FEDERAL COURT OF AUSTRALIA

Spencer v Commonwealth of Australia [2015] FCA 754

THE COURT ORDERS THAT:

1.    The application is dismissed.

2.    On or before 21 August 2015 the respondents are to file and serve any affidavit evidence and submissions on the question of the appropriate orders for costs in this proceeding, submissions to be limited to ten pages for each respondent.

3.    On or before 18 September 2015 Mr Spencer is to file and serve any affidavit evidence and submissions on the question of the appropriate orders for costs in this proceeding, submissions to be limited to 20 pages.

4.    On or before 2 October 2015 the respondents are to file and serve any submissions in reply on the question of the appropriate orders for costs in this proceeding, limited to five pages for each respondent.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

REASONS FOR JUDGMENT

INTRODUCTION AND SUMMARY

1    Mr Peter Spencer commenced this proceeding on 12 June 2007. When commenced, the Commonwealth was the only respondent. The State of New South Wales was joined as a respondent on 12 November 2010. The application and statement of claim sought various forms of declaratory relief and damages arising out of what was alleged to be the acquisition of property held by Mr Spencer. The acquisition was alleged to have occurred as a result of the State enacting vegetation clearance laws pursuant to agreements between the State and the Commonwealth to do so, in order that the Commonwealth could meet its targets under the Kyoto Protocol to the United Nations Framework Convention on Climate Change of 11 December 1997 and the State could secure Commonwealth funding for various policy initiatives on environmental reforms, especially in relation to restricting native vegetation clearance. The procedural history of the matter is considerable, but ultimately the trial was conducted effectively and efficiently by all concerned.

2    For the reasons set out below, there will be orders dismissing the application.

3    In summary, I have concluded that the two impugned federal laws should not be characterised as laws with respect to the acquisition of property. When considered at a broader level, in their practical operation and effect as part of a scheme involving four intergovernmental agreements and state legislative controls on native vegetation clearance, there was no acquisition of property in contravention of s 51(xxxi).

4    In the July 2007 decision of the NSW Rural Assistance Authority that Mr Spencer’s farm was not commercially viable because of the impact of the State’s native vegetation laws there was what can be characterised as a “sterilisation” or a “taking”, but it was by the State, and there was no acquisition by the State nor by any other person of an interest or benefit of a proprietary nature in the bundle of rights Mr Spencer held in his farm. If, contrary to my findings there had been an acquisition of his bundle of rights in Saarahnlee, Mr Spencer was offered just terms in November 2007 by the State’s offer to pay the then properly assessed market value for Saarahnlee.

5    I have found Mr Spencer has not proven the existence of any “informal arrangement” between the Commonwealth and New South Wales. Nor does he have any private right of action in respect of the respondents’ conduct even if contrary to my findings that conduct was unlawful or the legislative or executive acts invalid. Nor has he proven any economic or non-economic losses flowing from the alleged unlawful conduct of the respondents.

STRUCTURE OF THESE REASONS

6    I begin these reasons with a short description of Mr Spencer’s claims and the course of this proceeding. I then set out the witnesses called and the evidence adduced at trial. Next I turn to factual findings about Mr Spencer’s land, the regulatory history of land clearing in New South Wales, the Kyoto Protocol and the intergovernmental agreements between the Commonwealth and New South Wales which are impugned by Mr Spencer in this proceeding, including Mr Spencer’s claims involving an informal arrangement outside the four written agreements. I then turn to an application of the law Mr Spencer seeks to invoke in support of his claims, dealing with the claim under s 51(xxxi) of the Constitution, which is his principal claim, and his private law action which he describes as an “action on the case”. Finally, I make some findings about Mr Spencer’s damages claims.

7    There are a number of matters raised by the parties in evidence and submissions but which in my opinion do not need to be determined. I address those at [126] to [135] below.

A DESCRIPTION OF MR SPENCER’S CASE AND THE COURSE OF THIS PROCEEDING

Mr Spencer’s claims

8    At the beginning of his final written submissions, Mr Spencer reproduced the 1979 advertisement for the property which he purchased and called “Saarahnlee”, and which is the centrepiece of his claims in this proceeding.

COOMA 5414 ac freehold alpine property of breathtaking natural beauty. Three 5,000 ft peaks. Permanent trout creeks, teaming with native wildlife. Dozens of delightful cabins or homestead sites magnificent mountain retreat for professional or business person great potential for tourist development also considerable agricultural potential as about 3000ac easily improved. Present improvements include habitable homestead in lovely setting, small shearer’s quarters, various outbuildings substantial eucalyptus oil distillery, electricity and phone connected.

9    I note here that the word “Saarahnlee” is variously spelt in the evidence. Mr Spencer’s evidence is that the word is a combination of the names of his children. I have adopted the spelling “Saarahnlee” as it appears to me to be the one generally put forward by Mr Spencer.

10    Mr Spencer has lost most of Saarahnlee. I say “most” because the evidence is unclear whether he retains a proprietary interest in Lot 50, a matter to which I return in other parts of these reasons. There is no doubt whatsoever that loss has been of immensely significant proportions to him, in all senses of the word “loss”, not simply in a financial way. His evidence and submissions in this proceeding make that point clear. His damages claims in this proceeding are built around not only the loss of the property itself, but the loss of the several projects he had planned to undertake on that property, and the very personal losses he submits have flowed from the claimed unlawful acquisitions.

11    Somewhat ironically, given the twists and turns this proceeding has taken over the last eight years, the core aspects of Mr Spencer’s claims can be summarised relatively shortly. Mr Spencer claims that, as a result of formal agreements (or an informal arrangement) between the Commonwealth and the State, which were made consequent upon first the enactment of federal legislation concerning natural resources management and second Australia’s commitments under the Kyoto Protocol, the State enacted legislation and made regulations prohibiting the clearance of native vegetation without the State’s consent. Mr Spencer alleges that Commonwealth funding under the intergovernmental agreements was used as leverage by the Commonwealth to ensure the State enacted a sufficiently tight scheme of vegetation clearance regulation. His claim centres on the way these vegetation clearance prohibitions affected the use to which he could put his property, Saarahnlee. He claims the prohibitions, including a refusal of permission to clear a large amount of vegetation on his property in 2007, resulted in his property being assessed by the State’s Rural Assistance Authority as commercially unviable. He claims this assessment, together with the fact that he was unable to pursue a number of projects on the property which would have necessitated land clearing, ultimately or eventually led to the property being sold by the mortgagees. In simple terms, he claims that but for the existence and effect of the NSW vegetation clearance laws, he would still be on his property Saarahnlee and would be well advanced on a number of different and financially productive projects (either alone or in conjunction with other investors) such as wind farming, fine merino production and trout farming. Instead, he claims he is without a home at all, and financially ruined.

12    Taking into account both the length of time over which this proceeding has developed, and the fact that Mr Spencer ultimately represented himself, in the context of this proceeding any exposition of Mr Spencer’s claims in more detail must rely on at least three sources.

13    The first source is his case as pleaded, which is set out in the Further Amended Statement of Claim (FASOC) filed on 14 February 2011. That document came about by the orders of Justice Emmett on 11 February 2011, and was drafted with the benefit of the High Court’s reasons for judgment in Spencer v Commonwealth [2010] HCA 28; 241 CLR 118.

14    In the FASOC he seeks the following declaratory relief against the Commonwealth:

(1)    A declaration that the Natural Resources Management (Financial Assistance) Act 1992 (Cth) and the Natural Heritage Trust of Australia Act 1997 (Cth) are invalid, or invalid insofar as they “authorised the making of unconstitutional agreements whose effect or purpose was the acquisition of land including the Applicant’s land otherwise than on just terms”;

(2)    A declaration that the intergovernmental agreements are themselves “invalid and/or void”. That claim appears to be put on a similar basis (see paras [34] and [44] of the FASOC, read with the second prayer for relief).

15    Mr Spencer seeks against the State declarations that the Native Vegetation Conservation Act 1997 (NSW) and the Native Vegetation Act 2003 (NSW) are invalid.

16    The basis for declaratory relief against both respondents is first that the identified Commonwealth legislation is not authorised by s 51(xxxi) and is invalid. Second, that the identified NSW legislation is also invalid by reason of non-compliance with s 51(xxxi). Third, that the intergovernmental agreements could not be authorised by a valid law of the Commonwealth because the State agreed to “make and adopt measures with respect to the acquisition of property of … the Applicant otherwise than on just terms in consideration of the payment of moneys” by the Commonwealth (para [34] of the FASOC read with the first prayer for relief).

17    Damages or compensation are claimed against both respondents. The first basis is that the “acquisition” of Saarahnlee contrary to s 51(xxxi) has resulted in the Commonwealth being unjustly enriched (para [55] of the FASOC), and the applicant seeks either an account of profits or compensation, the basis for which is not further explained.

18    Further, there are pleadings against both the Commonwealth (paras [56A] to [56D]) and the State (paras [66] and [67], by reference to the former paragraphs) headed “action on the case”. In these paragraphs it is alleged that the arrangements between the Commonwealth and the State, and the payment of monies from the Commonwealth’s Natural Heritage Trust to the State were to induce the State to enact its native vegetation clearance legislation. It is then alleged that these “State measures” were directed at the applicant and caused him loss and damage, which is particularised only in the following way:

a.    The commercial viability of the Applicant's property Saahranlee has been destroyed or prevented by the combined actions of the First and Second Respondents and each of them;

b.    The reasonable user of the property between about 1997 to date has been prevented by the actions of the First and Second Respondents;

c.    The Applicant's ecosystem services enterprises on the land adopted as an alternative to farming and grazing have also been destroyed or prevented on the property;

d.    Carbon sequestration and carbon abatement rights have been taken or acquired;

e.    Improvements to the property specified in paragraph 5 herein have been taken or acquired;

f.    Crown lease rights have been prevented or acquired as specified in paragraph 5 (c) herein.

19    The second source is a document Mr Spencer’s legal representatives provided in May 2014. In late April 2014, there appears to have been a request from the Court for an agreed summary of the matter and its current status. The need for such a document is apparent when one has regard to the complicated procedural history of this matter, as I set out below. In addition to a summary agreed by the parties, a document entitled “Profile of Applicant’s Case” appears also to have been produced in response to the Court’s request. In that document, the allegation is made that there was a “scheme” or “joint venture” between the Commonwealth and the State to use state laws as “the instrument of acquisition for a Commonwealth ‘purpose’ … namely the satisfaction of its obligations under the UNFCCC … and Kyoto Protocol”. The document alleges the Commonwealth received benefits including the “substantial carbon sequestered on the land”, accounted for in the national carbon accounts and fixed at “at least $25 million”. This is also characterised in the document as an unjust enrichment of the Commonwealth.

20    In this document, there is no reference to the “action on the case” allegations.

21    The third source is the final submissions produced by Mr Spencer himself after the close of evidence, and after oral submissions. These submissions run to 92 pages. Given Mr Spencer represented himself at trial, and was refused an adjournment he sought so as to try and obtain different legal representation (a matter I deal with below), it is appropriate in my opinion that the Court use his final submissions as another source of understanding how he puts his claim. There is no prejudice to the respondents in doing so: both respondents have had ample opportunity to respond to the matters Mr Spencer has raised, and they have done so comprehensively.

22    Although these written submissions range widely over a number of issues and sources, not all of which can be said to be relevant to the legal and factual issues in this proceeding, my understanding of the steps in Mr Spencer’s claim in relation to s 51(xxxi) which can be discerned from these written submissions is as follows:

(1)    First, Mr Spencer claims he has three kinds of property rights: fee simple in his property Saarahnlee; a “subset of fee simple”, profit à prendre in relation to carbon stored in trees on his property; and finally perpetual Crown leasehold in the parts of his property which were not held in fee simple, that kind of leasehold being, he submits, “most like fee simple of all other property known to law”.

(2)    Second, he submits the respondents “entered into arrangements and contrivances to get around s.51(xxxi)” of the Constitution. He submits the Commonwealth cannot pay the State to make an unjust acquisition of property, without paying compensation, and with the parties “sharing the benefits of the property thus unjustly acquired”.

(3)    His property (in the three senses he has used the term) has been acquired for the purposes of s 51(xxxi) because the rights he could exercise over that property and which are bound up with ownership were “effectively sterilised” by the NSW vegetation clearance laws. The Commonwealth obtained a benefit from this sterilisation: namely a costs saving from the avoidance of the need to take other measures to reduce emissions in order to meet the Kyoto Protocol targets.

(4)    The “effective sterilisation” occurred through the legislative scheme in the NSW Native Vegetation Act 2003 and the Native Vegetation Regulation 2005 (NSW) made under that Act: an absolute prohibition on clearing without approval, the Minister being the consent authority, and consent depending on the application of a complex environmental assessment methodology – “the myriad onerous, minute and detailed standards” there set out. The Act also reverses the onus of proof in relation to an allegation of clearing without approval, “permits intrusive search without warrant” and “abolishes the privilege against self-incrimination”, all of which combines, Mr Spencer submits, to force farmers such as himself

to bear the costs, by holding our most significant capital goods – our production goods – in a kind of compulsory supposed pre-1788 botanical museum. The Native Vegetation Act stands for the unequal, capricious, discriminatory, disproportionate, unjustified oppression of a minority; and as since ancient times, we come to the Court for justice.

(5)    This, he submits, is an acquisition and not an extinguishment of rights because the State

has appropriated to itself the full measure of the use-rights in question, to grant or withhold permission to exercise them, from nought to a hundred percent, in the second respondent’s own discretion, for a purpose determined unilaterally by their own conception of their own management of my property for their own preferred development as defined by them, to effect any result from preservation on the one hand to total extirpation of native vegetation in favour of agriculture on the other, and everything in between, and to arbitrarily benefit whatever political favourites they choose to benefit, and impose the costs by unequally discriminating against any minority target group they choose, which was farmers; subject only to the Environmental Outcomes Assessment Methodology …. So unless the respondents are going to argue that the Environmental Outcomes Assessment Methodology ranks higher than the Constitution, therefore the use-rights have been acquired, not extinguished.

…

… the government has not effected a termination, extinguishment or modification of use-rights; but has by compulsion acquired the use-rights to the land, regards itself as the best and rightful manager, consider that they are deciding the best use and mix of relevant productive factors, consider that they are deciding the best balance of present versus future interests in the resources in question literally into the indefinite future, and regard themselves as running production of what they think best on the land. That’s why it’s called natural resource management for ecologically sustainable development.

…

… they [i.e., the respondents] are using my land to grow native vegetation.

(Emphasis in original.)

(6)    Although he submits it is not necessary to prove the Commonwealth obtained a benefit from the acquisition if the State obtained a benefit (as he contends), Mr Spencer contends that nevertheless the Commonwealth did obtain two kinds of benefits. First, a financial advantage in the costs savings from other measures to reduce emissions to meet Kyoto Protocol targets. Second, the “proprietary advantage” of carbon sequestered in native vegetation on Mr Spencer’s land as a result of banning land clearing.

(7)    He then submits it is common ground that just terms, or compensation, have not been paid, and declaratory relief should be given in relation to the invalidity of both the Commonwealth and NSW legislation set out at [14] and [15] above.

23    In addition to declaratory relief in relation to the state and federal legislation, Mr Spencer contends he is entitled to damages in tort. A carefully stepped through sequence of propositions about how the respondents’ liability to pay damages arises has never been given. The pleadings are wholly inadequate on this matter. The profile of case contains little more than assertion. Understandably, this was a difficult exercise for Mr Spencer, as a lay person, to tackle in his final submissions.

24    Mr Spencer described this cause of action as an “action on the case”. I will say more about that description later in these reasons. Mr Spencer invoked the decisions in James v Commonwealth [1939] HCA 9; 62 CLR 339, Beaudesert Shire Council v Smith [1966] HCA 49; 120 CLR 145 and Northern Territory v Mengel [1995] HCA 65; 185 CLR 307. He submitted that Mengel is not authority that action on the case has ceased to exist or been assimilated to negligence, and continued:

James, Beaudesert and Mengel have in common that they would all recognise an action on the case for damages for economic loss where the defendant was motivated by an intention to cause harm to the plaintiff by an act which was unlawful in the sense of positively forbidden by law; assuming the other elements of action on the case were made out.

25    As I understand it, Mr Spencer’s claim is that, if he is correct that the respondents (or either of them) effected – through the intergovernmental agreements and the identified federal and state legislation – an acquisition of his property contrary to s 51(xxxi) of the Constitution, he has a cause of action of the kind set out in Mengel, which he has described as an “action on the case”. He claims:

In this case, there was definitely an intention to inflict the harm in question, namely, to deprive me of my use-rights causing economic loss. The purpose of the whole exercise was to prevent farmers and landholders from exercising their lawful rights; to punish them if they did; and without paying compensation for the adverse effect; so the respondents could use those lands for their own ends. This is proved by Section 3 of the Native Vegetation Act; and by the definition of ‘ecologically sustainable development’.

Section 3 (b) says the Object is to “prevent broadscale clearing”, which as we have seen, is defined to include even a single blade of grass. The same clause goes on to say “unless it maintains or improves environmental outcomes”, which as we have seen, was based on a methodology which impermissibly failed to take into account human values, was grossly irrational in the Wednesbury sense, and thus reckless in tort as to the damage done to property rights by the application of this standard.

And the definition of ecologically sustainable development shows that the respondents thought, that what they were doing, was “integrating” economic and environmental considerations. In other words, they thought that the environmental benefit they were obtaining, had to be at the cost of the economic loss they were imposing; because, to their minds, they thought that the environmental benefits outweighed, i.e. justified the economic losses. So they intended the losses that they imposed.

26    There is also a brief reference to a cause of action in negligence – namely that the respondents had a duty of care not to enter into arrangements to effect an unjust acquisition of property. There has been to date no real mention of such a cause of action and it is not a matter which can be raised in final submissions.

27    As to the measure of damages claimed, that is put in several ways. First, against the State, Mr Spencer claims the difference between the value of Saarahnlee with and without the controls under the NSW native vegetation legislation. In his final submissions he does not appear to put a precise figure on this claim.

28    Second, against the Commonwealth, Mr Spencer claims that “the measure of damages be the Commonwealth’s own account of the proportion that my land area contribution bore to the whole, in the maximum value or expected value that the Commonwealth attached to carbon in its own carbon accounts”. In his written submissions he quantifies this in the following way:

As per tonnage witness’s agreed carbon retention on Saarahnlee being 3MM Tonnes, price being $24.00 per tonne as per the Carbon Tax legislated price for Kyoto period 1990 Jan to Dec 2012 = $72 million at this rate the lock is as stated in agreement/treaty – perpetual.

29    Having made those two claims, in another part of his written submissions he then also makes a damages claim only against the State for “Related Costs from loss of farm”: this relates to the cost of a new northern boundary fence along the boundary of Saarahnlee with the Namadgi National Park and Mr Spencer claims $250,000.

30    He then makes a damages claim only against the Commonwealth for “property restitution”: Mr Spencer alleges Saarahnlee is “still on the market” and could be repurchased for approximately $2.5 million.

31    He then makes a series of claims as against both respondents:

(1)    Loss of wind farm potential: “As per Steen Stavnsbo’s estimate. $ 700,000.pa for 20 years aggregate $14,000,000, plus any refit and another period of 20 years”;

(2)    Loss of opportunity, in terms of the potential of all the projects Mr Spencer planned for his land, taking into account its “value to me” and its “inability to be replaced other than by way of restitution”. Mr Spencer does not identify a fixed sum for this, but this appears to encompass the basis of the valuation of Saarahnlee given by Mr Davies, which was just over $9 million;

(3)    Loss due to personal distress, family dislocation and removal from the farm, disappointment and pain. No figure is placed on this, and later in his final submissions Mr Spencer appears to submit the figure for this claim should be “as the court determines”;

(4)    Storage of furniture, plant and equipment from the farm: $40,000 per year from March 2010;

(5)    “Destruction of personnel [sic] belongings, furniture, plant and equipment on and following eviction until current”: $100,000;

(6)    “Farm and asset and infrastructure maintenance left for 8 years”: $150,000;

(7)    “Legal fees research and costs for lawyers over and above allocation of costs by the court for the 8 years of proceedings. … damages as the court determines”.

32    Some of these claims are clearly in the alternative to others. The largest is obviously the carbon sequestration claim for $72 million against the Commonwealth. The wind farm losses in excess of $14 million appear to be the next largest, and they are made against both respondents. The loss of Saarahnlee itself on one measure (“value to me”) would be placed at more than $9 million and on another (the buyback proposal) at more than $2.5 million. I deal with Mr Spencer’s damages claims at [652] to [795] below.

33    I note, as the respondents also note in their final submissions, that this inventory of losses excludes any specific claims for losses over some of the projects which Mr Spencer claimed he was conducting, and or alternatively, proposed to conduct on Saarahnlee – such as the fine merino wool project. To some extent, they are subsumed in his claim as now expressed that he has lost Saarahnlee, and what he has lost is its value to him. Nevertheless, it is a distinct shift in the nature of his claim, as foreshadowed by the evidence filed on his behalf, that there are no longer particular claims for losses which were alleged to have flowed from the non-continuation of particular projects on Saarahnlee.

34    Although variously expressed in all three sources, in my opinion it is fair to say that the principal allegation made by Mr Spencer has remained constant throughout these three iterations of his case against the respondents. It appears to consist of the following steps (variously expressed in different documents, and sometimes within the one document):

(1)    Mr Spencer, as the owner of Saarahnlee, held a “bundle of rights” over that property including fee simple in part of it, Crown leasehold in other parts, rights to use and develop the property as he saw fit, and rights in the carbon sequestered in vegetation on Saarahnlee.

(2)    In three stages, or by three courses of conduct, both the Commonwealth and the State effected an acquisition of Mr Spencer’s property, contrary to the guarantee in s 51(xxxi) of the Constitution.

(3)    Those three stages were:

(a)    The Commonwealth enacted the Natural Resources Management (Financial Assistance) Act and the Natural Heritage Trust Act;

(b)    Relying on the Commonwealth legislation and s 96 of the Constitution to provide funds to the State, the Commonwealth concluded with the State the “1997 Agreement” to deliver the Natural Heritage Trust (FASOC [14]), the “2000 Salinity Agreement” (FASOC [24]), the “2002 Salinity Agreement” (FASOC [26]) and the 2003 “Trust Agreement” to deliver the Natural Heritage Trust (FASOC [28]). In these reasons I will refer to the Natural Heritage Trust agreements as the “1997 NHT Agreement” and the “2003 NHT Agreement”;

(c)    The State, in response to (and induced by) the provision of funds from the Commonwealth, and the imposition of pressure by the Commonwealth, enacted the Native Vegetation Conservation Act 1997 and the Native Vegetation Act 2003, preventing Mr Spencer from clearing any native vegetation on his property without the State’s approval. I interpolate here that the allegations about the “pressure” applied by the Commonwealth to the State may be the highest that, ultimately, the existence of any “informal agreement or arrangement” was put.

(4)    There was, in this course of conduct, an “acquisition” of a benefit or advantage of a proprietary character by the Commonwealth, in that it acquired either a financial advantage (not having to fund other ways to meet its Kyoto Protocol targets), or it obtained the benefit of the carbon stored in the native vegetation on Mr Spencer’s land and what would otherwise have been Mr Spencer’s proprietary rights to use or sequester that carbon.

(5)    The State also acquired, in this course of conduct, a benefit or advantage of a proprietary character (see FASOC [36A]-[36B] and [63]), which was effectively to control what occurred on, or what was done with, Mr Spencer’s land.

(6)    Those courses of conduct, as well as resulting in the invalidity of the federal and state legislation, and the intergovernmental agreements, caused Mr Spencer loss and damage in a way which creates in either or both of the respondents a legal obligation to pay him compensation.

35    Prior to embarking on an examination of these claims, it is necessary to turn to the procedural history of the case. From there, it is necessary to set out the factual background, and to make the necessary findings of fact on the evidence, to which the legal principles arising in those steps in Mr Spencer’s claims can be applied.

PROCEDURAL HISTORY

36    For reasons which I explain below, Mr Spencer ultimately represented himself at the final hearing of this matter, having had legal representation for all of the seven and a half years his proceeding had been in this Court. In various submissions, both written and oral, he gave some explanations about why he had terminated the retainer of his lawyers, and no more need be said about those explanations. It is important however to note that, as part of those explanations and at various other points during the final hearing and the interlocutory application for an adjournment, Mr Spencer did emphasise that the way he wished to present his case, including the evidence on which he wished to rely, differed from the way his lawyers had conducted the case on his behalf to the point at which he terminated their retainer. The change in direction affected the nature and scope of the evidence upon which Mr Spencer ultimately relied, and is reflected in these reasons.

37    In my interlocutory ruling on an adjournment application made by Mr Spencer in October 2014, I described some of the history of this proceeding: see Spencer v Commonwealth [2014] FCA 1117.

38    It is appropriate to repeat, and add to, that history, given these are my reasons for final judgment in the proceeding.

39    This proceeding has a long history. It was first issued on 12 June 2007. On 26 July 2007 the first respondent (then the only respondent), the Commonwealth, filed a notice of motion seeking summary dismissal of the proceeding pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth), which was heard by Emmett J in May and June 2008. On 26 August 2008, his Honour gave reasons why both Mr Spencer’s interlocutory application for interim relief and the proceeding should be dismissed: see Spencer v Commonwealth [2008] FCA 1256. Orders were made on 28 August 2008 dismissing the proceeding: Spencer v Commonwealth (No 2) [2008] FCA 1378.

40    Mr Spencer was granted leave to appeal the decision of Emmett J on 9 October 2008. The appeal was heard by a Full Court in February 2009 and, on 24 March 2009, the Full Court dismissed Mr Spencer’s appeal: Spencer v Commonwealth [2009] FCAFC 38; 174 FCR 398. Mr Spencer sought special leave to appeal to the High Court. His application was adjourned pending delivery of the High Court’s judgment in Arnold v Minister Administering the Water Management Act 2000 [2010] HCA 3; 240 CLR 242: see Spencer v Commonwealth [2009] HCATrans 126. Arnold was handed down on 10 February 2010. The Court in Arnold applied its decision in ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51; 240 CLR 140, judgment in ICM having been handed down on 9 December 2009. The Court’s decision in ICM was to be important in the determination of Mr Spencer’s claims in the High Court.

41    On 12 March 2010 Mr Spencer’s application for special leave was referred to an enlarged full court for argument as on appeal: Spencer v Commonwealth [2010] HCATrans 55. On 1 September 2010 the High Court granted special leave to appeal, allowed Mr Spencer’s appeal, set aside the orders of the Full Court and Emmett J and dismissed the Commonwealth’s application for summary dismissal: Spencer v Commonwealth [2010] HCA 28; 241 CLR 118.

42    Following the High Court decision, the proceeding returned to the docket of Emmett J. On 12 November 2010 the State of New South Wales was added as a respondent to this proceeding.

43    Since its remitter, there have been a number of interlocutory disputes about discovery, including claims by the Commonwealth of public interest immunity: see, e.g., Spencer v Commonwealth (No 3) [2012] FCA 637; Spencer v Commonwealth (No 4) [2012] FCA 1142; Spencer v Commonwealth [2012] FCAFC 169; 206 FCR 309.

44    The proceeding was re-docketed to Cowdroy J in February 2013. Following the retirement of Cowdroy J, the proceeding was transferred to the docket of Gleeson J on 17 April 2014.

45    On 22 May 2014 her Honour made orders for preparation for trial including filing of evidence and submissions, and, without any objection from the parties, provisionally listed the matter for hearing commencing on 24 November 2014 with an estimate of three weeks. It was as part of this process that the parties prepared the documents to which I have referred in [19] above. Further directions hearings were held before Gleeson J in June and August 2014, where orders were made relating to the filing of a draft court book index.

46    The proceeding was docketed to me on 4 September 2014 and, on 11 September 2014, a directions hearing was held where orders were made varying some of the timetable for preparation for trial. The parties made conscientious efforts to comply with the trial preparation timetable.

47    On 2 October 2014, the applicant’s then legal representative filed and served a notice of intention of ceasing to act pursuant to r 4.05(1)(a) of the Federal Court Rules 2011 (Cth). Although no notice of ceasing to act under r 4.05(1)(b) of the Rules has ever been filed, the Court and the parties then proceeded on the basis that Mr Spencer was thereafter representing himself.

48    By an application dated 10 October 2014, Mr Spencer applied for orders vacating the trial which was listed to commence on 24 November 2014, with an estimate of three weeks. He sought an order that the matter be relisted for a convenient date in 2015, and that the timetable for trial preparation be varied to take account of the new trial date. The principal basis for the adjournment application was his termination of the retainer of his legal representatives.

49    I refused the adjournment application for the reasons set out in my 17 October 2014 reasons for judgment: Spencer v Commonwealth [2014] FCA 1117. Thereafter, substantial accommodations were made for Mr Spencer in order to ensure the trial could begin and proceed as scheduled. In my orders of 17 October 2014, I granted Mr Spencer leave to have a person sitting at the bar table with him to assist him during any pre-trial hearings and during the trial. Further, I relieved Mr Spencer from preparing the court book and ordered the Commonwealth to prepare, file and serve the court book including the agreed tender bundle in electronic form, as well as serving a hard copy on Mr Spencer. The Commonwealth then engaged in the considerable ongoing task of updating the court book and the electronic index as evidence rulings were made and the parties made elections about the tender or non-tender of various evidence. I also directed that Mr Spencer be provided on a USB an electronic copy of the transcript of the trial which was to be updated on a daily basis and provided to Mr Spencer at 9.00 am the morning before the hearing resumed each day.

50    The matter proceeded to trial on 24 November and was completed within the estimated time. It was conducted cooperatively and efficiently and all parties, their counsel and instructing solicitors, and Mr Spencer’s assisting “team”, have the Court’s gratitude for the way the matter was conducted. In his final submissions, Mr Spencer alleged that the Commonwealth, in particular, has neglected or failed to meet its model litigant obligations. Certainly in relation to the part of the trial in which I have been involved, there is no foundation whatsoever for that kind of allegation against either respondent. Quite the contrary.

Some observations about the way the trial proceeded

51    At various points during the trial, Mr Spencer made statements about his lack of preparation, and his inability to cope. It is appropriate that I express my general view about those statements, so that where it might seem that Mr Spencer was pressed into continuing when he was saying he could not, my reasons for the way the trial was conducted are transparent. I give one example, which occurred during the valuation evidence:

MR SPENCER: Okay. Just another comment I wish to make if I may. If I’m going to be held accountable for every document in the evidence book, when I’ve only had three weeks to get prepared for this case, when I’ve already applied to this case an interlocutory hearing to be taken off for four months to get ready, it’s not an equitable situation at all. I have not read every document. I’ve made that quite clear. I physically, humanly can’t do it. Thank you.

52    It is not the case that Mr Spencer had only three weeks to prepare for this case. The great bulk of the preparation had been done on his behalf while he was legally represented.

53    The evidence demonstrates Mr Spencer had been intimately involved in all aspects of this case for the whole of the seven years. He brought other litigation dealing with the same broad subject matter. His opening of several hours was presented in a way which showed tremendous familiarity with the material he considered important, as did his oral evidence.

54    What was apparent is that Mr Spencer had very firm views about how he wanted his case presented, and how he did not. Whether this was a cause for the termination of the retainer of his lawyers is not a matter on which I should speculate. At many times during the trial he would dismiss the relevance of significant parts of the respondents’ evidence, including the documentary evidence. His concept of the case was in that sense very different to that of the respondents. This had nothing to do with preparation, but with perspective.

55    Even if Mr Spencer had been given his requested four months of additional time, I do not consider he would have spent any more time looking at evidence, whether in affidavits or in documents, that he did not consider important or relevant to how he saw the case. If he did not consider something relevant, he did not bother much to recall it or deal with it. That was his approach, and it was very evident during the trial itself. Rather, what is more likely to have occurred (and did indeed occur after judgment was reserved and Mr Spencer had a chance to put in additional documents) is that he continued to find documents supporting his view of the case, rather than attending to evidence (such as that of Mr Connolly) which was unhelpful and adverse to his claims. I make these observations not to criticise Mr Spencer at all, but rather to explain why at various points during the proceeding when he protested about his lack of time or resources, I made what I considered reasonable accommodation for him, but otherwise determined that giving Mr Spencer more time would be unlikely to resolve his difficulties.

WITNESSES AND EVIDENCE

Admissibility rulings

56    On the evening of Friday 21 November 2014, shortly before trial was due to commence on Monday 24 November 2014, the State filed written objections to the affidavit evidence filed by Mr Spencer. The Commonwealth also filed a list of objections in court on Monday 24 November 2014, and both respondents developed those objections by way of oral submissions on 26 November 2014.

57    Bearing in mind that Mr Spencer was self-represented, I relieved Mr Spencer from the need to respond in writing to those objections, but directed instead that he respond orally to a series of questions provided to him by email from my chambers on Monday 24 November 2014. Mr Spencer did so in court on 26 November 2014.

58    As I noted in my judgment on the respondents’ objections, the objections, if all upheld, would remove most of Mr Spencer’s evidence: Spencer v Commonwealth [2014] FCA 1288, at [13]. As I noted at [13]-[14]:

The general approach I have taken to the objections puts some considerable weight on the need for this matter, after seven years and the investing of considerable resources by all parties and the Court, to proceed as fairly and efficiently as possible, and without significant disruption, if that can reasonably be avoided. To disrupt the presentation of Mr Spencer’s case by removing the majority of his affidavit evidence, and that of his witnesses, would not serve the interests of the administration of justice generally, nor s 37M of the Federal Court Act in particular. It may prompt attempts by Mr Spencer to call new evidence, which, given his lack of legal experience, may not be any more compliant with the rules of evidence but will certainly delay the trial and increase the costs and resources expended by all involved, including the Court. It is apparent from various submissions made by Mr Spencer that he did not make the forensic judgments about the contents of the affidavit material. Indeed it appears he may not have been familiar at all with large parts of that evidence (other than his own) until he was required to deal with the objections.

The infirmities said to exist in Mr Spencer’s evidence can in my opinion be dealt with as effectively through submissions as to weight and relevance. Indeed, that is a course likely to advance the interests of the administration of justice in the sense of providing a more intelligible route for Mr Spencer to understand and deal with what the respondents submit are the difficulties he has in proving his case. Adopting this approach in my opinion contributes to a fairer trial for Mr Spencer than refusing to allow him to adduce most of his evidence at all.

59    As I noted at [16]-[18] of my judgment, a large proportion of the objections fell broadly into two categories: relevance, and objections to statements of opinion contrary to s 76 of the Evidence Act 1995 (Cth). Other objections were based on the impugned statements being in the nature of an assertion or conclusion, or “not the best evidence”, and the Commonwealth in particular raised other objections to some of Mr Spencer’s proposed expert witnesses expressing opinions either not based on any specialised knowledge or based on “second-hand views” and “speculation”.

60    For the reasons set out in that judgment, I ruled that two affidavits sworn by Mr Spencer other than for the purposes of tender at trial were inadmissible including because they had been superseded by Mr Spencer’s later affidavits. I also ruled to be inadmissible an affidavit sworn by Ms Jeanne Hughes, a farmer whose property had also been affected by the native vegetation clearance laws, on the basis that her predicament was not relevant to whether Mr Spencer could make out his claims; and certain paragraphs from an affidavit sworn by Dr Alan Moran, on the basis that the contents of those paragraphs were argumentative as to matters of law, expressed opinions about matters not relevant to the issues in this proceeding, and attempted to give a narrative of certain facts required to be proved by direct evidence. The remainder of the respondents’ objections were not upheld.

Subpoenas

61    At the time that I refused Mr Spencer’s adjournment application on 17 October 2014, I also made an order, after Mr Spencer foreshadowed an intention to subpoena people to give evidence outside the individuals for whom affidavits had been provided, that:

Any requests for leave to issue subpoenas for witnesses at trial are to be filed by 10 November 2014.

62    In substantial compliance with that request, on 11 November 2014 Mr Spencer filed and served by email requests to issue 28 subpoenas for persons to attend trial and give oral evidence, together with a volume of accompanying material seeking to identify the basis on which the witnesses were able to give evidence relevant to the issues in the trial.

63    The persons identified in the applications included two former Prime Ministers of Australia, a former Premier of New South Wales, a former Premier of Queensland, three current federal Members of Parliament, a current state Minister, two current state Members of Parliament, a number of former state and federal Members of Parliament, and a range of other individuals, some of whom held public office and some of whom were from private organisations. All were identified by Mr Spencer as having made comments, or voiced opinions about, the issues of climate change and carbon sequestration, Australia’s targets under the Kyoto Protocol, the merits of policies restricting vegetation clearing on private land as a mechanism to reduce carbon emissions and the merits of compensation for landholders affected by such policies.

64    Given the time remaining before the trial was to commence on 24 November 2014, the parties appeared before me on 12 November 2014. Mr Spencer was then given an opportunity from Thursday 13 November to Monday 17 November 2014 to respond in writing to the respondents’ submissions on his applications. As I noted in my judgment on the subpoena applications, Mr Spencer is to be commended for his efforts to meet the timetable imposed by the Court, bearing in mind the other deadlines he had to meet during that time: Spencer v Commonwealth [2014] FCA 1234, at [6].

65    On 18 November 2014, I granted leave to Mr Spencer to issue subpoenas to three witnesses: Mr Charles Armstrong, Dr David Kemp and Mr Malcolm Peters, and the evidence those witnesses ultimately gave at trial is described below. The reasons for granting leave to issue those subpoenas, and refusing leave to issue the other 25 subpoenas sought by Mr Spencer, are set out in Spencer v Commonwealth [2014] FCA 1234. At the time that I granted leave, I also directed Mr Spencer

to consult with a Registrar of this Court in relation to the proper form of the subpoenas, the requirements for service and the requirements for matters such as conduct money.

66    Among the witnesses to whom I refused leave to issue a subpoena was one Mr Bernard Sullivan. However, in refusing leave, I foreshadowed generally that Mr Spencer was not precluded from making, during the trial, a further application in relation to the witnesses I had refused: Spencer v Commonwealth [2014] FCA 1234, at [55]. On the fourth day of trial, 27 November 2014, Mr Spencer made by way of email to my chambers a further application for a subpoena to be issued to Mr Sullivan, a valuation expert, on the basis that there were a number of questions required to be asked of him as to the method and procedure used to prepare his valuation of Saarahnlee. As I set out further below, Mr Sullivan had been retained by the Nature Conservation Trust on behalf of the State to conduct a valuation of Saarahnlee in 2007. Mr Sullivan’s report was, however, not filed independently in this proceeding. At the time that he sought leave to issue the subpoena, Mr Spencer understood that Mr Connolly, who was called as an expert witness on valuation for the State, had prepared his valuation and report by reference to Mr Sullivan’s valuation. On 27 November 2014, I granted Mr Spencer leave for the issuing of a subpoena to Mr Sullivan to attend trial and give oral evidence, and I made orders on 28 November abridging the time for that subpoena to be served. At the time I granted leave, I inquired whether and Mr Spencer accepted that it may be appropriate for there to be an order that Mr Sullivan be remunerated in accordance with his usual professional rates.

67    The trial commenced with openings by the respondents, as a further accommodation to Mr Spencer. He was then given some additional time to prepare his own opening, which he delivered ably. The parties cooperated in the order and scheduling of the witnesses, which proceeded efficiently. At the conclusion of the evidence and after a short adjournment, the respondents again were asked to commence final oral submissions so as to assist Mr Spencer with a framework for his own submissions. The respondents also handed up final written closing submissions. Mr Spencer was then given a further one-day break to prepare for oral submissions, which he then delivered on 11 December 2014. Directions were given for Mr Spencer to file his final written submissions by 2 February 2015, a period he agreed was sufficient. The respondents were given a further two weeks or so to file submissions in reply. In early February 2015 Mr Spencer requested and was granted a short extension of time for filing his final written submissions.

68    As part of his submissions, Mr Spencer also relied on the following documents which had been filed on his behalf at various stages of this proceeding:

    written submissions prepared by his former counsel and filed on 1 June 2010 on Mr Spencer’s behalf in support of the High Court special leave application;

    written submissions in support of Mr Spencer filed on 7 June 2010 by the NSW Farmers’ Association seeking leave to intervene in the High Court special leave application;

    an outline of submissions in this proceeding dated 16 May 2013 prepared by Mr Spencer’s former counsel; and

    the “Profile of Case” document provided to the Court in May 2014 by Mr Spencer’s former counsel, to which I have referred earlier in these reasons.

Lay Witnesses

Peter Spencer

69    Mr Spencer faced the difficult task of both being the principal witness and conducting his own case, as well as attempting to make decisions about what material to present, and what could be left out. He performed these tasks with diligence, and it was evident throughout the conduct of the trial that he made forensic decisions with a good understanding of what parts of his case he wished to emphasise.

70    As a witness, it is fair to say that Mr Spencer was sometimes given to exaggeration and hyperbole, and I found he could at times seem unconcerned with whether he was recalling events entirely accurately. The fact that the events which are the subject matter of this proceeding have occupied his life for more than ten years make that entirely understandable at one level – both as to the emotional weight they have for Mr Spencer, and the number of facts and events he must try to keep in his recall. These features of his evidence do mean however that for the purposes of fact-finding, there are occasions (few in number) where I found his evidence not entirely reliable. For example, in relation to the events of the clearing proposal for Saarahnlee in 2007, I have found the evidence of the State’s witnesses, together with the documents, the most reliable source of an account of what occurred.

71    Mr Spencer was given to sweeping and generalised statements from time to time, and there were some inconsistencies in his evidence especially on the damages aspect, because of this. Had I needed to reach the point of quantifying any losses, it would not have been possible to do that reliably on his evidence as it stood.

72    Overall however, I find Mr Spencer did his best in a difficult situation, both as a witness and as an advocate.

Brian Plummer (applicant)

73    Mr Plummer was called by Mr Spencer and gave evidence regarding what he described as “the problems faced by farmers” as a result of the passage of the Native Vegetation Conservation Act 1997 and the way the scheme set out in that legislation was subsequently managed by the State. Critically, Mr Plummer’s evidence was relied upon in respect of a letter said to have been sent by the Commonwealth Minister for Environment and Heritage Senator Robert Hill to NSW Premier Bob Carr, which I deal with later in these reasons as it was one of the planks relied on by Mr Spencer to prove the “informal arrangement”.

74    Mr Plummer is a farmer in Tottenham, New South Wales, a member of the Fiveways Landcare Group and former Secretary of the Tottenham branch of the NSW Farmers’ Association. In his evidence, Mr Plummer addressed the concern local farmers in the community had with the introduction of the Native Vegetation Conservation Act 1997. Mr Plummer informed the Court that the Fiveways Landcare Group commenced a project in order to educate politicians and bureaucrats on the group’s concerns and the difficulties they faced as a result of the Native Vegetation Conservation Act 1997. As part of the project, the Fiveways Landcare Group arranged for Premier Bob Carr to attend the Fiveways area.

75    It was Mr Plummer’s evidence that on 24 March 2000, the then Director-General and Assistant Director-General of the Cabinet Office, Roger Wilkins and Chris Guest attended a meeting of the Fiveways Landcare Group to prepare for Premier Carr’s visit. Mr John Cobb, President of the NSW Farmers’ Association, also attended that meeting. Mr Plummer contends that during that meeting, Mr Cobb provided him with a copy of a letter addressed from Senator Hill to Premier Carr, which letter Mr Plummer deposed in general terms “stated that if the NSW Government did not halt land clearing within NSW then the Federal Government would withhold NSW’s share of the Natural Heritage Trust Funding, which at the time was the entire Bushcare Program.” At trial, Mr Plummer gave evidence that reading the contents of the letter “was like a big wakeup call … There’s further pressures here than just the State Government. It’s coming from a federal directive.” Mr Plummer gave evidence that upon realising the Federal Government’s role, the Fiveways Landcare Group initiated a meeting with their Federal Member for Parkes, Tony Lawler and he exhibited to his affidavit a letter addressed to him from Mr Lawler dated 21 June 2000 referring to their discussion. Mr Plummer’s evidence was that he no longer has that letter in his custody or possession and that he could not be certain whether or not it had been destroyed by him.

76    For reasons I set out below, I found Mr Plummer to be a reliable witness, the respondents’ submissions notwithstanding.

John Williams (applicant)

77    Dr Williams is an Adjunct Professor in Public Policy and Natural Resources Management and had been a founding member of the Wentworth Group of Concerned Scientists. Previously, he had been the Chief Scientist of the NSW Department of Natural Resources following his retirement from the CSIRO as Chief of Land and Water in 2004. He was not required for cross-examination. Initially he was put forward by Mr Spencer as an expert witness but in my admissibility ruling I limited the use of his evidence under s 136 of the Evidence Act to evidence of historical facts: Spencer v Commonwealth [2014] FCA 1288, at [58].

78    In his affidavit, Dr Williams deposed that he and other scientists had advocated to the State and Commonwealth Governments a proposal to use native vegetation to store carbon to mitigate climate change, namely “a proposal to lock up carbon by native vegetation and other forestation projects”. He further deposed that he became aware of implementation concerns amongst farmers about loss of use of land for agricultural purposes. He deposed that, as a result, he recommended to the NSW Government with the endorsement of the Wentworth Group that in such cases the land should be purchased by the State. He deposed “I am aware that the administrative procedures and processes involved appeared to be delayed, very cumbersome and largely ineffectual when set against the purposes proposed by the Wentworth Group.”

79    Copies of an extract from the 2003 Wentworth Group report to the NSW Premier and of a submission dated March 2010 from the Wentworth Group to the Senate inquiry into native vegetation laws were among the documents exhibited to his affidavit. The 2003 Wentworth Group report was elsewhere in evidence before me. As I explain elsewhere in these reasons, it is the case that the Wentworth Group advised the establishment of the Native Vegetation Reform Implementation Group (known also as the Sinclair Group), and the NSW Government ultimately relied on the Sinclair Group’s recommendation about compensation to establish the exit assistance scheme process. Whatever the inadequacies of the amount of funds set aside for that (one of Mr Spencer’s criticisms) or the cumbersome nature of the process (one of Dr Williams’ criticisms), the relevant fact for the purposes of this proceeding is that Mr Spencer was able to access the exit assistance scheme and was offered what he concedes was market value for Saarahnlee, which he elected not to take.

Shayleen Thompson (applicant)

80    An affidavit affirmed by Ms Thompson was filed on behalf of the Commonwealth. However, by the time of trial, it was Mr Spencer who sought to rely on Ms Thompson’s evidence. At the time of affirming her affidavit on 15 May 2008, Ms Thompson was the First Assistant Secretary, Strategies and Coordination Division, in the Commonwealth Department of Climate Change. She gave evidence regarding the Kyoto Protocol and Australia’s commitments under it, including evidence about greenhouse gas emissions, measures to reduce or mitigate emissions in Australia and Australia’s reporting obligations under the Protocol. Ms Thompson also gave evidence about emissions trading and the Federal Government’s position on emissions trading, at least at the time of affirming her affidavit in 2008. Her evidence was not controversial, and she was not required for cross-examination.

David Thompson (State)

81    Mr Thompson was called to give evidence on behalf of the State. At the time of the relevant events in 1998, Mr Thompson was employed by the Soil Conservation Service, a division of the NSW Department of Primary Industries, as the District Soil Conservationist at Cooma. Mr Thompson has been employed with the Soil Conservation Service since April 1988. Mr Thompson’s evidence provided an overview of protected land under the Soil Conservation Act 1938 (NSW), the process for obtaining clearing applications and how he and his colleagues assessed clearing applications pursuant to the Soil Conservation Act 1938. In particular, Mr Thompson gave evidence that he had inspected Saarahnlee on 1 July 1998 in connection with a possible clearing application. Mr Thompson deposed that this was a “pre-application” inspection which allowed Mr Spencer to show his property and to point out the area he wanted to clear, and exhibited to his affidavit notes and various documents relating to that visit. Mr Thompson’s evidence in relation to his inspection of Saarahnlee was not raised in cross-examination by Mr Spencer.

Raymond Willis (State)

82    Mr Willis also inspected Saarahnlee in connection with a proposal for land clearing, albeit much later on 19 February 2007, and was called to give evidence by the State. Mr Willis was employed between 2004 and 2010 at the Murrumbidgee Catchment Management Authority as Catchment Coordinator (Property Vegetation Planning) and deposed that he was the team leader involved in assessing land clearing applications. Mr Willis gave evidence that catchment management authorities were set up by the State Government in 2004 in connection with the implementation of the Native Vegetation Act 2003 including to assess applications to clear vegetation. Specifically, he deposed that the role of the Murrumbidgee Catchment Management Authority under the Farmers Exit Assistance Program was to process property vegetation plans made by landholders and to provide information to landholders about the program. In respect of the methodology and system used to assess land clearing applications, Mr Willis deposed that there was a general requirement that a clearing proposal have an overall result of maintaining or improving environmental outcomes.

83    Mr Willis gave evidence that he spoke with Mr Spencer on several occasions in 2006 and 2007 in relation to the Farmers Exit Assistance Program. Mr Willis gave evidence that he attended Saarahnlee for a site visit on 19 February 2007. He deposed that:

Prior to the inspection, Mr Spencer had not identified the part of his property that he wanted to clear. On 19 February 2007, at the start of the inspection, I said to Mr Spencer words to the effect of "What area do you want to clear Peter?" He threw his arms up in the air and said "Well I don't know I just want to access the Farmer's Exit Assistance Program." I said "You can't do that. In order to do that, you need a red light to clear. What part of the property do you want to clear? It's not our property. We can't tell you what you want to clear." Adam, Julie and I showed him maps of his property. I said "Peter, we need a line on a map. Where would you like to clear?"

84    Mr Willis deposed that after driving around the property with Mr Spencer, a colleague of Mr Willis drew a line and hatching on a map marking out a proposed area for clearing. He deposed that looking at that map, “I said to Mr Spencer words to the effect of ‘Leave it at that?’ Mr Spencer said ‘Yes’.” A copy of that map with the hatchings was in evidence before me. In documents annexed to Mr Willis’ affidavit were various references to the proposal as being a proposal to clear 1,402 hectares.

85    Mr Willis gave some further evidence about how Mr Spencer’s proposed land clearing was assessed and stated “it is my understanding that Mr Spencer’s application to clear received a red light since he proposed to clear a large area of land and the area he wanted to clear contained vegetation that was significant on the local, regional and landscape scale.” He further deposed that the proposal “red lighted at the biometric assessment stage and the threatened species stage. Carbon emissions or greenhouse issues did not factor into those assessments, nor did it factor into the assessment process generally.” Mr Willis described and annexed various documents relating to the site visit and assessment, and a letter he prepared to Mr Spencer dated 6 March 2007 which advised Mr Spencer the proposal could not be approved, and provided further information about the Farmers Exit Assistance Program. That letter is described further below, in my findings of fact about the inquiries and assessments about vegetation clearance that took place.

86    In cross-examination, Mr Spencer asked Mr Willis some general questions regarding his impressions of Saarahnlee. After prompting from the Court, Mr Spencer also cross-examined Mr Willis about how the calculation of the size of area proposed to be cleared was performed. Mr Willis gave evidence that was “not up to us to decide, that was up to the land holder to agree to, and you had agreed to that on the day.” Based on that indication from Mr Spencer, he deposed, a figure was calculated using various mapping techniques.

87    I found Mr Willis to be a reliable witness.

John Dyson (State)

88    Mr Dyson was called to give evidence by the State. Mr Dyson, from approximately 1998 to 2001, was the Resource Planning Manager at the NSW Department of Land and Water Conservation, where his role included administering and assessing land clearing applications. Mr Dyson also attended a pre-application site inspection of Saarahnlee, on 10 September 1998. He described the purpose of that visit as being for Mr Spencer to provide information about proposed land clearing and discuss his proposal to clear vegetation to undertake a number of agricultural projects.

89    His evidence was one of the pieces of evidence upon which the State relied to establish that Mr Spencer had been told on several occasions that he should lodge applications to clear smaller parcels of land, which might have better prospects of success. I do not consider this evidence to be relevant to any findings I need to make in this proceeding.

Subpoenaed Witnesses

Charles Armstrong

90    Mr Armstrong was subpoenaed by Mr Spencer to give evidence about the views of the NSW Farmers’ Association. Mr Armstrong is a farmer with a longstanding history of some 25 to 30 years’ involvement in the NSW Farmers’ Association, including holding at various times the offices of president, vice president and treasurer of the association. Mr Armstrong’s opinion evidence went to the impact that both the Native Vegetation Conservation Act 1997 following the State Environmental Planning Policy 46 and the Native Vegetation Act 2003 had on farmers in New South Wales, from the viewpoint of the NSW Farmers’ Association. It was Mr Armstrong’s evidence that the operation of farms, the value of farms and also the investment return on farms were impacted by the operation of both the 1997 and 2003 Acts. In particular, Mr Armstrong deposed to the views of the NSW Farmers’ Association regarding a report by the Commonwealth Department of Agriculture’s Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES):

a body of that stature in Canberra was able to put together the sorts of things that we were really – we, as farmers, were really concerned about, and my recollection of – of that, again, as a – really an ultimately summary that there was something like $1 billion of both lost production and lost opportunity was the – the two real factors that ABARES looked at and established as a result of the native vegetation. So in effect it was costing primary industry or costing farmers, or turn it round the other way, that farmers were in fact contributing to the whole issue of – of carbon up to an extent of about a billion dollars – that was ABARES’ figure – and we were footing the bill.

91    Mr Armstrong gave evidence that from the viewpoint of farmers, the “only reason” Australia was able to meet its targets under the Kyoto Protocol was because of the requirement to end broadscale clearing, and the carbon offsets that would thereby be generated. In this sense he corroborated Mr Spencer’s theories underlying this proceeding. I allowed Mr Armstrong to give this evidence on the basis that his position with the NSW Farmers’ Association enabled him to give an account of the perspectives of that organisation at the relevant times, but his evidence has not been relevant to any of the factual findings I have made.

Malcolm Peters

92    Mr Peters was also subpoenaed by Mr Spencer to give evidence in the proceeding as to the views of the NSW Farmers’ Association. Mr Peters stated his occupation to be a cattle farmer, and he held positions on a number of representative farming bodies. Mr Peters was the president of the NSW Farmers’ Association from 2002 to 2005 and also held the position of Director of the National Farmers’ Federation during that time.

93    In his evidence, Mr Peters described how the NSW Farmers’ Association lobbied the Commonwealth Government on the impact of native vegetation laws on farmers. In evidence before me was correspondence sent by Mr Peters in March 2002 in his capacity as president to the Prime Minister, Deputy Prime Minister and various ministers as part of those lobbying efforts.

94    Mr Peters deposed that in a subsequent meeting, in response to that letter, he was advised by the then Deputy Prime Minister, John Anderson, that the introduction of the Native Vegetation Conservation Act 1997 was a unilateral decision of the NSW Government. Mr Peters stated that the NSW Farmers’ Association did not accept that. In the Association’s view, the Federal Government had influenced the NSW Government to introduce the legislation and the later reforms. Mr Peters gave some evidence about the Native Vegetation Reform Implementation Group, which was made up of delegates from both the agriculture industry (including the NSW Farmers’ Association) and environment organisations and in 2003 provided input to the NSW Government on the proposed reforms to the native vegetation legislation. He gave evidence that the Native Vegetation Act 2003 as ultimately enacted did not reflect the recommendations in reports produced by the Sinclair Group, nor by the Wentworth Group. In cross-examination, Mr Peters conceded that some recommendations by the farmers’ representatives as reflected in the Sinclair Group report were successfully reflected in amendments to the legislation, although “[w]e won on a bit and the environmental groups won most of it”. Mr Peters gave evidence that the NSW Farmers’ Association was disappointed by the outcome and that in its view only a token amount of money was made available to compensate farmers affected by the legislation.

95    Like Mr Armstrong’s evidence, Mr Peters’ evidence – while corroborative of the position Mr Spencer sought to put – did not assist me in making any of the factual findings I needed to make, although the evidence of both Mr Armstrong and Mr Peters provided some context for farmers’ perspectives at the time of these reforms, balancing the perspectives of government which were apparent from the documentary evidence.

Dr David Kemp

96    Dr Kemp was the former federal Minister for the Environment and Heritage from 2001 to 2004 (being a period that covered, in particular, the introduction of the Native Vegetation Act 2003 in New South Wales) and, by way of subpoena, was to be ordered to attend to give evidence on 1 December 2014. In particular, as set out in my reasons for granting leave for the issuing of subpoenas, I considered there was a reasonable prospect Dr Kemp may be able to give relevant evidence about the existence or non-existence of the alleged informal arrangements: Spencer v Commonwealth [2014] FCA 1234, at [45]. As events unfolded, that subpoena was ultimately set aside and orders made in its place compelling Dr Kemp to attend. I need not recite those events in these reasons, suffice to say the process of having Dr Kemp, a former Minister of the Commonwealth, appear to give evidence after the Court had made a decision that he should be required to do so was more circuitous and complicated than it should have been, through no fault of Mr Spencer’s.

97    Dr Kemp gave evidence that the Commonwealth Government was concerned to reduce emissions in order to meet its Kyoto Protocol targets, that to encourage that reduction the Commonwealth was keen to see broadscale land clearing occurring in Queensland and New South Wales (the principal emitters of greenhouse gases from land clearing in Australia) reduced or stopped, and that that clear Commonwealth objective was communicated to those States. He stated that the Commonwealth was concerned by the lack of effective action in New South Wales at the time and was seeking reform of the way in which the NSW Government managed vegetation clearance, including by way of Commonwealth programs seeking to influence the rate and character of vegetation clearing. He gave evidence that the Native Vegetation Act 2003 was a matter for New South Wales, and that the Commonwealth’s only real concern with the NSW legislation was that it did not prevent the Commonwealth pursuing its strategies and that New South Wales was prepared to cooperate with the Commonwealth in pursuit of those strategies. He stated that compensation was a matter for the States, and that the Commonwealth made a clear distinction between structural adjustment assistance, such as might be provided to assist with resettlement, and compensation to affected individuals. In response to the suggestion put to him in cross-examination that there was an informal agreement or arrangement between the Commonwealth and New South Wales made, or extended or amended, around 2003 to acquire Mr Spencer’s property, Dr Kemp gave evidence that all the arrangements involving payment between New South Wales and the Commonwealth were done in writing, and that no informal arrangements existed in this context. He also gave evidence that there was no intention to acquire Mr Spencer’s property other than on just terms.

98    Once he did appear, Dr Kemp was a helpful, frank and cooperative witness whose evidence I found reliable.

Bernard Sullivan

99    Mr Sullivan is the valuer who was retained by the Nature Conservation Trust on behalf of the State to conduct a valuation of Saarahnlee in 2007. Mr Sullivan attended court on 3 December 2014, in compliance with the subpoena addressed to him, issued at Mr Spencer’s request. That afternoon, shortly before Mr Sullivan was due to be called, Mr Spencer advised the Court that he did not intend to call Mr Sullivan to give evidence as Mr Spencer had been proceeding on a misunderstanding about which of Mr Connolly’s reports would be relied on by the State. Mr Spencer then made an oral application for a one week adjournment for the hearing of expert evidence as to valuation, on the basis that his valuation expert Mr Davies had not reviewed the recent report by Mr Connolly. Counsel for the State, opposing the adjournment, submitted the Connolly report relied upon by the State had been filed and served in September 2014, albeit that service was upon Mr Spencer’s then lawyers, and had further been included in the court book filed and served on Mr Spencer on 20 November 2014. The State further noted the significant arrangements that had been made by Mr Sullivan and Mr Connolly to attend court, having each travelled some four to five hours from regional New South Wales. I accepted those submissions and refused Mr Spencer’s application for adjournment. In doing so, I noted that Mr Davies and Mr Connolly were likely to have had the opportunity that morning to confer as to their views, and I indicated that if necessary further accommodations could be made if I formed the view while evidence was being given that Mr Davies was not in a position to assist the Court. In fact, this is what occurred and Mr Davies was given an overnight adjournment to collect his thoughts before being cross-examined.

100    Given that he had travelled a long way unnecessarily, I determined that Mr Sullivan should be compensated for his expenses, and he gave evidence only as to that issue, following which an order for his expenses was made.

Expert Witnesses

David Evans, carbon expert (applicant)

101    Dr Evans is an engineer who worked as a contractor for the Australian Greenhouse Office from 1999 to 2005 and the Department of Climate Change in 2010 in the area of carbon accounting, and was one of two people who developed the FullCam system used by the Commonwealth in carbon accounting. Dr Evans was called by Mr Spencer to give expert evidence about the way in which the Commonwealth monitored land clearing and the carbon accounting associated with land clearing. Dr Evans deposed that FullCAM simulation involved scanning satellite imaging of 25 m by 25 m plots of land across Australia to monitor land clearing and revegetation. Where there was a change in status in terms of clearing and revegetation, the FullCAM system was used to estimate the carbon in the vegetation, debris and so forth attributable to that 25 m by 25 m plot. In his expert report, Dr Evans gave opinion evidence as to the amount of carbon dioxide that would be emitted by clearing for pasture and grazing all the trees on Mr Spencer’s land, and the estimated values of those tonnes of emissions calculated according to a range of alternative carbon values, namely various Australian carbon tax rates, historical world carbon prices and Australian Treasury projected carbon prices.

102    The oral evidence given by Dr Evans concurrently with Mr Sturgiss is described below.

Robert Sturgiss, carbon expert (Commonwealth and State)

103    Mr Sturgiss was, at the time of trial, the Assistant Secretary, National Inventory Systems and International Reporting Branch of the Commonwealth Department of the Environment. His curriculum vitae shows a long involvement within the federal bureaucracy with issues of climate change and greenhouse gas emissions. He described, in short compass, the conclusion of the Kyoto Protocol and Australia’s ratification of it, as well as the measures then taken by Australia to comply with the international obligations it had assumed. He also gave some evidence, and expressed some opinions, about the way in which Australia measures greenhouse gas emissions for, amongst other things, the purpose of assessing its compliance with its obligations under the Protocol. He also gave some opinion evidence about how emissions which may have flowed from a “clearing event” on Mr Spencer’s property would, or could, have affected the “inventory” kept by Australia in relation to meeting the emissions targets to which it had committed under the Protocol. Finally, he gave some evidence about the international pricing of carbon. He was a clear and capable witness with an impressive command of his subject matter and where his evidence is relevant to my findings, I have accepted it.

104    At trial, Dr Evans and Mr Sturgiss gave evidence concurrently. In respect of the areas in which the experts agreed, Mr Sturgiss first gave agreed evidence in respect of Australia’s obligations under the Kyoto Protocol, including that Australia’s target under the Protocol was to limit, in the period 2008 to 2012, emissions to 108% of its emissions in 1990. He described the different ways in which emissions arose, including from coal combustion, agricultural processes related to livestock management and land clearing and reforestation. In respect of land clearing, he noted that the breakdown of carbon in soil may take a number of years and as such emissions estimated to have occurred in 2008 may in fact stem from activity some years earlier. Dr Evans gave evidence agreed between the experts describing the nature and methodology of the FullCAM model, and Mr Sturgiss added that the greenhouse gas inventory functioned as an account of actual emissions not accounting for the abatement of emissions that may otherwise have occurred. Dr Evans then gave further evidence describing broadly how he had used the FullCAM model to derive an estimated carbon value, including by selecting for variables such as rainfall, temperature and forest species. Mr Sturgiss agreed the results thus obtained seemed likely for the kind of simulation performed.

105    The experts then turned to what the Commonwealth had suggested may be their areas of disagreement, being the appropriate date or dates to use in identifying carbon prices, and the appropriate market or markets from which the carbon price should be taken in a valuation exercise. Dr Evans gave evidence that carbon prices vary widely by date and by market, and for that reason a variety of dates had been used in his report. He noted, for example, that the price of carbon permits had now collapsed to less than $1 per tonne. Mr Sturgiss gave evidence that the global carbon market was a market for the purchase of instruments giving a carbon credit worth one tonne of carbon dioxide and reflecting an abatement action elsewhere in the system. He agreed that the current price in the global market was very low, at less than $1 per tonne, and gave evidence that the tracking system under the Kyoto Protocol was set up in such a way that it is still possible for a party or a government to purchase permits from the international markets now to acquit against their emissions targets for the period 2008 to 2012. He gave evidence that Australia had not yet completed the final review process for its national carbon inventory report, and that from that moment parties have an additional three months in which to acquire an international permit to meet their obligations for the 2008 to 2012 commitment period. Dr Evans agreed with that evidence.

106    Mr Sturgiss gave evidence that Australia had met its Kyoto Protocol targets for the 2008 to 2012 period, subject to the completion of the independent final review process expected to occur by August 2015. Dr Evans agreed with the proposition put by counsel for the Commonwealth that, subject to any issues identified in the final review, even if the entirety of Mr Spencer’s land had been cleared in 2000 there would have been no occasion for Australia to purchase carbon credits in respect of the 2008 to 2012 period. He also agreed that, if the commitment had not been met, the Commonwealth would be able to purchase credits in the market at any time up to August 2015 at the prevailing market rate, which was now very low.

107    Finally, Dr Evans gave further evidence regarding the approach he had adopted in using the FullCAM model and its possible limitations. Mr Sturgiss gave additional evidence that, in the event Australia had not met its targets, it also had the option of deferring its commitment or the gap to a future period, albeit with a 30% penalty incurred. In cross-examination by Mr Spencer, Mr Sturgiss also gave evidence the emissions from land clearing in Australia had fallen from 131 million tonnes in 1990 to an average of around 45 to 50 million tonnes per year in the 2008 to 2012 commitment period and agreed that other energy emissions in that period had increased in a manner apparently offset by the decrease in land clearing. Commenting on that evidence, Dr Evans stated that the emissions reduced by virtue of the ban on land clearing were taken up by other sectors of society, such that the burden of meeting the targets might be said to have fallen mainly on those prevented from clearing land.

Alan Moran, carbon expert (applicant): evidence given separately

108    Dr Moran was called as an expert witness by Mr Spencer and provided an interim expert report at an early stage of these proceedings on considerations affecting Australia’s graziers with substantial areas of native vegetation arising from Australia’s ratification of the Kyoto Protocol. At the time of providing the interim report Dr Moran held the position of Director, Deregulation at the Institute of Public Affairs and had previously been a senior official in the Productivity Commission. For the reasons set out in my judgment on admissibility, a subsequent report by Dr Moran was ruled to be inadmissible: Spencer v Commonwealth [2014] FCA 1288, at [51].

109    Dr Moran’s interim report, dated 9 April 2008, stated the opinion that Australia would not meet its Kyoto Protocol targets without including land clearing and was likely to miss its target even if land clearing was included. Dr Moran expressed the view that the proposition that land clearing regulations were made in order to meet Australia’s commitments in its national greenhouse accounts was clearly accurate, and that if the Commonwealth did not have the benefit of reduced emissions from preventing land clearing, it would face a heavy financial burden associated with meeting its targets. At trial, Dr Moran was cross-examined briefly by the Commonwealth and gave evidence that, as it turned out, Australia did meet its Kyoto Protocol commitments.

110    I have not had to consider any contentious aspects of Dr Moran’s evidence in any of the findings I have made in these reasons.

Colin Davies, valuation expert (applicant)

111    Mr Davies is a valuer, who was called as a witness by Mr Spencer. Mr Davies was instructed to assess the market value of Saarahnlee as at 18 March 2008, for the purposes of the NSW Farmers Exit Assistance Program, which it was common ground was at least in part a response to the recognised impact of the prohibitions on native vegetation clearance. Mr Davies carried out four inspections of the property for the purposes of his report, although he noted (at p 4) that a complete inspection of the property was not possible because many access tracks were obstructed by fallen timber, and because of the “density of timber”. Mr Davies’ report set out the following values for Saarahnlee: $1 million in respect of the freehold interest, $2 million in respect of leaseholders’ improvements, $4,922,000 in respect of timber treatment and $1,129,450 in respect of pasture, water and fencing. His report set out the methodology by which those values were derived, including by reference to recent sales results achieved for nearby properties, as well as describing the land details, its location and its improvements.

112    Mr Davies appeared at trial on 3 December 2014 in order, as had been proposed, to give evidence concurrently with Mr Connolly, the valuation expert for the State. As events unfolded, that did not occur. Consistent with what Mr Spencer, in seeking an adjournment on 3 December, had submitted (as described above in relation to Mr Sullivan), Mr Davies stated that he had not read or considered the report of Mr Connolly sought to be relied on by the State, beyond discussing a particular section in conference with Mr Connolly that day. In any event, by that time, Mr Spencer had also indicated that he did not propose to cross-examine Mr Connolly. As such, I formed the view and counsel for the State agreed there was little point in hearing evidence concurrently.

113    Mr Davies was cross-examined as to the contents and methodology of his report, on the basis that if required to comment on Mr Connolly’s report in a way that he did not feel equipped to do, he would be afforded time to review the report overnight and the opportunity to answer those questions the following day. Mr Davies gave evidence that, although the sum total of the various values set out for Saarahnlee was just over $9 million, it was not in any way his view that Saarahnlee had a market value of $9 million. In particular, he also gave evidence that in valuing the improvements, he had sought to assess their value to the owner, as distinct from their value to the market, with a view to how they would be valued by Mr Spencer if he were to sell. Similarly, he accepted that the value of what he called “timber treatment” or clearing could not be assessed readily on a market basis, because it was hard to find comparable sales. He conceded that it was doubtful whether the quote he had used as a basis for estimating the cost of clearing was a good proxy. He accepted he did not seek to assess whether the timber treatment added to the market value of the property. He accepted that no economically rational farmer would seek to clear Saarahnlee, as the cost of doing so far outweighed the value it would add, but he contended that there may be benefits in increased long-term productivity of the land. He also gave evidence that, in his instructions from Mr Spencer, it was put to him that Mr Spencer had a property affected by the native vegetation clearance laws that he did not wish to sell. He appeared to build Mr Spencer’s reluctance into his approach to his valuation.

114    After the opportunity to review Mr Connolly’s report overnight, Mr Davies gave evidence the next day commenting on that report. He gave evidence that he had approached his report taking the highest and best use of the land, which he viewed as being that all of the property could be used for agriculture and specifically for grazing. He accepted that, in contrast, Mr Connolly had valued some land as grazing land and other timbered land at a different value.

115    Mr Davies’ evidence was problematic. He appeared genuinely willing to assist the Court and I did not find him evasive. However, his evidence was confusing, in that when pressed he was quite unable to explain in a rational way how he had reached the figures he had put in his report. The explanations he sought to give by reference to the value of improvements were not rational, and there was never any persuasive or logical explanation for how he could reach a value of over $9 million for a property that two other qualified valuers had placed at between $2 million and $2.5 million.

Robert Connolly, valuation expert (State)

116    Mr Connolly was called to give valuation evidence by the State. Mr Connolly had previously inspected Saarahnlee for the purpose of providing a valuation report for the defendants in the NSW Supreme Court Proceedings No 30002 of 2008, Spencer v NSW Minister for Climate Change, Environment and Water and Nature Conservation Trust of New South Wales (see Spencer v NSW Minister for Climate Change, Environment and Water [2008] NSWSC 1059), in which he valued the property as at 30 August 2007 at $2.36 million. A copy of that report dated 7 May 2008 was exhibited to Mr Connolly’s affidavit in this proceeding. Mr Connolly had inspected the property in 2008 and inspected it again on 11 August 2014, with permission from the new owners (apart from Lot 50, which was inspected from its boundary with Lot 47).

117    Mr Connolly was subsequently instructed to provide a further opinion as to the market value of the property as at 30 August 2007. He affirmed the figure of $2.36 million. Mr Connolly’s instructions included a copy of Mr Spencer’s affidavit setting out various business projects including trout, wool and sheep genetics, water bottling, firewood, eucalyptus oil distillation, the carbon sink project and wagyu cattle. In Mr Connolly’s opinion, those potential projects did not add any extra value to the land.

118    Mr Connolly was also instructed to consider and comment on Mr Davies’ report, and gave evidence that the basis of the report was flawed and its methodology inappropriate. Although he agreed with Mr Davies’ sales evidence, Mr Connolly considered that the property only had about half the 594 hectares of cleared pasture country set out in Mr Davies’ report, the balance of the 594 hectares being uncleared natural timber and regrowth. He also considered the dry sheep equivalent value used to estimate the productive capacity of that land had been overestimated. Mr Connolly expressed the view it would be uneconomic fully to clear bushland as the cost of clearing would exceed the cleared value of the pasture land, and as such, no value should be attributed to what Mr Davies called “timber treatment” (or, clearing).

119    He also gave evidence that none of the Native Vegetation Conservation Act 1997, the Native Vegetation Act 2003 and the Native Vegetation Regulation 2005 had any adverse effect on the market value of Saarahnlee.

120    Despite a clear invitation from the Court, Mr Spencer declined to cross-examine Mr Connolly.

121    Mr Connolly’s criticisms of Mr Davies’ valuation were cogent, and I found him a reliable witness.

Stuart Smith, mapping expert (State)

122    Mr Smith is a senior scientist working in remote sensing and analysis at the NSW Office of Environment and Heritage. He was called to give evidence as a mapping expert by the State, the purpose being to verify how much of Saarahnlee had been under clearing controls prior to 1997. Mr Smith gave evidence that approximately 3,213 hectares of Saarahnlee were considered to be protected land, and that the remaining 1,915 hectares were non-protected land. Those figures were calculated using a digital process known as spatial referencing or georeferencing from points on maps. Copies of spatially referenced maps of Saarahnlee were exhibited to Mr Smith’s affidavit, including a map with markings demarcating protected land. Mr Spencer took up with Mr Smith the correct way to calculate the measurement of hectares on steeply sloping land (an issue to which Mr Spencer returned at several points in the trial, but which in my opinion is not relevant to any of the matters I have to decide), but otherwise did not challenge his evidence. I accept Mr Smith’s calculations.

Steen Stavnsbo, wind farm expert (applicant)

123    Mr Stavnsbo is a wind farm consultant who has known Mr Spencer for some ten years. In his affidavit he deposed that he attended Saarahnlee on several occasions between approximately 2003 and 2008, in connection to a request from Mr Spencer for a feasibility study into harnessing the wind energy on his property. Mr Stavnsbo deposed that, in his view, the land was suitable for wind farm usage and exhibited to his affidavit documents including the feasibility report produced by the company NEG Micon (Australia) in November 2003 and what was described as a preliminary development agreement between ANZ Infrastructure Services Limited, EHN (Oceania) Pty Limited and Mr Spencer. That document bears the title “Heads of Agreement” and the date 20 May 2004. It was accepted by Mr Spencer during his cross-examination that no wind farm development agreement was ultimately concluded, although “an access agreement, the heads of agreement” was concluded. Once that concession was made, the somewhat novel process which might otherwise have been implemented to allow Mr Stavnsbo to give evidence was not required.

124    Mr Stavnsbo also deposed that the benefits usually provided to a landowner providing wind turbine positions in respect of a wind farm project generally took the form of either a form of land rental payment (a specific flat fee per turbine) or a percentage of wind farm revenues. He deposed that between 2% to 5% of gross revenues was not uncommon in his experience, and stated the preliminary agreement annexed to his affidavit provided for revenue at 2.65% of gross revenues. Mr Stavnsbo estimated that assuming a particular type and number of turbines were installed at Saarahnlee, gross revenues would accrue to Mr Spencer of approximately $700,000 per annum.

125    Mr Stavnsbo resides in Aarhus, Denmark. Mr Spencer claimed he could not afford to bring Mr Stavnsbo to Australia and that during the trial Mr Stavnsbo would not be in Denmark, but elsewhere. He suggested using Skype. Consideration was given to this possibility and inquiries were made with Court officials to confirm it was possible. On the fifth day of trial, the Commonwealth conceded that no cross-examination was required provided Mr Stavnsbo’s references to the preliminary wind farm development agreement were not read as evidence of the fact of such an agreement being finalised. Accordingly Mr Stavnsbo was not required for cross-examination and his affidavit was read. There are no controversial aspects of Mr Stavnsbo’s evidence which have informed my findings.

MATTERS WHICH DO NOT NEED TO BE DECIDED

Mr Spencer’s claim under s 61 of the Constitution

126    Little attention was paid to this aspect of the FASOC by the respondents, and indeed it might be said this aspect of Mr Spencer’s claim was faint.

127    In one set of submissions relied on by Mr Spencer, those filed on his behalf in the High Court special leave application, the following submissions were made:

In R v Hughes Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ accepted the statement of Mason CJ in R v Duncan; Ex parte Australian Iron and Steel Pty Ltd that Executive power under s 61 of the Constitution extends to the entry of government agreements between the Commonwealth and State on matters of joint interest so long as the end to be achieved and the measures by which it is to be achieved are consistent with, and do not contravene the Constitution. It is submitted that this means that intergovernmental agreements are subject to the Constitutional guarantee in s 51(xxxi).

The question of whether an exercise of pure Executive authority by the Commonwealth, such as an exercise of prerogative power, is subject to s 51(xxxi) has never been the subject of full argument in this Court. It is submitted that the issue does not arise in this case either.

(Citations omitted.)

128    The submissions filed by the NSW Farmers’ Association, intervening in the High Court and on which Mr Spencer relied in this proceeding, proceed only on a characterisation of the two federal laws in their operation upon the intergovernmental agreements and in their real and practical operation, but without reference to s 61.

129    Despite the pleading in para [48] of the FASOC, in Mr Spencer’s final submissions there is nothing to develop this allegation independently of the challenge to the two federal laws, and the intergovernmental agreements as the consequences of the exercises of power under s 96.

130    It is therefore not surprising that the respondents’ final submissions do not address any arguments about s 61 as a freestanding source of power for the intergovernmental agreements, and whether it is itself conditioned by s 51(xxxi).

131    Accordingly I do not propose to say anything further about s 61.

Allegations of unjust enrichment

132    This term can be found in several places in various submissions made by and on behalf of Mr Spencer. There was no development of what was meant by it in the context of the claims in this proceeding, and how a private right of this kind was said to arise. I do not propose to consider it further.

Mr Spencer’s claims that the NSW native vegetation laws are invalid

133    In the submissions made on his behalf in support of the application for special leave to appeal to the High Court in June 2010, submissions were made concerning the invalidity of the two NSW native vegetation laws, based on passages from the judgment of Heydon J in ICM [2009] HCA 51; 240 CLR 140 (at [249]) and a number of earlier passages said to support that approach. The argument concerned the effect of covering cl 5 and s 106 of the Constitution. It was said, as I understand the reliance on these passages, that if state legislation was properly seen as part of a scheme “taken in concert to achieve a goal which depended on a contravention by the Commonwealth of s 51(xxxi)”, to use the language of Heydon J in ICM at [249], then that state law would be invalidated by s 51(xxxi).

134    Although this is not said in so many words, as I understand the submissions, it is to try to extend what was held in PJ Magennis Pty Ltd v Commonwealth [1949] HCA 66; 80 CLR 382 a step further. That is, rather than a scheme involving federal legislation, intergovernmental agreements and consequent state legislation resulting in invalid federal legislation, but intergovernmental agreements and state legislation that would be “inoperative”, this contention was designed to result in the state legislation also being held invalid.

135    Given my conclusions that the two federal laws are not properly characterised as laws with respect to the acquisition of property, and that those laws, taken together with the intergovernmental agreements and the state legislation do not effect any acquisition of Mr Spencer’s property, it is unnecessary to venture into the territory of covering cl 5 and s 106.

FACTUAL FINDINGS CONCERNING MR SPENCER’S LAND

General nature of the property

136    The following summary of Mr Spencer’s land is taken from the closing submissions of the State which I accept as an accurate summary of the evidence, together with the evidence set out in the report of Mr Connolly, which I accept. The State’s submissions go into considerably more detail than the findings I consider necessary for the purposes of resolving the issues between the parties but provided helpful contextual material which has assisted my understanding of the issues.

137    What is called “Saarahnlee” consists of 14 parcels of land in the area known as Shannons Flat, about 40 kilometres north-west of Cooma in New South Wales. Mr Spencer was the registered proprietor of most of the land, and Mrs Anne Spencer was for some time the registered proprietor of one parcel. The evidence reveals that the first purchase (of Lot 47) occurred in November 1980 by Mr Spencer, there was transfer of the Crown lease over Lot 48 to Mrs Spencer in May 1981, the smaller freehold parcels were purchased by Mr Spencer in November 1988 and the Crown lease over Lot 50 was transferred to Mr Spencer in July 1991. In November 1997 as a result of a family law settlement, Mrs Spencer transferred her interests in the perpetual Crown lease over Lot 48 to Mr Spencer. In or around October 2003, Mr Spencer borrowed a significant sum from his relatives, Mrs and Mr Bamber, secured by way of a registered mortgage over all of the freehold land and over Lots 47 and 48 (that is, all of Saarahnlee except Lot 50).

138    The land remained under his ownership until foreclosure by the mortgagees (the Bambers) of all the freehold land, and of Lot 47 and Lot 48 in July 2010.

139    The perpetual Crown lease over Lot 50 appears on the evidence before me to continue to be held by Mr Spencer, at least as at June 2014. This fact did not feature prominently in the evidence, and Lot 50 was generally discussed as if it also had passed out of Mr Spencer’s ownership. However the pleadings and evidence do not support this assumption (if that was what it was):

(1)    The State’s Amended Defence dated 9 September 2014 and filed 11 September 2014 states at [1(e)]: “the applicant is the holder of perpetual Crown lease 1929/12 Cooma in Lot 50 in Deposited Plan 750529, and has been since 13 June 1991, and the registered proprietor of the same since 24 July 1991.”

(2)    The Commonwealth’s Second Further Amended Defence dated and filed 3 October 2014 likewise states at [1.3]: “the applicant is the holder of perpetual Crown lease 1929/12 Cooma in Lot 50 in Deposited Plan 750529, and has been since 13 June 1991, and the registered proprietor of the same since 24 July 1991.”

(3)    A title search in evidence which post-dates the mortgagee sale to the Bambers shows Mr Spencer was the registered proprietor. An extract from the NSW Trade and Investment Land Revenue System Financial Events, Acct 107218 Perpetual Lease (being the lease corresponding to Lot 50) shows Mr Spencer as the current holder of this perpetual lease as at 10 June 2014.

(4)    At various points in oral submissions, senior counsel for the State excluded Lot 50 from descriptions he gave about what Mr Spencer had lost in terms of his property rights.

140    Nothing was said in the respondents’ submissions about this matter, nor did Mr Spencer make any submissions about it. If Mr Spencer had otherwise enjoyed some success in this proceeding, the ownership of Lot 50 would have been material. Given the findings I have made, I go no further than to describe what I understand to be the state of the evidence and the pleadings.

141    The total area of the property is over 5,000 hectares. Mr Connolly in his report states that the “Total Area (more or less)” is 5,205 hectares, whereas Mr Sullivan put the figure at 5,137 hectares. Mr Davies’ estimate was very close to that of Mr Connolly. The exact area is not material to the issues to be determined. On any view, it is a large property.

142    The smaller parcels are freehold as ordinarily understood, but the three largest parcels (Lots 47, 48 and 50) are not. One of those – Lot 47 – is “conditional purchase” land, which is a form of restricted freehold and remains subject under s 6 of the Crown Lands (Continued Tenures) Act 1989 (NSW) to recordings in the folio of the Register created in respect of the holding.

143    Lot 48 and Lot 50 were at the relevant dates Crown leasehold. Lot 47 and Lot 48 are by far the biggest parcels – at 2,191 hectares and 1,680 hectares respectively, according to Mr Connolly. Lot 50 is the next biggest, at 740 hectares according to Mr Connolly. The remaining lots vary from just over 16 hectares to just over 145 hectares.

144    Mr Connolly’s description of the various parts of the property (at pp 11-12 of his report), which I accept and adopt, is as follows:

40.     The property is located about 38 kilometres north-west of Cooma at the northern end of Callemondah Road which terminates at the property gate. In the north-western part of the property there are about 300 hectares of cleared pasture country, suitable for sheep and cattle grazing. This land is generally undulating and is bisected by Flynns Creek from which the land rises to the west and to the east, interspersed with rocky knolls of granite and green timber.

41.     The timbered freehold land (the majority of which is on Lot 47) ranges from undulating slopes to steeper hills, interspersed with gullies and small creeks and largely timbered with reasonably mature regrowth. There are small clearings scattered through the area along creek and gully lines. The northern boundaries of Lots 47 and 55 adjoin the 106,000 hectare Namadgi National Park along the ACT border. The north-western boundary of Lot 50 also adjoins the park.

42.     The leasehold land is a mixture of regrowth and natural bush interspersed with small pockets of clearing and thinned green timber, plus some 'fingers' of cleared pasture slopes projecting into the bush along the western boundary of Lot 48 towards the south-west comer.

43.     My inquiries indicate that the land was within a general rural zone at the relevant dates in the Cooma-Monaro LGA.

44.     From my investigations and inspections of the property my general impressions are:

(i)     The homestead on the property is a feature. It has been designed and constructed in harmony with its high country environment. Its main features are a high level of insulation and thermal mass to suit the weather conditions, large bedrooms all with individual bathrooms, a large multi-purpose living room with two fireplaces and an adjacent fully fitted out kitchen plus a separate formal lounge room. Other features include a hydronic heating system and double glazing to some elevations. There are three unfinished sheds around the homestead which detract from its presentation however their intended purpose to form a protective courtyard is in keeping with the style of the development.

(ii)    The undulating pasture country to the west and northwest of the homestead and the small lake below the house provide an attractive landscape for rural living. The fishing lodge just below the house which looks across the lake is also a feature.

(iii)     Much of the hilly bush country on the freehold and leasehold blocks does not have the aesthetic appeal of natural bushland because it is regrowth.

(iv)     The location is at a relatively high sub-alpine elevation (ranging from 700 to 1,500 metres but the majority at 1,100 to 1,500 metres) with very cold winters. Consequently the property does not have the broader market appeal of more moderate farming climates.

(v)     The steep to mountainous country along the eastern side of the property includes areas of natural bushland with Mountain Ash and Alpine Ash (logged in the past). It is a rugged but scenic landscape of timbered ridges and valleys with a 700 metre frontage to the Murrumbidgee River in the north-eastern corner of Lot 50.

145    Mr Davies’ descriptions do not seem to me to be at variance with those of Mr Connolly. Putting to one side for the moment the debate between the parties, and the experts, about the valuation of Saarahnlee, Mr Spencer did not make any specific criticisms of Mr Connolly’s description of the property, except perhaps for general disagreement with some of the comments made by Mr Connolly about the property’s “market appeal”. It is also true to say that at various points in his evidence and submissions, Mr Spencer highlighted certain features of certain parts of Saarahnlee and I will return to those where necessary.

146    In evidence, Mr Spencer accepted that more than 50% of Saarahnlee was at all times covered with native vegetation that had never been clear felled and had been maintained as forest. He also accepted that as at 1990, only 346 hectares had been fully cleared and could be described as improved. He maintained as part of his case, however, that in terms of use of the remainder of the land for grazing, it was possible to use quite heavily timbered land, as the sheep needed shelter as well as pasture. Although Mr Spencer appeared to see some disadvantage to his interests in this proceeding by admitting how much of his land was covered in timber and native vegetation, it was of course the extensive nature of this coverage which meant that the vegetation clearance regimes had such a drastic effect on his property.

History of the land

147    Part of the evidence adduced by Mr Spencer at trial was a report from Mr Porter. Although Mr Porter was not called as a witness, no submissions were made that his report was factually inaccurate, and the Commonwealth relied on his report as containing a description of the history of land use on Saarahnlee. I have found the report a useful source for the history of the use of Saarahnlee. In August 1998, well before this proceeding commenced, Mr Porter prepared a report entitled “Application for clearing vegetation under the Native Vegetation Conservation Act 1997 and Farm Management Plan for ‘Saarahnlee’ Shannons Flat NSW”. Mr Porter had described the purpose of the report in the following terms:

This document has been prepared firstly to accompany an application for clearing vegetation under the Native Vegetation Conservation Act (1997). Secondly it is to act as a Farm Management Plan that will ensure that “Saarahnlee” is developed and managed in an ecological sustainable manner. This will ensure the long-term productive use of this unique sub-alpine Australian high country property is preserved for future generations.

148    I accept the following extract from Mr Porter’s report as an accurate summary of the history of land use on Saarahnlee in the following terms:

Land use history

•    1919-1960 Lot 47, Lot 48 and Lot 50 were occupied as soldier settlement blocks. In this period Lots 47 and 48 approximately sixty percent of the vegetation was cleared using "ring-barking" methods for both grazing and logging. Lot 50 was subjected to minimal clearing for grazing. There has been substantial regrowth since the initial clearing. There was no pasture improvement program implemented after the clearing.

The main enterprise undertaken by the then owners was the grazing of sheep for wool. Sheep were grazed on unimproved native grasses. Lot 47 carried 1600 wethers and 400 ewes whilst Lot 48 carried 1400 wethers and 300 ewes. Lot 50 carried 400 wethers. In the latter period cattle were introduced in conjunction with the sheep on Lot 47 and Lot 48 each lot carrying approximately 70 head of cattle.

•    1919-1985 The Eucalyptus dives (broad-leaved peppermint) on the property were harvested for the production of Eucalyptus oil up to six distillation sites were used in the production of the oil. The resultant coppiced regrowth from the harvesting is substantive. In this time many roads and tracks were established throughout the property. There still exists a working Eucalyptus oil distillation plant.

•    1930's NSW State Forests carried out extensive logging on the property. This was carried out on the western, central, northern and eastern slopes. The main species logged were Eucalyptus dalrympleana spp. dalrympleana (mountain gum) and larger Eucalyptus pauciflora spp. pauciflora (snow gum or white sally).

As a result of this logging there is an extensive network or roads throughout the property. The roads were constructed to high standards with culverts, creeks piped and logging bridges built. These roads are now subject to erosion and require extensive maintenance. A large number of these roads are built on State Protected Lands. Some of the roads are designated Rural Fire Service fire trails that are required for the prevention and control of wildfire.

•    1980's NSW State Forests carried out extensive logging on the property. This was carried out on the western, central, northern and eastern slopes. The main species logged were Eucalyptus delegatensis (alpine ash) and larger Eucalyptus pauciflora spp. pauciflora (snow gum or white sally). As a result of this logging carried out with little or no environmental considerations the undergrowth and regrowth areas are a tangled mess. This causes both a fire hazard and lessened potential for the future use of the regrowth for agroforestry.

There is an extensive network or roads throughout the property as result of this and previous logging operations. These roads are now subject to erosion and will require extensive maintenance. Some of the roads are designated Rural Fire Service fire trails that are required for the prevention and control of wildfire.

Mr Spencer’s use of the land

149    At trial, and putting the issues of damages to one side, in terms of Mr Spencer’s s 51(xxxi) case, the main focus of the evidence was on events from about the middle of 1998, when Mr Spencer began making inquiries about developing the property and what authority was needed to clear parts of it. I return to that evidence below.

150    Prior to these events, the evidence discloses, and I find, that Mrs Spencer made up to three applications to clear parts of Saarahnlee. One application was made in approximately August 1981, and another two in September 1982. I accept the State’s submissions that there is no evidence to suggest that another, larger clearing application was submitted by Mr Spencer at a later stage in the 1980s, which accords with Mr Spencer’s recollection that he did not submit one. In both cases, the evidence reveals, as the State submitted, that consideration of the applications was affected by the categorisation of portions of Mr Spencer’s land as “protected land” under the Soil Conservation Act 1938 (NSW) and, in relation to parts of Mr Spencer’s land which were not “protected land”, by environmental considerations. This led, on the evidence, to approval being given to clear only parts of the land for which permission was sought, and to the imposition of conditions on clearing.

151    Through most of the 1990s Mr Spencer was working outside Australia, and had businesses in Papua New Guinea. It seems from his evidence that he intended to retire to Saarahnlee, as well as using the property for various projects while he was overseas.

Inquiries and assessments about vegetation clearance

152    The chronology was far from precise in the evidence, but the next event which should be dealt with occurred in approximately the middle of 1998. Mr David Thompson, an officer of the Soil Conservation Service of NSW, made arrangements to visit Saarahnlee. In evidence Mr Spencer accepted that this was a time where he was “testing in my mind” what kinds of projects and what kinds of development he might undertake on the property. Mr Thompson gave Mr Spencer an application form for clearing, as his evidence disclosed he had done for many farmers who sought assistance to understand the regulatory scheme about what they could and could not do on their land.

153    It was, I find, in connection with the ideas Mr Spencer was considering at this time that he commissioned Mr Porter to prepare his report, which is dated August 1998. It is the case, whether or not Mr Spencer intended to proceed along these lines or not, that Mr Porter’s report is based on an assumption that a very large part of the property would be cleared – up to 2,200 hectares. At the start of the report, Mr Porter sets out the following basic aspect with which his report deals:

154    I note on p 15 of the report, Mr Porter describes what vegetation (including trees) will and will not be cleared and contends that activities such as eco-tourism will be possible on the property because “sixty percent” of the vegetation is being retained. Broadly, that is consistent with the figures in the table at the start of his report.

155    A further meeting was held on Saarahnlee on 10 September 1998. This meeting was the subject of evidence from Mr Dyson, who was the principal officer from the NSW Department of Land and Water Conservation in attendance. There were some variations between his recollection of the meeting and that of Mr Spencer, but I do not consider any of those variations are material. I found Mr Dyson to be a reliable witness, whereas, for reasons I have explained above, I found Mr Spencer’s recollections of the detail of events and conversations often to be unreliable, or less reliable than other witnesses’. Mr Dyson’s evidence was that on the farm visit, he and those who accompanied him drove around the farm with Mr Spencer. He indicated to Mr Spencer some parts of the property that he, Mr Dyson, considered contained little remnant native vegetation and could probably be cleared with permission, so that Mr Spencer could undertake some of his projects, such as an orchard. Mr Dyson does not recall any precise figures being mentioned about how much land Mr Spencer wanted to clear, but he did recall it was a large amount. In his affidavit Mr Dyson described, and I accept, that he had a conversation with Mr Spencer on this visit about whether it would be preferable for Mr Spencer to lodge a series of applications to clear native vegetation, each covering a smaller area, explaining to Mr Spencer how this would reduce the detailed studies that were necessary, would make it easier to obtain approval and could demonstrate how Mr Spencer successfully completed one project before asking for permission to clear for another project, which would also enhance his prospects of approval. Mr Dyson gave evidence that Mr Spencer responded to this suggestion to the effect that:

I don’t want to lodge smaller applications. I want approval to clear everything to allow me to proceed with my overall developments.

156    Mr Spencer disputed that he had said anything to this effect, but I am persuaded Mr Dyson’s recollection is accurate. In the end, the size of the area Mr Spencer planned to clear is of marginal relevance, but it is also broadly consistent with what occurred in 2007, those events being more central to the issues in this proceeding.

157    Mr Dyson was adamant, and I accept, that Mr Spencer never formally lodged an application to clear native vegetation on Saarahnlee at this time. In this sense, all these meetings and discussions were mostly information gathering, although as I have observed there is some consistency with what occurred almost a decade later.

158    As the State’s submissions (at [57]-[64]) describe, between approximately 2000 and 2006 Mr Spencer undertook something of an experimental project on Saarahnlee involving ultra-fine merino sheep. To the extent it is necessary, I say more about the sheep project in the part of these reasons dealing with Mr Spencer’s damages claims. The project was unsuccessful – the reasons for this need not be the subject of any findings but I note Mr Spencer’s explanations differ somewhat from those suggested by the State in its final submissions.

159    By 2006, the NSW Government had an exit assistance scheme in place for farmers affected by drought, and a specific exit assistance scheme for those farmers adversely affected by the State’s native vegetation clearance laws.

160    In cross-examination, Mr Spencer admitted that he decided to make an application for exit assistance to “see if the government was sincere in going through with” assisting farmers, and he wanted to “test” the way the scheme operated. He admitted that he “may have accepted” what he thought was a good price but also admitted that it was highly unlikely the Nature Conservation Trust (which was administering the exit assistance scheme) could make him an offer high enough to induce him to sell, because of how valuable Saarahnlee was to him. He went as far as to assert that “I had no intentions of accepting an offer that they would make”. I am inclined to see this is an example of Mr Spencer’s tendency to exaggerate. Looking at his contemporaneous communications with Mr Willis, it seems to me his motives were mixed.

161    Following discussions between Mr Spencer and officers of the Murrumbidgee Catchment Management Authority, on 12 February 2007 Mr Willis from the Murrumbidgee Catchment Management Authority (whom I have described above as one of the State’s witnesses) wrote to Mr Spencer on behalf of the Authority inviting him to indicate the areas he wished to clear. The letter stated:

Following from our recent discussions, please find enclosed copies of relevant maps to consider prior to our site visit on the 19 February 2007.

Could you please consider what your clearing proposal is likely to be in order for the Murrumbidgee CMA to assess the proposal to ascertain whether it may be approved or not. As discussed, if it is not approved then you may be eligible to proceed to the Farmer Exit package that is handled by the Nature Conservation Trust's Nigel Strutt. We will advise more on this upon our visit.

Could you please indicate on the map the area of interest in terms of proposed clearing and the proposed offset areas, being areas that may be retained and managed for their environmental values.

Should you require any further clarification you can contact me at Wagga Wagga on … .

162    Despite that request, Mr Willis deposed, and Mr Spencer did not dispute, that prior to the visit on 19 February 2007 Mr Spencer did not provide any identification of the area he proposed to clear. After some communications between Mr Spencer and Mr Willis, Mr Willis and two other staff members from the Murrumbidgee Catchment Management Authority went to Saarahnlee on 19 February 2007. They drove around the property. Mr Spencer admitted that the officers had explained to him that in order to access the exit assistance program, he had to make an application for the clearing of native vegetation and have it refused. Mr Willis described this as a “red light” although that terminology was not used by Mr Spencer.

163    There was some time spent at trial on the details of conversations which occurred during this visit. In particular whether Mr Spencer said, on being asked what area he wanted to clear, words to the effect “Well I don’t know I just want to access the Farmers Exit Assistance Program”; and whether Mr Spencer agreed with a suggestion from one of the other officers during the visit that lines the officer drew on the map he had with him would represent the area Mr Spencer wished to clear. The map bearing the hatching said to represent what occurred during the visit in terms of an indicative area Mr Spencer wished to clear was produced in evidence through Mr Willis.

164    The hatched area shown on the map as the area which Mr Willis deposed Mr Spencer had agreed was a representation of what he wished to clear was a very large area indeed, approximately 1,402 hectares, including many heavily wooded parts of Saarahnlee. When it was suggested to him in cross-examination that the hatching represented what he had agreed he wanted to clear, Mr Spencer’s evidence was:

But I would not have agreed – if you’re saying it was shown to me – considering how that is part of our best natural land, we would never touch it.

165    The State’s final submissions urged the Court to accept Mr Willis’ account, and conclude that Mr Spencer had intended to make a clearing application that would fail “in order to trigger his access to the [Farmers Exit Assistance Program]”. It submitted Mr Spencer offered no other explanation as to how the map produced by Mr Willis came to exist.

166    Mr Willis produced his working notes from the visit as annexures to his affidavit. He deposed to a method employed when he and other members of his team visited properties for the purposes of assessing whether vegetation clearance would be permitted, or whether a farmer would be able to access the exit assistance program. There is no reason to doubt the reliability of his evidence, aided by these contemporaneous documents. There is no reason to doubt his evidence that the map with the hatched proposed clearing area was completed at the time of the visit, after a conversation with Mr Spencer. In that general sense, I accept Mr Willis’ evidence.

167    I find the areas hatched on the map exhibited to Mr Willis’ affidavit do represent the areas marked on the map during the site visit to Mr Spencer’s property on 19 February 2007. I find the hatched areas were marked as those proposed for clearance. I am not satisfied Mr Spencer positively endorsed these drawings as an accurate reflection of what he proposed to clear. Although he had, as I find elsewhere, various specific plans or projects in mind, he was also testing through the exit assistance process what his property was worth given the native vegetation clearance laws, and trying to see how badly affected he was by those laws.

168    I find that it is likely Mr Spencer paid scant attention to any precise delineation of the areas which were marked down as those he wanted to clear. Mr Spencer considered it unlikely, but not impossible, that depending on that valuation, he might accept the exit assistance package and leave Saarahnlee. It is probable, in my opinion, that Mr Spencer was intent on his general plans and projects and paying no attention to the detail of the marked areas during this visit. As I find below, since he never submitted any more formal application for clearing but rather was treated by the Rural Assistance Authority and the Nature Conservation Trust as if he had applied, he had no occasion to revisit what had been recorded by the Murrumbidgee Catchment Management Authority officers as the area intended to be cleared. It is unsurprising that, when confronted with the map during this proceeding, he expressed alarm at the areas marked and gave the evidence he did. I find he simply did not pay attention to these kinds of details during Mr Willis’ visit in February 2007, and was more intent on getting the officers to understand the uniqueness and beauty of the property, together with its potential, at a large scale, which in his view was all at risk of being lost because of the vegetation clearance laws. Mr Spencer, it seems to me, is a “big picture” kind of person.

169    Mr Spencer admitted, and I find, that he never filled out a vegetation clearance application form. Despite this, there is no dispute on the evidence that the Murrumbidgee Catchment Management Authority, the NSW Rural Assistance Authority and then the Nature Conservation Trust continued to treat Saarahnlee as if it was subject to such an application which had been refused, and acted on that basis right through to the making of an exit assistance offer.

170    Mr Willis’ conclusion after the site visit and assessment was:

Mr Spencer's Land Clearing Assessment PAMS case 3766 red lighted at the biometric assessment stage and the threatened species stage. Carbon emissions or greenhouse gas issues did not factor into those assessments, nor did it factor into the assessment process generally.

171    This conclusion was conveyed to Mr Spencer by way of a letter dated 6 March 2007. I set the contents of the letter out in full because it gives a summary of not only the assessment but the stages of the exit assistance process, which, as I set out below, I find Mr Spencer then undertook.

On 19 February 2007, the Murrumbidgee Catchment Management Authority (CMA) conducted a field assessment of your proposal to clear 1402 hectares of native vegetation on your property.

The Murrumbidgee CMA is required to assess proposals to clear native vegetation according to the 'maintain or improve' test as detailed in the Native Vegetation Regulation 2005. After analysis of field data collected, your current proposal fails to meet the 'maintain or improve' test and therefore the proposal cannot be approved.

The Murrumbidgee CMA has since assessed a number of alternative, smaller clearing sizes but these also failed to meet the 'maintain or improve' test.

I understand that you have expressed an interest in Farmer Exit Assistance. Through the PVP process you have been assessed as having satisfied the initial test of eligibility for the Farmer Exit Assistance known as the Relative Hardship Test.

The next stage of assessment process requires an assessment of financial eligibility. The Rural Assistance Authority (RAA) will carry out this assessment. To be financially eligible for assistance you will need to show that clearing of the area of land that satisfied the Relative Hardship Test was required to allow your farm business enterprise to meet some or all of the following factors:

•    The operating costs of the farm business enterprise;

•    The living costs of the farm family;

•    Servicing of the farm enterprise debts;

•    Future capital requirements, for plant and improvements; and,

•    Investment in sustainable farming systems.

In addition, you will need to demonstrate that you contribute the majority of your labour to the farm business enterprise and generate the majority (or have the potential to generate the majority) of your income from that enterprise.

If you wish to proceed with an application for Framer Exist Assistance [sic] you will need to provide the RAA with your last three years financial records along with a 1 page letter detailing the difference that approval to clear would have made to your business. You should contact Mr. Bob Waterson, Assessment Officer with the RAA on …

If your application meets the RAA's financial eligibility criteria it will be passed on to the Nature Conservation Trust (NTC). The NCT will commission an independent valuation of your property and provide an offer to purchase based on this valuation.

For your information, I am enclosing a copy of the NSW Government’s Native Vegetation Assistance Package fact sheet that outlines the Farmer Exit Assistance package and processes.

Please feel free to contact Ray Willis, Catchment Co-ordinator at the Murrumbidgee CMA on … or Nigel Strutt, Farmer Exit Assistance Program Manager at the Nature Conservation Trust on … for more information.

172    Mr Spencer wrote to Mr Waterson of the NSW Rural Assistance Authority, the authority responsible for administering the exit assistance program, on 13 April 2007. I find this letter was Mr Spencer’s attempt to comply, in his own way and on his own terms, with the request for information from Mr Waterson. In that letter, he asserts that “[t]he farm is not able to be used for agriculture except for a small section – 10% which is not sufficient to be viable”. He then sets out nine projects he either had started, or intended to start on the farm. These are some of the projects to which Mr Spencer has referred in evidence in this proceeding – merino sheep, the trout farm, the wind farm project. He volunteers a number of explanations as to why these projects have not been successful: not all of those explanations concern the presence of excess native vegetation on his land. For example, he asserts the recreation park plan was thwarted by zoning restrictions, and that the bottled water project could not go ahead because “we have no capital left to install the plant and no cash flow to market the product”.

173    Mr Spencer states “[w]e have sold most of the none fixed [sic] capital assets to keep going. Hence we have no funds to go on.” Then, in a reference to what would become the platform of this proceeding, he says:

We have no legal rights as evidently the State can make what ever laws it likes … even to take away your freehold rights – on other then “Just Terms”.

(Emphasis in original.)

174    Having then made a number of statements hostile to the New South Wales and Federal Governments, he concludes:

The environment has nothing to do with it. Our farm was always been blessed with an abundance of being at least 50% forested – being environmentally sustainable was our tradition. Otherwise how else would our farm boast such huge timber resources?

Give me back MY land and I will not ask for, nor will I need, the States help. …

(Emphasis in original.)

175    He adds:

In regards the matter of Carbon Credits as accrued under the Federal Governments Commitment to the "Australia Clause" negotiated by the Australian Government which is in effect between the years 1990 and 2020 – 30 years – this represents an asset of "Saarahnlee" – being that it has effect on the forests of "Saarahnlee" and further does not allow for the increasing dollar and timber growth value (appreciating the forest has its greatest carbon value between the age of 30 and 90 years) after that 30 years and the fact the harvesting of Carbon is ongoing – perpetually, past that date indefinitely – so to speak and is additional to this estimate.

For this report this asset, currently and only for the "Australia Clause" period, is worth approximately $32,000,000.00, (a little over 1 Million dollars per annum – interest to be added.) valued and in fact is the property of "Saarahnlee" taken by the Federal Government. As this property take over – being Freehold land, "locked up" was funded by the Federal Government through the Heritage Trust Fund as is public knowledge, is fundamentally a takings and this act is un-Constitutional under Section 51 ss xxxi of the Australian Constitution.

(Emphasis in original.)

176    Mr Spencer deposes to a number of conversations and communications between himself and the Rural Assistance Authority between approximately April and August 2007.

177    On 5 July 2007, the Rural Assistance Authority wrote back to Mr Spencer. That correspondence notified Mr Spencer that he was eligible for exit assistance, and did not otherwise address the contents of Mr Spencer’s letter, to which I have referred. The letter is relied on by Mr Spencer in these proceedings, and is the subject of competing contentions by the parties, so it is as well to set it out in full:

I refer to your application for assistance under the NSW Government’s Native Vegetation Assistance Package.

The Authority has now finalised its assessment of your financial information and position. The Authority was satisfied that your farming enterprise is not commercially viable and that this position is a result of the inability to clear native vegetation under the Native Vegetation Act 2003.

I have, in accordance with the requirements of the Farmer Exit Assistance component of this Package, forwarded advice of the Authority’s assessment to the Nature Conservation Trust of NSW.

178    Also on 5 July 2007, as indicated to Mr Spencer, the Rural Assistance Authority wrote to the Nature Conservation Trust forwarding the above letter and referring Mr Spencer and his property for further consideration under the exit assistance program. That letter to the Nature Conservation Trust stated:

The Authority has completed the financial eligibility assessment of this application for assistance under the Farmer Exit component of the NSW Government’s Native Vegetation Assistance Package.

The clients were previously advised by the Murrumbidgee Catchment Management Authority that they had been refused approval to clear native vegetation under the Native Vegetation Act 2003 and that they had been assessed as having satisfied the initial test of eligibility for the Package (the Relative Hardship Test).

The Authority has now completed the required assessment of financial eligibility under the Farmer Exit component of the Package. The Authority was satisfied that the farming property is not commercially viable and that this position is a result of the inability to clear native vegetation, under the Native Vegetation Act 2003.

Under the assessment process, the Authority therefore has determined that the property is eligible for purchase under the Farmer Exit Assistance measure. I am required to advise you of this outcome. I have also advised Mr Spencer of the outcome of the Authority’s assessment, and am enclosing a copy of this advice for your information.

179    In addition, a copy of the Murrumbidgee Catchment Management Area’s briefing note to the NSW Department of Environment and Climate Change, also dated 5 July 2007, was in evidence before me. It is convenient to set out the contents of that briefing note in full.

Background:

In 2006 Mr. Peter Spencer contacted the office of the then Natural Resources Minister, Mr. Ian MacDonald to enquire about possible assistance under the Government's Native Vegetation Socio-Economic Assistance package. Mr. Spencer was advised to liaise directly with the Murrumbidgee CMA so that a property inspection could be arranged.

Mr. Spencer contacted the Murrumbidgee CMA in late 2006 and was advised that a clearing application needed to be submitted and that if the clearing was not approved, then he could possibly be eligible for the Governments' Farmer Exit package. At the time Mr. Spencer indicated he was interested in obtaining such a result.

Clearing Proposal:

A property inspection was carried out at 'Saarahnlee' on February 19, 2007 by officers of the Murrumbidgee CMA.

Mr. Spencer advised the officers that he wished to clear the lower portions of native woodland - forest on his property. The area Mr. Spencer wished to clear totalled 1402 hectares. The Vegetation Type for this area is Montane Moist Forest and the dominant vegetation consists of a mix of Eucalyptus dives (Broad-leaf Peppermint) – Eucalyptus rubida (Candlebark) – Eucalyptus pauciflora (Snow Gum) woodland / forest.

The vegetation and land capability at four locations within the clearing proposal was assessed / sampled using standard methodology developed for the Property Vegetation Plan (PVP) process.

Results:

After assessing the collected data Mr. Spencer's proposal to clear 1402 hectares could not be approved as it failed the 'maintain or improve' test, as identified in the Native Vegetation Regulations, 2005. Specifically, the proposal was not approved because:

1.    The loss of native vegetation could not be offset.

A total of 3433 hectares was available on the property as potential offset but this proved inadequate to offset the original clearing (1402 ha.)

1.    The loss of habitat for several threatened species could not be offset.

A total of sixteen threatened fauna species were identified as likely to utilise the vegetation proposed for clearing. For all sixteen species the size of offsets was insufficient to offset the original clearing.

Mr. Spencer was advised in writing on the 6 March 2007 that his clearing proposal was not approved because it failed to meet the 'maintain or improve' test. Mr. Spencer was also informed that he had passed the initial test of eligibility for the Farmer Exit Assistance package. The process for applying for this package was summarised for him.

The Murrumbidgee CMA has not had any contact with Mr. Spencer since sending this letter to him.

180    In and from mid-July 2007, assessments commenced to complete the process by which an offer of exit assistance would be made to Mr Spencer. By late July 2007, Mr Nigel Strutt from the NSW Farmers Exit Assistance Program (a program being operated from within the Nature Conservation Trust of NSW) had arranged to visit Mr Spencer on Saarahnlee to look at the property as a step in the exit assistance process.

181    A key step in that assessment process was the instructing of Mr Sullivan, by the Nature Conservation Trust of NSW, to prepare a valuation of Saarahnlee. According to his report, Mr Sullivan was instructed on 3 August 2007 “to assess the current market value of the Freehold and Leasehold interests in the rural property known as ‘Saarahnlee’… for purchase purposes”. Again, according to his report Mr Sullivan inspected the property on 14 and 30 August 2007.

182    Mr Sullivan’s report was in evidence as part of the materials provided by the State to its expert valuer Mr Connolly. As I have set out above, there was a wholly unnecessary process undertaken during the trial to compel Mr Sullivan to attend to give evidence.

183    Mr Sullivan placed Saarahnlee’s market value at $2.17 million, as at 30 August 2007. In evidence, Mr Spencer accepted this represented market value at the time, although he maintained it did not represent its value to him, nor its value in terms of its potential if he had been able to undertake all the projects he had in mind for the property. This valuation was the subject of litigation by Mr Spencer in the Supreme Court of New South Wales, which I deal with elsewhere in these reasons.

184    By a letter dated 6 November 2007 from Mr Strutt, the NSW Nature Conservation Trust made an offer to purchase Saarahnlee at the valuation given by Mr Sullivan: namely, $2.17 million. Mr Spencer was given 60 days to accept or decline the offer. The Trust offered him up to $5,500 reimbursement for legal expenses, relocation and advisory services. Mr Spencer objected to the fact the letter was unsigned, and received a signed version on 22 November 2007. In a letter dated 26 November 2007, Mr Spencer then asked for an extension to the 60-day deadline, until 31 January 2008 (instead of 4 January 2008). In that letter, Mr Spencer also protested about the valuation arrived at by Mr Sullivan, in the following terms:

I also object to the brinkmanship adopted by your organization towards the “purchase” of my land. When Mr. Griffith the General Manager of the NSW Rural Assistance Authority wrote to me on 5 July this year, after I had provided evidence of the several valuable strategies substantially planned for the land, he conceded that the farming enterprise was unviable and that the “position is a result of the inability to clear vegetation under Native Vegetation Act 2003”.

I would like to point out even in the event I had voluntarily agreed to grow vegetation for a crop, as being the use of my land by choice, then I would have had the right to collect and be paid the full value of the Carbon Capture incorporated in that crop. However you and the offer has unconscionably denied me that right in my property which in fact is the end result of these numerous State actions.

Your take it or leave it offer states that it is prepared on the basis of what is called the “market value” in clause 7.1 of the valuation supplied with your letter. However this assumes that every prospective buyer knows the land is locked up and unusable by reason of the Native Vegetation laws of New South Wales.

This assumptive knowledge is not borne out in the issue of Section 149 Certificate, which accompanies each freehold land sale and where the information provided parallels the Zoning Provisions as set out in the relevant Zone … here 1A Rural.

To be specific, and to make my point, on one issue alone, I refer to the very substantial building improvements – capital assets on “Saarahnlee”, as they are now targeted and valued at a very substantial discount as apparently they are recognized as being an unnecessary over capitalization, due the impact of the Native Vegetation Legislation. Is this my fault?

Hence, even with out all the lost projects, presented to The Rural Assistance Authority, the resulting impacting lost value, of the Guest Cottage – Trout lodge, Homestead and attached Court Yard, previously valued for insurance purposes at replacement value at over 2.23 million dollars, are in fact, worth more then your entire property offer.

Mr. Strutt is this fair?

I believe, that is a very unfair and an unreasonable position for you to take. It is also inconsistent with the document you provided to me when this process commenced on 19 January and the CMA provided to me on 6 March this year, namely the Farmer Exit Assistance Program Fact Sheet. It clearly states that the independent valuation will be done on the basis that the Native Vegetation Act 2003 does not apply [emphasis provided]. I have therefore proceeded on the misconception generated by the Government.

Mr. Strutt, I suggest your current offer is far too low. The broad farming enterprise – “Saarahnlee”, incorporating the ecosystem services in the comprehensive farming business plan as presented, is way ahead of its time in conceptualization and as a business, is worth many more times than what you have offered, even at market value, without the burden of the Native Vegetation Act.

In the circumstances I would ask you to prepare a fresh valuation and make another offer this time one that is reasonable, based on the value of the comprehensive farming enterprise as a going concern – pre the Native Vegetation Act.

(Emphasis in original.)

185    The Nature Conservation Trust replied on 10 December 2007, informing Mr Spencer that any acceptance of its offer must be received by 11 January 2008, and any contract of sale from Mr Spencer’s solicitor needed to be received by 18 January 2008. As to Mr Spencer’s protests about the valuation itself, Mr Strutt replied:

The valuation and subsequent offer has been made in accordance with the guidelines of the program and will not change. These guidelines are not decided by the Trust and must be applied consistently to all applicants. The valuation process in the guidelines was changed by the NSW Minister for the Environment on 23rd of January 2007 from "current market value assuming the NVA 2003 does not apply" to "current market value". You were given the current fact sheet at the time, and were subsequently informed of the change by telephone and were also given a new fact sheet when Rob Dunn and I visited your property on Wednesday 25th of July 2007.

The offer made by the Trust remains unchanged in accordance with the guidelines of the program. I look forward to receiving a letter from you regarding your decision.

186    On 3 January 2008, Mr Strutt sent an email reminding Mr Spencer of the deadline, and noted he had tried to call him as well.

187    Apparently still dissatisfied with Mr Sullivan’s valuation and the Nature Conservation Trust offer, in early March 2008, Mr Spencer retained Mr Davies to prepare a valuation of Saarahnlee. This was the valuation which was over $9 million, and to which I refer elsewhere in these reasons.

188    In his evidence, Mr Spencer deposed to feeling “cheated” by the Nature Conservation Trust offer of $2.17 million. It appears from the evidence that Mr Spencer simply provided no further responses to the Nature Conservation Trust about their offer, and the offer lapsed.

189    The sequence of events I have set out above is consistent in all material respects with Mr Willis’ evidence in this proceeding and with the documentary evidence setting out the process for exit assistance that was laid out in the NSW Vegetation Assistance Package. I propose to set this out in some detail because later in these reasons I reject the respondents’ submissions that the evidence does not justify a finding that there was a “taking” of Mr Spencer’s bundle of rights in Saarahnlee. That does not, as I find, amount to an acquisition of property for the purposes of s 51(xxxi), but this sequence of events is important nonetheless.

190    Mr Willis deposed in his evidence that landholders were “only eligible to access the Farmer’s Exit Assistance Program if their application to clear land was refused”. Irrespective of whether there was a formal “application” that is how Mr Spencer’s proposal was treated by all officers of the State involved in the process.

191    Also in evidence was one of the “Business Plans” for the Native Vegetation Assistance Package. It was on this document that the Commonwealth relied to make the submission that the funds for the farmers’ exit assistance did not come from the Commonwealth, but rather from the NSW Government’s “City and Country Environment Restoration Program”. That is indeed what the Business Plan states on p 3. There is no evidence about the source of funds for that program. Further, this proposition appears contrary to the findings of Rothman J in the NSW Supreme Court, to which I refer below.

192    The Business Plan contains a number of statements which confirm in my opinion the seriousness which should be attached to an offer being made to Mr Spencer under this program. I note that from Rothman J’s reasons in the NSW Supreme Court there does not appear to have been any argument from the State to the effect that Mr Spencer did not make an application to clear land, did not have it refused and therefore in effect there was no foundation for the exit assistance offer.

193    The Business Plan notes that the exit assistance scheme arose out of recommendation 28 of the Native Vegetation Reform Implementation Group (the Sinclair Group) which it describes as follows:

‘The Government establish a revolving fund to purchase properties that as a result of the ending of broadscale clearing are no longer commercially viable’ and ‘provide structural adjustment to landholders who have suffered real financial loss as a direct result of the ending of broadscale clearing’. Broadscale clearing is defined under the Native Vegetation Act 2003 as meaning the clearing of any remnant native vegetation or protected regrowth.

(Emphasis in original.)

194    The program was described in the following terms:

Farmer Exit Assistance ($12 million) – a revolving fund to assist those landholders whose farm enterprises are no longer commercially viable as a result of the new legislation adjust out of primary production or relocate their farm business. NOTE: the fundamental purpose of this component of the package is to purchase properties that have been rendered unviable as a result of native vegetation reforms, not for conservation value (although significant overlap is expected).

…

Eligibility for the components of the package is restricted to landholders able to demonstrate hardship resulting from implementation of the native vegetation reforms, as outlined in Section 4 below.

…

4    Eligibility for the $37m Native Vegetation Assistance Package

The Native Vegetation Assistance Package provides financial assistance to those landholders who suffer adverse impacts as a consequence of native vegetation reforms. Eligibility to the program directly reflects any financial disadvantage as a consequence of being unable to clear land under the NV Act.

To be eligible for Native Vegetation Assistance a farmer must:

i.     have been unable to gain approval to clear native vegetation on an area of their property, assessed by

a.    the CMA for clearing applications through the PVP Developer, or

b.    the Department of Environment and Climate Change (DECC) for clearing for private native forestry (where a PNF PVP includes identified exclusion areas).

ii.    meet the Rural Assistance Authority's criteria for assessing the financial impact as a direct result of being unable to clear the proposed land; and

iii.    meet any additional criteria specific to the type of assistance for which the farmer is applying.

4.1    NVAP Assessment Criteria

4.1.1    Unable to gain approval to clear

To be eligible for access to the Farmer Exit Assistance or Sustainable Farming Grants components of the NVAP, the landholder must be unable to gain approval to clear native vegetation on an area of their property assessed through the PVP Developer assessment process undertaken by the relevant CMA, or the PNF PVP assessment process undertaken by DECC.

…

4.1.2     Assessment of financial eligibility

To be eligible to access Farmer Exit Assistance, a landholder must demonstrate, to the satisfaction of the NSW Rural Assistance Authority, loss of commercial viability.

To demonstrate loss of commercial viability, or real financial loss, the applicant must show that clearing of the area of land proposed was / is required to allow the farm business enterprise to meet the following factors:

•    the operating costs of the Farm Business;

•    the living costs of the farm family;

•    servicing of the Farm Business debts;

•    future capital requirements for plant and improvements; and

•    investment in sustainable farming systems.

(Emphasis in original.)

195    The document also describes the 60-day offer period, and its withdrawal after that time, all of which were borne out in the way the scheme was applied to Mr Spencer.

196    In Spencer v NSW Minister for Climate Change, Environment and Water [2008] NSWSC 1059, Rothman J made the following findings, which would seem, at least, to bind Mr Spencer and the State. That proceeding was a judicial review application brought by Mr Spencer to challenge Mr Sullivan’s valuation incorporated in the exit assistance package offer to him. It was unsuccessful. Having referred to the intergovernmental agreements which are the subject of this proceeding, Rothman J said at [9]:

The funds provided by the Commonwealth to New South Wales find their way into a program administered by the Nature Conservation Trust. One of the programs administered by the Nature Conservation Trust is the Farmer Exit Assistance Program.

197    Having recited the history of Mr Spencer’s application, based on evidence which seems generally in accordance with the evidence in this proceeding, Rothman J found (at [20]-[24]):

Pursuant to the process necessary for the Farmer Exit Assistance Program to be utilised, Mr Spencer applied to the Murrumbidgee Catchment Management Authority as to whether Saarahnlee was a property that ceased to be viable by virtue of the operation of the State Vegetation Acts.

The application to the Murrumbidgee Catchment Management Authority applied for exemption from the operation of some or all of the strictures in the 2003 Vegetation Act. The Catchment Management Authority rejected Mr Spencer’s proposal to clear parts of his property, for which clearance an exemption was required, but indicated to him that he satisfied the hardship test. This was done on 6 March 2007.

On 13 April 2007, Mr Spencer sent to the Rural Assistance Authority, material relating to the Murrumbidgee Catchment Management Authority decisions, which material, Mr Spencer submitted to them, disclosed that Saarahnlee was no longer viable.

On 25 May 2007, Mr Spencer and Mr Strutt discussed the Farmer Exit Assistance Program and, according to Mr Spencer, who on this issue I accept, Mr Strutt said that the valuation of the farm would be “on current value”.

On 5 July 2007, Mr Spencer received advice from the Rural Assistance Authority that Saarahnlee was “no longer commercially viable”, as a consequence of which Mr Spencer was eligible for the Farmer Exit Assistance Program. Further discussions occurred between Mr Spencer and Mr Strutt relating to the Program.

198    On the evidence before me, I find that an assessment of Saarahnlee was carried out under the Farmers Exit Assistance Program in a way which accorded with the regular operation of that program. It was a clear precondition to an offer of exit assistance that a farmer was unable to gain approval to clear native vegetation (as I set out at [194] above), and that the farmer demonstrated to the satisfaction of the NSW Rural Assistance Authority “loss of commercial viability”. Mr Spencer was assessed as meeting these preconditions and an offer of exit assistance was made in accordance with the program’s terms and conditions. In its terms, the offer ascribed the cause of loss of commercial viability to the NSW vegetation clearance laws, as was necessary for the funds to be available.

199    There is no basis to discount or diminish the centrality of these events to Mr Spencer’s claims and insofar as the respondents’ submissions invited me to do so, I reject them. The approach I take is also consistent with the terms of Rothman J’s decision.

200    At this point in the chronology of what occurred in relation to Saarahnlee and vegetation clearance controls, one other category of facts and events should be noted. In or around October 2003, and I infer due to his then financial difficulties with the farm, Mr Spencer borrowed about $1 million from relatives, Mrs and Mr Bamber. The loan was secured by a registered mortgage over all of Saarahnlee except Lot 50. It was the Bambers who eventually forced a mortgagee sale of most of the land comprising Saarahnlee in July 2010.

201    However, in November 2007, when Mr Spencer received the offer from the Nature Conservation Trust, his evidence was that once he had repaid the Bambers and other debts of over $300,000, he would have cleared about less than $700,000. While hindsight always places choices and events in a very different light, given Mr Spencer’s evidence of his current somewhat desperate and strained circumstances, his refusal to take up the exit assistance package could be characterised as unfortunate, to say the least. Had I reached the point of needing to calculate damages payable to Mr Spencer in this proceeding (which I do not), his decision to refuse the farmers exit assistance offer in the circumstances then facing him would no doubt have been one of the many examples of causation problems adversely affecting his damages claims.

202    I note that Mr Spencer had commenced this proceeding (on 12 June 2007) before he had been notified (in July 2007) of his eligibility for assistance under the Farmers Exit Assistance Program, and before an offer to purchase was made (in November 2007). I do not consider this aspect of the chronology affects the findings I have made. By that stage, Mr Spencer was well advanced through the exit assistance program process. He had made his claim in April 2007 to the Rural Assistance Authority that his farm was not viable under the 2003 Native Vegetation Act regime and that is, I find, what he genuinely believed. Some months later, the Rural Assistance Authority agreed with him.

REGULATORY HISTORY OF LAND CLEARING IN NEW SOUTH WALES AND THE APPLICABLE LEGISLATIVE REGIME

203    It was a significant aspect of the respondents’ case in this proceeding that the clearing of native vegetation on Mr Spencer’s land, like all land in New South Wales, was regulated well before the enactment of the Native Vegetation Conservation Act in 1997. These regimes had always been implemented for a variety of environmental and planning purposes, and what occurred after 1997 was no different in nature, although the regimes may have been stricter.

204    The regulatory history of land clearing in New South Wales demonstrated, the respondents submitted, that controls were not always uniform, and varied in their intensity, but did not change so much in 1997 or thereafter as to constitute any acquisition for the purposes of s 51(xxxi): rather the history of the regulation of clearing showed that by the 1997 legislation, the State was exercising progressively more intensive controls over land clearing but not gaining any new or different rights than it already had. The Commonwealth relied by analogy on the situation in ICM [2009] HCA 51; 240 CLR 140, as set out at [84] per French CJ, Gummow and Crennan JJ and [150] per Hayne, Kiefel and Bell JJ. The State submitted that the history of land clearing, which it explored in great detail in its evidence and submissions, might well demonstrate some kind of “taking” by the State (but not an acquisition) although if that was so, the taking occurred (the State contended) well before the 1997 state legislation which the applicant seeks to impugn.

205    Both respondents then submitted that there was not, in any event, any acquisition in a constitutional sense by either the Commonwealth or the State. I deal with those legal submissions in more detail below. In this part of my reasons, I propose to set out the essential characteristics of the legislative regimes in New South Wales concerning land clearing. It is not necessary, in my opinion, to make findings at the level of detail set out in the submissions of the State, although I was much assisted in terms of context and background by the detail in those submissions.

206    I accept the State’s submission that the practical and legal operation of the impugned federal and state laws, and the four impugned intergovernmental agreements, should be understood in the full context of the regulation of land clearing in New South Wales, which assists the identification of the nature of the property rights in question.

Regulation prior to State Environmental Planning Policy 46

207    Prior state regulation might be grouped into a number of categories. I accept the State’s submissions that forms of state regulation over clearing have been in existence since at least 1972.

208    There were controls intended to advance conservation or environmental interests, and objectives of this nature have continued to dominate the regulation of land clearing as applicable to Saarahnlee.

209    From 1972, through amendments introduced by the Forestry, Soil Conservation and Other Acts (Amendment) Act 1972 (NSW), s 21C of the Soil Conservation Act made it an offence to clear (“ringbark, cut down, fell, poison or otherwise destroy”) trees on land that was “protected land”, as that term was defined in ss 21A and 21B, except in accordance with an “authority” issued under s 21D of the Soil Conservation Act. In its Preamble, the Soil Conservation Act was described as “[a]n Act to make provision for the conservation of soil resources and for the mitigation of erosion”. One of the principal mechanisms used was the concept of “protected land”, which included pursuant to s 21B land which in the opinion of the Catchment Areas Protection Board had a slope of more than 18 degrees from horizontal; that is, steeply sloping land.

210    The restrictions extended to privately held land, and through the definition of “owner” in s 3, extended to land held under forms of Crown tenure. As the respondents’ submissions noted (and I refer to below in more detail) a large proportion of Saarahnlee was “protected land” within the meaning of the Soil Conservation Act, a fact which Mr Spencer did not dispute.

211    Although it was not suggested these restrictions applied to a great deal of Saarahnlee, ss 22A to 22C of the Rivers and Foreshores Improvement Act 1948 (NSW) prohibited clearing of land within 40 metres of a riverbank.

212    Several different pieces of state legislation sought to protect threatened species found in New South Wales, and the habitat on which they depended. From 1 January 1996 onwards, ss 118A to 118D of the National Parks and Wildlife Act 1974 (NSW) made it an offence to harm or pick any animal or plant that is part of a threatened species, endangered population or endangered ecological community or to damage the habitat of any animal or plant that is part of a threatened species, endangered population or endangered ecological community. Reference could be made in a similar way to the provisions of the Threatened Species Conservation Act 1995 (NSW) and the Endangered Fauna (Interim Protection) Act 1991 (NSW).

213    The State also referred to controls intended to regulate activities on land affecting natural resources such as the Clean Air Act 1961 (NSW), the Clean Waters Act 1970 (NSW), and the Environmental Offences and Penalties Act 1989 (NSW). These controls appear directed at different kinds of activities (waste disposal, fuel burning and the like) and appear less relevant.

214    There were planning restrictions, the most important being the State Environmental Planning Policy 46 – Protection and Management of Native Vegetation (10 August 1995) (SEPP 46) made under the Environmental Planning and Assessment Act 1979 (NSW). SEPP 46 was an important pre-1997 control on the clearing of native vegetation and a significant example relied on by the respondents to make good their submissions about the extensive regulation of land clearing in New South Wales prior to the 1997 state and federal legislation. In its submissions, the State made a general point about the effect of planning regimes, which I accept:

[I]t is significant that the effect of both of the impugned State Acts was to impose a requirement that development consent be obtained for certain types of land-clearing, where such consent was regulated by the Environmental Planning and Assessment Act 1979 (EPA Act). That Act, together with the environmental planning instruments made and preserved thereunder, constitutes the State’s main planning regime. There were predecessor regimes, going back many decades. For all of that time land in NSW has been subject to actual or potential restrictions on what uses may be made of, and what developments may occur on, land. Those restrictions may be very significant. The economic value of land may, for instance, vary enormously depending on how the land is zoned, or on whether or not a development consent has been granted for a particular type of development.

215    Finally, there were conditions imposed on tenures held over Crown land, designed to subjugate those tenures to land controls imposed by the State.

216    From at least 1972, s 27(1) of the Forestry Act 1916 (NSW) made it an offence to cut, remove or destroy any timber on Crown-timber lands, without a clearing licence or other authority from the Forestry Commission. The need to obtain permission extended to the Crown lessees of the land on which the timber was located. The State submitted and I accept that similar prohibitions were in force under earlier legislation.

217    On and from 1 May 1990, those holding Crown leases or what were called “incomplete purchases” had their tenure made subject to a number of statutory conditions through the Crown Lands (Continued Tenures) Act 1989 (NSW). As I have noted Lots 48 and 50 of Saarahnlee were Crown leases. Lot 47 of Saarahnlee was a “conditional purchase” from the Crown, and was within the definition of an “incomplete purchase” in s 3 of the Crown Lands (Continued Tenures) Act. The statutory conditions introduced by this legislation included the requirement to “comply with the requirements of any law relating to the use or management of the land” (as to incomplete purchases, cl 6(2)(b) of Sch 2; as to Crown leases, cl 2(2)(b) of Sch 6) and not to “do, permit or suffer anything that will materially degrade the land” (as to incomplete purchases see cl 6(3) of Sch 2; as to Crown leases see cl 2(3)(a) of Sch 6).

218    Based on the evidence, the State made the following submissions about the application of these pre-1997 restrictions (outside SEPP 46) to Saarahnlee (footnotes and emphasis omitted):

(a)     From 17 January 1974, Protected Land in the Burrinjuck Catchment Area has been designated on the “Map of Protected Land” maintained under the SCA. Approximately 3213ha of the total area of 5128ha the Land, or 63% of the total area of the Land, covering around ½ of Lots 47 and 48, parts of Lots 28, 33, 35, 36, 37, 38, 49, 55 of DP750539 and most of Lot 50, was subject to this prohibition on land clearing.

(b)     From 1972, the whole of Lots 48 and 50 were at all relevant times subject to s.27 of the Forestry Act, such that the then owner of the leases (who was not the applicant) was prohibited from clearing native vegetation without a licence; that the owner would be committing a criminal offence if he/she did so (and indeed would have been liable to pay royalties and/or compensation to the Crown).

(c)     Lot 47 was subject to a profit a prendre in favour of the Forestry Commission under s.25F of the Forestry Act, for 10 years from 30 May 1974 to 30 May 1984.

(d)     Particular historical conditions on Crown leases and incomplete purchases were preserved under the [Crown Lands (Continued Tenures) Act]. The “provisions, conditions or covenants recorded in the folio of the Register” included, for each of Lot 47, Lot 48 and Lot 50, special conditions prohibiting the cutting or removing of timber for the purposes of sale, a limited right to take timber for domestic building needs, and an obligation that “the lessee shall carefully preserve all timber within a strip of land at least 1 chain wide along each bank of all defined watercourses … creeks and gullies … and across the lowest part of flats where such gullies discharge water and there are no defined watercourses”. Lot 48 and Lot 50 are also subject to clause 7 of Memorandum 7300000D, which provides that “no timber shall be cut or removed from the land for the purposes of sale, except subject to the provisions of the Forestry Act 1916, and Regulations thereunder at the time in force”.

Thus, cumulatively, until 30 May 1984, a total of approximately 4611ha, or 88% of the Land, was subject to a prohibition or restriction upon clearing. Thereafter, Lot 47 ceased to be “Crown-timber lands” within the meaning of the Forestry Act, but remained expressly subject to the [Crown Lands (Continued Tenures) Act] and to other laws concerning the use and management of land. Those restrictions were in place even before the promulgation of SEPP 46, which warrants separate consideration.

219    The State contended that statutory conditions such as those found in the Crown Lands (Continued Tenures) Act that Crown tenures were subject to “any law relating to the use or management of the land” comprehended the yet to be enacted native vegetation laws such as SEPP 46 and the 1997 state legislation. The State submitted this was a “powerful indicator” that Mr Spencer’s proprietary interests in Lots 47, 48 and 50 were “inherently susceptible to variation” under state law, because (it seemed implicit in the State’s submissions) these statutory conditions contemplated the ambulatory application of state law to this land. The State relied on Attorney-General (NT) v Chaffey [2007] HCA 34; 231 CLR 651 at [18] and [30], which it submitted dealt with analogous statutory language.

SEPP 46

220    SEPP 46 is the shorthand reference for the State Environmental Planning Policy 46 – Protection and Management of Native Vegetation, a scheme regulating vegetation clearance in New South Wales enacted in August 1995 under Div 2 of Pt 3 of the Environmental Planning and Assessment Act 1979 (NSW).

221    As originally enacted cl 6(1) of SEPP 46 provided:

Clearing of native vegetation must not be carried out on land to which this Policy applies except with the development consent of the Director-General of Land and Water Conservation granted with the concurrence of the Director-General of National Parks and Wildlife.

222    Clause 2 of SEPP 46 set out the objectives of the policy:

(1)     The aim of this policy is to prevent inappropriate native vegetation clearance in New South Wales. This Policy requires the assessment of proposals to clear native vegetation for the purpose of ensuring that native vegetation is protected and managed in the environmental, social and economic interests of the State.

(2)     The strategy adopted by this Policy to achieve its aim is to allow the clearing of native vegetation to be carried out only with the development consent of the Director-General of the Department of Land and Water Conservation. Such a consent will be subject to the concurrence of the Director-General of National Parks and Wildlife.

223    The term “clearing” was defined in cl 5 in the following way:

"Clearing" of native vegetation means directly or indirectly:

(a)     killing, destroying or burning native vegetation; or

(b)     removing native vegetation; or

(c)     severing or lopping branches, limbs, stems or trunks of native vegetation; or

(d)     substantially damaging native vegetation in any other way,

but does not include sustainable grazing.

224    The term “native vegetation” was also defined in cl 5:

"Native vegetation" means vegetation that is indigenous to the State, including trees, shrubs, understorey plants and specified native grasslands, but not including seagrasses and other marine vegetation. For the purposes of this definition, indigenous vegetation is that of a species which existed in the State before European settlement.

225    The regime established by the Soil Conservation Act over “protected land” was excluded from the operation of SEPP 46, and regulation under the Soil Conservation Act of areas prone to erosion was thus intended to continue: see cl 3(e). Likewise, land regulated under the Forestry Act was excluded: see cl 3(d). There were a series of further exclusions in cl 11, read with Sch 3, including “minimal clearing” of land up to two hectares per annum, “minimal tree cutting” of up to seven trees per hectare in one year for “on-farm uses”, selective and sustainable logging of private native forest and clearing for farm structures.

226    There was no dispute that SEPP 46 applied to Saarahnlee, which is located within the Cooma-Monaro Shire, one of the areas listed in Sch 1 of SEPP 46, as originally enacted.

227    Clause 7 set out the parameters of any grant of development consent. It is worth setting out the entire clause, so that its strictness can be fully appreciated:

Such a consent may be granted to allow the clearing of native vegetation from an area of land only if the consent authority is satisfied that:

(a)    the vegetation is not remnant vegetation in a region which has been extensively cleared; and

(b)    the area does not have a high biological diversity; and

(c)    the area does not contain:

•    an endangered plant species or community; or

•    habitat for rare and endangered fauna; or

•    disjunct populations of a native species or a species which is near the limit of its geographic range; or

•    riparian vegetation; or

•    vegetation associated with wetlands; and

(d)    the area does not have connective importance as, or as part of, a corridor of native vegetation (meaning native vegetation forming a connection which allows for the potential passage of species of flora or fauna between two or more other patches of vegetation); and

(e)    the area is not, and is not part of, land identified as wilderness in a wilderness assessment report prepared by the Director-General of National Parks and Wildlife; and

(f)     the area does not contain, or drain into, a karst system; and

(g)     the vegetation is adequately represented in a conservation reserve system; and

(h)     the area is not, and is not part of, land which is significant as wildlife habitat; and

(i)    the area is not an "inholding" situated within land reserved or dedicated under the National Parks and Wildlife Act 1974; and

(j)    the area is not important as a site along a migratory route for wildlife; and

(k)    the area does not function as an important drought refuge for wildlife; and

(l)    clearance would not be likely to contribute significantly to any of the following problems:

soil erosion;

salinisation of soil and water;

acidification of soil;

land slip;

deterioration in quality of surface or ground water;

increased flooding.

228    There was some not inconsiderable reaction against the strictness of SEPP 46. By December 1995 SEPP 46 was amended, so that the matters which had, by cl 7, precluded the grant of development consent became mandatory considerations but would not preclude development consent (see cl 7 of the December 1995 amending policy, State Environmental Planning Policy No 46 – Protection and Management of Native Vegetation (Amendment No 1)). A further set of mandatory considerations was added, seemingly to balance some of the environmental factors: namely, the likely social and economic consequences of granting or refusing to grant the development consent for the applicant for the development consent, and for the locality, region and State.

229    The point made by the State in its written submissions, which I accept, is that SEPP 46 applied to the remaining 1,915 hectares of Saarahnlee which were not already protected land under the Soil Conservation Act. In that way, the whole of Saarahnlee was burdened with objectively restrictive state controls over native vegetation clearance, for some time before the enactment of the impugned state and federal legislation, and before the intergovernmental agreements from 1997 onwards.

The significance of earlier controls over Mr Spencer’s land

230    The 1997 and 2003 NSW native vegetation clearance laws continued this regulation, and I accept that debates could be had at some length about which form of regulation could be seen as the most restrictive. I do not consider it necessary to reach a concluded view on that, if such a view could be reached in the abstract and outside a specific clearing application, which I doubt. However, the State is obviously correct to submit that the nature of the regulation was not new. The way the State employed the history of vegetation clearance controls can be seen from the following passage in its reply submissions:

the State's submission is that it is necessary to look at the bundle of rights actually held at the time of the purported acquisition, and whether that bundle was limited by laws of the kind now impugned. As set out in the State's Opening Submissions, and the State's Closing Submissions, the bundle of rights actually held by the applicant immediately prior to 1998 and 2003 was significantly limited in respect of clearing. By 1995, all of Saarahnlee was subject to clearing restrictions in one or more of the Soil Conservation Act 1938, Crown Lands legislation, the Forestry Act 1916, the National Parks and Wildlife Act 1974, the Endangered Fauna Interim Protection Act 1991, the Threatened Species Conservation Act 1995, and SEPP 46. Indeed the applicant appears to concede that SEPP 46 detrimentally affected his property rights. The consequence is that, as pleaded by the State, the rights were inherently susceptible to regulation of this kind – or to put the matter another way, any acquisition of property rights had occurred at least by 1995.

(References omitted.)

231    The State’s contention has considerable force, although the nature of the proprietary interest here involved is ownership and possession of land, and to say that this kind of proprietary interest is “inherently susceptible” to regulation in the sense that phrase is used in the authorities on s 51(xxxi) may take the proposition too far. It is accurate, in my opinion, to say that controls which fall short of acquisition have historically and continuously been exercised over Saarahnlee.

232    The Commonwealth puts the contention this way (referring to the observations of Kiefel J in JT International SA v Commonwealth [2012] HCA 43; 250 CLR 1 (Plain Packaging Case) at [363]):

The restrictions on the applicants' land identified in para [36A] of the FASOC fall squarely within her Honour's example of matters that will not usually result in an acquisition of land by a governmental authority. That is further supported by the approach of the Queensland Court of Appeal in Bone v Mothershaw (2003) 2 Qd R 600, applying the reasoning in Tasmanian Dam case to a council ordinance in similar terms to the operative provisions of the 1997 and 2003 Acts and concluding (on that basis) that there was no acquisition (per McPherson JA at 613 [26], Williams and Byrne JJA agreeing).

There is also a useful parallel to be drawn with the facts of ICM. As submitted above, control over the clearing of native vegetation is a power the State has exercised for some considerable time, under various legislative regimes. Understood in that light, the restrictions effected by the 1997 Act and the 2003 Act of which the applicant complains are simply the more recent steps along a path of exercising progressively greater control over the clearing of vegetation on land within NSW (recognising that that natural resource has importance to the public beyond the private interests of those whose land it grows upon). And it follows that it may also be said (as in ICM) that the State thereby gained no larger or different right to that it already had: see, for example, per French CJ, Gummow and Crennan JJ at [84] and per Hayne, Kiefel and Bell JJ at [150].

233    That submission should be accepted, insofar as it bears on my findings below that there has been no acquisition of an interest which is proprietary in nature. Both the respondents’ submissions on this point diminish the events of July 2007 in a way I do not accept. This means, contrary to the respondents’ position, I find there was a “taking” but I agree there was no acquisition.

THE IMPUGNED LEGISLATION AND THE INTERGOVERNMENTAL AGREEMENTS

234    I turn now to describe the two federal laws, the two state laws and the four intergovernmental agreements which Mr Spencer seeks to impugn. In doing so, some attention must also be paid to the international obligations assumed by Australia under the Kyoto Protocol, and steps taken to comply with those obligations.

The Kyoto Protocol

235    Mr Sturgiss gave evidence about the negotiation and conclusion of the Kyoto Protocol, and the consequent steps taken by Australia to implement and comply with its obligations under the Protocol. Aside from matters arising from international law, the following findings are based on his evidence.

236    It is as well to note, and adopt, his description in evidence about key terminology. A “greenhouse gas emission” is a flow of a greenhouse gas into the atmosphere as a result of human activity. A “removal” is a sequestration or absorption of carbon dioxide from the atmosphere as a result of human activity. As is apparent, the international instruments use the term “anthropogenic emissions by sources and removals by sinks” but I did not understand Mr Sturgiss’ evidence to indicate that the difference in terminology resulted in any difference in meaning, at least, not at the level of generality with which these issues arise in the context of the present proceeding.

237    The Kyoto Protocol was negotiated in December 1997 as a protocol to the earlier United Nations Framework Convention on Climate Change of 9 May 1992 (UNFCCC). Australia signed the UNFCCC on 4 June 1992 and ratified it on 30 December 1992. It entered into force for Australia, in accordance with Art 23 of the UNFCCC, on 21 March 1994.

238    The UNFCCC was one of the three “Rio Conventions” adopted at the United Nations Conference on Environment and Development, or Earth Summit, in Rio de Janeiro in 1992, the other two being the United Nations Convention on Biological Diversity and the United Nations Convention to Combat Desertification. Despite recognising the scientific uncertainties surrounding climate change, parties to the UNFCCC, acknowledging the larger contribution of developed countries to greenhouse gas emissions and recognising the need for the widest possible international cooperation to respond to the challenges posed by climate change, committed to the following objective (at Art 2):

The ultimate objective of this Convention and any related legal instruments that the Conference of the Parties may adopt is to achieve, in accordance with the relevant provisions of the Convention, stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner.

239    Article 4(1)(a) committed parties to developing, updating and publishing “national inventories of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, using comparable methodologies to be agreed upon by the Conference of the Parties”. Commitments to reporting were also established by Art 12.

240    Binding commitments to limit greenhouse emissions, however, came through the Kyoto Protocol, developed in accordance with Art 17 of the UNFCCC. Although adopted in Japan on 11 December 1997, the Kyoto Protocol did not enter into force until 16 February 2005. The first “commitment period” under the Protocol (relating to emissions) started in 2008 and ended in 2012. Australia ratified the Protocol in December 2007, and in accordance with Art 25(3) it came into force for Australia three months after ratification.

241    Articles 3(1) and (2) of the Kyoto Protocol provide:

1.     The Parties included in Annex I shall, individually or jointly, ensure that their aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases listed in Annex A do not exceed their assigned amounts, calculated pursuant to their quantified emission limitation and reduction commitments inscribed in Annex B and in accordance with the provisions of this Article, with a view to reducing their overall emissions of such gases by at least 5 per cent below 1990 levels in the commitment period 2008 to 2012.

2.     Each Party included in Annex I shall, by 2005, have made demonstrable progress in achieving its commitments under this Protocol.

242    Australia’s emissions commitment in Annex B was to limit emissions to 108% of 1990 levels for the period 2008 to 2012. By Arts 5 and 7 of the Protocol, Australia committed to establishing a system for national reporting of greenhouse gas emissions and removals, and reporting its progress towards its targets to the Conference of the Parties to the Kyoto Protocol, including (through a process set out in Art 8) review by an international expert panel.

243    As Mr Sturgiss deposed, the practical effect of this was that the Australian Government submitted each year an inventory of greenhouse gas emissions and removals of carbon dioxide from the atmosphere for Australia, to demonstrate compliance with the commitments it made under the Protocol. Australia submitted its first report under the Kyoto Protocol in 2008 and its last in 2014. The key gases reported include carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons and sulphur hexafluoride.

244    Mr Sturgiss explained that the estimates recorded in the inventory rarely rely on direct measurement of emissions because of the cost and sometimes uncertainty attached to the estimates that might be obtained in that way. Rather, most estimates are prepared on the basis of models of emissions processes that link observable activity data with an estimate of emissions. The simplest example relates to the estimation of emissions from fuel combustion, where estimates are derived by obtaining data on the amount of fuel combusted nationally and an estimate of the average carbon content of the fuel and multiplying the two together. He explained that most of the models used in the inventory are more complex than that, including what is called the “FullCAM model”, which is used to estimate emissions in the land sector.

245    The FullCAM model, which is publicly available on the Department of the Environment’s website, is run through custom-built IT software. In the case of deforestation, it is used to combine data on the changes in the forest extent across Australia. That data is obtained from Landsat satellite imagery with localised climate and soil data. FullCAM then estimates the amount of emissions that would arise following a deforestation event (such as the clearance of native vegetation). Mr Sturgiss did concede in his expert report that FullCAM could be used to measure stored carbon, which is what Dr Evans sought to use it to do, in valuing the cost of the offsetting of emissions obtained by, on this hypothesis, the prevention of any clearing of native vegetation on Mr Spencer’s land. However, as Mr Sturgiss stated, FullCAM’s principal purpose (relevantly to the issues in this proceeding) is to estimate emissions from land clearing as those emissions occur. It does so most reliably at a national level and less reliably, according to Mr Sturgiss, at a local or regional level.

246    Given that what is measured are clearing events as they occur, any clearing event prior to 2008 would not, according to Mr Sturgiss, have been counted in Australia’s inventory as reported to the Kyoto Protocol Conference of Parties. That conclusion flows, I accept, from Mr Sturgiss’ evidence. The Commonwealth sought to make something of that conclusion, given the events around the assessment of proposed clearing of Mr Spencer’s land that occurred in 2007.

247    I do not accept the Commonwealth’s submission, based on Mr Sturgiss’ evidence, that there is no connection in fact between the impact of the vegetation clearance laws on Australia’s Kyoto Protocol targets, and the restrictions as they affected Mr Spencer and his ability to clear his land because emissions were counted only on and from March 2008. The whole point of Mr Spencer’s claim is that he was prevented from clearing his land – not only in 2007, but on an ongoing basis. Absent the stricter vegetation clearance laws, he claims, he could have pursued his projects and development plans throughout the later 2000s and onwards. Emissions from his clearing of land would then have been counted in Australia’s inventory and would have contributed to an increase in emissions reported. At this level of generality it seems to me that contention is correct, and the Commonwealth has previously accepted as much, and did so in final submissions at [98]-[99], where it stated:

It may be accepted that if the trees on the applicant’s land remained in place during the commitment period, there would have been no “deforestation” event contributing to further emissions (greenhouse gases released from decaying trees). It may also be accepted that if widespread land clearing constituting “deforestation” had taken place, the resulting emissions of greenhouse gases produced by decaying trees during 2008-2012 would have been included in Australia’s aggregate amount of greenhouse gas emissions (see Articles 3(3) and 3(1)). Preventing or reducing that possible source of emissions during 2008-2012 therefore assisted in meeting Australia’s obligations under the Kyoto Protocol. If such emissions were reduced below the level of emissions of greenhouse gases produced by land clearing constituting deforestation in the base year (1990), then that source of emissions will be counted as a net reduction for the purposes of determining whether Australia met its obligations under Article 3(1).

The Commonwealth further accepts that, if Australia had been unable to include any net reduction resulting from prevention of deforestation, other measures would have been necessary if the Commonwealth was to meet its commitments under the Kyoto Protocol.

248    As the Commonwealth’s submissions then observe, acceptance of those factual realities does not engage s 51(xxxi). And there remain difficulties of chronology in terms of the detail of Mr Spencer’s allegations, which I consider further below. Nevertheless, the factual realities at the broad level expressed above were clearly part of the impetus for the intergovernmental agreements and the increase in regulation over the clearing of native vegetation, in New South Wales and in other parts of Australia.

The Commonwealth legislation

249    The objects of the Natural Resources Management (Financial Assistance) Act 1992, as set out in s 3, are expressed in the following way:

(2)     This Act's primary object is to facilitate the development and implementation of integrated approaches to natural resources management in Australia that are:

(a)     for the purpose of achieving efficient, sustainable and equitable management of natural resources in Australia; and

(b)     consistent with the principles of ecologically sustainable development.

(3)     This Act also has the following objects:

(a)     to promote community, industry and governmental partnership in the management of natural resources in Australia;

(b)     to assist in establishing institutional arrangements to develop and implement policies, programs and practices that will encourage sustainable use of natural resources in Australia;