Scriven v Sargent[2014] QCA 133

SUPREME COURT OF QUEENSLAND

[1] FRASER JA:  On 9 September 2011 the applicant was found guilty after a trial in the Magistrates’ Court of carrying out “assessable development” without an effective permit in contravention of s 4.3.1 of the Integrated Planning Act 1997 (Qld) (“IPA”).  The applicant had cleared native vegetation (mulga and poplar box) on about 1,819 hectares of the applicant’s freehold land.  He was fined $118,000 and ordered to pay investigation and legal costs.

[2] On 20 September 2011 the applicant commenced an appeal to a District Court judge under s 222 of the Justices Act 1886.  Subsequently, on 1 February 2012, the applicant filed an application pursuant to s 224 of the Justices Act 1886 for an order amending the notice of appeal and the statement of grounds.  On 28 February 2012 a judge of the District Court granted the applicant leave to amend the notice of appeal to include a ground that the penalty imposed by the magistrate was manifestly excessive.  The application to otherwise amend was adjourned to a date to be fixed.  Counsel for the applicant informed the court that the further hearing was not brought on until 20 May 2013 because the respondent sought more time to review the basis of the additional grounds of appeal.

[3] Those grounds are as follows:

“(1)To the extent that the Vegetation Management Act 1999 [as amended] ("VMA") operated to render or define the appellant’s actions to be assessable development for the purposes of s 4.3.1 of the Integrated Planning Act 1997 ("IPA"), the VMA is invalid.

(2)The consequence of the invalidity identified in (1) is that the appellant, as a matter of law:

(a)did not carry out assessable development for the purposes of s 4.3.1 of the IPA; and

(b)is therefore not guilty of the offence.

…

Particulars of Ground (1):

I.The amendments to the VMA introduced by the Vegetation Management & Other Legislation Amendment Act 2004 ("the amendments") had the effect (inter alia) that the clearing of "not of concern" category vegetation for the purposes of cattle fodder in a time of drought became assessable development for the purposes of the IPA, s 4.3.1.

II.Prior to the amendments, the actions of the appellant did not constitute assessable development and did not require a development permit pursuant to the IPA.

III.The amendments in effect constituted an acquisition of property within the meaning of s 51(xxxi) of the Commonwealth Constitution.

IV.That acquisition occurred otherwise than on "just terms".

V.The acquisition, albeit carried out by State legislation, was carried out pursuant to an agreement or informal arrangements with the Commonwealth entered into for the purpose of avoiding s 51(xxxi) of the Constitution.

VI.Consequently, the legislative amendments that sought to give effect to that acquisition are invalid or inoperative.”

[4] At the hearing on 20 May 2013, the respondent did not submit that there was any discretionary reason for refusing leave to make the amendment.  The respondent submitted, and the primary judge accepted, that the amendment sought should be refused because it would be futile.  The primary judge considered that that the proposed challenge to the validity of the State legislation was foreclosed by the decisions of the High Court in PJ Magennis Pty Ltd v The Commonwealth[1] and Pye v Renshaw.[2]  The primary judge also considered that, notwithstanding any benefits which the Commonwealth might have sought to achieve by arrangements between it and the State, there had been no acquisition of property for the purposes of s 51(xxxi) of the Constitution.  In that respect the primary judge referred to Bone v Mothershaw.[3]  The primary judge held that it was “inconceivable given the present state of the authorities” that the respondent would not succeed in its contentions that the applicant’s constitutional challenge was untenable for three, related reasons:

“(1)section 4.3.11 of the IPA which created the offence for which the appellant was convicted was not conditioned on the existence of any Commonwealth agreement or law;

(2)section 51 (xxxi) of the Constitution does not invalidate State law and can have no impact on State laws that are not conditioned on the validity of a Commonwealth agreement or law; and

(3)in any event, section 4.3.1 of the IPA did not constitute an acquisition of property.”

[5] The applicant has applied for leave to appeal from the refusal of the amendment pursuant to s 118 of the District Court of Queensland Act 1967.  The applicant argued that the amendments should have been permitted in order to allow the applicant to investigate the facts relating to the alleged scheme between the Commonwealth and the State with a view to refining the applicant’s case and a proposed removal of the appeal from the District Court to the High Court.

[6] The respondent did not contend that leave to appeal should be refused otherwise than on the ground that the primary judge was correct in holding that granting leave to amend would be futile.  The respondent argued that, assuming for the purposes of argument the truth of the contentious allegation in paragraph V of the particulars of ground (1) of the amendment (“The acquisition, albeit carried out by State legislation, was carried out pursuant to an agreement or informal arrangements with the Commonwealth entered into for the purpose of avoiding s 51(xxxi) of the Constitution”), the proposition that s 51(xxxi) could invalidate a State law was not reasonably arguable.  The respondent also argued that it was not reasonably arguable that the prohibition upon clearing native vegetation without a permit provided for by s 4.3.1 of IPA constituted an acquisition of property within the meaning of s 51(xxxi).

[7] The applicant’s notice of application for leave to appeal includes eight grounds of appeal, including one ground which contends that the primary judge’s exercise of discretion to refuse leave to amend miscarried for four separate reasons.  It is unnecessary to deal separately with each of these grounds.  At the hearing of the application the respondent’s counsel accepted that the application should be granted and the appeal allowed if the Court found that the primary judge erred in concluding that it was futile to allow the amendment.  On the other hand, if the Court found that the primary judge’s conclusion was correct, it would be futile to allow the amendments and it would be inappropriate to grant leave to appeal merely to consider the suggested errors in the exercise of the discretion.

Statutory provisions and factual background

[8] Section 4.3.1 of the IPA makes it an offence for a person to “carry out assessable development unless there is an effective development permit for the development”.  “Development” includes “operational work”.[4]  “Operational work” includes “clearing vegetation, including vegetation to which VMA applies”.[5]  (“VMA” denotes the Vegetation Management Act 1999).[6]  The expression in s 4.3.1 of the IPA “assessable development” comprehends[7] “clearing of native vegetation on freehold land… unless the clearing is… the clearing of vegetation to which VMA does not apply…”.[8]  Section 7 of the VMA provides that the VMA “applies to all clearing of vegetation other than vegetation on –…” specified categories of areas.  The areas comprise certain forest or timber reserves under the Forestry Act 1959 and the Land Act 1994 and certain areas under the Nature Conservation Act 1992.

[9] The particulars of the charge against the applicant that he carried out assessable development contrary to s 4.3.1(1) of the IPA included the allegation that “[t]he assessable development consisted of operational work, being the clearing of native vegetation on: a. Leasehold land between 11 November 2005 to 27 July 2006; and b. Freehold land between 28 July 2006 to 20 October 2008”.  In a letter dated 25 May 2011, the Department of Environment & Resource Management gave notice of a proposed amendment to the complaint to the effect that the clearing was carried out on freehold land rather than leasehold land.  The magistrate made that amendment at the close of the evidence after making the point that the only evidence of any offending behaviour by the applicant concerned the period between 9 August 2006 and 23 February 2008 and on freehold land.

[10] The magistrate was satisfied beyond reasonable doubt that the applicant cleared the native vegetation covering an area on freehold land of about 1,819 hectares between 9 August 2006 and 2 May 2009 without having a development permit to do so.  The magistrate concluded that the applicant’s clearing of native vegetation was “operational work” and was therefore “assessable development” within the meaning of s 4.3.1(1) of the IPA. The magistrate also made these findings:

“There was evidence that if [the applicant] had applied for a permit, he may have been granted one.  This is because his property was in the grip of a vicious drought, and his cattle would have had no feed.  Clearing would have provided his stock with much needed feed.

If Mr Scriven had applied for a permit, and if it was granted, it would be limited to clearing of certain areas in a controlled manner.  In short, even if Mr Scriven had a permit, the evidence suggests that he cleared the land far in excess of any clearing which would be allowed under a permit.”

[11] The proposed ground (1) and the particulars of that ground impugn the validity of provisions of the VMA introduced by the Vegetation Management and Other Legislation Amendment Act 2004 (which I will call “VMOLAA 2004”) which resulted in the applicant’s conduct in clearing native vegetation on his freehold land being “assessable development” for the purposes of s 4.3.1 of the IPA.  However, the centrally relevant provision of VMOLAA 2004 instead amended the IPA.  The first section in Part 3 of VMOLAA 2004, s 29, provided that Part 3 amended the IPA.  Section 30 in the same part amended definitions previously found in s 1.3.5 of the IPA as follows:

(a) The part of the definition of “operational work” which comprehended “(e) undertaking work (other than destroying or removing vegetation not on freehold land) in, on, over or under premises that materially affects premises or their use”, became “(e) undertaking work (other than destroying or removing vegetation to which VMA does not apply) in, on, over or under premises that materially affects premises or their use”.

(b) The part of the definition of “operational work” which comprehended “(f) clearing vegetation on freehold land” became “(f) clearing vegetation to which VMA applies”.

[12] Before the commencement of VMOLAA 2004, the definition of “assessable development” in part 1 of schedule 8 of the IPA included, in item 3A, “[c]arrying out operational work that is the clearing of native vegetation on freehold land, unless the clearing is… (c) necessary for routine management in an area that is outside… an area of high nature conservation value; and… an area vulnerable to land degradation; and … a remnant endangered regional ecosystem shown on a regional ecosystem map; and… an area of unlawfully cleared vegetation…”.  The mulga which the applicant cleared was not in any such area; it fell instead within the designation “not of concern”.  The applicant’s case was that, drought being a not infrequent condition at his property, clearing mulga for the purpose of providing fodder for his cattle – which the magistrate found was the applicant’s purpose of clearing the mulga – amounted to “routine management”, so that he did not require a permit for that activity before the amendments made by VMOLAA 2004.  The amendments made by VMOLAA 2004 to the definition of “assessable development” in the IPA effectively replaced item 3A with item 3AA,  which omitted the exception of clearing work necessary for “routine management”.  Since this was an amendment to the IPA, rather than to the VMA, it does not fall within the proposed amendments.  It is appropriate at this stage of the proceeding to overlook that drafting defect.

[13] Another defect in the drafting of the grounds of appeal it that they identify the legislation which is impugned only by reference to its general effect that it “operated to render or define the appellant’s actions to be assessable development for the purposes of s 4.3.1 of [the IPA]…”.  The proposed amendments should clearly identify the legislative provisions which are contended to be invalid.  The relevant provisions were identified in the applicant’s outline of submissions in the District Court.  This drafting defect may also be overlooked for present purposes.

[14] The legislative provisions are complex and need not be discussed in detail here.  For present purposes it is sufficient to quote relevant parts of the applicant’s contentions in the District Court about the effect of VMOLAA 2004:

“49.Prior to VMOLAA coming into effect:

(a) the clearing of remnant native vegetation from freehold land required an application for, and the granting of, a development permit, unless the clearing fell into exceptions identified in Schedule 8 to the IPA;

(b) the “assessment manager” given the power to decide the application, was either the local government authority or the Department administering the VMA, depending on the circumstances; the Department in most instances was a “concurrence agency”, required to assess the application against its applicable policies and codes and having the power to direct refusal of an application, or require conditions to be imposed on an approval; the applicable codes included any applicable regional vegetation management plan or, where one did not apply, that part the State Planning Policy for vegetation management identified as a code for IDAS; such codes imported and required a consideration of matters relating to the nature and category of the vegetation in question, the biophysical characteristics of the land, assessment of the potential environmental impacts of the clearing, the planning designation of the land and the purpose of the clearing;

(c) while applications for clearing could be refused, there lay an appeal in relation to the decision, whether that decision emanated from the local authority as assessment manager or by requirement of a concurrence agency; an appeal could also be made in respect of conditions of an approval;

(d) a land owner did not have to apply where they cleared pursuant to an exemption under IPA; among these was the requirement that the clearing be “necessary” for “essential management” or “routine management”, both defined terms.  A notable example of such an exemption was the clearing of vegetation to supply fodder for stock in drought conditions only: this was regardless of the status of the vegetation and was of obvious practical importance to the land owner, lest they be required to submit to a development application process and its attendant delays while stock were deprived of food.

50.After the commencement of VMOLAA a landowner could only clear remnant vegetation if:

(a) they applied for and were selected in the clearing ballot for their “bioregion”; once the area allocation for the bioregion was used up, then they could no longer apply for approval to clear their land on a broadscale basis;

or

(b) they made an application to clear for a “relevant purpose”, as identified in s 22A(2) of the VMA; however, the chief executive administering the VMA has to be “satisfied” that the clearing is for a “relevant purpose”, otherwise the application is incapable of acceptance and hence, assessment; in addition, the range of relevant purposes is very narrow; again of note, one of the relevant purposes is “fodder harvesting”, a term neither defined in the VMA or the IPA, thus apparently providing no objective reference as to the meaning of the term; there was no basis upon which to appeal a view taken by the chief executive where that person was not satisfied that a “relevant activity” was involved;

or

(c) the proposed clearing came within the exceptions found in Schedule 8 to the IPA; again, these were limited in range and the exceptions were also identified by reference to the nature of the land tenure and the category of vegetation involved; these exceptions still included such defined activities (where “necessary”) as essential management and routine management, but the definition of each of these terms were significantly narrowed from pre VMOLAA definitions.

…

52.This effectively left landowners, particularly those using their land for agricultural purposes, substantially constrained, in terms of the extent they could interfere with vegetation on their land.  If such an owner did not have their application taken up in the ballot draw and approved, their opportunity to clear land to establish crop or pasture was effectively lost.  They could only provide fodder if they could satisfy the chief executive that it was a relevant purpose, or do so in drought conditions only, up to 30 June 2004; the exceptions were even more limited when vegetation was categorised “of concern” or “endangered”, as “routine management” as an exception was not available to these categories of vegetation.

…

54.The effect of the VMOLAA amendments is demonstrated by the applicant’s circumstances.  The nature of the applicant’s tenure is set out above.  On 6 October 2011, he was convicted by a magistrate of the offence prescribed under the IPA of carrying out assessable development without a permit; in short:

(a) the development in question was the carrying out of operational work,  namely the clearing of remnant vegetation, which consisted (according to the findings of the learned Magistrate) of 1819 hectares of  “not of concern” category vegetation;

(b) the subject clearing was found to have occurred between 9 August 2006 and 23 February 2008;

(c) it was not contested that the clearing occurred during a time of declared drought; it was also accepted by the learned Magistrate that the clearing was carried out for the purposes of providing fodder for his cattle;

(d) accordingly, in the absence of the commencement of the VMOLAA amendments, the applicant would not have committed a development offence, because his actions fell within the “routine management” exception.

55.It is worthy of note that, up to the time that the applicant took a freehold title to his land (27 July 2006), his actions (which post dated the taking of freehold title) would have required a permit from the chief executive administering the Land Act 1994, given the more narrow definition of “routine rural management” provided for in the regulations to that Act; however, such a permit was reasonably obtainable and subject to appeal rights.”[9]

Was there an acquisition of property?

[15] The applicant challenged the primary judge’s conclusion that the applicant’s constitutional challenge was untenable for the reason that s 4.3.1 of the IPA did not constitute an acquisition of property.  The applicant argued that the primary judge misstated the relevant question, which did not concern s 4.3.1 of the IPA but the amendments to the VMA introduced by VMOLAA 2004.  It is clear enough, however, that the primary judge referred to s 4.3.1 of IPA as a shorthand reference to the relevant amendments.

[16] The applicant’s case should be assessed upon the assumption that the amendments substantially constrained the applicant’s use of his land, as he alleged in his argument.  But even if it be assumed that the applicant’s property was effectively sterilised by the legislative amendments, s 51(xxxi) would not apply unless there was also an “acquisition” of “property” by the Commonwealth, the State, or another.[10]

[17] Spencer v The Commonwealth[11] involved a challenge to the validity of Commonwealth legislation in a context in which the plaintiff alleged an acquisition of his property under State legislation which imposed restrictions on the clearing of vegetation similar to those which the applicant challenges in this case.  The applicant relied upon the following passage in Emmett J’s reasons at first instance in Spencer:

“Mr Spencer also relies upon a concession made by the Commonwealth, for the purposes of the interlocutory hearing, that, if the Commonwealth did not have the ability, for the purposes of its obligations under the Kyoto Protocol, to account for the emissions reductions resulting from reducing land clearing, in the period between 2008 and 2012, the Commonwealth would need to take other measures to reduce emissions in order to meet its obligations and such measures would be likely to involve expense to the Commonwealth.

Mr Spencer also points to Australia’s report under the Framework Convention dated 28 November 2005.  In that report, the Minister for the Environment and Heritage said that Australia’s size, diverse environments and above average population growth, concentrated along an extensive coastline, expose it to a wide range of potential impacts and costs arising from climate change.  The Minister also said in the report that net land use, land use change and forestry emissions fell by 93.5% between 1990 and 2003.  Thus, Mr Spencer says, with the benefit of land use change, the Commonwealth has achieved a very significant saving in costs that would be incurred in otherwise meeting its target under the Kyoto Protocol.  He says that the only means of meeting its commitment, in the absence of actually reducing emissions in that way, would be by purchasing offsets on the international market.  Mr Spencer asserts that he has suffered a corresponding loss as a consequence of the 1997 Vegetation Act and the 2003 Vegetation Act.

It is clearly debatable whether the comparison proposed by Mr Spencer between the alleged detriment to him, on the one hand, and the purported benefit to the Commonwealth, on the other, has validity.  The so called benefit to the Commonwealth is concerned with its obligations in international law under the Framework Convention and the Kyoto Protocol.  While the Kyoto Protocol has been ratified by the Commonwealth, that does not create any obligation on the part of the Commonwealth under the municipal law of Australia.

The Commonwealth, of course, is a polity that is capable of owning property and incurring obligations under municipal law.  However, the obligation owed under international law to the other parties to the Framework Convention and the Kyoto Protocol is not an obligation that could be enforced against the Commonwealth under the law of Australia or of any State.  On the other hand, the Commonwealth accepts that it derives a benefit in relation to its international obligations by reason of restrictions imposed on the clearing of native vegetation and that to achieve that benefit by other means could incur substantial expense.  In the light of the conclusion that I have reached that there is an arguable case that there has been an acquisition, it is not necessary to express a final view on that question.

I consider that Mr Spencer has established that there is a serious question to be tried as to whether he has suffered such sufficient detriment as a consequence of the 1997 Vegetation Act and the 2003 Vegetation Act as might constitute a taking or acquisition in respect of Saarahnlee.  Further, to the extent that there was a benefit to be derived from the grant of carbon sequestration rights by undertaking voluntary restraint, it is certainly arguable that Mr Spencer has been deprived of that benefit.  Whether the restriction is such as to constitute a taking or acquisition or expropriation may depend upon detailed evidence of value.  Nevertheless, there is at least a seriously arguable case for concluding that there has been an acquisition of property of Mr Spencer’s.” [12]

[18] The conclusion that there was at least a seriously arguable case for concluding that there had been an acquisition of Mr Spencer’s property was not challenged in the appeal to the Full Court of the Federal Court[13] and it was not discussed in the further appeal to the High Court.[14]

[19] The applicant’s case is that he was deprived of the use of the mulga growing on his land as stock feed and the Commonwealth obtained a corresponding benefit in the form of assistance in meeting its obligations under the Kyoto Protocol and the United Nations Framework Convention on Climate Change of 9 May 1992 (which entered into force on 21 March 1994).  The applicant argued that this benefit related to the use, occupation, or ownership of the applicant’s land.

[20] The respondent advanced two reasons why Emmett J’s analysis in Spencer did not justify a conclusion in this case that it was arguable that there was an “acquisition”.  The first was that the relevant Queensland legislation was enacted in 2004 but although Australia executed the Kyoto Protocol in April 1997 it did not ratify entry into the Protocol until 12 December 2007.  As the applicant pointed out, Australia entered into the United Nations Framework Convention on Climate Change in 1992, but that convention did not include provisions of the kind found in the Kyoto Protocol which the applicant invoked for its contention that there had been an acquisition.[15]  It was the Kyoto Protocol which underlay the Commonwealth’s concession, recited in the reasons of Emmett J, that in the absence of the land clearing legislation the Commonwealth would have been required to take other measures to reduce emissions to meet its international obligations and those other measures would likely have involved the Commonwealth in expense.  The respondent made no similar concession in this matter.  Upon the basis only of the Framework Convention, it could not be accepted that if the State legislation had not been enacted it might have been necessary for the Commonwealth to purchase offsets in the international market.

[21] It is possible, however, that the State and Commonwealth governments acted in anticipation of Australia assuming the relevant obligations; as the applicant submitted, the explanatory notes for the Bill for the VMOLAA 2004 refer to the Kyoto Protocol as an explanation for at least some of the amendments.[16]  It is right to proceed upon the assumption that the Commonwealth and the State acted upon that basis.  What effect that might have upon the acceptability of the applicant’s case in the High Court is not clear upon the authorities cited in this application.

[22] The second reason advanced by the respondent for its contention that Spencer did not make it arguable that there was an “acquisition” in this case is related to the first reason.  It is that the benefit said to have been acquired by the Commonwealth upon the enactment of the Queensland legislation was not proprietary in character.  The respondent argued that the requirement that a proprietary interest by acquired was open to debate in the High Court when Emmett J gave judgment in Spencer but that the High Court has since held that it is essential.

[23] In the Tasmanian Dam Case, Deane J stated that there might be an “acquisition” where the effect of a legislative prohibition or regulation was to “confer upon the Commonwealth or another an identifiable and measurable advantage or is akin to applying the property, either totally or partially, for a purpose of the Commonwealth”.[17]  In JT International SA v Commonwealth,[18] Heydon J referred to that and other statements to similar effect before concluding that the authorities “support the proposition that it is not necessary for the Commonwealth or some other person to acquire an interest in property for s 51(xxxi) to apply” and that it was “only necessary to show that the Commonwealth or some other person has obtained some identifiable benefit or advantage relating to the ownership or use of property.”  The way in which the applicant put his case on appeal reflects that reasoning, but it was rejected by the other six members of the High Court, each of whom held that s 51(xxxi) operates only where there is an acquisition of a proprietary interest.[19]  The applicant’s argument that the Commonwealth acquired a benefit which was related to the use, occupation, or ownership of the applicant’s land is therefore insufficient to invoke this constitutional guarantee.

[24] The applicant argued that the Queensland legislative amendments did not merely assist the Commonwealth in discharging a treaty obligation but that they saved the Commonwealth expenditure in acquiring rights similar to the applicant’s former rights to use vegetation on his land.  Even though s 51(xxxi) has been liberally construed and the term “property” has been given a very broad meaning,[20] it remains difficult to see how the Commonwealth might have obtained any proprietary interest relating to the applicant’s land merely upon the Commonwealth’s assumption of legally unenforceable obligations under an international agreement.  In JT International SA, Gummow J (with whose reasons on this topic French CJ agreed) stated that “the reasoning and outcome in the Tasmanian Dam Case indicates… that the mere discharge by the Commonwealth of a treaty obligation itself is insufficient to provide an “acquisition” by the Commonwealth.”[21]

[25] However that principle was not articulated in the Tasmanian Dam Case itself and it has not been adopted in those terms as the basis of any decision of the High Court which was cited in this application.  Furthermore, the applicant’s argument may suggest that the benefit to the Commonwealth extended beyond the mere discharge of a treaty obligation; that the Commonwealth discharged its treaty obligation in part by taking advantage of a right to use the vegetation on the applicant’s land (allegedly a proprietary right belonging to the applicant) under an arrangement by which the State made that right available to the Commonwealth once the State acquired it from the applicant by the operation of the relevant legislative amendments.  There may be serious difficulties in making such a case, but analysis of the competing arguments is hindered by a lack of precision about the alleged arrangements and rights, deficiencies which might conceivably be remedied by the use of interlocutory processes foreshadowed by the applicant.  It must also be remembered that the purpose of the application to amend was to seek removal of the proposed constitutional case to the High Court.  In these circumstances, notwithstanding the apparent strength of the respondents’ arguments, the proposition that the Commonwealth acquired a proprietary interest should not be regarded as being so manifestly untenable as to justify the conclusion that it would be futile to allow the proposed amendments to the notice of appeal.

Is the challenge to the validity of the State legislation arguable?

[26] If there was an acquisition of the applicant’s property, the applicant was not given just terms for that acquisition.  A central question in this application is whether the State legislation which effected the asserted acquisition of the applicant’s property (the amendments adverted to in III of the particulars of proposed ground of appeal (1)) was arguably invalid because the applicant was not compensated for the asserted acquisition.  The proposed amendments to the notice of appeal contend for invalidity of that legislation on the ground that it implemented arrangements made between the State and the Commonwealth for the purpose of avoiding s 51(xxxi).  The applicant argued that:

(a) The effect of the amendments was to prevent all reasonable uses of the applicant’s land without the applicant having any corresponding entitlement to compensation.

(b) The amendments formed part of a larger suite of amendments giving effect to agreements or arrangements made between the Commonwealth and Queensland, under which the Commonwealth supplied financial assistance to Queensland and in exchange Queensland “took certain action, including the passing of the legislative amendment in question”,[22] and the Commonwealth was thereby facilitated in meeting its international commitments under the Kyoto Protocol.

(c) This was “a circuitous device to avoid the Constitutional guarantee…”[23] of just terms, by which the Commonwealth effectively procured Queensland to do that which the Commonwealth could not lawfully do.

[27] I accept the respondent’s contention that the case pleaded in the proposed amendments to the notice of appeal is in this respect so clearly untenable that the primary judge was right to refuse leave to amend.

[28] Section 51 of the Commonwealth Constitution confers upon the Parliament, subject to the Constitution, “power to make laws for the peace, order, and good government of the Commonwealth with respect to… (xxxi) the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws…”.  That provision operates in the way described by Brennan J in Mutual Pools & Staff Pty Ltd v The Commonwealth:[24]

“First, it confers power to acquire property from any State or person for any purpose for which the Parliament has power to make laws and it conditions the exercise of that power on the provision of just terms.  Second, by an implication required to make the condition of just terms effective, it abstracts the power to support a law for the compulsory acquisition of property from any other legislative power.”[25]

[29] The applicant’s arguments did not explain how that analysis could be reconciled with the applicant’s proposed case.  The short point is that s 51(xxxi) imposes a condition and limitation only upon Commonwealth legislative power and it is established beyond argument in this Court that State legislative power is not limited in any similar way.[26]  The essence of the applicant’s case for an extension of this established constitutional doctrine is stated in particular V of ground 1 in the proposed amended notice of appeal as being that the acquisition “was carried out pursuant to an agreement or informal arrangements with the Commonwealth entered into for the purpose of avoiding of s 51(xxxi) of the Constitution”, but the applicant did not point to any constitutional provision which arguably make that purpose relevant to the State’s legislative power to acquire the applicant’s property.

[30] The proposition that an arrangement between the Commonwealth and a State which is implemented in State legislation might engage the operation of s 51(xxxi) in a way which might affect the validity of that State legislation was recently rejected by the Full Court of the Federal Court in Alcock v The Commonwealth.[27]  Furthermore, the applicant’s arguments do not differ materially from those which were advanced and rejected 65 years ago in PJ Magennis Pty Ltd v The Commonwealth.[28]  In that case the High Court held by majority that a Commonwealth Act about a closer settlement scheme after World War II was invalidated by s 51(xxxi), and whilst a New South Wales Act which purported to approve and ratify an agreement between the Commonwealth and a State executed pursuant to the Commonwealth Act was valid, that Act was inoperative because it was enacted to give affect only to a valid agreement.  The appeal fell to be decided upon assumptions that the Commonwealth legislation “is designed to escape from the constitutional limitation contained in [s 51(xxxi)] … by using State legislative powers under an agreement made with the Commonwealth and approved by the Commonwealth Parliament for the purpose of acquiring land upon terms set out in the agreement, the Commonwealth subsidizing the State in its expenditure for this purpose … which is clearly a Commonwealth purpose, being a purpose in respect of which the Commonwealth Parliament has power to make laws …” and “that the State proposes to acquire under its Closer Settlement Acts and in pursuance of the aforesaid agreement land owned by the plaintiff company …”.[29]  Upon those assumptions, which are indistinguishable from the contentions in the appellant’s proposed grounds of appeal, the plaintiff alleged that the State legislation which authorised the acquisition of property to give effect to the agreement between the Commonwealth and the State was invalid.[30]  That case was unequivocally rejected.

[31] Latham CJ held that State Parliaments are not bound by any constitutional limitation similar to s 51(xxxi),[31] that the motives of the State and Commonwealth legislatures were “legally unimportant”,[32] and that if the legislatures acted within the law, “the intent of either or both to evade the constitutional limitation of Commonwealth legislative power is immaterial in considering the validity of the legislation.”[33]  Latham CJ concluded that, upon the allegations in the statement claim, the Commonwealth Act which approved the agreement between the Commonwealth and the State providing for the acquisition by the State of the plaintiff’s land for a Commonwealth purpose upon terms which were not just was invalid, but that the result was not that the State Act was invalid but simply that it had no effect because it was predicated upon the agreement with the Commonwealth being valid.[34]

[32] The applicant referred to a statement by Latham CJ that s 51(xxxi) “would be quite ineffective if by making an agreement with a State for the acquisition of property upon terms which were not just the Commonwealth Parliament could validly provide for the acquisition of property from any person to whom State legislation could be applied upon terms which paid no attention to justice.”[35]  In the immediately preceding paragraph, Latham CJ observed that the just terms requirement “must be satisfied by any Federal legislation which is a law with respect to the acquisition of property” and if Commonwealth legislation did not provide just terms it was invalid (emphasis added).  Immediately following the statement, Latham CJ referred to cases concerning the “question whether the constitutional requirements applies to acquisitions in pursuance of Commonwealth law other than acquisition by the Commonwealth itself” and concluded that Commonwealth legislation which was enacted under s 51(xxxi) must provide just terms for an acquisition whether it be by the Commonwealth, a State, or any other person (emphasis added).  The statement upon which the appellant relied was concerned only with Commonwealth legislation.

[33] For reasons similar to those of Latham CJ, Williams J (with whose reasons Rich J agreed) also held that s 51(xxxi) applied only to Commonwealth legislation and did not invalidate State legislation which did not provide just terms.  The remaining  member of the majority, Webb J, held that s 51(xxxi) was “broad enough to include an acquisition by the State exercising its powers of acquisition by agreement with the Commonwealth, and should, I think, be held to extend to such acquisition (see McClintock v The Commonwealth[36]) and that the State legislation and proclamation were “valid as regards closer settlement for State purposes; but that the State legislation is inoperative so far as it was enacted to give effect to the agreement…”.  That the first of those conclusions should not be understood as suggesting that s 51(xxxi) might invalidate State legislation is confirmed by reference to the cited passages in the judgments of Starke J and Williams J in McClintock v The Commonwealth.  Those passages concerned only a Commonwealth law providing for an acquisition by a person or body other than the Commonwealth.

[34] Dixon J dissented, but not on this point.  His Honour observed the State was not bound by the just terms condition in s 51(xxxi) and that “however hard or unjust it may be considered, there is nothing in s 51(xxxi) to restrain the power of the State …”.[37]

[35] The closer settlement legislation was subsequently amended to remove references to the arrangements made between New South Wales and the Commonwealth.  In Pye v Renshaw it was held that the amended State legislation was both valid and operative.  In relation to the question whether the State legislation was operative, Magennis was distinguished on the ground that, upon the proper construction of the amended legislation, it “is intended to take effect unconditioned by any Commonwealth legislation and irrespective of the existence of any agreement between the Commonwealth and the State…”.[38]  The applicant did not contradict the respondent’s submission that, upon the proper construction of s 4.3.1 of the IPA, that provision is not conditioned on the existence of any Commonwealth law or any agreement involving the Commonwealth.  It is not seriously arguable that any condition of that kind arose upon the proper construction of any of the provisions of VMOLAA 2004 which the applicant seeks to challenge.

[36] It is the holding in Pye v Renshaw that the amended State legislation was valid, which is relevant in this case.  In that respect, the High Court emphatically affirmed the decision in Magennis, observing that there was “no possible ground of attack on the validity of this legislation”[39] and that “[i]t is impossible to maintain that the validity of the resumption by the State can be affected if it chooses to co-operate with the Commonwealth in the matter of closer settlement or to accept financial assistance from the Commonwealth.”[40]  It may be that those statements were not necessary for the decision in Pye v Renshaw because, as Heydon J pointed out in ICM Agricultural Pty Ltd v The Commonwealth,[41] in Pye v Renshaw there was no challenge to the validity of the State legislation.[42]  Even so, those statements are powerful support for the respondent’s argument that the case which the applicant seeks to litigate is untenable.  This Court should not find that the applicant’s case for constitutional invalidity of State legislation is arguable where the High Court decided in Magennis that a materially indistinguishable case was not maintainable and the High Court in Pye v Renshaw considered that such as case was “impossible to maintain”.

[37] The applicant argued that the “condition reasoning” in Pye v Renshaw was rejected by the High Court in ICM Agriculture Pty Ltd v The Commonwealth.  The “condition reasoning” in Pye v Renshaw was not related to the validity of the State legislation.  It is not to the point.  What matters for present purposes are the holding in Magennis and the emphatic affirmation of that holding in Pye v Renshaw that State legislation is not rendered constitutionally invalid on grounds which are  indistinguishable from those alleged by the applicant.

[38] In ICM Agriculture, some Justices discussed the relationship between s 51(xxxi) and the legislative power of the Commonwealth under s 96 of the Constitution to “grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.”  This concerns an aspect of Pye v Renshaw which I have not yet mentioned, the rejection of an argument that the Commonwealth was not authorised by s 96 or any other constitutional provision “to provide money for a State in order that the State may resume land otherwise than on just terms”.[43]  In ICM Agriculture French CJ, Gummow J and Crennan J held that the Court in Pye v Renshaw was right to reject that argument, because the power under s 96 was not conditioned upon the absence of an improper purpose but upon the selection of permissible terms and conditions of any grant:

“The argument rejected in Pye v Renshaw was that the exercise of the power to grant financial assistance under s 96 would be vitiated if shown to be for the purpose of inducing the State to exercise its powers of acquisition on less than just terms.  The concept of improper purpose as a vitiating characteristic was rightly rejected.  Section 96 says nothing about purpose.  It authorises the making of grants on “such terms and conditions as the Parliament thinks fit”.  The constraints imposed by constitutional prohibitions or guarantees will be directed to the range of permissible terms and conditions rather than their underlying purpose.”[44]

[39] The last sentence suggests that the purpose alleged in V of the particulars of the applicant’s proposed ground of appeal (1) is irrelevant to the validity of any Commonwealth legislation giving effect to the alleged arrangement between the Commonwealth and the State.  That is consistent with the respondent’s argument that the same purpose is irrelevant to the validity of State legislation, but French CJ, Gummow J and Crennan J found that, because there was no “acquisition” for the purposes of s 51(xxxi), it was unnecessary to consider an argument that the New South Wales legislation which implemented a funding agreement between the Commonwealth and that State was invalid or inoperative.[45]

[40] Their Honours referred to an informal arrangement between governments which had “decoupled” the State statute from the agreement which was approved and ratified by the Commonwealth Act found to be invalid in Magennis,[46] and observed that it was unnecessary to consider whether an “assumption…that the terms and conditions attached to a s 96 grant may sufficiently be disclosed in an informal fashion…reflected a correct understanding of s 96 and of its relation to s 61 of the Constitution.”[47]  Their Honours went on to hold that the power under ss 96 and 51(xxxvi) did not extend to the grant of financial assistance by the Commonwealth to a State on terms and conditions which required the State to acquire property on other than just terms.[48]  Each of those provisions concerns Commonwealth power.  To the extent that there is tension between these reasons and the “condition reasoning” in Pye v Renshaw, that has no bearing upon the significance in this Court of the rejection of the challenge to the  validity of the State legislation in Magennis or the emphatic affirmation of that decision in Pye v Renshaw.

[41] Hayne, Kiefel and Bell JJ did not find it necessary to consider the plaintiffs’ case that the State legislation was invalid[49] or any issue about the intersection of ss 96 and 51(xxxi).[50]  Their Honours’ reasons do not touch upon the issue which arises in the present application.

[42] The applicant relied upon the dissenting judgment of Heydon J.  Having held that Commonwealth legislation which authorised the supply of funding to the State was invalid because it provided for the acquisition by New South Wales of property otherwise that on just terms, Heydon J held that it followed from s 106 of the Commonwealth Constitution and covering clause 5 “that the New South Wales Government, which operates under the Constitution of New South Wales, has no power to participate in conduct which is in contravention of s 51(xxxi)”, that the State legislation and instruments “were seen by New South Wales and by the Commonwealth as steps in a scheme or plan designed to achieve the goal of terminating the rights of bore licensees…”, that those and other steps were “taken in concert to achieve a goal which depended on a contravention by the Commonwealth of s 51(xxxi)”, and that although none of those steps were made contingent on the operation of a binding agreement or operative Commonwealth law they were part of the contemplated scheme and in consequence could not survive because “[a] contrary view would annihilate the effectiveness of s 51(xxxi).”[51]  (Section 106 of the Commonwealth Constitution provides that the Constitution of each State “shall, subject to this Constitution, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be, until altered in accordance with the Constitution of the State.”  Covering clause 5 (s 5 of the Imperial Act 63 & 64 Victoria, Ch 12, “[a]n Act to constitute the Commonwealth of Australia”) provides that “[t]his Act, and all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on the courts, judges, and people of every State and of every part of the Commonwealth, notwithstanding anything in the laws of any State; and the laws of the Commonwealth shall be in force on all British ships, the Queen's ships of war excepted, whose first port of clearance and whose port of destination are in the Commonwealth.”)

[43] Heydon J concluded that:

“The States, subject to their own legislation, are at liberty to make uncompensated expropriations, at least in fields which s 109 of the Constitution leaves open to them.  But they are not at liberty to embark on schemes with the Commonwealth involving steps which include a failure by the Commonwealth to comply with s 51(xxxi).”[52]

[44] Heydon J’s conclusion does not support the applicant’s case as it is pleaded in the proposed amended notice of appeal.  The amendment proposed by the applicant does not contend that the Commonwealth contravened s 51(xxxi) and it does not advance a case of a State participating in a scheme which depended upon a contravention by the Commonwealth of s 51(xxxi).  (Such a case would require that the Commonwealth be joined as a party.)  In any case, this Court should apply the relevant holdings in Magennis and Pye v Renshaw.

[45] The applicant contended that the High Court decision in Spencer established that it was arguable that, if the Commonwealth had enacted the legislation which the applicant now seeks to challenge, the applicant’s entitlement to just terms would have been protected by s 51(xxxi).  Putting aside the question whether there was an acquisition, a challenge to Commonwealth legislation in that form could not be regarded as having no reasonable prospects of success,[53] but the High Court’s reasons in Spencer do not touch upon the validity of State legislation.

[46] The cases after Magennis do not throw any doubt upon the binding force of the decision that a challenge to the validity of State legislation upon grounds which are materially indistinguishable from those articulated by the applicant is not maintainable.  In light of that decision, its emphatic affirmation in Pye v Renshaw, and the decision of the Full Court of the Federal Court in Alcock v The Commonwealth, this Court should hold that the applicant’s proposed case for invalidity of the State legislation is legally untenable.  On this ground the primary judge was right to refuse the application to amend the notice of appeal.

Proposed order

[47] The application should be refused with costs.

[48] MORRISON JA:  I have had the advantage of reading the reasons of Fraser JA and agree with his Honour that the application should be refused with costs.

[49] MULLINS J:  Assuming for the purpose of the application that the proposition put forward by the applicant that the Commonwealth acquired a proprietary interest in his land was not manifestly untenable, I agree with the reasons given by Fraser JA that the applicant’s challenge to the relevant State legislation is not maintainable in light of P J Magennis Pty Ltd v The Commonwealth (1949) 80 CLR 382.

[50] I therefore agree with Fraser JA that the application for leave to appeal should be refused with costs.