Speech by Lorraine Finlay, School of Law, Murdoch University at ALRC Freedoms Symposium, Brisbane, 2 September 2015.

Thank you to the ALRC, and in particular Professor Croucher and Emeritus Professor Ratnapala for inviting me to take part in this symposium. 

The ALRC Freedoms Inquiry covers an extraordinarily wide range of materials.  It is timely that we are focusing on these traditional rights and freedoms in what is the 800th anniversary of the sealing of the Magna Carta.  It is all too easy to take these fundamental rights and freedoms for granted, and the ALRC Freedoms Inquiry is an important opportunity to re-affirm our commitment to them.

The focus of this evening is on real property rights in the context of mining and environmental claims.  In my remarks I will focus on three key points:

  1. Making some preliminary comments about the importance of property rights;
  2. Identifying what I see as the two key problems with the current protection of property rights in Australia, namely the failure to extend the ‘just terms’ guarantee to the States and the failure to extend the guarantee beyond ‘acquisitions’ to also include the restriction or regulation of property rights; and
  3. Canvassing some of the key arguments in favor of extending the ‘just terms’ guarantee to include an expanded compensation mechanism where property rights are significantly restricted by government regulation.

The modern importance of property rights

To begin with, it is useful to briefly reflect on the contemporary importance of property rights.  The ALRC Interim Report notes that ‘the common law has long regarded a person’s property rights as fundamental’.[1]  While these rights are now primarily statutory based in Australia, it is still important to understand their historical context (which can be traced back 800 years to the Magna Carta) and common law background.  In the modern context real property rights are often controversial and easily dismissed.  For example, it was interesting to find reference in the ALRC Interim Report to an article claiming that a property rights guarantee ‘does not reflect a human right recognized under general international law’.[2]

I would emphatically disagree with this conclusion.  Property rights are a recognized human right (as seen, for example in Article 17 of the Universal Declaration of Human Rights) and they remain extremely important in the modern context.  There is an essential and undeniable connection between property rights, the rule of law, limited government and the protection of individual liberties.  There is also an inextricable link between economic growth and property rights, with guaranteed property rights providing individuals with the security and incentive that is necessary to both save and invest.

It is, however, important to note from the outset that property rights are not absolute.  It has long been accepted that property rights may be qualified, and a good example of this is the recognized need for environmental protection measures.  The question is always one of balance. 

My argument this evening is that Australia is not presently striking the ideal balance, and that we are insufficiently protecting property rights – primarily through the lack of an appropriate compensation mechanism.

In terms of the protection of property rights, there was a suggestion in some of the submissions that have been made to the ALRC that it is ‘nonsensical’ to use a human rights argument to challenge environmental law and regulation and that ‘the protection of the content of particular property rights is simply not suitable to a human rights style evaluation framework’.[3]  I would disagree with these submissions on two fronts.  First, it is not a question of unquestionably challenging environmental laws and regulations.  The question is rather one of balance – that is, how do we strike a sensible balance between protecting the environment and protecting private property rights.  Secondly, property rights are intrinsically centred in a human rights framework.  This is apparent internationally where, for example, property rights are featured in the Universal Declaration of Human Rights.  Even more importantly for our purposes, it is apparent within Australia with s.51(xxxi) of the Australian Constitution which provides that the Commonwealth Government may make laws for the acquisition of property but only ‘on just terms’.  This ‘just terms’ guarantee is particularly significant as it is one of the very few rights guarantees that are provided in the Australian Constitution.

Key problems with protecting property rights in Australia

There are two key problems that I identify with the current protection provided in Australia to private property rights.  The first is structural, namely that the ‘just terms’ guarantee doesn’t extend to the States.  The second is interpretive, focusing on the limited scope of the term ‘acquisition’. 

The first difficulty is that the ‘just terms’ guarantee provided under s. 51(xxxi) of the Australian Constitution ensures that the Commonwealth is required to provide just terms compensation whenever it acquires property, but does not extend a similar requirement to the Australian States.  This is a significant gap in the protection of property rights in Australia.

It is important to note here that the ALRC Freedoms Inquiry is limited by its Terms of Reference to the identification and critical examination of Commonwealth laws that encroach upon traditional rights, freedoms and privileges.  State laws lie beyond its remit.  There are, however, two important points to make in relation to these Terms of Reference:

  1. Given that the majority of planning and environmental laws that directly impact upon property rights are State laws it is impossible to discuss the protection of property rights in Australia in a practical and meaningful way without reference to the States.
  2. There is also increasingly concern over intergovernmental arrangements that see the Commonwealth encouraging, and often funding, policies that are implemented by the States that impact upon property rights.  As these are technically State-based policies they side-step the constitutional ‘just terms’ guarantee.  This was noted by the Law Council of Australia in their submission to the ALRC.[4]  For example, the key Commonwealth legislation that is considered in the ALRC Interim Report – namely the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) and Water Act 2007 (Cth) – cannot be viewed in isolation.  These legislative instruments are part of a broader framework of environmental protection that includes State legislation restricting property rights without compensation.

For these two reasons, it is not possible to neatly ‘carve out’ Commonwealth laws from State laws when considering the protection of property rights in Australia.

The second key difficulty is that the term ‘acquisition’ has been the narrow and technical definition given to this term by the High Court of Australia.  For example, it has been said that ‘to bring the constitutional provision into play it is not enough that legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be’.[5] 

The key issue that has emerged in relation to mining and environmental claims concerns cases in which there has been a restriction of rights that does not amount to an acquisition of property, and which therefore falls outside of the scope of the constitutional guarantee.  Government regulations may be so restrictive that they make it impossible to productively use the land, but unless they can be classified as an ‘acquisition’ there is no requirement for compensation.

The case of Peter Swift in Western Australia is a good example.  While this is a State case (and does not directly fall under Commonwealth legislation) it does provide a clear example of the injustice that can occur in these types of situations. 

Under the Environmental Protection Act 1986 (WA) (‘EPA’) the WA Environmental Minister may declare areas by notice to be Environmentally Sensitive Areas (‘ESAs’).  It is an offence under the EPA to clear native vegetation unless this is done under a legislative exemption or permit.  There are no exemptions provided for land containing an ESA designation.  It is a criminal offence to illegally clear native vegetation without a permit, with fines reaching $250,000 for individuals and $500,000 for companies.  The definition of clearing is extremely broad, incorporating such regular farming activities as the grazing of cattle.  The combined effect of the relevant regulations in Western Australia are that all wetlands in the Agricultural area of Western Australia have been declared as Environmentally Sensitive Areas.  The Standing Committee on Environment and Public Affairs recently considered this regulatory framework and found that the inclusion of wetlands was ‘seemingly all-encompassing but untested …’.[6]   It also found that around 98.042 parcels of land in Western Australia include land that is an ESA.[7]   It is difficult to see how it can be sensibly claimed that each and every one of these parcels of land contains areas of the highest environmental significance and deserving of the highest possible levels of environmental protection.

These regulations, however, amount to a restriction on land and not an acquisition.  Putting to one side the specific problems with the implementation of this ESA framework (which include the fact that no individual landowner was actually informed of their land being designated as an ESA and that the ESA designation does not appear on a property’s Certificate of Title) there is an obvious fairness issue when land can be ‘locked away’ without compensation being payable.

The case of Peter Swift falls under this legislative framework.  Peter Swift was prosecuted for clearing 14ha of native vegetation on his Manjimup property without a permit.  Although he was ultimately cleared (after a lengthy and expensive court battle) he was then faced with his grazing land having been effectively reduced from 1200 acres to around 240 acres due to the ESA designation.  He has received no compensation for this, but he is expected to individually deal with the continued compliance costs attaching to his property as well as paying his original mortgage that is based on the value of 1200 acres of productive land.  This case starkly highlights the moral need for reform in this area.

The clear problem with the current framework of environmental protection is that it imposes substantial restrictions on land use, but fails to provide any compensation to land owners who purchased their land before these restrictions were put in place and who can no longer realize the true productive value of their property.

Establishing an expanded compensation mechanism

The argument here is not that property rights should supersede environmental protection.  Rather, the focus should be on finding an appropriate balance, and on ensuring that compensation is provided to individual land-owners when they are required to ‘sterilize’ their land for environmental purposes.  There are three main arguments that I would like to touch upon tonight in favour of an expanded ‘just terms’ guarantee to protect property rights that are significantly restricted:

1. The pervasiveness of compensation

The first argument is that compensation for government policies has become a pervasive concept.  Modern politics seems to require that compensation measures be provided for anybody who is likely to be left even slightly worse off by a change in government policy, to the point recently where the compensation measures to be introduced with the carbon tax were left in place even when the original tax itself was repealed!  Why should providing compensation for the significant restriction of property rights be viewed any differently?

2. The moral case for sharing costs

One common argument against provided compensation for ‘restrictions’ is that it would ‘open up the floodgates’ and would be simply unaffordable for governments.  This misses the simple point that there is always a cost attached to environmental protection policies.  At the moment, however, we are simply forcing the private land owner to bear this cost, rather than the community who wishes to see the particular parcel of land being protected.  The moral case for sharing these costs is obvious.  If the community believes that it is important to impose particular environmental restrictions on a particular parcel of land, then the community should be willing to bear this cost. 

3. The practical case for improving environmental outcomes

There is also a practical argument that an expanded compensation mechanism would actually lead to improved environmental outcomes.  At present, a broad-brush approach tends to be applied as there is no tangible cost that government departments or individual bureaucrats need to consider before they ‘sterilize’ large areas of land under the guise of environmental protection.  Forcing the bureaucracy to actually consider the cost of these policies by imposing compensation mechanisms will lead to environmental policies that are more targeted and better focused, effectively prioritizing areas of key environmental significance rather than the current ‘super trawler’ approach to environmental protection.

Added to this, the current system created perverse incentives.  Locking up vast tracts of land actually prevents the sustainable management practices that ultimately benefit the environment in the long term.  There are many examples across Australia – Barrow Island in Western Australia comes to mind – that demonstrate that development and environmental protection are not mutually exclusive concepts.

Conclusion

There are significant concerns regarding the protection of property rights in Australia at present, based primarily on two significant ‘gaps’ in the s.51(xxxi) ‘just terms’ guarantee.  The compensation guarantee does not current extend to the States, and does not encompass significant restrictions to property rights that are imposed by government policies.

The title of tonight’s symposium is ‘A home is no longer a castle?’ and I note that Professor Croucher referenced the Australian movie classic, ‘The Castle’, in her introductory remarks.  In that movie, Daryl Kerrigan is asked by a High Court Judge ‘And what law are you basing this argument on?’.  He replies – ‘The law of bloody common sense!  A man’s home is his castle … you can’t just walk in and steal our home’.

That might be true in relation to the Commonwealth under s. 51(xxxi).  The Australian Constitution does mean that the Commonwealth can’t just walk in and steal your home, at least not without paying you ‘just terms’.  However, under the current state of play, their mates – the State Governments – can just walk in and steal your home without being required to pay you anything.  And while the Commonwealth can’t steal your home, they can just walk in and tell you that you can no longer use the kitchen or the poolroom.  These two limitations are serious gaps in the current protection of real property rights in Australia today. 


[1]     Australian Law Reform Commission, Traditional Rights and Freedoms – Encroachments by Commonwealth Laws (Interim Report), [8.1].

[2]     Ibid, [7.55].  Quoting Simon Evans, ‘Should Australian Bills of Rights Protect Property Rights’ (2006) 31 Alternative Law Journal 19, 20.

[3]     Ibid, [8.133].  Quoting submissions by the Australian Network of Environmental Defender’s Offices and Environmental Justice Australia.

[4]     Ibid, [8.27].

[5]     The Commonwealth v Tasmania (1983) 158 CLR 1, per Mason J at 145.

[6]     WA Legislative Council, Standing Committee on Environment & Public Affairs, Petition No. 42 – Request to Repeal the Environmental Protection (Environmentally Sensitive Areas) Notice 2005 (Report 41) (August 2015), [4.20].

[7]     Ibid, [Finding 3] at 13.

Published on 9 September 2015.