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High Court of Australia Transcripts |
Last Updated: 27 August 2009
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S24 of 2009
B e t w e e n -
ICM AGRICULTURE PTY LTD ABN 32 006 077 765
First Plaintiff
ICM AUSTRALIA PTY LTD ABN 49 005 120 703
Second Plaintiff
HILLSTON CITRUS PTY LIMITED ABN 45 100 483 243
Third Plaintiff
and
THE COMMONWEALTH OF AUSTRALIA
First Defendant
NATIONAL WATER COMMISSION
Second Defendant
THE STATE OF NEW SOUTH WALES
Third Defendant
THE MINISTER ADMINISTERING THE WATER MANAGEMENT ACT 2000 (NSW)
Fourth Defendant
FRENCH CJ
GUMMOW J
HAYNE J
HEYDON
J
CRENNAN J
KIEFEL J
BELL J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 27 AUGUST 2009, AT 10.16 AM
(Continued from 26/8/09)
Copyright in the High Court of Australia
__________________
FRENCH CJ: Solicitor-General for Victoria.
MS TATE: May it please the Court. Victoria’s submissions are confined to the issue of the consequences that flow for a State from a finding that a Commonwealth law is invalid or an intergovernmental agreement is void, that is, we seek to address the following question. When is it that a State law or instruments made under a State law are rendered inoperative by reason of the invalidity of a Commonwealth Act or the fact that an intergovernmental agreement between the Commonwealth and the State is void? In addressing that question we seek to examine the relationship between the cases of Magennis, Pye v Renshaw and Tunnock in Victoria and the legislation that was respectively in issue in each of them.
With respect to a State we rely on three fundamental propositions, each of which, we submit, must be given recognition. The first proposition is that there is no express or implied limitation upon the legislative or executive powers of a State to acquire property only upon the giving of just or adequate compensation. For that proposition we rely upon Durham Holdings v State of New South Wales 205 CLR 399 at 410, paragraph 14.
The second proposition, which is a corollary of the first, is that a State is free to implement State policy, for example, with respect to the preservation of a natural resource such as groundwater, by means of compulsorily acquiring property within the State free of any obligation to provide adequate compensation. The third proposition is that a State is entitled to accept financial assistance from the Commonwealth to pursue State policies that are within the powers of the State providing that in doing so the State action is not constitutionally compromised by the Commonwealth having acted beyond its powers.
The source of that proviso may lie either in covering clause 5, as your Honours Justices Gummow and Heydon have suggested, or in section 106 of the Constitution. In any event, we submit that for a State there are freedoms and constraints. The critical question is thus to determine at what point action taken by a State will be inoperative by reason of the fact that the action has been taken in conjunction with the Commonwealth and the Commonwealth has either acted beyond its powers or in contravention of a constitutional limitation upon it.
Might I begin then with the legislation that was in issue in Magennis. That is to be found in our spiral bound folder of legislation behind tab 2. Tab 2 is the Commonwealth Act that was struck down as invalid in Magennis. It is the War Service Land Settlement Agreements Act, Act No 52 of 1945. If I could draw your Honours’ attention to some key features of the legislation. The first is that it is an Act which has only three sections followed by two schedules. The first schedule is the agreement between the Commonwealth and New South Wales, Victoria and Queensland, and the second schedule is the intergovernmental agreement between the Commonwealth, South Australia, Western Australia and Tasmania.
GUMMOW J: A lot depends on the phrase “is hereby authorised” in a number of these statutes.
MS TATE: Yes.
GUMMOW J: What is that conveying?
MS TATE: What does that mean, your Honour?
GUMMOW J: Yes.
MS TATE: Well, your Honour, it is taken to mean in Magennis that this Act was the source of the agreement being binding upon the Commonwealth and, indeed, there is a provision in clause 1 of the schedule that the agreement will, indeed, have no force or effect on either party until approved by the Parliament of the State. But once that approval has been made by the State which is by means of a companion Act, and it is in the next tab, tab 3, then the legislation is the source by which the agreement is binding and each polity is bound to give effect to that agreement.
FRENCH CJ: Was the agreement conditional upon authorisation by the Commonwealth Parliament?
MS TATE: Your Honour, the Act itself appears to seek to provide that source of authority - - -
FRENCH CJ: No, I am just asking whether that was a term of the agreement.
MS TATE: It does not seem to be a clause of the agreement. Clause 1 speaks of the State, the Parliament of the State, and I have already referred your Honours to that.
FRENCH CJ: One wonders – pursuing Justice Gummow’s line of inquiry – what authorisation actually does.
HAYNE J: The Commonwealth had not executed, had they, for a start? This was authorisation before execution by the Commonwealth.
MS TATE: Yes, your Honour – but your Honours, if I could - - -
HAYNE J: Justice Dixon identified what he understood to be the purpose of the authority thus given. Now, there may be debate about whether his Honour’s understanding is complete or accurate. What do you say?
MS TATE: Our submission essentially, your Honour, is that the majority decision in Magennis can be distinguished from the disposition in Pye v Renshaw, and it can be distinguished from the circumstances of this case, but the basis upon which we say that is that it is apparent from the terms of the agreement that the Commonwealth played a vital role at every critical point of the scheme - - -
HAYNE J: I understand that is where the submission goes, Solicitor, but at 80 CLR at 410 Justice Dixon says that:
A legislative authority of –
the kind we encounter in the Commonwealth Act –
removes possible objections based on such authorities as Commercial Cable Co. v Government of Newfoundland and The Commonwealth v Colonial Ammunition Co. Ltd.
MS TATE: Yes, your Honour.
HAYNE J: Now, what do you say the Commonwealth Act was doing in section 3(1) when it said that execution is authorised?
MS TATE: It is our submission, your Honour, that the words of section 3(1) should be read in accordance with their plain meaning, that at least it purports to be the source of authority for the binding nature of the agreement upon the Commonwealth. But, your Honours, if I could refer you to clause 2 of the schedule? In clause 2(1)(b) your Honours will see there that the determination of eligibility for a person to be brought within this scheme is to be a matter upon which the Commonwealth will stipulate, “with the concurrence of the State”.
GUMMOW J: Is not 4(1) important?
MS TATE: I am sorry 4(1), your Honour?
GUMMOW J: Of the agreement in the first schedule?
MS TATE: Yes, indeed, your Honour. Clearly, your Honour, there are several clauses here which set out the fact that the Commonwealth is undertaking an obligation to provide financial assistance and the State will provide suitable land and purchase it, either by agreement or compulsorily resume it. But there are key clauses here where the Commonwealth clearly provides a critical determination and that is to be found, as I say, at 7(2), where it is for the Commonwealth to:
provide training and pay to applicants selected for training living allowances –
and then under 7(3) it is for the Commonwealth to:
provide living allowances for settlers - - -
GUMMOW J: We really have to understand this, Solicitor. Is 4(1) not an indication of what “authorised” means? In other words, if there had simply been an agreement without some form of legislative imprimatur which seems to be given by the phrase “is authorised”, the Commonwealth would be committing itself to spend moneys without parliamentary sanctions.
MS TATE: I see. Yes, your Honour.
GUMMOW J: Is that not what Sir Owen Dixon was talking about at 410?
MS TATE: Yes, your Honour. We are content with that, your Honour.
HAYNE J: But is it also a consequence of those answers that you have just given that these are terms and conditions as the Parliament thinks fit for the grant of the financial assistance that is contemplated by this agreement and Act?
MS TATE: Yes, your Honour. The proposition which I wish to address, your Honour, is, how is this to be characterised? How is the scheme that forms the basis of the agreement as set out in the schedule, what form of scheme is that? It would be our submission that it is effectively a Commonwealth scheme that seeks to use the machinery of the State to carry out various aspects of the scheme. Your Honours, if I could refer you to clause 10(b), the State is to provide certain information about the land that is to be required. Under (c) it is to submit details of proposals for settlements and then under (d) it is for the Commonwealth and the State to confer on each proposal. Under 11(1) it is 11(1)(b) which imposes the obligation on the State to acquire compulsorily land at a particular value, namely, the value on 10 February, $1,942, and then at the bottom of the page , 12(c), there is a question again raised about eligibility and the clause states that:
An applicant for settlement shall apply to the appropriate State authority which shall on behalf of the Commonwealth -
and we rely upon that part of the clause –
(i) determine whether an applicant is an eligible person –
In clause 13(1) it is for the Commonwealth to provide the living allowance for one year and then under 13(3) any further assistance to be extended to a settler will be extended upon conditions approved by the Commonwealth. Similarly, your Honours, the State under clause 15 is to make arrangements for advances to the settlers but those arrangements are to be approved by the Commonwealth. Your Honours, behind tab 3 is the New South Wales - - -
GUMMOW J: Does not one have to read 4(1) with 11(1)(b)? The Commonwealth is committing itself to supply money for the State to compulsorily acquire upon other than just terms. Is that not what it comes to?
MS TATE: Yes, your Honour.
HAYNE J: Therefore, what is the point that is made by characterising the scheme as a Commonwealth scheme? What is that characterisation directed towards, Solicitor?
MS TATE: It is directed towards the proposition that the financial assistance has not been provided to the State for a matter under the independent power of the State. It is not a question of the State simply seeking financial assistance for a scheme which it has already committed itself to as a matter of policy. It is rather suggesting that the scheme is a scheme which was a scheme taken at the initiative of the Commonwealth. It was something that the Commonwealth wanted to do for defence forces and persons whom it would determine was eligible and it provided financial assistance to the States so it could give effect to that Commonwealth plan.
If I could just take your Honours to the Act behind tab 3, which is the New South Wales Companion Act. It is Act No 6 of 1946. This is only a two section Act with the same schedule so it has the same relevant features in relation to the Commonwealth involvement. One can see, we submit, as apparent on the face of the Act, that the sole purpose of this Act, as Chief Justice Latham says at page 405 of Magennis, the sole purpose of this Act was the approval of the agreement.
Now, there was a second New South Wales Act that was also enacted at the same time, your Honours, and that is to be found behind tab 4. It is the War Service Land Settlement and Closer Settlement (Amendment) Act, Act No 14 of 1946. There are three sections that I wish to take your Honours to. The first is at page 428. This is a provision again in relation to eligibility where here it is stated that:
“Other eligible person” means any person included in a class of persons which the Commonwealth with the concurrence of the State determines shall be deemed eligible to participate in land settlement under the scheme contained in the Agreement –
Then at section 3(b), which is at page 441, there is an amendment made here to the Closer Settlement (Amendment) Act. Perhaps if I could ask your Honours to turn to the Act behind tab 1 because we have included that Act as the Act which was subject to the amendment. It is behind tab 1 at page 681, which is the second page. Your Honours will see there section 4 which sets out the general provisions for resumption of land and that requires a report from an advisory board about suitability. Then it requires under subsection (2) “subject to approval by resolutions of both Houses of Parliament” and, thirdly, it requires before any resumption that:
the Governor shall, by proclamation in the Gazette, notify that he proposes to consider the advisableness of acquiring such land –
At section 5(7), your Honours will see at page 684, at section 5(7)(f) and it is the second proviso which, in effect, states that the advisory board:
if satisfied that any enhancement in the value of the interest of the owner in any land –
This is interest in land, which is adjoining or 15 miles from railways then there can be a means of set-off or abatement. Now, that also is amended by the Act that I will take your Honours to, but while your Honours have that page open, at page 685, your Honours will see there is section 7, which really, as it were, completes the procedural requirements, the ordinary procedural requirements for resumption, namely that:
The resumption of land under this Act shall be effected by notification in the Gazette.
That is relied upon at page 80 of Pye v Renshaw. But if I could ask your Honours then to return to the Act behind tab 4 and at page 441 there is section 3(b). This inserts into section 4, which I have just taken your Honours to, an additional new subsection (4). First of all, it is a subsection in relation to purchase price, and again, there is the prescribed value of 10 February. Then in 4(b) there is a provision in relation to compensation in respect of resumption, and there is a proviso to that, that when the presumption is made for the purposes of the agreement, then the value of the land is to be assessed as that stipulated value of 10 February 1942. There is further an amendment after the second occurrence of the words “think just” in the proviso that I took your Honours to in the Act under tab 1 that again, there is to be a value which is the stipulated value.
If I could also refer your Honours to pages 458 to 459, which is section 9U, where there is a definition of “assistance period” and at about 459, point 2, there is a proviso again:
that with the concurrence of the Minister of State for the time being charged with the administration of Part VII of the Re-establishment and Employment Act 1945 of the Parliament of the Commonwealth an assistance period may be extended by the Minister beyond the said period of one year.
Now, if I could take your Honours to the judgments in Magennis, and first of all, if I could take your Honours to the argument of Sir Garfield Barwick in that case. The relevant part of the argument for our purposes begins at page 386 and your Honours will see at the foot of the page that the argument that was put was that:
The analysis of that agreement shows that the scheme is a Commonwealth scheme of land settlement seeking to obtain the necessary land upon unjust terms by the use of State machinery for settling thereon such discharged members of the Forces as may be chosen by the Commonwealth.
Now, that notion of State machinery is a notion that is picked up in Tunnock in Victoria by Justices Williams and Webb to distinguish the scheme there as a scheme which was not a matter simply of State machinery being used for a Commonwealth scheme.
Magennis [1949] HCA 66; (1949) 80 CLR 382 - as I say the argument really, for our purposes begins at 386 and then at 387 at about point 2, Sir Garfield Barwick argues in relation to the definition of “eligible person” that the Commonwealth is there able to “choose a class of persons”. Then he refers the Court to clause 7(2), which I have also referred your Honours to, in terms of the assumption of:
financial responsibility for the training of, living allowances -
Then at about point 5 under clause 13 it was for:
the Commonwealth alone has the right to determine whether there will be an extension of the period -
beyond one year for living allowance. Then, although it is for the State to make arrangements for advances, those arrangements were to:
be subject to the approval of the Commonwealth . . . Clause 12 refers to the determination and classification of eligible persons by the State “on behalf of the Commonwealth.”
Then the argument is that:
Broadly, the agreements are a complete scheme for the settlement of discharged members of the Forces. It is noticeable that they are controlled by the Commonwealth at every vital point, and, indeed, as to the persons to be settled, the choice is to be made on behalf of the Commonwealth . . . It is quite clearly a Commonwealth scheme and in no sense is it a State scheme.
Then at the end and over the page, “By the Act”, which is the Act behind tab 4:
the former State scheme was completely changed so as to accord with the scheme under the agreement . . . The agreement is a complete scheme in itself; it is not a State scheme, in the sense that the Commonwealth participates at every critical point.
GUMMOW J: I think Sir Garfield’s submission - it may not be all that well reported - was that the authorising section itself was a law. What it was saying was that it was authority for this agreement, he looked at the agreement and the agreement was one for acquisition on unjust terms, therefore the section itself was a law with respect to acquisition other than on just terms.
MS TATE: Yes, your Honour, but it is put on the basis that there is a need to consider the exact features of the scheme and to consider precisely what role the Commonwealth has within that scheme. It is our submission that at page 403 of the judgment of Chief Justice Latham there is, in effect, an acceptance of that argument put by Sir Garfield Barwick, and this is at about point 5 of the page where he refers to the fact that:
the legislative power of the State Parliament is not limited by any requirement of just terms -
Then he says, however, here, the Commonwealth clearly is so limited. He says:
If the agreement cannot validly be made by the Commonwealth then it cannot be valid as an agreement between the State and the Commonwealth. The agreement cannot be valid as an agreement in the case of the State and invalid as an agreement in the case of the Commonwealth.
Parenthetically we insert the word “Why” as a question and we then say that he answers that question by saying:
The operation of the agreement depends at all points upon action by the Commonwealth in pursuance of the agreement and upon the undertaking and performance by the Commonwealth of definite pecuniary obligations -
We say that that passage supports the proposition that there is a need to consider the exact terms of an agreement or of a co-operative scheme between the Commonwealth and the State to determine whether the agreement is one which depends at all points upon action taken by the Commonwealth, whereupon, of course, it follows that if it is invalid, there is simply nothing for the State to give effect to. In essence, if the Commonwealth has a role at every critical point, then, in our submission, there is no independent sphere of operation for the State Act. We would say that proposition is made most clearly with respect to the companion Act, which did nothing more than had as its sole purpose the implementation of the scheme.
Your Honours, in the judgment of Justice Williams at page 424 – just preceding 424, Justice Williams also looks very carefully at the particular terms of the agreement, so it is not a blanket review of the agreement as though its terms did not matter. Then he states at the top of 424:
The present agreement confers on the Commonwealth a number of legal rights which are at least contractual rights with respect to the use and disposal of the land acquired by the State. When the land is so acquired it must be disposed of in accordance with the agreement and not otherwise. The land is acquired by the State on behalf of the Commonwealth and itself. Half the excess cost of acquiring, improving and developing the land, and more than half the other expenses incidental to carrying out the scheme are to be borne by the Commonwealth. The scheme would be in substance the same if the land was acquired jointly by the Commonwealth and the State. Under the scheme the State acquires the land solely but it is then dealt with on account of the Commonwealth and State jointly.
We rely on those passages in the judgments, your Honours, for these propositions. We say that we can draw these propositions from the reasoning I have taken your Honours to, that where the State enacts legislation which has the sole purpose of giving effect to an agreement where the operation of the agreement depends at all points upon action taken by the Commonwealth, then if the agreement is void and the Commonwealth Act that supports it is invalid, then the State Act too is invalid.
HAYNE J: Invalid or inoperative?
CRENNAN J: Of no effect.
MS TATE: Or inoperative, I am sorry.
HAYNE J: There is a radical difference, Solicitor, which is it?
MS TATE: Indeed, your Honour, I had hoped to be more careful than that and I apologise.
CRENNAN J: That passage is critical to Mr Ellicott’s argument in relation to the instruments of being of no effect.
MS TATE: Yes, your Honour. The question we are seeking to address is the question of in what circumstances will a State law or instruments made under a State law be rendered inoperative or of no effect. If a Commonwealth Act is held to be invalid and an agreement is held to be void - - -
HAYNE J: In Magennis that turned, did it not, upon whether, on its true construction, the State Act was engaged in the events that had happened, in particular, on the formation of the conclusion that the Commonwealth Act was invalid. Step two in the argument was that has a consequence for the agreement. I forebear from saying what that consequence is properly described as. The State Act, in terms, was not engaged because it was to be engaged in respect of a valid, an enforceable, an operative Commonwealth/State agreement.
MS TATE: Yes, your Honour. We say in Magennis the operation of the State Act, particularly the companion Act, but the other New South Wales Act as well in the relevant parts, was entirely dependent upon the agreement with the Commonwealth. If that agreement was void, then there simply was, as it were, no substratum to which the State Act could give effect.
FRENCH CJ: There was nothing for the State Act to do.
MS TATE: There was nothing for the State Act to do, your Honour.
FRENCH CJ: But that does not go to questions of validity.
MS TATE: For the State Act, but not - - -
FRENCH CJ: Yes, for the State Act.
MS TATE: Of course, one sets aside those questions of validity with respect to the State Act, but the State Act could have no operation or effect if the very thing it depended upon had no legal operation.
HAYNE J: There are two consequences that follow from this, Solicitor, are there not, if you look at the whole suite of soldier/settler cases? I know we are fussed particularly with Magennis and Pye v Renshaw, but the other cases have to be considered. Tunnock stands apart because the proposition that is advanced in Tunnock is confined to a proposition the intergovernmental agreement is void, therefore the State legislation which would permit acquisition of property, but is not hinged about engagement of the agreement, is somehow affected. That argument is rejected, true?
MS TATE: Yes, your Honour.
HAYNE J: And in the other soldier/settler cases, particularly Tasmania and Western Australia, where the scheduled agreement in the Commonwealth Act did not have the unjust terms provision of clause 11, is it said that the agreement was not authorised? Is it said that the Act was pro tanto invalid?
MS TATE: As I understand it, your Honour, the other State Settlement Acts were all upheld. I think it is Milne in Tasmania – I do not have the reference with me – and I believe it is Gilbert in Western Australia. But those Acts purported to give effect to the second schedule agreement and the second schedule agreement quite rightly, as your Honour says, did not have clause 11(1)(b). So it did not have that stipulated value which was the substance of the unjust terms. Your Honours, we say that those passages from Magennis really support the proposition that I have just put to your Honours but they also support, really, the related proposition that if a State Act can have no independent sphere of operation separately from an agreement with the Commonwealth which is void or from a Commonwealth Act which is invalid, then the consequential inoperability of the State Act is inevitable.
The question then is, really, with respect to any particular State Act that is a relevant State Act, at what point can one say that the State Act has no independent sphere of operation? That is the question that must be uppermost in the minds of those who are assessing the operability of the State Act.
We would say, in our submission, that given the level of involvement of the Commonwealth in the scheme in Magennis, that Magennis should stand as authority only for a narrow proposition insofar as State legislation is concerned, namely that where a State Act is passed solely for the purpose of giving effect to an agreement with the Commonwealth and the agreement is made in order to implement a Commonwealth scheme using State machinery, or to acquire property jointly by the Commonwealth and the State, then if the Commonwealth Act is struck down and the agreement is held to be void, the State Act is also consequentially rendered inoperative.
We say ultimately the question must be whether the State Act can have an independent sphere of operation and whether indeed an exercise can be engaged in which is analogous to the doctrine of severance. So we contest the view that with respect to an intergovernmental agreement, that an agreement that is void for one party is necessarily deprived of all operation for the other. We submit that it may lose its status as an agreement, but if the agreement did not seek to implement a Commonwealth scheme and it did not provide for the State to acquire property jointly for the Commonwealth and itself, then the State Act may indeed survive.
FRENCH CJ: It may not be necessary to go to the question of the validity of the agreement. This raises the issue of the content of that term when you have an agreement which may be a political compact and may not be legally enforceable. The fundamental question surely is whether the Commonwealth, for example, is authorised to make grants on the conditions which are specified in the agreement or otherwise, regardless of how you legally characterise the agreement, is that not right - because if the Commonwealth could not make the grants, for example, and the State Act was posited on the receipt of moneys, then the State Act has nothing to do because the moneys do not come through.
MS TATE: Well, we would say – there may be an open question depending upon the particular circumstances of the case as to whether what the Commonwealth sought for the State to do was going to be done in any event and perhaps there is not quite the plenty of money that there would otherwise be but there might be a degree of money and it might take a longer period to implement.
GUMMOW J: But I think Mr Sexton’s point is that the State legislation in this case, when you look at it in the water legislation, is not posited upon the receipt of Commonwealth moneys.
MS TATE: Yes, your Honour. We adopt the submissions of New South Wales in that regard. We would say here that when one looks at the instruments that effected the conversion and one looks at their statutory source of authority which takes one back to 55A and 88A of the Water Management Act and other parts, then it is clear that that Act – neither the Act nor the instruments were made solely for the purpose of giving effect to an agreement with the Commonwealth, nor was that agreement made in order to implement a Commonwealth scheme using State machinery, and for that proposition we rely upon the narrative that we sought to set out in the first substantive section of our written submissions.
The fact that the preservation of groundwater and the means of finding a proportionate distribution of groundwater to licence holders is something that goes back – possibly goes back to the 1906 Act which was the first Act to compel the construction of new bores to be licensed, but certainly goes back to 1984 and 1997 and the policy licensing framework and all of those other matters to which we have referred in our written submissions.
We would say that taking into account that history and the terms of the relevant legislation and the terms of the agreement, one could not draw the inference that the agreement was made in order to implement a Commonwealth scheme using State machinery.
HAYNE J: Can I just understand that proposition better. Is the proposition that the scheme in Magennis was a Commonwealth scheme advanced in support of a further proposition which seeks to distinguish between, on the one hand, grants to States for the purposes of effecting joint Commonwealth and State schemes but on terms requiring unjust acquisition and, on the other hand, grants for purposes of effecting a Commonwealth scheme on terms that would have an acquisition otherwise than on just terms? Do you seek to draw the latter distinction?
MS TATE: We do, your Honour, and we say that here the scheme cannot be sensibly characterised as a scheme, which is a Commonwealth scheme, in respect of which the States are obliged to acquire property. We also say that it is not the case that any property that is acquired – and, of course, we reject the view that it is property and we reject the view that there is an acquisition, and we adopt in their entirety the submissions made by the Commonwealth Solicitor-General in that regard, but putting that to one side, we say that even if there is any acquisition of property here, it is not an acquisition jointly by the Commonwealth and the State. We say on that basis Magennis can be distinguished from the circumstances here and can also be distinguished from Pye v Renshaw.
We start with the observation that the Court in Pye v Renshaw did not overrule Magennis, so we start with the observation that the Court considered that its reasoning and its disposition in that case was consistent with Magennis. On that basis we submit that there is a need to read Magennis in a way that renders it compatible or consistent with Pye v Renshaw and we submit that the way in which we have submitted it should be read – that is as authority only for that narrow proposition that I have articulated – is a way of rendering it consistent and compatible with the reasoning and disposition in Pye v Renshaw. If I could take your Honours to the legislation that was in issue in Pye v Renshaw. That is to be found behind tab 12 of our spiral-bound folder.
FRENCH CJ: It only goes up to tab 10.
MS TATE: Tab 5, your Honour. It is the New South Wales Act. It is Act No 14 of 1950. In this Act your Honours will see at page 151, section 2 the earlier Act, the War Service Land Settlement Act 1945, is repealed. The Act behind tab 3, which we have described as the companion New South Wales Act, the Act with only two sections and a schedule, that that Act “is hereby repealed”. There is then an amendment made under section 3(1)(a) to the War Service Land Settlement Act 1941. The amendment is to the effect that the eligible person who is an eligible person is no longer going to be determined by the Commonwealth with the concurrence of the State but rather be inserting in lieu the Minister shall determine who is “to participate in war service land settlement under this Act”. So that is the State Minister.
GUMMOW J: Subsection (2) is important, is it not?
MS TATE: Yes, it is a retrospective appeal, your Honour, yes.
GUMMOW J: Magennis was delivered on 21 December 1949.
MS TATE: Yes, it was delivered – and this Act came into effect, well it was assented to on 3 May 1950, so clearly very promptly after the delivery of judgment in Magennis – but then at section 3(3), there is an amendment made to the Closer Settlement (Amendment) Act, and this is the Act behind tab 1. So this is the, as it were, uninfected Act. This is the Act which had the three procedural requirements for resumption, the approval by both Houses of Parliament and so on and what that does is to then remove that subsection (4), that I took your Honours to, where there was a reference made to the scheme under the agreement, and that is to be replaced now by a reference to the War Service Land Settlement Act. Similarly 4(b) is amended in the same way.
Under section 3(3)(b), at page 153, there is then an amendment to 5(7)(f), that I took your Honours to, which relates to the land within 15 miles of the proposed railways and again there is a removal of all reference to the agreement and the substitution of the ordinary State Act within its ordinary terms, the ordinary State scheme.
GUMMOW J: Do we know how the State was to fund its activities under this Act? Was it still to receive Commonwealth assistance?
MS TATE: Under this Act, your Honour, it is - - -
GUMMOW J: Not under the Act, but outside the Act, was the Commonwealth still to provide assistance? What happened?
MS TATE: Because this, in essence, renders the settlement of the ex-servicemen under the ordinary State scheme, one would have expected that the State would have its standard ordinary amount of funding for that scheme, and Pye v Renshaw, it is rather murky as to what payments were still being made.
GUMMOW J: It is, yes.
MS TATE: - - - and what the source of authority was for those payments, and we are not addressing your Honours on that, but the effect, we say and we submit, of the Act that was considered in Pye v Renshaw [1951] HCA 8; 84 CLR 58, is that there was, in essence, a regularisation if one likes of the removal of the dependency upon the agreement, and the assimilation of the settlement of ex-servicemen into the ordinary State scheme. Now, in the judgment of the Court at - - -
GUMMOW J: If we go to page 60, paragraph 6:
The plaintiff alleges and the fact is that in accordance –
with the old system, now repealed the Commonwealth already had approved. So, in a way, it is a transitional problem.
MS TATE: Yes, your Honour.
FRENCH CJ: The allegation at 15C of the statement of claim appears at 62. That is the apprehended payment on - - -
MS TATE: Certainly there is a reference to moneys being paid by the Treasurer of the Commonwealth and continuing to pay that. To what extent that was used for the purposes of the State scheme insofar as it related to the settlement of persons from the defence forces is an historical question that I am not in a position to answer. Your Honours, the Court considered the Act that I have just taken your Honours to, the Act No 14 of 1950, at the foot of page 79 and the Court there makes the observation that that Act:
deleted from all relevant legislation 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.
As has already been pointed out, the legislative power of the State is not affect 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. And the effect of Act No. 14 of 1950 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.
Now, having arrived at that conclusion, their Honours then say at the foot of page 80 – they refer to those standard procedural requirements for resumption, which includes approval by Houses of Parliament, and they say:
There is no suggestion that any of the three conditions prescribed by s. 4 has not been complied with, no attack is made on the report of the advisory board, and there is not even any suggestion that the land is not in fact suitable to be acquired for closer settlement or is not in fact being acquired for closer settlement.
They then say at page 81 at about point 8:
Obviously, if the statutory conditions have been fulfilled, it does not matter who has approved for disapproved, or approves or disapproves, of the acquisition.
It is a reference to the fact that the Commonwealth may have approved the particular acquisition at that previous time. Then at the top of page 82 they go on to say:
It 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.
They refer to Magennis’ Case and then say:
Whatever may have been the position before Act No. 14 of 1950, it is now very clear that the power of acquisition on the prescribed conditions is given by Parliament to the Executive irrespective of the agreement and of anything contained in it.
Now, your Honours, it is our submission that Pye v Renshaw can be understood by reference to the particular terms of the legislation that was being considered and the fact that that involvement of the Commonwealth at every critical point of the scheme had simply been removed. It is our submission that that removed that dependency upon the agreement with the Commonwealth and thus allowed the State Act to have an independent sphere of operation. We say again that that is the critical question in relation to any scheme.
If I could return just finally then to the case of Tunnock, your Honours, We have provided for your Honours from tab 6, which is the principal Act, which is the pre-Magennis Act, and we have provided the amendments to that Act down to tab 10. I am not intending to take your Honours through that. We have referred to the effect of the amendments in our submissions, but if I could just refer your Honours now to a couple of key provisions.
Firstly, in the principal Acts – that is behind tab 6 which is Act No 5107 – at section 4 we have the approval and ratification of the execution of the agreement by the Premier. Then at page 58, section 27, the power to compulsorily acquire property which is conferred on the Governor in Council is a power that is conferred in the terms that the Governor in Council has that power to acquire property for the purposes of this Act. If it cannot be acquired by agreement then it can be acquired compulsorily.
So even in the original, the principal Act, the purposes of the acquisition was for the purposes of this Act and not for the purposes of the agreement. So in that sense it is distinct from the New South Wales Act. It also might be noted that rather than having two sections with a full schedule which is the agreement, the Act clearly sets out for itself its own State scheme even if at this stage it is a scheme which is affected by the Commonwealth’s involvement.
Then at section 28 we have the requirements for publication of the notice of compulsory acquisition. After that publication the land is vested in the Crown. Then section 36(2)(b), which is on page 61 of the reprint. This is the provision that relates to the valuation of the land and, as this is the pre-Magennis Act, that valuation is in terms of the stipulated prescribed value as 10 February 1942.
GUMMOW J: That was the date in which price control regulations came in, I think.
MS TATE: I see, your Honour, yes.
GUMMOW J: I think that was the idea.
MS TATE: We had sought to find if there was any particular ruling on that day and it is referred to at times as a ruling but the word “ruling” seems to have been used only in the sense of what is applicable. In other parts of the legislation the advisory board is just to arrive at a value which is to be not in excess of whatever value would have applied hypothetically at that time. The most significant amendment is made by the Act behind tab 10, which is Act No 5438, section 3, and section 3 is at page 332, and what that does is, in effect, to remove section 36(2) which was the, as it were, unjust terms valuation and it replaces it with a valuation which is effectively market value such as would have been applied to a bona fide purchaser. There are also, within the course of those amendments, the deletion of references to the agreement at a number of stages.
Now, in considering the legislation, the Court in Tunnock v Victoria [1951] HCA 55; (1951) 84 CLR 42, of course they upheld that series of State Acts, the State Settlement Acts of 1945 to 1949, as not suffering from a consequential inefficacy or inoperability as a result of the Commonwealth Act being struck down or the agreement being held to be void. It is made perfectly clear in the judgments that the judgments are written – and it is in the same volume of the Commonwealth Law Reports as Pye v Renshaw – but the judgments are written - - -
HAYNE J: It was delivered the same day.
MS TATE: Yes, indeed, your Honour. Heard at different times, but delivered on the same day. It is against the background of the knowledge that the agreement is void. Your Honours, if I could refer you to the judgment of Justice Williams and Justice Webb at page 56. Their Honours consider carefully before that page all of the different provisions in the Acts that I have taken your Honours to, and at the end of that inquiry they say at about point 5 of page 56 that – particularly by reference to the new valuation which will apply:
This shows that the Victorian Parliament did not intend the operation of the power of acquisition contained in Part IV of the Soldier Settlement Acts to be mere machinery for carrying out the agreement.
At the bottom of the page they say:
An examination of the amendments indicates a definite intention on the part of the Victorian Parliament to make the operation of its Soldier Settlement Acts self-contained and quite independent of the validity of the agreement.
There are some references still to the agreement, but even if those are ineffective, they do not infect the validity of the other provisions, and it is on that basis that this Court upheld the validity of that State legislation.
So it is our submission overall, your Honour, that the question of consequential inoperability is a question which invites exact attention to the terms of any scheme which a State Act is purporting to give effect to, to determine whether any involvement by the Commonwealth in that scheme can be disentangled, as I say, as an exercise analogous to severance, to determine whether the State Act can have an independent sphere of operation. If it can have that independent sphere of operation, then the State Act should not fall when the Commonwealth Act falls or when the
agreement is held to be void. They are the submission for Victoria, your Honour.
FRENCH CJ: Thank you.
MS TATE: Perhaps I should just mention that we have provided the Court with some supplementary submissions in response to question 2 of the questions that were asked by your Honours.
FRENCH CJ: Yes, thank you. Solicitor for South Australia.
MR HINTON: If the Court pleases. In the division of duties among the interveners, it fell to me to deal with matters historical. As it turns out, my learned friends, the Solicitors-General for New South Wales and the Commonwealth, have left me with little to do. May I take a moment, however, to provide your Honours with some references that may assist, and in particular deal with questions asked by your Honours Justices Gummow and Crennan. I confine myself to the common law and the consequence of the enactment of section 4B and its successors, section 12(1) and then section 392 of the 2000 Act.
Commencing with the common law and being as quick as I can, at common law rights with respect to water were an incident of title or rights held in land. They are rights superadded to those ordinarily held by the landholder. If I could give your Honours some references: Gartner v Kidman [1962] HCA 27; (1962) 108 CLR 12 at 23, the judgment of Justice Windeyer; Thorpes v Grant Pastoral Company [1955] HCA 10; (1955) 92 CLR 317 at 325 in the judgment of Justice McTiernan at 329 and the judgment of Justice Fullagar. Your Honour Justice Gummow also mentioned Chasemore v Richards [1859] EngR 894; (1859) 7 HL Cas 349, 382, which cites Mason v Hill [1833] EngR 171; (1833) 5 B & Ad 1, also to be found in [1833] EngR 171; 110 ER 692.
Depending upon whether water travels in a defined or known water course, the rights are either usufructuary or rights of appropriation. Importantly, at common law it remains the case in New South Wales. There is no title in water whether it be surface or groundwater and whether it does or does not travel in a defined water course. Water is publici juris. The references for that proposition are Embrey v Owen [1851] EngR 386; (1851) 6 Ex 353 at page 369, Mason v Hill, as I have already cited to your Honours, Liggins v Inge 7 Bing 680, also to be found in [1831] EngR 706; (1831) 131 ER 263.
We then come to the rights of an overlaying landholder. They will be usufructuary if the water travels in a defined and known water course. Chasemore v Richards is the authority, I have given your Honours citation, and Mason v Hill. The rights of a landholder to groundwater where that groundwater does not travel in a known or defined channel, but percolates, as in this case, through the strata will be the right to appropriate the water. It is not a usufructuary right but it is a right to appropriate.
The authorities relevant are Ballard v Tomlinson (1885) 29 Ch D 115 at page 121, Chasemore v Richards, again at 3767, Acton v Blundell (1843) 12 Mees & Wels 348 at 354 and, indeed, there is mention of it in Justice O’Connor’s judgment in the Perth Corporation v Halle [1911] ArgusLawRp 101; (1911) 13 CLR 393 at 414.
GUMMOW J: Some of those cases, in the Perth case I think, as Mr Ellicott emphasised, the word “proprietary” is used, I think.
MR HINTON: It is.
GUMMOW J: What do you say about that?
MR HINTON: Proprietary, in my submission, applied proprietary in the sense of proprietary rights to appropriate and no more. That was the basis upon which the position of the municipal corporation was distinguished from that of an overlying landholder. These cases are all collected and discussed quite helpfully in a report by Sanford Clark that appears in our written submissions and many of the other intervenors. The report is produced by the Department of National Development, Australian Water Resources Council, entitled Groundwater Law and Administration in Australia Technical Paper No 44 and, in particular, at page 28 Mr Clark wraps up, if I can put it that way, the title that an overlying landowner has in groundwater that does not travel in a defined water course. That leaves me then to some brief submissions as to the effect of section 4B and its predecessors.
GUMMOW J: How did all this fit in the Torrens system?
MR HINTON: It is an incident to titling land if - - -
GUMMOW J: It does not appear on the register.
MR HINTON: No.
GUMMOW J: There is a case in the New South Wales Court of Appeal, I do not know whether it is exclusive to the New South Wales Torrens system, Jennings v Sylvania Waters [1972] 2 NSWLR 4, which I think is consistent with what you are saying.
MR HINTON: I have not had the advantage of reading that case. I will be glad to adopt the last bit of your Honour’s comment. When we come then to section 4(b) there - - -
GUMMOW J: But then there is also the question large amount of areas of New South Wales were not under Torrens title, they were under some Crown lease system. Are there authorities indicating how the common law fitted in with the Crown lease legislation system?
MR HINTON: Without having regard to - - -
GUMMOW J: In this case, Mr Ellicott’s clients got Torrens title but there would be a lot of land that does not.
MR HINTON: The common law principles, in my submission, subject to the New South Wales statutory regime would apply or remain an incident of the title to land conveyed. Of course, the common law principles would have been developed with respect to landholding, it was not the subject of any Torrens title system.
GUMMOW J: It would not have been subject to the strange Australian systems of Crown lease either.
MR HINTON: Yes. There are two authorities that might offer some assistance to your Honours then when it comes to the effect of section 4B. They are, and one of them has been mentioned in passing, Thorpes v Grant Pastoral Company [1955] HCA 10; (1955) 92 CLR 317. Of course, that concerned section 4A and not section 4G, surface water not groundwater. But the crucial words, in my submission, are those that appear in both sections and that is the “right to the use and flow” and “the control of”. That is the language of riparian rights. I do not pause to take your Honours to it. That is the language that deals with a usufructuary right or a right of appropriation. So when one looks at Thorpe’s Case and the interpretation given to section 4A, one can take it into account in what one makes of section 4B.
HAYNE J: The other point about 4B is that it is overlaid by the further consideration of can you get at the water. Can you drill?
MR HINTON: Yes. Precisely, and hence the word “use” must necessarily take into account the notion of appropriate.
HAYNE J: Well, once you regulate drilling you have gone a long way to dealing with what can be done about groundwater.
MR HINTON: Yes, your Honour, undoubtedly. The second case is Beaudesert v Smith [1966] HCA 49; (1966) 120 CLR 145. It concerned section 4(1) of the Water Act (Qld). Similar terms appear: use, flow, control and indeed controls over getting to the water. In that case, as in the Thorpes Case, the
issue arose as to whether or not there was any riparian right. Of course, one would not describe it as a riparian right when we come to groundwater, but in any event, what we can draw from those cases is whatever common law rights remained after section 4B came into force, they were something other than the right to appropriate.
So if one looks at what Justice Fullagar was attempting to do in Thorpes Case by his reference to the New South Wales decisions of Hanson and Lawrence, it was really looking at the right to take action in a court if your title, your landholding was in some way affected by someone dealing with groundwater that percolated from their property to yours. That is a different right to the right to appropriate.
So to that extent, Justice Fullagar’s comment in the Thorpes Case does not detract from the fact that in this case the right that is advocated for is a right to extract, it is a right to appropriate, and since 1966 in New South Wales that right has been vested in the Crown and since then been the subject of a statutory regime controlling, in every respect, the exercise of that right. If the Court pleases, those are the submissions that I seek to make orally. South Australia relies upon its written submissions.
FRENCH CJ: Thank you, Mr Solicitor. Yes, Mr Ellicott.
MR ELLICOTT: Your Honours, I wanted to deal first with the submission that the water licences were subject to a statutory scheme introduced by the Water Management Act, and therefore, they were susceptible to variation. It is our submission that that is flawed because the Water Management Act scheme left the water licences intact. They remain subject only to the terms of the Water Act itself, and the conditions of the licence.
A major purpose of the Water Management Act was to replace them with aquifer access licences, and this replacement, in our submission, for reasons we have already dealt with, involved an acquisition of property. The scheme did not vary the conditions on which the licences continued to exist supported by the Water Act. The scheme was not implemented until the funding agreement – indeed, until after the funding agreement – and it was the funding agreement which enabled the purpose of the scheme to be achieved. As a matter of fact, the replacement would not have occurred if the Commonwealth had not agreed to funding.
Under the agreement, the actual replacement had to take place before funding was provided. In other words, your Honours, we would submit that when my friend says that the Water Management Act came into existence and it, as it were - I think he used the expression, “it hung like a dagger” over the water licences that was not only exaggerated, but it was not in accordance with the fact the water licences, in effect, had no varying factors that came out of the Water Management Act itself. You cannot say that to introduce legislation that supervenes, in effect, in order to affect a purpose of acquiring the very thing that is the subject matter, namely the water licences, that in some way that has the effect of a – as is suggested in the cases – of being a situation susceptible to variation.
Now, in Newcrest, what happened was no different in substance. The Conservation Act came into force as an Act, while the Mining Act was in existence. That Act enabled the mining lease to be sterilised. No doubt it was government policy that in setting up Kakadu it would be sterilised by a proclamation.
It could just as easily be argued that when the Conservation Act came into force, the mining lease was susceptible of variation or partial extinguishment by a statutory scheme. In other words, there was in place, under the Newcrest situation, a method of getting rid of the first thousand feet as a mining area and it had the effect, one might argue if one were taking a solicitor’s point of view, of subjecting the mining lease to variation. Indeed, in that case, your Honours will recall, there was a proviso in a clause. That clause was found in a form of mining lease.
I wanted to point out that when you look at the mining regulations of the Northern Territory which were in force then, and I think your Honours have - your Honours, could I hand up some copies. Your Honours, there will be, I think, two sets of documents. I am sorry to load your Honours with more. One of the them is headed “Mining Regulations” and if your Honours go to page 565 your Honours will find
Every mining lease granted under Part V of the Ordinance shall be in accordance with Lease Form No 1, Lease Form No 2 –
et cetera. Then if you go over to 631, your Honours will find a form of lease No. 1, which I understand was the one in this case, as a proviso which in mine is highlighted, I hope it is in yours. Your Honours will see a proviso that:
WE may at any time, without compensation to the lessee, resume possession of any portion of the surface of the land hereby demised for the construction thereon of roads, tramways or railways, including all necessary approaches thereto, or for any other public purpose whatsoever—
Then in the “Mining Ordinance” your Honours will find the lease covenants in 73:
(1) A mining lease shall contain –
(a) a covenant to pay the rent . . .
(b) a covenant to use the land continuously and bona fide . . .
(c) a covenant to work the land demised . . .
(d) a covenant not to assign . . .
(e) a condition for the forfeiture –
At page 73, section 147:
The Administrator, and pending a recommendation to the Administrator a warden, may temporarily reserve Crown land from occupation under this Ordinance.
Now, that, we say, applies where a mining lease exists in relation to the land. Your Honours, I do not want to delay too long on that, but simply to make the point that where you get, in Newcrest, a lease which is subject to that proviso and that proviso has a legislative base, and whereas here in this case you have, as my friend suggests, something that can subject it to variation, the same position occurred in Newcrest in substance as would have occurred here. Now Newcrest, of course, was decided in the way it was, first of all, because of the nature of the right, having a common law base and, secondly, in terms of acquisition of property on the basis that the Crown got a benefit and, thirdly, on the basis that what was done was done under the Conservation Act and not under those provisions.
So, in our submission, my friend’s argument that somehow it is part of a scheme because the Water Management Act has come into force, although it sounds attractive at first, it has spun a web around our poor old water licences and enveloped them and, therefore, all is lost. In our submission, what is needed is to see the whole perspective which shows that the licences themselves are, in effect, licences which stand alone and they are the whole object of the Water Management Act. The Act is going to get them and it is going to replace them, and it is that replacement which we say, of course, is an acquisition of property, and I do not want to go back to those arguments again. Your Honours, I do mention the fact that in this case, of course, in the relevant sections, there are provisions for cancellation, as I put to your Honours in-chief.
Now, reference was made to several cases, Davey and Bienke. Those cases, we would submit, stand alone and quite separate from this case. Davey and Bienke obviously were dealing with public rights and they were also adjusting relationships between people who had rights to fisheries. The right here was one which was a private right, the right there is a public right and therefore this case stands apart from them.
I wanted to refer quickly to WMC Resources [1998] HCA 8; 194 CLR 1. There is a passage in the judgment of Chief Justice Brennan which, we would submit, is of significance. It is in paragraph 16 on page 16. There is reference to Georgiadis and his Honour says:
In this passage, their Honours treat “acquisition of property” as a single concept. I agree that, where a purely statutory right is by nature susceptible of modification or extinguishment, its modification or extinguishment works no acquisition of property. But, in my respectful opinion, it does not follow that a law of the Commonwealth which extinguishes purely statutory rights having no basis in the general law can never effect an “acquisition of property” –
I think that has been accepted by other Justices of the Court.
If statutory rights were conferred on A and a reciprocal liability were imposed on B and the rights were proprietary in nature, a law extinguishing A’s rights could effect an acquisition of property by B. In the present case, where the rights of the permittee and of WMC, though created by statute, are properly to be regarded as proprietary in nature, a Commonwealth law which purported to effect a compulsory transfer of those rights to a third party would be a law for the acquisition of property. But the Consequential Provisions Act does not have that effect. The present case does not turn on the proprietary nature of the rights of the permittee or of WMC; it turns on a different issue, namely, whether the modification of the rights of the permittee and of WMC amounts to an acquisition by the Commonwealth of the rights which the permittee and WMC respectively possessed before the Consequential Provisions Act commenced.
Where a law of the Commonwealth creates or authorises the creation of a right, a statutory modification or extinguishment of the right effects its acquisition if, but only if, it modifies or extinguishes a reciprocal liability . . . Thus in Newcrest Mining (WA) Ltd v The Commonwealth, the law which sterilised Newcrest’s right under its mining lease to carry on “operations for the recovery of minerals” on land vested in the Commonwealth was, in my opinion, a law for the acquisition of property because it extinguished the liability of the Commonwealth to have those minerals extracted from its land and thereby enhanced the property of the Commonwealth.
We have submitted to your Honours an argument, which I will not repeat, in relation to the water in this case and the effect of the acquisition by the extinguishment of the water licence.
But where a law of the Commonwealth creates or authorises the creation of a right that does not impose on the Commonwealth a reciprocal liability, the mere extinguishment of the right effects no acquisition of the right by the Commonwealth . . .
Of course, a statute or the common law may confer on a person a right enforceable by a public law remedy to compel the Commonwealth or its officers to perform a public law duty so that the right and the duty are truly reciprocal.
He goes on and explains why that would not be an acquisition of property as found in Health Insurance Commission v Peverill.
In the present case, although the rights vested in the permittee and in WMC pursuant to the P(SL) Act at the time immediately prior to the commencement of the Consequential Provisions Act may properly be classified as property, the relevant question is whether those rights were acquired by the Commonwealth or were simply extinguished without acquisition.
At paragraph 78 Justice Gaudron said:
In Georgiadis v Australian and Overseas Telecommunications Corporation, Mason CJ, Deane J and I pointed out that, prima facie at least, a statutory right is inherently susceptible of statutory modification or extinguishment and no acquisition of property is effected by a law which simply modifies or extinguishes a statutory right that has no basis in the general law.
Now, your Honours, the attempt is being made here by my friend to turn what we say is of the nature of a common law right into a statutory right. That, we would submit, offends the principle as stated in this case.
Your Honours, I do not need, I think, to go back to Chaffey and Smith v ANL. Reference was made to those by my friend, but I think it is sufficient to say that because of how we answer this that they stand aside from those cases. We are not trying to submit that in some way those cases do not operate according to their terms. Those cases deal with a significantly different situation.
My friend referred to section 392, which is the section of the Water Management Act. It is in the first and second defendant’s book of legislation at tab 2. That is the one that defined the State’s water rights in terms which, when analysed, is basically no different to the provision that was introduced in 4B, that is to say that:
the rights to the control, use and flow of . . .
(c) all water occurring naturally on or below the surface of the ground,
are the State’s water rights.
It is significant, we would submit, that section 393 abolishes common law riparian rights, but the Act does not purport in any way to abolish the common law rights in underground water. In the Water Act itself, if I can take your Honours to that, my friend took your Honours to section 117I, which is at tab 1. That is the offence provision, and he has suggested that that was the prohibition. Your Honours, the prohibition, we would submit, is in section 112, which says:
The sinking of a bore shall not be commenced, nor shall a bore be enlarged, deepened, or altered unless:
(a) in pursuance of a licence issued under this Part, or
(b) the bore is to be sunk, enlarged, deepened or altered by the Crown.
That is the prohibition – in other words, you cannot take water and use it unless you get a licence. Section 117I, which was introduced much later, is simply an offence provision to support the prohibition, and nothing extra comes from 117I, except that. The prohibition has been there since the beginning, and it is the way in which the control of the water was instituted.
Your Honours, the powers under the licence were not used because they were not, in our submission, directed at the replacement or extinction of the licence. I just want to make that point because there is a blurring of the distinctions I have already addressed at some length, your Honours might think, about that particular issue, but there just is not any - and this needs to be kept steadily in mind, in our submission, there is nothing there that - that is to say in Part 5 of the Water Act - which is designed to suggest that somehow there will be a replacement. There is nothing in there.
In other words, that there might be some – my friend used the expression “transmogrification”, that I think came from the lips or the pen of Sir Owen Dixon and terrorised us for a while as to what it meant. We would submit that “replacement” is something quite different to that word. “Replacement” means you can say that in relation to your lounge suite, if you replace it with another, what is there is different to what was there. You might say my lounge suite still exists, because I have put it in the garage, but here we cannot say that the water licence still exists. It has been replaced. It means extinguished and that is it.
What replaced it, actually, was a much more tenuous licence, and my friend referred to some of those provisions, but I just wanted to take your Honours to volume 3 of the special case book, page 983, clause 52 – and this in a way has something – it is also related to just terms, as to what they really obtained. This part is made in accordance with sections 17(c) and 20(2)(e) of the Act that my friend took your Honours to, and deals with mandatory conditions:
All access licences shall have mandatory conditions in relation to the following:
(a) the specification of the share component of the access licence,
(b) the specification of the extraction component of the access licence,
(c) the requirement that all taking of water under the access licence will be subject to the available water determinations -
My friend was pointing to those to show that they could vary.
(d) the requirement that all taking of water under the access licence will be subject to any local impact management restrictions established in this Plan,
(e) the requirement that all taking of water under the access licence will be subject to the account management rules established in this plan,
(f) the requirement that water may only be taken under the access licence by the water supply –
Well, that is a different –
(g) the taking of water in accordance with the access license may only occur if the resulting debit from the access licence water allocation account will not exceed the volume . . .
(h) any other conditions required to implement the provisions of this Plan.
Then there is a subclause (2) which was actually deleted, but substituted with a clause much to the same effect. Those mandatory conditions, of course, in our submission, make the aquifer access licence much more tenuous than just saying that what happened was that instead of 18,638 megalitres you got a licence for 5,193. You cannot say that in this case, and it only solidifies the point that something was replaced, namely those Water Act licences. As I said, that proposition also bears on the question whether just terms were provided because that would have to be weighed into the situation.
Your Honour, my friend’s argument under section 96 - one aspect that I do not think my friend addressed was the relationship between placitum (xxxi) and placitum (xxxvi). Placitum (xxxvi) says:
matters in respect of which this Constitution makes provisions until the Parliament otherwise provides -
My friend was putting the submission, which I am answering, namely, that in no way was section 96 subject to section 51(xxxi). Section 51(xxxvi) is a power to make laws with respect to matters in respect of which this Constitution makes provision. Section 96, clearly:
and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.
If it is in section 51, then that provides an additional reason why section 96 should be regarded as subject to section 51(xxxi).
Your Honours, a reference was made by me, and indeed in our submissions we made reference to what was said first of all by the Privy Council in relation to section 96 being subject to other provisions in the Constitution. I will not repeat it, that was in Moran’s Case. Nor did my friend, in our submission, deal in any way by way of answer to what Sir Garfield Barwick, Chief Justice, said in the DOGS Case. Section 96 obviously could, as a term and condition, be used to provide that moneys should be used for the purposes of establishing a religion. If it did well surely section 116 would strike it down because of the prohibition.
In other words, the flexibility of the Constitution demands that both guarantees and prohibitions should have their effect where it is a rational and reasonable application of those prohibitions. If they are seen, as we would submit, section 51(xxxi) is seen, as a fundamental proposition in a democracy such as ours, namely one that is based on private property, then it is essential that at any point where there may be an attempt to undermine that right through a constitutional process by the Commonwealth, the process of legislation under section 96, for instance, then it is essential that some force be given in the use of 96 if it does result in the acquisition of property for other than just terms where it is for a purpose in respect of which the Parliament can make laws.
GUMMOW J: Mr Ellicott, I can understand that, but 96 talks about terms and conditions fixed by the Parliament. What do you say is the consequence where the terms and conditions, as a practical matter perhaps, seem to be related to the grant but they are to be found in some purely executive activity?
MR ELLICOTT: Your Honour, if a grant has to be made then of course it has to have a section 96 law in relation to it. It therefore requires an Act which will in some way engulf terms and conditions in the particular case. In this case we have the National Water Commission Act and we have the provisions in sections 40 and 42 that we have been to, and they embrace, by dint of the argument that we have put and I will not go back to that, they embrace an agreement and we say an agreement of this character.
Therefore Parliament, if it is true, that the Act is implementing the National Water Initiative, and again I will not go back – if that is true, and that involves the reduction of entitlements and the application of Commonwealth funds in the process, then those conditions are conditions that are, in effect, being approved by Parliament – that is how we put our case and that is how we say section 96 comes in to apply because Parliament is indeed giving authority to impose such terms and conditions.
Parliament should be deemed to know, having regard to the National Water Initiative, and the purposes for which that Act was passed – that one of the objectives of the National Water Initiative was indeed to reduce entitlements and all the Commonwealth is doing, really, in this joint – we called it a joint venture in our pleading. That was denied – but nevertheless, it is a joint enterprise by the Commonwealth and the State.
This is not one where it is a State purpose or a Commonwealth purpose exclusively – just dealing with some of the submissions that were put by my learned friend, the Solicitor from Victoria – we would submit it has a joint purpose, the States and the Commonwealth are involved, and that where it is happening here, in terms of section 96, it is a fulfilment of the terms of section 96, as a legislative instrument fixing terms and conditions.
HAYNE J: What is the consequence that you say follows if the term or condition imposed, through the mechanism we have just been describing, is beyond power because the term or condition imposed provides for acquisition otherwise than on just terms?
MR ELLICOTT: The consequence is that the Act is invalid because in that respect it is law with respect to the acquisition of property for a purpose in respect of which Parliament can pass laws, namely to give financial assistance to the States, if your Honours do not agree with any proposition that I put in relation to other heads of power, on other than just terms. That is how we put it, your Honour.
It is not correct, in our submission, that a mere appropriation can make a grant without identifying the purpose, and if it offends section 51(xxxi), then a section 96 grant is outside power. There is a tendency in the learned Solicitor’s argument, in our submission, to try and get back again under that bar that Pape’s Case tended to put in relation to Commonwealth executive action, that it could just go and appropriate some money and spend it as it would.
If there was an Appropriation Act, then it must identify some purpose and a Commonwealth purpose to which that money can be applied, and if it does not do that, then it is invalid and the appropriation is invalid. If it fixes on a purpose which is the application of funds towards a funding agreement under a particular program and you have to trace it through the appropriation, and that program involves the acquisition of property on other than just terms, then that appropriation would be invalid.
Your Honours, there is really no basis for distinguishing section 122 from section 96 so far as Commonwealth purpose is concerned. They are both sections which are designed to effect a Commonwealth purpose. Indeed, it is very difficult to think that having regard to the history in relation to section 122, why it would necessarily come first in deciding whether or not other sections than are in 51 or 52 are subject to the provisions of section 51(xxxi). Section 96 is critical in relation to that placitum because it is providing what is likely to become an increasing use in Commonwealth and State relations and that is why in one sense this issue is very important.
If the Court does not see or endorse the proposition that a grant does not have to have regard to section 51(xxxi) then it will, in our respectful submission, leave open an area where by legislative action and by agreement between the states and the Commonwealth the individual in this country’s rights can gradually be eroded. Now, that is the underlying importance of the proposition and because section 51(xxxi) is so important in the democratic sense there is a need to be assured, in a way, in an approach to section 51(xxxi) that there is no way in which section 96 can be used to defeat that right.
My friend said that section 51(xxxi) was a coercive provision. I was not clear, and it is probably my fault, in understanding whether the learned Solicitor was saying that there had to be an acquisition by the Commonwealth under section 51(xxxi) and that brought to bear the coercive power of the Commonwealth. Unless Magennis’ Case is pushed aside then that of course could not be correct.
If coercion is of the essence of section 51(xxxi) then the coercion of the State is just as significant in that sense. If, contrary to our submission, the notion of coercion has to be introduced then that can be introduced in a case such as this where the State has to do it through the coercive powers of the State, and there is no doubt that in relation to the funding agreement that the order and the regulation that were put into effect, we say invalidly, they were coercive in that respect.
I have referred earlier to the enforceability of the agreement. I do not want to take your Honours through it again but I just stress that various provisions there take on the tone and manner and words of commercial agreements between parties. The agreement itself is enforceable in this sense. It provides, in a sense, for its own enforcement. If the State does not reduce the entitlements, they will not get any money. On the other hand, if the States do reduce the entitlements, they could sue the Commonwealth at law, in our submission, under that agreement for the money if the Commonwealth did not pay it. In other words, there was a legal obligation enforceable at law against the Commonwealth to pay the money in those circumstances. There are numerous provisions in that agreement which, in our submission, fall within that context. I will not go to them now, your Honours.
Your Honours, my friend said that Magennis is wrong. We of course disagree with that vehemently. We thought he was just trying to use Pye v Renshaw [1951] HCA 8; 84 CLR 58 in order to – in Pye v Renshaw, if I could take your Honours to page 83, that is the last page of the case, and if I can read it down towards the middle:
But, even if it be assumed (an assumption of doubtful validity) that the plaintiff has such an interest as would enable him to maintain an action founded on this proposition, the proposition itself cannot be supported.
I am sorry, your Honours, I need to identify the proposition.
HEYDON J: The proposition is in the sentence beginning “No doubt”. Do you see the sentence beginning “No doubt”?
MR ELLICOTT:
it is intended to be based on the proposition of law that an appropriation by the Commonwealth Parliament for the purposes mentioned is unconstitutional.
Thank you, your Honour. Now, going down –
The Commonwealth cannot itself acquire land except upon just terms. A State can resume land on any terms, just or unjust, authorized by its Parliament. But the Commonwealth is not authorized by s. 96 or any other provision of the Constitution to provide money for a State –
and he uses the words “in order that”:
the State may resume land otherwise than on just terms.
The learned Solicitor for Victoria said something that we agree with and that is that Magennis’ Case should not be overruled. Of course, bearing in mind if there is any merit in the distinction she is drawing between an agreement which is to achieve a Commonwealth scheme or an agreement to achieve a State scheme in the legislation, that is not present here because we say it is a joint scheme. It is clearly a joint scheme for both their purposes:
to provide money for a State in order that the State may resume land - - -
FRENCH CJ: That is the argument that is being rejected here, is it not?
MR ELLICOTT: That is the argument that is said to be rejected, yes, but I am placing emphasis on “in order that” because they are very uncertain words and they cover the sort of agreement that perhaps the counsel for Pye in this case was putting, that is to say, that there was some arrangement or understanding between the Commonwealth and the State that the moneys would be used to acquire land, the State using its powers of acquisition on other than just terms. The words “in order that” – in other words, we would submit - have to be understood against the background that this case – again as the learned Solicitor for Victoria said – did not overrule Magennis’ Case. In other words, where there is an agreement of the nature of Magennis, then the words “in order that” must have accepted from them the case of an agreement. That is the point I wanted to make.
But taking your Honours to those two passages - the first is in Victoria v the Commonwealth [1926] HCA 48; 38 CLR 399 - the only way one can get any assistance of an intellectual character from the judgment, which must be the shortest judgment in this Court’s history, although perhaps I am wrong, is to read Mr Menzies’, as he then was, argument. But it was read to you, your Honours. There is nothing in there about section 51(xxxi) and its relationship to section 96. There is nothing there and the Solicitor pointed out the two arguments.
Under that section the Parliament cannot attach as conditions to its grant any conditions which amount in substance to the exercise of any legislative power which is not within sec. 51 of the Constitution.
Of course section 51(xxxi) is but I do not think he was really thinking about that.
Alternatively, the terms and conditions referred to in sec. 96 are financial terms and conditions unless they are terms and conditions falling within one of the legislative powers in sec. 51.
In our submission, that argument has just been pushed aside so often that it was not correct and it was not correct in this case and those are the arguments but they do not give the support to a proposition, in our submission, that section 96 - that the Commonwealth is not authorised by 96 to provide money for a State in order that the State may resume land otherwise than on just terms in the accepted case of there being an agreement of the nature in Magennis.
We do not need to talk about winks and nods and arrangements of that nature. We do not need to consider cases such as Tunnock’s Case or for that matter Pye v Renshaw because they were clearly cases where the Court has said there was a severance between the agreement and the actions of the State. We do not need to go beyond, for the purposes of this case, the fact that there was an agreement which obliged the acquisition of the property and the provision of Commonwealth money for that purpose.
The other case was Sir John Latham in South Australia v The Commonwealth, the First Uniform Tax Case 65 CLR 417. Your Honours, I will not read it again because this is the point and I can state it shortly. This is about inducement and it talks about coercion. What we are talking about is agreement. Inducement is one thing; it is not agreement. Coercion is another thing; it is not necessarily agreement. We are not relying on coercion.
I do not whether the proof of the pudding is in the eating. Sir John Latham later in Magennis did indeed embrace the proposition that my friend is trying to negate by using those last sentences of Pye v Renshaw at page 83. In other words, there is no doctrine that has been developed in this Court, in our submission, which would support the notion that section 96 can be used in circumstances notwithstanding the fact that it involves an acquisition of property on other than just terms.
HAYNE J: It may be, Mr Ellicott, that the submissions you have just been making are to be understood as saying that the Roads Case, the First Uniform Tax Case are concerned with whether section 96 is limited by the ambit of the power granted by section 51 but that, as Chief Justice Dixon pointed out first in Banking and later in Schmidt, 51(xxxi) has a dual aspect and that the answer to the first question of whether section 96 is limited by the ambit of the power granted by 51 does not necessarily answer the separate question whether 96 is limited by the condition upon the exercise of power that is supplied by 51(xxxi) or by 92, see what Justice Dixon said in Gilpin.
MR ELLICOTT: Yes. Well, your Honour, obviously it is a truism. It is obvious that over the years the Court’s doctrines – when I say the Court’s doctrines, I mean the doctrines that are developed in relation to the Constitution change, and in the potpourri of judgments that have been written since 1903, there are passages by very learned judges of great eminence such as Sir Owen Dixon, that can be used in that particular way. But when the Court is faced with the very issue, as it is here, then it just challenges the mind to see whether there is any reason in logic why section 96 should not be subject to the provisions of section 51(xxxi) just as this Court - in the light of the cases such as Lamshed v Lake and notwithstanding that those judgments were also given by Judges who affirmed the non-federal nature of section 122 - eventually, after Newcrest, comes to the view that that old doctrine must be set aside.
That may be one of the challenges in this case, but we would submit that there is certainly no handed-down doctrine of the Court. There may be odd passages - again from very learned and highly respected Justices such as Sir Owen Dixon - there may be passages which may suggest another view, but when faced with it, we would submit, your Honours will find our submissions to be correct.
Your Honours, I wanted to deal with the proposition which says in effect that there has been or there is in the evidence, or on the face of things, an obvious loss of the difference between 18,638 megalitres and 5,193 – the difference between the two is obviously something that was somehow dissipated in time, and that 5,193 was the figure that you should adopt as having some expression of just terms.
Now, that is a submission that the learned Solicitor put and we would submit that there is nothing to support the view that there was, in fact, an inevitable loss between those figures. My friend was saying that, and I would submit that that has to be a question of fact, and your Honours will not find in the books before you any evidence to establish that proposition. It has to be understood that in the context of the calculations that are made.
They are very much based on expert evidence. Views of hydrologists may change. They raise such issues as the quantum of water in the aquifer, and that is no easy subject. I can only say that, not as an expert, I can only say it must be a very difficult subject, but hydrologists are trained to no doubt make assessments, but it must be a question which experts would perhaps differ on.
The rate of recharge itself, which is obviously in the policy minds of the State and the Commonwealth very important, that rate of recharge has to depend on expert evidence. I do not need, I think, for the purposes of my reply to develop that proposition. Your Honours, we would submit that in terms of considering whether there are just terms, there is no basis for the proposition that there was an inevitable loss between the two figures.
If one posits that there would be a case in which the Commonwealth and our client was asking the Court to decide what were just terms, well, all these propositions as to recharge and the like would become involved in that exercise. There is nothing in the agreement that enables the Court, in our submission, to come to a view that on any basis there is a provision of just terms as a matter of certainty in any respect. Anything that is determined is a matter of policy, then in effect implemented by expert evidence as given to the various governments.
FRENCH CJ: This is in answer to any suggestion that it would be appropriate to apply the approach taken by Justice Burchett in I think it was Davey’s Case in relation to just terms where you have a diminishing resource.
MR ELLICOTT: Yes, your Honour, that is correct.
GUMMOW J: Mr Ellicott, could you just go to paragraphs 81 and 82 of the special case?
MR ELLICOTT: Yes, your Honour.
GUMMOW J: We are looking at the New South Wales situation. Paragraph 81 refers to the “Departmental Minute” which is set out in volume 3 at 1098.
MR ELLICOTT: Yes.
GUMMOW J: Under the heading “Background” it talks about the Commonwealth funding arrangement. Then paragraph 82 of the special case says that “the Minister believed that the Funding Agreement was not invalid”. The Solicitor-General for New South Wales, I think, rather discounted the significance that might come from that when looking at the question of the validity or the susceptibility to challenge of the instruments made in New South Wales which implemented the reduction.
MR ELLICOTT: Yes your Honour. On one view it matters not what the Minister believed, and in fact the better view, we would submit, is that what is, on the hypothesis, what has happened is there is, the parties have perhaps unwittingly or not really believing that there is invalidity does not matter. There is invalidity. The agreement is an agreement which has to be implemented they believe and they go ahead and do it, but it is invalid and that is enough to either - - -
GUMMOW J: But what makes it invalid at the State end?
MR ELLICOTT: What makes it invalid at the State end is the fact that at the point of carrying into effect the reduction in entitlements, the State is clearly implementing the funding agreement and the Commonwealth is clearly going to make payments to the State under the funding agreement. There is no other exercise upon which those parties are acting. It is not a case where the State can be said to be going off on its own issue because the State has said at the beginning that if it is a matter of what they are doing, the State at the beginning has said “We will not go ahead and reduce the entitlements unless we get funding”. They have said that, and your Honours have the references to that.
At the point where they are actually proceeding to do that very thing, if the funding agreement is their charter and it is invalid – and we say it is – then what they are doing is putting into effect, by State instrument, a step which ex hypothesi has to be an invalid step, that is, a step towards depriving, not only my client, but hundreds of other licensees by similar orders around the States of their water licences on other than just terms, and that is the conduct they are involved in, and that is unconstitutional conduct.
GUMMOW J: We are talking about an exercise of power under 55A, are we not, of the State Act, and 88A, I think it is, that produced the making of these instruments?
MR ELLICOTT: We are talking about an exercise of power under section 45, and what we are saying is that in relation to - - -
GUMMOW J: That is 45 of the federal Act, is it not?
MR ELLICOTT: No, section 45 of the State Act, the Water Management Act. Under subsection (2) he may amend a management plan and my learned friend took your Honours through that and that is the section as appears from the order.
GUMMOW J: Does it then become a question of what limitations or constraints attend the exercise of this power under 45 when it says “the Minister may”, what are relevant and irrelevant considerations?
MR ELLICOTT: Well, in this case, unreasonableness. Because it is legislative in character, it has to be unreasonable in the sense that the Parliament, in effect, if asked the question – I do not think many State members would agree with what I am about to say – “Would you want your Minister to make an order in circumstances where it is repugnant to the Constitution”, that is to say, that it involves a step putting into effect an agreement which is acquiring the property of individuals on other than just terms. Now, that falls within the Austral Fisheries Case that we referred to and the statement in Mixnam’s Properties by Lord Diplock.
GUMMOW J: A more prosaic reaction might be should the Minister sign this if contrary to the agreement we understand we have, in fact we do not and we do not have the Commonwealth funding, because with success on your arguments, this is section 96 at the Commonwealth end.
MR ELLICOTT: It does depend, I suppose - if the only power is section 96 - on the application of section 51(xxxi). But the invalidity arises, we say, because of that principle and also because of section 106 of the Constitution. To answer a proposition that the learned Solicitor from New South Wales put, that the State got no benefit, I would only be repeating the submissions I made – that they got a benefit or advantage; they got the benefit of what was an interest in land, that is to say there was returned to them that interest. It did not have to be commensurate and it was one which was effective.
Your Honour Justice Gummow said that maybe the State law is not posited on receipt of Commonwealth money. It depends whether that question is asked – and I am not asking your Honour the question – on the basis of practical reality. We would submit that this is a practical matter and that the scheme here did not commence until after the funding agreement. In those circumstances it was in consequence of the funding agreement and as a matter of practical reality what the State was doing when it signed the order was acting on the basis of receiving Commonwealth money.
The other proposition that we want to put – and I just want to give your Honours some references – is this, that the Commonwealth was clearly involved in this scheme. I have said this, it was a joint scheme and the funding agreement references to the Commonwealth approval are in clauses 6.6, 6.10, 4.2 and 4.3 and item 1.15. Your Honours, in 1.8 will recall that there has to be approval between the Premier and the Prime Minister on the reduction methodology and on the structural adjustment assistance.
The other aspect of this case is we would invite the Court to look at the proposition - if you think it is relevant, if you decide it is relevant - in Australian Tape Manufacturers, the proposition that the adjustment of rights between parties or groups is not within section 51(xxxi). That does appear, in our respectful submission, to be a gloss on section 51(xxxi), which is very difficult to get out of the section, which after all is talking about the acquisition of property. Some of these approaches to section 51 do start to introduce notions that really blur the real question. The real question is whether it is an acquisition of property?
If one says well it is the adjustment of rights and therefore cannot be an acquisition of property, it can ultimately become such a gloss that with various cases that have come before the Court, you can get away from the words of the Constitution. We would submit that if, in relation to that particular proposition, it is not necessarily sound in logic and we would invite your Honours to look at it - - -
FRENCH CJ: Does that amount to anything more than a submission that the adjustment of rights, qualification or exclusion should not be pushed too far?
MR HINTON: I suppose it is, your Honour. It is that, but the danger is that the proposition becomes the Constitution and not the other and the cases, as this case can become a battle between does that proposition apply or not when really the question is, is there an acquisition on other than just terms. I quoted what Chief Justice Gleeson said in Smith v ANL Limited 204 CLR 493 at 501:
It prevents expropriation of the property of individual citizens, without adequate compensation, even where such expropriation may be intended to serve a wider public interest. A government may be satisfied that it can use the assets of some citizens better than they can; but if it wants to acquire those assets in reliance upon the power
given by S 51(xxxi) it must pay for them, or in some other way provide just terms of acquisition.
If your Honours please.
FRENCH CJ: Thank you, Mr Ellicott. The Court will reserve its decision.
The Court will adjourn until 2.00 pm.
AT 12.44 PM THE MATTER WAS ADJOURNED
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