Welcome to the third article in our ‘UCT 102’ series, designed to answer some of the more nuanced questions that arise when it comes to the unfair contract terms (UCT) regime under the Australian Consumer Law (ACL), recently overhauled by the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Act). For more information about the reforms, see the previous articles in our UCT 101 and 102 series.
For our first article of 2025, we tackle a frequently asked question: does the UCT regime apply to government?
The answer to this query requires consideration of three specific questions, which are essential for understanding how the UCT regime may apply to certain government bodies. These questions are:
- When and to what extent is ‘the Crown’ (ie government bodies that can be properly described as such, per question 2 below) immune from legislation (in this case, the UCT regime contained in the ACL) (Crown Immunity)?
- Who exactly constitutes the Crown (Crown Identity)?
- When is the Crown ‘carrying on a business’ (Business Test)?
Crown Immunity – when and to what extent is the Crown immune from legislation?
At common law, there is a presumption that the Crown is immune from statutory obligations unless specified (or implied) otherwise by the relevant legislation.1
What does legislation say about the Crown’s immunity from the UCT regime?
Commonwealth
For the Crown in right of the Commonwealth, the answer can be found in the Competition and Consumer Act 2010 (Cth) (CCA). According to section 2A of the CCA, the Crown in right of the Commonwealth is bound by the ACL (and therefore the UCT regime, which forms part of the ACL) in so far as it is carrying on a business, either directly or through an authority.
However, section 2A(3) of the CCA clarifies that the Crown is exempt from liability for pecuniary penalties and from being prosecuted for an offence (although this exemption does not extend to Commonwealth Crown authorities).2
States and Territories
For the Crown in right of a State or Territory, the answer can be found in that State’s or Territory’s Fair Trading Act (or equivalent legislation as set out in the footnote) (FTA).3 Each FTA adopts the text of the ACL and provides that the Crown in right of the relevant State or Territory is bound by the ACL in so far as it is carrying on a business, either directly or through an authority.
Like the CCA, each FTA stipulates that the Crown is exempt from liability for pecuniary penalties and from being prosecuted for an offence. Again, this exemption does not extend to State or Territory authorities.4
Local government
For local government, the position is not so clear cut, except in the case of NSW where the Local Government Act 1993 (NSW) specifically provides that “a council does not have the status, privileges and immunities of the Crown” and that “a law of the State applies to and in respect of a council in the same way as it applies to and in respect of a body corporate“.
Consequently, the UCT regime applies to local government in NSW without any need to establish that the relevant government agency is “carrying on a business”. In other jurisdictions lacking specific local government legislation, local government may be considered an ‘authority’ of the relevant State or Territory, thus potentially enjoying the same immunity position as the State or Territory for which it is an authority (ie it is immune from the UCT regime except to the extent that it is carrying on a business).
The alternative argument is that local government does not satisfy the Crown Identity tests (see our commentary on that below) and therefore should be treated in the same way as any other body corporate when it comes to the UCT regime.
Crown Identity – who constitutes ‘the Crown’?
It is crucial to establish whether a particular entity has Crown Identity, because if an entity claiming to be a Crown entity does not in fact have the status of the Crown, then the question of whether (and to what extent) immunity from legislation may be lost or modified becomes a moot point, as the relevant entity will have no presumptive immunity in the first place.
According to case law, whether an entity is the Crown will depend on an interpretation of the legislation establishing the entity, the activities that are engaged in under that legislation, and the nature and extent of governmental or ministerial control over the entity.5
The below cases highlight the tests applied by the courts when considering whether an entity is in fact the Crown. These tests include reviewing the level of control exercised by the government over the relevant entity and considering the relevant functions that the entity performs (whether they are governmental or private, in nature).
Case | Findings |
---|---|
Auswest Timbers Pty Ltd v Department of Sustainability and Environment [2010] VSC 389 | It was found that the Department of Sustainability and Environment (DSE) was part of the Crown. The DSE was set up by the Conservation, Forests and Lands Act 1987 (Vic) (CFLA), which:
provided for the department head of the DSE (Secretary) to be appointed by the Premier on behalf of the Crown; |
ACCC v Australian Egg Corporation Ltd [2016] FCA 69 | It was found that the Australian Egg Corporation Limited (AECL) was not part of the Crown. While the court acknowledged there were a number of ‘close ties’ between AECL and the Australian Government, with the AECL acting as a declared industry provider under applicable legislation and relying on funding from the Commonwealth Government, this was not in the court’s view sufficient to warrant the characterisation of AECL as an agent or emanation of the Crown. Factors which supported the court’s decision were: AECL was not a statutory corporation. While its establishment was contemplated by another Act, it was not established under that Act. The ability of the Commonwealth Government to exercise direct control over AECL’s activities was limited – there was no statutory provision for the appointment of any representation of the Commonwealth Government as a director of AECL, for example. The underlying agreements between AECL and the Australian Government clearly stated that they did not constitute AECL as an “agent” of the Commonwealth. AECL had in a previous publication described itself as an ‘industry-owned corporation’, stating that it believed this model struck an appropriate balance between ensuring accountability to Government ‘while protecting the independence of the organisation’. |
Business Test – When is the Crown ‘carrying on a business’?
As noted, the Crown in right of the Commonwealth, State, or Territory (and potentially local government, excluding NSW) maintains immunity from the UCT regime unless and to the extent that it is ‘carrying on a business’.
Determining what constitutes “carrying on a business”
According to case law and legislation, this determination is factual and context dependent. The key guiding principles are set out below:
- The term ‘business’ denotes activities undertaken in a commercial enterprise in the nature of a going concern (that is, activities engaged in for the purpose of profit on a continuous and repetitive basis).6
- The expression ‘carry on a business’ signifies a course of conduct involving the performance of a succession of acts with system and regularity, not the effecting of a solitary transaction.7
- Despite the above, while repetitiveness is an indicator, it is not alone sufficient to constitute the carrying on of a business. The absence of a system and regularity might show that a business is being carried on, but the presence does not necessarily establish that it is.8
Section 2C of the CCA sets out a list of activities that will not amount to carrying on a business for the purposes of sections 2A (as well as ss2B and 2BA). However, they are not exhaustive. The list includes:
- imposing or collecting taxes, levies or licence fees;
- granting, refusing to grant, revoking, suspending or varying licences;
- transactions involving only persons that are acting for the Crown in the same right or acting for the same authority of the Commonwealth;
- transactions involving only non-commercial authorities of the Commonwealth; and
- the acquisition of primary products under legislation, subject to certain exceptions.
Let’s examine how the courts have applied the test in practice.
Case | Findings |
---|---|
ASaitta Pty Ltd v Commonwealth of Australia [2001] VSC 170 | The Court found that the Commonwealth was not carrying on a business when providing pharmaceutical, sickness and hospital benefits, and other medical and dental services, in accordance with the provisions of the National Health Act. |
JS McMillan Pty Ltd v Commonwealth (1997) 147 ALR 419 | The Commonwealth was carrying on a business by providing general printing and design services through its business (the Australian Government Publishing Service), even though these services were rendered in connection with the government. |
Markit Pty Ltd v Federal Commissioner of Taxation (Cth) [2006] QSC 157 | The Commission of Taxation was not carrying on a business when bringing proceedings for penalties for non-payment of taxes. This was a governmental activity. |
Suatu Holdings Pty Ltd v Australian Postal Commission [1989] FCA 60 | The Australian Postal Commission was carrying on a business by entering into an agreement to deliver brochures for films and books to ‘every household in Australia’, even though such business arose in the performance of its statutory functions to operate postal services. |
Sirway Asia Pacific Pty Ltd v Commonwealth [2002] FCA 1152 | The Department of Defence was not carrying on a business by acquiring chinaware in industrial quantities to be used at mealtimes by members of the armed forces. The Court noted that the Department’s core function was the defence of Australia and its national interests, and the acquisition of chinaware was essential to allow members of the armed forces to be ‘fed in a civilised manner’. The Court said that the activity did not ‘have the flavour of a commercial enterprise’, rather, it was ‘inextricably linked with a function of government’. |
Navigating the issues discussed in this article can be complicated. Set out below is a high-level flowchart which summarises the core questions to consider when assessing UCT application for Commonwealth, State, and Territory entities.
UCT application to government agencies flow chart9
How can we help?
We have a dedicated contracting and consumer law team that can assist you with contract preparation and review and can provide you with advice on your rights and obligations under the ACL, particularly in light of recent reforms. We also routinely present to businesses on the ACL and the unfair contract terms regime. Please contact us if you would like more information about the services we provide.
This article was written by Teresa Torcasio, Partner, and Zoe Vise, Senior Associate.
1 Bradken Consolidated Ltd v Broken Hill Propriety Co Ltd (1979) 145 CLR 107 at [123], [129] and [136]; Bropho v Western Australia (1990) 171 CLR 1 at [19] – [22]; Province of Bombay v Bombay Municipal Corp [1947] AC.
2CCA, Section 2A(3A).
3Fair Trading Act 1987(NSW) Part 3; Fair Trading Act 1989 (Qld) Part 3; Fair Trading Act 1987 (SA) Part 3; Australian Consumer Law (Tasmania) Act 2010 (Tas) Part 2; Australian Consumer Law and Fair Trading Act 2012 (Vic) Chapter 2; Fair Trading Act 2010 (WA) Part 3; Fair Trading (Australian Consumer Law) Act 1992 (ACT) Part 2; Consumer Affairs and Fair Trading Act 1990 (NT) Part 4.
4CCA, Section 2A(3A).
5Inglis v Commonwealth Trading Bank of Australia [1969] HCA 44.
6Hope v Bathurst City Council (1980) 144 CLR.
7JS McMillan Pty Ltd v Commonwealth (1997) 147 ALR 419.
8 Ibid at [354].
9 This flow chart is limited to consideration of the Crown in right of the Commonwealth and the Crown in right of a State or Territory given the lack of certainty that applies to the position around local government, as described in this article.