FEDERAL COURT OF AUSTRALIA

Spencer v Commonwealth of Australia [2018] FCAFC 17

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    Within 21 days hereof, the parties should seek to agree orders which otherwise give effect to these reasons. If they are unable to reach agreement, including on costs and whether there should be lump sum costs orders, each should file and serve within that time an outline of written submissions not exceeding 10 pages in support of their respective proposed orders. Final orders will then be determined on the papers and without a further oral hearing.

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

REASONS FOR JUDGMENT

GRIFFITHS AND RANGIAH JJ:

1. Introduction

1    Mr Spencer appeals against the judgment and orders of a Justice of the Court (see Spencer v Commonwealth of Australia [2015] FCA 754; 240 FCR 282 (Spencer below)). The case raises issues concerning the nature and extent of s 51(xxxi) of the Constitution, which relates to the acquisition of property on other than just terms.

2    In broad terms, Mr Spencer complains that his property was acquired as a result of the operation of NSW vegetation clearance laws. He contends that these laws were enacted pursuant to inter-governmental agreements made between that State and the Commonwealth in order that the Commonwealth could meet its targets under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (opened for signature 16 March 1998, 2303 UNTS 162, entered into force 16 February 2005) (Kyoto Protocol) and the State could secure Commonwealth funding under s 96 of the Constitution for environmental reforms. The four agreements, as described in Emmett J’s judgment in Spencer v Commonwealth of Australia [2008] FCA 1256 (Spencer 2008: see [32] below), are:

(a)    a bilateral agreement to deliver the National Heritage Trust, made on 31 October 1997 between the Commonwealth and the State of New South Wales (the 1997 NHT Agreement);

(b)    the inter-governmental agreement on a “National Action Plan for Salinity and Water Quality in Australia”, made on 3 November 2000 between the executive governments of the Commonwealth, the State of New South Wales and other Australian governments (the 2000 Salinity Agreement);

(c)    a bilateral agreement relating to the “National Action Plan for Salinity and Water Quality in Australia”, made on 17 May 2002 between the Commonwealth and the State of New South Wales (the 2002 Salinity Agreement); and

(d)    a bilateral agreement to deliver the extension of the National Heritage Trust, made on 14 August 2003 between the Commonwealth and the State of New South Wales (the 2003 NHT Agreement).

3    In brief terms, in Spencer below her Honour held that:

(a)    The two federal laws challenged by Mr Spencer (the Natural Resources Management (Financial Assistance) Act 1992 (Cth) (the NRM Act) and the Natural Heritage Trust of Australia Act 1997 (Cth) (the NHT Act)) were not invalid. They were not laws with respect to the acquisition of property within the meaning of s 51(xxxi) of the Constitution. Furthermore, when considered at a broader level, their practical operation and effect as part of a scheme involving the four intergovernmental agreements, coupled with the NSW vegetation clearance laws, did not give rise to an acquisition of property in contravention of s 51(xxxi) of the Constitution.

(b)    The decision dated July 2007 of the NSW Rural Assistance Authority (the RAA) that Mr Spencer’s farm was not commercially viable because of the effect of the State’s native vegetation clearance laws could be characterised as a “sterilisation” or a “taking” of his property, but that taking 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 (which was called ‘Saarahnlee’).

(c)    Even if there had been an “acquisition” of property within the meaning of s 51(xxxi) of the Constitution, Mr Spencer was offered just terms in November 2007 when the State offered to pay the then properly assessed market value for Saarahnlee.

(d)    Mr Spencer had not proven the existence of any “informal arrangement” between the Commonwealth and NSW.

(e)    Mr Spencer did not have any private right of action in respect of the conduct of the Commonwealth and the State even if that conduct was unlawful or the relevant legislative or executive acts were invalid, nor had he proven any economic or non-economic losses flowing from the alleged unlawful conduct.

4    It will be necessary to summarise her Honour’s detailed reasoning for these conclusions below.

5    The relevant State vegetation clearance laws are the Native Vegetation Conservation Act 1997 (NSW) (1997 NVC Act) and the Native Vegetation Act 2003 (NSW) (2003 NV Act).

2. Primary judge’s reasons for judgment summarised

6    The primary judge gave detailed reasons for her judgment, totalling 227 pages, which reflects the extensive consideration given to Mr Spencer’s claims. In order to understand Mr Spencer’s appeal it is necessary to summarise the relevant parts of her Honour’s reasons.

(a) Summary of Mr Spencer’s claims

7    The primary judge summarised Mr Spencer’s claims in relation to s 51(xxxi) of the Constitution as follows at [22] in Spencer below.

(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.

8    In addition to declaratory relief in relation to the State and Commonwealth legislation, Mr Spencer also sought damages in tort. The primary judge described Mr Spencer’s pleadings as “wholly inadequate” on this matter.

9    Mr Spencer described this cause of action as an “action on the case”, citing James v Commonwealth [1939] HCA 9; 62 CLR 339 (James), Beaudesert Shire Council v Smith [1966] HCA 49; 120 CLR 145 (Smith) and Northern Territory v Mengel [1995] HCA 65; 185 CLR 307 (Mengel).

10    As to the measure of damages claimed, that was put in several ways. First, against the State, Mr Spencer claimed the difference between the value of Saarahnlee with and without the controls under the NSW native vegetation legislation. No precise figure was put on this claim.

11    Secondly, against the Commonwealth, Mr Spencer claimed 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”. This was quantified in Mr Spencer’s written submissions:

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.

12    Her Honour then summarised at [34] her understanding of Mr Spencer’s principal allegation by reference to the following steps:

(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.

13    There is a further matter to note. Although in Spencer below a claim for unjust enrichment was raised in [55] of the further amended statement of claim (FASOC), the primary judge noted the undeveloped nature of that claim:

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.

14    The primary judge summarised at some length the lay and expert evidence at [69] to [135] of Spencer below.

(b) Primary judge’s factual findings concerning Mr Spencer’s land

15    It is convenient to adopt the same headings as those of the primary judge.

16    (i) General nature of Mr Spencer’s property: Saarahnlee consists of 14 parcels of land located 40 kilometres north-west of Cooma. The total area of the property exceeds 5,000 hectares. The smaller parcels are freehold, but the three largest parcels (Lots 47, 48 and 50) are not. 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) (Crown Lands Act) to recordings in the folio of the Register created in respect of the holding. Lots 48 and 50 (which are by far the largest parcels, measuring 2,191 and 1,680 hectares respectively) were Crown leasehold. Mr Spencer accepted in his evidence that more than half of Saarahnlee was at all times covered with native vegetation that had never been clear felled and that, as at 1990, only 346 hectares had been fully cleared and could be described as “improved”.

17    (ii) History of the land: At [147]-[148], the primary judge set out various passages from a report prepared by Mr Porter entitled “Application for clearing vegetation under the Native Vegetation Conservation Act 1997 and Farm Management Plan for ‘Saarahnlee’ Shannons Flat NSW”, which described the history of land use on Saarahnlee.

18    (iii) Mr Spencer’s use of the land: The primary judge found that, prior to mid-1998, when Mr Spencer began making inquiries about developing his land, Mr Spencer’s former wife had made three applications to clear parts of the property.

19    (iv) Inquiries and assessments about vegetation clearance: In mid-1998, an officer of the Soil Conservation Service of NSW (Mr David Thompson) provided Mr Spencer with an application form for clearing his property. It was about this time that Mr Spencer commissioned Mr Porter to prepare his report, which is dated 1998.

20    The primary judge accepted evidence given by Mr Dyson, the principal officer from the NSW Department of Land and Water Conservation who was present at a meeting held on Saarahnlee on 10 September 1998, that he and Mr Spencer had discussed the possibility of clearing parts of the land so that Mr Spencer could undertake some of his planned projects, including an orchard. Mr Spencer did not formally lodge any application to clear native vegetation on Saarahnlee at this time, however, between approximately 2000 and 2006 he conducted “an experimental project” on Saarahnlee involving ultra-fine merino sheep.

21    By 2006, the NSW Government had a specific exit assistance program for farmers who were adversely affected by the State’s native vegetation clearance laws.

22    The primary judge found at [169] that, as Mr Spencer had himself admitted, he never filled out a vegetation clearance application form. Nevertheless, her Honour observed that there was no dispute that the Murrumbidgee Catchment Management Authority, the RAA and the Nature Conservation Trust continued to treat Saarahnlee as though it was subject to such an application, which had been refused, and acted on that basis up to the making of an exit assistance offer.

23    Her Honour also described various correspondence which passed between Mr Spencer and the RAA on the topic of exit assistance, including a letter dated 5 July 2007 in which the RAA stated that it “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.” Mr Spencer was advised that the RAA had forwarded its assessment to the Nature Conservation Trust because it had determined that his property was eligible for purchase under the Farmers’ Exit Assistance Program.

24    The primary judge also found that the Nature Conservation Trust instructed a valuer, Mr Sullivan, to prepare a valuation of Saarahnlee as part of the assessment process. Mr Sullivan placed a market value on Saarahnlee, as at 30 August 2007, at $2.17 million.

25    By an unsigned letter dated 6 November 2007, the Nature Conservation Trust offered to purchase Saarahnlee at that price, as well as to reimburse Mr Spencer for legal expenses, relocation and advisory services. A further signed letter in similar terms was sent to Mr Spencer on 22 November 2007. Mr Spencer objected to the valuation and was given more time to consider the offer. Mr Spencer obtained a valuation from Mr Davies, who valued Saarahnlee at over $9 million. Her Honour found that the Trust offer lapsed because Mr Spencer provided no further response to it.

26    The primary judge found at [198] 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, that Mr Spencer was assessed as being unable to gain approval to clear native vegetation and that the RAA accepted that there was a “loss of commercial viability”. Her Honour observed that these findings were consistent with Rothman J’s decision in Spencer v NSW Minister for Climate Change, Environment and Water [2008] NSWSC 1059.

27    The primary judge also observed at [201] that, if she had had to assess damages, Mr Spencer’s decision to refuse the Farmers’ Exit Assistance Program offer would have been relevant to the issue of causation.

(c) Summary of regulatory history of land clearing in NSW

28    After accepting the State’s submission that the practical and legal operation of the impugned federal and State laws and the four intergovernmental agreements should be understood in the full context of the history of regulation of land clearing in New South Wales, her Honour summarised that history. The primary judge found that native vegetation clearance was regulated in the State well before the enactment of the 1997 NVC Act and that, what occurred after 1997, was no different in nature even though the regimes may have been more strict. Her Honour found that forms of State regulation over such clearing had been in existence in NSW since at least 1972 and were designed to advance conservation or environmental interests. Her Honour described the regulation which existed prior to the commencement in 1995 of the State Environmental Planning Policy 46 – Protection and Management of Native Vegetation (SEPP46). In brief, that included regulation under legislation such as the Forestry, Soil Conservation and Other Acts (Amendment) Act 1972 (NSW), the National Parks and Wildlife Act 1974 (NSW), the Threatened Species Conservation Act 1995 (NSW), the Endangered Fauna (Interim Protection) Act 1991 (NSW) and statutory conditions imposed upon Crown leases under the Crown Lands Act.

29    Her Honour described at some length the contents of SEPP46 and concluded at [229] that SEPP46 applied to the remaining 1,915 hectares of Saarahnlee which were not already protected land under the Soil Conservation Act 1938 (NSW) (Soil Conservation Act). This meant that all 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” (at [229]).

30    Her Honour ultimately concluded at [231] that these various State controls over native vegetation clearance, which she found fell short of “acquisition”, have “historically and continuously been exercised over Saarahnlee”. Accordingly, although her Honour found that there was a “taking” of Mr Spencer’s property, she did not accept that this constituted an “acquisition” for the purposes of s 51(xxxi) of the Constitution.

(d) The impugned legislation and intergovernmental agreements

31    The primary judge outlined the relevant features of the federal and State laws and intergovernmental agreements which Mr Spencer challenged. She explained how, under the Kyoto Protocol (which did not enter into force in Australia until three months after it was ratified in December 2007), Australia’s emissions commitment in Annex B to the Kyoto Protocol was to limit emissions to 108 per cent of 1990 levels for the period 2008 to 2012. By Arts 5 and 7, Australia committed to establishing a system for national reporting of greenhouse gas emissions and removal. Her Honour found at [247] and [248] that, at a level of generality, Australia’s Kyoto Protocol targets were part of the impetus for the intergovernmental agreements and the increase in regulation over the clearing of native vegetation in New South Wales and other parts of Australia.

32    On the appeal, Mr King (who appeared for Mr Spencer) acknowledged that copies of all four relevant intergovernmental agreements were not in evidence before the Full Court. He was content to rely upon the summary of those documents in Emmett J’s judgment in Spencer 2008. It was also evident, from the way that Mr Spencer’s appeal was conducted, that Mr King placed primary reliance upon the 1997 NHT Agreement, as developed by the 2003 NHT Agreement. Accordingly, it is convenient to concentrate on those two intergovernmental agreements, as summarised by Emmett J.

33    The 1997 NHT Agreement begins as follows:

Australia, as a Federation, relies upon all levels of government working cooperatively based on their respective roles, responsibilities and interests. The Natural Heritage Trust is a major capital initiative aimed at conserving and managing Australia's biodiversity, land, water, vegetation and sea on an ecologically sustainable basis. This agreement sets out the roles and responsibilities of the Commonwealth and New South Wales for the delivery of the objectives of the Natural Heritage Trust and any associated programs.

34    The preamble to the 1997 NHT Agreement relevantly provides that the Commonwealth and New South Wales:

    Recognise the need for urgent action to enhance and improve the condition and management of Australia’s natural heritage.

    Recognise that the Natural Heritage Trust provides a basis for further cooperative and integrated approaches to dealing with Australia's environmental problems.

    Note that the Commonwealth’s objectives for the Natural Heritage Trust are to:

(a)    provide a framework for strategic capital investment, to stimulate additional investment in the natural environment;

(b)    achieve complementary environmental protection, sustainable agriculture and natural resources management outcomes consistent with agreed national strategies; and

(c)    provide a framework for cooperative partnerships between communities, industry and all levels of government.

    Agree that the 1997 NHT Agreement establishes a framework within which the parties will work cooperatively towards common and complementary environmental protection, sustainable agriculture and natural resources management outcomes, acknowledging that these outcomes can best be achieved through strategic planning, streamlined administration and integrated implementation.

    Recognise the appropriate and different roles of the Commonwealth and the States.

35    By cl 3 of the 1997 NHT Agreement, the parties agree to give effect to a number of principles, which underpin the implementation of the Natural Heritage Trust programs and other Commonwealth or State programs agreed by the parties to be covered by the 1997 NHT Agreement. The principles include the following:

    Priority will be given to activities that are derived from strategies to address the fundamental causes of Australia's environmental and natural resources problems.

    The involvement of local communities and regional organisations in relation to Natural Heritage Trust programs should be through State agencies and should be simple, readily understood and based on the “one-stop-shop” concept, that is, a single application form incorporating relevant Commonwealth and State programs, a single assessment process, single payments, and a single evaluation process.

    The parties agree that their cooperation will be focussed on achieving outcomes at the program level.

    Implementation of the 1997 NHT Agreement will occur within the strategic framework of:

-    the Inter-Governmental Agreement on the Environment,

-    the National Strategy for Ecologically Sustainable Development,

-    the National Strategy for the Conservation of Australia’s Biodiversity,

-    the National Greenhouse Response Strategy,

-    the water reform framework of the Council of Australian Governments,

-    the National Water Quality Management Strategy,

-    the National Principles For the Provision of Water for Ecosystems,

-    the National Forest Policy Statement,

-    the Decade of Landcare Plan,

-    the Murray-Darling Basin Initiative, or

-    other national or State strategies as agreed by the parties.

36    Clause 4 of the 1997 NHT Agreement establishes a framework under which the parties propose to work cooperatively for the purposes of s 19 of the NHT Act. The 1997 NHT Agreement is to apply to those Natural Heritage Account funds provided to New South Wales for programs set out in the NHT Act and any additional State or Commonwealth programs that are included from time to time in attachments to the 1997 NHT Agreement, as agreed by the parties. Clause 4 expressly provides that the 1997 NHT Agreement allows for the future inclusion of other related programs in the Natural Heritage Trust, additional mechanisms and innovative approaches for the protection and management of Australia's natural heritage, the inclusion of which is agreed by the parties.

37    Clause 5 of the 1997 NHT Agreement provides for attachments consistent with the 1997 NHT Agreement to be developed and to become part of the 1997 NHT Agreement. Attachment A is to relate to the arrangements for managing particular programs or other activities agreed by the parties, and is to include, but is not limited to, the strategic framework in which progress towards identified outcomes is to be achieved. Attachment B contains provisions for financial assistance to the States in accordance with the 1997 NHT Agreement. Attachment C outlines the approach to integrated delivery in New South Wales. By reason of cl 5.1 of the 1997 NHT Agreement, Attachments A, B and C all form part of the 1997 NHT Agreement itself.

38    By cl 6 of the 1997 NHT Agreement, the parties agree, in accordance with the principles outlined in cl 3, to plan, develop and support jointly the implementation of strategies to achieve the purposes of the 1997 NHT Agreement. The specific roles of the Commonwealth and New South Wales are set out in cll 6.2 and 6.3 respectively. None of those provisions are concerned in terms with the acquisition of any property or the imposition of restrictions on the use of land or the clearing of native vegetation.

39    Clause 7 of the 1997 NHT Agreement deals with financial arrangements. Under cl 7.2, financial arrangements are to be determined in accordance with principles therein stated. Clause 8 deals with financial administration. Clause 8.2 provides that financial assistance will be provided in accordance with the provisions of Attachment B.

40    Attachment A to the 1997 NHT Agreement consists of a description of Commonwealth programs and delivery arrangements. The programs relevantly are as follows:

    Bushcare: The National Vegetation Initiative (the Bushcare Program);

    …

    National Landcare Program;

    …

41    The national objectives of the Bushcare Program are stated to:

    conserve remnant native vegetation;

    conserve Australia's biological diversity; and

    restore, by means of revegetation, the environmental values and productive capacity of Australia’s degraded land and water.

42    The national objectives of the National Landcare Program are to:

    assist and enhancing [sic] the long term productivity of natural resources in Australia;

    promote community, industry and governmental partnership in the management of natural resources in Australia;

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

    assist in developing approaches to help to resolve conflicts over access to natural resources in Australia; and

    assist in raising the natural resource and business management skills of landholders.

43    Clause 4.1-4.3 of the Bushcare Program section of Attachment A provides as follows:

[4.1]    New South Wales will adopt a state-wide ‘whole of government’ approach to the conservation and sustainable management of native vegetation in the social, economic and environmental interests of the State. There will be a shift from the current situation where there are a range of different existing permit and licensing procedures, to a situation whereby clearing is allowed without a permit if it conforms to a Regional Vegetation Management Plan which has been prepared by stakeholders and approved by the Government. These Plans will be specific to regions, but underpinned by state-wide thresholds, consistent with the approach outlined in Objective 1.2 of the National Strategy for the Conservation of Australia’s Biological Diversity and section 4.2 below.

[4.2]    Consistent with relevant legislation and strategies including the national strategies for ecologically sustainable development and biological diversity, New South Wales will:

(a)    encourage and promote sustainable native vegetation management;

(b)    protect remnant native vegetation of high conservation value;

(c)    improve the condition of existing native vegetation;

(d)    encourage revegetation of land with appropriate native vegetation; and

(e)    prevent inappropriate native vegetation clearing.

[4.3]    Measures to be undertaken to achieve the aims of 4.2 include:

(a)    enactment of native vegetation conservation legislation which will repeal/rationalise existing native vegetation controls and provide for a coordinated State-wide approach;

(b)    promotion of regional vegetation management plans with a biogeographic basis which have legislative status;

(d)    ongoing state-wide monitoring program using satellite technology and supplemented by strategic on-ground, assessments which will provide information for monitoring and compliance;

(e)    encouragement of a whole property planning approach where native vegetation management is integrated with all relevant aspects of property management;

(f)    consideration of property agreements (voluntary) with covenants to qualify landholders for incentive schemes;

(g)    assessment and consent for clearing under native vegetation legislation consistent with that proposed in the Integrated Development Assessment system; and

(h)    promotion of codes of practice to undertake clearing for particular land uses which specify environmental, social and economic criteria consistent with the aims and principles of State native vegetation legislation.

44    Clause 4.6(b) of the National Landcare Program section of Attachment A provides as follows:

New South Wales is committed to the conservation and sustainable management of native vegetation. The statutory basis for this will be a new Native Vegetation Conservation Act which will require that native vegetation clearing is subject to comprehensive environmental assessment and permit clearing where consistent with a Regional Vegetation Management Plan.

45    Attachment B to the 1997 NHT Agreement contains standard terms and conditions of financial agreements between the Commonwealth and New South Wales for the purpose of financial assistance. The 1997 NHT Agreement is described in Attachment B as “the Partnership Agreement”. That term is defined as meaning an agreement made between the Commonwealth and the State under s 19 of the NHT Act of the type referred to in s 19(4) of that Act.

46    Clause 3 of Attachment B provides that payments made to New South Wales will be in accordance with a signed financial agreement as outlined in the pro forma annexed to Attachment B, for defined projects or programs with specified outputs, outcomes and reports. The pro forma attached recites that the agreement is made for the purpose of providing Commonwealth financial assistance to the State under s 19 of the NHT Act, s 16 of the National Parks and Wildlife Conservation Act 1975 (Cth) and s 5 of the NRM Act. It also recites that the agreement is made for the purposes of linking Commonwealth and State priorities and programs agreed between the parties as outlined in Attachments A and C of the Partnership Agreement and for specified activities to enable the State, within the financial assistance provided, to achieve, in part, the outcomes sought in Attachment A.

47    It is convenient now to return to summarise the primary judge’s analysis of the 1997 NHT Agreement. Her Honour emphasised the provisions in cl 7 of the 1997 NHT Agreement, which dealt with financial arrangements associated with a fund called the Natural Heritage Trust, set up under the NHT Act. The Trust operated through the “Natural Heritage Trust of Australia Account”, which was in large part sourced from the partial sale of Telstra. One of the main objectives of the Account was to conserve, repair and replenish what the primary judge described at [254] as “the value inherent in Australia’s natural environment”.

48    The 2003 NHT Agreement, which was expressed to be made pursuant to s 19(2) of the NHT Act and s 5 of the NRM Act, built on the 1997 NHT Agreement, the 2000 Salinity Agreement and the 2002 Salinity Agreement. Under it, the Commonwealth would allocate approximately $65 million to the State from the Trust for three financial years commencing 2002-2003. Further details regarding the National Landcare and Bushcare Programs were set out in Attachment 1 to the 2003 NHT Agreement and included limits on clearing through vegetation clearance controls. One of the expressly identified outcomes was “greenhouse gas abatement”.

49    In his summary of the 2003 NHT Agreement in Spencer 2008 at [81] Emmett J also described cl 4.1, by which the parties acknowledged that New South Wales was significantly advanced in land, water and biodiversity reforms and had strategies that were consistent with the overall national policy approach outlined in the Natural Heritage Trust. At [82] his Honour also outlined how, by cl 4.6, the State agreed to pursue measures:

    to prevent clearance of ecological communities with an extent below 30 per cent of that present pre-1750;

    to assess native vegetation condition; and

    to continue to reducing [sic] the national net rate of land clearance to zero.

50    Returning to summarise the primary judge’s reasons in Spencer below, her Honour outlined the contents of a report entitled “Report on Native Vegetation Management in New South Wales” dated August 1996 (prepared by the NSW Vegetation Forum) concerning the future regulation and management of native vegetation in the State. The Forum favoured the adoption of legislative reform encompassing a “whole State” approach. This recommendation was adopted in a White Paper which was published about a year later entitled “A proposed model for native vegetation clearance in New South Wales”. It was stated in the Executive Summary to the White Paper that SEPP46 and provisions relating to native vegetation conservation and management in various other Acts, including the Soil Conservation Act, would be repealed and replaced by a Native Vegetation Conservation Act. The primary judge noted at [304] that many of the proposals by the Forum and in the White Paper were adopted in the 1997 NVC Act. The controls under SEPP46 and the Soil Conservation Act were incorporated into one legislative regime, while retaining the concept of “protected land” from the Soil Conservation Act.

51    The main relevant features of the 1997 NVC Act were outlined by the primary judge at [305] to [309]. A key feature was that clearing of native vegetation was prohibited unless certain consents, plans or practices were in place, with the responsible Minister identified as the consent authority.

52    Following recommendations made by the Native Vegetation Reform Implementation Group, the 2003 NV Act was enacted. It repealed the 1997 NVC Act and simplified the regulatory scheme. One of the express objects of the Act, as stated in s 3, was “to prevent broadscale clearing unless it improves or maintains environmental outcomes”. Again, there was a general prohibition on clearing native vegetation without a development consent, or otherwise than in accordance with a “property vegetation plan” approved by the Minister (see s 12).

53    Her Honour noted at [323] that the text and context of the 2003 NV Act in particular revealed a “considerable shift in emphasis”. That shift, which the primary judge said was consistent with the aims and objectives of the two relevant federal laws and the four intergovernmental agreements, was that clearing of native vegetation was assessed as having serious adverse consequences and required increased prominence in terms of environmental reform. Her Honour also observed at [325] that the new legislative scheme “may have provided scope for Mr Spencer to use and develop Saarahnlee, albeit in a way which was closely regulated and required him to subject his projects to scrutiny by decision-makers under that scheme”, but that an approach which was dependent upon close bureaucratic supervision was “clearly not to Mr Spencer’s liking”.

(e) The alleged “informal arrangement”

54    Although the primary judge found that Mr Spencer’s case as presented at trial relied very little on the existence or nature of an alleged informal arrangement, he had pleaded that there was such an arrangement. This, he claimed, was “evidenced by” ministerial committee minutes from the Council of Australian Governments (COAG) from 1993 to 2005, as well as COAG minutes relating to the Kyoto Protocol conference commencing in December 1997. He also relied upon a letter dated in or about 2003 from the Prime Minister or the Minister for Environment to the Premier of New South Wales.

55    Her Honour described Mr Spencer’s case in respect of the alleged informal arrangement in [326] to [372], which included her Honour’s summary of the evidence given by Dr  David Kemp, a former federal Minister for the Environment and Heritage. Her Honour noted that Mr Spencer, who represented himself below, did not put to Dr Kemp for comment many of the allegations he made concerning the existence of an informal arrangement.

56    Her Honour also described the evidence of Mr Plummer, a farmer, who gave evidence of a letter, a copy of which he no longer had, which was sent by Senator Robert Hill, the then federal Minister for the Environment and Heritage, to the Premier of New South Wales some time in 2000 concerning the Commonwealth’s attitude to land clearing in New South Wales. Her Honour accepted Mr Plummer’s evidence regarding the contents of Senator Hill’s letter which, together with other Commonwealth documents, revealed that the Commonwealth was relying on its grants power as a way to influence policy and reform initiatives over which it did not have exclusive legislative competence (at [370]).

57    Her Honour ultimately found at [371] that Mr Spencer had not discharged his burden of proof that there was an “informal arrangement” of the kind pleaded by him and that there was “no evidence of any improper or inappropriate, let alone unlawful, collusion or conspiracy of the kind Mr Spencer foreshadowed, nor of any plan to “get around” s 51(xxxi)”.

3. Primary judge’s determination of Constitutional law issues

58    The primary judge’s reasons for rejecting Mr Spencer’s various Constitutional law claims, which related to both ss 51(xxxi) and 96 of the Constitution, are set out at considerable length in [373] to [604] of her Honour’s reasons for judgment. It will be necessary to describe some aspects of that reasoning in greater detail below. It suffices at this point to set out [383] to [386] of her Honour’s reasons, which summarise her key findings:

383.    In summary, I conclude that the two federal laws are not to be characterised as laws with respect to the acquisition of property. It is therefore strictly unnecessary to determine whether they effect an acquisition other than on just terms but, in case I am wrong in my opinion on the first issue, I determine that the valuation regime put in place by New South Wales, and applied to Saarahnlee, meant that Mr Spencer was offered just terms for the “bundle of rights” he held in the property itself. If, contrary to my opinion, it could be established that Mr Spencer’s “carbon rights” had been acquired as a result of the federal laws, then it is clear on the evidence that there was no compensation paid for these rights and therefore no just terms.

384.    It appears to be common ground that it is appropriate to characterise the two federal laws as laws with respect to the grants of financial assistance to the States, and at least to that extent supported by s 96 of the Constitution. In my opinion the current weight of authority suggests s 96 is conditioned by s 51(xxxi). That being the case, if the two federal laws had authorised the making of grants of financial assistance, terms of which required the State to acquire property (for itself, or for another) other than on just terms, then the federal laws would be exposed to invalidity, and the intergovernmental agreements and the state legislation which carried through these conditions might be inoperative (at least). It is arguable that Magennis [1949] HCA 66; 80 CLR 382 supports this proposition. I conclude that while the 1997 NHT Agreement, concluded pursuant to the two federal laws, required New South Wales to enact legislation further restricting the clearing of native vegetation on land in New South Wales, this did not effect an acquisition of property. I conclude that the remaining three intergovernmental agreements on which Mr Spencer relies did not impose terms and conditions which required New South Wales to take any steps (whether through exercise of legislative or executive power) to acquire property.

385.    As to the informal arrangement alleged to have been made between the Commonwealth and the State, I have found elsewhere (see [326] to [372]) that Mr Spencer has not proven any such arrangement existed. Had he proven such an arrangement, it is arguable on the basis of dicta in ICM [2009] HCA 51; 240 CLR 140 that such an arrangement would also be conditioned by s 51(xxxi). How this occurs without a connection to federal law is not something that is, with respect, clear from the judgments in ICM. If this kind of argument rests on the proposition that s 51(xxxi) conditions executive power exercised under s 61 of the Constitution, this was barely touched on in argument by the parties, and in particular by the respondents. However, even if I had reached this point in my reasoning favourable to Mr Spencer, I would then have concluded that the nature of the arrangement he alleges did not effect, or result in, the acquisition of property by the Commonwealth, the State, or anyone else, because its terms did not differ materially from what can be found in the four intergovernmental agreements themselves.

386.    The impact of the state legislation in its 1997 and 2003 forms could be generally characterised as variations on the kind of regulation imposed on Saarahnlee under previous state regulatory regimes, although with a discernible shift in emphasis towards halting vegetation clearance that did not manifest positive environmental outcomes as I have explained earlier in these reasons. Once that impact crystallised in July 2007 with the Rural Assistance Authority’s decision, then it could in my opinion appropriately be characterised as a “taking”. It was not however a “taking” required or achieved by federal law, nor by intergovernmental agreements contemplated by those federal laws. The State chose the form and content of the laws, and chose to implement an exit assistance scheme to deal with the impact of its laws. It chose, it can be said, to respond at least to some extent, to the urging of the Commonwealth to tighten and enhance its control over native vegetation clearance. No doubt at some level, funding from the Commonwealth played a role in its decision-making and the Commonwealth recognised both expressly and implicitly in all four agreements that adverse impacts of clearing controls might require adjustment packages from the State. The Commonwealth did not require those adjustments to be made. The State was able to impose vegetation controls without the constraint imposed by s 51(xxxi). Finally, even if I am wrong in seeing the state legislation as legally independent of the two federal laws and the intergovernmental agreements, there may have been a “taking” in July 2007, but there was no acquisition. If Mr Spencer had accepted the offer and sold Saarahnlee, there would have been. I fail to see how it was an acquisition required for Commonwealth purposes. In any event, as I set out below, the terms of the acquisition were just.

    (Emphasis added.)

59    In examining the relationship between ss 96 and 51(xxxi) of the Constitution, the primary judge closely analysed the High Court’s decisions in Pye v Renshaw [1951] HCA 8; 84 CLR 58 (Pye); P J Magennis Pty Ltd v Commonwealth [1949] HCA 66; 80 CLR 382 (Magennis); Gilbert v Western Australia [1962] HCA 7; 107 CLR 494 (Gilbert) and ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51; 240 CLR 140 (ICM). Her Honour noted at [462] that both the Commonwealth and the State appeared to accept that the majority in ICM supported the proposition that s 51(xxxi) conditions an exercise of power under s 96. Her Honour concluded at [470] that a purpose shared by the Commonwealth and the State, that the State should acquire property on other than just terms, will not invalidate federal grants under s 96 which may assist a State in achieving that purpose, as long as the terms and conditions of the grant do not purport to require or enforce that outcome.

60    At [481], the primary judge found that there was no doubt that each of the four intergovernmental agreements “proposed a series of measures to be carried principally by the State, to reduce the clearance of native vegetation and indeed to increase the total cover of native vegetation across New South Wales”. Further, this was done in the context of broader measures to promote natural resources management and, to a significant extent, the Commonwealth and the State shared these purposes and objectives. Her Honour found, however, that, while the NRM Act empowered the Commonwealth to pay financial assistance to the States, none of ss 7 to 9 of that legislation contemplated, let alone required, the State to acquire property, nor did the provisions induce the State to do so. Rather, it was open to the State to accept the Commonwealth’s financial assistance on the terms offered, and if this occurred, the State would be subject to conditions concerning repayment.

61    Her Honour then turned her detailed attention to the 1997 NHT Agreement (see [485]-[490]). Although her Honour found that the 1997 NHT Agreement gave effect to the objectives of the NHT Act, it did not do so in a way which could be characterised as requiring or effecting an acquisition of property. It is desirable to set out [485] to [489] inclusively:

485.    The 1997 NHT Agreement gives effect to the objectives of the Natural Heritage Trust Act, but not in a way which can lead to its characterisation as requiring or effecting an acquisition of property. The principles in cl 3 set out how choices will be made about programs and projects to be funded, and the Agreement concentrates in cl 6 on the roles and responsibilities of each party, while filling out the content of proposed programs and activities. It is not surprising that there are clauses which condition the provision of funding by the Commonwealth against the achievement of outcomes and milestones set out in Attachment A to the 1997 NHT Agreement for each of the nominated programs: see in particular cl 7.2(b), which I have set out earlier in my reasons.

486.    It is true that in Attachment A, the Bushcare program describes outcomes which involve not only the maintenance, but the increase of native vegetation cover in New South Wales. The Commonwealth submits that cl 4 in the Bushcare program does not suggest the enactment of the Native Vegetation Conservation Act 1997 was a condition of the provision of funding. The Commonwealth points to how well advanced planning was at state level for reform proposals that led to the 1997 Act. It submits it is “inapt” to describe the process as the fulfilment of some form of requirement imposed by the Commonwealth.

487.    That submission may be too broad. The clause did seek to describe, in some detail, how the State was to regulate native vegetation clearance. On pain of repayment if the conditions were not complied with (see cl 7.2(b) of the Agreement) New South Wales agreed to “prevent inappropriate native vegetation clearing” (cl 4.2(e) of the Bushcare program), and it was expressly contemplated this would be done by legislation to “repeal/rationalise existing native vegetation controls” (cl 4.3(a) of the Bushcare program), assessment and consent for clearing under native vegetation legislation to be consistent with what was proposed in the “Integrated Development Assessment system” (cl 4.3(g) of the Bushcare program).

488.    In my opinion the 1997 NHT Agreement does impose terms and conditions on New South Wales, requiring it to enact legislation to decrease vegetation clearance, and increase retention of native vegetation. However, unlike Magennis, the agreement says nothing about the content of the legislation, and certainly nothing about New South Wales having to acquire property as part of any native vegetation clearance legislative regime.

489.    There are no such requirements in the 2000 and 2002 Salinity Agreements.

(Emphasis added.)

62    The primary judge found that the obligations and commitments under 2003 NHT Agreement were “general and aspirational”, as reflected in provisions such as cll 4.6 and 6.5.

63    Thus, although the primary judge found that there was a requirement in the 1997 NHT Agreement for the State to enact native vegetation clearance legislation, there were no requirements concerning acquisition, nor did the 1997 NVC Act or the 2003 NV Act have the effect of acquiring Mr Spencer’s property.

4. Summary of Mr Spencer’s submissions on the appeal

64    At the commencement of the appeal, the Court indicated that it had difficulty understanding Mr Spencer’s outline of written submissions in chief, which he had prepared himself, and that it expected Mr King to address any relevant points in his oral address.

65    Mr King submitted that the heart of the primary judge’s error was to assume that there was no proprietary relationship between the Crown in right of NSW and Mr Spencer with respect to the leasehold and fee simple holdings in Saarahnlee before and after the enactment of the State’s vegetation clearance laws. He submitted that those laws modified the pre-existing proprietary relationship by imposing easements in gross or restrictive covenants upon Mr Spencer’s use of, and title to, his land with the result that his interest was “sterilised”.

66    Mr King explained that there were five essential steps in the way in which the appeal was put. First, that the primary judge was correct to find that there was a “taking”, but then erred in not also finding that this amounted to an “acquisition” in the relevant Constitutional sense.

67    Secondly, in support of Mr Spencer’s case concerning s 51(xxxi) of the Constitution, Mr Spencer would seek to lead further evidence which was not available below relating to the Kyoto Protocol.

68    Thirdly, the primary judge erred in not accepting Mr Spencer’s case that his property had been acquired by the joint action of the Commonwealth and State governments, citing Magennis. He also contended that the intergovernmental agreements were invalid as being in contravention of s 51(xxxi) of the Constitution.

69    Fourthly, the Commonwealth was unjustly enriched by the acquisition of Mr Spencer’s property and it should be compelled to disgorge those unjust enrichments. Mr King acknowledged that this matter had been dealt with only “perfunctorily” in the proceeding below.

70    Fifthly, Mr Spencer contended that the State had trespassed on his property and was liable to him in an action on the case.

71    These matters were then developed in oral address broadly as follows.

(a) “The taking” was also an “acquisition”

72    Mr King submitted that the “taking” of Mr Spencer’s property, as was reflected in the offer to pay him compensation by reference to the Farmers’ Exit Assistance Program, also constituted an “acquisition”. This was because it involved a modification of the existing proprietary relationship between Mr Spencer and the State by reference to his rights as a landholder in fee simple and also by reference to that part of his land which was the subject of a Crown lease. Further, the taking of his land amounted to a “mini-nationalisation” of his property, citing Bank of NSW v Commonwealth [1948] HCA 7; 76 CLR 1 (the Bank Nationalisation Case). Moreover, the Commonwealth received an advantage or benefit relating to the use of Mr Spencer’s property, primarily by reference to carbon sequestration rights.

73    It was submitted that the primary judge erred in the following three respects:

(1)    Her Honour’s findings at [564]-[567] that there was no proprietary relationship between Mr Spencer and the State and her Honour’s reliance on ICM, for the proposition that, for s 51(xxxi) to apply, there needs to be a “legal interest”, were said to be in error. It was submitted that the modification of an existing proprietary relationship amounted to an acquisition of property, citing Smith v ANL Ltd [2000] HCA 58; 204 CLR 493 (Smith).

(1)    Her Honour erred by stating at [386] of her reasons for judgment, with reference to the RAA’s decision in July 2007 that farming on Saarahnlee was not “commercially viable” because of what could be characterised as a “sterilisation” or a “taking” due to the inability to clear native vegetation under the native vegetation clearance laws, it was not a taking which was required or achieved by federal law nor by the intergovernmental agreements. Her Honour also erred in stating that, alternatively, even if the State legislation was not legally independent of the two federal laws and the intergovernmental agreements, the “taking” which may have occurred in July 2007 was not an acquisition, and that:

If Mr Spencer had accepted the offer and sold Saarahnlee, there would have been [an acquisition].

(2)    Criticism was also levelled at her Honour’s finding at [505] that the carbon sequestration rights upon which Mr Spencer relied were “entirely speculative”.

74    Mr Spencer’s submissions on each of these three matters may be summarised as follows.

75    (i) No proprietary relationship: It was submitted that the 2003 NV Act created rights of a proprietary character. Reference was made to provisions such as s 12 (prohibiting vegetation clearance except by way of development consent or a property vegetation plan); s 13 (creating the Minister as the consent authority); s 27 (providing for Property Vegetation Plans (PVPs); s 31 (which provided that a PVP runs with the land and is capable of registration with the General Register of Deeds); s 35 (creating rights of entry on to land); s 36 (providing for the right to obtain information); and s 38 (creating the right to carry out remedial work on the land itself, not limited to any vegetation).

76    It was submitted that ICM strongly supported Mr Spencer’s case concerning s 51(xxxi) because the High Court found that there was a “joint action” between the Commonwealth and NSW and the critical reason for why the case failed was because of the Court’s finding that groundwater was not “property” for the purposes of that provision.

77    Mr Spencer submitted that the primary judge erred in her understanding of carbon sequestration, which error was said to be manifest in [585] of the reasons for judgment. In particular, it was submitted that, under the Kyoto Protocol, carbon credits were earned by way of abatement in respect of land which was otherwise intended to be cleared, citing Art 3, rule 7. Australia was assisted in meeting its carbon emission targets by way of abatement schemes, such as those created by the NSW vegetation clearance laws. The primary judge erred in not understanding that the scheme operated not by reference to the clearing of vegetation, but rather by preventing such clearance.

78    Unlike groundwater, so it was submitted, trees are “property”, which was separate from the land on which they grow, citing Sir Francis Barrington’s Case 8 Co. Rep. 136b, Richard Liford’s Case 11 Co. Rep. 46b and Australian Softwood Forest Pty Ltd v Attorney-General for NSW; Ex rel Corporate Affairs Commission [1981] HCA 49; 148 CLR 121 at 130 and 132 per Mason J.

79    The following additional submissions were made. First, contrary to the primary judge’s finding, there was an existing proprietary relationship between Mr Spencer and the State which relationship was modified by the relevant State legislation. Mr King relied on Smith at [7], regarding the modification of a limitation period which affected the right to bring a chose in action, for the proposition that the modification of a proprietary right can amount to an acquisition for the purposes of s 51(xxxi). The existing proprietary relationship was said to be reflected in the relationship Mr Spencer had with the State in respect of his Crown lease and the radical title in his fee simple interest in the relevant part of the land. The Court was taken to the terms of Mr Spencer’s Crown lease, including clause (d). It was submitted that the primary judge erred in finding that there needed to be a transfer of title for there to be an acquisition, referring to [386] and [564]-[567] of the primary judge’s reasons.

80    Secondly, Mr King repeated his submission that the events which occurred amounted to a “mini-nationalisation”, citing the Bank Nationalisation Case at 349 per Dixon CJ.

81    Thirdly, ICM was cited in support of the submission that the State acquired both a “forestry right” and a “carbon sequestration right” within the meanings of those concepts in s 87A of the Conveyancing Act 1919 (NSW) (the Conveyancing Act).

82    (ii) Any “taking” was not an “acquisition”: It was submitted that Kiefel J’s observations in JT International SA v Commonwealth of Australia [2012] HCA 43; 250 CLR 1 (the Plain Packaging Case) at [363] were not inconsistent with Mr Spencer’s case because her Honour said there that a regulatory taking does not “usually” involve an acquisition for the purposes of s 51(xxxi) of the Constitution. Moreover, it was submitted that Mr Spencer’s case did not turn on the characterisation of the State legislation and four intergovernmental agreements as “regulatory”. The primary judge incorrectly applied the Plain Packaging Case at [563]-[564] because the State’s laws operated to enhance the State’s radical title in the land and it was irrelevant how significant that modification was, citing Mutual Pools and Staff Pty Limited v Commonwealth [1994] HCA 9; 179 CLR 155 (Mutual Pools). Mr King was particularly critical of the last sentence in [567] of the primary judge’s reasons for judgment. He submitted that it should be read as a finding that Mr Spencer was obliged to accept the offer of compensation which he had received.

83    Heavy reliance was placed by Mr Spencer on the primary judge’s observations at [580] concerning the “benefit” which the Commonwealth obtained. It is desirable to set out that paragraph:

580.     The problem for Mr Spencer is that although there is little difficulty in characterising this as a “benefit” to the Commonwealth, as one might usually understand that term, and a material one, it has no proprietary character.

84    It was submitted that the Commonwealth’s benefit was the enhanced ability for Australia to comply with its obligations under the Kyoto Protocol, in particular Arts 3.3 and 3.7. It is desirable to set out both those provisions:

3.    The net changes in greenhouse gas emissions by sources and removals by sinks resulting from direct human-induced land-use change and forestry activities, limited to afforestation, reforestation and deforestation since 1990, measured as verifiable changes in carbon stocks in each commitment period, shall be used to meet the commitments under this Article of each Party included in Annex 1. The greenhouse gas emissions by sources and removals by sinks associated with those activities shall be reported in a transparent and verifiable manner and reviewed in accordance with Articles 7 and 8.

…

7.    In the first quantified emission limitation and reduction commitment period, from 2008 to 2012, the assigned amount for each Party included in Annex 1 shall be equal to the percentage inscribed for it in Annex B of its aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases listed in Annex A in 1990, or the base year or period determined in accordance with paragraph 5 above, multiplied by five. Those Parties included in Annex 1 for whom land use change and forestry constituted a net source of greenhouse gas emissions in 1990 shall include in their 1990 emissions base year or period the aggregate anthropogenic carbon dioxide equivalent emissions by sources minus removals by sinks in 1990 from land-use change for the purposes of calculating their assigned amount.

85    Mr King submitted that the Commonwealth admitted that it obtained a benefit as from 1 January 1998, but did not admit that it was of a proprietary character. Mr King did not refer the Court to when or where this alleged admission was made.

86    The benefit said to have accrued to the Commonwealth was a benefit of a proprietary nature because the vegetation clearance laws prohibited the trees being felled and hence they remained in situ to grow. Mr King claimed that s 87A of the Conveyancing Act was inserted in 1999 (therefore after commencement of the 1997 NVC Act but before the 2003 NV Act), and that it merely recognised that the 1997 NVC Act had given rise to benefits of a proprietary nature. As such, in Mr Spencer’s submission, the mere fact that s 87A was enacted after the 1997 NVC Act did not mean that there was no proprietary right of the sort recognised by Dixon J in the Bank Nationalisation Case. A difficulty with this submission is that s 87A was first inserted in 1986 and was subsequently amended several times, including in 1999.

87    A carbon sequestration right is defined to mean:

carbon sequestration right, in relation to land, means a right conferred on a person by agreement or otherwise to the legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land after 1990.

88    Thus, Mr King submitted that because the definition extends to rights “conferred by agreement or otherwise” (emphasis added), it included a right conferred by statute, being the right to enter and maintain a crop of trees on Mr Spencer’s land which, in turn, falls within the definition of a “forestry right” in s 87A, namely:

forestry right, in relation to land, means:

(a)    an interest in the land pursuant to which a person having the benefit of the interest is entitled:

(i)    to enter the land and establish, maintain and harvest (or to maintain and harvest) a crop of trees on the land, or

(ii)    to enter the land and establish, maintain and harvest (or to maintain and harvest) a crop of trees on the land and to construct and use such buildings, works and facilities as may be necessary or convenient to enable the person to establish, maintain and harvest the crop, or

(b)    a carbon sequestration right in respect of the land, or

(c)    a combination of the interest and right referred to in paragraphs (a) and (b).

89    Mr King in turn relied upon s 88AB of the Conveyancing Act which provided that:

(1)    A forestry right shall, for all purposes, be deemed to be a profit à prendre.

(2)    If a forestry right consists in whole or in part of a carbon sequestration right, the profit à prendre deemed to exist by subsection (1) in relation to the carbon sequestration right consists of the following:

(a)    the profit from the land is taken to be the legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land that is the subject of the carbon sequestration right,

(b)    the right to take something from the land is taken to be the right to the benefit conferred by the carbon sequestration right.

90    As such, Mr King submitted that the right was registrable under the Real Property Act 1900 (NSW).

91    Furthermore, as the definition of “carbon sequestration right” refers to rights of carbon sequestration “by any existing or future tree or forest on the land after 1990” (emphasis added), Mr King submitted that the definition “links it straight to the UNFCCC and the Kyoto Protocol, all dating from 1 January 1990. So that’s how it all marries together. Native Vegetation Acts mention the same date”.

92    Mr Spencer took issue with the primary judge’s findings at [580]-[581], where her Honour said the benefit to the Commonwealth of the prohibitions on clearance of native vegetation was not of a proprietary character and accordingly, on the current state of authority, could not constitute an acquisition. Mr King submitted that the finding of a benefit or advantage to the Commonwealth in terms of compliance with the Kyoto Protocol by reason of the vegetation clearing laws was sufficient for Mr Spencer to succeed on the ground that there was an acquisition. That benefit was said to be in substance a profit-à-prendre. It was not necessary, in his submission, for the international rights to be incorporated into domestic law because they have an economic and measurable advantage for the Commonwealth which suffices to establish that they constitute a proprietary interest.

93    In this regard, Mr Spencer relied upon the reasons of Hayne, Kiefel and Bell JJ in ICM at [477]ff where four “advantages or benefits” were identified, and of Heydon J at [285] who used the same language. Reliance was also placed upon Mutual Pools at 185 as demonstrating that it is sufficient to constitute an acquisition if there is a deprivation of rights “in relation to property”. The obtaining of at least some identifiable benefit or advantage relating to the ownership or use of property was sufficient.

94    When pressed to identify where the primary judge said that it was necessary for there to be a transfer of title in order for s 51(xxxi) to apply, Mr King relied on the reference in [386] of her Honour’s reasons to Mr Spencer’s land being sold to the Trust if he accepted the offer of compensation.

95    In reply, Mr King reiterated his submission that trees were capable of giving rise to proprietary rights, as was the case with minerals, citing ICM at [84] and [145]. He said that the State’s radical title had been enhanced by the acquisition of Mr Spencer’s property. He reiterated that, for s 51(xxxi) to apply, there was no need for a transfer of title or a conveyance, citing Newcrest Mining (WA) Limited v Commonwealth [1997] HCA 38; 190 CLR 513 (Newcrest Mining) at 643-636.

96    Emphasis was placed on the fact that in ICM at [340] the Commonwealth was refused leave to challenge the correctness of Magennis. Mr King also submitted that the concept of “purpose” in s 51(xxxi) is different from the notion of purpose in s 96 of the Constitution.

97    In relation to the emphasis placed by the Commonwealth on what was said in ICM at [46], Mr King submitted that this was not a statement of principle and that Magennis at 398 per Latham CJ and at 422 per Williams J, strongly supported Mr Spencer’s case as it related to joint action. He submitted that the words in [46] of ICM were not words of limitation.

98    Mr King further emphasised the fact that neither of the relevant Commonwealth Acts contained an express provision providing for just terms.

99    (iii) Were the carbon sequestration rights “entirely speculative”?: Mr Spencer was critical of the primary judge’s findings at [585] concerning the irrelevance of Mr Spencer’s proposed large-scale clearing to the calculation of Australia’s Kyoto Protocol commitments. This was particularly because of Mr Spencer’s own evidence that he would not have cleared his land in such a wholesale way all at once and the lack of any evidence from him about how much he would have cleared, and when. Accordingly, her Honour concluded that what the clearing of Saarahnlee would, or would not, have contributed to in terms of increasing Australia’s greenhouse gas emissions was “entirely speculative”.

100    In Mr Spencer’s submission, the finding that the operation of the vegetation laws was “speculative” misconceived the way that the Kyoto Protocol operates and is inconsistent with admissions by the Commonwealth. In his submission, the finding wrongly assumed that, unless actual clearing of the land takes place, there can be no benefit conferred upon the Commonwealth. This was because, under the national carbon accounting system which was brought into effect by the National Greenhouse Response Strategy adopted in 1992, the benefits to the Commonwealth in carbon credits from banning land clearing counted as a credit to Australia under Art 3 of the Kyoto Protocol. Thus Mr Spencer submitted that the effect of Art 3.3 and Art 3.7 of the Kyoto Protocol with respect to land use or land use claims is that carbon credits are not conferred where land is cleared but rather where land is not cleared. The credit is, in other words, an abatement credit. Accordingly, a change in the use of land by reason of a prohibition upon clearing has the result that the Commonwealth earns carbon credits. But for those bans on lands, Australia would have been unable to meet its commitment. Thus Mr Spencer submitted that a very significant benefit of a proprietary nature accrued by reason of the vegetation laws banning land clearing, being the carbon credits earned by Australia which saved Australia many billions of dollars.

(b) Mr Spencer’s application to adduce further evidence

101    This matter is dealt with below in [137]ff.

(c) Joint action by the Commonwealth and State for the purposes of s 51(xxxi) of the Constitution

102    Mr Spencer’s case concerning the alleged error by the primary judge in rejecting his claim that there was “joint action” between the Commonwealth and the State, which attracted the Constitutional protection was developed in oral address broadly as follows. The joint action was said to be constituted either by:

(f)    the four relevant intergovernmental agreements; or

(g)    the alleged informal arrangement between the Commonwealth and the State.

103    In relation to the intergovernmental agreements, it was submitted that the primary judge made a finding in [493] in favour of Mr Spencer that the effect of the intergovernmental agreements was to require the State to enact the native vegetation laws which were passed in 1997 and 2003. Gilbert was cited in support of this submission. It was contended that the primary judge fell into error in [595] when she found that the High Court in ICM did not refer to Gilbert as a new principle.

104    The alleged informal arrangement was described as being the Commonwealth’s provision of additional funding to the State as the “quid pro quo” for which the 2003 NV Act was passed, relying in particular on the payment made by the Commonwealth to the State in October 2003.

105    It was submitted that the primary judge had imposed too high an onus on Mr Spencer in respect of his informal arrangement case, as was said to be reflected by the primary judge’s use of the words “collusion” or “conspiracy” in [371] which, it was submitted, overstated Mr Spencer’s case concerning joint action. It was contended that the effect of the intergovernmental agreements was to require the State to enact the relevant laws, citing Magennis at 398ff, 401 and 402 per Latham CJ and at 420, 422-423 per Williams J.

106    Mr Spencer’s case concerning the intergovernmental agreements focused on the 1997 NHT Agreement and related documents concerning the Bushcare Program, as referred to in Attachment A to that Agreement. He relied on various contemporaneous correspondence, including correspondence between the then Prime Minister and Premier of Queensland and the primary judge’s acceptance of Mr Plummer’s evidence at [75], as demonstrating that the alleged informal arrangement existed. Reliance was also placed on additional material, including an Australian Government Report dated 2005, which demonstrated in Table 1.1 that the carbon credits earned by restricting native vegetation clearing was critical to Australia meeting its Kyoto Protocol targets.

(d) Mr Spencer’s claims for damages

107    Mr Spencer’s claims for damages against both the Commonwealth and the State were dealt with briefly in his written submissions in reply dated 23 January 2017 and, even more briefly, in oral address. The claim for damages against the Commonwealth was said to be for unjust enrichment or, alternatively, damages for monies had and received to the use of the Commonwealth to the value of carbon credits transferred to it.

108    The claim for damages against the State was said to be based upon an action for trespass and “by operation of the unlawful interference in the land”. In oral address, Mr King said that the alleged unlawful interference was “a basis for an action in trespass by operation of the overriding right to possession which the State sought to exert against his possessory title. Alternatively, it’s an action on the case to the same effect or, alternatively, it’s a case of civil conspiracy between the State and the Commonwealth”.

109    These claims were not developed in either the written or oral submissions made on behalf of Mr Spencer.

(e) Action on the case

110    Mr Spencer’s brief submissions on this matter are summarised at [108] above.

5. Commonwealth’s submissions summarised

111    Mr Lancaster SC and Mr Lenehan appeared for the Commonwealth. It is not intended to summarise their submissions at length. Many of them are reflected in the Court’s reasoning below. It is appropriate, however, to record at a broad level what might be described as the Commonwealth’s main submissions.

112    First, emphasis was placed on the need to identify and understand the terms and conditions on which the Commonwealth gave financial assistance to the State. No terms and conditions are set out in the two relevant Commonwealth Acts. Those matters were left to the four intergovernmental agreements.

113    Secondly, considerable emphasis was placed on the following passages from the plurality’s judgment in ICM (footnotes omitted):

36.    Counsel for the plaintiffs also pointed to the use in the critical passage in Pye v Renshaw set out above of the phrase “in order that” when encapsulating the argument the Court was rejecting. It is significant that from the legislation under consideration in Pye v Renshaw any arrangement or agreement with the Commonwealth had been, as Professor Saunders has said, “decoupled” in 1950 upon the repeal of the War Service Land Settlement Agreement Act 1945 (NSW). The argument rejected in Pye v Renshaw was that the exercise of the power to grant financial assistance under s 96 would be vitiated if shown to be for the purpose of inducing the State to exercise its powers of acquisition on less than just terms. The concept of improper purpose as a vitiating characteristic was rightly rejected. Section 96 says nothing about purpose. It authorises the making of grants on “such terms and conditions as the Parliament thinks fit”. The constraints imposed by constitutional prohibitions or guarantees will be directed to the range of permissible terms and conditions rather than their underlying purpose.

…

46.    The result is that the legislative power of the Commonwealth conferred by s 96 and s 51(xxxvi) does not extend to the grant of financial assistance to a State on terms and conditions requiring the State to acquire property on other than just terms. The plaintiffs' case, to that extent, should be accepted.

114    It was submitted that, for s 51(xxxi) to apply, it was necessary for Mr Spencer to demonstrate that the Commonwealth required the State to acquire Mr Spencer’s property other than on just terms. It was submitted that [46] in ICM contained a statement of applicable constitutional principle and was not a mere acceptance of a proposition. The Commonwealth submitted that this statement of Constitutional principle was adopted and applied by the Full Court in Esposito v Commonwealth of Australia [2015] FCAFC 160; 235 FCR 1 (Esposito) at [66] and [67]. The Commonwealth acknowledged that this statement of principle applied across the board to any measure which is said to contravene the Constitutional protection, whether that be legislation, a formal intergovernmental agreement or an informal arrangement.

115    Thirdly, after noting that Mr Spencer’s case was primarily conducted by reference to the 1997 NHT Agreement, Mr Lancaster SC drew the Court’s attention to the following features of that Agreement:

(1)    it is made plain in the recitals that the agreement is one between two independent polities and that it provided a broad framework for future actions to be taken by each of those individual polities without there being imposed any requirement or obligation to do so;

(2)    relevant provisions in cl 5.2 regarding the development and implementation of that framework did not impose any requirement on the State, including any requirement to enact legislation; and

(3)    the Bushcare Program referred to in Attachment A did not attract any separate agreement which required the State to acquire any property and it was left to the State to decide how it would implement the framework described in the 1997 NHT Agreement.

116    These matters were put in support of the Commonwealth’s amended notice of contention which challenged the primary judge’s finding in the first sentence of [488] (ie that the 1997 NHT Agreement imposes terms and conditions on New South Wales requiring it to enact legislation to decrease vegetation clearance, and increase retention of native vegetation).

117    On the issue of the alleged informal arrangements, it was submitted that the exchange of ministerial letters upon which this aspect of Mr Spencer’s case was put on the appeal had not been run below, notwithstanding that the issue of the alleged informal arrangement provided the foundation for the initial decision of the High Court to remit the case to the Federal Court.

118    The Commonwealth submitted that, notwithstanding the primary judge’s reference to the Commonwealth having obtained a benefit in [580] of her reasons for judgment, her Honour was correct to find at [599] and [600] that there was no bridge or connection between any informal arrangement and the Commonwealth’s interest in Australia complying with its international law obligations under the Kyoto Protocol.

119    The Commonwealth defended the primary judge’s finding that Mr Spencer had failed to discharge his onus of establishing the alleged informal arrangement.

120    The Commonwealth developed that part of its amended notice of contention which challenged the primary judge’s finding that there was a “taking”. The Commonwealth also submitted that, having regard to relevant statements in the Plain Packaging Case, even if the effect of the State laws was to diminish Mr Spencer’s property by limiting his right to clear his land of native vegetation and to limit his right to grant a profit-à-prendre in respect of the timber on his land or other rights recognised by the Conveyancing Act, this did not amount to an acquisition for the purposes of s 51(xxxi) of the Constitution.

121    It was submitted that Newcrest Mining did not assist Mr Spencer’s case in the circumstances where the Commonwealth had no radical title in Mr Spencer’s fee simple or leasehold land.

122    The Commonwealth submitted that the corollary of its submission that the Commonwealth imposed no requirement on the State to acquire property other than on just terms was that the State acted entirely independently when it enacted the relevant State laws. Mr Lancaster SC emphasised that this necessarily meant that there was no chain of causation which would render the Commonwealth liable to Mr Spencer. Furthermore, he submitted that, because there was no “acquisition” within the meaning of s 51(xxxi), there was no basis for Mr Spencer’s claim that the Commonwealth had been unjustly enriched by such an acquisition.

6. State’s submissions summarised

123    Mr Kirk SC appeared with Ms Rao for the State. It is unnecessary to summarise the State’s submissions at any length as they are broadly reflected in the Court’s reasoning below. It is desirable, however, to highlight what might be described as the primary submissions made on behalf of the State.

124    The primary focus of the State’s oral address related to that part of its notice of contention which challenged the primary judge’s finding that there had been a “taking” of Mr Spencer’s property. The following five topics were addressed:

(1)    the nature of Mr Spencer’s “property”;

(2)    the concept of “acquisition”;

(3)    the concept of a “taking”;

(4)    the proposition that, even if the Commonwealth laws or the four relevant intergovernmental agreements were invalid, that would not mean that the relevant State laws were also invalid; and

(5)    Mr Spencer’s claim for damages.

125    The State relied upon various extracts from individual judgments in the Commonwealth v Tasmania [1983] HCA 21; 158 CLR 1 (Tasmanian Dam), with particular reference to what was said concerning s 9(1)(e) of the World Heritage Properties Conservation Act 1983 (Cth), which prevented use of the world heritage site. Reliance was placed on observations at 145-146 per Mason J, with particular reference to the notion of “sterilisation”; at 181 per Murphy J and at 247-248 per Brennan J, who described the US approach to “regulatory taking”.

126    Mr Kirk SC also emphasised the significance of the Plain Packaging Case and the requirement that any benefit be of a proprietary nature. As to Mr Spencer’s reliance on Smith and the proposition that the diminution of rights can be a taking, Mr Kirk SC cited Attorney-General for the Northern Territory v Chaffey [2007] HCA 34; 231 CLR 651 at [21], [22] and [30].

127    Mr Kirk SC submitted that if Mr Spencer was correct, all regulatory laws would be vulnerable to challenges in respect of s 51(xxxi), which he said would be inconsistent with what was said by three judges in Tasmanian Dam.

128    The State emphasised the following three points:

(1)    there was no taking, because any taking of Mr Spencer’s property rights occurred prior to the impugned State vegetation clearance laws;

(2)    any affectation of Mr Spencer’s property rights was within the notion of defeasibility and the susceptibility of rights to modification as at 1 January 1998; and

(3)    even if the Commonwealth induced New South Wales to pass the relevant laws, there was a long prior history of regulation in the State of native vegetation clearance, thus there was no causation.

129    Mr Kirk SC submitted that the Court should be wary of being too definitive in this area. He placed some reliance on the High Court’s recent decision in Cunningham v Commonwealth of Australia [2016] HCA 39; 90 ALJR 1138 at [32], [43] and [46].

130    Two other cases of particular significance were, he submitted, Telstra Corporation Limited v Commonwealth [2008] HCA 7; 234 CLR 210 (Telstra) and the Full Court’s decision in Esposito. With regard to Telstra, Mr Kirk SC emphasised the significance which the High Court placed on the fact that Telstra’s ownership of the PSTN and the local loop was always subject to access obligations, from the time that Telstra first became a corporation in 1991. He emphasised that the High Court did not conduct any detailed analysis of subsequent legislation which also created access rights and obligations in respect of Telstra and that it was sufficient to note that access regimes of one form or another were always in place. Mr Kirk SC said that the primary judge’s approach was inconsistent with this analysis because, although at one point the primary judge said that it was unnecessary to descend into detail, subsequent findings were made by her Honour to the effect that the 1997 NVC Act and the 2003 NV Act tightened the controls on clearing native vegetation.

131    As to Esposito, reference was made to the significance of the fact that the relevant land had been subject to New South Wales planning laws and controls since at least 1979 and that the same could be said here. Reference was made to [65] of the Full Court’s decision.

132    Mr Kirk SC then traced the history of the vegetation control regulations in the State, commencing with the Soil Conservation Act and then SEPP46, which commenced in August 1995. He submitted that, on 1 January 1998, the entirety of Mr Spencer’s land was subject to relevant vegetation and controls imposed under the 1997 NVC Act. He summarised the nature of those controls and limitation.

133    The Court’s attention was drawn to the primary provisions in the 1997 NVC Act, which relevantly replaced the controls and restrictions in relation to native vegetation clearance imposed by the Soil Conservation Act and SEPP46, subject to transitional provisions.

134    It was submitted that the primary judge’s analysis and findings in [229]-[231] were inconsistent with Esposito. The State was critical of her Honour’s finding at [545] that the more recent laws represented an “increase” in the degree of control or regulation which, it was submitted, displayed an analysis which was inconsistent with the approach in Telstra.

135    It was submitted that, if in fact the Nature Conservation Trust had purchased Mr Spencer’s land, it would have been subject to the same limitations and controls as any other person because the relevant legislation bound the Crown.

136    Finally, brief submissions were made concerning Mr Spencer’s claim for damages against the State.

7. Mr Spencer’s application to adduce further evidence under s 27 of the FCA Act

137    Towards the end of his oral address in chief, and late in the morning on the second day of the appeal, Mr Spencer made an application under s 27 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) to adduce further evidence in the appeal. The material involved more than 100 pages of documents, which were not consecutively paginated. The Court was not taken to each individual document and the proposed tender was put by reference to the bundle of documents as a whole. It is apparent that many of the documents related to Dr David Kemp, when he was Commonwealth Minister for the Environment and Heritage. These documents comprised ministerial correspondence to and from Dr Kemp, media releases in which he was involved, a transcript of a press conference which he gave and ministerial minutes to him from his Department, plus attachments. Mr King explained that some of the material was in evidence below, but some was not. He said that he was unable at that time to identify which documents had not been put in evidence below. All the material had been discovered for the purposes of the proceeding below. The Court was told that Mr Spencer wished to rely on the material in support of his appeal against the primary judge’s finding that he had not discharged his onus of proof below concerning the existence of the alleged informal arrangement.

138    Mr Spencer applied for the Court to exercise its discretion under s 27 of the FCA Act by reference to the following primary matters:

(1)    the fact that Mr Spencer represented himself below;

(2)    the fact that copies of two outlines of written submissions used in earlier interlocutory proceedings were placed before Mortimer J, which submissions were directed to the documents which Mr Spencer now wished to add to the appeal books, but Mr Spencer had not tendered them below;

(3)    some (but not all) of the documents were put in evidence below;

(4)    all the documents had been discovered; and

(5)    fairness and justice required the Court to exercise its discretion favourably in order that the appeal relating to the alleged informal arrangement proceeded on a full evidentiary basis.

139    Both the Commonwealth and the State opposed the interlocutory application. Both complained about the late receipt of the material the subject of the application (the Court was told from the Bar table that the material was received after 5:00 pm on the last business day before the hearing commenced). Both also submitted that they would suffer prejudice if the material was now admitted by reference to the fact that, if they had known that the material was to be relied upon by Mr Spencer, they would have had to consider what, if any, evidence they may have wished to adduce in response and, more particularly, it could have affected their cross-examination of relevant witnesses, including Dr Kemp. Both also submitted that no explanation had been offered as to why the material which predated the trial below had not been adduced in evidence. Ms Rao, who presented this part of the State’s case, also emphasised the fact that the primary judge had specifically drawn Mr Spencer’s attention to the need for him to put all relevant documents to Dr Kemp which he intended to rely upon.

140    In reply on the interlocutory application, leave was sought to have Mr Spencer give oral evidence to explain why he had not sought to rely on many of the documents below. The Court declined to grant such leave. It also declined to admit into evidence under s 27 of the FCA Act any document in MFI-3 which was not in evidence below. The Court indicated that it would give its reasons for these rulings in its final reasons for judgment. These are those reasons.

141    Having regard to the submissions made by both the Commonwealth and the State concerning the prejudice which they would suffer if the new material was now admitted into evidence in the appeal, we are unpersuaded that the matters raised by Mr Spencer should prevail. We accept that such prejudice would flow, particularly against the background of the fact that many of the documents relate to Dr Kemp, who was called as a witness, and Mr Spencer was told by the primary judge that he had to put to Dr Kemp any documents he was relying on relating to Dr Kemp upon which he would make submissions. We also accept the submission of both respondents that if the new material had been put in evidence below, they would have turned their minds to the issue whether they needed to rely on additional evidence in response. The prejudice to the respondents is a sufficient basis for rejecting the proposed tender in respect of material which was not in evidence below.

142    Accordingly, we declined to admit the new material into evidence. Furthermore, because of the prejudice to the respondents, which provided the basis for our ruling under s 27 of the FCA Act, there was no point having Mr Spencer explain why he did not adduce the evidence below because any such explanation could not overcome the prejudice to the respondents.

8. Consideration of the appeal

(a) The formal intergovernmental agreements

143    Section 51(xxxi) of the Constitution provides:

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to…the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws

144    A Commonwealth law with respect to the acquisition of property will be invalid unless the acquisition is to be on just terms. Before the primary judge, Mr Spencer sought to demonstrate that the NRM Act and the NHT Act, when considered with either the four formal intergovernmental agreements, or an alleged informal intergovernmental agreement, were laws with respect to the acquisition of property. He submitted that the Commonwealth and NSW took “joint action” to acquire property by agreeing that the State would impose restrictions on vegetation clearance through the State’s enactment of the 1997 NVC Act and the 2003 NV Act. He argued that as his property was not acquired on just terms, the laws were invalid.

145    The primary judge held at [470]:

470.     …[A] purpose shared by the Commonwealth and the State, that the State should acquire property on other than just terms, will not invalidate federal grants made under s 96 which may assist a State in achieving that purpose, so long as the terms and conditions on the grant do not purport to require or enforce that outcome.

146    Her Honour went on to hold that s 51(xxxi) of the Constitution would not be engaged unless the intergovernmental agreements required New South Wales to acquire property as part of any native vegetation clearance regime on other than just terms.

147    The primary judge considered the terms of the NRM Act and the NHT Act. Those Acts allowed the Commonwealth to make agreements with the States for the funding of projects to be carried out by the States. It was not in dispute that the provision of such financial assistance was supported by s 96 of the Constitution. Her Honour held at [483] – [484] that neither the NRM Act nor the NHT Act themselves contemplate, let alone require, that a State will acquire property, nor do they say anything about the terms on which any acquisition of property undertaken by the State will occur. That finding has not been contested in the appeal.

148    The four formal intergovernmental agreements were the 1997 NHT Agreement, the 2000 Salinity Agreements, the 2002 Salinity Agreement and the 2003 NHT Agreement. As to the first of these agreements, the primary judge held at [488]:

488.     In my opinion the 1997 NHT Agreement does impose terms and conditions on New South Wales, requiring it to enact legislation to decrease vegetation clearance, and increase retention of native vegetation. However, unlike Magennis the agreement says nothing about the content of the legislation, and certainly nothing about New South Wales having to acquire property as part of any native vegetation clearance legislative regime.

(Emphasis added.)

149    Her Honour added at [493]:

493.     …I have concluded that there was a requirement in the 1997 NHT Agreement for New South Wales to enact native vegetation clearance legislation but no requirements concerning acquisition…

150    In respect of the 2000 Salinity Agreement and the 2002 Salinity Agreement, the primary judge also concluded at [489] that there were “no such requirements” for the acquisition of property. Her Honour made a similar finding at [492] with respect to the terms of the 2003 NHT Agreement.

151    In summary, her Honour held that as the intergovernmental agreements did not require NSW to acquire property as part of any native vegetation clearance regime, s 51(xxxi) was not engaged.

152    In the appeal, Mr King’s submissions challenged her Honour’s conclusion concerning the 1997 NHT Agreement, but did not address the 2000 and 2002 Salinity Agreements or the 2003 NHT Agreement. Mr King submitted that her Honour was wrong to hold that s 51(xxxi) of the Constitution would not be engaged unless the 1997 NHT Agreement required the State to acquire property as part of any native vegetation clearance regime. He submitted, relying on Magennis, that it was only necessary to demonstrate “joint action” between the Commonwealth and State to acquire property. The Commonwealth submitted that it was necessary for Mr Spencer to demonstrate that the Commonwealth required the State to acquire property on other than just terms, relying on ICM at [46]. The State relied on the Commonwealth’s submissions on this issue. Mr King submitted that ICM does not establish the principle contended for by the State.

153    Magennis was the first in a series of cases concerning a scheme between the Commonwealth and the States for settlement of land upon discharged soldiers after World War II. The Commonwealth passed the War Service Land Settlement Agreements Act 1945 (Cth) authorising the execution of agreements with the States substantially in the form contained in schedules to the legislation. The scheme was to be partly funded by the Commonwealth. The form of the agreement with NSW, Victoria and Queensland contained a clause that the State “shall” acquire compulsorily or by agreement, land at a value not exceeding its value on 10 February 1942. The NSW Parliament passed legislation authorising the agreement. The plaintiff had spent money improving its land since February 1942, greatly increasing its value, but NSW sought compulsorily to acquire the land at its February 1942 value. The plaintiff argued that the acquisition was required by s 51(xxxi) of the Constitution to be on just terms, and that the terms were not just.

154    In Magennis, Latham CJ at 398-399 said that the only question was whether the Commonwealth and the State had “by joint action” succeeded in evading the Constitutional obligation of the Commonwealth to provide just terms when it made a law for the acquisition of property. Justice Williams (with whom Rich J agreed) described the agreement as a “joint scheme” (at 422) and a “joint venture” (at 424) between the Commonwealth and the State, the essence of which was the acquisition of land.

155    In Magennis, Latham CJ held at 401-402:

The constitutional provision is not limited in terms to laws providing for the acquisition of property by the Commonwealth itself. The words are general “with respect to the acquisition of property.'' It is obvious that the constitutional provision could readily be evaded if it did not apply to acquisition by corporation constituted by the Commonwealth or by an individual person authorized by a Commonwealth statute to acquire ·property. Further, the present case shows that the constitutional provision would be quite ineffective if by making an agreement with a State for the acquisition of property upon terms which were not just the Commonwealth Parliament could validly provide for the acquisition of property from any person to whom State legislation could be applied upon terms which paid no attention to justice.

…

The provisions in the schedule to the Commonwealth Act are provisions of an agreement and not of a statute. It is true that the Act is a law authorizing only the execution of the agreement, but the whole subject matter of the agreement is the acquisition of property upon certain terms and conditions for certain purposes. The provisions of the agreement are directed to the acquisition of property and the agreement becomes effective in achieving its objective of the settlement of discharged servicemen only when property has been acquired. I can see no reason whatever for holding that a law approving an agreement of such a character as this is not a law with respect to the acquisition of property.

(Emphasis added.)

156    Justice Williams (with whom Rich J agreed), speaking of s 51(xxxi) of the Constitution, said at 423:

In my opinion the paragraph applies to all Commonwealth legislation the object of which is to acquire property for a purpose in respect of which the Commonwealth Parliament has power to make laws. It is immaterial whether the acquisition is to be made by the Commonwealth or some body authorized to acquire property by the Commonwealth or by a State by agreement with the Commonwealth. The Commonwealth legislation is invalid unless it provides for the acquisition of the property on just terms by whatever machinery the acquisition is to be brought about.

157    Justice Webb held at 429-431:

It speaks of a law with respect to the acquisition of property. As the Commonwealth Parliament is a plenary legislature these words should be given their fullest meaning consistent with other provisions of the Constitution. They are broad enough to include an acquisition by the State exercising its powers of acquisition by agreement with the Commonwealth, and should, I think, be held to extend to such acquisition (see McClintock v. The Commonwealth).

…

To sum up: If the agreement expressly stated that its purpose was to secure land for discharged soldiers at less than fair prices it would be impossible to hold that the agreement and the Commonwealth statute antecedently authorizing it did not amount to a purported exercise of the defence power under par. (vi.) invalidated by par. (xxxi.) of the Commonwealth Constitution. But invalidity is not avoided because that purpose is implied and not expressed.

(Emphasis in original.)

158    In Magennis, the majority held that not only was the Commonwealth legislation and the intergovernmental agreement invalid, but the State legislation was inoperative. As Webb J put it at 430, properly construed, the State legislation contemplated a valid agreement.

159    Following the judgment in Magennis, the NSW legislation was amended by deleting all reference to any agreement with the Commonwealth, and all reference to any direct or indirect participation of the Commonwealth in any scheme of soldier settlement. In Pye, the High Court held at 80 that:

[T]he effect of [the amendments] is to make it perfectly clear that all relevant legislation of the Parliament of New South Wales is intended to take effect unconditioned by any Commonwealth legislation and irrespective of the existence of any agreement between the Commonwealth and the State of New South Wales. To adopt the language of Webb J already quoted, it cannot now be correct to say that, properly construed, the State Acts contemplate the existence of a valid agreement or of any agreement or scheme.

160    In that case, the High Court considered an allegation that an acquisition had been made by “arrangement” with the Commonwealth under which the Commonwealth would decide who would be settled and who would finance the settling. The Court said at 82:

It is impossible to maintain that the validity of the resumption by the State can be affected if it chooses to cooperate with the Commonwealth in the matter of closer settlement or to accept financial assistance from the Commonwealth.

161    The High Court then considered the plaintiff’s allegation that the Commonwealth was paying and intended to continue paying money to NSW upon terms that the State would use the money for the purpose of acquiring lands at a price below their real value. The Court said at 83:

The argument really comes to this. The Commonwealth cannot itself acquire land except upon just terms. A State can resume land on any terms, just or unjust, authorised by its parliament. But the Commonwealth is not authorised by section 96 or any other provision of the Constitution to provide money for a State in order that the State may resume the land otherwise than on just terms. This is the very argument which was rejected in Victoria v. The Commonwealth (1926) 38 CLR 399; see also South Australia v. The Commonwealth (1942) 65 CLR 373 at p. 417, where Latham. C.J. said: -“The Commonwealth may properly induce a State to exercise its powers…by offering a money grant.”

162    In Tunnock v Victoria [1951] HCA 55; 84 CLR 42 (Tunnock), the case was conducted on the basis that the judgment in Magennis rendered the agreement with Victoria under the War Service Land Settlement Agreements Act 1945 (Cth) invalid. The High Court distinguished the Victorian legislation from the NSW legislation considered in Magennis. Justice McTiernan held at 50 that the Victorian legislation embodied a scheme which was the creation of the State legislature and did not merely adopt the scheme embodied in the agreement. Justices Williams and Webb held at 54 – 57 that there had been an independent exercise of the powers of the Victorian Parliament and that the validity of the operative parts of the legislation was not dependant on the validity of the agreement. Therefore, the Victorian legislation was not inoperative and the compulsory acquisition was valid.

163    In ICM, the Commonwealth submitted that the legislative power of the Commonwealth under s 96, or s 96 with s 51(xxxvi), extends to granting financial assistance to a State for the purpose of the State acquiring property on other than just terms. The Commonwealth argued that, to the extent that its submission was contrary to Magennis, that case should be reconsidered and overruled, and the better view was that indicated in Pye. Chief Justice French, Gummow and Crennan JJ refused leave to re-open Magennis, saying at [40] that the reasoning on which the judgment was based was sound. Justice Heydon agreed at [174] with their Honours on this issue.

164    In the appeal, the Commonwealth submitted that at [46] of ICM, their Honours stated a Constitutional principle that an intergovernmental agreement for the provision of financial assistance must require the State to acquire property on other than just terms if s 51(xxxi) is to apply to an acquisition made by the State. The effect of this submission is that there are two elements that must be satisfied before s 51(xxxi) can apply where an acquisition is made by a State: firstly, there must be a requirement in an intergovernmental agreement that the State acquire property; and, secondly, there must be a requirement that the property be acquired on unjust terms. The relevant passages from ICM, including [46], are set out at [113] above.

165    In our view, the statement in [46] of ICM does not establish the principle contended for by the Commonwealth. In that passage, French CJ, Gummow and Crennan JJ rejected the Commonwealth’s submission that s 96 and s 51(xxxvi) permit the grant of financial assistance to a State on terms requiring the State to acquire property on other than just terms. The passage describes a limitation on Commonwealth legislative power under s 96 and s 51(xxxvi), a limitation imposed by s 51 (xxxi). The passage does not purport to define the circumstances in which s 51(xxxi) is not engaged.

166    However, support for at least the first element of the Commonwealth’s submission, that there must be a requirement in a funding agreement that the State acquire property, is found at [36] of ICM. Section 96 provides that the Parliament may grant financial assistance to the States “on such terms and conditions as the Parliament thinks fit”. Their Honours held that constraints imposed by Constitutional prohibitions or guarantees will be directed to the range of permissible terms and conditions of an agreement, rather than their underlying purpose. Heydon J at [174] agreed with this passage. Thus, s 51 (xxxi) is not engaged merely because the Commonwealth provides funds to a State intending that the State should acquire property on terms that are unjust. However, the terms and conditions of an intergovernmental agreement designed to achieve that purpose may impose impermissible constraints on a State which enliven s 51(xxxi).

167    In Victoria v Commonwealth [1957] HCA 54; 99 CLR 575 (the Second Uniform Tax Case), Dixon CJ said at 605 that s 96 is “but a power to make grants of money and impose conditions on the grant”. In Attorney-General (Vic); (Ex rel Black) v Commonwealth [1981] HCA 2; 146 CLR 559, Gibbs J referred at 593 to “a condition imposed under s 96” and Wilson J at 650 to s 96 operating to “impose conditions to a grant of financial assistance” (emphasis added). The expression “on such terms and conditions” in s 96 refers to requirements imposed upon a State in return for the provision of Commonwealth financial assistance. The use of the word “impose” does not suggest that a State can be forced to accept financial assistance on terms and conditions sought to be imposed by the Commonwealth: see, for example, the Second Uniform Tax Case at 605, 623; Victoria v Commonwealth [1975] HCA 52; 134 CLR 338 at 357-358. However, by accepting a grant, a State may bind itself to act in accordance with terms and conditions attached to the grant.

168    In Magennis, Latham CJ said at 401 that s 51(xxxi) would be ineffective if “by making an agreement with a State for the acquisition of property” (emphasis added) the Commonwealth could validly provide for the acquisition of property on terms which were not just. Justice Williams said it was “immaterial whether the acquisition is to be made ... by a State by agreement with the Commonwealth” (emphasis added). In Magennis, where the terms and conditions of the intergovernmental agreement required the State to acquire property on less than just terms, the agreement was invalid. In ICM, French CJ, Gummow, Crennan and Heydon JJ approved the reasoning of the majority in Magennis. Their Honours must be understood to have accepted that the terms and conditions of an intergovernmental agreement for the provision of funding must at least require a State to acquire property in order for s 51(xxxi) to be engaged.

169    Esposito also supports the first element of the Commonwealth’s submission. Addressing an argument that the funding agreement there between the Commonwealth and the State, which provided the funds to acquire the appellant’s land, was a circuitous device by which the Commonwealth and the State could, by combination, avoid the prohibition in s 51(xxxi), the Full Court said:

66    It is true, as all parties before us accepted, that the Commonwealth may not impose as a condition on a s 96 grant to a State a requirement that it acquire property other than on just terms…This principle would apply in the current case to prevent the conclusion between the Commonwealth and New South Wales of an agreement under which the Commonwealth would fund acquisitions by New South Wales of land for the purposes of the Natural Heritage Act on terms which were not just within the meaning of s 51(xxxi). But that, for the reasons which follow, is not what has happened in this case.

67    There are a number of difficulties which confront this argument at the outset. The principle (sic) one is that New South Wales did not use any of its powers to acquire land compulsorily nor was it required to do so under the agreement. It merely put the Foundation in funds to make offers to acquire the land. There was no compulsion required and none imposed. The appellants were not obliged to accept the offers which were made and, indeed, many members of the class did not. There is thus missing from this limb of the appellants' case any compulsory acquisition which might fall within s 51(xxxi). It is a critical difference with Magennis.

(Emphasis added.)

170    It is evident that the Full Court in Esposito proceeded on the basis that an essential element in such a case was that the Commonwealth impose a requirement on the State to acquire property.

171    The High Court observed in Pye at 83 that the State can acquire property on any terms, just or unjust, as it chooses. On the other hand, as Latham CJ said in Magennis at 401, the Constitutional provision under s 51(xxxi) would be ineffective if the Commonwealth could evade the just terms requirement by making an agreement for a State to acquire property on other than just terms. Where a State acquires property on unjust terms using financial assistance provided by the Commonwealth under s 96, the question of whether s 51(xxxi) is engaged lies at the intersection of these principles. Where a Commonwealth law provides for a grant of financial assistance on terms and conditions, the Commonwealth law takes its character from the terms and conditions imposed upon the grant. In the absence of a term or condition of a funding agreement imposing a requirement that a State must acquire property, it is for the State to choose how it implements the agreement. If a State does not bind itself under the agreement to acquire property, but it then decides to carry out the terms of the agreement by acquiring property, it engages in a legally independent exercise of the State’s legislative power. An intergovernmental agreement for the provision of financial assistance must at least require a State to acquire property if s 51(xxxi) is to be enlivened.

172    That leaves the question of whether there is a further requirement that a State must acquire property on unjust terms before s 51(xxxi) can apply. That was the situation in Magennis, where the 1945 agreement required NSW to acquire property at 1942 values. In ICM, French CJ, Gummow and Crennan JJ said at [36] that the constraints imposed by Constitutional prohibitions or guarantees will be directed to the range of permissible terms and conditions, but left open the question of what terms and conditions are permissible in the context of s 51(xxxi). Their Honours approved the reasoning in Magennis, but were not required to, and did not, examine whether the outcome would necessarily have been the same if the agreement required the State to acquire property, but left it to the State to decide the terms of acquisition, and the State then legislated to make the acquisition on unjust terms. Would the Commonwealth and NSW have then, as Latham CJ put it in Magennis at 398-399, by joint action succeeded in evading the constitutional obligation of the Commonwealth to provide just terms compensation? Pye and Tunnock indicate that there is no such evasion where the State engages in an independent exercise of its powers. If an intergovernmental agreement does not require a State to acquire property on unjust terms, the State engages in a legally independent exercise of its powers if it chooses to acquire property without providing just terms compensation. Unless the terms and conditions of an intergovernmental agreement for the provision of financial assistance by the Commonwealth under s 96 of the Constitution require a State to acquire property on other than just terms, s 51(xxxi) will not apply to an acquisition of property by the State.

173    In respect of the 1997 NHT Agreement, the primary judge correctly identified the initial question as whether the terms and conditions of the Agreement required the State to enact legislation which acquired property, or enabled the acquisition of property. Her Honour held that they did not.

174    In the appeal, Mr King next submitted that her Honour’s finding at [493] that the 1997 NHT Agreement required the State to enact native vegetation clearance laws was a finding that the State was required to enact the very legislation, namely the 1997 NVC Act and the 2003 NV Act, which was enacted. Mr King submitted that, having made that finding, her Honour erred in failing to find that the 1997 NHT Agreement required the State to acquire property, as the 1997 NVC Act and the 2003 NV Act themselves affected an acquisition of Mr Spencer’s property. That submission should be considered together with the ground of the Commonwealth’s notice of contention which challenges the primary judge’s finding that the 1997 NHT Agreement imposed terms and conditions requiring the State to enact legislation to decrease vegetation clearance and increase retention of vegetation.

175    The NHT Act allowed financial assistance to be provided to the States. Section 19(2) of the NHT Act provided that any terms and conditions were to be set out in a written agreement between the Commonwealth and the State.

176    Clause 4.1 of the 1997 NHT Agreement stated that the Agreement established a “framework” under which the parties would work cooperatively for the purposes of s 19 of the NHT Act. Clause 5.1 provided that the “Attachments” would be “developed” consistently with the terms of the Agreement and would become part of the Agreement. Clause 5.2 provided that Attachment A shall relate to the “arrangements” for managing particular programs or other activities agreed in accordance with cl 5.1. Under cl 5.2, Attachment A was to include, but not be limited to, goals, objectives and outcomes relevant to each program or activity, a strategic framework in which progress towards identified outcomes was to be achieved and actions each party was expected to undertake commensurate with their responsibilities and financial arrangements. Clause 5.3 stated that Attachment B contained provisions for financial assistance to the States in accordance with the Agreement.

177    Clause 7 of the 1997 NHT Agreement dealt with financial arrangements. Clause 7.2 provided that financial arrangements would be determined in accordance with principles that included that the provision of funding by the Commonwealth was subject to the agreed objectives, outcomes and milestones described in Attachment A being progressively met.

178    Attachment A described eleven programs, including “Bushcare: The National Vegetation Initiative”. The national goal of the Bushcare Program was stated in Attachment A to be “to reverse the long-term decline on the quality and extent of Australia’s native vegetation cover”, including by “conservation of remanent native vegetation.” The primary outcomes to be achieved related to “on-ground increases in the quality and extent of native vegetation”. Another outcome was to “avoid or limit any further broad-scale clearance of native vegetation…to those instances in which regional biological diversity objectives not compromised.”

179    Under the description of the Bushcare Program in Attachment A, the State was to adopt a State-wide “whole of government” approach to the conservation and sustainable management of native vegetation. There was to be a shift from a range of different existing permit and licensing procedures, to a situation whereby clearing was allowed without a permit if it conformed to a Regional Vegetation Management Plan approved by the Government. The State was to protect and promote remnant vegetation of high conservation value and to prevent inappropriate native vegetation clearance using measures which included “enactment of vegetation conservation legislation which will repeal/rationalise existing native vegetation controls and provide for a coordinated State-wide approach”.

180    Attachment B to the 1997 NHT Agreement set out the terms and conditions under which financial assistance was to be provided to the State. Clause 3.1 provided the payments made to the State would be in accordance with a signed financial agreement as outlined in the pro forma agreement annexed to Attachment B. Clause 3.5 allowed the Commonwealth to defer payment of an instalment until the State had completed a relevant part of a project or program to the satisfaction of the Commonwealth. The pro forma financial agreement provided, relevantly, for the insertion of the name of the relevant program, a description of the scope and timeframes for the program, the instalments to be paid against progress of completion of the outputs and outcomes specified, and any special terms and conditions.

181    The National Landcare Program provisions in Attachment A stated that the State was committed to the conservation and sustainable management of native vegetation. The statutory basis for this commitment would be “a new Native Vegetation Conservation Act” which would require that native vegetation clearing be subject to comprehensive environmental assessment and permit clearing where consistent with a Regional Vegetation Management Plan.

182    It may be seen that under the Bushcare Program contemplated under the 1997 NHT Agreement, the State was to reform its legislative regime in order to better protect and promote remnant vegetation of high conservation value and to prevent inappropriate native vegetation clearance. The State was to enact vegetation conservation legislation which would repeal or rationalise existing native vegetation controls and provide for a coordinated State-wide approach. Under the National Landcare Program, the State was to enact new vegetation clearance legislation imposing controls on vegetation clearance. Contrary to Mr King’s submission, there was nothing in the 1997 NHT Agreement which required the State to enact vegetation conservation legislation in the form of the 1997 NVC Act or the 2003 NV Act. The form of the new legislation and the vegetation clearance controls was left up to the State. Further, the terms and conditions of the 1997 NHT Agreement did not require the State to acquire property or to pass legislation which would have the effect of acquiring property. It would have been open to the State to implement the objectives of the Bushcare Program and the National Landcare Program by, for example, enacting legislation paying landholders subsidies to retain native vegetation, or requiring that any clearing be offset by a greater amount of planting elsewhere.

183    These conclusions are enough to require rejection of Mr King’s argument that the 1997 NHT Agreement, by its operation with the State laws, brought s 51(xxxvi) of the Constitution into play. However, the Commonwealth’s contention that the primary judge erred in finding that the 1997 NHT Agreement imposed terms and conditions requiring the State to enact legislation to decrease vegetation clearance and increase retention of vegetation should be considered. The primary judge’s conclusion at [488] that the 1997 NHT Agreement did impose such terms and conditions was based on the terms of the Bushcare Program.

184    The Commonwealth submitted that the 1997 NHT Agreement was concerned with establishing a framework, or principles, for future agreements, rather than imposing any requirements on the State. In particular, the Commonwealth submitted that there was no concluded agreement to implement the Bushcare Program and there was merely an agreement to agree in the future as to its terms. The Commonwealth also submitted that there was no evidence of any subsequently concluded Bushcare Program.

185    There is force in the Commonwealth’s submissions. The 1997 NHT Agreement was not an agreement binding the State to implement any finalised version of the Bushcare Program. The Agreement envisaged that there would be a further agreement based on the pro forma financial agreement annexed to Attachment B, which would require agreement as to the amount of funding the Commonwealth agreed to provide and the scope of the Bushcare Program the State agreed to implement. These were matters that the 1997 NHT Agreement envisaged would be negotiated in the future.

186    The primary judge’s conclusion at [488] that the 1997 NHT Agreement did impose terms and conditions on the State requiring it to enact legislation to decrease vegetation clearance and increase retention of native vegetation cannot be supported. Such a conclusion might have been supported if there was a concluded pro forma financial agreement for the Bushcare Program, but the Court was informed that no such agreement was in evidence before the primary judge.

187    Mr Spencer has not demonstrated error in the primary judge’s conclusion that the terms and conditions of the 1997 NHT Agreement did not require the State to acquire property. Section 51(xxxi) of the Constitution was therefore not engaged by that Agreement. In the appeal, Mr Spencer did not rely on any of the other three formal intergovernmental agreements.

(b) The alleged informal agreement

188    Mr King submitted that the primary judge erred in finding that Mr Spencer had not discharged his burden of proving that there was an “informal arrangement” of the kind pleaded by him. In order to consider that submission, it is necessary to describe more fully the way Mr Spencer’s argument was put below and her Honour’s findings upon that argument.

189    The primary judge described the terms of the informal arrangement alleged by Mr Spencer as follows at [328]:

i.    The first respondent would propose to the Kyoto conference of parties to the UNFCCC that the target of emission reduction by Australia by 2010 be 108% of the 1990 level;

ii.    that the first respondent's proposed reduction in emissions would be contingent on it being able to count as a credit any reduction in levels of emissions attributable to levels of land clearing being lower than in 1990;

iii.    The second respondent would ensure that land clearing on private land in its territory was restricted to an extent which would enable the overwhelming component of the reduction in carbon emissions necessary to meet the target of 108% of 1990 emissions be achieved by the prevention of land clearing;

iv.    The second respondent would comply with National Monitoring conditions imposed by the UNFCCC Compliance Committee;

v.    The first respondent would provide the second respondent with funds through the Natural Heritage Trust fund to enable it to prevent land clearing;

vi.    The question of compensation for affected land holders in the territory of the second respondent was the concern of the second respondent and not the first respondent;

vii.    In the event that the first respondent achieved the outcomes in (i) and (ii) hereof and the second respondent met the requirement in (iii) hereof, the second respondent would not be otherwise required by the first respondent to achieve reductions in carbon emissions to meet the first respondents commitment under the Kyoto protocol.

(Emphasis added.)

190    The informal arrangement was alleged by Mr Spencer to be evidenced by ministerial committee minutes from the Council of Australian Governments (COAG) from 1993 to 2005, the special minutes of COAG in a series of meetings convened in November 1997 leading up to and during the Kyoto Protocol conference commencing in December 1997 and by other documents.

191    Mr Spencer alleged that the Commonwealth and State had not made a discovery of all documents directly relevant to the alleged informal arrangement. However, her Honour rejected Mr Spencer’s complaints about the inadequacy of discovery.

192    Her Honour referred at [332] to a document in evidence headed “Council of Australian Governments’ Meeting 7 November 1997, National Greenhouse Strategy and International Negotiations: Talking Points”. Her Honour said that the document appeared to have been created for the use of the Prime Minister or a senior minister for the COAG meeting in November 1997, shortly after the signing of the 1997 NHT Agreement. The document referred to the need for State cooperation, to the significant Commonwealth funding to be applied to the initiatives concerning greenhouse gas emissions, and to advice received by the Commonwealth that it had the necessary legislative power to implement greenhouse measures in the event that State cooperation was not forthcoming. The document stated that one of the options if the COAG meeting refused to endorse a uniform mandatory approach across the country was to respond as follows:

...in many of these areas, the voluntary approach is not giving satisfactory results. Clearly, the Commonwealth would prefer a voluntary approach to these issues, however we cannot allow action to slip unnecessarily.

193    The primary judge said at [334] that this was the kind of comment that Mr Spencer sought to seize upon to demonstrate an informal arrangement. Her Honour said that the problem was that these comments had little, if any, probative value. There was no evidence as to the author of the document or the recipient of the document. More importantly, whether the talking points were ever delivered, and whether they were delivered in this form was unknown. Her Honour concluded that it was not possible for the Court to rely on documents such as the Talking Points document to prove, or contribute to proving, the existence of a plan that the Commonwealth would seek to achieve its protocol emissions’ targets through State vegetation clearance controls.

194    The primary judge found the evidence of Dr David Kemp, the Federal Minister for Environment and Heritage from 2001 to 2004, to be reliable. Dr Kemp gave evidence that:

[A]ll the arrangements that involved the payment of money between New South Wales and the Commonwealth were arrangements in writing, and they were written agreements or letters exchanged between the Commonwealth and the State, and there were no other agreements or arrangements that one might call informal.

195    Dr Kemp also said:

The Commonwealth’s concern was that whatever legislation the New South Wales government introduced, it should be legislation which was supportive of the strategies and programs that the Commonwealth was seeking to implement. But whatever other elements there were in the New South Wales legislation were matters for New South Wales.

196    Her Honour referred to other documents relied on by Mr Spencer to found his argument that there was an informal arrangement and concluded at [348]:

Mr Spencer is correct that one can find in these documents the use by the Commonwealth of its financial assistance and grant powers to encourage reforms that it saw as desirable, especially in terms of a view held at various times within the Commonwealth that reform on halting vegetation clearance in New South Wales was too slow, or too ineffective, or both.

197    For example, in mid-1998, Senator Hill, who was then the responsible Federal Minister, wrote to his NSW counterpart expressing concern about rates of land clearing in NSW and that there were no set State-wide criteria for clearing controls which were required to be incorporated in regional vegetation management plans. Senator Hill said:

You will appreciate that in considering your State’s further bids for Natural Heritage Trust Funding, I am required to consider progress on these matters, particularly that there be no clearing of endangered regional ecosystems, no clearing that would change the conservation status of regional legal systems, and that controls are put into place, across all land tenures to avoid unsustainable land clearing.

198    The primary judge also referred to a detailed reply from the then NSW Minister for the environment. Her Honour said at [357]:

357.     These kinds of communications are not evidence of any “informal arrangement”; they are evidence of the working out of the financial and policy commitments provided for in the 1997 NHT Agreement and the negotiations preceding the conclusion of the 2003 NHT Agreement, with each side doing its best to advance the policy interests it sees as most important. There are many other examples in the evidence of communications from the Commonwealth where statements are made to the effect that the Commonwealth will consider progress towards identified outcomes in determining New South Wales’ bids for monies from the Natural Heritage Trust. That is, it seems to me, exactly what the 1997 NHT Agreement contemplates will occur.

199    Her Honour then referred to correspondence between Dr Kemp and his NSW counterpart in October 2002 in the course of negotiations for the 2003 NHT Agreement. Dr Kemp indicated a lack of satisfaction with the progress made by the NSW government with respect to reform of vegetation clearance laws. Her Honour said at [359]:

359.     Again, these communications show the obvious consciousness of the influence the Commonwealth’s spending powers might have on priorities within the legislative competence of New South Wales. That is the way the authorities have contemplated grants under s 96 of the Constitution might lawfully operate.

200    Her Honour accepted the evidence of Mr Plummer, a witness called by Mr Spencer, to the effect that he had seen a letter from Senator Hill to the then NSW Premier Bob Carr stating that if the State government did not halt clearing within NSW, then the Commonwealth would withhold the State’s share of the Natural Heritage Trust Funding. Her Honour held that her acceptance of Mr Plummer’s evidence did not take Mr Spencer’s case about an informal arrangement any further, as the same statement was reflected in some of the other Commonwealth documents. Her Honour said at [370] that what the documents revealed was that the Commonwealth was relying on its grants power as a way to influence policy and reform initiatives over which it did not have exclusive legislative competence.

201    Her Honour concluded:

371.    Mr Spencer has not discharged his burden of proof that there was an “informal arrangement” of the kind he has pleaded. Rather, the evidence on which he relies reveals an ongoing (and sometimes tense) working out between Federal and State Governments, and their agencies, about how best to achieve the various environmental goals to which they were each committed, and who should bear the costs of those goals. That process occurred within the context of the four intergovernmental agreements. It is nothing more than the process of government at work in a federation. There is no evidence of any improper or inappropriate, let alone unlawful, collusion or conspiracy of the kind Mr Spencer foreshadowed, nor of any plan to “get around” s 51(xxxi).

372.    The kind of arrangements and agreements for which Mr Spencer contends – in terms of their effects – are those contained in the 1997 and 2003 NHT Agreements. By his final submissions, his focus on what he alleges is unlawful had shifted almost exclusively to the terms of those agreements. Insofar as he maintained his claim of an informal arrangement by final submissions, he has not established any such arrangement existed at all, let alone what its terms might have been.

(Emphasis added.)

202    Mr Spencer’s argument based on an informal arrangement stemmed from ICM, where French CJ, Gummow and Crennan JJ, referring to Gilbert said:

38.    The assumption being made was that the terms and conditions attached to a s 96 grant may sufficiently be disclosed in an informal fashion, falling short of an intergovernmental agreement of the kind seen in this case in the Funding Agreement. It is unnecessary to consider whether that reflected a correct understanding of s 96 and of its relation to s 61 of the Constitution.

203    In Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 (Spencer 2010), French CJ and Gummow J said:

31.    The question that arises is whether Mr Spencer’s pleading left open the possibility, requiring factual exploration and possible amendment, of an informal arrangement between the Commonwealth and the State of New South Wales conditioning the relevant Commonwealth funding upon acquisition by the State of Mr Spencer’s property rights on other than just terms. On the face of the pleading before Emmett J and the Full Court that possibility was open, even if not fully formulated or adequately particularised. Given the existence of the Commonwealth Acts and the relevant intergovernmental agreements, it is likely that there are negotiations and communications between the Commonwealth and the State of New South Wales, records of which might flesh out or cast light upon the practical operation of the Commonwealth and State funding arrangements. Documentary and electronic records of such negotiations and communications may be amenable to discovery and ancillary processes in the Federal Court which could be invoked by Mr Spencer.

32.    It is not necessary for present purposes to determine whether a law of the Commonwealth, providing for grants to be made to a State under s 96 of the Constitution, or for agreements under which such grants could be made, might be characterised by reference to informal arrangements between the Commonwealth and the State as a law with respect to the acquisition of property. There are complex and difficult questions of both law and fact raised by that possibility, which was at least open on the amended statement of claim before the primary judge.

204    In Spencer 2010, Hayne, Crennan, Kiefel and Bell JJ held at [40]:

40.     Having regard to this Court’s decision in ICM Agriculture Pty Ltd v The Commonwealth, delivered after the Full Court’s decision in this matter, it cannot now be held that the applicant “has no reasonable prospect of successfully prosecuting the proceeding”. Whether, or how, ss 51(xxxi), 61 and 96 intersect where there is an informal arrangement or understanding between the Commonwealth and a State, falling short of an intergovernmental agreement, was expressly left as an open question by three members of the majority in ICM.

(Citations omitted.)

205    The primary judge held at [595]:

595.     The Commonwealth submits that there was no “new principle” being articulated in ICM, by reference to the factual circumstances of Gilbert. I accept that submission. Indeed, the facts of Gilbert illustrate that what occurred, in the end, was a “formal” agreement or arrangement in any event. It is also correct that the kind of arrangement made in Gilbert did not have the invalidating features of the agreement in Magennis.

206    Her Honour also observed that a principal connection that Mr Spencer sought to draw in relation to the informal arrangement was between the Commonwealth needing to meet its targets under the Kyoto protocol and an arrangement with the State that, in return for funding assistance, the State would preserve additional amounts of native vegetation cover in NSW to help the Commonwealth meet those targets. Her Honour said at [599]:

599.     This aspect of Mr Spencer’s informal arrangement allegations has at least the following difficulties:

(1)    The evidence of Mr Plummer does not support any informal arrangement concerning Kyoto Protocol targets, but tends to confirm the contents of the 1997 NHT Agreement, and cl 7.2(b) in particular.

(2)    The documents in evidence surrounding the November 1997 COAG meeting disclose a variety of policy considerations about the nature and extent of Australia’s commitment to the Kyoto Protocol, the apprehended role for the States in decisions about that commitment and about meeting targets Australia might commit to, but all in terms one would expect to see on such an important national issue: namely, the need for the Commonwealth and the States to work cooperatively within their respective areas of legislative and executive power.

(3)    The allegations about a second period – 2002 to 2003 (prior to the Native Vegetation Act 2003) – as a possible period during which some kind of informal arrangement was concluded are not supported by the documentary evidence (see my findings earlier in these reasons at [358] to [362]).

(4)    The oral evidence of Dr Kemp establishes there was no informal arrangement, certainly during the period when he was the responsible Minister, and gives no support to any connection with Kyoto Protocol targets. It was this period that was prominent in the submissions prepared by the applicant’s former legal representatives, and set out in the “Profile of Case” document.

207    Her Honour considered that there were also problems of chronology with Mr Spencer’s contentions. Australia’s ratification of the Kyoto protocol did not occur until a decade after the 1997 NHT Act and 15 years after the NHM Act. Australia did not commit to any targets until 2007. By that time all of the events in which Mr Spencer wished to rely in support of his allegation of an informal arrangement had well and truly passed. Her Honour said that if the Commonwealth was intent on coercing the State into greater rates of native vegetation preservation to meet its targets, then one could expect to see that pressure exerted after Australia’s commitment to meet those targets. However, there was nothing in the evidence relied on by Mr Spencer which dated from that time. Her Honour concluded at [604]:

604.     Whether as to an informal arrangement to give effect to general Commonwealth environmental concerns about native vegetation clearance (for example, biodiversity and salinity concerns), or to give effect to the Commonwealth’s need to meet its Kyoto Protocol targets, I am not satisfied Mr Spencer has established on the evidence that any such arrangement existed.

208    In the appeal, Mr King submitted that her Honour had set too high a bar at [371] in requiring that there be an improper, inappropriate, or unlawful collusion or conspiracy, or a plan to get around s 51(xxxi). Mr King submitted that all that is necessary was that there be “joint action” between the Commonwealth and a State and that it is enough that there be an “understanding” that the State is to use Commonwealth funds to acquire property.

209    In our view, Mr King’s first submission mischaracterises the primary judge’s findings at [371]. In that passage, her Honour was rejecting the particular allegations her Honour understood Mr Spencer to have made. Her Honour was not suggesting that an improper, inappropriate, or unlawful collusion, or a conspiracy, or a plan to get around s 51(xxxi) was necessary in order to enliven that provision. Her Honour went on to find at [372] that Mr Spencer had not proved the existence of any informal arrangement of the kind he contended for. Her Honour found that, further, Mr Spencer had not proved the existence of any agreement the terms of which required the State to acquire property. Her Honour said at [476] that if Commonwealth laws and intergovernmental agreements leave a choice to the State as to whether to take up the financial assistance and enact its own laws without dictating the terms of the State legislation, then the laws and the agreements will not be invalid.

210    Mr Spencer’s submission that it was necessary only for her Honour to find that there was “joint action” between the Commonwealth and the State for the State to acquire property is too broad. As we have said, where it is alleged that the State has effected an acquisition of property, s 51(xxxi) will not apply unless the State is required under an intergovernmental agreement with the Commonwealth to acquire the property on other than just terms. Assuming that an informal agreement is sufficient, there can be no lesser requirement where the agreement is an informal one. Latham CJ used the expression “joint action” in the context of the specific facts of the case in Magennis where the terms and conditions of an agreement required the State to acquire property. There is no Constitutional principle that any action that can be described as “joint action” that has the effect of acquiring property enlivens s 51(xxxi) of the Constitution. The expression cannot be understood as some free-standing criterion for the engagement of the provision.

211    Mr King submitted that the primary judge erred at [595] by accepting the Commonwealth’s submission that there was no new principle being articulated in ICM by reference to the factual circumstances of Gilbert. He submitted that in ICM, French CJ, and Gummow and Crennan JJ at [38] accepted that an informal arrangement of the type in Gilbert – a funding arrangement evidenced by an exchange of letters or some other evidence – was enough to engage s 51(xxxvi) of the Constitution.

212    Gilbert dealt with changes made to arrangements for the soldier settlement arrangements between the Commonwealth and Western Australia following the judgment of the High Court in Magennis. In Gilbert, the High Court described the changes at 505:

Conferences were therefore held between representatives of the Commonwealth and the States with a view to enabling the war service settlement schemes to be carried on without the legal impediments that had been created by the decision of this Court. On 16th March 1951 the Prime Minister wrote to the Premier of Western Australia stating that, as the State was continuing to settle ex-servicemen on the land, he felt that an arrangement could and should be made between the two governments “by which the Commonwealth Government co-operates in your scheme of settlement by providing financial assistance”. He sent with this letter a memorandum setting out the conditions of an arrangement which would be acceptable to the Commonwealth. The proposal was, in essence, that the Commonwealth should provide financial assistance, not as previously for the purposes of the 1945 Agreement and under the Re-Establishment and Employment Act, but by direct grant to the States pursuant to s. 96 of the Constitution—the grants to be for the purposes of war service land settlement, and to be on such conditions as the Commonwealth Minister for the Interior should determine. An arrangement on the conditions thus envisaged was to take the place of the 1945 Agreement. Further correspondence took place concerning details of the proposal. In one letter (dated 19th December 1951) the Prime Minister, having in mind that the decision in Magennis's Case was regarded as having struck down Commonwealth participation in the 1945 Agreement, said: “The Commonwealth wished to avoid, for constitutional reasons disclosed by the Magennis Case, any arrangement of a formal character.” ... And “In all the circumstances we feel strongly that the best legal foundation for future action can be provided by means of a grant of financial assistance pursuant to s. 96 of the Constitution supplemented by an informal arrangement (in the form say of an exchange of letters) between governments setting out the conditions to be observed.” This proposal was adopted.

(Citations omitted and emphasis added.)

213    The High Court had said at 504 that the correspondence it described had limited relevance:

When we allude to it, we do so only because, the scheme being in essence an arrangement between governments, these communications are explanatory of the course of events.

214    The High Court at 505-509 referred to further correspondence between the Commonwealth and Western Australia negotiating various aspects of the grants under s 96 of the Constitution. The Court said at 508-510:

The final result of the discussions between the Commonwealth and State authorities, which went on during 1951 and 1952, appears in the final formulation of the conditions on which it was agreed that the Commonwealth would make grants of financial assistance. A statement of these was printed and sent to the State on 31st July 1953. This statement, as it describes itself, was thereafter generally referred to as “the conditions”. These conditions were, in terms, framed to operate prospectively. They state the principles on which in the future the scheme should be administered and moneys received by the State applied. They dictate the terms on which the State should grant leases in the future. …

The matters in controversy between the State and Commonwealth authorities had thus been determined. The State was prepared to accept grants on the conditions as promulgated, and, in transactions between itself and settlers, to administer the scheme thereafter on the basis of those conditions. To this end the State Parliament passed the 1954 Act, which came into operation on 28th January 1955. Its purpose, according to the long title, was “to enable the State to carry out and give effect to war service land settlement and to accept appropriations mentioned in the States Grants (War Service Land Settlement) Act 1952 of the Commonwealth Parliament for the purpose of financial assistance in connexion with war service land settlement in such amount and subject to such conditions as the Minister (scil. the Commonwealth Minister) determines under that Act”. The conditions so determined were those printed and promulgated in 1953. From then on those conditions were, it seems, regarded by the officials concerned with the administration of the scheme as superseding the 1945 Agreement, the original statutory authority for it having been repealed. The provisions of the conditions thus became really the terms of an agreement which the parties to the 1945 Agreement had substituted for it. So that, so far as the scheme was to be found embodied in any document, it was after 1954 to be found in the 1954 Act and the conditions. The conditions were, as we have said, in strict point of law the conditions on which the Commonwealth made moneys available to the State; and they were to apply prospectively, that is to the scheme as it was to be carried on under the new arrangement.

(Emphasis added.)

215    The primary judge considered at [594] that Gilbert did not provide an example of an informal arrangement. We respectfully agree with that conclusion. In Gilbert, while the Prime Minister had indicated that the Commonwealth desired to proceed by means of a grant of financial assistance supplemented by an informal arrangement setting out the conditions to be observed, the conditions were ultimately promulgated in a formal way. In ICM, French CJ, Gummow and Crennan JJ left open the question of whether terms and conditions attached to a grant under s 96 of the Constitution may sufficiently be disclosed in an informal fashion, rather than being found only in a formal intergovernmental agreement. That question was concerned with the mode of proof, rather than what needed to be proved. The primary judge was correct to say that there was no new principle being articulated in ICM by reference to the factual circumstances of Gilbert.

216    In the appeal, Mr King next submitted that her Honour should have found that there was an informal agreement under which the Commonwealth agreed to provide additional funding to NSW as the quid pro quo for which the 2003 NV Act was enacted. Mr King sought to make good this proposition by reference to a number of documents in evidence, some of which the primary judge had not been taken to by Mr Spencer. The Commonwealth submitted that this argument was not run before the primary judge and should not be permitted to be raised in the appeal.

217    One aspect of Mr Spencer’s argument before the primary judge was that some kind of informal arrangement was concluded in the period from 2002 to 2003 before the 2003 NV Act was passed. Her Honour rejected that argument at [599]. Therefore, Mr King’s argument in the appeal was not a new one. Instead, the argument was articulated, in part, by reference to evidence before the primary judge to which her Honour was not taken. As will shortly emerge, the case which was run on the appeal by Mr King tied the alleged informal arrangement to the Commonwealth’s concern to achieve its Kyoto Protocol targets, which is consistent with the way the case was run below (see [328] of the primary judge’s reasons for judgment). Mr King’s argument should be considered.

218    Mr King relied on several Commonwealth government documents showing that, as early as 1992, the Commonwealth recognised that combating climate change meant that property rights might have to be adjusted through restrictions on land clearing and, if so, that compensation would have to be paid. Mr King referred to a statement issued by Senator Hill in 1997 saying that a major aim of the National Heritage Trust was to reduce vegetation loss and revegetate degraded land thereby contributing to a better greenhouse outcome. There were other documents which demonstrated that there would be a benefit to the Commonwealth in terms of meeting the Kyoto Protocol targets if land clearing was reduced.

219    Mr King relied on a letter dated 24 July 2001 from the then Prime Minister to the then Premier of Queensland. The letter stated:

However, I recognise that it is in the national interest to reduce the very high rates of land clearing in Queensland to achieve a significant reduction in greenhouse gas emissions beyond the reduction likely to be achieved through the implementation of Queensland’s existing legislation. Accordingly, I reiterate that the Commonwealth would be prepared to provide a financial contribution commensurate with the land clearing reduction negotiated and implemented by your government…

The Commonwealth would be prepared to provide assistance if Queensland negotiates and implements further land clearing restrictions that would…compensate landholders if and when property rights are lost as a result of achieving further Queensland land clearing reductions…

I would expect that arrangements would be implemented to link any payments to abatement in outcomes achieved by the actual reduction in clearing.

220    On 18 February 2004, the Premier of Queensland wrote to the Prime Minister noting that the Prime Minister had written on several occasions over the past three years to advise that the Commonwealth government was prepared to share the costs of implementing a curb on land clearing in Queensland. The letter sought a commitment to finalise an agreement between the Queensland and Commonwealth governments. The letter said that achievement of the 2006 deadline, required in order to meet Australia’s international greenhouse gas commitments during the first Kyoto reporting period, meant that action must be taken quickly. The letter sought a contribution from the Commonwealth government of $75 million.

221    Mr King explained that, while NSW claimed that it had independently decided to enact the 2003 NV Act, Mr Spencer’s case was that “the Commonwealth pulled the State back into line because it was in its interest that the [1997 NVC Act] be strengthened in its operation by including broad scale clearing.” This was said to have been done by the payment of $342 million to NSW in October 2003 in exchange for the passing of the 2003 NV Act. Mr King submitted that “The Commonwealth induced the making of [the 2003 NV Act], the quid pro quo, by large payments under s 96 to the State”. Mr King submitted that this amounted to an informal agreement and “joint action” to acquire property without payment of just terms compensation.

222    It can be accepted that the documents relied on by Mr King demonstrate that the Commonwealth was concerned to achieve a reversal in the rate of land clearing in order to help it meet its Kyoto Protocol targets when they became applicable and envisaged that property might have to be acquired to achieve this reversal. This is consistent with what her Honour found, for example, at [348].

223    However, the provision of funding by the Commonwealth to NSW in these circumstances falls far short of establishing the existence of an informal agreement, the terms and conditions of which required the State to enact legislation under which property would be acquired. While the State may have been encouraged to do so by Commonwealth funding, there is no evidence that the State made anything other than an independent decision to enact the 2003 NV Act in its terms.

224    Further, while documents showed what the primary judge described at [348] as “the use by the Commonwealth of its financial assistance and grant powers to encourage reforms that it saw as desirable”, that is not enough to attract the operation of s 51(xxxi). The exercise of the power to grant financial assistance under s 96 is not vitiated because the Commonwealth’s purpose is to induce a State to exercise its powers of acquisition on other than just terms: ICM at [36], Pye at 83; South Australia v Commonwealth [1942] HCA 14; 65 CLR 373 at 417; Huddart Parker Limited v Commonwealth of Australia [1931] HCA 1; 44 CLR 492 at 515-516; Murphyores Incorporated Pty Ltd v Commonwealth [1976] HCA 20; 136 CLR 1 at 20. Mr Spencer has not shown the existence of any relevant informal arrangement.

225    In summary, Mr Spencer has not demonstrated any error in the primary judge’s conclusion that there were no intergovernmental arrangements, formal or informal, which attracted the operation of s 51(xxxi) of the Constitution. That is enough to require that the appeal be dismissed.

(c) Validity of the State laws

226    In their respective notices of contention, the Commonwealth and NSW assert that the impugned State laws, the 1997 NVC Act and the 2003 NV Act, remained valid and operative as they were each a legally independent exercise of the State’s legislative power.

227    The primary judge did not make any finding on this issue. It was enough for her Honour to conclude that as there was no infringement of s 51(xxxi), the Commonwealth laws were not invalid. We will deal with the argument for completeness.

228    In Magennis, the NSW legislation approved and ratified entry into an agreement with the Commonwealth which was held to be invalid. The NSW law was held to be premised on the existence of a valid agreement. The NSW law was found to be inoperative, but valid.

229    In Pye, the High Court said at 79-80:

As has already been pointed out, the legislative power of the State is not affected by s. 51 (xxxi.) of the Constitution. If a State Act provides for the resumption of land on terms which are thought not to be just, that is of no consequence legally: it cannot affect in any way the validity of the Act or of what is done under the Act.

230    The present case is analogous to Tunnock. In that case, the Victorian Act had never been “coupled” to the Commonwealth legislation. Justices Williams and Webb found at 55 that the enactment of the relevant parts of the Victorian legislation was “an independent exercise of the constitutional legislative powers of the Victorian Parliament’. The Victorian legislation was held to be valid and not inoperative.

231    In ICM, the majority did not find it necessary to consider the argument that the NSW legislation which implemented a funding agreement between the Commonwealth and the State was invalid or inoperative. Justice Heydon, in dissent, at [249]-[255] held that the State government had no power to participate in conduct which contravenes s 51(xxxi) and, consequently, the State legislation was invalid. However, his Honour also said at [252]:

The States, subject to their own legislation, are at liberty to make uncompensated expropriations...

232    In Alcock v Commonwealth of Australia [2013] FCAFC 36; 210 FCR 454, the Full Court said at [82]:

The postulation of an arrangement of some sort between the Commonwealth and Victoria did not supply any factor which might engage the operation of s 51(xxxi) in a way which would affect the authority of the Victorian Parliament or the validity of the Marine Parks Act. Even if there was some arrangement (formal or informal) between the Commonwealth and Victoria which was reflected in the Marine Parks Act, that would not signify that Victorian legislation, dealing with areas where Victoria had title, property and full legislative capacity, was invalid, as s 51(xxxi) of the Constitution is not addressed directly to the power of a State Parliament.

233    The primary judge concluded at [386] and [648] that the enactment of the State vegetation clearance laws was an independent exercise of the legislative powers of the NSW Parliament. That finding has not been demonstrated to be wrong. The 2007 NVC Act and the 2003 NV Act were each therefore valid and operative.

234    The Commonwealth submitted that there are two consequences of such a finding. The first is that if any property was acquired by or under valid and operative NSW laws, there can be no tenable claim for damages or compensation against the Commonwealth. That submission should be accepted.

235    The Commonwealth submitted that a second consequence is that if there is no viable claim against the State, consideration of the validity of the Commonwealth legislation and the intergovernmental agreements is a hypothetical exercise that produces no consequence. The Commonwealth submitted that Mr Spencer therefore has no standing. To arrive at the point where the Commonwealth was able to make that submission, the validity of the Commonwealth and State legislation and the agreements already had to be considered and determined. The Commonwealth’s submission is itself an arid one and need not be considered further.

(d) Whether the State Laws operated to effect an acquisition of property

236    In view of our conclusion that the primary judge was correct to hold that s 51(xxxi) was not engaged as the intergovernmental agreements did not require the State to acquire property, and did not require the State to do so on other than just terms, it is unnecessary to consider Mr King’s submission that the State legislation operated to acquire Mr Spencer’s property. It is also unnecessary to consider the respondents’ submission that her Honour erred in finding that there had been a “taking” of Mr Spencer’s property under the State laws.

(e) Unjust enrichment and trespass or action on the case

237    The fourth point made by Mr King was that the primary judge erred in not holding that the Commonwealth had been unjustly enriched at the expense of the appellant. That was an issue that was pleaded, but does not seem to have been argued before the primary judge. Her Honour said at [132] that the term “unjust enrichment” was found in several places in the submissions made by and on behalf of Mr Spencer, but there was no development of what he meant by it in the context of the proceeding, and how a private right of that kind was said to arise. Her Honour determined not to consider the allegation of unjust enrichment any further.

238    In the appeal, Mr King’s submission was limited to saying that Mr Spencer was entitled to compensation for unjust enrichment, or, alternatively, damages for monies had and received to the use of the Commonwealth as pleaded in the FASOC.

239    The FASOC alleged that the first respondent acquired Mr Spencer’s property without his consent and without payment. It alleged that the Commonwealth did not have a lawful justification for acquiring the applicant’s property and had used that property for its own benefit. The Commonwealth was said to have received, retained and used Mr Spencer’s property in a manner which was against conscience and that it was thereby unjustly enriched. The primary judge described the relevant property as a bundle of rights in the land owned or leased by Mr Spencer and the carbon rights asserted by him.

240    Mr Spencer’s pleaded allegation of unjust enrichment was premised on the allegation that the Commonwealth had acquired his property. As the primary judge found that the Commonwealth had not acquired any property from Mr Spencer, his claim for unjust enrichment could not succeed. In the appeal, Mr Spencer has not demonstrated any error in her Honour’s finding.

241    Mr King’s fifth point was that the primary judge erred in not holding that NSW had unlawfully trespassed on Mr Spencer’s property by taking away his property rights without lawful authority. Mr King submitted that alternatively her Honour ought to have found that there was an action on the case, or a civil conspiracy between the State and the Commonwealth.

242    The primary judge noted that Mr Spencer’s argument was that if he could show the Commonwealth was motivated by an intention to cause harm to him by an act which was unlawful, he was able to make a claim in tort for damages against the Commonwealth. The unlawful act he relied on was the acquisition of his property contrary to s 51(xxxi) of the Constitution. The authorities he relied upon were, as noted above, James, Smith, and Mengel.

243    The primary judge held at [641] that there was no correspondence between the three cases relied upon by Mr Spencer and the circumstances of the proceeding. The “unlawful act” identified by Mr Spencer was the taking of his property (his bundle of rights in Saarahnlee and his carbon rights) contrary to s 51(xxxi) of the Constitution. Her Honour said that as none of the Commonwealth or State legislation was invalid on the basis that it infringed the protection of s 51(xxxi), and there was no invalidity of the intergovernmental agreements, there was no unlawful act. Her Honour also held that even if there was some invalidity, Mr Spencer was not entitled to rely on acts held invalid under s 51(xxxi) as giving rise to any private cause of action entitling him to damages.

244    Mr King has not demonstrated any error in her Honour’s conclusion that there was no infringement of s 51(xxxi) of the Constitution. Accordingly, there was no unlawful act. Although Mr King mentioned civil conspiracy in his submissions, it is not apparent that Mr Spencer relied on the tort of conspiracy in his pleadings or submissions before the primary judge. Mr King did not, in any event, develop that aspect of his submissions. Mr King’s fifth submission must be rejected.

9. Whether Mr Spencer was offered just terms

245    The primary judge concluded that if it were assumed that the Commonwealth laws were with respect to the acquisition of property, Mr Spencer had been offered just terms for the “bundle of rights” he held in Saarahnlee. Her Honour said that if, however, it could be established that Mr Spencer’s “carbon rights” had been acquired as a result of the Commonwealth laws, there was no just terms compensation for those rights.

246    In November 2007, the NSW Nature Conservation Trust offered to purchase Saarahnlee for $2.17 million. That offer was based on an assessment of the market value of that conducted by a valuer, Mr Sullivan, as at August 2007.

247    Mr Spencer responded by asserting that the offer was far too low and asking that a fresh valuation be prepared and another offer be made. The Nature Conservation Trust declined to increase the offer. Mr Spencer provided no further response to the Nature Conservation Trust about their offer, and the offer lapsed. Mr Spencer’s mortgagees exercised their power of sale and most of the land was sold in July 2010.

248    At the hearing below, valuation evidence was given by Mr Connolly, who was called by the State, and Mr Davies, who was called by Mr Spencer. Mr Connolly’s evidence was that the value of Saarahnlee in August 2007 was $2.36 million. Her Honour at [728] described Mr Connolly’s valuation as being only marginally higher than Mr Sullivan’s. It was critical to Mr Connolly’s valuation that, in his opinion, neither the 1997 NVC Act nor the 2003 NV Act had any adverse impact upon the market value of Saarahnlee. Mr Davies’ evidence was that the value of Saarahnlee was approximately $9 million. Her Honour at [686] preferred the evidence of Mr Connolly, giving detailed reasons for that conclusion.

249    Mr Spencer contended that he had planned a number of projects to be conducted at Saarahnlee and that this increased the value of the property. However, her Honour found at [727] and [730] that there was no expert evidence supporting that contention and that those planned projects could not be factored into the value of the property.

250    In the appeal, Mr King submitted that her Honour erred in finding that Mr Spencer had been offered just terms compensation for three reasons. Firstly, he submitted that the offer made by the Nature Conservation Trust was for the impaired value of the land, that is, the land affected by the 1997 NHT Act. Secondly, he submitted that the offer made no provision for Mr Spencer’s lost profits or lost net revenue as a result of the acquisition. This submission appears to refer to Mr Spencer’s allegation that his “carbon rights” had been acquired and that he would have made profits from the various projects that he had planned. Thirdly, Mr King submitted that it was not adequate for the respondents to simply make an offer and walk away from it, and that the Commonwealth or State should instead have renewed the offer or paid money into Court.

251    It is quite understandable that the primary judge found it appropriate to consider whether Mr Spencer was offered just terms, despite finding that there had been no acquisition of his property. However, the exercise was rather artificial.

252    Mr King’s first submission cannot be accepted. The primary judge accepted Mr Connolly’s evidence that the 1997 NVC Act had no adverse impact upon the market value of Saarhnlee. That finding has not been shown to be wrong.

253    Mr King’s second submission must also be rejected. The primary judge found that Mr Spencer’s “carbon rights” had not been acquired and that finding has not been shown to be wrong. Further, her Honour found that Mr Spencer had not established that the projects he had planned were likely to have proceeded. That finding has also not been shown to be wrong.

254    Mr King’s third submission is too artificial to determine. The primary judge found that the offer made by the Nature Conservation Trust lapsed. Later, Mr Spencer’s mortgagees sold much of the property. It is too hypothetical to attempt to determine the effect of an offer to pay compensation lapsing when Mr Spencer’s property was not in fact acquired. Obviously, if an offer had been made for the acquisition of the property and the property had been acquired after the lapse of the offer, such that no compensation was paid, there might have been substantial issues to consider. However, that did not occur here. It is unnecessary to further consider Mr Spencer’s third submission.

10. Conclusion

255    For these reasons, the appeal should be dismissed. Within 21 days hereof, the parties should seek to agree orders which otherwise give effect to these reasons.  If they are unable to reach agreement, including on costs and whether there should be lump sum costs orders, each should file and serve within that time an outline of written submissions not exceeding 10 pages in support of their respective proposed orders.  Final orders will then be determined on the papers and without a further oral hearing. 

Associate:

Dated:    15 February 2018

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1.1    The decision below

256    The appellant, Mr Peter James Spencer, alleged that as the owner of land known as Saarahnlee, he held a bundle of rights over the land including rights in fee simple over part of it, Crown leasehold in other parts, and rights to use and develop the property as he saw fit. He also alleged that he owns carbon sequestration rights in vegetation on the property. He contended that, by three stages or courses of conduct, the Commonwealth and the State of New South Wales (the State) (the first and second respondents respectively) acquired his property otherwise than on just terms contrary to the guarantee in s 51(xxxi) of the Commonwealth Constitution. As summarised by the primary judge in Spencer v Commonwealth of Australia [2015] FCA 754; 240 FCR 282 (Spencer below) at [34], those three stages were as follows.

(1)    The Commonwealth enacted the Natural Resources Management (Financial Assistance) Act 1992 (Cth) (NRM Act 1992) and the Natural Heritage Trust of Australia Act 1997 (Cth) (NHT Act 1997) (together the Commonwealth laws).

(2)    The Commonwealth entered into a series of agreements with the State (including some to which other polities were party) between 1997 and 2003 (the intergovernmental agreements) to provide funds to the State pursuant to the Commonwealth legislation and s 96 of the Constitution.

(3)    The State, allegedly 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 (NSW) (NVC Act 1997) and the Native Vegetation Act 2003 (NSW) (NV Act 2003) (together the State vegetation laws) which prevented Mr Spencer from clearing any native vegetation on his property without State approval. In this regard the primary judge noted that the alleged “pressure” applied by the Commonwealth to the State may be the highest that, ultimately, the existence of any “informal agreement or arrangement” between the State and the Commonwealth was put.

257    By this course of conduct, Mr Spencer alleged that:

(1)    the Commonwealth acquired a benefit or advantage of a proprietary character in that it acquired either:

(a)    a financial advantage in not having to fund other ways to meet its emissions reductions target under the Kyoto Protocol to the United Nations Framework Convention on Climate Change, opened for signature 16 March 1998, 2303 UNTS 162 (entered into force 16 February 2005 and for Australia on 11 March 2008) (the Kyoto Protocol); or

(b)    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; and

(2)    the State acquired a benefit or advantage of a proprietary character being, in effect, the ability to control what occurred on, or was done with, Mr Spencer’s land.

258    As a result, Mr Spencer submitted that the Commonwealth and State laws were invalid, together with the intergovernmental agreements, because just terms for the acquisitions were not given contrary to s 51(xxxi) of the Constitution and that he had suffered loss and damage for which either or both of the respondents were liable in compensation.

259    The primary judge dismissed the application. Her Honour’s reasons for doing so were summarised as follows:

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.

1.2    Issues raised on the appeal

260    As Griffiths and Rangiah JJ explain at [64] of their joint reasons (which I have read in draft), the Court indicated at the start of the hearing of the appeal that it had difficulty in understanding Mr Spencer’s written submissions (which he had prepared personally) and that it expected his counsel, Mr King, to address any relevant points in his oral address. These reasons proceed on that basis. In addition, regard has been had to additional written submissions filed by Mr King, counsel for the appellant.

261    I am also indebted to Griffiths and Rangiah JJ for their comprehensive summary of the parties’ submissions. It suffices to say at this stage that counsel for the appellant explained that the appellant’s case was put in five ways as follows.

(1)    The primary judge erred in failing to hold that the acquisition was effected by “joint action” between the Commonwealth and the State when this joint action engaged the constitutional guarantee in s 51(xxxi) invalidating the State and federal measures, including the agreement between the parties for the purposes of the joint action. In this regard, the primary judge correctly held that, if the acquisition measures were invalid, so also were the intergovernmental agreements that linked the Commonwealth action and the State measure. The appellant also challenged the findings at [596]-[617] below that he had not established an informal arrangement between the State and the Commonwealth about the Kyoto Protocol targets.

(2)    The primary judge erred in failing to hold that the “taking” of the appellant’s property (which her Honour correctly found had occurred) led to the acquisition of the property by the State vegetation laws on other than just terms.

(3)    The primary judge erred in failing to hold that the acquisition of the appellant’s property was for a purpose other than that for which the Commonwealth had power to make laws. Pursuant to the United Nations Framework Convention on Climate Change, opened for signature 4 June 1992, 1771 UNTS 107 (entered into force 21 March 1994) (the UNFCCC) and the Convention of Biological Diversity, opened for signature 4 June 1992, 1760 UNTS 79 (entered into force 29 December 1993) (the Biodiversity Convention), Australia acknowledged the importance of incentives to be paid to others, including State governments, for the benefit of obtaining carbon credits by re-forestation. This was the Commonwealth’s motive or incentive for intervening and influencing the State to enact the State vegetation laws at the lowest possible expense to the Commonwealth.

(4)    The primary judge erred in not holding that the Commonwealth, by a suite of measures, was unjustly enriched at the expense of the appellant. While the appellant’s counsel acknowledged that the point had been dealt with perfunctorily only by Mr Spencer in the Court below, nonetheless he submitted that it was seriously in issue, bearing in mind that the appellant was self-represented at trial. The primary judge also erred at [789] below in finding that the appellant had not established any economic loss or unjust enrichment.

(5)    The primary judge erred in failing to hold that the State is liable to the appellant by reason of the intervention and taking away of his property rights without just authority or in combination with the Commonwealth to give effect to that acquisition or purpose. That claim was variously described as an action on the case, unlawful trespass, and alleged unlawful interference in the land.

262    I note, however, that various procedural complaints and complaints of alleged factual errors which do not appear to have had any impact on the outcome of the case below were not addressed in oral submissions by the appellant’s counsel or in written submissions prepared by the appellant’s legal representatives: see in particular grounds 5, 6(d) to (h) inclusive, (j), (l)-(m), (s), (t), and (x). I have therefore proceeded on the basis that these were not pressed in line with the intimation from the Court referred to at [260] above. That being so, it is also unnecessary to consider the respondent’s objections to competency on the ground that leave to appeal was required but not sought with respect to the alleged errors in refusing an adjournment (ground 6(e) and (x)), and leave to subpoena 28 witnesses to give oral evidence but allowing only three (ground 6(d)).

263    The State and the Commonwealth also filed notices of contention, alleging among other things, that the judgment below should be affirmed on the alternative ground that there was no taking of the appellant’s bundle of rights in Saarahnlee. Save for grounds 3 and 3A of the Commonwealth’s amended notice of contention and ground 4 of the State’s notice of contention (see below at [373] and [434]-[441]), I have not found it necessary to address those alternative grounds.

1.3    Summary of conclusions

264    For the reasons summarised below, the appeal must be dismissed.

(1)    The primary judge correctly held that:

(h)    neither the NRM Act 1992 nor the NHT Act 1997 imposed any conditions on grants to the State under s 96 of the Constitution requiring the acquisition of property on other than just terms; nor can either Commonwealth law otherwise be characterised as laws with respect to the acquisition of property;

(i)    no such condition was imposed by any of the impugned intergovernmental agreements; and

(j)    the appellant failed to prove the existence of any informal arrangement to acquire property otherwise than on just terms between the State and the Commonwealth (Spencer below at [596]-[604]).

(2)    Given that it was only in respect of those Commonwealth measures that s 51(xxxi) was potentially engaged, it is unnecessary to consider whether the State legislative regime operated so as to acquire any property owned by Mr Spencer contrary to her Honour’s conclusions. Further the appellant’s alleged “action on the case” and damages claims were founded on his claims that the Commonwealth and, by inducement or complicity, the State, had acted in contravention of s 51(xxxi). As such, as the respondents submitted, if s 51(xxxi) was not engaged by any relevant Commonwealth measure, Mr Spencer’s claim was bound to fail at that threshold point: Commonwealth amended notice of contention, ground 3A.

265    Finally, I agree with the reasons of Griffiths and Rangiah JJ at [137]-[142] as to why the Court refused the appellant’s application to adduce further evidence on the appeal under s 27 of the Federal Court of Australia Act 1976 (Cth).

2.    BACKGROUND

2.1    The land

266    The appellant did not take issue with the findings in Spencer below at [136] et seq with respect to the land, subject to his submissions as to the alleged acquisition of his property.

267    The land is described as follows by her Honour :

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….

141    The total area of the property is over 5,000 hectares. … 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.

…

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.

268    The appellant contended that it was not in dispute that he was in possession of the whole of the land and he had a farming enterprise on the land for the production of high quality wool. He also contended that all of the vegetation on the land was native vegetation although approximately 300 hectares had been cleared for grazing and before 1990 was classified as regrowth land (also subject to the restrictions), and there had been some clearing by the NSW State Forests in the 1980’s on the Crown leasehold.

2.2    Events leading to the offer of exit assistance under the Native Vegetation Assistance Package

269    The evidence at trial primarily focused upon events from about the middle of 1998 when Mr Spencer began making inquiries about developing Saarahnlee and the authority necessary to clear parts of the land (Spencer below at [149]).

270    In mid-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” about the kinds of projects and development that he might undertake on the property. Mr Thompson gave Mr Spencer an application form for clearing (Spencer below at [152]). A further meeting was held on Saarahnlee on 10 September 1998 which was attended by Mr Dyson, the principal officer from the NSW Department of Land and Water Conservation. The primary judge accepted Mr Dyson’s evidence that he discussed with Mr Spencer whether it would be preferable for him to lodge a series of applications over smaller areas of land to clear native vegetation, and that Mr Spencer responded that he did not want to lodge smaller applications but rather wanted approval to clear everything (Spencer below at [155]). Mr Spencer did not lodge a formal application to clear native vegetation on Saarahnlee at this time. These early meetings were mostly information gathering (Spencer below at [157]).

271    Between 2000 and 2006, Mr Spencer undertook an experimental project on Saarahnlee involving ultra-fine Merino sheep which was unsuccessful (Spencer below at [158]).

272    By 2006, the New South Wales 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 (Spencer below at [159]). The plan was described in the Business Plan for the Native Vegetation Assistance Package explained in the primary judge’s reasons at [191]-[195]. 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. Mr Spencer’s motives for doing so were mixed (Spencer below at [160]). In this regard, her Honour held that:

503.     …I accept [Mr Spencer’s] evidence that he was open to considering taking up an offer to buy Saarahnlee, depending on what was offered. It should be recalled the property had been suffering from the severe drought, Mr Spencer was in a precarious financial position and his sheep project had all but failed by this point.

273    On 12 February 2007, Mr Willis from the Murrumbidgee Catchment Management Authority wrote to Mr Spencer on behalf of the Authority inviting him to indicate the areas he wished to clear. Mr Willis and two other staff members from the Murrumbidgee Catchment Management Authority visited Saarahnlee on 19 February 2007 and drove around the property with Mr Spencer. The areas proposed for clearance were marked in hatching on a map at the time of the visit, although the primary judge found that Mr Spencer paid scant attention to any precise delineation of the hatched areas (Spencer below at [168]). Rather her Honour found that:

168. …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.

274    As her Honour finds, Mr Spencer never filled out a vegetation clearance application form. Nonetheless it was not in dispute that the Murrumbidgee Catchment Management Authority, the NSW Rural Assistance Authority, and the then 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 through to the making of an exit assistance offer (Spencer below at [169]).

275    By a letter dated 6 March 2007, the Murrumbidgee Catchment Management Authority wrote to Mr Spencer advising that his current proposal to clear native vegetation failed to meet the “maintain or improve” test in the Native Vegetation Regulation 2005 (NSW) and, therefore, could not be approved. The Authority also advised that it had since assessed a number of alternative, smaller clearing sizes but these had also failed to meet the same test. The letter also referred to Mr Spencer’s expression of interest in the Farmer Exit Assistance Program and advised that, while he had been assessed as having satisfied the initial test of eligibility for that assistance (the Relative Hardship Test), information was required from him to assist in the next step of assessing his financial eligibility (Spencer below at [171]). Mr Spencer replied in what the primary judge described as an “attempt to comply, in his own way and on his own terms, with the request for information…” (Spencer below at [172]).

276    On 5 July 2007, the Rural Assistance Authority wrote back to Mr Spencer notifying him that he was eligible for exit assistance but did not otherwise address the contents of his letter. The letter was relied upon by Mr Spencer in the proceedings and was the subject of competing contentions (Spencer below at [177]). The letter read:

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.

(emphasis added)

277    The primary judge placed considerable weight upon the statement in this letter emphasised in the passage above in concluding that the appellant’s rights in Seranhalee had effectively been sterilised by the State vegetation laws which had therefore effected a “taking” of his rights in the land.

278    Also on 5 July 2007, the Rural Assistance Authority wrote to the Nature Conservation Trust forwarding the letter extracted at [276] above, and referring Mr Spencer and his property for further consideration under the Exit Assistance program. Further, a briefing note from the Murrumbidgee Catchment Management Authority to the NSW Department of Environment and Climate Change dated 5 July 2007 advised among other things that:

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.[sic]     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.

2.3    Mr Spencer’s refusal of the offer of exit assistance

279    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. A key step in that process was the instruction of Mr Sullivan on 3 August 2007 to prepare a valuation of Saarahnlee on the basis of “the current market value of the Freehold and Leasehold interests in the rural property known as ‘Saarahnlee’… for purchase purposes” (Spencer below at [181]). Mr Sullivan inspected the property on 14 and 30 August 2007 and assessed Saarahnlee’s market value as $2.17 million as at 30 August 2007. Mr Spencer accepted at trial that this represented market value at the time, although he maintained that it did not represent its value to him or its value in terms of its potential if he had been able to undertake all the projects he had in mind for the property (Spencer below at [183]).

280    In this regard, as the primary judge noted, this valuation lead to an application for judicial review by Mr Spencer in the Supreme Court of New South Wales before Rothman J. Specifically, Mr Spencer argued that the offer to purchase at the price of $2.17 million was invalid because the Nature Conservation Trust was bound to apply the Farmer Exit Assistance Program in a manner consistent with the Native Vegetation Assistance Package Business Plan as it existed before 30 June 2007. Prior to 30 June 2007, the Business Plan had provided that market value was to be assessed on the assumption that NV Act 2003 did not apply. However, following an amendment to the Business Plan by the relevant State Minister with effect from 30 June 2007, offers to purchase were to be “based on independent valuation of the current market value.” Mr Spencer also challenged the validity of the amendment to the Business Plan. In addition, Mr Spencer sought compensation or an amendment to the offer on the grounds that the Nature Conservation Trust had engaged in misleading and deceptive conduct and had acted unconscionably Mr Spencer’s claims were unsuccessful: Spencer v New South Wales Minister for Climate Change, Environment and Water [2008] NSWSC 1059.

281    The primary judge found that:

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.

282    Her Honour observed that the approach which she took was consistent with the decision of Rothman J in the New South Wales Supreme Court (Spencer below at [199]).

283    By a letter dated 6 November 2007 from Mr Strutt, the New South Wales Nature Conservation Trust made an offer to purchase Saarahnlee at the valuation given by Mr Sullivan, namely $2.17 million, which offer was expressed to be open for a period of 60 days. Reimbursement was also offered up to $5500.00 for legal expenses, relocation and advisory services. In his letter dated 26 November 2007, Mr Spencer sought an extension of time for the offer and protested about the valuation arrived at by Mr Sullivan, alleging that the current offer “is far too low… even at market value without the burden of the Native Vegetation Act” (Spencer below at [184]) (emphasis in original). 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 (thereby extending the offer by 7 days) and, with respect to Mr Spencer’s protests about the valuation itself, stated:

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.

(Reasons below at [185])

284    Her Honour found that following these events:

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.

285    In this regard, the primary judge found that Mr Spencer’s decision to refuse the Farmers Exit Assistance offer in the circumstances then facing him would no doubt have been one of many examples of causation problems adversely affecting his damages claims (Spencer below at [201]).

2.4    The State vegetation laws

286    As the primary judge accepted at [206], the particular legal operation of the impugned federal and state laws, and the four impugned intergovernmental agreements, needs to be understood in the context of the regulation of land clearing in New South Wales.

2.4.1    State laws regulating land clearing in New South Wales before SEPP 46

287    Forms of State regulation over clearing have been in existence since at least 1972 and were intended to advance conservation or environmental interests (Spencer below at [207]-[208]). These laws included the Soil Conservation Act 1938 (NSW) (now repealed) (Soil Conservation Act). This Act was intended “to make provision for the conservation of soil resources and farm water resources and for the mitigation of erosion”: preamble, Soil Conservation Act. In furtherance of that purpose, by 1986 it was an offence under s 21C of the Soil Conservation Act to clear (i.e. “ringbark, cut down, fell, poison or otherwise destroy”) trees on land that was “protected land” as defined in ss 21A and 21B save in accordance with an “authority” issued under s 21D of that Act. An authority issued under s 21D could be subject to conditions including requiring trees to be retained on the land, requiring trees of specified size and dimensions not to be destroyed, and requiring acts to be done to eliminate or mitigate any soil erosion (s 21D(3)). “Protected land” included land identified by the Commissioner as land within a catchment area having a slope greater than 18° from the horizontal and land that was, in the Commissioner’s opinion, environmentally sensitive or liable to be affected by soil erosion, siltation or land degradation (s 21B(1), Soil Conservation Act). The Act applied to privately held land, including land held under a Crown lease: see the definition of owner in s 3(1), Soil Conservation Act.

288    It was not in dispute that a large proportion of Saarahnlee was “protected land” within the meaning of the Soil Conservation Act: Spencer below at [210]. The primary judge found that approximately 3213 hectares of Saarahnlee, (i.e. 63% of the land), were considered to be protected land, while the remaining 1915 hectares were non-protected land (Spencer below at [122]).

289    Furthermore, from 1972, lots 48 and 50 were subject to s 27 of the Forestry Act 1916 (NSW) (Forestry Act) as a result of which the then owner of the leases (who was not the applicant) was prohibited from clearing native vegetation without a license. Lots 47, 48 and 50 were also held subject to conditions which prohibited the cutting or removing of timber for the purposes of sale.

2.4.2    SEPP 46 (repealed)

290    The primary judge also found that there were planning restrictions which had applied to the land, the most important being the State Environmental Planning Policy No 46 – Protection and Management of Native Vegetation (10 August 1995) (SEPP 46) (now repealed). SEPP 46 was a scheme regulating vegetation clearance in New South Wales enacted in August 1995 with immediate effect under Div 2 of Pt 3 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act). The primary judge observed that SEPP 46 was an important pre-1997 control on the clearing of native vegetation and accepted (at [214]) the State’s submission about the effect of planning regimes generally that:

[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.

291    As I later explain, SEPP 46 was itself part of a phased approach leading up to the enactment of the NVC Act 1997.

292    Clause 2 of SEPP 46 set out the objectives of the policy, namely:

(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.

(emphasis added)

293    In furtherance of that policy, cl 6(1) of SEPP 46 provided that:

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.

294    Clause 7 as originally enacted provided that consent could be granted only where the consent authority was satisfied of all of the matters set out in cl 7(a) to (l), including that the area does not have a high biological diversity or connective importance as part of a corridor of native vegetation allowing for the passage of species of flora or fauna, is not significant as wildlife habitat, and that clearance would not be likely to contribute significantly to problems such as soil erosion or deterioration in the quality of surface or groundwater. Furthermore, the Director-General was required to take into consideration whether there is any need for conservation of some or all of the vegetation for other reasons (SEPP 46, cl 8).

295    The term “clearing” was broadly defined in cl 5 as follows:

"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.

296    The term “native vegetation” in turn was defined in cl 5 to mean:

…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.

297    The strictness of the regime established by SEPP 46 was ameliorated by amendments made in December 1995. By virtue of those amendments, those matters referred to in cl 7 as initially in force as jurisdictional preconditions, became relevant considerations which the consent authority was required only to take into consideration (see cl 7 of the December 1995 amending policy, State Environmental Planning Policy No 46 – Protection and Management of Native Vegetation (Amendment No 1)). Additional mandatory considerations were included which were apparently intended to provide a balance for the environmental factors: namely, the likely social and economic consequences of granting or refusing to grant the development consent for the applicant for consent, and for the locality, region and State.

298    It was not in dispute that SEPP 46 applied to Saarahnlee, which is located within the Cooma-Monaro Shire, being one of the areas listed in Sch 1 of SEPP 46, as originally enacted: Spencer below at [226]. It follows, as the State submitted, that SEPP 46 applied to the remaining 37% of the land which was not protected land. However, as her Honour held at [225] below, 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 (SEPP 46, cl 3(e)). Likewise, land subject to a clearing licence under s 27G of the Forestry Act was excluded (SEPP 46, cl 3(d)). Further exclusions in cl 11, read with Sch 3, included “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.

299    Accordingly, her Honour concluded at [229] 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.

2.4.3    The Native Vegetation Conservation Act 1997 (NSW) (repealed)

300    The primary judge dealt with the background to the enactment of the NVC Act 1997 at [297]-[304] of her reasons. No issue was taken with that background on the appeal and the salient points can be summarised as follows.

301    In August 1996, the NSW Vegetation Forum (the NSW Forum), a body established by the NSW Government with representatives from governmental and non-governmental agencies and stakeholders, delivered a report to the NSW Government about the future regulation and management of native vegetation in New South Wales, namely, the “Report on Native Vegetation Management in New South Wales” (the 1996 NSW Report). This predated the enactment of the Natural Heritage Trust of Australia Act 1997 (Cth), although substantially similar issues regarding the importance of native vegetation conservation and revegetation were canvassed in the extrinsic material in June 1996 regarding the Natural Heritage Trust of Australia Bill 1996 (Cth).

302    In its report, the NSW Forum summarised the existing state of knowledge about vegetation loss, referring among other things to estimates that between 1983 and 1993 approximately 500,000 hectares per year were cleared Australia wide, with NSW estimated to have cleared 150,000 hectares of that annual figure (Spencer below at [298]). The 1996 NSW Report referred to the 1992 National Strategy for Ecologically Sustainable Development and other initiatives adopted nationally including the National Greenhouse Response Strategy and the Intergovernmental Agreement of the Environment, the National Forest Policy Statement and the draft National Strategy for the Conservation of Biological Diversity. (I note that a number of these documents were relied on by the appellant in support of the alleged informal arrangement, as I later explain.) After examining the approaches in other states and territories, the 1996 NSW Report set out (at p. 20) the four phases undertaken or to be undertaken in New South Wales, namely:

State Environmental Planning Policy (SEPP 46) was introduced on 10 August 1995 as part of a phased approach to achieve sustainable native vegetation management through co-operative programs such as Total Catchment Management.

Phase 1 has been the introduction of SEPP 46. The Policy's aim is to prevent inappropriate native vegetation clearance in NSW. The policy requires assessment of clearing proposals to ensure native vegetation is protected and managed in the environmental, social and economic interests of the State. A number of exemptions allow for on-going farm management. The environmental, social and economic benefits are described in the section 4.2 'Benefits of Conservation', pp 17-18.

Phase 2 is the community consultation and SEPP 46 performance review stage that are further described below. Phase 2 began on 10 August 1995 and continued until July 1996. During this time the views of the community and of the NSW Vegetation Forum, together with the Forum's recommendations, have and will continue to be conveyed to the Minister for Land and Water Conservation for consideration.

During Phase 3 the Government will consider further amendments, options and alternatives for SEPP 46. This phase will date from July 1996 onwards.

A long-term management regime directed to sustainable native vegetation management through the co-operative processes of Total Catchment Management will be Phase 4.

303    The Forum noted in its executive summary that the submission of its report marked the commencement of Phase 3.

304    The principal recommendations of the Forum were summarised at pp. 7-8 of the 1996 NSW Report as follows:

The Forum favours the adoption of a legislative reform, covering a 'whole state' approach, with either a new Native Vegetation Management Act or a new Native Vegetation and Soil Conservation/Management Act which is based on the existing Soil Conservation Act as well as amending any other legislation such as the Crown Lands legislation and the Western Lands Act. DLWC [the Department of Land and Water Conservation] should be the consent authority with an obligation to consult where required with other relevant authorities in the administration of the new Act.

A tiered approach with State Guidelines, (bio)regional/catchment management plans, local plans/agreements and a permit system is the preferred option (see sections 3.6-3.9). There should be generic exemptions on a statewide basis with specific exemptions incorporated into Regional Plans which recognise that circumstances vary greatly across regions.

Incentives should be based on the concept of stewardship and be provided to assist in the achievement of vegetation management outcomes. They could be operated in a number of ways rather than being strictly applied to one activity. Regional Plans should be used to assist in the equitable setting of priorities for incentives. Accountabilities for incentives should be achieved either through the use of Local/Property Agreements or leases, and be for a defined term.

305    A year later, the NSW Department of Land and Water Conservation released a White Paper entitled “A proposed model for native vegetation conservation in New South Wales” (the White Paper). In line with the recommendations made in the 1996 NSW Report, the White Paper detailed “a statewide ‘whole of government’ approach to the conservation and sustainable management of native vegetation… built around a proposal for a Native Vegetation Conservation Act.” The proposed new Act would repeal SEPP 46 and provisions in other Acts relating to native vegetation conservation and management, including the Soil Conservation Act. In their place, the new Act would provide for: regional vegetation management plans; a single system for obtaining development consent; a range of exemptions to allow clearing for day-to-day land management; property agreements with landholders; a Native Vegetation Advisory Council; and a $15 million Native Vegetation Management Fund to provide incentives to landholders over three years to manage native vegetation on their land (Spencer below at [303]).

306    As the primary judge observed at [304], many of the proposals made by the NSW Vegetation Forum and in the White Paper were adopted in the NVC Act 1997 including combining the controls under SEPP 46 and the Soil Conservation Act into one regime.

307    The NVC Act 1997 came into force on 1 January 1998. Its objectives were set out in s 3 which read:

(a)     to provide for the conservation and management of native vegetation on a regional basis, and

(b)     to encourage and promote native vegetation management in the social, economic and environmental interests of the State, and

(c)     to protect native vegetation of high conservation value, and

(d)     to improve the condition of existing native vegetation, and

(e)     to encourage the revegetation of land, and the rehabilitation of land, with appropriate native vegetation, and

(f)     to prevent the inappropriate clearing of vegetation, and

(g)     to promote the significance of native vegetation,

in accordance with the principles of ecologically sustainable development.

308    The NVC Act 1997 maintained the concept of “protected land” which was defined in s 7 so as to include any land previously defined as “protected land” under the Soil Conservation Act 1938. Subject to various exemptions and exclusions in ss 9 to 12, Part 2 of the NVC Act 1997 imposed prohibitions on the clearing of native vegetation. In this regard, the Act distinguished between clearing native vegetation on land subject to a regional vegetation management plan (Div 2, Part 2, NVC Act 1997), on the one hand, and land which was not subject to a regional vegetation management plan (Div 3, Part 2, NVC Act 1997), on the other hand. With respect to the former, ss 18 and 19 prohibited clearing native vegetation subject to a plan and clearing regional protected land otherwise than in accordance with a regional vegetation management plan and development consent where such consent was required under the regional management plan. With respect to the latter, s 21 prohibited clearing native vegetation on any land save in accordance with a development consent or native vegetation code of practice, while s 22 prohibited clearing State protected land except in accordance with a development consent.

309    The Act also contained mechanisms for enforcing those prohibitions such as by a “stop work” order under s 46 or an injunction under s 63, and conferred powers of entry and inspection by authorised officers under s 61.

2.4.4    Circumstances leading to the enactment of the Native Vegetation Act 2003 (NSW)

310    Notwithstanding the centrality of regional vegetation management plans to the scheme of the NVC Act 1997, the New South Wales Auditor-General found in 2002 that only one of the 22 Regional Vegetation Committees established by the Act and tasked with preparing the plans, had prepared a plan in a form suitable for Ministerial approval (Spencer below at [310]). The Auditor-General’s report became an occasion for comment by the Commonwealth to the State.

311    In November 2002, the Wentworth Group of Concerned Scientists convened by the World Wide Fund for Nature (WWF) and comprising experts from the natural and environmental sciences, economic, military, and farming sectors, produced a national report on soil conservation management and native vegetation clearing entitled “Blueprint for a living continent: a way forward from the Wentworth Group of concerned scientists” (Spencer below at [311]). The report made various recommendations including:

3.    Immediately end broadscale landclearing of remnant native vegetation and assist rural communities with adjustment. This provides fundamental benefits to water quality, prevention of salinity, prevention of soil loss and conservation of biodiversity.

4.    Pay farmers for environmental services (clean water, fresh air, healthy soils). Where we expect farmers to maintain land in a certain way that is above their duty of care, we should pay them to provide those services on behalf of the rest of Australia.

312    The Wentworth Group observed that the Council of Australian Governments (COAG) had the opportunity to make a number of significant changes immediately, including to end broadscale clearing of remnant vegetation.

313    The Wentworth Group subsequently produced at the request of the NSW Government a report focusing on New South Wales. That report recommended the establishment of a Native Vegetation Reform Implementation Group which was established and reported to the NSW Government in October 2003. Membership of that group included representatives from the Wentworth Group, State Government, the NSW Farmers’ Association, and the WWF.

314    The Native Vegetation Reform Implementation Group in turn made 48 recommendations including Recommendation 28 which, as the primary judge pointed out, is of particular relevance to this case, namely:

It is recommended that the Government establish a revolving fund to:

•    Purchase those properties that as a result of the ending of broadscale land clearing are no longer commercially viable; and

•    Compensate17 farmers who have suffered real financial loss as a direct result of the ending of broadscale land clearing.

17 The Environmental Group's view is that "structural adjustment" is the preferred terminology.

315    In addition, Recommendation 46 recommended that “the Government examine the potential to seek additional Commonwealth and private funding that recognises the greenhouse benefits to be derived from ending broadscale land clearing.”

2.4.5    The Native Vegetation Act 2003 (NSW)

316    As the primary judge found at [320], broadly in accordance with the recommendations of the Native Vegetation Reform Implementation Group, the State enacted the Native Vegetation Act 2003 (NSW). That Act repealed the NVC Act 1997 and simplified the scheme established under it. The provisions of the NV Act 2003 were in effect at the time of the trial and applied to the events in 2007 earlier described.

317    The NV Act 2003 applies to all property outside urban areas (s 5, NV Act 2003). It was not in issue that the NV Act 2003 applied to the whole of the appellant’s land so as to preclude clearing of native vegetation save in accordance with the regime created by that Act.

318    In s 3, the expression of the objects of the NV Act 2003 reveals the different emphasis on broadscale clearing with adverse impacts:

The objects of this Act are:

(a)    to provide for, encourage and promote the management of native vegetation on a regional basis in the social, economic and environmental interests of the State, and

(b)    to prevent broadscale clearing unless it improves or maintains environmental outcomes, and

(c)    to protect native vegetation of high conservation value having regard to its contribution to such matters as water quality, biodiversity, or the prevention of salinity or land degradation, and

(d)    to improve the condition of existing native vegetation, particularly where it has high conservation value and,

(e)    to encourage the revegetation of land, and the rehabilitation of land, with appropriate native vegetation,

in accordance with the principles of ecologically sustainable development.

319    Section 12 prohibits “clearing” native vegetation (as defined in s 7) without a development consent, or otherwise than in accordance with a “property vegetation plan” approved by the Minister under Pt 4 of the NV Act 2003. Sections 14 and 29 in turn provide that the Minister is not to grant development consent for “broadscale clearing” of native vegetation, or to approve a property vegetation plan that proposes “broadscale clearing”, respectively, “unless the proposed clearing will improve or maintain environmental outcomes.” “Broadscale clearing” is defined in s 8 to mean “the clearing of any remnant native vegetation or protected regrowth.” “Remnant native vegetation” is defined in s 9(1) to mean any native (i.e. indigenous) vegetation other than “regrowth” (as defined in s 9(2)), while “protected regrowth” is defined in s 10 to mean any native vegetation that is regrowth and is identified as protected in a property vegetation plan or other specified instruments. Property vegetation plans, including proposals for clearing native vegetation on land, may be submitted by a landholder or group of landholders for approval under Part 4 and, if approved, upon registration bind successors in title to the land by virtue of s 31 of the NV Act 2003. As such, property vegetation plans provide, as her Honour observed at [322], “a mechanism for planning for the use and development of properties at a more individual level than had been available under previous legislative schemes.” Clearing of regrowth other than “protected regrowth” (s 19) and native groundcover with low percentages of indigenous species (s 20) is permitted, as are activities comprehended by the statutory definition of “routine agricultural management activities” (s 22) and, in some circumstances, the continuation of existing farming activities (s 23).

2.5    The UNFCCC and Kyoto Protocol

320    The primary judge considered the intergovernmental obligations assumed by Australia under the Kyoto Protocol at [235]-[248].

321    The Kyoto Protocol was negotiated in December 1997 as a protocol to the UNFCCC. Australia was one of the original signatories to the UNFCCC when it opened for signature in June 1992. The UNFCCC entered into force generally (and for Australia) on 21 March 1994 in accordance with Art 23 of the UNFCCC. However, while adopted at the Third Conference of the Parties to the UNFCCC 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 commenced in 2008 and ended in 2012. Australia ratified the Protocol in December 2007 and it entered into force for Australia three months later in March 2008 (Spencer below at [240]).

322    Parties to the UNFCCC committed to the “ultimate objective” of the Convention, namely, “to achieve … stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” (art 2, UNFCCC).. That objective is to be achieved in accordance with the Convention within a timeframe that allows ecosystems to adapt naturally to climate change, does not threaten food production, and enables economic development to proceed in a sustainable manner (art 2, UNFCCC)..

323    In line with one of the guiding principles of the Convention in Article 3(1) that developed countries should “take the lead” in combating climate change and its adverse effects (article 3(1), UNFCCC), the UNFCCC imposes an obligation upon developed country parties including Australia and other Annex I parties to (among other things) adopt national policies and measures to limit their anthropogenic emission of greenhouse gas (GHG) emissions, and to protect and enhance GHG sinks and reservoirs, with the aim of returning to their 1990 levels of GHG emissions (see art 4(2), UNFCCC). 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.

324    As its title suggests, the UNFCCC largely established a framework of principles and broad commitments. It was by the Kyoto Protocol that the Annex I parties first committed to quantified emissions reduction targets and to a timetable within which to achieve those targets. Different targets were set for the Annex I parties, with Australia’s emission commitment in Annex B being to limit emissions to 108% of 1990 levels for the commitment period 2008 to 2012: Spencer below at [242].

325    Obligations are imposed by the UNFCCC and Kyoto Protocol upon the Parties under international law. These obligations start from the premise that any effective response to climate change will require a co-ordinated global response. In practical terms, that cooperation is intended to translate in the first instance into action taken by the various parties at the domestic level (Art 4(2), UNFCCC). These national measures include undertakings to promote sustainable management, to prepare for adaptation, and to “[t]ake climate change considerations into account, to the extent feasible, in their relevant social, economic and environmental policies and actions” (art 4(1)(f), UNFCCC; see also e.g. art 2(1)(a) and art 10(a) and (b), Kyoto Protocol). Detailed reporting of such measures is required by Australia and other Annex I parties (arts 4(2)(b), 7,(2), 10 and 12(1) and 12(2), UNFCCC)

326    In calculating the emissions of an Annex I Party for the commitment period, art 3(3) of the Kyoto Protocol provides that net changes in greenhouse gas emissions by sources and removals by sinks resulting from direct human-induced forestry activities and land use change (afforestation, reforestation and deforestation taking place since 1990) are to be included. The Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol affirmed relevantly that “… the mere presence of carbon stocks be excluded from accounting”: FCCC/KP/CMP/2005/8/Add.3, p. 3, Decision 16/CMP.1 at [1(d)]. In other words, as the Commonwealth submitted, the mere presence of trees on Mr Spencer’s land did not assist the Commonwealth to meet its obligations under art 3 of the Kyoto Protocol. Only emissions or removals by one of the activities referred to in art 3(3), namely afforestation, reforestation or deforestation, could be relevant to determining whether Australia had exceeded its assigned amount: see Spencer below at [577]. (I note that the Conference of the Parties is a body given power to make decisions necessary to promote the effective implementation of the Kyoto Protocol by Article 13(4) of the Protocol.)

327    With respect to the discharge by Australia of its international reporting obligations, the primary judge found that:

243. …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.

328    Further, most estimates reported by Australia are prepared on the basis of models of emissions processes that link observable activity data, including changes in the forest extent across Australia, with an estimate of the amount of emissions: Spencer below at [244]-[245]. In the case of emissions from land clearing, those are estimated by Australia as they occur: Spencer below at [245].

329    As the Commonwealth rightly submitted, Australia’s international obligations, including those under the UNFCCC and the Kyoto Protocol, do not give rise to any rights, obligations or liabilities under the Australian domestic legal system and do not therefore bind the Commonwealth as a matter of domestic law absent their incorporation into municipal law: Minister of State for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 286-287 (Mason CJ and Deane J). However, the primary judge found at [248], that “the factual realities” of the relationship between deforestation and compliance by Australia with its obligations under the Kyoto Protocol, as accepted by the Commonwealth in its final submissions, “were clearly part of the impetus of the intergovernmental agreements and the increase in regulation over the clearing of native vegetation, in New South Wales and other parts of Australia.” The Commonwealth relevantly accepted in its final submissions at trial (quoted by the primary judge at [247]) that:

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.

330    The Commonwealth confirmed this position in its written submissions on the appeal.

3.    CONSIDERATION

3.1    Section 51(xxxi): general principles

331    Section 51(xxxi) of the Constitution empowers the Commonwealth Parliament to enact laws with respect to “the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”. Section 51(xxxi) therefore confers the power to acquire property compulsorily but subject to the requirement of just terms, thereby preventing arbitrary exercise of the power at the expense of the State or the individual: Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 (Mutual Pools) at 169 (Mason CJ). As such, the failure to provide just terms renders the Commonwealth law invalid, but does not of itself confer a right or entitlement to just terms.  

332    Moreover and importantly, in the absence of a contrary intention the other legislative heads of power are construed so as not to authorise the making of a law for the acquisition of property otherwise than on just terms. As Deane and Gaudron JJ explained in Mutual Pools at 185, “[i]t is in its indirect operation that the requirement of just terms transcends the limits of par. (xxxi) and reaches into other grants of legislative power in s. 51.” Section 51(xxxi) therefore abstracts power from the other heads of legislative power to the extent to which they might otherwise sustain a law which may fairly be characterised as a law with respect to the acquisition of property: Mutual Pools at 169 (Mason CJ), 177 (Brennan J) and 188-189 (Deane and Gaudron JJ); Wurridjal v Commonwealth [2009] HCA 2; (2009) 237 CLR 309 (Wurridjal) at [185]-[186] (Gummow and Hayne JJ); and ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51; (2009) 240 CLR 140 (ICM) at [135] (Hayne, Kiefel and Bell JJ)). However, as the primary judge held, State legislative power is not affected by s 51(xxxi) or any equivalent limitation upon power and, as such, NSW may validly acquire property on terms which are not considered just: PJ Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382 (PJ Magennis) at 404 (Latham CJ); Pye v Renshaw (1951) 84 CLR 58 (Pye v Renshaw) at 78-79; Durham Holdings Pty Ltd v New South Wales [2001] HCA 7; (2001) 205 CLR 399 at [13]-[14] (Gaudron, McHugh, Gummow and Hayne JJ) and [56]-[59] (Kirby J).

333    The principles to be applied in determining whether a law is to be characterised as a law with respect to a head of legislative power are well settled. As Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ held in New South Wales v Commonwealth (Work Choices Case) [2006] HCA 52; (2006) 229 CLR 1 (Work Choices) at [142], “[t]he character of the law must … be determined by reference to the rights, powers, liabilities, duties and privileges which it creates. The practical as well as the legal operation of the law must be examined.”

334    In order to attract the operation of s 51(xxxi), the subject matter of the acquisition must constitute “property” within s 51(xxxi). The term “property” in this context has been broadly construed: see, for example, ICM  at [147] (Hayne, Kiefel and Bell JJ).

335    Further, what has occurred must constitute an “acquisition”. As the primary judge held, the mere deprivation, extinguishment or sterilisation of rights is not sufficient. Rather, it is necessary to establish that there has been both a taking of property from the owner and a gain or receipt of some benefit relating to the ownership or use of the property by another. As Mason J (as his Honour then was) stated in Commonwealth v Tasmania (1983) 158 CLR 1 (Tasmanian Dam) at 145 in explaining the difference between a ‘taking’, being the subject matter of the Fifth Amendment to the United States Constitution, and an acquisition, being the subject-matter of s 51(xxxi) of the Commonwealth Constitution:

The emphasis in s 51(xxxi) is not on a ‘taking’ of private property but on the acquisition of property for purposes of the Commonwealth. To bring the constitutional provision into play it is not enough that the legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be.

336    This passage from the reasons of Mason J in Tasmanian Dam has since been approved by the High Court on numerous occasions: see e.g. JT International v Commonwealth [2012] HCA 43; (2012) 250 CLR 1 (Plain Packaging) at [42] (French CJ), [118] (Gummow J), [169], [188] (Hayne and Bell JJ), [278] (Crennan J), and [357], [369]-[370] (Kiefel J); ICM at [132] and [147] (Hayne, Kiefel and Bell JJ). See also e.g. Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 (WMC) at [24] (Brennan CJ), [77] (Gaudron J), [132] (McHugh J) and [185] (Gummow J); Mutual Pools at 172-173 (Mason CJ), 176 (Brennan J), 185 (Deane and Gaudron JJ), and 223 (McHugh J); Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 (Georgiadis) at 304-305 (Mason CJ, Deane and Gaudron JJ).

337    It follows, as French CJ held in Plain Packaging at [42], “[i]mportantly, the interest or benefit accruing to the Commonwealth or another person must be proprietary in character”: see also Plain Packaging at [147]-[150] (Gummow J), [278] (Crennan J), and [369]-[370] (Kiefel J).

338    The requirement that there be an “acquisition” does not require that the Commonwealth itself acquire a benefit or advantage. Rather, it suffices if that accrues to a third party: WMC at [185] (Gummow J) and [237(6)] (Kirby J); Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480 (Australian Tape Manufacturers) at 510 (Mason CJ, Brennan, Deane and Gaudron JJ); PJ Magennis. Nor need there be a precise correspondence between the property that is taken and that which is received: Georgiadis at 304-305 (Mason CJ, Deane and Gaudron JJ); WMC at 35 (Gaudron J). As such, the concept of an acquisition for the purposes of s 51(xxxi) has also been broadly construed.

339    Nonetheless, the mere imposition of restrictions upon the use of property will not normally involve an acquisition within s 51(xxxi). For example, in Tasmanian Dam, the High Court held that restrictions imposed on the use of property by Tasmania under the World Heritage Properties Conservations Act 1983 (Cth) were valid. No proprietary interest of any kind in the property was acquired by the Commonwealth or anyone else by virtue of the impugned legislation: Tasmanian Dam at 145-146 (Mason J), 181-182 (Murphy J) and 247-248 (Brennan J).

340    In short, as Deane J explained in Tasmanian Dam at 283:

…[L]aws which merely prohibit or control a particular use of, or particular acts upon, property plainly do not constitute an “acquisition” of property for the purposes of the Commonwealth. Commonly, such laws are of general application and apply to property by reason of its being property of a particular description or by reference to the nature of the use or act prohibited or controlled … The mere extinguishment or deprivation of rights in relation to property does not involve acquisition.

(emphasis original)

341    Finally, the requirement of just terms is concerned with fairness: Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495 (Nelungaloo) at 569 (Dixon J); Smith v ANL Limited [2000] HCA 58; (2000) 204 CLR 493 (Smith v ANL) at [48] (Gaudron and Gummow JJ) (citing with approval Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269 (Grace Brothers) at 290 (Dixon J). This requires that the terms be actually just, and not merely those which the Parliament considers to be just: PJ Magennis at 397 (Latham CJ). As a general rule, the principle for a determination of just terms compensation is “the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities, excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired…”: Grace Brothers at 293 (Dixon J) (quoting with approval Fraser v City of Fraserville (1917) AC 187 at 194. In other words, just terms are generally afforded where the price paid for the property reflects its market value by reference to the price that a willing but not anxious purchaser would pay to a willing but not anxious vendor before notice was given of the intention to compulsorily acquire: Nelungaloo at 540 (Latham CJ), 547-548 (Starke J); Minister of State for Home Affairs v Rostron (1914) 18 CLR 634 at 636 (Isaacs J); Spencer v Commonwealth (1907) 5 CLR 418 at 432 (Griffiths CJ) and 440-441 (Isaacs J).

342    In its submissions, the Commonwealth points to differences of view in the authorities as to whether full monetary compensation or some process directed to that outcome is required by s 51(xxxi): contrast e.g. Georgiadis at 310-311 (Brennan J) (endorsed by Gleeson CJ in Smith v ANL at [8]) and Wurridjal at [190] (Gummow and Hayne JJ). While the Commonwealth submitted that the better view is that full monetary compensation is not required relying upon Wurridjal at [190], it is unnecessary to consider that issue here. As I later hold, no error is shown in the primary judge’s finding that the appellant was offered the current market value of the land. There is nothing to suggest that anything more was required to compensate him for the full monetary value of his land.

3.2    The relationship between s 51(xxxi) and s 96 of the Constitution: is joint Commonwealth/State action sufficient to establish a contravention of s 51(xxxi)?

343    The appellant submits that it suffices to establish a contravention of s 51(xxxi) if he proves “joint action” by the Commonwealth and the State which resulted in the State acquiring property on other than just terms, or complicity between them to achieve such an objective. That submission should be rejected.

344    The relationship between s 96 of the Constitution, which confers power on the Commonwealth to "grant financial assistance to any State on such terms and conditions as the Parliament thinks fit”, and s 51(xxxi), was recently considered in ICM by French CJ, Gummow and Crennan JJ (with whom Heydon J relevantly agreed at [174]. (I note that Hayne, Kiefel and Bell JJ ultimately found it unnecessary to decide these issues in their joint reasons: ICM at [141]).

345    In ICM, the question arose as to whether, as submitted by the Commonwealth, the decision in PJ Magennis should be overruled and that in Pye v Renshaw, preferred. Relevant also to this issue was the High Court’s decision in Tunnock v Victoria (1951) 84 CLR 42 (Tunnock) which distinguished PJ Magennis.

346    Turning first to PJ Magennis, that case concerned the validity of the War Service Land Settlement Agreements Act 1945 (Cth) which purported to authorise the execution of an agreement between the Commonwealth and (relevantly) NSW to acquire land compulsorily for the settlement of returning veterans. It was not in issue that the compensation provided for in that agreement was less than just terms (PJ Magennis at 398 (Latham CJ)). The High Court by majority held that the Commonwealth law infringed s 51(xxxi). That being so, the majority also held that, while s 51(xxxi) does not apply to the states and there is no equivalent requirement for states to acquire property on just terms, as a matter of construction the reciprocal NSW Act had no legal operation because it purported to approve and ratify an agreement with the Commonwealth which the Commonwealth had no power to make: Latham CJ at 403-404, Williams J at 424 and Webb J at 430. As the High Court subsequently explained in Pye v Renshaw at 78-79 with respect to the decision in PJ Magennis, the NSW Act:

…was treated as simply inoperative. The position thus reached could not, of course, affect the validity of any State legislation authorizing the acquisition of land, because State powers are in no way affected by s. 51(xxxi).

347    Following the decision in PJ Magennis, the Commonwealth repealed the War Service Land Settlement Agreements Act 1945 (Cth) and NSW amended its legislation so as to delete any reference to participation with the Commonwealth in soldier resettlement. The validity of the amended State Act was considered subsequently in Pye v Renshaw. In that case the plaintiff alleged that the acquisition was made by “arrangement” with the Commonwealth in order that the Commonwealth might settle discharged soldiers on the plaintiff’s land in the sense of deciding who was to be settled and possibly financing the “settling”, and that the plaintiff might be paid less than the true value of the land (at 81-82). In this respect the Court unanimously held that “[i]t is impossible to maintain that the validity of the resumption by the State can be affected if it chooses to co-operate with the Commonwealth in the matter of closer settlement or to accept financial assistance from the Commonwealth” (emphasis added) (at 82). Equally, the Court rejected the argument that the compulsory acquisition by NSW was invalid because “the Commonwealth is not authorised by s 96 or any other provision of the Constitution to provide money for a State in order that the State may resume land otherwise than on just terms.” (Pye v Renshaw at 83). Rather, the Court held at 83 that:

This is the very argument which was rejected in Victoria v the Commonwealth [(1926) 38 CLR 399]; see also South Australia v The Commonwealth [(1942) 65 CLR 373 at 417] where Latham CJ said: “the Commonwealth may properly induce a State to exercise its powers… by offering a money grant.”

348    In Tunnock the High Court considered whether the Soldier Settlement Act 1945 (Vic) was inoperative in light of the decision in PJ Magennis. In common with the State law in PJ Magennis, Part I of the Victorian Act was held inoperative because it purportedly ratified and approved the agreement held invalid in PJ Magennis (Tunnock at 53). However, the Court held that the remainder of the Victorian Act was operative despite being enacted mainly to carry out the joint Commonwealth and State scheme embodied in the agreement. This was because the remaining Parts of the Act “embody a scheme of ‘soldier-settlement’ which is the creation of the State legislature. It has not merely adopted the scheme embodied in the Agreement. The Soldier Settlement Acts authorize the compulsory acquisition of land only for the purpose of ‘soldier settlement’ pursuant to these Acts”: Tunnock at 50-51 (McTiernan J); see also 56-57 (Williams and Webb JJ) and 57 (Kitto J).

349    This line of authority was considered by the High Court in ICM. In rejecting the Commonwealth’s argument that there was a tension between the decisions in PJ Magennis and Pye v Renshaw, the plurality in ICM held that:

36. … It is significant that from the legislation under consideration in Pye v Renshaw any arrangement or agreement with the Commonwealth had been, as Professor Saunders has said, “decoupled” in 1950 upon the repeal of the War Service Land Settlement Agreement Act 1945 (NSW). The argument rejected in Pye v Renshaw was that the exercise of the power to grant financial assistance under s 96 would be vitiated if shown to be for the purpose of inducing the state to exercise its powers of acquisition on less than just terms. The concept of improper purpose as a vitiating characteristic was rightly rejected. Section 96 says nothing about purpose. It authorises the making of grants on “such terms and conditions as the Parliament thinks fit”. The constraints imposed by constitutional prohibitions or guarantees will be directed to the range of permissible terms and conditions rather than their underlying purpose.

350    The plurality further held that:

39. Further, it is significant… that, in Pye v Renshaw, Magennis was not said to be overruled and that the reason why the Court found it unnecessary to do so is to be found in the “decoupling” effected by the changes to the legislation in the intervening period. In Pye v Renshaw the Court referred to the deletion from all relevant State legislation of all reference to any agreement with the Commonwealth and all reference to any direct or indirect participation of the Commonwealth in any scheme of soldier settlement. In the companion decision upon the Victorian soldier settlement legislation, Tunnock v Victoria, Williams and Webb JJ, who had been in the majority in Magennis, concluded that the Victorian Parliament had not intended the power of acquisition conferred by its statute “to be mere machinery” for carrying out the agreement with the Commonwealth.

351    The plurality refused leave to re-open PJ Magennis, finding that the correctness of the decision was reinforced by subsequent developments in the authorities (ICM at [40]-[45]). Their Honours concluded at [46] that:

The result is that the legislative power of the Commonwealth conferred by ss 96 and 51(xxxvi) does not extend to the grant of financial assistance to a State on terms and conditions requiring the State to acquire property on other than just terms. The plaintiffs’ case, to that extent, should be accepted.

352    In my view, in so stating the plurality were not merely accepting a proposition advanced by the plaintiff in the particular circumstances of that case as Mr King submitted for the appellant, but were stating the relevant constitutional principle. As the Commonwealth submitted, that principle in turn was applied by the Full Court in Esposito v Commonwealth [2015] FCAFC 160; (2015) 235 FCR 1 (Esposito). In that case, the appellants submitted relevantly that a funding agreement between the Commonwealth and NSW which provided the funds used to acquire their land was a circuitous device by which the Commonwealth and the State could, by combination, avoid the prohibition in s 51(xxxi). The Full Court first identified the relevant principle at [66], namely, that “… the Commonwealth may not impose as a condition on a s 96 grant to a State a requirement that it acquire property other than on just terms. This was the very holding in PJ Magennis…” (emphasis added). Secondly, the Court found that there were a number of difficulties confronting the appellant’s argument, including that “New South Wales did not use any of its powers to acquire land compulsorily nor was it required to do so under the agreement. It merely put the Foundation in funds to make offers to acquire the land.” (at [67]).

353    Against this, the appellant relies upon certain passages in PJ Magennis to contend that it is sufficient for him to establish “joint action” by the Commonwealth and the State resulting in the State acquiring property on other than just terms, or complicity between them to achieve such an objective. However, that submission is directly inconsistent with the decisions in ICM and Esposito. It also takes the passages in PJ Magennis on which the appellant relies out of context. In this regard, Latham CJ identified the question as “whether the Parliaments of the Commonwealth and, in this case, of the State of New South Wales, have by joint action succeeded in evading the constitutional obligation of the Commonwealth Parliament to provide just terms when it makes a law with respect to the acquisition of property …” (PJ Magennis at 398-399) (emphasis added). Further at 422, Williams J found that the “[i]t is apparent that the agreement is a joint scheme by the Commonwealth and the State to settle on the land discharged members of the Forces selected by a State authority on behalf of the Commonwealth” (emphasis added): see also Williams J at 424 referring to “joint venture”. However, the references to “joint action”, “joint scheme” and “joint venture” in these passages were merely descriptive of the scheme in question, as opposed to articulating the test by which the validity of the Commonwealth law was determined.

354    It follows that the Commonwealth does not contravene the constitutional guarantee in s 51(xxxi) by imposing terms and conditions on a grant under s 96 which are intended only to induce a State to acquire property other than on just terms. The Commonwealth’s objectives, aims, or purposes are not relevant. Rather, the character of the Commonwealth law for the purpose of considering whether the constitutional limitation has been infringed is determined by the range of permissible terms and conditions of the statutory power to grant financial assistance. Only where the terms and conditions of a s 96 grant require the State to acquire property otherwise than on just terms will the constitutional guarantee in s 51(xxxi) be infringed. This is because only in such a case do the terms and conditions require the State to be “mere machinery” for carrying out the agreement. Equally, even if such a requirement is imposed by the Commonwealth on a s 96 grant, a State scheme to acquire property otherwise than on just terms will not thereby be rendered inoperative if the State legislative scheme is properly characterised as the creation of the State, i.e., the State has not intended the power of acquisition enacted by it to be “mere machinery” for carrying out the agreement with the Commonwealth.

355    With respect to Commonwealth executive power to enter a funding agreement, as s 96 is relevantly qualified by s 51(xxxi), an agreement to facilitate such a grant which could not be authorised by s 96, would equally not be supported by s 61 of the Constitution conferring executive power: ICM at [29]. The plurality in ICM held at [29] that “[i]n this way, limitations upon legislative power may indicate whether the ends of an agreement are consistent with the Constitution”.

356    Finally, in ICM the plurality left open the question whether the assumption in Gilbert v Western Australia (1962) 107 CLR 494 (Gilbert) at 505 that the terms and conditions attached to a s 96 grant may sufficiently be disclosed in an informal fashion falling short of an intergovernmental agreement, reflects a correct understanding of s 96 and its relationship to s 61 of the Constitution: ICM at [38]. It follows, as the State submitted, that it has not yet been definitively determined whether a prohibited “term or condition” under s 96 and s 51(xxxi) might be found in a “side agreement” or informal arrangement.

357    The last of these matters has particular relevance to these proceedings. Given that ICM left this issue open, the High Court allowed the appeal against summary dismissal of this matter because of the possibility that an informal agreement between the Commonwealth and the State of this kind might exist: see Spencer v Commonwealth (2010) 241 CLR 118 (Spencer (HCA)) at [31]-[34] (French CJ and Gummow J) and [46]-[49] (Hayne, Crennan, Kiefel and Bell JJ). As the High Court also explained, in order to succeed on his pleaded case, the appellant would have to establish as a matter of fact that such an informal agreement existed and, if so, persuade the Court that the agreement was constitutionally relevant: Spencer (HCA) at [46]-[48]. In this regard and consistently with the approach in ICM, French CJ and Gummow J expressly referred to the possibility that the appellant may establish the existence of an informal intergovernmental agreement “conditioning the relevant Commonwealth funding upon the acquisition by the State of Mr Spencer’s property rights on other than just terms”: Spencer (HCA) at [31]. However, as I later explain, ultimately the evidence lent no support to the existence of any informal agreement imposing such a requirement as a condition of the grant of financial assistance to NSW.

3.3    No basis for impugning the validity of the Commonwealth laws

3.3.1    The Natural Resources Management (Financial Assistance) Act 1992 (Cth) and the Natural Heritage Trust of Australia Act 1997 (Cth)

358    The first issue concerns the validity of the NRM Act 1992 and the NHT Act 1997. These laws provide for the making of agreements to grant financial assistance to the States in furtherance of environmental objects.

359    The primary object of the NRM Act 1992 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.” (s 3(2), NRM Act 1992). Section 5 of the NRM Act empowers the Commonwealth to enter into a written agreement with a State on financial assistance, whether by way of a grant from the Commonwealth or otherwise, in respect of projects approved by the Commonwealth and the State acting jointly on specific projects (s 5(1)-(2), NRM Act 1992). Section 7 provides that an agreement must include, among other things, provisions relating to the object of the projects to which the agreement relates and the conditions subject to which payments under the agreement are to be made. In addition, s 8 provides relevantly that a State must repay to the Commonwealth all or a specified part of a payment made under the agreement where the Commonwealth Minister or authorised person is satisfied that the State has not fulfilled a condition of the agreement or undertaken a project in accordance with the agreement.

360    The NHT Act 1997 established the Natural Heritage Trust of Australia Account (NHT Trust). The purposes of the NHT Trust include the National Vegetation Initiative, environmental protection, supporting sustainable agriculture, “natural resources management”, and the making of grants of financial assistance for any of these purposes (s 8, NHT Act 1997; see also the preamble to the Act). The primary objective of the National Vegetation Initiative was set out in s 10, namely:

... to reverse the long-term decline in the extent and quality of Australia’s native vegetation cover by:

(a)    conserving remnant native vegetation; and

(b)    conserving Australia’s biodiversity; and

(c)    restoring, by means of revegetation, the environmental values and productive capacity of Australia’s degraded land and water.

361    “Natural resources management” was, in turn, defined in s 17 to mean relevantly “(a) any activity relating to the management of the use, development or conservation of one or more of the following natural resources:… (iii) vegetation;…”.