Melbourne Institute of Technology Pty Ltd CRICOS Provider No: 01545C, 03245K NSW
Business and Company Law
Answers Tutorial One
Unit Coordinator: Dr. Tushar Das
Tutorial Questions
Discussion Questions
1.15 Under what constitutional basis does the Competition and Consumer Act 2010 (Cth) operate?
The Competition and Consumer Act 2010 (Cth) has its constitutional basis in the corporations power (s 51(xx) of the Commonwealth Constitution). The Concrete Pipes case (Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468) made it clear that the Commonwealth could use the corporations power to legislate over the activities of corporations. The Commonwealth has jurisdiction over transactions made between States, however the power to make law under the CCA has been extended by cooperation of the States with the Commonwealth in that the ACL will replace some of State consumer legislation.
1.16 How did Commonwealth v Tasmania (1983) 158 CLR 1 (the Tasmanian Dam Case) extend the Commonwealth’s power to make laws?
In the Tasmanian Dams case (Commonwealth v Tasmania (1983) 158 CLR 1) the High Court upheld the validity of Commonwealth legislation which gave effect to the World Heritage Convention. The Commonwealth had, under the external affairs power (s 51(xxix) of the Commonwealth Constitution) entered into the World Heritage Convention. The Convention required signatory nations to protect listed World Heritage sites. The Gordon below Franklin River was so listed and the Commonwealth’s legislation protected it from the Tasmanian Government’s plan to dam the river. Thus, the case extended the federal scope to make laws, by using the external affairs power to legislate concerning activities which would normally be the province of State governments.
1.17 What is the “purposive construction” of a statute? How does it differ from the “literal rule”?
Purposive construction of a statute” is having the court which is interpreting a statute to take the statute’s purpose into account. The federal, State and Territory courts are required by the relevant Acts Interpretation Acts to prefer “a construction that would promote the purpose or object underlying the Act”. This is, to some extent, contrary to the common law “literal rule” of interpretation, which says that the courts should, as far as they can, give the words of an act their natural, ordinary and grammatical meaning. The purposive construction required by the Acts Interpretation Acts goes further than the common law “mischief rule”. The mischief rule requires that the words of an act be ambiguous, illogical or inconsistent before it applies and requires the court to take the purpose of the act into account. Purposive construction instead applies all of the time.
1.18 What is “equity”? What is the relationship between equity and the common law?
Equity is the system of rules developed by the English Court of Chancery, as opposed to the “common law” developed by the other English courts. The rules of equity are based on the notion of “the King’s conscience” and have a sense of fairness or justice about them which are not always present in the more formal common law. In Australia all courts apply both common law and equity, and, technically, the rules of equity overrule the common law. The main effect that equity has had is to increase the remedies that courts can give. Under common law, damages (compensation) is the only remedy a court can normally give. Equity has added remedies like injunctions, specific performance and account for profit
1.19 Briefly, what are the alternatives to suing somebody in court to enforce your legal rights, and why would you consider them?
The alternatives to suing somebody in court include: arbitration – where the parties agree to have their dispute decided by an arbitrator they appoint, rather than by a court alternative dispute resolution methods – such as negotiation, facilitation, mediation, conciliation and independent expert appraisal which are methods of assisting the parties to reach an agreement rather than have a decision imposed.
You would consider them to get a faster or cheaper solution to a court decision. Also, alternative dispute resolution methods may mean a better relationship with the other side, if you need to keep dealing with them
Problem Questions
1.20 Tony is a researcher for an Australian consumer organisation, called Consumer National. Consumer National is very concerned about the software several overseas companies are marketing in Australia, either directly or through local Australian businesses licensed to manufacture or sell it. Consumers can buy the software by mail order from overseas, in several chain stores in Australia, or by downloading it from websites in Australia or overseas. Consumer National wants to lobby to make the software illegal. Tony’s job is to work out which governments to lobby. Advise Tony.
Tony and Consumer National would need to lobby the federal government which has the following relevant constitutional powers:
Trade and commerce power – s 51(i) applies to trade and commerce with other countries and among states, so the federal government could regulate Australians dealing the overseas companies or trading the software interstate. Posts and telegraph power – s 51(ii) means the federal government could regulate mail order and, to some extent downloading from websites. With downloading it could cover Australian websites and Australian downloaders, but not foreign websites. Corporations power – s 51(xx) means the federal government could regulate corporations trading in Australia.
They could also lobby State and Territory governments to make manufacturing, selling or possessing the software illegal for individuals. The federal government would only be able to do this for trading corporations
1.21 Anne is the Queensland Minister for Consumer Affairs. She has introduced a Bill into Parliament to outlaw some real estate scams which have recently been exposed by TV journalists. The Bill has been through its first reading when Anne realises, in response to an Opposition question, that the Bill has a serious defect. Is it too late for Anne to do something about it? If not, what can she do and when will the Bill become law?
Anne’s bill has only been through its first reading. So, she could simply decide to withdraw it and then reintroduce an amended bill. Alternatively, she could go ahead with a second reading and propose amendments while the bill is in “the committee stage”. The bill will become law (ie an “Act”) after the Parliament passes it (remember Queensland has no upper house), and the Governor gives assent. The date of commencement will be the date of the Governor’s assent unless the act says it commences on a later date.
1.22 The Wills Probate and Administration Act 1898 (NSW) used to provide in s 61B(3) that:
If the intestate leaves a husband or wife and also leaves issue, then if the value of the estate … does not exceed the prescribed amount then the whole estate shall be held in trust for the husband and wife …
The “intestate” is a person who has died without leaving a valid will, and “issue” are children, grandchildren, etc. The “prescribed amount” is currently $150,000. The problem here, though, is that if the estate is worth less than $150,000 it is to be “held in trust for the husband and wife” one of whom is dead, the “intestate”. You cannot hold assets in trust for a dead person. How would a court resolve this problem?
The literal rule of statutory interpretation does not work here. The golden rule requires the court to depart from the literal meaning to prevent an absurdity. Both the common law mischief rule and the purposive construction required by the Acts Interpretation Act would have the court consider the purpose of the statute. In this case, the court would likely find that the purpose of the statute was to distribute the intestate’s property among the surviving family. That would lead the court to read “husband and wife” as “surviving spouse”.
1.23 Australian Consumer Law (ACL), s 22 – Unconscionable conduct in business transactions
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to another person (other than a listed public company); or
(b) the acquisition or possible acquisition of goods or services from another person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable.
Under s 22(2) a court, in considering whether a person contravenes the unconscionability provisions, may have regard to (noting that the following considerations are not a complete list):
- the relative strengths of the bargaining positions of the supplier and the business consumer; andTop of Form
- whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
- whether the business consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and
- whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
- the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and
- the extent to which the supplier’s conduct towards the business consumer was consistent with the supplier’s conduct in similar transactions between the supplier and other like business consumers; and
- the requirements of any applicable industry code.
Applying ss 20 – 22 of the ACL, consider the following situation: the tenants of a shopping centre are told by the owner that they will not have their shop leases extended, unless they abandon any legal claims against the owner. The owners will only receive a new lease if they contractually agree to drop what would otherwise have been legitimate claims under the law.
The tenants would clearly invoke s 22(2) of the Competition and Consumer Act whereby the behaviour of the owners of the shopping centre contravenes the unconscionability provisions. The tenants may claim they are being forced to give up legitimate claims in order to secure a new lease. The tenants may ask a judicial body to consider the unfairness of the relationship between the parties when negotiating the contract, in particular: the relative strengths of the bargaining positions of the supplier and the business consumer; and whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier
