When a case comes before a court, the parties to the action present the evidence they need to support their case. The judge listens to the evidence, decides what evidence is relevant and what facts have been proved, decides what law is relevant, and applies that law to the facts in making a decision which is binding on the parties.
The kind of case that a particular court decides depends on the jurisdiction of that court, in other words its authority to determine particular issues. The courts are arranged in a hierarchy, based on the kinds of issues being decided, with appeals from lower courts going to a higher court.
A party to a case who is not satisfied with the court's decision may appeal to a higher court for a reconsideration of the decision. If an appeal is not made within the time allowed, the matter is finalised and the case usually cannot be reopened. If it is made within time, the higher court hearing the appeal can affirm (agree with) or reverse, also called overrule, (go against) the lower court's decision.
The law declared by the judge in the reasons for the court's decision directly affects the parties to the case. That law will also affect, indirectly, people bringing actions involving similar legal principles before other courts in that jurisdiction, because of the doctrine of precedent.
Precedent means that judges are bound to follow interpretations of the law made by judges in higher courts, in cases with similar facts or involving similar legal principles. For example, a decision of a judge in a State Supreme Court (the State's highest court) is binding on judges making decisions in similar cases in all State courts, but not on a judge in a Federal Court (which has a Federal jurisdiction) or in the Supreme Court of another State (the State Supreme Courts are at the same level in the hierarchy of Australian courts).
Some of the rules that make up the doctrine of precedent are:
Parliament made law is binding on all courts and judges. Courts cannot overrule or challenge an Act unless they hold it to be unconstitutional (that is, beyond the powers given to Parliament by a State or Commonwealth Constitution). Decisions about constitutionality are made by the High Court. The State Parliament has power to make law (Acts or statutes) for all people living within the boundaries of the State. Laws made in one State have no force in another. The Commonwealth Parliament has power to make laws which affect all people living within Australia, but this power is limited to the subject matters listed in the Constitution.
Laws made by the Commonwealth or a State Parliament are called Acts (or statutes or, more generally, legislation). While an Act is in draft form (that is, before it has been voted on and either passed or rejected by the Parliament) it is called a Bill. Parliament may repeal (do away with) or amend (changes) an Act.
In addition to Acts, there are laws covering administrative details and other matters not easily dealt with in an Act. Acts may empower a public authority, a local council, a Minister controlling a government department or a public servant to make Regulations, Rules, ordinances or by-laws. These laws are collectively known as subordinate (or delegated) legislation, because Parliament has delegated its powers to pass these types of laws to another body.
An Act overrules the common law (judge made law) if both apply in the same area. Often an Act adds to an area of the common law, and sometimes Parliament passes an Act that replaces an area of common law completely. Common law that has been replaced may or may not be relevant to the interpretation of the new Act. This may be specifically indicated in the Act or may be determined only after careful interpretation of the Act.
Legislation attempts to control future activity, so legislation is often unable to cover or predict every possible scenario that may arise. A specific case may therefore require a court to decide an Act's meaning in that specific case. The court's interpretation is then read with the Act to make up the law on that topic. For example, the law on families is not contained completely in the Family Law Act 1975 (Cth). It is found in a combination of the Act and decisions of the Family Court made on matters controlled by the Act.
Sometimes an Act may be ambiguous and its interpretation by the courts may be difficult to predict for a particular case. When this occurs, the law is difficult to state one way or the other. In this situation a lawyer can give two kinds of advice - what the law might, on some interpretations, allow and what it definitely allows.