Protections from statutory encroachments

8.6          As outlined in Chapter 7, property rights find protection in the Australian Constitution, through the principle of legality at common law, and in international law.

Australian Constitution

8.7          Section 51(xxxi) of the Constitution concerns acquisition of property on just terms.[5] Section 100 of the Constitution is also relevant to the issues considered in this chapter.[6] It provides that:

The Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.

8.8          Lorraine Finlay has argued that ‘the “just terms” guarantee in s 51(xxxi) in fact offers only limited protection to property rights in Australia, with there being two main limitations to its efficacy—one structural, and the other interpretive’.[7] The structural limitation is that it does not extend to state governments.[8] As Latham CJ observed in PJ Magennis Pty Ltd v Commonwealth, state parliaments do not have a constitutional limitation equivalent to s 51(xxxi) of the Australian Constitution: ‘[t]hey, if they judge it proper to do so for some reason, may acquire property on any terms which they may choose to provide in a statute, even though the terms are unjust’.[9] However, states are able to, and often do, provide compensation even though there is no constitutional requirement for them to do so. On some occasions the Commonwealth has used its influence to encourage states to do so.[10]

8.9          The Commonwealth has imposed a requirement for just terms for any acquisition of property on both the Northern Territory and the Australian Capital Territory in their respective self-government statutes.[11] The High Court in Wurridjal v Commonwealth overruled Tau v Commonwealth,[12] which was long standing authority for the proposition that s 122 of the Constitution (the so-called ‘territories power’ which confers power on the Commonwealth Parliament to make laws for the government of the territories) confers power to acquire property which is unconstrained by the requirement for just terms.[13]

8.10       Finlay sees the other limitation to the efficacy of s 51(xxxi) as stemming from the way that the provision requires an ‘acquisition’, ‘with the result that the just terms guarantee can effectively be side-stepped by the Commonwealth Government if it limits or restricts property rights in a manner that does not amount to an actual acquisition’.[14]

Takings v regulation

8.11       In the context of arguments about s 51(xxxi), a distinction is often made between a ‘taking’ (that is, an ‘acquisition’) and a ‘regulation’. The regulation of land use for a number of purposes, particularly related to the environment and biodiversity, has ‘produced a strong backlash’ from landowners, arguing that such measures are effectively ‘takings’,[15] and therefore amenable to compensation.

8.12       What amounts to the acquisition of property is a subject of lively academic debate. O’Connor, for example, identifies three propositions underpinning property rights arguments, influenced to a great extent by analysis of the US takings clause:

The first is that the property rights of a landowner are not just a unitary estate or interest in land, but a bundle of rights which include the rights to use and enjoy the land, to dispose of or alienate it, and to exclude others from it. … Gray calls this an ‘atomic’ conception of property, …

The second proposition is premised on the idea of property as ‘an ad hoc collection of rights in resources’. It holds that any regulation which curtails one or more of the rights in the owner’s bundle is a prima face ‘taking’ [‘conceptual severance’]. …

The third proposition is that compensation must be paid whenever a disproportionate burden has been unfairly imposed on some citizens for the benefit of the public as a whole [‘distributional fairness’]. …[16]

8.13       A further issue concerns substances that sit within the Crown prerogative. This has arisen particularly in the context of states. If a landowner does not own minerals in that land, for example, then a taking of them is not compensable.

8.14       An illustration of the width of the power of states is the acquisition of coal. At common law the Crown had the right to ‘royal’ minerals—gold and silver—with the power to enter, dig and remove them.[17] This common law position also became the law in the Australian colonies.[18] In Wade v New South Wales Rutile Mining Co Pty Ltd (Wade), Windeyer J commented that

Gold, the ‘royal metal’, has always had a special position in law: a position which silver is perhaps entitled to share. Gold in the Australian colonies belonged always to the Crown, whether it was in Crown land or in lands alienated by the Crown. No express reservation was necessary to preserve the Crown’s rights. They depended upon prerogative rights recognized by the common law. Thus gold did not pass by a Crown grant of the land in which it lies. If this were once debatable, all doubts were dispelled, for Victoria, by the decision of the Privy Council in Woolley v Attorney-General (Vict) (1877) 2 App Cas 163. And in New South Wales the position was expressly recognized by the legislature when in the Preamble to the Mining on Private Lands Act of 1894 it was recited that

… certain other lands have from time to time been alienated without express reservation of any minerals which might afterwards be found therein, but having regard to the well established laws of England whereby it has been held from time immemorial that the royal metal gold does not pass from the Crown unless by express conveyance in the grant of such lands …[19]

8.15       Cadia Holdings Pty Ltd v New South Wales concerned a mine in which gold and copper were intermingled and could not be mined separately.[20] The High Court held that by the time the common law was received in New South Wales the prerogative rights described in Wade had been abridged by s 3 of the Royal Mines Act 1688 (Imp), so that where copper and gold were intermingled in the ore there was no ‘mine of gold’ for the purposes of the prerogative.

8.16       Wade concerned mining leases under the Mining Act 1906 (NSW). Under that Act a mining warden could grant an authority to enter private lands and search for minerals not reserved to the Crown. Rent and compensation were required to be paid to the landowner; and royalties for minerals taken had to be paid. As Windeyer J remarked, ‘the obvious policy of this is to encourage mining’, but

[t]he means adopted involve a further, and quite radical, interference with the common law rights of a landowner. Even when he owns the minerals in his land he must suffer them to be mined unless he be active in mining them himself.[21]

8.17       Windeyer J referred to

the elementary principle of the common law that a freeholder for an estate of inheritance is entitled to take from his land anything that is his. Except for those minerals which belong to the Crown, the soil and everything naturally contained therein is his.[22]

8.18       In the Australian colonies minerals were ‘reserved’ in Crown grants of land, reflecting the Crown right to minerals. The general pattern in each jurisdiction was ‘to progressively reserve various minerals from Crown grants by legislation’.[23] What amounts to ‘minerals’ is a matter of construction. Professor Peter Butt explains:

A reservation of ‘minerals’ is widely construed. It includes whatever substances are encompassed by the vernacular meaning of that word as used in the mining world, the commercial world, and by landowners, at the time of the Crown grant. Within that meaning, it includes even minerals of a kind which, at the time of the Crown grant, were thought unworthy of extraction or were technologically incapable of extraction.

More recent Crown lands legislation attempts to obviate arguments over the meaning of ‘minerals’ by defining the term. These statutory definitions are very wide—so wide that one writer has commented that modern landowners may not even own the soil on their land.[24]

8.19       However the practice was not consistent until 1861, with the enactment of the Crowns Land Alienation Act. As Professor Butt explains:

Until 1824, Crown grants in New South Wales did not reserve minerals to the Crown. From 1828 until 1844 Crown grants variously reserved gold, silver and coal. From 1844 until 1850 only coal was reserved. In 1850 the Crown rescinded all former reservations of coal, except in land within a city, township or village; reservations of coal continued to be made, however, in relation to urban land. From 1850 until 1861 Crown grants generally did not reserve minerals (although there were some exceptional cases).[25]

8.20       This has meant that the dates of the original Crown grants and the particular legislation in each jurisdiction ‘assume great significance in determining in each instance whether a landowner owns a particular mineral beneath her or his land’.[26]

8.21       On 1 January 1982, the Coal Acquisition Act 1981 (NSW) vested all coal in the Crown, with provision made for payments of compensation. At the time the legislation was passed there were substantial coal reserves in the Hunter Valley that were still in private ownership and there were major coal mining developments planned.[27] Moreover, the rate of compensation was capped under the legislation.[28] As explained by Tony Wassaf:

This meant that owners of those [privately owned] reserves were set to receive substantial royalties from those developments. The Government decided that it would be better for the State if the Crown received those royalties rather than the private owners.[29]

8.22       The validity of this legislation was tested in Durham Holdings Pty Ltd v New South Wales.[30] It was argued that the capping of compensation amounted to the denial of ‘just’ or ‘adequate’ compensation and as such was invalid. As Blackshield and Williams point out, ‘[i]f the acquisition had arisen under a Commonwealth statute, it would have breached the requirement in s 51(xxxi) of the Constitution that such acquisitions be made on “just terms”’.[31] The argument drew upon the judgment of the court in Union Steamship Co of Australia Pty Ltd v King, in leaving open the possibility that there was a constitutional limit in state power founded on ‘rights deeply rooted in our democratic system of government and the common law’.[32]

8.23       The Court of Appeal rejected this argument and the High Court refused special leave to appeal. Gaudron, McHugh, Gummow and Hayne JJ held that:

What the Court of Appeal said is true of the application to this Court, namely:

The [applicant] was unable to point to any judicial pronouncements, let alone a decided case, which indicated, at any time, that any such principle existed in the common law of England, or of the colonies of Australasia, or of Australia. It advocated the development of the common law, by the recognition of such a principle for the first time in this case.

The applicant sought to rely upon statements respecting the common law in decisions respecting the powers of several of the states of the United States before the inclusion in those written state constitutions of guarantees respecting the taking of property. However, what would be involved if the applicant’s submission were accepted would not be the development of the common law of Australia. Rather, it would involve modification of the arrangements which comprise the constitutions of the states within the meaning of s 106 of the Constitution, and by which the state legislatures are erected and maintained, and exercise their powers.

… Further, whatever may be the scope of the inhibitions on legislative power involved in the question identified but not explored in Union Steamship, the requirement of compensation which answers the description ‘just’ or ‘properly adequate’ falls outside that field of discourse.[33]

8.24       The legal result was that the states could acquire property without having to pay just compensation.

8.25       The 1988 referendum included a proposed law to alter the Constitution, amongst other things, ‘to ensure fair terms for persons whose property is acquired by any government’. The vote in favour of the resolution was 30%.[34] As one commentator remarked, the ‘true level of public support for the idea was, however, impossible to gauge due to the way in which the question was presented as part of a larger package’.[35]

8.26       The Law Council of Australia submitted that ‘the lack of any constitutional or general protection from acquisition other than on just terms under State constitutions or statutes’ amounted to ‘a significant gap in property rights protection’.

In some cases, this has resulted in States compulsorily or inadvertently acquiring or interfering with property rights, without any corresponding compensation for the right-holder.[36]

8.27       The Law Council stated that an area of concern was a utilisation by the Commonwealth of this limit in constitutional compensatory provisions in the states:

Of particular concern to this Inquiry is where this may have occurred due to intergovernmental arrangements or agreements between the Commonwealth and States, which require or encourage States to interfere with property rights but with no corresponding duty to compensate on just terms.

In such cases, there has been no remedy available to the land-owner because the scheme might have been established informally, through mutual agreement, rather than through a federal statute.[37]

8.28       The Law Council drew attention to Spencer v Commonwealth,[38] as appearing to demonstrate a possible inconsistency in relation to protection of property rights under Australian law.[39] The plaintiff, Peter Spencer, owned a farm in New South Wales. He claimed that the restrictions on the clearing of vegetation imposed on his farm by the Native Vegetation Conservation Act 1997 (NSW) and the Native Vegetation Act 2003 (NSW)—in furtherance of agreements between New South Wales and the Commonwealth—constituted an acquisition of property other than on just terms pursuant to s 51(xxxi) of the Constitution.[40]

8.29       Under the Natural Resources Management (Financial Assistance) Act 1992 (Cth), the Commonwealth may enter into an agreement with a state to provide financial assistance in respect of projects jointly approved by the relevant Commonwealth and State Ministers or specified in the agreement.[41] The Natural Heritage Trust of Australia Act 1997 (Cth) established the Natural Heritage Trust of Australia Account, one purpose of which is to conserve remnant native vegetation.[42] Pursuant to an agreement with the Commonwealth in 1997, the state of New South Wales undertook to enact native vegetation conservation legislation. In 1997 the Native Vegetation Conservation Act 1997 (NSW) was introduced, restricting the clearing of native vegetation on land. Further agreements provided for compensation to assist where property rights were lost, which were to be addressed in developing catchment or regional plans.

8.30       Mr Spencer argued that his property acquired pursuant to this scheme included carbon sequestration rights. Such a right is defined in New South Wales legislation as a right to the ‘legal, commercial or other benefit … of carbon sequestration by any existing or future tree or forest on the land after 1990’.[43] It is also deemed to be a profit à prendre, a defined interest in land.[44] Mr Spencer alleged that, by reason of the state legislation, he had been prevented from clearing native vegetation on his land, which amounted to an acquisition of his property. His inability to clear his land rendered it commercially unviable. He argued that the scheme between the Commonwealth and New South Wales was designed to avoid the ‘just terms’ constraint on the exercise of legislative power under s 51(xxxi) of the Constitution.

8.31       The Federal Court rejected Mr Spencer’s claim. The High Court granted special leave to appeal. French CJ and Gummow J stated:

The case which Mr Spencer seeks to raise potentially involves important questions of constitutional law. It also involves questions of fact about the existence of an arrangement between the Commonwealth and the State of New South Wales which may justify the invocation of pre-trial processes such as discovery and interrogatories. The possible significance of those questions of fact has become apparent in the light of this Court’s judgment in ICM Agriculture Pty Ltd v The Commonwealth … , which had not been delivered when the primary judge and the Full Court delivered their judgments.[45]

8.32       The decision in ICM Agriculture Pty Ltd v Commonwealth is discussed in detail below in relation to water rights. For present purposes it is relevant to note that the challenge was to a funding agreement (and related legislation) under which the Commonwealth had paid financial assistance to New South Wales. While the claim failed, the High Court held that a grant under s 96 of the Constitution—which relevantly provides that ‘the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit’—cannot be made on terms and conditions that may require a state to acquire property on other than just terms.[46] Hayne, Kiefel and Bell JJ noted that a law may contravene s 51(xxxi) ‘directly or indirectly, explicitly or implicitly’.[47] Further, French CJ, Gummow and Crennan JJ indicated that the limitation in s 51(xxxi) may extend to executive action.[48] These comments suggest awareness by the High Court of the need to consider the indirect and implicit effect of legislation, and grants and executive actions in relation to s 51(xxxi).

8.33       The Law Council stated:

While, the [Spencer] case was struck out by the Federal Court and Full Federal Court as not having reasonable prospects of success, the High Court ruled that the Federal Court had erred in finding that the case did not have reasonable prospects of success and referred it back for reconsideration. The case appears to demonstrate a possible inconsistency in relation to protection of property rights under Australian law.[49] 

8.34       In June 2010, the Hon Bob Katter MP introduced a private member’s Bill, entitled the Constitution Alteration (Just Terms) Bill 2010, into the Commonwealth Parliament. The Bill sought to do two things. First, it sought to alter the Constitution so as to extend the constitutional requirement for just terms to ‘any restrictions on the exercise of property rights’. Secondly, it sought to alter the Constitution so as to ‘prohibit state laws acquiring property or restricting the exercise of property rights of any person, except on just terms’.[50] The first reading speech referred to Mr Spencer’s legal action.[51]

8.35       As at the time of writing, Mr Spencer’s case is before the Federal Court, with Mortimer J scheduled to deliver judgment on 24 July 2015.

8.36       There is no clear boundary between a taking or acquisition of property by government and the regulation of use rights. The way that property rights are envisaged conceptually and politically also drives arguments about which side of the boundary a particular government initiative should fall. O’Connor refers to a ‘shifting paradigm of property rights’ that is ‘increasingly evident in public debates about regulatory changes’:

It used to be assumed that laymen implicitly accepted the molecular conception of property as a ‘discrete asset’, or the whole package of rights in a thing. We are now seeing evidence, in submissions to government inquiries and even in government documents, that the atomic or bundle of rights paradigm and conceptual severance are gaining wide acceptance among landowners affected by regulation. … [T]his changing public perception of property can be expected to make a significant difference to the willingness of citizens to tolerate regulatory interference with their property.[52]

8.37       This chapter considers particular areas of concern in Commonwealth laws affecting real property and the rights of landowners.

Principle of legality

8.38       As discussed in Chapter 7, the principle of statutory interpretation now known as the ‘principle of legality’ provides some protection to vested property rights. Blackstone commented:

So great moreover is the regard of the law for private property, that it will not authorize the least violation of it; no, not even for the general good of the whole community. If a new road, for instance, were to be made through the grounds of a private person, it might perhaps be extensively beneficial to the public; but the law permits no man, or set of men, to do this without consent of the owner of the land … Besides, the public good is in nothing more essentially interested, than in the protection of every individual’s private rights, as modelled by the municipal law. In this and similar cases the legislature alone can, and indeed frequently does, interpose, and compel the individual to acquiesce. But how does it interpose and compel? Not by absolutely stripping the subject of his property in an arbitrary manner; but by giving him a full indemnification and equivalent for the injury thereby sustained … All that the legislature does is to oblige the owner to alienate his possessions for a reasonable price; and even this is an exertion of power, which the legislature indulges with caution, and which nothing but the legislature can perform.[53]

8.39       In R & R Fazzolari Ltd v Parramatta City Council, a case which concerned the Parramatta City Council’s attempt to acquire land by compulsory process,  French CJ stated:

Private property rights, although subject to compulsory acquisition by statute, have long been hedged about by the common law with protections. These protections are not absolute but take the form of interpretive approaches where statutes are said to affect such rights. … The attribution by Blackstone, of caution to the legislature in exercising its power over private property, is reflected in what has been called a presumption, in the interpretation of statutes, against an intention to interfere with vested property rights.[54]

International law

8.40       Article 17(2) of the Universal Declaration of Human Rights provides that ‘[n]o one shall be arbitrarily deprived of his property’.[55] This protection is, however, a limited one.

8.41       International instruments cannot be used to ‘override clear and valid provisions of Australian national law’.[56] However, where a statute is ambiguous, courts will generally favour a construction that accords with Australia’s international obligations.[57]

Bills of rights

8.42       As noted in Chapter 7, in other countries, bills of rights or human rights statutes provide some protection to certain rights and freedoms. The European Convention for the Protection of Human Rights and Fundamental Freedoms (European Convention on Human Rights) expressly added a recognition of property rights in Protocol 1, art 1—‘for the peaceful enjoyment of one’s possessions’.[58]