Commonwealth of Australia v Western Mining Corporation M27/1996 [1996] HCATrans 275 (5 August 1996)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M27 of 1996

B e t w e e n -

COMMONWEALTH OF AUSTRALIA

Applicant

and

WESTERN MINING CORPORATION

Respondent

Application for special leave to appeal

DAWSON J

McHUGH J

KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON MONDAY, 5 AUGUST 1996, AT 10.05 AM

Copyright in the High Court of Australia

MR J.J. SPIGELMAN, QC: If the Court pleases, I appear with my learned friends, MR H.C. BURMESTER and MR S.J. GAGELER, for the applicant. (instructed by the Australian Government Solicitor)

MR G.A.A. NETTLE, QC: If the Court pleases, I appear with my learned friend, MR P.J. HANKS, for the respondent. (instructed by Arthur Robinson & Hedderwicks)

DAWSON J: Mr Nettle, we thought we might confer on you the doubtful honour of beginning.

MR NETTLE: May it please your Honour. If the Court please, it is submitted that special leave ought be refused because the case raises no question of principle which has not been decided previously by the Court. The applicant has put forward four questions which it says raises questions of principle but none of them do. The first of them, the so-called question of whether a statutory right is inherently defeasible because it is a statutory right is not a question of principle but, it is submitted, clearly from the authorities which go before, a question of application. Georgiadis and Peverill make it clear, it is submitted, that in order to decide whether a right created by statute is intended to be inherently defeasible it is necessary to look at the terms of the statute by which the right is created.

Thus, for example, it is clear enough when one looks at a Medibank refund right that the terms contemplated that it be inherently defeasible but, on the other hand, if one looks at a petroleum production licence of the kind, say, under which Woodside operate on the north-west shelf and pursuant to which they invest literally billions of dollars, it cannot be contemplated that the Parliament intended that the right be revocable at will without notice and without compensation. And one can see it from the terms of the statute that no such thing was contemplated.

DAWSON J: Where is the acquisition?

MR NETTLE: It is a different point. The acquisition he submitted inheres in this. The rights which are granted to the permit holder are granted by the Commonwealth in exercise of its sovereignty over the area to which the right pertains. Those sovereign rights are analogous to the rights which the sovereign enjoyed over the territorial sea at common law which were recognised as amounting to, in effect, ownership, not only of the surface of the sea but the land below it and the right to exploit most of the resources including the minerals and things such as royal fish. By analogy when the Seas and Submerged Lands Act extended the sovereignty of the Commonwealth to the continental shelf the Commonwealth asserts rights which are in every respect the same as those which the sovereign used to assert over the territorial sea. Hence, therefore, when permit has been granted but is extinguished or revoked, there springs back up in the Commonwealth untrammelled rights of sovereignty.

DAWSON J: All it lost was the right to explore, if "lost" is the right word, so thereby what it acquires is the right to explore. Is that correct?

MR NETTLE: Not just the right to explore, but the right to grant to others the right to explore and the right to do everything else which might have been inconsistent with the right to explore.

DAWSON J: Can you talk about the right to grant to others the right to explore as being property in any real sense?

MR NETTLE: Yes.

DAWSON J: Even taking the broadest view of property.

MR NETTLE: Yes, it is submitted clearly that the right to explore is property in a very real sense.

DAWSON J: Sovereign rights of property?

MR NETTLE: The Commonwealth rights?

DAWSON J: Yes, Commonwealth sovereeign rights are property.

MR NETTLE: Your Honour, I misunderstood you. I thought you said that the right to explore was property which is granted - - -

DAWSON J: The right to grant to others the right to explore which is a sovereign right is property?

MR NETTLE: In the sense contemplated by the Constitution, yes, for this reason: if one goes back in time to the time at which the common law recognised that the rights of sovereignty over the territorial sea amounted to ownership, the common law conceived of those rights as being proprietary. Similarly, it is submitted, although the sovereignty which now reaches to the continental shelf is the product of treaty and statute, what the Commonwealth acquires is so much analogous to what the king had in the territorial sea is properly to be regarded as property for the purposes of 51(xxxi) of the Constitution. Thus, it is submitted that when a right granted away by the Commonwealth is extinguished there springs back up in the Commonwealth, if you like, as the reversioner, an enhanced proprietary interest.

DAWSON J: One may not like as a reversioner. This is no more than a licence, is it?

MR NETTLE: Granted, your Honour, but it is analogous.

DAWSON J: It is not really, is it, because when a licence is taken away the licensor does not acquire anything, and when a lease is extinguished, the reversion is, as it were, expanded to the whole estate.

MR NETTLE: It may be true that as a matter of English real property law a licence confers no real property interest, but as a matter of constitutional law it is submitted it is clear that a bare licence is capable of amounting to property for the purposes of 51(xxxi).

DAWSON J: That is clear. Some are.

MR NETTLE: Now, equally, if the licence, albeit not a real property licence or a licence giving rise to a real property interest which was conveyed away as extinguished, is of a particular kind, it may so much enhance the reversionary estate as to be regarded as creating the situation whereby the reversioner has, indeed, acquired something. Now, it is submitted that that is the case here. In just the same way as the extinguishment of a cause of action of the kind dealt with in Georgiadis was conceived to give rise to an acquisition of property by the Commonwealth so much the more so, it is submitted here, that the extinction of the right to explore and the contingent right to acquire the right to produce petroleum when extinguished gives right to an acquisition of property by the Commonwealth.

DAWSON J: Well, certainly, Georgiadis supports you.

MR NETTLE: Not all of the decisions in Georgiadis, but, your Honour, might I go further and say this - I do not mean to be disrespectful, your Honour's analysis in Georgiadis is, it is submitted, consistent with the view that we submit now. Your Honour, it is submitted, conceived of the necessity for the acquisition of something in the nature of a proprietary interest, which is to say some sort of right with respect to land, as your Honour put it before, that there could be acquisition.

DAWSON J: We have held that licences, television broadcasting licences, are property, have we not?

MR NETTLE: Yes, indeed, your Honour has in ACT Television.

DAWSON J: Yes.

MR NETTLE: To come back to the point, the Court asked me at the outset why ought this not be perceived of as a special leave case. The answer we give with respect to the so-called first issue is that the extinguishment of statutory rights does not give rise to an a priori notion that because they are created by statute there is necessarily inherent defeasibility in them. What the decided cases show clearly enough, and one would expect as a matter of common sense is, that one must look at the terms of the statute to decide what was the nature of the right which was conferred. Now, once one comes to that point one comes to the very sort of analysis which is undertaken by Chief Justice Black and Justice Beaumont below of painstakingly going through each of the relevant provisions of the legislation to decide what was it that the Parliament intended to and did confer on the permit holder.

Was it something which was to be ephemeral and which could be swept away at the whim of the executive or was it something which was meant to be enduring and assignable and in the nature of property as it is conceived of under 51(xxxi) of the Constitution? Now, that, with great respect to them, is a mechanical exercise in jurisprudence, applying the principles clearly enunciated by this Court already, and it is not for this Court to go back and undertake that sort of exercise again if what has been applied are the principles already clearly established. Thus, it is submitted, that this first question is not a question of principle at all, it is clearly one of application only and thus not a special leave issue.

Your Honours, if we may go to the second of the so-called questions, it is submitted that the position is very much the same. The second of the so-called issues for which the applicant contends is that there has been no acquisition because there has merely been extinction. Your Honour the presiding judge has touched on the problem already but the answer, it is submitted, is clear enough. This Court has held more than once already that that which needs to be acquired by the Commonwealth or a third party before there is acquisition need not be the same thing as that which the victim has lost as a consequence of the acquisition.

It is enough, according to Chief Justice Mason and Justices Gaudron and Deane, if there is a significant enhancement in the rights and interests of the Commonwealth or third party, and it is enough according to your Honour Justice Dawson and Justice Toohey if some sort of rights in relation to land are acquired by the acquirer. On either test in this case it is clear enough that that which the Commonwealth got back as a result of the extinction satisfies the test of what needs to be acquired before it can be said that there is acquisition.

DAWSON J: That is what I was questioning before and now we have come to the point again. Do you say that what the Commonwealth acquires are the sovereign rights which it relinquished in part by the grant of an exploration licence?

MR NETTLE: Your Honour, I would prefer to put it this way: it has the sovereign rights always. In exercise of those sovereign rights it grants away rights to the permit holder to do certain things including to explore and if it finds petroleum to obtain a production licence. The sovereignty remains at all times. It is just that it has carved out of its sovereign rights some rights which it grants to the permit holder. When those rights of the permit holder are extinguished sovereignty continues to inure but the benefit which is within them is enhanced. They are better rights now, just like the reversioner under a leasehold are better rights because it leaves the Commonwealth free to grant to another rights to explore or to produce or, as in this case, to grant away to a foreign power the rights to do so.

DAWSON J: That is going a long way, is it not, because it is one thing to say that when a chose in action is extinguished thereby extinguishing an obligation in the cases which the Commonwealth had to someone, the Commonwealth benefits because it no longer has to pay money in accordance with the chose in action. That is one thing, but to say that sovereign rights which still continue to exist are nevertheless somehow enhanced in value by the extinguishment of a licence, that is enough to say that there is property.

MR NETTLE: Yes.

DAWSON J: I mean, one cannot get round the fact that you have to have an acquisition of property, and there comes a point at which you cannot say that there is any identifiable property acquired. There may or may not be in this case.

MR NETTLE: Can I meet it in this way, or endeavour to, your Honour. Think for a moment, if you will, of a production licence. Think of the north-west shelf Rankin Field out of which pumps gas daily, into which has been invested literally billions of dollars. If the Commonwealth were overnight to extinguish the production licence under which that petroleum is produced, it cannot be gainsay that the Commonwealth would thus acquire something. It would acquire all the petroleum which daily splurges out of that field which is a vast amount of money.

DAWSON J: Yes, but that is a production licence.

MR NETTLE: That is a production licence. The same sovereign area, same continental shelf, exactly the same sovereign rights were used in order to grant away the production licence. The question then is what is the nature of the right which has been granted by the Commonwealth to the permit holder which is extinguished.

DAWSON J: Well, you see, it is the Commonwealth saying, "Well, we said you could explore in that area. Events have happened so we have to say now we're restricted to that area".

MR NETTLE: It is a little bit more than "you may explore".

DAWSON J: I am probably simplifying it, yes.

MR NETTLE: It is said "You may explore and if you find petroleum you may mine the petroleum".

DAWSON J: Yes.

MR NETTLE: That is the exercise which is undertaken by Chief Justice Black and Justice Beaumont in going through the legislation.

DAWSON J: That is a chance.

MR NETTLE: Yes, but a very valuable one.

DAWSON J: No doubt it is valuable, and then you can - well, you did, you paid something for these licences, I presume, and you could sell them.

MR NETTLE: Can I come to this point. If your Honour recognises, as I would urge upon you, the view that the extinction of a production licence would give rise to an acquisition by the Commonwealth within the meaning of 51(xxxi), then it ought follow, and it is submitted does follow, that whether or not there is an acquisition consequent upon the extinction of rights under the Petroleum (Submerged Lands) Act depends upon an analysis of the rights which were held by the permit holder. One cannot say that simply because they were created by an Act they may be extinguished at will. One must look at the terms which create them and decide, painstakingly by reference to them, what was it that was given to the permit holder and was it of sufficient weight and substance that when extinguished there was an acquisition of something by the Commonwealth.

DAWSON J: There is no doubt that the points you make have a lot of force, but it is an important question, is it not, and why should not this Court give it its attention?

MR NETTLE: For the reason already advanced, it is submitted, your Honour, namely, that you have already adumbrated the principles by reference to which these things may be decided. The third of the issues is the so-called Nintendo qualification. It seems to inhere in two parts, as the applicant puts it. The first is that the exercise of legislative power in this case was one which was necessarily inconsistent with the notion of just terms. In other words, that this is somehow to be equated to legislation, working a forfeiture, or a penalty or taxation. It is submitted it is obvious that an acquisition effected under the Foreign Affairs power of this kind is clearly not such an exercise in legislative power as to be necessarily inconsistent with just terms for otherwise the whole of - - -

DAWSON J: Does section 51(xxxi) extract or abstract from the external affairs power an acquisition power, so that it is only on just terms that one could acquire, even where otherwise one would be exercising the external affairs power to acquire property?

MR NETTLE: It is submitted clearly, yes, for otherwise the Tasmanian Dams Case would have been a waste of paper. I mean, the whole of that analysis proceeds correctly, it is submitted, upon the assumption that 51(xxxi) does extract from the foreign affairs power the ability to acquire otherwise than on just terms.

DAWSON J: So that even if it were the acquisition of property outside Australia from, let us say, an Australian citizen, there would be an obligation to pay - - -

MR NETTLE: Yes, certainly, it is submitted. For example, if the Commonwealth were to acquire property in the United Kingdom from an Australian citizen it would be subject to 51(xxxi), if it were not the exercise of one of these powers which is necessarily inconsistent with them.

DAWSON J: And it would be difficult to see how you could acquire from a foreign citizen compulsorily property outside Australia.

MR NETTLE: Yes. So that is the first aspect of Nintendo. It just has no application and the ambit of that aspect has already been, again, clearly established by the Court in decisions such as Lawler, Mutual Pools, Nintendo itself, and Tasmanian Dams. The second aspect of Nintendo as we apprehend it from the outline of submission of the applicants is that this legislation which extinguished Western Mining's permit as to part was simply regulating competing claims in the way in which the Commonwealth was regulating competing claims to copyright and suchlike. Well, again, it is manifest, it is submitted, that that sort of analysis has no application in this case. The regulation of competing claims can have nothing to do with the regulation of claims as between Australian subjects and foreigners, absolutely nothing. All of that law is devoted to regulating claims between Australians, not giving away what has previously been regarded as Australian territory to a foreign power.

Finally, the fourth issue, which is the question of just terms. It is submitted the question simply does not arise. The first part of the trial before his Honour Justice Ryan was to establish whether or not there had been an acquisition and, if so, was it possible that the terms were not just. His Honour ruled, and he was upheld on appeal, that but for section 24 there would be no just terms. He ruled also correctly, it is submitted, and it was upheld on appeal, that the measure of just terms would have to be decided by reference to the value of what was lost and what was gained. In those circumstances there can be no issue of just terms in this case. It is a question of fact to be decided by reference to the law.

Might I conclude by saying nor can there be any suggestion that what is given by the so-called right to share is just terms, because it is not given by law, enforceable by the law of this country. It is given only by administrative arrangement. May it please the Court, it is submitted that there is no special leave question. It is simply a question of application of principles already established. If the Court pleases.

DAWSON J: Thank you, Mr Nettle. Mr Spigelman.

MR SPIGELMAN: Your Honours, as to the first question, we submit that there is no decision of this Court that finds that a right created by statute that has absolutely no basis in the general law and is created solely by statute is within 51(xxxi) at all. We submit that it is open for the Court - - -

DAWSON J: Why should not it be? I mean, why should not a statute create proprietary rights?

MR SPIGELMAN: This does not create proprietary - what we say is - - -

DAWSON J: Well, you say it does not.

MR SPIGELMAN: It can create proprietary rights, but not such that are immune from amendment, and what we say is it inheres in a statute - - -

DAWSON J: You might be right, but amendment subject to section 51(xxxi).

MR SPIGELMAN: Of course, that is right. We say that in a form of property that is created and owes its existence only to statute and has no basis in the general law - we are not dealing with something like Crown land over which a mineral lease might have been given. We are not dealing with a situation such as that. We are dealing with a form of statute, which is the Petroleum (Submerged Lands) Act, which prohibits any form of exploration activity in the relevant areas defined as adjacent areas. The licences so-called are exceptions to that prohibition. They are not licences in terms of an interest in land, whether it be one or not. They are licences to, as it were, breach the overriding prohibition in the first part of the statute and it is that form of - - -

DAWSON J: It is, sort of, the Lord giveth and the Lord taketh away argument. The Lord taketh away without just terms.

MR SPIGELMAN: What we submit is that as that what you get, you get a property which is by its nature inherently susceptible to variation, and that that is, as it were, an inherent characteristic of the property you acquire - variation by parliamentary action. That is the first proposition. There are at least two judges of this Court who have indicated in their reasoning in two different cases that they would support a proposition of that character.

DAWSON J: Who are they, and where?

MR SPIGELMAN: Justice McHugh in Georgiadis and Justice Gummow sitting in the Federal Court.

DAWSON J: Yes.

MR SPIGELMAN: And we have given your Honours references to the pages in our submissions.

KIRBY J: And that is true of all property acquired from the Commonwealth?

MR SPIGELMAN: No, it is true of property that the Commonwealth, if it be property - property that is created by the Commonwealth and has no relevant basis in the general law.

KIRBY J: That is the distinction from Georgiadis, you assert?

MR SPIGELMAN: Yes, it is the distinction in Georgiadis, and that is, we say, a basic distinction. It would also be a distinction between, say, Crown land to which mineral leases are given. In such a case there is a relevant application of the common law with respect to the ownership of land. The critical distinction here is that there is purely and simply an exercise by the Commonwealth of a right to sovereignty and of a character which does not bear any direct involvement of a proprietorial character by the Commonwealth.

DAWSON J: Is not your argument really to say that as long as the statute creates a recognisable form of property, then section 51(xxxi) applies, but if it is a new, a novel, form of property, then that is different because the statute shapes the form and, therefore, it can shape it in whatever way it wants to by amendment, even if it means taking it away.

MR SPIGELMAN: That may be a basis for a distinction. It is not the only one for which we contend. We say if it has a form of right when one calls it property is very much the question. One creates a form of right, it inheres in the nature of that right, it being a purely statutory right that it is subject to subsequent amendment.

DAWSON J: That is so with any statutorily created property.

MR SPIGELMAN: No, because in the Crown law case, for example, one does have the statute, but one has a concept of ownership at the heart of the Crown Lands Acts.

DAWSON J: Well, the holder of a licence has a concept of ownership. It buys the licence, it can sell the licence, there is a register of licences.

MR SPIGELMAN: Yes.

DAWSON J: Why cannot one have a concept of ownership in relation to that?

MR SPIGELMAN: We submit that that is not property vis-a-vis the creator of the property, namely the Parliament. It may be property - - -

DAWSON J: Well, why is it any more or less so than a chose in action created by the creator of the chose in action Parliament?

MR SPIGELMAN: The chose in action is a form that is transferable.

DAWSON J: So is the licence.

MR SPIGELMAN: In accordance with the general law, and is also capable of acquisition in a sense, and cancellation, by the creator of the chose.

DAWSON J: So is the licence.

MR SPIGELMAN: No.

DAWSON J: Not in accordance with the general law, but under the statute.

MR SPIGELMAN: Not in accordance with the general law, and that is the principle.

DAWSON J: Is that a difference without a difference?

MR SPIGELMAN: We would submit that it is a difference. It is a difference which is reasonably arguable and we submit that it is a matter of some significance for this Court to decide whether that principle is correct or not, and that is sufficient for present purposes. We submit that it is open by Georgiadis, obviously, because there is a majority decision there which indicated that in certain circumstances a mere extinguishment can constitute an acquisition. And the issue for the Court, if special leave is granted, will be to identify the circumstances in which that is so.

DAWSON J: What was it that was acquired in Georgiadis?

MR SPIGELMAN: Your Honours, the majority consists of two judgments, a joint judgment of three, and this is the second special leave issue in this case, that the joint judgment of three indicated some language of the character. If the Commonwealth acquired a benefit, which it did, namely, the fact that it did not have to pay compensation. That was regarded as an acquisition in the context of that case. The other member of that majority, the present Chief Justice, did not adopt that reasoning. So, in a sense, there is no clear majority - there is a majority in Georgiadis which establishes a principle, but the reasoning is to be found in two separate judgments, and, accordingly, it is not clear for future application, and this is such a future application, of what the principle is.

KIRBY J: That first theory would be consistent with the right being a right which is in the holder of the right, and the property of that holder, as distinct from something which has been conferred, the Lord giving and taking away, it belonged to the person.

MR SPIGELMAN: That is the first basis on which the Commonwealth would wish to argue that there is a relevant distinction, namely, it inheres in the nature of the statutory right. But, if we are wrong about that then one comes to the second special leave question and it is this: is the principle involved in Georgiadis that if the Commonwealth acquires a benefit it has, therefore, acquired property, because that is the way it has been applied here. What has been said - there is a majority of two and the reasoning is not the same. The Chief Justice of the Federal Court suggested that the benefit that the Commonwealth acquired was that it could use the land for its external affairs purposes. Justice Beaumont, the other member of the majority, suggested that it was more like the acquisition of a reversion on a lease. We would submit that Justice Beaumont mixed up rights of sovereignty and rights of property. Justice Black did not do so, but found that the relevant benefit that the Commonwealth acquired to be in the ability to enter the treaty arrangement with Indonesia that cured the international dispute over the Timor Gap, as it was called.

We submit that there is no majority of this Court that suggests that the test is that if the Commonwealth acquires a benefit. There are a number of judgments that indicate that, going back to Justice Deane's judgment in Tasmanian Dams. We submit that the nature of the benefit has to be, nevertheless, something that answers the description of an acquisition of property. We do not have a provision of acquisition of benefits on unjust terms, but the reasoning of the majority in this case suggests that it is as broad as that. There is a line of authority in this Court which suggests, but not a majority - there is no case which decides this by majority - that an acquisition of benefit satisfies the test.

Nevertheless, the Court has never worked out what kind of benefits are of the character that make a mere extinguishment an acquisition. And, we submit that in this case the benefit identified being the right to enter into for external affairs purposes, as the terminology of the Chief Justice below, that that is not a benefit which answers the description of an acquisition of property.

Another way we put it, other than the general proposition that it inheres in the nature of the statutory right which founds no basis in the general law, the other way we put it is to adapt the Nintendo principle to this area of discourse. The Nintendo principle talked about a resolution of a dispute, in that context of a copyright, different claims on a copyright, and the resolution of a dispute which stopped certain claims for copyright being effective in favour of others.

We submit that that is directly analogous in this case. What the Court did in this case quite clearly was to say that is entirely irrelevant. The entire international dispute is irrelevant to our considerations. We are dealing here with a pure question of municipal law and one will take no account of the existence of the international dispute and the resolution of that dispute by treaty with Indonesia and the implementation of that treaty. That was regarded as completely irrelevant and, therefore, the Nintendo principle did not apply and just terms, which is the fourth special leave issue - that matter was regarded as irrelevant to just terms.

The basis nature of the dispute was, as I am sure your Honours were well aware, that Australia made a claim to sovereignty over the entire area of the continental shelf. It did that at a time when in the North Sea Case and other cases, that was regarded as a possible international rule. After that claim to sovereignty was made in the course of the Law of the Sea Convention a different prima facie rule was developed, namely, the equidistance, the mid-point between two territories. But, of course, that was subject to other matters such as the continental shelf claim.

Now, what this all goes back to is that we negotiated with Indonesia an arrangement which gave us what our then claim was, namely, the entirety of the continental shelf, but left a gap during the period that Portugal was in charge of Timor. Subsequently, when we came back to negotiate with Indonesia for drawing a line across the Gap, they made the claim that in accordance with the Law of the Sea Convention the prima facie case was the mid-point between Australia and Indonesia.

DAWSON J: I know that is the point you make but - - -

MR SPIGELMAN: What I am saying is this background created a situation where there could be an Australian claim under Australian sovereignty to be able to explore in the area of the Timor Gap and at the same time a claim by someone having his rights from the Indonesian Government to explore in the same area.

DAWSON J: I appreciate that. How do you put it in legal terms?

MR SPIGELMAN: What we submit is that in the contest of the external affairs power, that Nintendo principle where one is simply adjusting rival claims, that is not an acquisition.

DAWSON J: There is a relinquishment of sovereignty to an extent. Is that the way you put it?

MR SPIGELMAN: In fact, there is not a relinquishment of sovereignty in the sense that the treaty operates on the basis that both claims to sovereignty continue to operate.

DAWSON J: Yes, but that means there is not an exclusive sovereignty, does it not?

MR SPIGELMAN: Well, I think the claim to sovereignty is there, but there is an arrangement by international treaty as to the operations within the disputed area.

KIRBY J: I do not quite get the point that you are moving to. You can make these arrangements, but, inconveniently for the Commonwealth, it has to do so subject to the Constitution and that supports the just terms requirement.

MR SPIGELMAN: We say that this is exactly the same as the Nintendo Case where what has is a situation of rival and competing claims to particular rights, namely, the ability in that case to exploit rights of copyright, and that what the Commonwealth did in the Nintendo Case and this Court found was a reasonable readjustment of those. It is true that the readjustment involved the extinguishment of some - - -

DAWSON J: The readjustment of what?

MR SPIGELMAN: The readjustment of the rights to exploit the copyright in certain works.

DAWSON J: No, no, readjustment of what in this case?

MR SPIGELMAN: In this case the readjustment between Australian citizens claiming under Australian law to drill for petroleum in the Timor Gap area and Indonesian - or anyone who claims under Indonesian law to do the same thing.

DAWSON J: That is what I am putting to you. That is a readjustment of sovereign rights.

MR SPIGELMAN: Sorry, that is, as it were, we put our first point that it is simply a sovereign right and not the right in the nature of property. If we are right about that one does not get to this proposition.

KIRBY J: But you do not accept that there is a readjustment of sovereign rights because sovereign rights have been reserved, both by Australia and Indonesia?

MR SPIGELMAN: There is an adjustment of the exercise by persons claiming under the sovereign rights of the two nations.

DAWSON J: Well, there is a stand-off. Why is not that an adjustment of sovereign rights?

MR SPIGELMAN: It may be, your Honour, but I am not sure that that terminology - - -

DAWSON J: You do not want to admit it, no.

MR SPIGELMAN: - - -is determinative of the facts of this case. We are saying that if we are wrong about the principle, that it is inherent in the nature of the property created that it can be modified or extinguished, if we are wrong about that then the question is what is the next test? And the question here, we say, is that the Nintendo principle applies, that we do have a readjustment. It is true it is not wholly within municipal law, but the way the Full Court dealt with this matter was to treat the entirety of the international dispute as irrelevant to its deliberations on the basis that it was concerned purely with municipal law. We say, particularly when one is dealing with the external affairs power, that ought not be done, and one is dealing with it - - -

DAWSON J: You do not seem to want to go the distance and say, well, the readjustment involved a readjustment of rights as between Indonesia and Australia, and the readjustment was such that there was no room for the acquisition of anything by the Commonwealth.

MR SPIGELMAN: I am sorry, that is - - -

DAWSON J: Is not that the way you have to put it?

MR SPIGELMAN: It is, and we may put it in a way that - - -

DAWSON J: You do not have to call the rights sovereign, you can call them what you like, but if they are relinquished rights - - -

MR SPIGELMAN: There may be, your Honour, a difference - something your Honour indicated and asked my friend, Mr Nettle, whether or not the external affairs power was different in this respect. It may be when one is talking about the core of the power. It will be different when one is talking about the implied or express incidental power when issues such as proportionality and the others, Richards v Forestry Commission, come into play, but when one is dealing with the core of the power it may very well be that questions of sovereignty of the character your Honour has indicated are such as to extract from the operation, the implicit operation of 51(xxxi) into each of the other placita of 51, to extract it when one is dealing with something that is external affairs in the sense of external to Australia.

Now, that is another argument, and it is a possible argument, and it, as it were - well, I think it would cover the point your Honour puts to me about the resolution of sovereign rights. At the heart of the issue here on the question of the application of the Nintendo test is the way that the Federal Court simply treated the international dispute as irrelevant to its considerations.

It did so, also, on the fourth matter that we put, and that is the question of just terms, because we submit that what was in the course of resolving these potentially significant disputes, namely, Western Mining Corporation asserting a right under Australian law to drill in the same area as somebody claims to be able to do from the Indonesian Government, in the course of that there were a number of benefits that we identify which were referred to in our submissions, particularly they were not obliged to give up in accordance with their then licence, half the area, and, also, they were given certain rights of an administrative character to get preferential treatment for the allocation by the joint authority of the new joint licences.

KIRBY J: But your statute reserved just terms, did it not, by section 24?

MR SPIGELMAN: That is a different issue. We submit that that is effectively what we lost on. It reserved just terms in case just terms were either required, which were the first three points, or not otherwise given, which is the fourth point. We submit in the overall circumstances of resolving an international dispute of this character, what has evolved in just terms is a test of fairness, not equivalence. It may very well be that what they got was not equivalent to what lost, but in the context where there was that international dispute, there was an equivalence, a fairness if not an equivalence, and that is sufficient for just terms. That is the fourth issue on which we claim.

KIRBY J: That is purely a factual matter, is it not, really, to work out what the just terms in the particular case are?-

MR SPIGELMAN: No, well, in the particular case in this sense, that it is a particular case involving the area of the Timor Gap. It is not particular in the sense of being unique to Western Mining, but it is particular in that sense, your Honour. We submit that on the face of the statute, given the circumstances, there are just terms there. This does not raise questions of valuation or anything like that, as long as the test of just terms is fairness, not equivalence. We submit that is a fourth issue, but, obviously, one only gets to that if we lose on the others. If the Court pleases, those are our submissions.

DAWSON J: Thank you, Mr Spigelman. Mr Nettle?

MR NETTLE: May it please the Court, two things. First, there has been no readjustment of sovereign rights. The Commonwealth has always, for all relevant times, and continues to assert sovereignty over this area and that assertion of sovereignty - - -

DAWSON J: Well, there has been an arrangement arrived at.

MR NETTLE: It continues to be the assertion of sovereignty.

DAWSON J: By both?

MR NETTLE: And no concession to Indonesia that it has sovereignty over the area.

DAWSON J: There have been concessions to Indonesia. I mean, it may be just a name.

MR NETTLE: What has happened is that in the exercise of those sovereign rights the Commonwealth has taken back from Western Mining part of its permit and given over the area to a joint authority to be granted away to somebody else. What this Court held in Horta is that the Commonwealth's assertion of sovereignty is not justiciable, thus, for the purposes of this Court sovereignty always has been and continues. There has been no rearrangement of sovereignty.

DAWSON J: You say the arrangement with Indonesia is irrelevant?

MR NETTLE: It eschews sovereignty. All it is is it just administrative co-operation for political purposes which has an effect upon the subjects of this country by taking away their property so that it can be made to work.

The second point, your Honour, arises out of what was said by Justice Beaumont at appeal book 147, which it is submitted was really misconceived in the whole of the applicant's case. What Justice Beaumont perceived, as does, indeed, Chief Justice Black at 99, is that what is here involved is so much analogous to common law conceptions of real property as to be proprietary and an acquisition of property for the purposes of 51(xxxi) and he so holds, correctly, it is submitted, because he applies principles already clearly established. May it please the Court.

DAWSON J: Thank you, Mr Nettle. There will be a grant of special leave in this matter.

AT 10.43 AM THE MATTER WAS CONCLUDED