory interpretation.

Judge made law, also known as common law, is what the name indicates. It is the law made by judges. It has its roots in the laws that were received in Australia upon colonisation. As Australia has evolved as a nation we have developed our own laws, some that differ to the English laws on which our original laws were based.

What are the common ways of resolving legal disputes in Australia?

Legal disputes between parties can be resolved in a variety of different ways. Going to court is not the only pathway to resolve legal disputes.

A large number of legal disputes between parties are resolved without the involvement of lawyers or the courts. Where legal proceedings are commenced, most disputes will settle by agreement before the matter goes before a court or tribunal.

There is no formal requirement that if you find yourselfin a legal dispute with another party that the matter be dealt with by a court or tribunal.

Legal disputes may be resolved in a variety of ways. The five main ways of resolving a legal dispute are:

• Negotiation.
• Mediation.
• Conciliation.
• Arbitration.
• Litigation.

Negotiation involves the parties privately resolving a dispute as between themselves, and is by far the most preferred method to resolve any legal dispute as it can avoid long and drawn out legal proceedings which are almost always very costly.

Mediation, conciliation and arbitration are a form of alternative dispute resolution, which provides a means of resolving a dispute with the assistance of a third party and sits outside seeking the decision of a court or tribunal.

Litigation involves having your dispute heard by a court or tribunal. Tribunals are less formal than courts, and the formal rules of evidence may not apply. Going to court is a much more formal process, and a judge will make a decision about a dispute according to the rules of evidence and the applicable law. It is the most formal of the dispute resolution options. Decisions of both tribunals and courts are a matter of public record, and the information about the case is made available to the general public through the publication of the court’s decision.

Final thoughts …

Understanding the Australian legal system is a crucial foundation to assist business owners to develop and improve their legal literacy, as it provides context for the role of law and justice in Australian society. By understanding how laws are made and enforced, business owners can better navigate their legal obligations and mitigate legal risks.

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