A significant, safe-guarding provision in our Australian Commonwealth Constitution is s 51(xxxi) which provides that the Commonwealth 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”.
The failure to provide “just terms” renders an impugned Commonwealth law invalid, but does not of itself give rise to a right in the property owner to just terms. The provision does not apply to the legislative powers of a State, so that a law of a State dealing with the acquisition of property does not engage s 51(xxxi). However, the High Court has held that if the Commonwealth can be seen as being part of the acquisition arrangements by way of a joint venture or joint action with a State, granting to the State financial assistance but requiring the State to acquire property on unjust terms, then s 51(xxxI) would be engaged. The High Court has lately also observed that it would not be unarguable to plead that s 51(xxxi) might be engaged even if the arrangements were made informally.
In Spencer v Commonwealth of Australia  FCAFC 17 a farmer, Mr Spencer, seeking to engage s 51(xxxi), contended that property rights vested in him had been acquired as a result of NSW vegetation anti-clearing laws (the Native Vegetation Act 2003) affecting his 5000 ha property, which Act had been passed following the enactment of two Commonwealth funding Acts and the completion of four Commonwealth/State inter-governmental Agreements (providing strategy for “Ecologically Sustainable Developments” and “the Conservation of Australia’s Biodiversity” ). The object, he said, of the new laws and agreements, was to enable the Commonwealth to meet its Kyoto climate change targets and to enable the State to secure Commonwealth funding under s 96 of the Constitution for State environmental reforms.
Mr Spencer argued that by virtue of the 2003 substantive restrictions on land clearing, NSW had acquired “use-rights” of his property whilst the Commonwealth had acquired the benefit of (i) costs savings from other measures which might have been necessary to reduce emissions to meet its Kyoto targets and (ii) the “proprietary advantage” of carbon, sequestered in native vegetation remaining on his land.
The NSW Rural Assistance Authority had found that in light of the NSW 2003 Act, Mr Spender’s property was now commercially unviable. The NSW Nature Conservation Trust had made an assessment of his property for the purposes of the Farmers’ Exit Assistance Program and made an offer to purchase the property, which offer Mr Spencer had not accepted as being , he said, far too low.
His Federal Court action in reliance of s 51(xxxi) failed at first instance and now a full court of the Federal Court has unanimously upheld the decision at first instance that the two Commonwealth laws challenged by Mr Spencer (the Natural Resources Management (Financial Assistance) Act 1992 (Cth) and the Natural Heritage Trust of Australia Act 1997 (Cth) in their setting as part of a scheme involving the four Commonwealth/State intergovernmental agreements, coupled with the NSW vegetation clearance laws, did not give rise to a contravention of s 51(xxxi) by the Commonwealth. In particular, the arrangements and legislation could not be seen as a Commonwealth strategy to “get around” its s 51(xxxi) obligation. Here, the terms and conditions on the Commonwealth’s grant of financial assistance did not require acquisition of farmland, even if at some level, funding from the Commonwealth might have played a role in the State’s decision-making. If there was a “taking”, it was up to the State of NSW to decide on compensation. It was true that the 1997 National Heritage Trust Agreement (one of the four intergovernmental Agreements) did impose terms and conditions on NSW requiring it to enact legislation but that Agreement said nothing about NSW having to acquire property as part of its laws.
It was further held that the primary judge did not err in finding that Mr Spencer had not discharged his burden of proving that there was an “informal” Commonwealth/State arrangement involving particular funding to NSW if it enacted the relevant vegetation clearing laws. The informal arrangement was alleged to have been evidenced by such things as ministerial committee minutes, by special minutes of COAG in a series of meetings leading up to and during the 1997 Kyoto Protocol conference and by other documents. The primary judge found that such documents were not indicative of an arrangement but were, for example, merely evidence of the working out of financial and policy commitments concerning the 1997 National Heritage Trust Agreement and that any comments relied upon had little, if any, probative value.
The full court (Griffiths and Rangiah JJ, Perry J concurring) concluded: “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.”
Christine Henchman LLB (Syd)