LWB242 Constitutional Law

LWB242 Constitutional Law • Lecture 8: Express Limits on Federal Power Video: “The Castle Constitution Vibe” from YouTube http://www.youtube.com/watch?v=ITUSZ6LRHrk

LWB242 Constitutional Law • Podcast 1: Introduction to acquisition of property on just terms Video: “The Castle Constitution Vibe” from YouTube http://www.youtube.com/watch?v=ITUSZ6LRHrk

Activity Discussion Forum

Overview • Online activity: Discussion forum • Podcast 1: Introduction to acquisition of property on just terms • Reading: textbook • Podcast 2: Property and an introduction to acquisition • Online quiz • Podcast 3: Acquisition continued • Reading: JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v The Commonwealth • Podcast 4: Just terms • Online quiz

Acquisition of Property on Just Terms 51. The Parliament [has] power, subject to this Constitution, to make laws for the peace, order and good government of the Commonwealth with respect to:- … (xxxi) the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws;

Introduction • Section 51(xxxi) is both: • a grant of power; and • a qualification of all Commonwealth powers. • In the absence of 51(xxxi), each other paragraph would contain an implied grant to acquire for the relevant purpose. However, if that was the case, the Commonwealth would be able to rely on another head of power to avoid the qualification, so this must be seen as the sole source of power for compulsory acquisition. • Attorney-General (Commonwealth) v Schmidt • This is an example of the qualification to the Engineers’ principle; namely, words in one paragraph can limit those in other paragraphs if otherwise the former words would become totally meaningless.

Introduction • In Grace Bros Pty Ltd v Commonwealth, Dixon J at 290-1 described s 51(xxxi) in these terms: • “The power conferred by s 51(xxxi.) is express, and it was introduced as a specific power, not, like the Fifth Amendment, for the purpose of protecting the subject or citizen, but primarily to make certain that the Commonwealth possessed a power compulsorily to acquire property, particularly from the States. The condition "on just terms" was included to prevent arbitrary exercises of the power at the expense of a State or the subject.” • Or Bank of New South Wales v Commonwealth (the Bank Nationalisation case), Dixon J at 350: • “Section 51 (xxxi) serves a double purpose. It provides the Commonwealth Parliament with a legislative power of acquiring property: at the same time as a condition upon the exercise of the power it provides the individual or the State, affected with a protection against governmental interferences with his proprietary rights without just recompense ... In requiring just terms s 51 (xxxi) fetters the legislative power by forbidding laws with respect to acquisition on any terms that are not just.”

Effect on States and Territories • Section 51(xxxi) does not stop the States from acquiring property on a compulsory basis. • Pye v Renshaw • In Teori Tau v Commonwealth (1969) 119 CLR 564 at 570, the High Court held that s 51(xxxi) did not operate to restrict the territories’ power in s 122. • Teori Tau was challenged in Newcrest Mining WA Ltd v Commonwealth and was ultimately overturned in Wurridjal v Commonwealth.

Elements of s 51(xxxi) • Four elements of s 51(xxxi): • that what the Commonwealth has acquired is property; • that the Commonwealth has effected an acquisition; • that where property has been acquired, just terms compensation must be provided; • the Commonwealth can only acquire property for any purpose in respect of which the Parliament has power to make laws.

Activity Reading: textbook

LWB242 Constitutional Law • Podcast 2: Property and an introduction to acquisition Video: “The Castle Constitution Vibe” from YouTube http://www.youtube.com/watch?v=ITUSZ6LRHrk

Property • The High Court has adopted a broad approach to the language of s 51(xxxi). • In the Bank Nationalisationcase, Dixon J said s 51(xxxi) “is not to be confined pedantically to the taking of title by the Commonwealth to some specific estate or interest in land recognized at law or in equity and to some specific form of property in a chattel or chose in action similarly recognized, but that it extends to innominate and anomalous interests and includes the assumption and indefinite continuance of exclusive possession and control for the purposes of the Commonwealth of any subject of property.” • As such property includes: • estates or interests in land recognised at law or in equity; • specific forms of property in a chattel or in a cause of action recognised at law or in equity; • innominate and anomalous interests not recognised at law or in equity.

Property • Bank Nationalisationcase • The Bank of New South Wales (and others) challenged federal legislation that enabled the Commonwealth to acquire the business of all private banks in Australia. The legislation authorised the Commonwealth Bank (an agent of the federal government) to buy shares in private banks; authorised the Treasurer to direct that shares in private banks be vested in the Commonwealth; and provided, on a certain date, that all of the directors of private banks in Australia would no longer hold office, and that the Governor of the Commonwealth Bank, on the advice of the Treasurer, was given the power to appoint new directors to run the banks. • Held, that the provisions constituted a compulsory acquisition on other than just terms. • Dixon J at 349 characterised the provisions as removing effective control over the property of the private banks: • “legal conceptions involved in the continuance of the corporate existence of the banking company as the repository of the title to the undertaking is all that is left ... The company and its shareholders are in a real sense, although not formally, stripped of the possession and control of the entire undertaking ... Upon consideration I have reached the conclusion that this is but a circuitous device to acquire indirectly the substance of a proprietary interest without at once providing the just terms guaranteed by s 51(xxxi) of the Constitution when that is done.”

Property • Minister of State for the Army v Dalziel • The Minister took possession of land of the defendant under National Security (General) Regulations. The defendant was a tenant from week to week of the land • Held, the acquisition of leasehold interest amounted to an acquisition of property. • McTiernan J held the word “property” signifies any tangible or intangible thing which the law protected under the name of property. • Rich J held the meaning of “property” must be determined upon general principles of jurisprudence, as property is a “bundle of rights”. • Starke J held “property” extends to “every species of valuable right and interest”.

Acquisition • “Property” may be defined widely, but the section wasn’t intended to apply to everything that could broadly be called an “acquisition” of property. • Re Director of Public Prosecutions; Ex parte Lawler • Held, the confiscation of fishing vessels illegally fishing within Australia’s 200 mile zone was not an acquisition. • Deane and Gaudron JJ pointed out at 285: • “the power conferred by s 51(xxxi) is one with respect to "acquisition of property on just terms". That phrase must be read in its entirety and, when so read, it indicates that s 51(xxxi) applies only to acquisitions of a kind that permit of just terms. It is not concerned with laws in connection with which "just terms" is an inconsistent or incongruous notion. Thus, it is not concerned with a law imposing a fine or penalty, including by way of forfeiture, or a law effecting or authorizing seizure of the property of enemy aliens or the condemnation of prize. Laws of that kind do not involve acquisitions that permit of just terms and, thus, they are not laws with respect to "acquisition of property", as that expression is used in s 51(xxxi). It follows that a law which effects or authorizes forfeiture of property in consequence of its use in the commission of an offence against the laws of the Commonwealth stands outside s 51(xxxi).” • Similarly these laws are also generally not likely to be legitimately characterised as laws directed towards the acquisition of property: • laws imposing taxation (Moore v Commonwealth); • laws imposing pecuniary penalties or requiring the forfeiture of property as a penalty for an offence (Burton v Honan).

Acquisition • An acquisition for the purposes of s 51(xxxi) involves compulsion. • Poulton v Commonwealthat 573 • As such, an acquisition does not take place where the Commonwealth has acquired an interest in land by agreement. • John Cooke & Co Pty Ltd v Commonwealth at 282 • Acquisition refers to a “taking”. • But “the word ‘acquisition’ is not to be pedantically or legalistically restricted to a physical taking of title or posession.” • Mutual Pools & Staff Pty Ltd v Commonwealth per Deane and Gaudron JJ at 184 • Mere extinguishment or modification of proprietary rights will not constitute an acquisition.

Activity Online quiz

LWB242 Constitutional Law • Podcast 3: Acquisition continued Video: “The Castle Constitution Vibe” from YouTube http://www.youtube.com/watch?v=ITUSZ6LRHrk

Acquisition • An acquisition extends to the extinguishment of a vested cause of action, where: • the extinguishment results in a direct benefit or financial gain. • the cause of action is one that arises under common law. • The position may be different in a case involving the extinguishment or modification of a right that has no existence apart from statute, as prima facie, a right which has no existence apart from statute is one that, of its nature, is susceptible of modification or extinguishment. • Georgiadis v Australian and Overseas Telecommunications Corporation • Georgiadis, having sustained an injury while working for Telecom, sought to sue his employer. The Compensation Commonwealth Employees Act 1971allowed Georgiadis to either claim workers compensation, or, to pursue a common law action. Georgiadis wanted to pursue common law damages. However, in 1988, the Commonwealth Employees Rehabilitation and Compensation Act 1988, extinguished Georgiadis’s common law action. • Held, it was an acquisition of property as the Commonwealth had derived a direct benefit and financial gain from the extinction of the liability - an acquisition extends to the extinguishment of a vested cause of action. • The court made a distinction between statutory rights and common law rights: statutory rights are always susceptible to alteration.

Acquisition • The extinction of a statutory right or proprietary interest, where the right involves a reciprocal liability on the part of the Commonwealth, is an acquisition of property. • Newcrest Mining v Commonwealth • Newcrest owned various mining leases near Kakadu National Park in the Northern Territory. In 1989, the Commonwealth extended the boundaries of Kakadu to include the area of the mining leases, effectively providing that Newcrest could not mine on their leases. There was no provision for compensation. • Held, the extinction of a statutory right or proprietary interest, where the right involves a reciprocal liability on the part of the Commonwealth, is an acquisition of property. • Brennan J said that as a result of the extension of boundaries, the property of the Commonwealth was enhanced, and it was therefore an acquisition of property.

Acquisition • The extinction of a statutory right or proprietary interest, where the right involves a reciprocal liability on the part of the Commonwealth, is an acquisition of property. • Commonwealth v WMC Resources • WMC Resources was part of a joint venture consortium that had a six year permit to explore for petroleum in the Timor Sea – an area which was subject to a dispute between Australia and Indonesia as to who had sovereign rights over it. While disputing sovereignty, Australia and Indonesia entered into an interim treaty which divided up the area into three zones. For one zone, Australia had primary administrative responsibility; for another zone, Indonesia had primary responsibility; and the middle zone (Zone A) was to be jointly administered by both countries. The mining permit of the consortium was in area that included Zone A. Pursuant to the interim treaty, the Commonwealth passed a consequential provisions Act that effectively extinguished any permits that extended into Zone A. No compensation was provided for. • Held, in affirming the Newcrest principle that, it was not an acquisition of property: • Brennan CJ and Gaudron J held there was no reciprocal liability on the part of the Commonwealth as the area was not its property. • McHugh J held statutory rights are always in principle susceptible to alteration, as when the Commonwealth grants rights under a statute it does so under a head of power, and under that very same head of power it has the power to extinguish those rights. • Gummow J followed both views of Brennan CJ and Gaudron J, and McHugh J. • Toohey and Kirby JJ dissented. • A strong tone in Kirby J’s judgment was that s51(xxxi) should be considered a constitutional right which should be treated literally.

Acquisition • It is immaterial whether the acquisition is to be made by the Commonwealth or somebody authorised to acquire property by the Commonwealth or by a state by agreement with the Commonwealth. • McClintock v Commonwealth • Growers of pineapples were directed by orders made under the National Security (General) Regulationsto deliver part of their crop to a committee acting as an agent for the Commonwealth. The payment for the pineapples so received was determined by another committee associated with the scheme. • Held, although the Commonwealth did not acquire any property, there was still an acquisition of property. • Starke J: the transaction amounted to an acquisition of property by the purchaser as an agent for the Commonwealth. • PJ Magennis Pty Ltd v. Commonwealth • After World War II, the War Service Land Settlement Agreements Act 1945 (Cth) authorised the Commonwealth to enter into an agreement with New South Wales under which New South Wales could compulsorily acquire land for returned servicemen. Just terms weren’t provided for. • Held, it was an acquisition of property, even though it was not acquired by the Commonwealth.

Activity Reading: JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v The Commonwealth

LWB242 Constitutional Law • Podcast 4: Just terms Video: “The Castle Constitution Vibe” from YouTube http://www.youtube.com/watch?v=ITUSZ6LRHrk

Just terms • A law for acquisition not on just terms is not within a head of power and therefore is invalid. • Just terms provides for fair monetary compensation and natural justice in the manner of assessment of compensation. • As most legislation passed under s 51(xxxi) provides for a method of calculating and paying compensation, the court scrutinises that process to determine if just terms have been provided for. • Two aspects: • decision making process; • principles of assessment or calculation of compensation.

Just terms: decision making process • The agency which determines compensation must be administratively separate from the agency which acquires the property. • The cases seem to indicate that it is sufficient separation if the Minister of the relevant government department does the acquisition, and the calculation of compensation is made by an independent board. • It is irrelevant that the board reports back to the minister and the minister has the capacity to either accept of reject the recommendations of the board. • However, if the minister has the capacity to alter the recommendations of the board and adopt his or her own assessment of compensation, the court is unlikely to accept that this sufficient compensation. • The tribunal must not be biased - there must be an opportunity to present a case and to know the evidence upon which the tribunal acted when valuing property. • There must be an opportunity to appeal to a court - compensation cannot be conclusively by a minister, board or some other non-judicial tribunal. • There must be a reasonably timely determination of compensation - there cannot be too much leeway for the determiner and payer of compensation to delay payment. • These principles are drawn from these cases: • Andrews v Howell • Australian Apple and Pear Marketing Board v Tonking • Nelungaloo Proprietary Limited v Commonwealth

Just terms: principles of assessment or calculation of compensation • Principles: • Market value, where available, is the starting point for the appropriate measure of monetary compensation. • Nelungaloo Proprietary Limited v Commonwealth • When an acquisition of property involves a loss of good will (for example, where the property acquired is essential to the owner’s business.), that loss of good will must be taken into account when calculating the compensation received - the amount of compensation will be increased. • Johnston Fear & Kingham v Commonwealth • If the property acquired is difficult by nature to replace, it must be taken into account when calculating the compensation received - the amount of compensation will be increased. • Johnston Fear & Kingham v Commonwealth • If there is no market (for example, if war prevents trade), just terms is determined by postulating a willing but not anxious buyer and seller who are willing to form a contract to purchase whatever is being acquired, but is not anxious to do so, and therefore is not inclined to take anything other than the fair price for whatever is being acquired. • Nelungaloo Proprietary Limited v Commonwealth

Just terms: principles of assessment or calculation of compensation • As acquisitions are usually made under general statutes, the court will uphold the general rules if they are reasonable rules of assessment to be applied to all acquisitions, even if in particular circumstances the rules may create a perceived injustice to a particular person from whom property is acquired. • Grace Brothers Pty Ltd v Commonwealth • The Land Acquisitions Act 1906-1936 (Cth) authorised the Governor General to acquire land, providing for compensation. Section 29 of the Act stated that the calculation of the value of the land acquired was to be assessed according to the value of the land prior to the date on which the announcement was made that the land was to be acquired. Section 40 of the Act provided for interest of 3%. • Held, the legislation provided a general statute which was reasonable, as it was a true attempt to provide a fair and just standard of compensation. The 3% interest was held to be fair as interest rates were susceptible to variation.

For any purpose in respect of which the Parliament has power to pass laws • The Commonwealth may only acquire property on just terms under s 51(xxxi) for a “purpose in respect of which the Parliament has power to pass laws”. • This means every law supported by s 51(xxxi) must also be supported by at least one other additional legislative power.

Activity Online quiz

LWB242 Constitutional Law