Sussing out the vibe: Federal property acquisition and the search for a principled approach to the scope of the ‘just terms’ proviso in s 51(xxxi) of the Australian Constitution
Ilan Lewis
A thesis in fulfilment of the requirements for the degree of
Masters of Law
Faculty of Law
August 2016
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THE UNIVERSITY OF NEW SOUTH WALES Thesis/Dissertation Sheet
Surname or Family name: Lewis
First name: Ilan Other name/s:Roland
Abbreviation for degree as given in the University calendar: LLM
School: Law Faculty: Law
Title: Sussing out the vibe: Federal property acquisition and the search for a principled approach to the scope of the ‘just terms’ proviso in s 51(xxxi) of the Australian Constitution.
Abstract 350 words maximum: In relation to the case law dealing with the scope of s 51(xxxi) of the Australian Constitution (‘the Proviso’) it has been suggested that no coherent line of principle emerges, that one meets undisclosed processes of reasoning and that, as a consequence, the Proviso’s operation is unpredictable. This dissertation gives an account and critique of the increasing incoherence of s 51(xxxi) jurisprudence and the High Court’s failure to articulate the constitutional values the Proviso serves to protect. A comprehensive account is given of the Proviso’s inherent interpretive challenges and the various approaches the High Court has adopted to tackle them. The thesis considers in detail the Proviso’s complex interrelationships with other constitutional powers and limitations. It is argued that understanding these interrelationships is a necessary pre-requisite to understanding the problems the Proviso throws up and the formulation of possible solutions. In this context, it considers whether the Proviso’s protective scope can be coherently described as a function of whether or not a given acquisition operates arbitrarily or breaches various tenets of the rule of law. Are decisions dealing with the Proviso’s scope explicable on the basis that the Proviso operates to proscribe legislation which offends such principles as non-retrospectivity, generality and the separation of powers - at least in the property domain? Four cases dealing with the application of the Proviso to what might be called ‘retrospective interests,’ that is, interests arising by way of the retrospective operation of judicial decisions are analysed in detail. It is argued that by excising these types of cases from the mainstream of s 51(xxxi) jurisprudence an opportunity to clarify other areas of doctrine and reconcile other decisions opens up.
Finally, various accounts of the Proviso’s purpose or function are evaluated. The thesis concludes that, while various rule of law principles provide a useful guide to understanding the High Court’s decisions in many instances, there exist a number of hard limits on reconciling existing case law and that it is easy to overstate the degree of coherence to be found within it.
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COPYRIGHT STATEMENT
‘I hereby grant the University of New South Wales or its agents the right to archive and to make available my thesis or dissertation in whole or part in the University libraries in all forms of media, now or here after known, subject to the provisions of the Copyright Act 1968. I retain all proprietary rights, such as patent rights. I also retain the right to use in future works (such as articles or books) all or part of this thesis or dissertation. I also authorise University Microfilms to use the 350 word abstract of my thesis in Dissertation Abstract International (this is applicable to doctoral theses only). I have either used no substantial portions of copyright material in my thesis or I have obtained permission to use copyright material; where permission has not been granted I have applied/will apply for a partial restriction of the digital copy of my thesis or dissertation.'
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‘I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in the thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project's design and conception or in style, presentation and linguistic expression is acknowledged.’
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ACKNOWLEDGEMENTS
For their patience, input and suggestions I am greatly indebted to my supervisors Prof. Theunis Roux and Prof. Brendan Edgeworth as well as my review panel members, Assoc. Prof. Lyria Moses, Fergal Davis, Assoc. Prof. Sean Brennan and Prof. George Williams AO.
I also wish to thank Jenny Jarrett at UNSW whose administrative prowess and sympathetic ear was indispensable.
For comments on various parts of this Thesis I thank Keith Mason QC and Evelyn Waygood. I am also grateful to my partner Christina Newman for her support and encouragement and our son Henry whose timely arrival spurred the completion of this thesis.
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Sussing out the vibe: Federal property acquisition and the search for a principled approach to the scope of the ‘just terms’ proviso in s 51(xxxi) of the Australian Constitution
Table of Contents
Table of Contents ...... 5
Introduction...... 9
Chapter Outlines ...... 10
1 Chapter 1 – Exposition and Exploration of Existing Doctrine ...... 12
1.1 Problem Statement ...... 12
1.2 General Approaches and Overt Justifications ...... 14
1.3 Exegetical Challenges and Characterisation ...... 17
1.4 Property ...... 23
1.5 Acquisition ...... 26
1.6 For Any Commonwealth Legislative Purpose ...... 34
1.7 On Just Terms ...... 38 1.7.1 ‘Compound Conception’ Exclusions ...... 39 1.7.2 Conclusion ...... 53
1.8 The ‘Tests’ ...... 54 1.8.1 Inherently Subject to Modification test ...... 55 1.8.2 The ‘General law’ ...... 59 1.8.3 Proportionality ...... 60 1.8.4 ‘Adjustment of competing claims’ test ...... 65 1.8.5 Discussion ...... 70
1.9 Reconciling the Cases ...... 71
1.10 Conclusion ...... 76
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2 Chapter 2 - Interactions and Intersections with other Constitutional Principles and Policies ...... 78
2.1 Introduction ...... 78
2.2 The Australian Constitution and the Rule of Law ...... 79
2.3 Open, Clear, Prospective ...... 83
2.4 Retrospectivity, Legal Certainty and Proprietary Expectations ...... 86 2.4.1 Conclusion ...... 113
2.5 The Retrospective Nature of Judicial Decision Making ...... 114
2.6 Exceptions ...... 125
2.7 Legal and Fiscal Chaos...... 125
2.8 Restitution ...... 129 2.8.1 Objective Public Law Approach ...... 132 2.8.2 Subjective Proprietary Expectation Approach ...... 140
2.9 Crown Immunity from Suits in Tort and Contract ...... 143
2.10 Contractual interests ...... 146
2.11 The Separation of Powers - the fettering of Parliament’s law making power by the Executive ...... 147 2.11.1 Perpetual Executors and Magrath ...... 148
2.12 Generality ...... 152
2.13 Chapter 2 Conclusion ...... 156
3 Chapter 3 – Case Studies ...... 158
3.1 Introduction ...... 158
3.2 Werrin v Commonwealth (1938) 59 CLR 150 ...... 161 3.2.1 Facts ...... 161 3.2.2 Judgment ...... 161 3.2.3 Restitutionary approach – No cause of action ...... 162 3.2.4 Operation of the Proviso to Legislation which Bars Restitution ...... 163 3.2.5 Crown Immunity from Suit ...... 165 3.2.6 Discussion ...... 167
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3.2.7 The Tax Problem ...... 167 3.2.8 An Alternative approach ...... 168
3.3 Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 ...... 170 3.3.1 Facts ...... 170 3.3.2 Questions for the Court ...... 171 3.3.3 Judgment ...... 172 3.3.4 The Merits ...... 173 3.3.5 The Scheme ...... 173 3.3.6 Restitutionary Analysis ...... 174 3.3.7 The Retrospective interests ...... 175 3.3.8 The Dilemma ...... 176 3.3.9 Expectation-based approach to Mutual Pools ...... 184 3.3.10 Evidence of expectation and detrimental reliance ...... 185
3.4 Health Insurance Commission v Peverill (1994) 179 CLR 226 ...... 187 3.4.1 Facts ...... 187 3.4.2 Judgment ...... 188 3.4.3 The Reasons...... 188 3.4.4 Expectation-based approach ...... 200 3.4.5 Conclusions Re Peverill ...... 204
3.5 Attorney-General for the Northern Territory v Chaffey (2007) 231 CLR 651 ...... 207 3.5.1 Facts ...... 207 3.5.2 Judgment ...... 208 3.5.3 Discussion of Chaffey...... 210 3.5.4 Chaffey Conclusion ...... 218
3.6 Chapter 3 Discussion ...... 220 3.6.1 Retrospective Interests ...... 221 3.6.2 The Acquisition Question ...... 224 3.6.3 Conclusion ...... 225
4 Chapter 4 – Possible Purposes of the "Just Terms" Guarantee ...... 227
4.1 Introduction ...... 227
4.2 Purposes or Functions of the Proviso - What is the Evil? ...... 227
4.3 The Tax and Criminal Penalties Problem ...... 231
4.4 Not so Neat ...... 236 7
4.4.1 Tape Manufacturers ...... 238
4.5 Problem Cases ...... 240
4.6 Rhetoric vs. Reality ...... 242
5 Conclusion ...... 244
5.1 Introduction ...... 244
5.2 The Negative Critique ...... 244
5.3 The Emergent Model ...... 247 5.3.1 The Exceptions ...... 249 5.3.2 Predictive Power ...... 254
5.4 A Rule of Law Protection? ...... 255
5.5 Possible Expansions ...... 256 5.5.1 Constitutionalisation of Criminal Procedure ...... 257 5.5.2 Retrospective taxation ...... 258 5.5.3 Regulatory Property ...... 258 5.5.4 Regulatory Takings ...... 259 5.5.5 Expectation of profit ...... 259 5.5.6 Reliance interests ...... 260
5.6 Conclusion Regarding the Emergent Model ...... 261
5.7 Concluding Remarks ...... 261
6 Bibliography ...... 263 6.1.1 A Articles/Books/Reports ...... 263 6.1.2 B Cases ...... 270 6.1.3 C Legislation ...... 278 6.1.4 D Other ...... 279
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Introduction
Section 51(xxxi) of the Australian Constitution (‘the Proviso’) confronts the High Court with a catalogue of conceptually problematic questions and some stark and difficult choices.1 However, in resolving its scope of operation not only have the answers provided by the Court become somewhat incoherent and opaque but the questions the Court poses itself have themselves become increasingly confused.
Against this background, this thesis undertakes to give an account of this incoherence and its origins through an analysis of underlying historical, philosophical and doctrinal tensions and debates. An account will be given of the radical challenge the Proviso’s existence presents to English common law doctrine and constitutional norms. Further, it will explore what it might mean to take seriously the view expressed by Dixon J in Grace Brothers Pty Ltd v Commonwealth2 that:
The condition "on just terms" was included to prevent arbitrary exercises of the power at the expense of a State or the subject.3
More specifically, it seeks to explore what an interpretation of ‘just terms’ as a condition of compensation for arbitrary acquisitions of property might mean and the extent to which decisions dealing with the scope of s 51(xxxi) support such an approach. In other words, can the scope of s 51(xxxi) and the cases in which it has been applied be explained purely by reference to an assessment of the degree to which the exercise of the Commonwealth’s legislative power in that instance conforms with or breaches various rule of law principles?
The argument is made that by taking Joseph Raz’s minimalist take on the rule of law as a starting point a remarkable degree of congruence is to be found in the sense that it often appears to be the case that the Proviso is operating to proscribe legislation which offends such principles as non-retrospectivity, generality and the separation of powers - at least when property interests are at stake.
It is not proposed that such an approach can reconcile all the existing problems and interpretive challenges the Proviso presents. However, it is capable of drawing out a series of
1 Tom Allen, 'The Acquisition of Property on Just Terms' (2000) 22(3) Sydney Law Review 351, 351. 2 (1946) 72 CLR 269. 3 Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 290. 9 substantive issues which may have been intuitively guiding the Court’s approach to the Proviso and so provide a degree of clarity to s 51(xxxi) jurisprudence.
The purpose of this thesis is not to prescribe how the courts should be interpreting s 51(xxxi) but rather to give full recognition to its inherent difficulties while suggesting some consistent themes as to how courts have interpreted, are interpreting and likely will interpret the Proviso into the future. Further, an attempt is made to meet the challenge posed by Kirby J in Attorney-General for the Northern Territory v Chaffey4 that:
The way to bring clarity to this area of discourse would seem to be by attempting to identify more explicitly the purposes of the "just terms" guarantee.5
Chapter Outlines
Chapter One explores the inherent interpretive challenges posed by the Proviso and the ways in which the High Court has sought to meet them. It gives a near comprehensive account and critique of existing s 51(xxxi) doctrine highlighting thematic consistencies and contradictions as well as areas in which there has been substantial agreement and disagreement between members of the High Court.
Chapter Two takes a step back from the problems with existing doctrine and explores the question whether the Proviso’s protective scope can be coherently described as a function of whether or not a given acquisition operates arbitrarily or breaches various tenets of the rule of law. The argument is made that, in fact, s 51(xxxi), litigation presents something of a parade of ‘rule of law’ issues and the conundrums these higher-order principles throw up. Highlighted is the way in which interpretation of the Proviso directly intersects and sometimes finds itself in direct conflict with a swathe of common law doctrines and the operation of other express and implied constitutional limitations and powers. Particular focus is given to the principle of non- retrospectivity, the manner in which expectation-based doctrines (such as public law estoppels) could operate within the context of s 51(xxxi) and the extent to which these doctrines are capable of providing some insight into or explanation for the decisions in s 51(xxxi) cases.
4 (2007) 231 CLR 651 (‘Chaffey’). 5 A-G (NT) v Chaffey (2007) 231 CLR 651, 667; Simon Evans, 'When is an Acquisition of Property not an Acquisition of Property? The Search for a Principled Approach to Section 51(xxxi)' (2000) 11(3) Public Law Review 183, 199. 10
Chapter Three takes the form of four case studies, each exploring a significant High Court decision dealing with the application of s 51(xxxi). In each case the Court was considering the application of s 51(xxxi) to what might be called ‘retrospective interests,’ that is, interests arising by way of the retrospective operation of judicial decisions.
The Chapter seeks to explore the problems with the reasons provided by the Court in those cases while arguing that at the root of these problems lay the Court’s attempt to force retrospective interests into the mainstream of (already problematic) s 51(xxxi) doctrine where they simply would not fit. The distortion of existing doctrine and increasing incoherence that can be found in the Court’s reasons in these cases can be seen to have been an inevitable consequence of the Court’s failure to tackle the central conundrum, being a coherent doctrine which deals with the status of retrospective interests.
The scenarios presented by these cases confront and have direct implications for the rule of law, the retrospective nature of judicial decision making and many of the other issues considered in Chapter Two. The analysis suggests that these decisions can or ought to be excised from the mainstream of s 51(xxxi) jurisprudence, thereby opening up the possibility that other areas of doctrine may be clarified and other decisions better reconciled.
Chapter Four presents a synthesis and evaluation of the various possible purposes or functions that the Proviso might serve. It analyses the hard limits on reconciling existing case law in terms of rule of law principles and the Proviso’s difficult relationship to other constitutional powers and limitations. Returning to the difficulties with existing doctrine explored in Chapter One, it considers the extent to which any real reconciliation of the case law can take place and how easy it is to overstate or give a misleading impression regarding the degree of coherence to be found within it.
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1 Chapter 1 – Exposition and Exploration of Existing Doctrine
Section 51: The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: …
(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…
1.1 Problem Statement
Amongst all the judicial and scholarly pronouncements on section 51(xxxi) of the Australian Constitution (‘the Proviso’) the clearest consensus to emerge is that no sensible rationale can explain or predict its operation. As Kitto J observed over 60 years ago in Nelungaloo Pty Ltd v Commonwealth:
The decisions of the Court on s 51 (xxxi) have been comparatively few, and the judgments that have been delivered have revealed the existence of serious problems still to be faced.6
Over 25 years later in Trade Practices Commission v Tooth and Co Ltd, Gibbs J observed:
I am not sure that a completely satisfactory explanation has yet been given of the principles by which it is to be determined which laws do, and which laws do not, fall within s 51(xxxi).7
Some 15 years later again in Mutual Pools & Staff Pty Ltd v Commonwealth8 Deane and Gaudron JJ surmised that:
there is no set test or formula for determining whether a particular law can or cannot properly be characterized for the purposes of s 51(xxxi) as a law with respect to the acquisition of property9
In Attorney-General for the Northern Territory v Chaffey,10 Kirby J echoed Blackshield’s and Williams’ view that the jurisprudence on s 51(xxxi) remains burdened by 'inconsistencies’ and
6 Nelungaloo Pty Ltd v Commonwealth (1952) 85 CLR 545 , 600. 7 (1979) 142 CLR 397, 408. 8 (1994) 179 CLR 155 (‘Mutual Pools’). 9 Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155, 189. 12
‘subtle distinctions ... exacerbated by the judicial differences in emphasis and approach’.11 His Honour had previously expressed the view in Smith v ANL Ltd12 that:
Finding a touchstone to distinguish legislation which falls within, and that which falls outside, the requirements of s 51(xxxi) is not easy. No verbal formula provides a universal criterion.13
Simon Evans has described the High Court’s current approach as ‘confused and unsatisfactory.’14 Former Commonwealth Solicitor-General and now High Court Judge Stephen Gageler SC, succinctly described interpretation of the Proviso as ‘unfinished business’ for the High Court.15 Unlike the difficulties which beset the interpretation of another constitutional guarantee, s 92 of the Australian Constitution, s 51(xxxi) has no Cole v Whitfield decision which reconciles the cases.
In oral submissions before the High Court in Attorney-General for the Northern Territory v Chaffey,16 Queen’s Counsel for the NT Attorney-General frankly admitted that:
There are at present, except on the outer limits, no bright line tests and except in a case by case development it is unlikely that one will be developed. I say that because this is a difficult area of the law in which to present oral submissions and that is because from any given starting point there are expressions in the cases which may be strung together to produce a plausible result in either direction.17
Most disconcerting was his admission that, ‘advising governments whether a particular measure will or will not be a law with respect to acquisition of property otherwise than on just terms [is] somewhat chancy.’18
It is ironic that, as regards a proper application of the Proviso, the nation’s top QCs cannot offer the High Court any better guidance, nor the government any better advice, than the
10 A-G (NT) v Chaffey (2007) 231 CLR 651, 667. 11 Blackshield and Williams, Australian Constitutional Law and Theory, Commentary and Materials (Federation Press, 4th ed, 2006), 1285. 12 (2000) 204 CLR 493. 13 Smith v ANL Ltd (2000) 204 CLR 493, 528-9. 14 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 183. 15 ‘High Court still has a full plate’, Financial Review (Sydney) 13 June 2008, 51. 16 (2007) 231 CLR 651. 17 Transcript of Proceedings, A-G for the NT v Chaffey [2007] HCATrans 203 (16 May 2007) (T I Pauling QC). 18 Ibid. 13 mutterings of a fictional suburban lawyer to the effect that ‘it’s the Constitution, it’s Mabo, it’s justice... it’s law, it’s the vibe, and ah, no that’s it, it’s the vibe.’19
For commentators, the experience of an engagement with s 51(xxxi) jurisprudence has been one of exasperation. The relatively small body of literature reveals an ongoing attempt to discern any doctrinal consistency, to reconcile the ‘multiplicity of approaches to s 51(xxxi)’20 and divergent judicial views regarding the Proviso’s purpose, significance, its role in the overall constitutional structure, historical antecedents21 and the relevance of other jurisdictions’ approaches to similar protections.22
None of the foregoing ought to be construed as a suggestion that the High Court has decided cases wrongly or has not generally done a good job of balancing the competing policy issues which come to be litigated under s 51(xxxi). It is the coherence of the accreted doctrinal formulae and the reasoning adopted in the case law dealing with the Proviso that are the subject of this critique.
1.2 General Approaches and Overt Justifications
The High Court has repeatedly confirmed its adherence to an expansive view of s 51(xxxi); it is to be construed ‘liberally’23 and not ‘narrowly24’ or ‘pedantically.’25 As Dixon J held in the Bank Nationalisation Case:26 ‘the paragraph should be given as full and flexible an operation as will cover the objects it was designed to effect.’27
As McHugh J stated in Mutual Pools:
Section 51(xxxi) is, … both a source of power and a guarantee that the property of a State or an individual citizen will not be sacrificed for the public welfare of the Commonwealth.
19 The Castle (Directed by Robert Sitch,Working Dog, 1997), 58:04. 20 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 186. 21 Duane L Ostler, 'The Drafting of the Australian Commonwealth Acquisition Clause' (2009) 28(2) University of Tasmania Law Review 211. 22 Marcus Cox, 'Acquiring Property on Just Terms' (1994) 19(3) Melbourne University Law Review 768; Health Insurance Commission v Peverill (1994) 179 CLR 226, 248 (Dawson J). 23 Clunies-Ross v Commonwealth (1984) 155 CLR 193, 201-2; see also Minister of State for the Army v Dalziel (1944) 68 CLR 261, 276 (Latham CJ), 284-285 (Rich J); Bank of New South Wales v Commonwealth (1948) 76 CLR 1, 349 (Dixon J); Commonwealth v Tasmania (1983) 158 CLR 1, 282 (Deane J); Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480, 509 (Mason CJ, Brennan, Deane and Gaudron JJ); Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 285. 24 Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106, 197 (Dawson J). 25 Mutual Pools (1994) 179 CLR 155, 184; ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349 (Dixon J). 26 (1948) 76 CLR 1. 27 ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 201-202. 14
If the Parliament wishes to acquire property belonging to a State or individual, the cost of the acquisition has to be borne by the taxpayers of the Commonwealth and not by the owner of the property.28
As Mason CJ observed in Mutual Pools:
The provision has been described as a provision of a fundamental character, having the status of a constitutional guarantee, which was designed to protect citizens from being deprived of their property except on just terms.29
In Newcrest Mining (WA) Ltd v Commonwealth30 Kirby J described the Proviso as reflecting ‘a universal and fundamental’ right.31
Simultaneously, broad expressions as to the limits of its scope have been posited. As Brennan J held in Mutual Pools:
It would be erroneous so to construe grants of legislative power as to fetter their exercise by implying that s 51(xxxi) precluded the enactment of laws under other heads of power where the laws involved an acquisition of property without just terms, even though laws of that kind are appropriate and adapted to the execution of those powers in the public interest.32
Again, McHugh J made a similar observation:
Although s 51(xxxi) abstracts the power of acquisition from other legislative powers in s 51, it cannot be interpreted so broadly as to render meaningless the legitimate use and operation of other powers conferred by s 51.33
In A-G (Cth) v Schmidt34 Dixon CJ held:
It is hardly necessary to say that when you have, as you do in par. (xxxi), an express power, subject to a safeguard, restriction or qualification, to legislate on a particular subject or to a particular effect, it is in accordance with the soundest principles of interpretation to treat that as inconsistent with any construction of other powers conferred in the context
28 Mutual Pools (1994) 179 CLR 155, 219. 29 Ibid, 168 (Mason CJ) citing Dalziel (1944) 68 CLR 261, 276 (Latham CJ), 284-285 (Rich J); Clunies-Ross v Commonwealth (1984) 155 CLR 193, 201-2; Tape Manufacturers (1993) 176 CLR 480, 509. 30 (1997) 190 CLR 513. 31 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 660. 32 Mutual Pools (1994) 179 CLR 155, 180 (Brennan J). 33 Ibid, 219 (McHugh J). 34 (1961) 105 CLR 361. 15
which would mean that they included the same subject or produced the same effect and so authorized the same kind of legislation but without the safeguard, restriction or qualification.
But… it is necessary to take care against an application of this doctrine to the various powers contained in s 51 in a too sweeping and undiscriminating way.35
Whatever the perceived status of, or function performed by, s 51(xxxi) in the overall constitutional structure, it has never been seriously questioned that the acquisition by the Commonwealth of full ownership rights in land falls squarely within the Proviso’s protection. Indeed, on one view, protection of land holdings was the original intended scope of the provision.36 Compulsory acquisitions of land by the Commonwealth have taken place under successive incarnations of the Lands Acquisition Act 1906 (Cth)37 and litigation has taken place under its provisions.38 Likewise, the acquisition of ownership rights in personal property, including saleable commodities and chattels, have long been recognised as falling within the Proviso’s protection.39 One might say that such acquisitions represent the ‘centre’ of the protection but do not give us its ‘circumference’.40
Straying any distance beyond this core of certainty, the courts have struggled to articulate a coherent doctrine.41
Though there is a group of laws whose operation has long been recognised as falling outside the scope of s 51(xxxi) including the imposition of fines, civil penalties and forfeitures,42 a clear rationale for these exclusions has proven elusive. Again, though taxation has always been held to be outside the Proviso’s scope, articulating a firm delineation between a tax under s 51(ii)
35 A-G (Cth) v Schmidt (1961) 105 CLR 361, 372. 36 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 130; Mutual Pools (1994) 179 CLR 155, 196. 37 Prior to the 1906 Act was the Property for Public Purposes Acquisition Act 1901 (Cth). 38 See generally Douglas Brown, Land Acquisition: An Examination of the Principles of Law Governing the Compulsory Acquisition or Resumption of Land in Australia (LexisNexis Butterworths, 6th ed, 2009). 39 Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314; Andrews v Howell (1941) 65 CLR 255. 40 A-G (NSW) ex rel Tooth & Co Ltd v Brewery Employees' Union of NSW (1908) 6 CLR 469, 610; W H Blakeley & Co Pty Ltd v Commonwealth (1953) 87 CLR 501, 521, ‘acquisition by the Commonwealth itself is at the centre of the legislative power’; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 425 (Stephen J); cf Commonwealth v Australian Capital Territory (2013) 250 CLR 441. 41 George Williams, Human Rights under the Australian Constitution (Oxford University Press, 1999), 153. 42 See Mutual Pools (1994) 179 CLR 155, 188. 16 and an acquisition of property under s 51(xxxi) has proven difficult.43 Whether or not the Proviso’s guarantee of ‘just terms’ is enlivened by acquisitions under heads of power other than s 51(xxxi), or by more abstract forms of property, has been an ongoing source of litigation and confusion.
1.3 Exegetical Challenges and Characterisation
Despite the seemingly uncomplicated wording of s 51(xxxi), the interpretive challenges it poses cannot be underestimated. In Minister of State for the Army v Dalziel44 Starke J took what might be considered the very reasonable view that:
The power of the Commonwealth to make laws with respect to the acquisition of property is an extensive power, but the Court must construe it according to the plain and ordinary signification of English words.45
However, as will be demonstrated, this approach is deeply problematic. Even a cursory review of the history books squarely locates the Proviso at the battle-fronts of some of the most heated jurisprudential debates of the past several hundred years. Furthermore, the purpose or purposes the Proviso was intended to serve, like its historical precedents in the French Declaration of the Rights of Man and of the Citizen and the US Constitution, remain nebulous.46
As Bentham wrote of the property clause in the French Declaration of the Rights of Man and of the Citizen:
…if anything were clear in it, … whatever proprietary rights, whatever property a man once has, …, can never be taken away from him by any law: … therefore, … all laws and all judgments, …—all taxes, for example, and all fines—are void, …47
43 Federal Commissioner of Taxation v Clyne (1958) 100 CLR 246. 44 (1944) 68 CLR 261. 45 Dalziel (1944) 68 CLR 261, 290. 46 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 198; Simon Evans, 'Property and the drafting of the Australian Constitution' (2001) 29(2) Federal Law Review 121; Tonja Jacobi, Sonia Mittal and Barry R Weingast, 'Creating a Self-Stabilizing Constitution: The Role of the Takings Clause', (2015) 109(3) Northwestern University Law Review 601, 617; cf William Treanor, 'The Original Understanding of the Takings Clause and the Political Process' (1995) 95(4) Columbia Law Review 782, 789-91. 47 Jeremy Bentham, 'Anarchical Fallacies; being an examination of the Declartion of Rights issued during the French Revolution' in John Bowring (ed) The Works of Jeremy Bentham Vol 2 (William Tait, 1843) 489, 503. 17
A plain English reading of the Proviso is open to the same criticism. Almost universally, ‘proprietary guarantees’ of this nature do not specify their own limits.48 That such provisions have been framed in absolute terms has meant that it has been the role of the courts to determine those limits. It was this very imprecision and vagueness that inspired Bentham, writing about the right to property in the French Declaration of the Rights of Man and of the Citizen, to famously pen that 'natural rights is simple nonsense: natural and imprescriptible rights, rhetorical nonsense, nonsense upon stilts.'49
Bentham’s invective was not an attack on rights as such, rather it was a denunciation of what he perceived to be woolly ‘mischievous’ thinking giving rise to imprecise and vague laws.50 This problem, identified by Bentham some 200 years ago, plagues constitutional courts around the globe to this day. Seeking guidance from the comparative literature in interpreting the Proviso is fraught with difficulties and not only because of the differing constitutional contexts and wording utilised in analogous provisions. As AJ van der Walt wrote:
In most countries with an entrenched Bill of Rights, the property clause is regarded as one of the most difficult provisions to interpret and apply…51
To take just one example, the US Supreme Court’s jurisprudence dealing with the US Constitution’s Fifth Amendment ‘takings clause’ is frankly described by commentators as a ’mess’.52
It is perhaps obvious from Bentham’s positivist critique that the Proviso and like provisions straddle and are entangled in the Natural Law versus Positivist debate and the conceptions of property expounded by each.53 Indeed, the ‘property question’ could be considered the
48 A J Van der Walt, Constitutional Property Clauses: A Comparative Analysis (Juta, 1999). 49 Bentham, 'Anarchical Fallacies', above n 47, 500. Bentham was referring to Article 2 of the Declaration of the Rights of Man and of the Citizen; in particular its declaration of the right of man to his ‘natural and imprescriptible’ right of property. 50 Ross Harrison, 'Jeremy Bentham' In Ted Honderich (ed), The Oxford Companion to Philosophy (Oxford University Press, 1995) 85. 51 AJ Van der Walt, Constitutional Property Law (Juta, 3rd ed, 2011), x; see also Van der Walt, Constitutional Property Clauses: A Comparative Analysis, above n 48. 52 Treanor, 'The Original Understanding of the Takings Clause', above n 46, 782 citing Daniel A Farber, Public Choice and Just Compensation, (1992) 9 Constitutional Commentary 279, 279; Saul Levmore, 'Just Compensation and Just Politics' (1990) 22 Connecticut Law Review 285, 287. 53 Richard A Epstein, Takings: Private Property and the Power of Eminent Domain (Harvard University Press, 1985); Pamela O'Connor, 'The Changing Paradigm of Property and the Framing of Regulation as a "Taking"' (2010) 36(2) Monash University Law Review 50. 18 foundational clash between the two philosophies.54 The theoretical and ideological quagmire in which s 51(xxxi) is mired is a deep one indeed.
Aside from a few notable exceptions,55 the High Court has done its best to avoid engaging in these debates in formulating s 51(xxx) doctrine.56
A comparison with the High Court’s approach to s 92 since Cole v Whitfield is instructive. In that context the Court has developed an almost genealogical approach to the concepts of free trade and protectionism (as they were understood at the time of federation) which anchor the Court’s enquiry and application of s 92. Section 51(xxxi) has no such foundations and its purpose remains radically under-theorised by the High Court. Though various problems associated with entrenched property protections are universal, nonetheless, side stepping the deeper theoretical and philosophical issues comes at a price.
The question of whether the Proviso’s primary significance lies in its status as a grant of power or its ‘guarantee’ of just terms has been an ongoing point of disagreement between members of the High Court.57 Ultimately however, this fairly sterile debate appears to have played little if any role in the Court’s approach to its interpretation.
The phrase which perhaps best captures the difficulties the High Court has encountered in articulating the scope of s 51(xxxi) are its declarations to the effect that the legislation in question has ‘nothing to do’58 with the Proviso. Similar comments can be found in a large number of decisions and include statements to the effect that ‘the whole matter lies outside the power given by s. 51 (xxxi.)’59 or is ‘altogether outside’60 its scope. Very little is plainly outside its reach.
54 See generally Jeremy Waldron, The Right to Private Property (Clarendon, 1988). 55 ICM Agriculture v Commonwealth (2009) 240 CLR 140, (Heydon J), A-G (NT) v Chaffey (2007) 231 CLR 651, (Callinan J); Smith v ANL Ltd (2000) 204 CLR 493, (Kirby J); Commonwealth v WMC Resources Ltd (1998) 194 CLR 1, (Kirby J); Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, (Kirby J) Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, (Dixon J), Dalziel (1944) 68 CLR 261, 286 (Rich J). 56 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 204. 57 See for eg Mutual Pools (1994) 179 CLR 155, 187 (Deane and Gaudron JJ); Colin Howard, Australian Federal Constitutional Law (Lawbook, 2nd ed, 1972), 395. 58 Theophanous v Commonwealth (2006) 225 CLR 101, 115 (Gleeson CJ). 59 Burton v Honan (1952) 86 CLR 169, 180 (Dixon CJ). 60 A-G (Cth) v Schmidt (1961) 105 CLR 361, 373 (Dixon CJ); Also formulated as ’whole subject is altogether outside the scope of s 51(xxxi)’ Peverill (1994) 179 CLR 226, 373; ‘entirely outside the provisions of s 51(xxxi) of the Constitution’ Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508, 526 (Rich J). 19
Though there clearly are limits to the Proviso’s scope, finding a clear rationale to explain them has presented an ongoing problem for the Courts. As Brennan J stated in Mutual Pools:
Section 51(xxxi) of the Constitution has a dual effect. First, it confers power to acquire property from any State or person for any purpose for which the Parliament has power to make laws and it conditions the exercise of that power on the provision of just terms. Second, by an implication required to make the condition of just terms effective, it abstracts the power to support a law for the compulsory acquisition of property from any other legislative power.61
Reconciling the traditional exclusions with this long-standing conception of s 51(xxxi) as extracting from the other heads of power, the power to acquire property has presented a particular challenge. That certain heads of power or certain exercises of those powers do not attract the operation of s 51(xxxi) is uncontroversial. Nevertheless, it can be demonstrated that when difficult cases come before the courts, there is a tendency for the judiciary to sweep cases into this category without posing a coherent rationalisation for those cases traditionally excluded or why the case before them fits into that category.62
One line of authority which attempts to rationalise the traditional exclusions follows from the relatively unusual placement of the Proviso in the Constitution’s text. It has been observed on many occasions that the limit placed on acquisitions of property sits uneasily in s 51 which otherwise deals with the Commonwealth’s legislative heads of power, rather than in a separate bill of rights.63 The Australian Constitution is unique in this respect64 and also in being the first British Commonwealth constitution to adopt such a provision.65
Little has been made of this observation but it raises a series of higher-order issues. Historically, the UK had no common law right to compensation for expropriations nor, up until very recently, any entrenched property protections. Such matters were left to the Parliament’s discretion.66 While there is ample evidence of ad hoc statutory provision for compensation
61 Mutual Pools (1994) 179 CLR 155, 177. 62 See eg Peverill (1994) 179 CLR 226 (Dawson and Toohey JJ); Mutual Pools (1994) 179 CLR 155, 202 (Dawson and Toohey JJ). 63 Howard, Australian Federal Constitutional Law, above n 57, 395; Allen, 'The Acquisition of Property on Just Terms', above n 1, 351. 64 Van der Walt, Constitutional Property Clauses: A Comparative Analysis, above n 48, 40. 65 Ibid, 39. 66 William Treanor, 'Origins and Original Significance of the Just Compensation Clause of the Fifth Amendment' (1985) 94 Yale Law Journal 694. 20 following expropriation of land in the UK,67 the common law evolved an entirely different set of property protections underpinned (or possibly undermined) by Royal Prerogative68 and the doctrine of parliamentary supremacy.
On Federation, Australia simultaneously inherited a property clause inspired by the French and American revolutions, a monarchy, limited government and an English common law ‘natural justice’ approach to the protection of proprietary rights. Furthermore, the framing of the Proviso and its subsequent interpretation as a limit on legislative power rather than as a personal right dislocated it from the 17th and 18th century rights discourse from which it emerged. No obvious reconciliation of these disparate historical trends is presented by the simple words of the Proviso though in a practical sense they come to be resolved under it.
As Brennan J suggests above, many of the High Court’s rationalisations for the numerous exclusions to the Proviso’s application have been explained simply by reference to its interaction with other heads of power. In this way, the High Court has interpreted the Proviso in accordance with the Constitution’s structure in much the same way that the structure of the Constitution’s various Chapters gives rise to implications regarding the separation of powers.69
There are two problems with this approach. Firstly, it is in conflict with the plain words of the Proviso. Section 51(xxxi) does not state that the grant of power and the limitation on that power, being the requirement to provide just terms, are subject only to other heads of legislative power. The plain words of the Proviso are that they are ‘subject to this Constitution.’ Of all the Proviso’s words and phrases, it is this phrase which has received the least attention.70
As will be explored, the most important question for the High Court in many instances is not whether the scope of s 51(xxxi) is limited by other heads of legislative power, but whether its scope is limited by the exercise of Commonwealth executive or judicial power or by other
67 William B Stoebuck, 'A General Theory of Eminent Domain' (1971) 47 Washington Law Review 553; F A Mann, 'Outlines of a History of Expropriation' (1959) 75 Law Quarterly Review 188. 68 Mutual Pools (1994) 179 CLR 155, 170 (Mason CJ); A-G (Cth) v Schmidt (1961) 105 CLR 361, 373; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 456-457 (Aickin J). 69 See generally Victorian Stevedoring & General Contracting Company Pty Ltd v Dignan (1931) 46 CLR 73; New South Wales v Commonwealth (1915) 20 CLR 54. 70 Cf Smith v ANL Ltd (2000) 204 CLR 493 (Kirby J); Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513. 21 constitutional implications or provisions outside of s 51.71 As Brennan J held in Re State Public Services Federation; Ex Parte Attorney-General (WA):
…the construction of a head of legislative power is itself ascertained by reference to the entire context of the Constitution and that its scope may be limited by implication.72
The second problem with this approach is that interpreting a constitutional guarantee, and what in other contexts might be regarded as a ‘universal’ human right, in the same manner as other heads of power, that is, in accordance with doctrines of ‘characterisation,’73 is bound to lead to difficulties.74 The conflicts which have arisen between ordinary characterisation doctrine and various doctrines associated with the Proviso are many. The dual characterisation doctrine is one example. As McHugh J observed in Airservices Australia v Canadian Airlines:75
Despite the recognition by their Honours that a law can bear more than one character and a denial that a law will be outside s 51(xxxi) unless that is its ‘‘sole or dominant character’’, the approach taken by other members of the Court to s 51(xxxi) appears to search for the ‘‘sole or dominant character’’ of the law. Support for this assertion may be found in statements which have implicit in them a choice of characterisation between s 51(xxxi) and another s 51 head of power. The analysis often seems to indicate that a law is outside s 51(xxxi) because it is more properly regarded as being within another s 51 head of power — which is based on an assumption that there is a ‘‘most correct’’ characterisation of a law.76
In Trade Practices Commission v Tooth & Co Ltd Barwick CJ made the same criticism:
…it is plainly fallacious to suggest that [a law] cannot be a law with respect to the acquisition of property because found in a statute which predominantly has to be supported on some other head of power than s 51 (xxxi).77
71 Mutual Pools (1994) 179 CLR 155, 178. 72 Re State Public Services Federation; Ex Parte A-G (WA) (1993) 178 CLR 249, 275 (Brennan J). 73 Mutual Pools (1994) 179 CLR 155, 188 (Deane and Gaudron JJ); Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 433 (Mason J). 74 See WMC Resources (1998) 194 CLR 1, 98-99 (Kirby J) ‘the task of characterisation which is invoked obliges the Court to evaluate all of the features of the law in question in order to classify it as falling within, or outside, the operation of the guarantee in s 51(xxxi).’ 75 (1999) 202 CLR 133. (‘Airservices Australia’). 76 Airservices Australia v Canadian Airlines (1999) 202 CLR 133, 247-248; see also Rosalind Dixon, 'Overriding Guarantee of Just Terms or Supplementary Source of Power? Rethinking s 51(xxxi) of the Constitution' (2005) 27(4) Sydney Law Review 639. 77 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 402. 22
As discussed below, also at odds with mainstream characterisation doctrine is that in some circumstances Parliament’s motive for enacting a piece of legislation might have some relevance to the question of whether or not it falls afoul of s 51(xxxi).78
Another difficulty with the application of doctrines of characterisation in the context of s 51(xxxi) can be seen to arise from the holding of McHugh J in Leask v Commonwealth:
If there is a sufficient connection between a subject of federal power and the subject matter of a federal law, it matters not that the federal law is harsh, oppressive, or inappropriate or that it is disproportionate or ill adapted to obtain the legislative purpose. As soon as it can be seen that the ‘subject matter is fairly within the province of the Federal legislature the justice and wisdom of the provisions which it makes in the exercise of its powers over the subject matter are matters entirely for the Legislature and not for the Judiciary.’79
However, in the context of interpreting the scope of a ‘just terms’ proviso, it may well matter if the law is unjust, harsh, oppressive, or inappropriate or that it is disproportionate80 or ill- adapted to achieve the legislative purpose. And further, this is a matter for the judiciary as the judiciary are the final arbiters of these questions in the context of s 51(xxxi), which, by its non- specificity, is largely silent on the matter. With respect to ascertaining the proper scope of s 51(xxxi), the challenge for the High Court has always been to articulate the principles on which these judgments have been made and ascertain the nature of the ‘injustices’ the Proviso is meant to remedy or prevent.
1.4 Property
The High Court has long taken the view that 'property is the most comprehensive term that can be used'81 and that it includes for the purposes of s 51 (xxxi) ‘every species of valuable right and interest including real and personal property, incorporeal hereditaments such as rent
78 Stephen Lloyd, 'Compulsory Acquisition and Informal Agreements: Spencer v Commonwealth' (2011) 33 Sydney Law Review 137, 144. 79 Leask v Commonwealth (1996) 187 CLR 579, 616 citing Burton v Honan (1952) 86 CLR 169, 179; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1, 101. 80 Rowe v Electoral Commissioner (2010) 243 CLR 1, (French CJ). 81 Mutual Pools (1994) 179 CLR 155, 184 (Deane and Gaudron JJ); Commonwealth v New South Wales (1923) 33 CLR 1, 20-21 (Knox CJ and Starke J); Tape Manufacturers (1993) 176 CLR 480, 509 (Mason CJ, Brennan, Deane and Gaudron JJ). 23 and services, rights of way, rights of profit or use in land of another, and choses in action.’82 It has also been held to extend to ‘innominate and anomalous interests.’83
Alongside these definitional accounts, the High Court has embraced the ‘bundle of rights’ theory of property and some of the writings of Kevin Gray.84 Quoted with approval in JT International SA v Commonwealth85 and Telstra Corporation Ltd v Commonwealth86 was the following passage from Gray’s article, ‘Property in Thin Air’:87
Much of our false thinking about property stems from the residual perception that 'property' is itself a thing or resource rather than a legally endorsed concentration of power over things and resources.88
Though often repeated in the case law,89 these doctrines have provided little guidance to the courts. While they make clear that, for the purposes of s 51(xxxi), the Court is rejecting a narrow layman’s concept of property as restricted to land or ‘things,’90 these approaches sidestep the issue of what property itself is or means in a way that might provide assistance when more difficult cases come before the courts. Indeed, on reviewing the s 51(xxxi) jurisprudence, Allen expressed the view that there may be some doubt as to ‘the utility of the legal conception of property in resolving constitutional issues.’91
82 Dalziel (1944) 68 CLR 261, 290 (Starke J). 83 ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349. 84 See Dalziel (1944) 68 CLR 261, 285 (Rich J); Kevin Gray, 'Property in Thin Air' (1991) 50(2) Cambridge Law Journal 252, 299; Yanner v Eaton (1999) 201 CLR 351, 365-366 [17] (Gleeson CJ, Gaudron, Kirby and Hayne JJ); Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210, 230-231 [44]; White v DPP (WA) (2011) 243 CLR 478, 485 [10] (French CJ, Crennan and Bell JJ); Peverill (1994) 179 CLR 226, 264 (McHugh J); JT International SA v Commonwealth (2012) 250 CLR 1 (French CJ). 85 (2012) 250 CLR 1 (‘ JT International’). 86 Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210, 230-231 [44]. 87 Gray, 'Property in Thin Air', above n 84, 299; see also Yanner v Eaton (1999) 201 CLR 351, 366 (Gleeson CJ, Gaudron, Kirby and Hayne JJ). 88 Yanner v Eaton (1999) 201 CLR 351, 365-367 [17]-[20] (Gleeson CJ, Gaudron, Kirby and Hayne JJ), 388- 389 [85]-[86] (Gummow J); JT International (2012) 250 CLR 1, 31 [37] (French J) citing Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210, 230-231; 89 See eg, Peverill (1994) 179 CLR 226, 226. 90 Kevin Gray and Susan Francis Gray, 'The Idea of Property in Land' in Susan Bright and John K Dewar (eds), Land Law: Themes and Perspectives (Oxford University Press, 1998) 15. 91 Allen, 'The Acquisition of Property on Just Terms', above n 1, 355. 24
The outcome of the application of these doctrines, as gauged by more recent decisions of the High Court, is to render the definitional question a non-issue because virtually every legal interest is capable of satisfying the definition.92
It is also arguable that these ‘definitions’ have not been followed or applied in many instances. Indeed, at various times, in apparent conflict with the broad yet traditionally accepted doctrinal definitions, the following interests have been held to be entirely outside the Proviso’s scope of operation:
- Property rights created by Federal statute93 - Property rights having no antecedent in the ‘general law’94 - Money95 - A mere ‘financial advantage’ or benefit96 - Contractual rights generally97 - Contractual rights held against the Commonwealth98 - Native title rights99 - Rights with a connection to ‘the general commercial and economic position occupied by traders.’100 - Accrued but unpaid welfare and Medicare entitlements101 - Services102
While some of these exclusions only represent the holdings of individual judges, some have received broad and ongoing support from the High Court. As such, one might conclude that the broader definitions are repeated as mere rhetorical flourishes rather than substantive
92 Sean Brennan, 'Native Title and the 'Acquisition of Property' under the Australian Constitution' (2004) 28(1) Melbourne University Law Review 28, 42-43. 93 Peverill (1994) 179 CLR 226, 256 (Toohey J). 94 Ibid, 237; Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297, 306. 95 Mutual Pools (1994) 179 CLR 155, 201 (Dawson and Toohey JJ). 96 Ibid, 204 (Dawson and Toohey JJ). 97 R v Ludeke; Ex parte Australian Building Construction Employees' & Builders Labourers' Federation (1985) 159 CLR 636, 653. 98 Mutual Pools (1994) 179 CLR 155, 174 (Mason J). 99 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 613; Brennan, above n 92. 100 British Medical Association v Commonwealth (1949) 79 CLR 201, 270 (Dixon J); JT International (2012) 250 CLR 1, 67 [167] (Hayne and Bell JJ), 35 [47] (Gummow J), 128 [357] (Kiefel J). 101 Peverill (1994) 179 CLR 226. 102 'Political Advertising Case' (1992) 177 CLR 106, 166 (Brennan J), 245 (McHugh J), 198 (Dawson J); Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508, 523 (Latham CJ). 25 doctrine.103 Indeed, Van der Walt describes as ‘empty talk’ the High Court’s apparent adherence to the broader doctrines.104
1.5 Acquisition
Though one can point to a number of contradictory findings, the most frequently cited indicium of a Commonwealth ‘acquisition’ of property rights within the terms of the Proviso is whether or not there has been a transfer of ‘an interest in property however slight or insubstantial it may be.’105 An acquisition is not limited to transfers to the Commonwealth itself but extends to acquisitions ‘by any other person.’106 As Mason J explained in Trade
Practices Commission v Tooth & Co Ltd:
As a matter of policy and protection it makes very little sense to say that the Commonwealth cannot pass laws for its acquisition of the citizen's property without giving just terms but it can pass laws for the acquisition of the citizen's property by others without giving any compensation at all.107
Subject to other constitutional constraints, were the Commonwealth not required to pay compensation in such scenarios it could, without raising taxes, redistribute property and economic power between individuals or groups on purely arbitrary grounds including race, nepotism, self-enrichment of government officers or indeed any ground that might curry favour with a majority of the sitting members of Parliament.108 This was the ‘serious gap in the
103 Tom Allen, The Right to Property in Commonwealth Constitutions (Cambridge University Press, 2000), 8. 104 Van der Walt, Constitutional Property Clauses: A Comparative Analysis, above n 48, 63-66; Van Der Walt also describes the High Court’s approach as paying ‘lip service’ to a liberal interpretation of property; and see Allen, The Right to Property in Commonwealth Constitutions, above n 103, 63-64. 105 'Tasmanian Dam Case' (1983) 158 CLR 1, 145 (Mason J); Tape Manufacturers (1993) 176 CLR 480, 499-500 (Mason CJ, Brennan, Deane and Gaudron JJ); JT International (2012) 250 CLR 1, 33-34 [42] (French CJ). 106 Mutual Pools (1994) 179 CLR 155, 199 (Toohey and Dawson JJ), 189 (Deane and Gaudron JJ) citing P J Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382, 401-402, 411, 422-423, 429-430; Jenkins v Commonwealth (1947) 74 CLR 400, 406; McClintock v Commonwealth (1947) 75 CLR 1, 23, 36; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 407-408, 427, 451-452; Clunies-Ross v Commonwealth (1984) 155 CLR 193, 202; Tape Manufacturers (1993) 176 CLR 480, 510-511, 526; Allen, 'The Acquisition of Property on Just Terms', above n 1, 378-379. 107 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 426. 108 Jacobi, Mittal and Weingast, 'Creating a Self-Stabilizing Constitution', above n 46. 26 constitutional safeguard’109 averred to by Aicken J in explaining why the Proviso covers third party acquisitions. As Latham J stated in P J Magennis Pty Ltd v Commonwealth:110
It is obvious that the constitutional provision could readily be evaded if it did not apply to acquisition by a corporation constituted by the Commonwealth or by an individual person authorized by a Commonwealth statute to acquire property.111
As Dixon J held in the Bank Nationalisation Case and as has been consistently maintained:
…s 51(xxxi) is not to be confined pedantically to the taking of title ... to some specific estate or interest in land recognized at law or in equity.112
As McHugh J reiterated in Mutual Pools:
Whether or not the Commonwealth has acquired property in a particular case is to be examined as a matter of substance and not form.113
Conversely, an ‘acquisition’ has variously been held to be distinguishable from legislation which merely:
• ‘adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property’,114 • causes the property right to be ‘diminished’,115 or which in relation to the property right, affects a mere:
• ‘extinguishment’,116 • ‘taking’;117
109 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 452. 110 (1949) 80 CLR 382. 111 P J Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382, 401; cited with approval in Tape Manufacturers (1993) 176 CLR 480, 510-511. 112 ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349. 113 Mutual Pools (1994) 179 CLR 155, 219 citing ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 407. There is a direct conflict between this doctrine and the doctrine which suggests that what the Commonwealth receives must be the same as that which is acquired as the doctrine gives priority to form over substance. 114 'Tasmanian Dam Case' (1983) 158 CLR 1, 145 (Mason J). 115 Peverill (1994) 179 CLR 226, 237 (Mason CJ, Deane and Gaudron JJ). 116 JT International (2012) 250 CLR 1; Ludeke (1985) 159 CLR 636, 653; British Medical Association v Commonwealth (1949) 79 CLR 201, 270-271 (Dixon J); 'Tasmanian Dam Case' (1983) 158 CLR 1, 145-146 (Mason J), 181-182 (Murphy J), 247-248 (Brennan J), 283 (Deane J); Tape Manufacturers (1993) 176 CLR 480, 528 (Dawson and Toohey JJ). 27
• deprivation118 or modification;119 • restriction;120 or • compulsory divesting.121
In JT international, the most recent High Court decision dealing with this issue, a number of judges criticized the definition of an ‘acquisition’ posited by Gaudron and Deane JJ in Mutual Pools. In line with the dissenting judgment of Deane J in the Tasmanian Dam Case, Gaudron and Deane JJ held in Mutual Pools that:
...an extinguishment, modification or deprivation of the proprietary rights of one person would involve an acquisition of property by another by reason of some identifiable and measurable countervailing benefit or advantage accruing to that other person…122
The criticism was to the effect that the benefit or advantage accruing to the other person ‘must be understood as an advantage of a proprietary nature.’123 In dissent, Heydon J took the opposite view,124 concurring with the view of Deane J in Commonwealth v Tasmania125 ('Tasmanian Dam Case') that the Commonwealth may affect an acquisition where the Commonwealth or another obtains ‘an identifiable and measurable advantage’ and that ‘the absence of a material benefit of a proprietary nature’126 did not conclude whether or not there had been an acquisition of property.
At the heart of these divergent views lie two distinct issues. The first is whether or not, for the purposes of the Proviso, the pursuit and/or achievement of a policy objective is, of itself, capable of constituting a benefit accruing to the Commonwealth. In JT International a majority
117 JT International (2012) 250 CLR 1, 33 [41] (French CJ); 47 [100] (Gummow J); 66 [164] (Hayne and Bell JJ); 'Tasmanian Dam Case' (1983) 158 CLR 1, 145 (Mason J); 181-2 (Murphy J), 247 (Brennan J), 283, (Deane J); Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408; Ludeke (1985) 159 CLR 636, 653; 'Political Advertising Case' (1992) 177 CLR 106, 166, 198-199. 118 Mutual Pools (1994) 179 CLR 155, 185 (Gaudron and Deane JJ). 119 Ibid. 120 JT International (2012) 250 CLR 1, 34-35 [44] (French CJ). 121 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408; JT International (2012) 250 CLR 1, 51-52 [113] (Gummow J). 122 Mutual Pools (1994) 179 CLR 155, 185 (Gaudron and Deanne JJ). 123 JT International (2012) 250 CLR 1, 68 [172] (Hayne and Bell JJ). 124 Ibid, 77 [198]. 125 (1983) 158 CLR 1. 126 JT International (2012) 250 CLR 1, 75 [195]; 'Tasmanian Dam Case' (1983) 158 CLR 1, 286-287 (Deane J). 28 of the High Court rejected this proposition.127 The second issue is whether any economic loss sustained by a plaintiff is a relevant consideration in assessing whether or not an acquisition has taken place.
These debates have arisen largely as a result of the confusion over the inherently vexed question of regulatory takings. That is, at what point does the regulation of a proprietary interest cross the line and become an acquisition of that interest? Aside from a few notable single-judge dissents,128 the High Court’s long-standing view appears to be that regulation, of itself, will not amount to an ‘acquisition’. Thus, the Court has consistently rejected the importation of a US style regulatory takings doctrine into Australian constitutional jurisprudence.
While so much is clear, it can be demonstrated that, in many instances, the Court has conflated the regulatory takings issue with other substantive issues including whether the right in question is to be properly characterised as property129 or whether, as discussed below, the matter ought to be outside the Proviso’s scope because the acquisition in question is non- arbitrary in nature. Further, it remains the case that the acquisition doctrine as it stands does not provide ready solutions to the unenviable judicial task of drawing a line between an “acquisition” and “mere regulation” in the domain of third-party transfers such as arose in Trade Practices Commission v Tooth and Co Ltd.130
In more recent decisions, the High Court’s wide approach to the definition of property and failure to develop a coherent rationale for a number of other exclusions from the Proviso’s scope has left the definitional issue of an ‘acquisition’ to do virtually all the doctrinal heavy lifting. As a matter of logic there can be no acquisition if there is no property to be acquired and the ‘property’ question is logically prior to the question of whether there has been an acquisition. However, the High Court’s current approach to the application of s 51(xxxi) effectively begins and often ends with the question of whether there has been an
127 JT International (2012) 250 CLR 1, 68 [172] (Hayne and Bell JJ), 109 [303] (Crennan J), 62 [147] (Gummow J), 33-34 [42] (French CJ). 128 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397 (Stephen J); 'Tasmanian Dam Case' (1983) 158 CLR 1 (Deane J); JT International (2012) 250 CLR 1 ( Heydon J). 129 See Allen, The Right to Property in Commonwealth Constitutions, above n 103, 65. 130 (1979) 142 CLR 397; and see Allen, 'The Acquisition of Property on Just Terms', above n 1, 375-6. 29
‘acquisition.’131 As Howard concluded, the question of ‘what amounts to an acquisition … is sometimes only another way of delimiting the concept of property…’132
The most curious paradox at the heart of the Court’s current acquisition doctrine is that while it has been held that the Proviso is ‘plainly intended for the protection of the subject,’133 its protective scope falls to be determined not on the basis of any detriment or loss incurred by a citizen but only by reference to the legal or substantive impact of the acquisition on the Commonwealth. As has been repeatedly confirmed:
Taking involves deprivation of property seen from the perspective of its owner. Acquisition involves receipt of something seen from the perspective of the acquirer.134
The doctrines have nothing to say to businesses whose activities become strictly regulated at the expense of profits or that become entirely regulated out of existence. They are insensitive to any economic impact regulation may have on people.135
That is not to argue that economic harm or loss ought to be the sole criterion or even one of a number of criteria determining the scope of an acquisition but rather that it raises the question that if the Proviso is not there to protect citizens or states from economic loss then from what is it designed to protect them and how might such considerations find doctrinal expression?
Also calling into question the coherence of the High Court’s ‘acquisition’ jurisprudence is that several of the key decisions dealt with purported acquisitions of un-alienated and unimproved Crown land from State governments.136 While the words of the Proviso do not indicate some differential operation between acquisitions from a State or person, any broader reflection would suggest there may well need to be. Many of the purposive considerations underpinning the protection of a citizen’s property entitlements have no or very limited application or
131 JT International (2012) 250 CLR 1. 132 Howard, Australian Federal Constitutional Law, above n 57, 394. 133 Dalziel (1944) 68 CLR 261, 276 (Latham CJ) cited by Heydon J in ICM Agriculture (2009) 240 CLR 140, 207. 134 JT International (2012) 250 CLR 1, 33-34 [42] (French CJ) citing Georgiadis (1994) 179 CLR 297, 304- 305 (Mason CJ, Deane and Gaudron JJ), 315 (Dawson J), 320-321 (Toohey J); cf Phonographic Performance Company of Australia Limited v Commonwealth (2012) 246 CLR 561, 595; Kiefel J ‘…the extent of the disadvantage to a property owner may be a material matter in deciding whether just terms have been, or should have been, provided.’ 135 Cf JT International (2012) 250 CLR 1, (Heydon J); Allen, 'The Acquisition of Property on Just Terms', above n 1, 358. 136 Allen, The Right to Property in Commonwealth Constitutions, above n 103, 62. 30 relevance to the transfer of title or legislative competence between State and Federal governments. Indeed, in such contexts, when it comes to questions of territory, there may well be no distinction to be made between title and legislative competence.137
These distinctions become more obvious when one considers whether the Court’s decisions in the Tasmanian Dam Case138 and Commonwealth v Western Australia139 would have been different were the property in question the freehold title of a homeowner or small business or just as pertinently the leasehold interest of a sole trader as was the case in Minister of State for the Army v Dalziel.140 The same point can be made were the State government interests in question public utilities or infrastructure, chattels or office buildings. On this view, a State/Commonwealth acquisition doctrine takes on the character of the implied prohibition against the Commonwealth exercising its legislative powers to impose ‘some special burden or disability upon a State or inhibit or impair the continued existence of a State or its capacity to function.’141
More broadly speaking, the US approach to a ‘taking’ (which includes the regulatory takings doctrine) and the High Court’s approach to an ‘acquisition’ each embody a fundamentally different view of the relationship between citizen and government and the role of constitutional courts within the overall political system.142 The US approach has deep philosophical, cultural and historical roots in concerns about the power of a centralised government ‘meddling’ in the affairs of its citizens and Lockean notions of the pre-political nature of property relations. In contrast, as discussed below, the Australian approach and its legal traditions lie in the other direction, having their roots in UK common law traditions including the supremacy of parliament and the limited role the judiciary ought to play in undertaking merits review of Commonwealth legislation. That the Court is able to discern this distinction simply on the basis of the difference in terminology between a ‘taking’ and an
137 Hugo Grotius, On the Law of War and Peace (A C Campbell, Batoche books, 2001) [trans of: De Jure Belli ac Pacis (first published 1625)], Book II Chap 3; Ulla Secher, 'The meaning of radical title: the pre- Mabo authorities explained- Part 1' (2005) 11(3) Australian Property Law Journal 179; Australian Constitution, s 52(i); see generally Dennis J Rose, 'The Commonwealth Places (Application of Laws) Act 1970' (1971) 4(2) Federal Law Review 263. 138 (1983) 158 CLR 1. 139 (1999) 196 CLR 392 (‘Mining Act Case’). 140 (1944) 68 CLR 261. 141 Koowarta v Bjelke-Petersen (1982) 153 CLR 168, 216; Austin v The Commonwealth (2003) 215 CLR 185; 'Tasmanian Dam Case' (1983) 158 CLR 1. 142 Jacobi, Mittal and Weingast, 'Creating a Self-Stabilizing Constitution', above n 46, 636. 31
‘acquisition’ without any reference to broader considerations begs an explanation.143 This resort to legalism is similarly evident in the holding of Dawson and Toohey JJ that ‘merely as a matter of nomenclature, forfeiture or confiscation is something different from acquisition.’144
Collectively however, the acquisition doctrines carve out a broad sphere of ‘legitimate’ government activity where, in effect, the Commonwealth does not have to pay to exercise its legislative powers. Relative to the US Supreme Court’s regulatory takings doctrine, the High Court’s approach represents a position of judicial deference to the Parliament and a more expansive stance on the role of government in the economy and society generally.145
Inherent in this broad limitation on the Proviso’s scope is an accommodation of democratic principles as embodied by Parliamentary decision making, and more broadly, a preference for a relatively adaptive legal framework overall.
From a purposive standpoint, the acquisition doctrines represent a minimalist position in maintaining the efficacy of one of the potential purposes of the Proviso being a buttressing of the Constitutional safeguards against abuse of the taxation and criminal sanction powers, including the manner and form provisions of s 55 and the implied proscription of Acts of Attainder and Acts of Pains and Penalties.146 Also maintained is the limit it places on opportunities for corruption of political processes and actors.147
Were s 51(xxxi) not in place these other limitations on various legislative powers could be easily circumvented. The Proviso works in concert with these protections and thereby stands as an added protection against the evils which these other limitations are intended to curtail. These other proprietary protections thus also buttress the effectiveness of s 51(xxxi) by limiting the mechanisms by which it can be effectively circumvented.
143 Ibid, 632; Smith v ANL Ltd (2000) 204 CLR 493, 546 [166] (Callinan J); JT International (2012) 250 CLR 1, 77 (Heydon J). 144 Mutual Pools (1994) 179 CLR 155, 199. 145 See Australian Communist Party v Commonwealth (1951) 83 CLR 1, (Fullagar J) ‘in our system the principle of Marbury v Madison is accepted as axiomatic, modified in varying degree in various cases (but never excluded) by the respect which the judicial organ must accord to opinions of the legislative and executive organs.’; cited with approval in Thomas v Mowbray (2007) 233 CLR 307; and see Leask v Commonwealth (1996) 187 CLR 579, 616 (McHugh J). 146 Mutual Pools (1994) 179 CLR 155, 202 (Dawson J) citing Polyukhovich v Commonwealth (1991) 172 CLR 501, 535-536, 645-651, 685-686; 'Communist Party Case' (1951) 83 CLR 1 (Latham CJ). 147 If nothing which can be put to use by the Commonwealth or if nothing of a proprietary nature can vest in the Commonwealth without compensation there is little or no motivation or scope to abuse the Parliament’s legislative power to an individual’s or political constituency’s advantage outside of the distribution of tax revenues. See Daniel B Kelly, 'The "Public Use" Requirement in Eminent Domain Law: A Rationale based on Secret Purchases and Private Influence' (2006) 92(1) Cornell Law Review 1. 32
As Span rightly observed, ‘one problem with the act of legislating is that it often involves being a judge in one's own cause.’148 To a very limited extent, mandating the provision of compensation of itself works against arbitrary decision making in the guise of self-interested bias on the part of the Commonwealth Legislature because opportunities for personal enrichment and/or political gain without a corresponding political cost (ie. having to raise taxes) are removed. In this sense, s 51(xxxi) reinforces the principle of legality because it has the result that the Parliament must raise taxes to fund acquisitions and therefore ‘must squarely confront what it is doing and accept the political cost.’149 As Kirby J explained in Commonwealth v Western Australia, if widely construed it ‘ensure[s] that, before acquisitions take place pursuant to federal law, proper consideration is given to the costs for which the Commonwealth is thereby rendered accountable.’150
Such considerations were clearly contemplated by McHugh J in Mutual Pools in holding that:
If the Parliament wishes to acquire property belonging to a State or individual, the cost of the acquisition has to be borne by the taxpayers of the Commonwealth and not by the owner of the property.151
Likewise, in Theophanous v Commonwealth152 Gleeson CJ remarked that:
If Parliament legislated to modify or take away accrued entitlements simply for the purpose of saving money, … then the case may fall within s 51(xxxi).153
Again, in conflict with ordinary doctrines of characterisation, it would appear to be the case that in the context of s 51(xxxi) a law can ‘be characterised by the motive that inspired it.’154
148 Henry A Span, 'Public Choice Theory and the Political Utility of the Takings Clause' (2003) 40(1) Idaho Law Review 11, 75. 149 R v Secretary of State for the Home Department; Ex parte Simms (2002) 2 AC 115, 131–2 (Lord Hoffmann); Plaintiff S157/2002 The Commonwealth (2003) 211 CLR 476, 492, [30] (Gleeson CJ); Al- Kateb v Godwin (2004) 219 CLR 562, 577 [19] (Gleeson CJ); Daniels Corporation v ACCC [2002] 213 CLR 543, 582 [106] (Kirby J); B v DPP (2000) 2 AC 423, 470; Ngati Apa Ki Te Waipounama Trust v The Queen (2000) 2 NZLR 659, [82] cited in Chief Justice J J Spigelman 'The Principle of Legality and the Clear Statement Principle' (Speech delivered at New South Wales Bar Association Conference, Sydney, 18 March 2005)
1.6 For Any Commonwealth Legislative Purpose
The phrase which expresses the scope of the Proviso as ‘for any purpose in respect of which the Parliament has power to make laws’ has been given three entirely divergent (but not necessarily incompatible) interpretations.
One interpretation is that it limits the exercise of the grant of power to acquire property. That is, any acquisition of property must be supported under both s 51(xxxi) and another head of power to be a valid law. The second interpretation is that the phrase extends the operation of the Proviso to all Commonwealth law-making powers, including in particular the s 122 territories power. The third interpretation is that the phrase places a limit on the types of property and/or the types of acquisitions that are subject to the provision of just terms.
Expressions of the first interpretation can be found in a number of cases,155 including JT International, wherein Kiefel J held that:
The words "for any purpose in respect of which the Parliament has power to make laws" limit the exercise of the power to "an implementation of a purpose within the field of Commonwealth legislative power.156
The second interpretation first found expression in Newcrest Mining (WA) Ltd v Commonwealth157 where the phrase was posited as a basis for the finding of some members of the Court that the s 122 territories power will be subject to s 51(xxxi) so long as the relevant law is characterisable as falling within another s 51 head of power.158
The third interpretation focuses on the question of whether the acquisition is for the ‘use and service of the Crown.’159 As Dixon J held in Attorney-General (Cth) v Schmidt:160
155 ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349-350; W H Blakeley & Co Pty Ltd v Commonwealth (1953) 87 CLR 501, 518-519; Mutual Pools (1994) 179 CLR 155, 169, 173 (Mason CJ); Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 407 (Gibbs CJ) , 448 (Aikin J); 'Tasmanian Dam Case' (1983) 158 CLR 1, 283 (Deane J); Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314, (Latham CJ); Smith v ANL Ltd (2000) 204 CLR 493, (Kirby J). 156 Mutual Pools (1994) 179 CLR 155, 169 (Mason CJ); Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408 (Gibbs J). 157 (1997) 190 CLR 513. 158 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 560-561 (Toohey J), 561, 565 (Gaudron J), 612-613 (Gummow J). 159 A-G (Cth) v Schmidt (1961) 105 CLR 361, 372 (Dixon J). 160 (1961) 105 CLR 361. 34
[It is not the case] that property can never pass to or become vested in the Commonwealth or its officers except under a law made in pursuance of s 51 (xxxi). The scope of s 51 (xxxi) is limited. Prima facie it is pointed at the acquisition of property by the Commonwealth for use by it in the execution of the functions, administrative and the like, arising under its laws. …The expression "for any purpose" … refers to the use or application of the property in or towards carrying out or furthering a purpose comprised in some other legislative power. It covers laws with respect to the acquisition of real or personal property for the intended use of any department or officer of the Executive Government of the Commonwealth in the course of administering laws made by the Parliament in the exercise of its legislative power.161
… but it does not affect … anything which lies outside the very general conception expressed by the phrase "use and service of the Crown". Perhaps it is desirable to remark that we are not here concerned with the question whether s 51 (xxxi) applies to legislation for the transfer of property by A to B and is not concerned only with the acquisition by the Crown in right of the Commonwealth or by agencies of the Commonwealth.162
Following this line of reasoning, if the Commonwealth is not left with any tangible interest once the purported ‘acquisition’ has been effected, there is no use to which the taking can be put in furtherance of a legislative purpose. Thus, one indicium of the applicability of the Proviso is whether or not, once a ‘taking’ has been effected, the Commonwealth or another party has acquired any ‘interest in property’ ..., however slight or insubstantial it may be.’163
There is another application of this interpretation that focuses on whether or not the purpose of the acquisition or the legislation in question is to acquire property for the use and service of the Crown. Such an interpretation has been applied in relation to criminal penalties and forfeitures as an explanation as to why such acquisitions are outside the Proviso’s scope. As Dixon CJ explained in Burton v Honan:164
... it has always been treated as obvious that if the purpose of the forfeiture is to bring a penalty upon the offender it could not come within s 51(xxxi), it not being an acquisition
161 A-G (Cth) v Schmidt (1961) 105 CLR 361, 372. 162 Ibid, 373. 163 'Tasmanian Dam Case' (1983) 158 CLR 1, 145 (Mason J), 181-182 (Murphy J), 247 (Brennan J); 283 (Deane J); Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408; Ludeke (1985) 159 CLR 636, 653; Tape Manufacturers (1993) 176 CLR 480, 499-500 (Mason CJ, Brennan, Deane and Gaudron JJ); JT International (2012) 250 CLR 1, 33-34 [42] (French CJ). 164 (1952) 86 CLR 169. 35
of property for any purpose in respect of which the Parliament has power to make laws within that provision.
…the whole matter lies outside the power given by s 51(xxxi). It is not an acquisition of property for any purpose in respect of which Parliament has power to make laws. It is nothing but … a forfeiture imposed as part of the incidental power for the purpose of vindicating the Customs laws.165
The relevant distinction averred to is that title to specific property does pass to the Commonwealth but the acquisition is only incidental to achieving the primary purpose of enforcing some measure enacted under another head of power. In practical terms, the Commonwealth does not seize fishing boats being used to fish illegally in Australian waters because officers exercising powers granted pursuant to the s 51(x) fisheries power require boats; it seizes them as an enforcement measure as against Australia’s fishing regulations.
In broad terms, these latter interpretations are based on the proposition that the phrase casts some light on what types of property and/or what types of acquisition are subject to the requirement that just terms be provided to the holder of the interest. Thus, they can be used to circumscribe the otherwise broad definitions of property adopted in relation to the Proviso and limit its applicability to instances of conventional government procurement only.166 Thereby, more novel types of proprietary interest and/or non-traditional modes of acquisition are excluded from the Proviso’s scope. Clearly, if s 51(xxxi) is limited to government procurement and analogous acquisitions, there is little or no room for a ‘regulatory takings’ type doctrine.
This third interpretation has been subject to some criticism. For instance, in Mutual Pools, Mason CJ held that s 51(xxxi) does not only apply to an acquisition of property for ‘the use and service of the Crown.’167 In Trade Practices Commission v Tooth & Co Ltd Gibbs J expressed the view that:
I doubt whether the suggestion of Dixon CJ in Attorney-General (Cth) v Schmidt - that the section does not affect “anything which lies outside the very general conception
165 Burton v Honan (1952) 86 CLR 169, 180-181. 166 Allen, 'The Acquisition of Property on Just Terms', above n 1, 377. 167 Mutual Pools (1994) 179 CLR 155, 172. 36
expressed by the phrase ‘use and service of the Crown”’ - fully expresses the ground of distinction.168
In that same decision Mason J expressed the view that:
There is nothing in the wide and general language of s 51 (xxxi) which gives support to the view that the "acquisition of property" to which it refers is limited to acquisition for the "use and service of the Crown", a conception which is in itself by no means precise and certain in scope.169
While the use and service of the Crown doctrine as formulated by Dixon J may not cover all the circumstances in which the Proviso may have some operation, it succinctly captures its purpose in ensuring that resources to be used by the Commonwealth for public consumption be obtained via the tax system and not in any other way.
Nonetheless, the various interpretations placed on this phrase of the Proviso are easily conflated such that a literal reading of the case law is largely nonsensical. A finding that the impugned acquisition is ‘not for any purpose in respect of which the parliament has power to make laws’ begs the question as to how the law is within power at all but the result is to have it upheld rather than struck down.170 Alternatively, it reads as nothing more than a restatement of the Proviso itself and a bare declaration that it does not apply to the legislation in dispute.
The issue of conflation, however, is only half the problem because the High Court is, in effect, willing to apply more than one interpretation simultaneously. Further, it can be observed that the doctrines given rise to by the latter interpretation are of the same effect or substantially identical to some of the interpretations placed on ‘acquisition.’ As discussed below, they also have the same effect as some of the interpretations placed on ‘just terms’ and some of the subsidiary tests. Thus, alternative interpretive approaches embody the same mode of reasoning and suggest the same conclusion. Indeed, one can find instances of judges criticizing doctrines which, in substance, are found to be applied in their own judgments.
168 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408 (Gibbs CJ). 169 Ibid, 426. 170 See for eg Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, (Dawson J). 37
1.7 On Just Terms
The question of ‘just terms,’ has a number of dimensions. Firstly, there is the substantive question of the quantum of compensation: does the legislation in dispute provide for any or sufficient compensation to a person or State whose property has been acquired such that it matches up to the constitutionally mandated requirement of ‘just terms’? Secondly, a procedural question arises where the quantum is to be determined by a specified body: are the procedural rights afforded capable of ensuring that a just measure of compensation will be afforded to any particular claimant?
Both of these issues are threshold issues in the sense that if the legislation in question falls short, it will be in breach of s 51(xxxi) and therefore invalid.171 However, there is a further threshold issue which properly comes before either of the matters just mentioned. In interpreting the Proviso as a ‘compound phrase’ the High Court has held that certain exercises of legislative power are incompatible with the provision of just terms and that particular types of property are incapable of being acquired ‘on just terms’ such that, in each case, the operation of the Proviso is entirely excluded.
The question of whether ‘just terms’ signifies some particular measure of monetary compensation, being full or partial compensation and the proper principles to be applied in any given case are points on which there has been a significant divergence of judicial opinion. Howard commented that a precise definition of just terms has ‘proved elusive.’172
The finer details of the doctrines on compensation are outside the scope of this thesis. Of some significance, however, is a point of confusion apparent from both the case law and commentary.
On a number of occasions judges have made pronouncements on the general approach to be taken in assessing whether the compensation afforded to a plaintiff under a piece of legislation is sufficient to satisfy the Proviso. In Grace Brothers Pty Ltd v Commonwealth173 Latham J stated:
171 Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314. 172 Howard, Australian Federal Constitutional Law, above n 57, 404. 173 (1946) 72 CLR 269. 38
Justice involves consideration of the interests of the community as well as of the person whose property is acquired.174
Similarly, in Nelungaloo Pty Ltd v Commonwealth,175 Dixon J held that:
Unlike 'compensation,' which connotes full money equivalence, 'just terms' are concerned with fairness.176
In contrast, Brennan J in Georgiadis v Australian and Overseas Telecommunications Corporation177 held that:
In determining the issue of just terms, the Court does not attempt a balancing of the interests of the dispossessed owner against the interests of the community at large.178
The point to be made is that these and similar remarks are taken out of context in other decisions and commentary as if they were pronouncements on the general scope of the Proviso’s operation.179 Regarding each of the quotes extracted above, the context in which they are made was specifically in relation to the question of the quantum of compensation and the proper principles to be applied in determining that sum. They were not pronouncements on the proper considerations regarding whether the Proviso ought to be engaged or the proper interpretation of what might constitute ‘property’ or an ‘acquisition’ for the purposes of s 51(xxxi). Examples appear in the analysis which follows.
1.7.1 ‘Compound Conception’ Exclusions
One of the interpretive approaches to s 51(xxxi) is the ‘compound phrase’180 approach. Under this doctrine, a court is not to consider each of the words of the Proviso separately, but rather
174 Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 280. 175 (1947) 75 CLR 495 (‘Nelungaloo’). 176 Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495, 569; Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314, 326 (Starke J); 'Tasmanian Dam Case' (1983) 158 CLR 1, 289-291 (Deane J). 177 (1994) 179 CLR 297 (‘Georgiadis’). 178 Georgiadis (1994) 179 CLR 297, 310 (Brennan J). 179 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 58 (D J Rose QC). 180 See Mutual Pools (1994) 179 CLR 155, 219 (McHugh J) citing Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 290 (Dixon J). 39 to consider it as a ‘compound conception.'181 Dixon J was the first to articulate an approach to the Proviso along these lines, stating in Grace Brothers Pty Ltd v Commonwealth that:
The legislative power given by s 51 (xxxi) is to make laws with respect to a compound conception, namely, "acquisition-on-just-terms." "Just terms" doubtless forms a part of the definition of the subject matter, and in that sense amounts to a condition which the law must satisfy. But the question for the Court when validity is in issue is whether the legislation answers the description of a law with respect to acquisition upon just terms.182
As Stephen J held in Trade Practices Commission v Tooth & Co Ltd:
The reference to 'just terms' throws light upon the particular meaning of ‘acquisition' in the placitum.183
A series of doctrines have been developed in applying this interpretive approach to explain various exclusions from the Proviso’s scope. Broadly speaking, these doctrines fit into one of two streams. The first stream works from the premise that ‘just terms’ operates as a condition of compensation for arbitrary acquisitions while in the second stream it signifies a measure of compensation.
1.7.1.1 Non-Arbitrary Acquisitions Stream
Certain acquisitions of property have been held to be outside the scope of s 51(xxxi) on the basis of a purposive interpretation of the Proviso namely that:
The condition "on just terms" was included to prevent arbitrary exercises of the power at the expense of a State or the subject.184
In placing an interpretation on ‘just terms’ as a condition of compensation for arbitrary acquisitions of property, it has been held that s 51(xxxi) does not operate to protect various
181 As Kirby J has held: 'Each word of s 51(xxxi) is important and has been scrutinised by this Court. But it is essential to view the paragraph as a whole. In particular, the acquisition of property is a compound conception': WMC Resources (1998) 194 CLR 1, 90 citing; Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 285; cf Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 290. 182 Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269; Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 285 (Deane and Gaudron JJ), ‘the area in which s.51(xxxi) operates as a guarantee of acquisition on just terms can only be ascertained by reading that paragraph as a whole.’ 183 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 416; Commonwealth v New South Wales (1923) 33 CLR 1, 55; British Medical Association v Commonwealth (1949) 79 CLR 201, 270. 184 Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 290 (Dixon J). 40 non-arbitrary acquisitions. This approach to the Proviso finds parallels in at least one other jurisdiction’s constitutional property clause.185
The least controversial and now well-established of these doctrines is that which excludes voluntary acquisitions from the Proviso’s scope.186 That is, where an owner has voluntarily agreed to sell property to the Commonwealth, the vendor cannot impugn the contract by way of a subsequent claim against s 51(xxxi) on the basis that the contract did not provide just terms. As Rich and Williams JJ held in the Bank Nationalisation Case:
An agreement freely entered into between parties truly at arm’s-length for a voluntary acquisition would contain intrinsic evidence that the acquisition was on just terms…187
Notably, however, another justification for the exclusion was posited by Dixon J in Schmidt with his Honour taking the view that the Proviso does not bind the executive.
It must be borne in mind that s 51 (xxxi) confers a legislative power and it is that power only which is subject to the condition that the acquisitions provided for must be on just terms.188
An explanation for the exclusion of taxation from the scope of s 51(xxxi) on the basis that it is a non-arbitrary acquisition is suggested (but not accepted) in the joint judgment of Dawson and Toohey JJ in Mutual Pools. As their Honours explained:
Protection against misuse of the taxation power lies elsewhere and it is to be found in the requirements that a tax be neither a penalty nor arbitrary nor incontestable.189
The relevant doctrines regarding the exercise of the taxation power were explored in the decision of MacCormick v Federal Commissioner of Taxation.190 Cited with approval was the holding of Dixon J in Deputy Federal Commissioner of Taxation v Brown that:
185 See South African Constitution s 25. 186 Peverill (1994) 179 CLR 226, 250 (Dawson J); Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, (Stephen J); John Cooke & Company Pty Ltd v Commonwealth (1922) 31 CLR 394, 282; Poulton v Commonwealth (1953) 89 CLR 540 , 573 (Fullagar J); British Medical Association v Commonwealth (1949) 79 CLR 201, 271 (Dixon J); Commonwealth v Huon Transport Pty Ltd (1945) 70 CLR 293, 303-5 (Latham CJ). 187 ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 264. 188 A-G (Cth) v Schmidt (1961) 105 CLR 361, 372. 189 Mutual Pools (1994) 179 CLR 155, 198 citing MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622, 639-644. 190 (1984) 158 CLR 622; see also Austin v The Commonwealth (2003) 215 CLR 185. 41
… it has, I think, been generally assumed that under the Constitution liability for tax cannot be imposed upon the subject without leaving open to him some judicial process by which he may show that in truth he was not taxable or not taxable in the sum assessed, that is to say that an administrative assessment could not be made absolutely conclusive upon him if no recourse to the judicial power were allowed.191
As the majority in MacCormick went on to hold:
For an impost to satisfy the description of a tax it must be possible to differentiate it from an arbitrary exaction and this can only be done by reference to the criteria by which liability to pay the tax is imposed. Not only must it be possible to point to the criteria themselves, but it must be possible to show that the way in which they are applied does not involve the imposition of liability in an arbitrary or capricious manner.192
A third instance of the Proviso being excluded on this basis arose in the context of the division of property in divorce proceedings In the Marriage of Gould.193 The Proviso was argued as a basis for the invalidity of s 85 of the Family Law Act 1975 (Cth) which provided for the ‘clawing back’ of assets transferred to third parties for the purposes of defeating an existing or anticipated order of the Family Court.194 One of the bases on which the majority found s 85 outside the scope of s 51(xxxi) was as follows:
…even if an order under s 85 does amount to an acquisition of property within the meaning of s 51(xxxi), it would not, in our view, be an acquisition other than on "just terms". The expression or concept of "just terms" was interpreted by Dixon J in Nelungaloo Ply Ltd v Commonwealth (1948) 75 CLR 495 at 569 as being "concerned with fairness", and was distinguished from "compensation" which "connotes full money equivalence." An order made under s 85 can only be made in the narrow circumstances to which s 85(1) applies, and after a judicial consideration of the competing claims which any application under s 85 would be likely to raise and in determination of which the Court must have regard to the interests of, and must take an order for, the protection of a bona fide purchaser or other person interested. Accordingly, when it is remembered that the context of "just terms" is concerned with fairness not full monetary compensation, we
191 Deputy Federal Commissioner of Taxation v Brown (1958) 100 CLR 32, 40 (Dixon J), 52 (Williams J). 192 MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622, 640 [32] (Gibbs CJ, Wilson, Deane and Dawson JJ). 193 In the Marriage of Gould (1993) 115 FLR 371. 194 Section 106B of the Family Law Act 1975 (Cth) is now the equivalent section. 42
cannot see how an acquisition of property that is occasioned by an order made under s 85 could be said to be made other than "on just terms".195
Fogarty J, with whom the majority largely agreed, made similar observations:
This power is to be exercised judicially by the courts in accordance with principles of justice and fairness and it has not in the past and cannot now be described as falling within the ordinary meaning of the phrase "acquisition of property".196
“Unlike 'compensation', which connotes full money equivalence, 'just terms' are concerned with fairness." It is difficult to see how a determination by a court as to the content of just terms, namely the balance between the interests of a party to the marriage and those of a third party, could be seen as not according those parties an appropriate outcome which is fair and reasonable in all the circumstances.197
There is a public purpose in all legislation which is enacted to regulate society. It is the "arbitrary exercise of the power at the expense of a State or the subject" (per Dixon J in Grace Bros (at 290)) against which s 51 (xxxi) operates.198
There are several problems with the Federal Court’s analysis in the Marriage of Gould not least of which was the taking out of context doctrines pertaining to the quantum of damages and utilising them for the purposes of ascertaining the Proviso’s scope. Secondly, to suggest that an acquisition is non-arbitrary principally on the basis that it is subject to judicial review and ‘exercised judicially’ is to offend the principles laid down in Kable v Director of Public Prosecutions (NSW).199 In substance it would represent an attempt by Parliament to cloak the arbitrariness of an acquisition in the ‘neutral colours of judicial action.’200 That the quantum or
195 In the Marriage of Gould (1993) 115 FLR 371, 374-5 (Nicholson CJ and Finn J) citing Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495, 569 (Dixon J). 196 In the Marriage of Gould (1993) 115 FLR 371, 400. 197 Ibid, 401. 198 Ibid, 402. 199 (1996) 189 CLR 51. 200 International Finance Trust Co Ltd v NSW Crime Commission (2009) 240 CLR 319; South Australia v Totani (2010) 242 CLR 1; George Williams, David Hume, 'Human Rights under the Australian Constitution' (Oxford University Press, 2nd ed, 2013), 369. 43 precise property to be acquired under a Commonwealth statute is to be determined by a judge does not, of itself, make it any less an acquisition other than on just terms.201
Criminal fines and forfeitures
It would seem that the exclusion of criminal forfeitures from the scope of s 51(xxxi) can also be explained on the basis that they are non-arbitrary in nature and so fit within this stream of authority. As Dixon J observed in Burton v Honan:202
…it has been said that even if it was within s 51(xxxi) there is nothing unjust in a provision forfeiting the property of the offender as part of the punishment for the offence.203
While the interpretation of ‘just terms’ as a condition of compensation for arbitrary acquisitions is uncontroversial, it appears to have been largely forgotten in more recent decisions. For instance in Airservices Australia204 Gaudron J did not include it in her Honour’s list of exclusionary doctrines. Where it has been applied, it has been applied to cover legislation which, prima facie, does effect an arbitrary acquisition.205 Further, in cases dealing with pieces of legislation which clearly do not effect an arbitrary acquisition, it can be demonstrated that such considerations are neither referred to nor discussed. There are a number of High Court decisions which are clearly explicable on this exclusionary rationale.206 Some of these decisions will be explored in the following chapters.
In more recent times, the High Court has been demonstrably unwilling to explore the subtleties of an interpretation of the Proviso as a limit on un-compensated arbitrary acquisitions. On numerous occasions the Court has effectively refused to undertake such an analysis.207 Such an approach does not lead to an open-ended inquiry into fairness or merits
201 The effect of s 106B is analogous to the forfeiture in Burton v Honan and is distinguishable largely for its generosity in that the third party enjoys a right to be heard when a judge makes the determination as to whether the transaction will be set aside. 202 R v Smithers; Ex parte McMillan (1982) 152 CLR 477. 203 Burton v Honan (1952) 86 CLR 169, 180; see also R v Smithers; Ex parte McMillan (1982) 152 CLR 477, 488. 204 (1999) 202 CLR 133. 205 Mutual Pools (1994) 179 CLR 155; Peverill (1994) 179 CLR 226, (Toohey and Dawson JJ). 206 Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134, Airservices Australia (1999) 202 CLR 133. 207 MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622; Mutual Pools (1994) 179 CLR 155, (Brennan J). 44 review,208 but an integration of extant administrative and natural justice doctrines into s 51(xxxi) doctrine; a process that it will be argued has, to a large extent, already taken place.
1.7.1.2 Just Compensation Stream
In the second stream of ‘compound phrase’ exclusions, ‘just terms’ is understood to signify a measure of compensation. On this approach various acquisitions are said to be outside the scope of s 51(xxxi) on the basis that, as a matter of logic,209 they are inconsistent with the provision of monetary compensation. As Deane and Gaudron JJ explained in Re Director of Public Prosecutions; Ex parte Lawler,210 the expression ‘acquisition of property on just terms’:
…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.211
Included in this category are acquisitions in the nature of taxation, criminal and civil penalties and forfeitures. The ‘incongruity test’ posited by McHugh J fits squarely within this subset of doctrines.
1.7.1.3 The ‘Incongruity’ test
As McHugh J held in Mutual Pools:
The compound conception of an 'acquisition of property on just terms' predicates a compulsory transfer of property from a State or person in circumstances which require that the acquirer should pay fair compensation to the transferor. When, by a law of the Parliament, the Commonwealth or someone on its behalf compulsorily acquires property in circumstances which make the notion of fair compensation to the transferor irrelevant or incongruous s 51(xxxi) has no operation. Thus, property taken from the citizen by taxation is in substance an acquisition of property but it is not an acquisition of property for the purposes of s 51(xxxi).212
Deane J was correct when he expressed the view in The Commonwealth v Tasmania ("the Tasmanian Dam Case") that compulsory taxation does involve an acquisition of property
208 Wurridjal v Commonwealth (2009) 237 CLR 309, (Kirby J). 209 Sean Brennan, 'Wurridjal v Commonwealth: The Northern Territory Intervention and Just Terms for the Acquisition of Property Case Note' (2009) 33 Melbourne University Law Review 957, 974. 210 (1994) 179 CLR 270. 211 Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 285; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408. 212 Mutual Pools (1994) 179 CLR 155, 220. 45
but is nevertheless outside the scope of s 51(xxxi). This is because the exercise of the taxation power necessarily involves an acquisition of property from the taxpayer. Similarly, when a statute provides for the forfeiture of property obtained in breach of Commonwealth law even when the property has passed into the hands of a bona fide purchaser for value, the case is outside s 51(xxxi). The notion that the Commonwealth should pay fair compensation to the owner of the property in such a situation is simply absurd.213
In a similar vein, Mason J posited that ‘[o]f its nature "taxation" presupposes the absence of the kind of quid pro quo involved in the "just terms" prescribed by s 51(xxxi).’214 In Schmidt, Taylor J used the same mode of argument to explain the non-applicability of the Proviso to the forfeiture of the plaintiff’s property under the Trading with the Enemy Act 1939-1957 (Cth).215
In Mutual Pools and Australian Tape Manufacturers Association Ltd v Commonwealth,216 Dawson and Toohey JJ used this line of reasoning to exclude from the Proviso’s scope the acquisition of money.217 However, this holding was roundly rejected by other members of the Court and subsequently has not found broader support.
Nonetheless, in each of the instances discussed above, the Court is expressly or implicitly working from the premise that ‘just terms’ connotes some, if not full, monetary compensation. The Court then engages in a reductio ad absurdum type argument which suggests that certain types of acquisition are not within the scope of s 51(xxxi).
Suggesting that it wasn’t even so much as a doctrine or test, in Theophanous Gleeson CJ was somewhat critical of the approach in holding that:
… to observe that a requirement of just terms is incongruous [in this] context is fair comment, but it is an observation about a step in a process of constitutional interpretation.218
213 Ibid, 220-21 (citations omitted). 214 Ibid, 171. 215 A-G (Cth) v Schmidt (1961) 105 CLR 361, 377. 216 (1993) 176 CLR 480 (‘Tape Manufacturers’). 217 Mutual Pools (1994) 179 CLR 155, 201. 218 Theophanous v Commonwealth (2006) 225 CLR 101, 115. 46
1.7.1.4 “Direct Conflict Incongruity”
A careful analysis of the case law reveals that the incongruity test has been utilised in the context of two separate categories of exclusions. The first category might be best described as those involving heads of power that in their core operation appear to be in direct conflict with the plain words of the Proviso. This category was described by Deane J in the Tasmanian Dam Case:
There are two obvious limitations to the proposition that the other paragraphs of s 51 do not authorize a law with respect to the acquisition of property…The first is that some laws which are plainly authorized under other heads of power necessarily involve the acquisition of property for the purposes of the Commonwealth: the compulsory payment of tax, the forfeiture of prohibited imports and the sequestration of the property of a bankrupt are obvious examples.219
Similarly in Mutual Pools McHugh J held that:
compulsory taxation does involve an acquisition of property but is nevertheless outside the scope of s 51(xxxi). This is because the exercise of the taxation power necessarily involves an acquisition of property from the taxpayer.220
Notably however, as Dixon J stated in Schmidt, when considering the exclusion from the scope of s 51(xxxi), the sequestration of a bankrupt’s estate:
… if a law was made under which a piece of land was acquired for a Bankruptcy Office, s 51 (xxxi) would govern the legislation and not s 51 (xvii).221
‘Direct conflict’ exclusions are neatly explained by the maxim generalia specialibus non derogant,222 ("the general does not detract from the specific"). As Mason J explained in Mutual Pools:
…acquisitions of various kinds, even though they might perhaps fall prima facie within the general power, are to be regarded as authorized by the exercise of specific powers…223
219 'Tasmanian Dam Case' (1983) 158 CLR 1, 555. 220 Mutual Pools (1994) 179 CLR 155, 221 (citations omitted). 221 A-G (Cth) v Schmidt (1961) 105 CLR 361, 372. 222 The Vera Cruz (1884) 10 App Cas 59, 68; Magrath v Commonwealth (1944) 69 CLR 156. 223 Mutual Pools (1994) 179 CLR 155, 171. 47
Thus, by conventional rules of statutory interpretation, the plain English interpretative trap identified by Bentham224 – that such provisions would, if read literally mean that all taxes and the like would be void – does not arise.
That is not to suggest that the Court has consistently applied this doctrine or that the line is always an easy one to draw. For instance in Mutual Pools, McHugh J held that:
An enactment can fall within s 51(ii) and outside the operation of s 51(xxxi) even though it provides for the acquisition of property and does not itself impose a tax, provided that it is a law with respect to taxation.225
Similarly, Mason CJ held that laws made pursuant to the taxation power will only ‘rarely’226 amount to an acquisition of property other than on just terms but appeared to posit that some unidentified ‘additional element’ is required in order to engage the Proviso in respect of a law which does not impose a tax but is made pursuant to the taxation power. Thus, both McHugh J and Mason J appeared to reject the dicta of Dixon J in Schmidt.
In many contexts, the operation of s 51(xxxi) and other heads of power are not ‘mutually exclusive,’227 that is, in direct conflict and the exclusion cannot be explained on this basis.
1.7.1.5 ‘Category II incongruity’
The incongruity test has also been utilised to explain the exclusion from the Proviso’s scope, laws enabled under heads of power which do not manifest a direct conflict with the Proviso’s operation. This second category of exclusions includes laws imposing fines, civil penalties and certain types of criminal and civil forfeiture. These exclusions rest on an entirely different rationale though the Court often conflates or fails to distinguish between the two categories. An example, cited with approval in Attorney-General (NT) v Emmerson,228 is to be found in the majority judgment in Theophanous where it was stated that the incongruity test, whatever its difficulties:
… is grounded in the realisation that to characterise certain exactions of government (such as levying of taxation, imposition of fines, exaction of penalties or forfeitures, or
224 See above [1.3]. 225 Mutual Pools (1994) 179 CLR 155, 224. 226 Ibid, 170. 227 Ibid, 224 (McHugh J). 228 (2014) 253 CLR 393. 48
enforcement of a statutory lien) as an acquisition of property would be incompatible with the very nature of the exaction.229
As Brennan J stated in Lawler with respect to criminal sanctions:
A law which imposes a penalty or sanction for breach of a provision prescribing a rule of conduct and which, apart from its imposition of the penalty or sanction, is a law with respect to a head of power other than s 51(xxxi) cannot be classified as a law with respect to the acquisition of property within s 51(xxxi). To place it within the s 51(xxxi) category would be to annihilate the penalty or sanction and thus to weaken, if not destroy, the normative effect of the prescription of the rule of conduct.230
Similarly, as Gibbs J held in Trade Practices Commission v Tooth & Co Ltd:
It appears to me that there are cases in which s. 51 authorizes the compulsorily divesting of property in circumstances in which no question of just terms could sensibly arise-for example, it would be absurd to say that the legislature could make provision for the exaction of a fine, or for the imposition of a forfeiture of property used in the commission of a crime, only on just terms.231
These intuitive responses to scenarios that do not present direct conflicts are seductive. Indeed, at first glance it would be a remarkable result were the Proviso to proscribe the imposition of fines. It is not argued that the Court has come to the wrong view. Nonetheless, the justifications given for this position bear examination.
Almost certainly, the Proviso as worded is open to the interpretation that criminal fines and forfeitures are proscribed. Now whilst it is the case that the Australian Constitution has no equivalent to the Eighth Amendment to the US Constitution namely that ‘Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted’,232 s 53 of the Australian Constitution explicitly contemplates that fines and other pecuniary penalties might be enacted by Parliament.233
229 Theophanous v Commonwealth (2006) 225 CLR 101, 126. 230 Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 278-279; Theophanous v Commonwealth (2006) 225 CLR 101 (Gleeson CJ). 231 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408. 232 The English Bill of Rights 1689 (UK) 1 William & Mary Sess 2 c 2, on which the Eighth Amendment was based, contains a nearly identical clause. 233 See also Australian Constitution s 46. 49
Inasmuch as the imposition of criminal fines and forfeitures are not the subject of a specific head of power their enactment may be inconsistent with a literal interpretation of the Proviso but they give rise to no more incongruity than the idea that an unlimited right to liberty might proscribe the imposition of a term of imprisonment. The range of sanctions available to the Commonwealth for breaches of rules of conduct would be narrowed but other non-property- based punishments would remain within its legislative competence.
If the purpose of the Proviso is to protect proprietary interests it is no answer that the Proviso permits property-based sanctions on the basis that the Commonwealth would have a more limited range of punishments available to it in deterring certain forms of conduct. Rules of conduct would not be annihilated nor their normative effect undermined. Such conduct would merely fall to be deterred by other means. The same flawed argument could be mounted against a hypothetical entrenched proscription of the death penalty: that the normative effect of the rules against murder or drug importation would be weakened or destroyed and therefore such sanctions are permissible in some instances. Only a presupposition of the validity or legitimacy of fines and forfeitures gives rise to any argument about the incongruity of s 51(xxxi) proscribing them.
The relevant ‘incongruity’ must surely consist of more than an inconsistency between s 51(xxxi) and the operation of the legislation in question as this is the very question a court is asked to resolve. Section 51(xxxi) would effectively be read out of the Constitution were this not the case. What has been described as a ‘realisation’ of incongruity might be better described as instances of cognitive dissonance. As Evans commented, the ‘approach appears to rest on an intuitive sense about which acquisitions require compensation and which do not.’234 Other justifications provided by the Court rest on firmer foundations and are grounded in history, the common law and a consideration of the purposes the Proviso was intended to serve.
As Lord Camden held in the seminal case of Entick v Carrington:235
The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right
234 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 198. 235 (1765) 19 St Tr 1029. 50
of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description.236
Though this decision has not been specifically quoted, authorities to the same effect are cited in a number of decisions. In R v Smithers; Ex parte McMillan237 the Court observed that ‘[i]t has never been considered that a civil action for penalties involves an acquisition of property by the Commonwealth, let alone an acquisition of property otherwise than on just terms.’238
Similarly, in Lawler, Dawson J observed that:
Confiscation of property connected with the commission of crimes was long part of the common law and had its origin in the doctrines of attainder and deodand. Property could be forfeited even if its owner was not involved in the crime. Forfeiture at common law was abolished in England in 1870 and thereafter in this country, but statutory powers of forfeiture have remained in certain areas and, indeed, have been introduced in some new areas.239
Again, the majority in Theophanous observed that:
Such exactions are, and long before the Commonwealth were, regular features of the law in England, the Australian colonies and now of the Commonwealth. It cannot therefore have been the purpose of s 51(xxxi) to apply to such exactions an obligation to provide “just terms.” 240
In Airservices Australia Callinan J raised the logical objection to this line of reasoning being that historical common law doctrines ‘must yield to the Constitution…’241
This is yet another area in which, at least on one view, there arises a clear tension between English common law and s 51(xxxi) and the question arises as to the extent to which s 51(xxxi) can or ought to be interpreted in light of pre-Federation common-law concepts242 -- a common law which regarded as wholly foreign the concept of limited government and substantive proprietary protections.
236 Entick v Carrington (1765) 19 St Tr 1029, 1066. 237 (1982) 152 CLR 477. 238 R v Smithers; Ex parte McMillan (1982) 152 CLR 477, 487. 239 Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 289 (Dawson J) (citations omitted). 240 Theophanous v Commonwealth (2006) 225 CLR 101, 126. 241 Airservices Australia (1999) 202 CLR 133, 315; see also Lange v Australian Broadcasting Corporation (1997) 189 CLR 520. 242 See generally Chief Justice Owen Dixon, 'The Common Law as an Ultimate Constitutional Foundation' (1957) 31 Australian Law Journal 240. 51
However, what is really missing from this analysis is the broader possibility that the Proviso might operate as a limit on the Commonwealth’s power to impose such punishments arbitrarily. As discussed above, one of the reasons it has been said that criminal fines and forfeitures are outside the Proviso’s scope is that ‘there is nothing unjust in a provision forfeiting the property of the offender as part of the punishment for the offence.’243
That is not to suggest that the High Court ought to be free to engage in an assessment of the fairness or harshness of the penalty itself, rather, that the process by which an offender is convicted (on indictment or otherwise) and subsequently sentenced could be constitutionalised244 and that retrospective criminal laws imposing property-based penalties or mandatory minimum proprietary penalties which exclude judicial discretion upon which procedural fairness in sentencing hearings ought to operate could fall foul of the Proviso.245 There is some asymmetry in the result that a person whose property is being forcibly acquired cannot be forced to accept the Parliament’s judgment as to the appropriate measure of compensation but an offender must accept its judgment as to the measure of punishment.
Any apparent inconsistency or incongruity between the Proviso’s operation and the tax power can also be reconciled using this same line of reasoning. Once ‘just terms’ are understood not as a measure of compensation but as a limit on arbitrary legislative interferences with proprietary interests, any inconsistency between ss 51(xxxi) and 51(ii) disappears for the reason that s 51(xxxi) would not mandate the immediate return of funds taken in tax and so ‘defeat the very purpose of the taxation power’.246 The Proviso would only operate so as to limit the Parliament’s power to impose taxes which, in some relevant sense, operate arbitrarily. Such an approach also avoids the problem of distinguishing between an acquisition of property and a tax247 for the reason that the operation of both powers would be subject to the same limiting criteria being that the laws which impose them must not be arbitrary in any relevant sense.248
243 R v Smithers; Ex parte McMillan (1982) 152 CLR 477, 488. 244 Williams and Hume, 'Human Rights under the Australian Constitution', above n 41, 377. 245 Magaming v The Queen (2013) 252 CLR 381 (Gageler J); Contra Burton v Honan (1952) 86 CLR 169; Allen, 'The Acquisition of Property on Just Terms', above n 1, 370. 246 Mutual Pools (1994) 179 CLR 155, 198 (Dawson and Toohey JJ). 247 Ibid, 198 (Dawson and Toohey JJ); See generally Eric A Kades, 'Drawing the Line Between Taxes and Takings: The Continuous Burdens Principle, and Its Broader Application' (2002) 97 Northwestern University Law Review 189. 248 See below [4.3]. 52
1.7.2 Conclusion
On one view, the provision of compensation mandated by the Proviso does not neutralise the essentially arbitrary nature of a forced acquisition; it is merely remedied by monetary compensation. The most the Proviso can achieve is, as Dixon J suggested, to prevent such acquisitions taking place ‘at the expense of a State or the subject.’249 Such an approach leads directly to the view ‘that s 51(xxxi) applies only to acquisitions of a kind that permit of just terms.’250 Another view posits the Proviso’s ‘underlying purpose,’ as that of ‘prevent[ing] arbitrary acquisitions.’251 On this view, the provision of compensation transforms an otherwise arbitrary acquisition into one that is non-arbitrary and leaves an interpretive space for the Proviso to apply more broadly as a general limitation on legislation which acts arbitrarily against persons’ and states’ proprietary interests.
Whichever one’s preference, the former view of the Proviso, which continues to enjoy the overwhelming support of the High Court, cannot be characterised in either a literal or philosophical sense as a liberal approach to its interpretation.252 An argument is at least available that the traditional exclusions from s 51(xxxi) are not, as has been repeatedly held, ‘altogether outside’ its scope but rather that these powers, each with their own associated safeguards and limitations, operate in parallel and may, at their boundary points, even interact.
249 Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 290 (Dixon J). 250 Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270, 285; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 408. 251 A-G (NT) v Emmerson (2014) 253 CLR 393, 449 [119] (Gageler J); Airservices Australia (1999) 202 CLR 133, (Callinan J). 252 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 204. 53
1.8 The ‘Tests’
Alongside approaches to the Proviso which proceed from an interpretation of the words of the section itself, numerous 'tests' have been proposed and/or distilled by various judges attempting to identify the indicia of a law that ultimately invokes or excludes its operation.
Though a number of the posited ‘tests’ for the application of the Proviso appear to be pointing in the direction of, or hinting at, a coherent rationale, if taken literally, they are legitimately characterisable as ‘empty verbal formulae.’253 The case law provides a large number of examples of these types of ‘tests.’ As Kirby J stated in Leask v Commonwealth:
The verbal tests afforded by the Court's past authority are not precise enough to command a single, simple solution. The most that they can offer are techniques by which to test the impugned law. They provide expressions which point the decision-maker in the direction of some of the considerations which, in the past, have been found to be useful for the ultimate judgment which has to be made.254
However, as will be demonstrated, not only are the tests often contradictory, difficult or impossible to apply, but in their very application they lead the judiciary down dead-end paths of analysis and reasoning and divert the Court from addressing the key substantive legal and policy issues at stake. They subvert the very role they are designed to perform.
The High Court’s characterisation of the difficulties which arose in interpreting s 92 of the Australia Constitution aptly captures some of the challenges in s 51(xxxi) jurisprudence:
…the history of the doctrine is an indication of the hazards of seeking certainty of operation of a constitutional guarantee through the medium of an artificial formula. Either the formula is consistently applied and subverts the substance of the guarantee; or an attempt is made to achieve uniformly satisfactory outcomes and the formula becomes uncertain in its application.255
Discussed and analysed below are some of the key subsidiary tests developed by the High Court, identifying the limits of the Proviso’s application.
253 Ibid, 186 n 23. 254 Leask v Commonwealth (1996) 187 CLR 579, 636-7. 255 Cole v Whitfield (1988) 165 CLR 360, 402. 54
1.8.1 Inherently Subject to Modification test
Perhaps the most slippery of all the posited doctrines dealing with the Proviso’s scope is the ‘inherently subject to modification’ test. This test asks whether the legislatively created property right is inherently subject to later statutory modification. If it is, the Proviso is not engaged.
The test has its roots in the decision of Allpike v The Commonwealth:256
In the case of the Commonwealth, therefore, such right as there is, is the creation of Commonwealth statute or Commonwealth regulation. That right may be altered by the authority which created it.257
There are several variations or formulations of this test. One version goes all the way to hold that all statutory rights created by the Parliament are inherently defeasible by the Parliament and by nature exclude the operation of s 51(xxxi).258
In Peverill, McHugh J somewhat tempered the absolutism of the test laid down in Allpike, transforming the analysis into one of statutory interpretation.
Allpike is authority for the proposition that, without infringing s 51(xxxi), the Commonwealth can regulate a federal statutory entitlement to a payment even after the beneficiary of the payment has fulfilled the conditions entitling that person to the payment provided that the entitlement was made subject to the condition that it could be regulated. It need hardly be said that such a condition may be imposed expressly or by implication or by inference from all the circumstances of the enactment. Moreover, logically no distinction can be drawn between an entitlement subject to a condition of regulation and an entitlement subject to a condition of reduction or revocation.259
The problem with this test was averred to by Callinan J in Chaffey.260 In essence, the objection is that it can be rationally argued that all statute law is inherently subject to modification. If Kartinyeri v Commonwealth261 is correct and that, subject to any applicable constitutional qualification, the power of an Australian legislature to make laws, ‘includes the power to
256 (1948) 77 CLR 62. 257 Allpike v Commonwealth (1948) 77 CLR 62, 69 (Latham CJ). 258 See eg Peverill (1994) 179 CLR 226, (Toohey J). 259 Ibid, 261. 260 A-G (NT) v Chaffey (2007) 231 CLR 651, 672 (Callinan J). 261 (1998) 195 CLR 337. 55 unmake them’262 one might ask how any meaningful distinction is to be drawn between laws ‘inherently subject to modification’ and those that are not without reference to some other principle or factual context.
Callinan J went on to suggest that the Kartinyeri principle ‘does not have the consequence that the Commonwealth may escape the operation of s 51(xxxi).’263
Heydon J made a similar criticism in the recent case of JT International observing that:
…all common law rules, and all statutes in a field over which the Commonwealth has legislative power, are capable of being modified or extinguished by a Commonwealth statute. Yet not all common law and statutory rights are viewed as inherently susceptible to modification or extinguishment. The submission did not offer any test for distinguishing between what was inherently susceptible and what was not.264
Again, in Theophanous Gleeson CJ said:
I would not accept that statutory superannuation or pension benefits are inherently defeasible and that, on that account alone, their modification or withdrawal could never constitute an acquisition of property.265
In Chaffey a majority of the High Court had already begun to move away from an unconditional application of the test holding that:
Where the asserted "property" has no existence apart from statute further analysis is imperative. … ‘It is too broad a proposition, … that the contingency of subsequent legislative modification or extinguishment removes all statutory rights and interests from the scope of s 51(xxxi).266
A similar view can be found in Wurridjal v The Commonwealth.267 When the doctrine came to be tested directly in JT International, dealing as it did with intellectual property rights, one of the few property rights being entirely the product of Commonwealth statute, the doctrine was not utilised by any member of the High Court.
262 A-G (NT) v Chaffey (2007) 231 CLR 651, 651 (Gleeson CJ, Gummow, Hayne and Crennan JJ). 263 Ibid, 672. 264 JT International (2012) 250 CLR 1, 80 [209]. 265 Theophanous v Commonwealth (2006) 225 CLR 101, 114 (Gleeson CJ). 266 A-G (NT) v Chaffey (2007) 231 CLR 651, 664; Wurridjal v Commonwealth (2009) 237 CLR 309, 361-2 (French CJ). 267 (2009) 237 CLR 309. 56
Nonetheless, the rapid expansion over the past half century of what Reich and other commentators have referred to as ‘the new property’ or what Gray calls ‘regulatory property’268 has given rise to some legitimately difficult questions regarding the Proviso’s interpretation and scope. Many of the valuable interests held by individuals are no longer comprised of traditional forms of property and a large proportion of the income received by individuals is not derived from traditional forms of property. Rather, these interests and income sources are very often derived directly from government revenue or are an element of some larger legislative scheme.
Statutory interests can now be found in an incredibly diverse range of forms on a spectrum from welfare payments, licensing and workers compensation schemes, market based schemes to mitigate environmental degradation, superannuation and shares all the way to Torrens title itself.
Though there are academic arguments to the effect that statutory gratuities, including for instance welfare benefits, should be characterised as property,269 the High Court has never expressed any support for the idea.270 There exist strong policy arguments for excluding such interests from the Proviso’s scope, not the least of which is the protection of the Commonwealth Parliament’s capacity to maintain control of government expenditure. Were welfare schemes and the like effectively entrenched and not subject to repeal, the government would not be able to maintain control over government outgoings within the government’s actual means nor freely exercise the inherently political decision making power regarding appropriate rates of taxation. Further, were the Parliament’s power to make these decisions fettered by those of a previous Parliament,271 it would be excluded from deciding the question of who should receive such gifts and in what circumstances in accordance with the most pressing needs of the community and the will of the electorate who must ultimately fund such payments.
268 Charles A Reich, 'The New Property' (1964) 73(5) The Yale Law Journal 733; Kevin Gray, 'Regulatory Property and the Jurisprudence of Quasi-Public Trust' (2010) 32 Sydney Law Review 221. 269 Reich, above n 268; Karen M Tani, 'Flemming v Nestor: Anticommunism, the Welfare State, and the Making of "New Property"' (2008) 26(2) Law and History Review 379; Flemming v Nestor, 363 US 603 (1960); Universal Declaration of Human Rights, GA Res 217A (III), UN GAOR, 3rd sess, 183rd plen mtg, UN Doc A/810 (10 December 1948) arts 22, 25; cf Goldberg v Kelly, 397 US 254 (1970). 270 See generally Ronald Sackville, 'Property, Rights and Social Security' (1977) 2(3) University of New South Wales Law Journal 246; Peverill (1994) 179 CLR 226. 271 See generally Nicholas Seddon, 'State Instrumentalities and Sovereign Risk' (2005) Australian Mining and Petroleum Law Association Yearbook 29; Nicholas Seddon, Government Contracts: Federal, State and Local (Federation Press, 3rd ed, 2004). 57
Standard legal analyses of the Ainsworth272 variety, which conceptualise property in terms of transferability and the like, struggle in the face of such novel categories of interest and more significantly, in dealing with the broader policy issues at stake in a constitutional context.273 Welfare payments aside, the question remains, what then, in a constitutional context, are the relevant attributes of a statutory interest which invoke or exclude the operation of the Proviso. Rather than articulating a test,274 a finding that a right is inherently variable or ‘subject to modification’ is the announcement of a result.
More broadly, difficulties arise because there exists an inherent tension between the historic English common law conception of the unfettered nature of Parliamentary law making power as against s 51(xxxi) which expressly limits the Commonwealth Parliament’s legislative competence.
One of the basic jurisprudential questions raised by s 51(xxxi) and the place of such protections generally is a Parliament’s role and capacity to fundamentally alter or intervene in the existing social and economic order. Such protections can, on the one hand, promote the rigidity of a regulatory, legal and social order and concomitantly, foster a degree of legal certainty. Thus, such protections place some sort of limit on legal unpredictability and uncertainty and thereby potentially protect a basic tenet of the rule of law.
On the other hand, such protections can work against legal and regulatory adaptability and responsiveness to economic, political and social pressures and changes.
Thus, inherent in the Proviso’s operation is a fundamental tension between rule of law principles on the one hand and Parliamentary sovereignty and democracy on the other. The depth of the conundrum that s 51(xxxi) poses is simply summed up by Professor Harrison Moore when he wrote that:
It is one of three great principles which, taken together, really summarize our political system—the rule of law, self-government, Parliamentary sovereignty. Of these, the most
272 National Provincial Bank Ltd v Ainsworth [1965] AC 1175. 273 Allen, 'The Acquisition of Property on Just Terms', above n 1, 355. 274 Allen, The Right to Property in Commonwealth Constitutions, above n 103, 158. 58
modern is Parliamentary sovereignty, and it remains to be seen whether this and the rule of law in any but a formal sense are able to live together. 275
As Stewart similarly remarked, ‘the principles of the rule of law and parliamentary sovereignty seem incompatible and their combination is incongruous.’276 Walker, in a similar vein wrote that, ‘[i]f parliament ... can change any law at any moment ... then the rule of law is nothing more than a bad joke.’277
1.8.2 The ‘General law’
A frequently cited basis for the exclusion of s 51(xxxi) has been a characterization of the interest in dispute as having no precedent in the ‘general law.’278
Such a characterisation appears to posit a normative dichotomy between rights recognised at, or created by, the common law versus those created by Parliament, the former being preferred over the latter. It is a curious dichotomy and not one that enjoys any support in the ‘general law’ itself. It is a trite observation that, while statute law prevails over common law where there is any inconsistency, neither is ‘better’ (or indeed more permanent or stable) than the other. If this characterisation of the ‘general law’ is incorrect then one must embark on the enquiry as to where the general law ends, and where the ‘special law’ (for want of a better term) begins.
This exact issue arose in the case of Georgiadis.279 In that case, an argument developed as to whether the plaintiff’s right in tort against the Commonwealth was a common law chose in action or, because it was thought to rest upon provisions of the Judiciary Act 1903 (Cth) abrogating Crown immunity from suit, was properly to be characterised as a statutory right and therefore inherently subject to modification.
275 Sir Robert Menzies, The Rule of Law During the War, 1917 Bowen Prize Essay, University of Melbourne (Charles F Maxwell, 1917), 3-4 cited in Justice John Toohey AC, ‘A Government of Laws, and Not of Men?’ (1993) 4 Public Law Review 158, 164. 276 Cameron Stewart, 'The Rule of Law and the Tinkerbell Effect: Theoretical Considerations, Criticisms and Justifications for the Rule of Law' (2004) 4 Macquarie Law Journal 135, 141. 277 Geoffrey de Q Walker, The Rule of Law: foundation of constitutional democracy (Melbourne University Press, 1988), 159 cited in Stewart, 'The Rule of Law and the Tinkerbell Effect', above n 276, 141. 278 Peverill (1994) 179 CLR 226, 237; Georgiadis (1994) 179 CLR 297, 306. ‘It is significant that the rights that have been terminated or diminished are statutory entitlements to receive payments from consolidated revenue which were not based on antecedent proprietary rights recognized by the general law.’ 279 Georgiadis (1994) 179 CLR 297. 59
The positing of such a dichotomy does highlight the unusual place that s 51(xxxi) holds in the overall Constitutional structure inasmuch as State Parliaments are not bound by it280 while at the same time they have primary legislative competence to make laws with respect to land tenure and regulation and (though not exclusively) personal property and, further, that State Courts are the primary, though not ultimate, common law courts in the Jurisdiction.
The clearest analogy with the ‘general law’ dichotomy is that applying in the criminal law sphere, of little currency in modern jurisprudence, being the Malum prohibitum/Malum in se dichotomy. Whatever its initial appeal, it is a dichotomy that tends to break down upon close analysis.281 In contemporary society where major forms of wealth, including superannuation, intellectual property, government securities and shares, are the creation of statute, one need not dig very deep before the ‘general law’ doctrine starts to crumble as a substantive mode of analysis. It was on this basis that Callinan J outright rejected the test stating that:
I do not think that a right to compensation should turn upon the way in which rights have originally arisen or have been created, whether by statute or otherwise.282
Though the search for an analogy with traditional forms of property might assist a court in considering whether or not a particular interest falls within the Proviso’s scope, such an approach must be abandoned if it mandates a purely formalistic categorisation of the interest at the expense of an analysis of substantive issues.
As McHugh J reiterated in Mutual Pools:
Whether or not the Commonwealth has acquired property in a particular case is to be examined as a matter of substance and not form.283
1.8.3 Proportionality
The High Court’s stance on the place of proportionality tests as a means of ascertaining the Proviso’s scope has, like many other s 51(xxxi) doctrines, varied over time. There is a discrete body of decisions dealing with the Proviso in which a proportionality test of some sort, albeit in
280 Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399 but subject to Pye v Renshaw (1951) 84 CLR 58. 281 Mark S Davis, 'Crimes Mala in Se: An Equity-Based Definition' (2006) 17 Criminal Justice Policy Review 270; Note 'The Distinction between "Mala Prohibita" and "Mala in se" in Criminal Law' (1930) 30(1) Columbia Law Review 74. 282 Smith v ANL Ltd (2000) 204 CLR 493, 554, [189]. 283 Mutual Pools (1994) 179 CLR 155, 219 citing ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349; Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 407. 60 various guises and formulations, has been applied by one or more members of the High Court.284 In Attorney-General (NT) v Emmerson,285 the most recent statement of the Court, the majority judgment of six members of the Court held that proportionality has no place in determining the Proviso’s scope, at least in the context of its application to criminal forfeitures.
… because the forfeiture worked by the Forfeiture Act is imposed as punishment for crime, the impugned provisions do not amount to an acquisition of property other than on just terms. …, whether that punishment fits the crime (in this case, the repeated commission of certain crimes) is a matter for the legislature. It is irrelevant (and wrong) for the courts to attempt to determine whether any forfeiture which may be worked by the Forfeiture Act (or which is worked in this particular case) is proportionate to the stated objectives.286
The question is whether the statutory scheme can be properly characterised as a law with respect to forfeiture, that is, a law which exacts or imposes a penalty or sanction for breach of provisions which prescribe a rule of conduct. That inquiry must be answered positively, which precludes any inquiry into the proportionality, justice or wisdom of the legislature's chosen measures.287
Despite the apparent clarity of the Court’s stance in Emmerson, proportionality remains relevant to the application of the Proviso for a number of reasons. Firstly, proportionality continues to have some role in doctrines of characterisation and characterisation as a mode of ascertaining the Proviso’s scope has dominated a good proportion of s 51(xxxi) jurisprudence. Thus, there are lines of authority which have applied proportionality directly as a means of ascertaining the Proviso’s scope. Further, as discussed below, it is arguable that the ‘adjustment of competing claims’ test is a proportionality test in all but name.
A third reason that proportionality remains relevant is that Emmerson can be distinguished from a number of the other decisions. Two of the earlier forfeiture decisions can be distinguished on the basis that the forfeitures in question operated not against the offender themselves but against third parties. In Burton v Honan288 the forfeiture operated against the
284 Theophanous v Commonwealth (2006) 225 CLR 101, 114 (Gleeson CJ). 285 (2014) 253 CLR 393. 286 A-G (NT) v Emmerson (2014) 253 CLR 393, 435 [75]. 287 Ibid, 437-8 [80] (Citations omitted). 288 (1952) 86 CLR 169. 61 owner of a car who had come into possession of it from the importer as a bona fide purchaser for value. Lawler involved the forfeiture of a boat which had been used by a third party to fish illegally in Australia waters. Against this background, Emmerson stands on even firmer ground dealing as it did with a forfeiture imposed directly against an offender as punishment for the relevant offences.
The proportionality analysis undertaken in Lawler and Burton v Honan was fairly rudimentary and focused on the difficulty of enforcing Customs and fishing regulations and the necessity of the imposition of harsh penalties in order to deter the proscribed conduct. These two decisions reflect an approach to proportionality simply as a test of whether the Parliament has ‘use[d] a sledgehammer to crack a nut'.289
Mutual Pools and Airservices Australia290 stand apart in a number of respects inasmuch as they did not deal with criminal fines or forfeitures and arguably a far more nuanced approach to proportionality was adopted.
In Mutual Pools Brennan J sought, in effect, to directly confront the problematics of a plain English approach to the Proviso and Bentham’s critique in recognising that the legislation in dispute in that case fell ‘literally’ within its terms.291 Brennan J framed the issue in the case as whether the extinction of the plaintiff’s right constituted ‘an acquisition of property for the purposes of s 51(xxxi)’292 or otherwise that the Refund Act was to ‘be classified as a law falling under a head of power other than s 51(xxxi).’293
In order to resolve this question, Brennan J proposed, and then applied, the following test:
…a law may contain a valid provision for the acquisition of property without just terms where such an acquisition is a necessary or characteristic feature of the means which the law selects to achieve its objective and the means selected are appropriate and adapted to achieving an objective within power, not being solely or chiefly the acquisition of property. But where the sole or dominant character of a provision is that of a law for the
289 Jeremy Kirk, 'Constitutional Guarantees, Characterisation and Proportionality' (1997) 21 Melbourne University Law Review 1, 2. 290 (1999) 202 CLR 133. 291 Mutual Pools (1994) 179 CLR 155, 178. 292 Ibid, 176. 293 Ibid, 178. 62
acquisition of property, it must be supported by s 51(xxxi) and its validity is then dependent on the provision of just terms.294
The application of proportionality in Mutual Pools and Airservices Australia has been the subject of some criticism. As previously noted, in Airservices Australia itself McHugh J remarked that:
The analysis often seems to indicate that a law is outside s 51(xxxi) because it is more properly regarded as being within another s 51 head of power — which is based on an assumption that there is a ‘‘most correct’’ characterisation of a law.295
Evans critique was that ‘these approaches use the language of characterisation to rationalise a conclusion drawn from other sources.’296
Writing some 15 years ago, Allen described the proportionality tests applied by various members of the High Court as ‘a very loose, impressionistic type of proportionality.’297 More recently, Kiefel J remarked in JT International regarding the application of proportionality in the context of s 51(xxxi) that:
[What such arguments] may really come down to is a proposition that some legislative purposes might justify infringement of, or the treatment of a law as standing apart from and not subject to the requirements of, s 51(xxxi).298
Section 51(xxxi) contains its own limits and conditions. The requirement of just terms applies if the law is one which provides for the acquisition of property. That is the question to be addressed and it is not answered by a test of proportionality.299
Indeed, there is some irony in Kirk’s view that ‘[p]roportionality might be seen as an unnecessary extra protection for property rights given s 51(xxxi)’300 given that such tests are
294 Ibid, 180. 295 Airservices Australia (1999) 202 CLR 133, 247-248; see also Rosalind Dixon, 'Overriding Guarantee of Just Terms or Supplementary Source of Power?' above n 76. 296 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 197. 297 Allen, 'The Acquisition of Property on Just Terms', above n 1, 367. 298 JT International (2012) 250 CLR 1, 124 [344]. 299 Ibid, 123 [340]. 300Kirk, 'Constitutional Guarantees, Characterisation and Proportionality', above n 289, 43. 63 used as a way of limiting rather than expanding its scope. As expressed by Heydon J, ‘the test saps s 51(xxxi) of content.’301
Evans suggested that while a proportionality test can ‘rationalise existing findings about the scope of s 51(xxxi)'s negative implication’302 (i.e. its relationship to other heads of power) it cannot function as a ‘useful predictive or diagnostic tool.’303
The tensions that arise in an application of proportionality in this context are the same as those that arise in the ‘use and service of the Crown’ doctrine. On one view, that a given measure falls within a Commonwealth head of power is the circumstance that brings the Proviso into operation. Were the measure not within a head of power it would fail simply for want of legislative competence. By contrast, a proportionality analysis proceeds on the exact opposite footing being that a proportionate exercise of another head of power is the operative factor excluding the Proviso’s operation. Indeed, Evans’ central criticism of an application of proportionality in this context is that it could be conflated:
…with an approach that merely asks whether the law is supported by the implied incidental power by reason of its being (reasonably capable of being regarded as) appropriate and adapted to the fulfilment of an objective falling within some substantive head of power.304
Were this the case, s 51(xxxi) would be read entirely out of the Constitution and the ‘implication required to make the condition of just terms effective, [that the Proviso] abstracts the power to support a law for the compulsory acquisition of property from any other legislative power,’305 would be rendered nugatory.306
The other challenge confronting any attempt to assess the proportionality of a particular measure as a test of the Proviso’s scope is the nature of the balancing exercise that must be undertaken as a part of that process. The crux of an application of proportionality is a balancing of the public purpose to be served by a piece of legislation (and whether the restriction actually serves those purposes) as against the restriction imposed on the otherwise
301 ICM Agriculture (2009) 240 CLR 140, 230. 302 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 189. 303 Ibid, 189. 304 Mutual Pools (1994) 179 CLR 155, 188. 305 Ibid, 177. 306 Margaret Brock, 'When is property inherently defeasible for the purposes of s 51(xxxi)?' (2012) 21 Australian Property Law Journal 180, 183. 64 protected right.307 This balancing process requires a consideration both of the purposes of the legislation in dispute and the values protected or purposes served by the Proviso. How else can a burden imposed on a guarantee of just terms be adjudged as incidental or otherwise if not by reference to its core objective or purpose.
Indeed, it may be that in many instances it is Parliament’s purpose in enacting the law that makes it run afoul of the Proviso. Arguably, the real question in some instances is whether or not the law has more than one purpose, whether one or more of its purposes is a proscribed purpose or its sole or dominant purpose and to what extent a law might possess a secondary proscribed purpose but still escape the Proviso’s scope.
The only way to avoid the inherent paradox at the heart of a proportionality test as a test of the Proviso’s scope is resort to a merits type analysis or a mechanical application of the test which sidesteps the issue of appropriateness and a clear articulation of the purposes the Proviso is intended to serve. When one recognises that, as Brennan J held in Leask, an assessment of ‘incidentiality’ ‘involves matters of judgment and degree’308 which cannot be mechanically determined, the test becomes entirely indeterminate.
The judgments utilising proportionality as a test of the Proviso’s scope all address in one way or another the wisdom or merits of the legislation in dispute. For our purposes, however, the concern is not whether there are instances where merits type assessments masquerade under doctrinal guise but rather whether substantive principle has become cloaked in the language of merits-based doctrines.
1.8.4 ‘Adjustment of competing claims’ test
The ‘adjustment of competing claims’ test can be seen to have arisen from the comments of Deane J in the Tasmanian Dam Case.
Difficult questions can arise when one passes from the area of mere prohibition or regulation into the area where one can identify some benefit flowing to the Commonwealth or elsewhere as a result of the prohibition or regulation. Where the benefit involved represents no more than the adjustment of competing claims between citizens in a field which needs to be regulated in the common interest, such as zoning under a local government statute, it will be apparent that no question of acquisition of
307 Unions NSW v New South Wales (2013) 252 CLR 530, 554-563 [44]-[60]; See generally Kirk, 'Constitutional Guarantees, Characterisation and Proportionality', above n 289. 308 Leask v Commonwealth (1996) 187 CLR 579, 593. 65
property for a purpose of the Commonwealth is involved. Where, however, the effect of prohibition or regulation is to confer upon the Commonwealth or another an identifiable and measurable advantage or is akin to applying the property, either totally or partially, for a purpose of the Commonwealth, it is possible that an acquisition for the purposes of s 51(xxxi) is involved.309
In that decision Deane J was wrestling with the difficulties inherent in formulating a doctrine covering ‘regulatory’ type takings. His Honour went on to quote with approval a passage from the judgment of Stephen J in Trade Practices Commission v Tooth and Co Ltd:
On the one hand, many measures which in one way or another impair an owner's exercise of his proprietary rights will involve no `acquisition' such as pl (xxxi) speaks of. On the other hand, far-reaching restrictions upon the use of property may in appropriate circumstances be seen to involve such an acquisition. That the American experience should provide guidance in this area is testimony to the universality of the problem sooner or later encountered wherever constitutional regulation of compulsory acquisition is sought to be applied to restraints, short of actual acquisition, imposed upon the free enjoyment of proprietary rights. In each case the particular circumstances must be ascertained and weighed and, as in all questions of degree, it will be idle to seek to draw precise lines in advance.310
The test took a more concrete doctrinal form in Tape Manufacturers:311
In a case where an obligation to make a payment is imposed as genuine taxation, as a penalty for proscribed conduct, as compensation for a wrong done or damages for an injury inflicted, or as a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity, it is unlikely that there will be any question of an "acquisition of property" within s 51(xxxi) of the Constitution. On the other hand, the mere fact that what is imposed is an obligation to make a payment or to hand over property will not suffice to avoid s.51(xxxi)'s guarantee of "just terms" if the direct expropriation of the money or other property itself would have been within the terms of the sub-section.312
309 'Tasmanian Dam Case' (1983) 158 CLR 1, 283. 310 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 414-415. 311 Tape Manufacturers (1993) 176 CLR 480. 312 Ibid, 510 (Mason CJ, Brennan, Deane and Gaudron JJ) (emphasis added) (citations omitted). 66
However, the test is something of a movable feast as in each case in which it is applied, the test itself appears to change. In Nintendo Co Ltd v Centronics System Pty Ltd313 it was expressed as follows:
…a law which is not directed towards the acquisition of property as such but which is concerned with the adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity is unlikely to be susceptible of legitimate characterization as a law with respect to the acquisition of property for the purposes of s. 51 of the Constitution.314
One rendering of the test makes no reference to whether the relevant adjustment need be ‘genuine’ or not:
…laws which are unlikely to bear the character of a law with respect to the acquisition of property notwithstanding the fact that an acquisition of property may be an incident of their operation or application [include] … laws which provide for the creation, modification, extinguishment or transfer of rights and liabilities as an incident of, or a means for enforcing, some general regulation of the conduct, rights and obligations of citizens in relationships or areas which need to be regulated in the common interest.315
Dawson J posited that the test was applicable only to acquisitions by third parties such that it operates as a test of the Proviso’s applicability to regulatory type takings.316 Deane and Gaudron JJ in their application of the test in Mutual Pools posited that the impugned legislation only need adjust ‘possibly competing claims’317 to fall outside the Proviso’s scope. When Mason CJ applied the test in Mutual Pools his Honour widened its applicability from adjustments of competing claims between individuals in the community, to adjustments of competing claims between individuals and the Commonwealth itself.318 The same approach was adopted in Health Insurance Commission v Peverill.319 In Airservices Australia320 the test was applied in several of the judgments but differing conclusions were reached.
313 Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134. 314 Ibid, 161 (citations omitted); Mutual Pools (1994) 179 CLR 155, 171, 189-190. 315 Mutual Pools (1994) 179 CLR 155, 189-190. 316 Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134, 167. 317 Mutual Pools (1994) 179 CLR 155, 191. 318 Ibid, 171. 319 (1994) 179 CLR 226, 236 (‘Peverill’). 320 Airservices Australia (1999) 202 CLR 133. 67
Thus, the test began to be applied in circumstances where a benefit of a proprietary nature was conferred upon the Commonwealth or another or in circumstances which were ‘akin to applying the property, either totally or partially, for a purpose of the Commonwealth.’321 The reasoning of Deane J which framed his Honour’s original dictum and the considerations underlying it became entirely lost in its transformation into a concrete doctrine or test. Further, it has been adopted and applied by judges who have explicitly rejected a regulatory takings type doctrine. The test now bears no substantive resemblance to such doctrines despite its history and appearances to the contrary. It now appears to be the default explanation for cases which fall ‘altogether outside the scope of s 51(xxxi)’ where the Court can offer no cogent reasons for the conclusion reached.
However formulated, the test presents a number of problems. The first is its very imprecision which flows from the importation of qualifications to the tests application. The test requires that the law not be directed at acquisition ‘as such’ and that application of the test is only unlikely to have the effect of excluding the operation of the Proviso.322
Secondly, the two undefined normative qualifiers, ‘legitimately’ and ‘genuine’ permit all laws to fall either within or outside its scope of application. The test fails to answer the question it poses, being an identification of the indicia of a law which affect a genuine or not or legitimate or not abrogation of a citizen’s or a State’s proprietary entitlements. As Callinan J held in Smith v ANL Ltd, the test is ‘too imprecise and subjective … for general application.’323
As Kirk observed regarding the characterisation of a law as genuinely made in the pursuit of some legitimate purpose:
Invocation of such vague terms only serves to hide the reasons supporting, and the values behind, the assessments involved.324
The more fundamental problem with the test is that it fails to identify a dichotomy of any sort.325 It may reasonably be argued that the creation of, or amendment of, any law is ‘concerned with the adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity.’ As Callinan J observed in Smith v ANL Ltd:
321 For eg ibid; Mutual Pools (1994) 179 CLR 155. 322 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 15. 323 Smith v ANL Ltd (2000) 204 CLR 493, 552 [181]. 324 Kirk, 'Constitutional Guarantees, Characterisation and Proportionality', above n 289, 19. 325 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 191. 68
The statements in the cases about competing rights and obligations have generally not defined the rights and obligations in question, or made clear what the competition is, whether between rights and rights, or obligations and rights, or what "rights" are so fragile that they must give way to some other right or obligation. … Some would argue that there are very few areas of human conduct, or of rights and obligations, or of relationships between citizens, which do not call for some general regulation in the common interest. In short, much of the business of government is the general regulation of the conduct, rights and obligations of citizens, but that regulation must, like any other governmental activity, be conducted within the constitutional framework and not otherwise.326
As will be discussed in Chapter Two, even if there is such a distinction to be made, between what we call ‘property’ and ‘legal regulation of conduct,’ it is often not easily found.327 And as French J acknowledged in Wurridjal v Commonwealth:328 ‘[a]n acquisition of property is no less an acquisition of property because it also has a regulatory or other public purpose.’329
One of the dangers of the application of such an indeterminate test, which otherwise permits non-compensated acquisitions, is the possibility of it operating as an inverted public purpose test. That is, instead of a public purpose test that requires the purported acquisition to be for a public purpose as a limitation on the acquisitions power, it permits an acquisition if the court deems the purpose of the acquisition to be of sufficient merit and/or in the public/common interest.330 As the following remarks of Crennan and Kiefel JJ in Phonographic suggest, the entrenchment of such an approach is more than a mere possibility:
Whether or not any subsequent legislative reduction of that right whilst it subsisted effected an acquisition of that property would turn on several considerations. Such considerations are likely to include the nature of the public interest to be served by the reduction of the copyright owner's subsisting exclusive rights.331
An application of the adjustment of competing claims test gives the judiciary ample scope to engage in merits-type decision making. Though it does not appear to have been the intention of the judiciary to formulate a test with such a degree of indeterminacy, if one looks to the key elements of the test, a court need only be satisfied that the acquisition is in the ‘common
326 Smith v ANL Ltd (2000) 204 CLR 493, 551 [181]. 327 Kevin Gray, 'Can Environmental Regulation Constitute a Taking of Property at Common Law?' (2007) 24 Environmental and Planning Law Journal 161. 328 (2009) 237 CLR 309. 329 Wurridjal v Commonwealth (2009) 237 CLR 309, 364. 330 See, eg, Theophanous v Commonwealth (2006) 225 CLR 101, 127. 331 Phonographic (2012) 246 CLR 561, 596 [114]. 69 interest’ in an area that ‘needs’ to be regulated. It may well be that these are the imperatives which define a ‘genuine’ or ‘legitimate’ purpose for acquisitions otherwise protected by s 51(xxxi). As Reich wrote:
…"the public interest" is all too often a reassuring platitude that covers up sharp clashes of conflicting values, and hides fundamental choices.332
It could be argued that a characterisation of the Proviso as a fundamental individual right and bulwark against an individual having to bear the burden of schemes in the common interest inevitably leads to a merits-based approach. That is because it poses the s 51(xxxi) issue as a contest between private and public interests333 rather than as an exercise in balancing one public interest against another public interest. That is, as a balancing of the public interest in legal certainty, the security provided by the rule of law and doctrines of private property and substantive adherence to other constitutional restrictions on legislative power,334 as against other public interests including legal adaptability, democracy, parliamentary sovereignty,335 the separation of powers and the maintenance of the Constitution itself. The question is not whether the public interest outweighs or ought to be overridden by private interests but a choice of which public interest ought to be given priority in a given set of circumstances. Blackstone made an argument along these lines, though to the other extreme, writing that:
…the public good is in nothing more essentially interested, than in the protection of every individual’s private rights, as modelled by the municipal law.336
The question cannot be whether an acquisition has a public purpose or falls within a head of power (which it must in any case to be valid at all). The central issue to be determined is whether the purposes of the Proviso are offended by any purpose or effect of an acquisition.
1.8.5 Discussion
Leaving aside the specific problems identified with the tests and the various interpretative approaches discussed above, the manner in which they are combined and applied in the
332 Reich, above n 268, 787. 333 Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193, 221 (Gummow J); Margaret Allars, 'Tort and Equity Claims Against the State' in PD Finn (ed), Essays on Law and Government, Vol 2: The Citizen and the State in the Courts (1996) 49, 93. 334 Keith Mason, 'Money Claims By and Against the State' in PD Finn (ed), Essays on Law and Government, Vol 2: The Citizen and the State in the Courts (Law Book, 1996) 101, 122. 335 Joseph P Longo, 'The Concept of Property and the Concept of Acquisition on Compulsory Acquisition of Land' (1983) 7(3) University of Tasmania Law Review 279, 284. 336 William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), Vol 1, 135. 70 decisions is rather unusual. It is not uncommon to find two or three or even more interpretive approaches or tests applied in a single judgment.337 Not only are the interpretative approaches and subsidiary tests treated as neither conclusive nor exclusive but alternative and potentially conflicting interpretations of the same phrase are often applied within a judgment without any attempt to reconcile the implicit tensions between them. While the ‘General Law’ and ‘inherently subject to modification’ tests are clearly related as they go to the characterisation of the interest, more surprising combinations can be found.
This would appear to be symptomatic of the High Court’s dissatisfaction with the extant doctrines and a frustration that brings about a willingness ‘to seize upon the first plausible rule that becomes handy to dispose of a case that has no merit.’338 However, this only exacerbates the problem and the High Court’s failure to provide a cogent account of matters outside the scope of s 51(xxxi) has generated something of a snowball effect as errors and confusion are perpetuated and then magnified in later decisions.
More than anything, the established interpretive approaches and tests reveal how difficult it is to approach s 51(xxxi) purely in the abstract without a clear sense of ‘the evils it was designed to eliminate,’339 and without taking into account the many forms that property takes, the many ways in which legislation might impact upon those interests and without a more precise conception of property itself.
1.9 Reconciling the Cases
One of the key analytical difficulties, in searching for a ratio or even a common theme in the case law relating to s 51(xxxi), is the preponderance of cases in which the Proviso has been found not to apply. Indeed, it has been wryly observed on more than one occasion that, for ‘a
337 Mutual Pools (1994) 179 CLR 155 (Dawson and McHugh JJ); In their joint judgment, Dawson and Toohey JJ approached the validity of the legislation in dispute by applying nearly all of the established interpretative approaches to s 51(xxxi). 338 Arthur L Corbin, Corbin on Contracts (West Pub Co, revised ed, 1960), 756 [617] cited in Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539, 1199. 339 United States v Brown, 381 US 437, 442 (1965); cited in Polyukhovich (1991) 172 CLR 501, 646 (Dawson J). 71 very great constitutional safeguard’,340 one can easily be ‘underwhelmed’ by the scope of its protection.341
There are a number of possible reasons why the balance of s 51(xxxi) claims are rejected. Firstly, it has been said that the Proviso is argued as a defence of last resort by deep-pocketed plaintiffs with marginally relevant claims.342 Another reason might be that the case law is so confused and contradictory that plaintiffs and their legal advisers are simply unable to assess whether their claims are likely to succeed or not.343 As Gummow J observed in JT International:
Expressions of conclusion in one case as to the deprivation of property, and, if so, the existence of an acquisition of property, do not necessarily provide a sufficient guide to the outcome in later disputes.344
Accounting for various decisions or holdings on the basis of some particular legal or factual issue or other substantive normative dichotomy has proven difficult, if not impossible, in many instances. Even if one categorises cases in terms of similar types of interest being litigated, be it land use,345 mining exploration licenses346 or decisions concerning compensation for injuries sustained in the workplace,347 the High Court’s decisions appear to be flatly inconsistent. In a similar vein, there has been no successful defence of intellectual property rights,348 though the Court has consistently maintained such interests are within the Proviso’s scope. As Williams concluded, ‘s 51(xxxi) cases reveal a fractured jurisprudence.’349
As new cases come before the courts, the parties as much as the Judiciary must attempt to reconcile the diverse and often contradictory propositions and terminology to be found in High Court precedents.
340 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 403 (Barwick CJ); JT International (2012) 250 CLR 1, 95 [263] (Crennan J). 341 Andrew Macintosh and Jancis Cunliffe, 'The Significance of ICM in the Evolution of s 51(xxxi)' (2012) 29 Environmental and Planning Law Journal 297, 315. 342 For eg in Federal Commissioner of Taxation v Clyne (1958) 100 CLR 246, 258; Dixon J characterised the plaintiff’s invocation of s 51(xxxi) as a ‘somewhat desperate-looking, argument’; Eugene Clark, 'Nintendo Wins the Circuit Layout Game' (1994) 5(2) Journal of Law, Information and Science 330. 343 Allen, 'The Acquisition of Property on Just Terms', above n 1, 380. 344 JT International (2012) 250 CLR 1, 54 [119]. 345 Dalziel (1944) 68 CLR 261; 'Tasmanian Dam Case' (1983) 158 CLR 1; Wurridjal v Commonwealth (2009) 237 CLR 309. 346 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513; WMC Resources (1998) 194 CLR 1. 347 A-G (NT) v Chaffey (2007) 231 CLR 651; Georgiadis (1994) 179 CLR 297; Commonwealth v Mewett (1997) 191 CLR 471; Smith v ANL Ltd (2000) 204 CLR 493. 348 JT International (2012) 250 CLR 1; Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134. 349 Williams, Human Rights under the Australian Constitution, above n 41, 153. 72
The following table sets out the possible analyses available on any given set of facts.350
Is the interest Has the interest Is the Proviso engaged? Property? been Acquired? Y N No Y Y Yes or No (for some other reason) N Y No N N No
Under the ‘compound phrase’ approach the following decisional matrix is available.
Has there been an Is the Proviso engaged? ‘acquisition of property on just terms’? N No Y Yes or No (for some other reason)
Without even exploring any of the other exceptions (falling under the ‘No for some other reason’ category above), on the above analysis, we are already faced with up to five divergent and potentially irreconcilable approaches which nevertheless all reach the same conclusion, being that the Proviso is not engaged. To give just one example, at least eleven separate bases have been given justifying the exclusion of criminal fines and forfeitures:
1. To require just terms would be incongruous 2. Such penalties do not permit of just terms 3. The imposition of such penalties is just 4. The imposition of the penalty serves a public interest 5. Such penalties are a proportionate exercise of another head of power 6. It is not the Court’s place to review the wisdom of Parliament’s judgment no matter how harsh the penalty 7. They are not an ‘acquisition’
350 For the sake of simplicity the ‘just terms’ element has not been included. 73
8. Such penalties are not for any purpose in respect of which the Parliament has power to make laws 9. To require just terms would undermine the normative power of the prohibition 10. Such penalties have nothing to with the Proviso or lie altogether outside its scope 11. The common law has long recognised such forms of criminal sanction as legitimate and it is not the Proviso’s purpose to reform these types of penalties
Even within a single judgment such as the majority judgment in Theophanous it was held that the forfeiture of the plaintiff’s interest, as a penalty for a criminal offence, was outside the Proviso’s scope on the basis of an application of the incongruity test351 (‘for some other reason’). Simultaneously, the majority cited with approval the following passage from R v Smithers; Ex parte McMillan:
…a penalty or fine by way of punishment for a criminal offence involves no acquisition of property…352
Conversely, as Evans rightly observed, in discussing the incongruity test excluding laws with respect to taxation; criminal fines and forfeitures and the property of enemy aliens:
This catalogue of examples is pressed into service to support each of competing approaches to s 51(xxxi). Practically all judges who have considered the question agree that laws in relation to these subject matters do not attract the requirement of just terms. Accordingly, they cannot be used to delimit or explain any particular formulation about which laws fall outside s 51(xxxi).353
A further complicating factor is that in the absence of any underpinning doctrinal, theoretical or terminological consistency, there is the real possibility of what might be called conceptual conflation or slippage. For instance, an intuitive characterisation of the property right in question might actually be posited as a conclusion about whether or not the right has been acquired, whether or not just terms have been satisfied or whether or not for some other reason, the Proviso is not engaged.
Consider for instance the characterisation by Mason CJ in Mutual Pools of the decision in R v Ludeke; Ex parte Australian Building Construction Employees' & Builders Labourers'
351 Theophanous v Commonwealth (2006) 225 CLR 101, 125 (Gummow, Kirby, Hayne, Heydon and Crennan JJ). 352 R v Smithers; Ex parte McMillan (1982) 152 CLR 477, 487. 353 Evans, 'When is an Acquisition of Property Not an Acquisition of Property?', above n 5, 198. 74
Federation,354 as standing for the proposition that ‘the complete extinguishment of contractual rights does not constitute [an ‘acquisition of property’]’.355 Subject to one’s theoretical or doctrinal model of property, if the extinguishment of all contractual rights is outside the Proviso’s scope, it may well be equally valid to say that contractual rights are not property for the purposes of s 51(xxxi).356
To paraphrase Hamilton and Till: it is incorrect to say that the Proviso protects acquisitions of property; rather we call an ‘acquisition of property’ that which the Proviso accords protection.357
A more concrete example is that of McHugh J vacillating on a rationale for the exclusion of taxation from the scope of s 51(xxxi). His Honour’s initial view as expressed in Tape Manufacturers358 was that taxation does not constitute an ‘acquisition of property.’ His Honour’s later view, as expressed in Mutual Pools, was that taxation did constitute an ‘acquisition of property’ but was nevertheless outside the scope of s 51(xxxi) for some other reason (being an application of his incongruity test).359
Another possibility is that in some instances s 51(xxxi) could have some application in cases where no monetary compensation was payable.’360 That is, although there was an acquisition of property, just terms does not require the payment of a sum of money to a person or State such that a failure to provide compensatory measures in the relevant legislation does not invalidate it. As Crennan and Kiefel JJ held in Phonographic, ‘the extent of the disadvantage to a property owner may be a material matter in deciding whether just terms have been, or
354 Ludeke (1985) 159 CLR 636. 355 Mutual Pools (1994) 179 CLR 155, 172-173. 356 Allen, The Right to Property in Commonwealth Constitutions, above n 103, 65; See also Mutual Pools (1994) 179 CLR 155, 201 (Dawson and Toohey JJ) ‘we are unable to accept that money constitutes property, at all events property which under s 51(xxxi) may only be acquired on just terms.’; Van der Walt, Constitutional Property Clauses: A Comparative Analysis, above n 48, 48-49; Howard, Australian Federal Constitutional Law, above n 57, 402. 357 ‘It is incorrect to say that the judiciary protected property; rather they called that property to which they accorded protection.’ Walton H Hamilton and Irene Till, ‘Property’ in Edward R A Seligman and Alvin Johnson (eds) Encyclopaedia of the Social Sciences (Macmillan, 1930-1967) vol 12, 528 cited in Felix S Cohen, 'Dialogue on Private Property' (1954) 9 Rutgers Law Review 357, 380. 358 Tape Manufacturers (1993) 176 CLR 480, 528. 359 Mutual Pools (1994) 179 CLR 155, 220. 360 Allen, 'The Acquisition of Property on Just Terms', above n 1, 370; Wurridjal v Commonwealth (2009) 237 CLR 309, 425 (Kirby J) ‘The acquisition of an interest in property might be essential, temporary and involve very limited federal interference. Such property interests might be controlled by the Commonwealth briefly, for the defence of the nation. So long as proper procedures were instituted and observed and the property owners duly informed and quickly restored to full rights once the danger had passed, “just terms” might require little or no monetary compensation’. 75 should have been, provided.361 This argument had been put before the High Court (but rejected) on at least two previous occasions.362 An intuitive conclusion of this nature might also take the form of a holding that there was no acquisition, that the interest was not property for the purposes of s 51(xxxi) or that for some other reason the Proviso was not engaged. Doubling again the confusion is the certainty of the existence of substantive doctrinal and theoretical disagreements amongst members of the High Court over time which for want of a lexical or ontological framework have not found clear articulation.
1.10 Conclusion
Litigation involving s 51(xxxi) is, unavoidably, an arena in which, expressly or not, philosophical contests over the proper role of Parliament in the regulation of the economy and the very meaning and definition of property are fought. Be it in the context of the division of power between Commonwealth, State and Territory governments,363 civil and political rights,364 the nationalisation365 and privatisation366 of various industries, the regulation of new forms of proprietary interest,367 taxation,368 environmental protection,369 public health,370 trade practices,371 defence,372 workplace relations,373 external affairs374 or the enforcement of the
361 Phonographic (2012) 246 CLR 561, 595 [111]. 362 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993); Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993). 363 'Tasmanian Dam Case' (1983) 158 CLR 1; Teori Tau v Commonwealth (1969) 119 CLR 564; Commonwealth v Western Australia (1999) 196 CLR 392. 364 'Communist Party Case' (1951) 83 CLR 1; Ludeke (1985) 159 CLR 636. 365 ‘Bank Nationalisation Case’ (1948) 76 CLR 1. 366 Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210. 367 ICM Agriculture (2009) 240 CLR 140; Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134; JT International (2012) 250 CLR 1. 368 Federal Commissioner of Taxation v Clyne (1958) 100 CLR 246; Mutual Pools (1994) 179 CLR 155; Werrin v Commonwealth (1938) 59 CLR 150. 369 'Tasmanian Dam Case' (1983) 158 CLR 1; Spencer v Commonwealth (2010) 241 CLR 118; ICM Agriculture (2009) 240 CLR 140; Minister for Primary Industry and Energy v Davey (1993) 47 FCR 151. 370 Peverill (1994) 179 CLR 226; JT International (2012) 250 CLR 1. 371 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397. 372 A-G (Cth) v Schmidt (1961) 105 CLR 361; Dalziel (1944) 68 CLR 261; Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495; Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314; Commonwealth v Western Australia (1999) 196 CLR 392; Jenkins v Commonwealth (1947) 74 CLR 400. 373 Ludeke (1985) 159 CLR 636; Chaffey v Santos Ltd (2006) 18 NTLR 22; Georgiadis (1994) 179 CLR 297; R v Taylor; Ex parte Federated Ironworkers Assn of Australia (1949) 79 CLR 333. 374 WMC Resources (1998) 194 CLR 1. 76 criminal law,375 s 51(xxxi) has been raised. Indeed, virtually every facet of the relationship between citizen, constitutional government and property has been the subject of litigation under s 51(xxxi).
However, some rational expression and principled foundation must be given to the connection between the Proviso’s scope of operation and any effect the acquisition may have on the purported title holder to whom just terms might be owed.376 As Burchett J held in Peverill v Health Insurance Commission:
a ... “fundamental human right — the peaceful enjoyment of one's possessions”, must, by its nature, be concerned with the other side of the transaction — with its effect upon the “person” from whom the acquisition is made.377
Such considerations surely must have some role in determining the question of what constitutes just terms and when they will be invoked and satisfied if there is any content to the principle that s 51(xxxi) is ‘a provision of a fundamental character, having the status of a constitutional guarantee, which was designed to protect citizens from being deprived of their property except on just terms.’378
Finding a principled middle path between an absolutist imprescriptible right of property and a majoritarian ‘public good’ approach is a practical as much as it is a philosophical problem.379
375 Theophanous v Commonwealth (2006) 225 CLR 101; Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270; R v Smithers; Ex parte McMillan (1982) 152 CLR 477; A-G (NT) v Emmerson (2014) 253 CLR 393. 376 Peverill v Health Insurance Commission (1991) 32 FCR 133, 459 (Burchett J); Peter Hanks, 'Adjusting Medicare Benefits: Acquisition of Property?' (1992) 14(4) Sydney Law Review 495, 500. 377 Peverill v Health Insurance Commission (1991) 32 FCR 133, 459 citing R v Secretary of State for the Home Department; Ex parte Brind [1991] 1 AC 696, 757 (Lord Ackner). 378 Dalziel (1944) 68 CLR 261, 276 (Latham CJ). 379 Michael J DeMoor, 'Aristotle and Hegel on Private Property and the Common Good' (Paper presented at Canadian Political Science Association 82nd Annual Conference, Concordia University, 2 June 2010). 77
2 Chapter 2 - Interactions and Intersections with other Constitutional Principles and Policies
2.1 Introduction
It is the merit of the common law that it decides the case first and determines the principle afterwards… It is only after a series of determinations on the same subject- matter, that it becomes necessary to ‘reconcile the cases’, as it is called, that is, by a true induction to state the principle which has until then been obscurely felt.1
… people often reach correct answers for wrong or illogical reasons.2
In light of the difficulties with existing doctrine explored in Chapter One, the purpose of this chapter is to explore a number of discrete doctrinal and policy issues which potentially interact or intersect with the Proviso’s interpretation, operation and scope. These include:
1. The Rule of Law under the Australian Constitution 2. Retrospectivity and proprietary expectations 3. The retrospectivity of judicial decision making 4. The ‘disruption to public finances’ 5. Restitutionary claims against the Commonwealth 6. Common law immunity from suits in tort and contract 7. The fettering of Parliament’s law making power by the Executive and the separation of powers 8. Generality and the Separation of Powers
The purpose of this investigation is to consider to what extent these constitutional principles and policies, ordinarily thought of as external to the Proviso’s operation, can better explain various s 51(xxxi) decisions and doctrines and the extent to which they can offer insights into the underlying substantive normative contests both between the parties and the various
1 Oliver Wendell Holmes, 'Codes, and the Arrangement of the Law Note' (1870) 5 American Law Review 1, 1. 2 Stephen Jay Gould, 'Unenchanted Evening' (1991) 100 (9) Natural History 6. 78 reasons provided by the Court. Also to be considered in this and the following chapter is the extent to which there is any direct or indirect support for these alternative approaches in the case law itself.
2.2 The Australian Constitution and the Rule of Law
On Howard’s view, s 51(xxxi) represents ‘one of the few protective guarantees against arbitrary government to be found in the Australian Constitution’3 and indeed, as discussed in the previous chapter, there exists a body of s 51(xxxi) doctrine that arises directly out of what might broadly be described as ‘rule of law’ considerations. Such considerations have long been understood as having direct implications for the Proviso’s operation and scope. Accepting that the rule of law is to be contrasted with arbitrary power,4 the view of Dixon J, that the Proviso was included in the Constitution ‘to prevent arbitrary exercises of the power to acquire property at the expense of a State or the subject’,5 stands as the most cogent authority for such an approach.
However, the remarks of Dixon J are anything but self-explanatory and concepts as nebulous as the rule of law6 do not present ready-made doctrinal formulas capable of straight-forward application.7 Indeed, s 51(xxxi) litigation is something of a parade of the many theoretical and practical problems which arise when various rule of law considerations are at odds with each other and suggest diametrically opposing resolutions to a legal issue.
Dixon J did not give any precise indication of what he meant by ‘arbitrary exercises of power’ and it is not clear that his Honour’s conception of ‘arbitrary power’ is the same as that employed by such writers as Joseph Raz8 or Lon L. Fuller9 or in contemporary administrative
3 Colin Howard, Australian Federal Constitutional Law (Lawbook, 2nd ed, 1972), 394. 4 Albert Venn Dicey, Introduction to the Study of the Law of the Constitution (Macmillan, 7th ed, 1908), 188; Joseph Raz, 'The Rule of Law and It's Virtue' (1977) 93 The Law Quarterly Review 195; Keith Mason, 'The Rule of Law' in PD Finn (ed), Essays on Law and Government, Vol 1: Principles and Values (1995) 114, 129. 5 Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269, 290 (Dixon J). 6 Martin Krygier, 'Still A Rule of Law Guy' [2013] University of New South Wales Faculty of Law Research Series 53; Raz, above n 4. 7 Keith Mason, 'Money Claims By and Against the State', above n Keith Mason, 'Money Claims By and Against the State' in PD Finn (ed), Essays on Law and Government, Vol 2: The Citizen and the State in the Courts (Law Book, 1996) 101, 105. 8 Raz, above n 4. 9 Lon L Fuller, The Morality of Law (Yale University Press, revised ed, 1969), 33–38. 79 law contexts.10 However, his Honour’s judgments in British Medical Association v Commonwealth11 and the Communist Party Case12 would suggest much common ground between them.
The most obvious source for the view expressed by Dixon J is Blackstone:
If a new road, for instance, were to be made through the grounds of a private person, … the legislature alone can, and indeed frequently does, interpose, and compel the individual to acquiesce. But how does it interpose and compel? Not by absolutely stripping the subject of his property in an arbitrary manner; but by giving him a full indemnification and equivalent for the injury thereby sustained.
All that the legislature does is to oblige the owner to alienate his possessions for a reasonable price; and even this is an exertion of power, which the legislature indulges with caution, and which nothing but the legislature can perform.13
This well-known passage of Blackstone’s has been criticised on the basis that he was ‘unable to provide historical support for his position’ and that in fact the common law sets no limits on Parliament’s legislative authority to resume property without compensation.14 Whatever one’s view of Blackstone’s account, it does not represent the contemporary common law position in Australia with the consequence that, since federation at least, State Parliaments, when they acquire or take property, are not obliged to provide compensation.15
In any case, Blackstone’s central point and principal concern were the limits on the exercise of executive power; the prerogative powers to resume property in particular. As the majority explained in Clunies-Ross v Commonwealth:16
…an executive power of acquisition of land for a public purpose is different in nature to a legislative power of a national Parliament to make laws with respect to the acquisition of land for a purpose in respect of which the Parliament has power to make laws…17
10 Mabo v Queensland [No 1] (1988) 166 CLR 186; Clunies-Ross v Commonwealth (1984) 155 CLR 193; Leighton McDonald, 'The entrenched minimum provision of judicial review and the rule of law' (2010) 21 Public Law Review 14. 11 (1949) 79 CLR 201. 12 (1951) 83 CLR 1. 13 William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), 135. 14 William Treanor, 'Origins and Original Significance of the Just Compensation Clause of the Fifth Amendment' (1985) 94 Yale Law Journal 694., 697 n 9. 15 Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399. 16 (1984) 155 CLR 193. 80
This limit on executive power, being a requirement that resumptions be authorized by an Act of Parliament, and Blackstone’s faith in the legislative practices of the UK Parliament to grant compensation, were clearly sufficient in his view to qualify as a safeguard against arbitrary interferences with private property.
The error in looking to English common law for guidance in interpreting or understanding s 51(xxxi) is not merely that it provided no substantive protection to proprietary interests against legislative action but that the very notion of limited government is conceptually foreign, if not entirely repugnant, to it.18 Lord Camden’s dicta in Entick v Carrington19 that property rights are ‘preserved sacred and incommunicable in all instances,’ did not include instances where such rights had been taken away by the Parliament.20 As Kirby J observed in Durham Holdings Pty Ltd v New South Wales,21 the very existence of the common law rule of construction that legislation will not be taken to deprive persons of proprietary rights except by provisions expressed in clear language is implicitly, by its very susceptibility to rebuttal, indicative that the power indeed exists.22
Many aspects of the rule of law of concern to modern jurists are clearly not met by Blackstone’s focus and, as discussed below, the UK Parliament could and did seize property without compensation in a range of circumstances that would not be permitted under the Australian Constitution.
The UK’s limit on majoritarian disruptions to proprietary interests took the form of what in practice, if not law, was the qualification on the right to vote and/or the right to stand for a seat in the House of Commons, the possession of significant land and/or other property interests. Additionally, the House of Lords was largely comprised of landholding aristocracy. That is, to a large degree, the Parliament stood as a self-interested body protecting its own collective propertied interests.
There is clearly a distinction to be made between Blackstone’s fairly narrow and other, more expansive conceptions of arbitrariness. More contemporary conceptions of the rule of law, even of the minimalist kind, would posit a far longer list of conditions to be met such that an
17 Clunies-Ross v Commonwealth (1984) 155 CLR 193, 201. 18 Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399; Treanor, 'Origins and Original Significance of the Just Compensation Clause', above n 14. 19 (1765) 19 St Tr 1030. 20 Lord Camden’s concern in that case were the limits on executive power. 21 (2001) 205 CLR 399. 22 Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399, 426 [58]. 81 exercise of power could be considered non-arbitrary in nature. The starting point for Raz is that:
It is the business of law to guide human action by affecting people’s options. Deliberate violation of the rule of law affects not only the external circumstances but also one’s very ability to decide, act or form beliefs about the future.
Violations of the rule of law affect one’s fate by frustrating one’s deliberations, by making it impossible for a person to plan his future to decide on his action on the basis of a rational assessment of their outcome.23
The two limits on power identified by Blackstone do meet several rule of law concerns. In an Australian context the requirement that forced acquisitions be authorized by an Act of Parliament places them under the same scrutiny, procedural requirements and substantive limitations as any other Act of Parliament. Thus, at a basic level, Raz’s concern that there be a set of ‘durable’ and ‘general rules creat[ing] the framework for the enactment of particular laws’24 is met.
To a certain extent, forcing the Parliament to compensate individuals for acquisitions of property works against arbitrary decision making on the part of the legislature as ‘it enhances Parliament's accountability to taxpayers, since it forces Parliament to take the aggregate costs of its activities into account when deciding which activities to undertake.’25
At a higher level of abstraction, general principles of constitutional law are operative within the s 51(xxxi) context including the principles of judicial review of the constitutionality of statutes and executive action.26
Such trite observations merely confirm the observation of Dixon J in the Communist Party Case that the Constitution gives effect to, is framed in accordance with and proceeds on an assumption of the rule of law.27
23 Raz, above n 4, 205. 24 Ibid, 200. 25 Tom Allen, 'The Acquisition of Property on Just Terms' (2000) 22(3) Sydney Law Review 351Allen, 'The Acquisition of Property on Just Terms', above n , 373. 26 Marbury v Madison, 5 US 137 (1803); Leighton McDonald, 'The entrenched minimum provision of judicial review and the rule of law' (2010) 21 Public Law Review 14. 27 'Communist Party Case' (1951) 83 CLR 1, 193. 82
The doctrines which prescribe that acquisitorial legislation must afford a claimant natural justice and that an independent tribunal with avenues of review determine the measure of compensation28 ensure that the Proviso operates as a true remedial provision. They enshrine the principle that if an Act of Parliament were to make a man judge in his own cause the Court might disregard it.29 Were the legislature to have a free hand in prescribing the level of compensation for an acquisition the protection afforded by the Proviso could easily be set at nought. Likewise, the doctrine excluding voluntary acquisitions from the Proviso’s scope gives imprimatur to a non-arbitrary process for determining the measure of compensation.
Beyond these narrow examples, the question to be considered is whether the Proviso’s protective scope can be coherently described as a function of whether or not a given acquisition operates arbitrarily or breaches various tenets of the rule of law, and further, how a Court might approach the task of making such a determination.
2.3 Open, Clear, Prospective
Perhaps the least controversial tenet of the rule of law is that ‘[t]he law must be open and adequately publicised. If it is to guide people they must be able to find out what it is.’30 Notable in this context is the judgment of Gleeson CJ and Kirby J in Airservices Australia. In finding a statutory lien imposed against an aircraft which had been leased to a third party valid as against s 51(xxxi) their Honours observed of the position as regards the owners of the aircraft:
By inference, they [entered into the lease] knowing that such aircraft would be flown on routes to, from and within Australia, attracting charges for services and facilities provided to all airline operators. They could be taken to know that such charges were not insubstantial. Unpaid, they would accumulate to very large sums. They could readily have ascertained that provision for statutory liens existed under Australian law as under the laws of other jurisdictions involved in civil aviation of a comparable kind. By inference, it
28 ‘Bank Nationalisation Case’ (1948) 76 CLR 1; 'Tasmanian Dam Case' (1983) 158 CLR 1; Commonwealth v Western Australia (1999) 196 CLR 392, 463 (Kirby J), 491 (Callinan J); Wurridjal v Commonwealth (2009) 237 CLR 309. 29 G De Q Walker, 'Dicey's Dubious Dogma of Parliamentary Sovereignty: A Recent Fray with Freedom of Religion' (1985) 59 Australian Law Journal 276; cf Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399. 30 Raz, above n 4, 198-199; William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), 46. 83
would have been open to them to protect themselves (by contract, insurance, or facilities for auditing and reporting) against the kind of result that ensued.31
A similar observation was made by McHugh J:
…any reasonable due diligence process on the part of the owners or lessors prior to the granting of a lease to the operator would have disclosed that at the time the leases were executed, the Australian regulatory framework included the liens provisions. That such a process in fact took place in this case is illustrated by the fact that the leases made the imposition of a lien on the aircraft an event of default. Thus, the imposition of liens over the aircraft was one of the commercial risks evaluated by the owners and lessors when negotiating the lease.32
In both judgments it is notable that these observations were made in the context of a consideration of the ‘proportionality’ of the measures in issue.
Similar observations were made in Nintendo Company Limited v Centronics Systems Pty Ltd;33 a case concerning gaming consoles imported into Australia. After importation, the layout of some the electronic components within the consoles became subject to intellectual property rights which had the effect that the importers were no longer permitted to sell them. Against the finding of the Federal Court below that such a result was ‘unjust’ and ‘irrational’ the High Court, in upholding Nintendo’s appeal, observed that:
…the fact that a period of more than sixteen months was permitted to expire between the enactment of the Act and the commencement of its substantive provisions goes a long way towards removing the consideration of practical injustice to which their Honours adverted. In that regard, the fact that the subject goods were imported more than six months after the enactment of the Act would seem to us to be as significant as the fact that they were imported some ten months before the Act's practical commencement.34
The principle of non-retrospectivity is integral to this approach. As Raz expressed the principle, ‘[o]ne cannot be guided by a retroactive law. It does not exist at the time of action.’35 As the
31 Airservices Australia (1999) 202 CLR 133, 181. 32 Ibid, 255. 33 (1994) 181 CLR 134. 34 Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134, 148. 35 Raz, above n 4, 198; William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), 46. 84
High Court recently affirmed in Director of Public Prosecutions (Cth) v Keating,36 the principle underpins the presumption against retrospectivity in the interpretation of statutes that impose criminal liability. Quoted with approval was the following passage:
A person cannot rely on ignorance of the law and is required to obey the law. It follows that he or she should be able to trust the law and that it should be predictable. A law that is altered retrospectively cannot be predicted. If the alteration is substantive it is therefore likely to be unjust.37
As discussed below, retrospectivity can work to the detriment of either the Commonwealth or an individual in various contexts.
36 (2013) 248 CLR 459. 37 Francis Bennion, Bennion on Statutory Interpretation (Butterworths, 5th ed, 2008), 807 (citations omitted). 85
2.4 Retrospectivity, Legal Certainty and Proprietary Expectations
A useful way of conceptualising the resumption of a proprietary interest is as the retrospective repeal of a proprietary right that operates exclusively against a single individual or narrow community of proprietors. Legislation of this nature offends the principles of non- retrospectivity and generality. Conceiving of the acquisition of property rights in these terms offers a plausible description of the injustices a proprietary protection such as s 51(xxxi) might exist to remedy or prevent. As Deane J remarked in Polyukhovich v Commonwealth:38
Civil legislation which operates retrospectively in the sense that it extinguishes or alters pre-existing rights or liabilities or deems rights and liabilities which it creates to have existed at an earlier time may, depending on the circumstances, be susceptible of legitimate criticism as unfair or unjustified.39
A law creating a property right can be conceived in terms of a representation or undertaking by a government to recognize or protect a given interest. On Bentham’s view, such rights are ‘the promise of the law…’.40 When an individual invests resources on the basis of that representation or undertaking they have implicitly relied on that assurance. When the Commonwealth withdraws the assurance by legislative means a person’s prior deliberations and ‘expectations,’ the rational assessments41 made of the likely results of their own actions will be frustrated. The retrospective defeat of proprietary interests makes a charade of an individual’s capacity to make relevant decisions regarding their financial and business affairs.
In practical terms, proprietary rights, as officially sanctioned assurances or representations, act as a positive encouragement and inducement to an individual to ‘alter his or her position.’42 Individuals invest money, material resources, physical labour or otherwise structure their affairs on the basis of existing laws. When vested property rights are diminished by legislative action, the laws granting the rights that formed the foundation of an individual’s expectation and that led them to alter their position are nullified and an individual’s expectations are frustrated. As Toohey J remarked in Polyukhovich:
38 (1991) 172 CLR 501. 39 Polyukhovich (1991) 172 CLR 501, 608. 40 Jeremy Bentham, 'Principles of the Civil Code' in John Bowring (ed) The Works of Jeremy Bentham Vol 1 (William Tait, 1838) 297, 308. 41 Raz, above n 4, 205. 42 See generally Commonwealth v Verwayen (1990) 170 CLR 394. 86
Laws should function to give reasonable warning of their operation and permit individuals to rely on that scope and meaning until expressly altered.43
Recognising that people rely on their proprietary entitlements to plan their lives and conduct their everyday affairs, the withdrawal of those interests by the Commonwealth as against any one person will ordinarily entail a loss to the person in the nature of a detrimental reliance on that right.
Described in these terms, property rights take the form of an innately legal relationship between citizens and the sovereign which, of its nature, operates as a foundation of economic expectation.44 That is, property rights have no pre-legal or pre-political existence or independence from the state.45 As Bentham wrote, ‘Property is entirely the creature of law… [it] is only a foundation of expectation.’46 Blackstone took the same view in the Commentaries writing that:
…the modifications under which we at present find [private property], the method of conserving it in the present owner, and of translating it from man to man, are entirely derived from society; and are some of those civil advantages, in exchange for which every individual has resigned a part of his natural liberty.47
Such an approach recognises that people invest resources and make important economic decisions on the basis of some expectation that legally enforceable property entitlements have of a degree of stability or permanence.48
If the evil to which s 51(xxxi) is addressed is the arbitrariness of the retrospective defeat of a legal entitlement as against an individual or community of proprietors, expectation-based doctrines are precisely designed to meet this type of problem. Though writing in another context, Campbell suggested that ‘retrospectivity … has been and may be moderated’ by
43 Polyukhovich (1991) 172 CLR 501, 688. 44 Bentham, 'Principles of the Civil Code', above n 40, 308. 45 Ibid, 308. 46 Ibid. 47 William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), 134. 48 Ainsworth [1965] AC 1175, 1248; Bentham, 'Principles of the Civil Code', above n 40, 309; Felix S Cohen, 'Dialogue on Private Property' (1954) 9 Rutgers Law Review 357, 371-2. 87 estoppel-based doctrines.49 Indeed, it can be demonstrated that the elements of such doctrines map precisely onto the actual scenarios encountered in many s 51(xxxi) cases.
As a set of expectation-based doctrines, public law estoppels represent a principled response to the impact that retrospective decision making and retrospective laws have on individuals and the community at large. Were expectation-based considerations relevant to an application of the Proviso they would meet what Burchett J described as ‘the other side of the transaction,’ that is, any ‘effect upon the “person” from whom the acquisition is made.’50 They might also meet Bentham’s concern that:
With respect to property, security consists in no shock or derangement being given to the expectation which has been founded on the laws, of enjoying a certain portion of good. The legislator owes the greatest respect to these expectations to which he has given birth: when he does not interfere with them, he does all that is essential to the happiness of society; when he injures them, he always produces a proportionate sum of evil.51
As Toohey J remarked in Polyukhovich:
Prohibition against retroactive laws … represents a protection of a public interest. This is so, … in the sense that ….it serves to promote a just society by encouraging a climate of security and humanity.52
In an Australian context, expectation-based doctrines find form both as public law estoppels (principally the doctrine of legitimate expectation)53 and as private law estoppels such as promissory estoppel in contract law.54 Each share the same basic elements - an assurance, reliance on the assurance, and loss or prejudice.55 As Mason J observed in the Voyager Case, the various types of estoppel ‘are intended to serve the same fundamental purpose, namely ‘protection against the detriment which would flow from a party's change of position if the
49 Enid Campbell, 'The Retrospectivity of Judicial Decisions and the Legality of Governmental Acts' (2003) 29(1) Monash University Law Review 49, 50, 59. 50 Peverill v Health Insurance Commission (1991) 32 FCR 133, 459 (Burchett J) citing R v Secretary of State for the Home Department; Ex parte Brind [1991] 1 AC 696, 757 (Lord Ackner). 51 Bentham, 'Principles of the Civil Code', above n 40, 309. 52 Polyukhovich (1991) 172 CLR 501, 688-689; see also University of Wollongong v Metwally (1984) 158 CLR 447, 472 (Wilson J) ‘Retrospective legislation which has the effect of subjecting to penalty actions which at the time of their commission were not so subject will often be abhorrent to those who are concerned to maintain a just society governed by the rule of law.’ 53 Res judicata is another but it does not strictly conform to this pattern. 54 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. 55 Dean Knight, Estoppel (Principles?) in Public Law: The Substantive Protection of Legitimate Expectations (Masters Thesis, University of British Columbia, 2004), 1. 88 assumption (or expectation) that led to it were deserted.’56 As Lord Denning stated in Moorgate Mercantile Co Ltd v Twitchings: 57
Estoppel … is a principle of justice and equity. It comes to this: when a man, by his words or conduct, has led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him to do so.58
As another commentator has surmised:
…estoppel and substantive legitimate expectation uphold the principle of legal certainty. This principle is derived from the Rule of Law which, amongst other things, suggests people should be able to plan their lives secure in the knowledge of the legal consequences that flow. … public bodies violate that principle when they renege on assurances or change policies without accommodating the expectations they have previously induced in people.’59
The question then becomes whether or not these doctrines are capable of providing some insight into or explanation for the decisions in any s 51(xxxi) cases.
At its broadest, an expectation-based doctrine operating in the s 51(xxxi) context would require payment of compensation for all retrospective extinguishments of proprietary rights. As Kirby J held in Smith v ANL Ltd:
In the context of s 51(xxxi) of the Constitution, the Parliament may adjust for the future the respective rights to common law damages and statutory compensation.
However, in so far as the Parliament enacts a special law with retrospective operation, … such legislation has to run the gauntlet of s 51(xxxi) of the Constitution.
…I judge the approach of the Court to the meaning of s 51(xxxi) not only to accord with the text of the Constitution but also with universal principles of human rights and, I believe, the expectations of citizens.60
56 Commonwealth v Verwayen (1990) 170 CLR 394, 409; see also Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. 57 [1976] 1 QB 225. 58 Moorgate Mercantile Co Ltd v Twitchings [1976] 1 QB 225, 241. 59 Knight, above n 55, 2. 60 Smith v ANL Ltd (2000) 204 CLR 493, 530 (citations omitted). 89
However, as between public and private law estoppels there exist significant differences and public law estoppels themselves exhibit a significant diversity of form and formulation. The key differences for our purposes are between objective and subjective approaches to expectation and reliance and where the onus of proof lies.
The Objective Approach
In Minister of State for Immigration & Ethnic Affairs v Ah Hin Teoh61 the doctrine of legitimate expectation was expressed in the following terms:
It is not necessary that a person seeking to set up such a legitimate expectation should be aware of the Convention or should personally entertain the expectation; it is enough that the expectation is reasonable in the sense that there are adequate materials to support it.62
Similarly, as was stated in Re Minister for Immigration and Multicultural Affairs; Ex parte Lam,63 an estoppel might arise where there is:
…a reasonable inference ... available that had a party turned his or her mind consciously to the matter in circumstances only in which that person was likely to have done so, he or she would reasonably have believed and expected that certain procedures would be followed.64
This approach is objective in two senses. Firstly, in that it is irrelevant whether or not an individual held a subjective expectation or even knew about the law governing any particular interest.65 It is also objective in the sense that a Court is not concerned with what a hypothetical ‘reasonable person’ might expect.66 In ascertaining the scope of the expectation the Court is engaging only in a process of construing the terms of the representation. By analogy, in the s 51(xxxi) context, under a strictly objective approach the scope of the expectation would be determined only by way of a process of statutory interpretation or an
61 (1995) 183 CLR 273. 62 Minister of State for Immigration & Ethnic Affairs v Teoh (1995) 183 CLR 273, 291 (Mason CJ and Deane J). 63 (2003) 214 CLR 1. 64 Re Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1, 47 (Callinan J). 65 Minister for Immigration and Border Protection v WZARH (2015) 326 ALR 1,8; cf Kurtovic (1990) 21 FCR 193. 66 Cf Frank I Michelman, 'Property, Utility and Fairness: Comments on the Ethical Foundations of "Just Compensation” Law' (1967) 80(6) Harvard Law Review 1165. 90 interrogation of the common law in terms of its promise of stability or indefeasibility.67 In this way a ‘legitimate’ expectation could not extend beyond the strict bounds of the promise, representation or law granting the right. This approach is similar but not identical to the ‘inherently subject to modification test’ as formulated by McHugh J in Peverill68 discussed in the previous chapter. In that decision McHugh J held that:
…without infringing s 51(xxxi), the Commonwealth can regulate a federal statutory entitlement to a payment even after the beneficiary of the payment has fulfilled the conditions entitling that person to the payment provided that the entitlement was made subject to the condition that it could be regulated. It need hardly be said that such a condition may be imposed expressly or by implication or by inference from all the circumstances of the enactment. Moreover, logically no distinction can be drawn between an entitlement subject to a condition of regulation and an entitlement subject to a condition of reduction or revocation.69
What is missing from McHugh J’s approach is any substantive criterion against which an entitlement’s defeasibility can be assessed. An objective assessment of the promise of stability embodied in the legislation granting the entitlement fills that lacuna.
The use of an objective test in this way has some resonance with s 92 doctrine which also makes use of an objective test in construing and interpreting the legislation in dispute.70 In both instances the provisions are operating as objective limits on legislative power and not as individual rights. Whereas, in the context of s 92, the concept of ‘protectionism’ is the criterion against which validity is assessed, one could say that as against s 51(xxxi), the breaking of a promise of stability would be the relevant criterion mandating that provision be made for compensation. Without such touchstones one is left with a purely formalistic doctrine lacking any connection to the substantive purposes of the Constitutional provision.
67 It is questionable as to whether the subjective expectations of an individual might have any relevance even as evidence going to a construal of what reasonable expectations the statute or law granting the property right is capable of giving rise to. 68 (1994) 179 CLR 226. 69 Peverill (1994) 179 CLR 226, 261. 70 Betfair Pty Ltd v Racing New South Wales (2012) 249 CLR 217, 265; APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322, 394 [178], 462 [424]. 91
By way of contrast, the elements of private law estoppels do look to the subjective expectations of an individual in the sense that the representation must be communicated to the representee71 and reliance must flow from the assurance.72
Reliance
The way in which the element of reliance operates as between public and private law estoppels is also substantially different. In Australia, the doctrine of legitimate expectation operates as a procedural protection only.73 The detriment in such contexts is the loss of an opportunity to present one’s case. It is a forbearance loss in a situation whereby a decision maker has failed to ‘bring to a person’s attention the critical issue or factor on which the administrative decision is likely to turn so that he may have an opportunity of dealing with it.’74 So long as the expectation is objectively reasonable and an actual opportunity is lost,75 reliance is, in effect, presumed.
In contrast, private law estoppels do require proof of reliance though it should be noted that, in some circumstances, a plaintiff need not prove reliance in the nature of a forbearance.76
In the context of s 51(xxxi), an objective test of expectation and a presumption of reliance where detriment or prejudice can be proved is in harmony with a presumption that people know the law and that such states of mind need not be proven.77 The following remarks of Mason CJ and Deane and Gaudron JJ in Georgiadis are notable in this context.
Doubtless, Mr Georgiadis and other workers provided their skill and labour on the basis that they were entitled to damages at common law as well as workers' compensation benefits if injured as a result of Telecom's negligence.78
These remarks clearly do not reflect an assessment of the evidence in that case and are better understood as the expression of a presumption of law that the plaintiff was aware of his common law rights.
71 Legione v Hateley (1983) 152 CLR 406; see generally G E Dal Pont, Equity and Trusts in Australia (Lawbook Co, 3rd ed, 2004), 294, 298. 72 see generally Dal Pont, above n 71, 294, 298. 73 A-G (NSW) v Quin (1990) 170 CLR 1. 74 Teoh (1995) 183 CLR 273; Lam (2003) 214 CLR 1. 75 Lam (2003) 214 CLR 1; Kurtovic (1990) 21 FCR 193. 76 Foran v Wight (1989) 168 CLR 385. 77 DPP (Cth) v Keating (2013) 248 CLR 459. 78 Georgiadis (1994) 179 CLR 297, 306. 92
This is a somewhat different approach to the doctrines of legitimate expectation and procedural fairness where the presumption of reliance, in effect, presumes that the plaintiff was ignorant of the representation or relevant legal rule and, for that reason, lost the opportunity to make relevant representations. Ultimately however, the focus in each instance is on the actions of a decision maker and, rather than granting an individual right, places an objective limit on the exercise of executive, judicial or parliamentary power.
An objective test of expectation and a presumption of reliance can also be understood as protecting collective reasonable expectations and the general public interest being served in the protection of the economic expectations of the community as a whole.79 Thus, where an interest is transferable, an objective assessment of expectation is congruent with market value assessments of compensation. That is because a forbearance loss at its highest would cover the forbearance of a market sale of property immediately prior to its resumption (or notice of the resumption) less any normal outgoings. So long as a property interest is capable of being valued, again, detriment can be presumed on the basis that any value to the property holder has been lost by the transfer of the interest out of his or her hands.
As Kirby J remarked in Commonwealth v WMC Resources Ltd:80
One of the institutional strengths of the Australian economy is the constitutional guarantee of just terms where the property interests of investors are acquired under federal law. This Court should not undermine that strength by qualifying the guarantee. Neither the Court's past authority nor economic equity require such a result. If it can happen here it can happen again and investors will draw their inferences.81
These same sentiments were expressed at the convention debates by a number of delegates. As has been pointed out on a number of occasions, the Proviso was subject to very little debate at the Convention.82 Nonetheless, the debates did focus on what measures would best
79 Simon Evans, 'When is an Acquisition of Property not an Acquisition of Property? The Search for a Principled Approach to Section 51(xxxi)' (2000) 11(3) Public Law Review 183, 202 citing Carol M Rose, 'A Dozen Propositions on Private Property, Public Rights, and the New Takings Legislation' (1996) 53 Washington & Lee Law Review 265. 80 (1998) 194 CLR 1. 81 WMC Resources (1998) 194 CLR 1, 102 [259]; see also Justice Michael Kirby, ‘Is There Hope? Law And Economics’ (Speech delivered at Melbourne University Law School, 4 July 1997)
[A] vast amount of English capital is invested in these colonies, ... and I apprehend that the owners of capital and the projectors of business in the old country will view with anything but satisfaction a determination on the part of these colonies to prohibit them in the case of a conflict involving large interests on their part from having the opinion of the best judges in the land upon the question involved.83
The confidence with which investments of all sorts are now made in Australasia by people at home must be largely due to the knowledge that rights of property will be dealt with here by the Law Courts on British principles of justice, and subject to final review by one of the highest English courts.84
The British capitalist, when he considers whether he will invest his money here, will ask, not what is likely to be the decision of a court of law in a contest, but what is our legislation. He will ask what are the laws which govern the subject-matter on which he is asked to invest his money. ... He is never looking to the courts of law for an ultimate decision. He is not apprehending the question of litigation. He relies on the honour and integrity of those with whom he is dealing, and all he asks and likes to see is what is the legislation on the subject.85
Another point raised is that British capital will be terrified from investment in Australia if we keep this High Court only. Does anyone say that British capital has been kept away from the United States because the States have not got an appeal to Great Britain? We know that British capital flows more readily there than to Australia ... As British capital flows to the States so it will flow to Australia, so long as Australia keeps its settled condition and shows its wholesome dread of any violent changes.86
83 Official Report of the National Australasian Convention Debates, Sydney, 1 April 1891, 541 (Sir Henry Wrixon). 84 Official Report of the National Australasian Convention Debates, Adelaide, 20 April 1897, 971 (Sir Joseph Abbott). 85 Official Record of the Debates of the Australasian Federal Convention, Melbourne, 11 March 1898, 2316 (Sir Isaac Isaacs). 86 Official Report of the National Australasian Convention Debates, Adelaide, 20 April 1897, 988 (Henry Higgins). 94
That s 51(xxxi) was subject to so little debate and met with so little resistance at the convention would suggest that the inclusion of a provision of this nature was something of a ‘no-brainer’ for the delegates. Such was the intellectual climate of the day.
From this perspective s 51(xxxi) can also be seen to have some role as a general bulwark against political instability by minimising the kind of political disturbance that could be generated by the frustration of proprietary expectations.87 As Gray remarked:
…it is hugely questionable whether, save in extraordinary circumstances, state-authorised confiscation accompanied by blatant denials of compensation therefor could long remain a politically tenable stance.88
The Proviso potentially prevents incumbent Commonwealth Parliaments from undermining community acquiescence in the existence of government under the rule of law and ‘[t]he continued existence of the community under the Constitution…’89 The place of property right protections, embodied in various constitutional documents from the Magna Carta onwards can be understood in this context:90 that is, principally as the terms of a political settlement amongst various interest groups with the resources available to destabilise the established legal order.91 In political systems which entrench propertied interests within the legislature, as the UK Parliament did at one time, the political impetus or imperative to entrench such protections is diminished.
The High Court’s decision in Telstra Corporation92 presents an example of a case congruent with a strictly objective approach. The Court in that case held, in effect, that the interest which was claimed to have been acquired by the Commonwealth had never been granted or promised. The interest in dispute was a right to exclude competitors from access to its ‘local loops,’ being twisted pairs of copper or aluminium-based wires which run from an end-user's premises to a local exchange. As the Court held:
87 Michelman, above n 66– Michelman describes these as potential ‘demoralisation costs’; see generally Tonja Jacobi, Sonia Mittal and Barry R Weingast, 'Creating a Self-Stabilizing Constitution: The Role of the Takings Clause', (2015) 109(3) Northwestern University Law Review 601. 88 Kevin Gray, 'Can Environmental Regulation Constitute a Taking of Property at Common Law?' (2007) 24 Environmental and Planning Law Journal 161, 168. 89 'Communist Party Case' (1951) 83 CLR 1, 141 (Latham CJ), 188 (Dixon J); As Locke wrote, ‘the first and fundamental natural law, which is to govern even the legislative itself, is the preservation of the society.’ John Locke, The Second Treatise of Government (Basil Blackwell, 1948), 66, § 134. 90 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 659 (Kirby J); ICM Agriculture (2009) 240 CLR 140, 618 (Heydon J). 91 See generally Jacobi, Mittal and Weingast, 'Creating a Self-Stabilizing Constitution', above n 87. 92 (2008) 234 CLR 210. 95
Telstra has never owned or operated any of the assets that now comprise the PSTN except under and in accordance with legislative provisions that were directed to "promoting ... competition in the telecommunications industry generally and among carriers" and sought to achieve this goal by "giving each carrier the right ... to obtain access to services supplied by the other carriers"…
Telstra's argument that there is an acquisition of its property otherwise than on just terms is, … synthetic and unreal because it proceeds from an unstated premise that Telstra has larger and more ample rights in respect of the PSTN than it has. But Telstra's "bundle of rights" in respect of the assets of the PSTN has never been of the nature and amplitude which its present argument assumes. Telstra's bundle of rights in respect of the PSTN has always been subject to the rights of its competitors to require access to and use of the assets.93
A strictly objective approach would suggest that Telstra Corporation failed in this case because it never held the interest claimed or had no property in the interest. There could be no objectively reasonable expectation because there was no ‘representation’ at all that the interest existed. As Gray remarked of the case, 'ownership [had been] replaced by access.'94 In this sense, the Court had no need to go on and consider reliance and the result is explicable purely in terms of a formal legal analysis of the rights conferred and acquired.
It is significant to note, however, that once a strictly objective approach is distilled into a concrete doctrine, substantive elements of expectation and reliance recede into the background if not entirely disappear from view. All that is left is a construal of the boundaries of the proprietary right and an objective assessment of loss occasioned by the transfer of the interest to the Commonwealth if in fact that has occurred. The apparently critical elements of expectation and reliance are presumed and need not be specifically considered.
One might ask then, in what way is such a doctrine a public law estoppel or expectation-based doctrine at all? The same issue has arisen in the development of the doctrine of legitimate expectation and indeed the High Court has sought to do away with the notion of ‘legitimate expectation’ precisely because it is apt to mislead.95 None of the elements of that doctrine are concerned with any expectation actually held or proof of detrimental reliance. The High Court
93 Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210, 233 [51]-[52] (citations omitted). 94 Kevin Gray, 'Regulatory Property and the Jurisprudence of Quasi-Public Trust' (2010) 32 Sydney Law Review 221, 239. 95 Minister for Immigration and Border Protection v WZARH (2015) 326 ALR 1, 7-8. 96 has properly emphasised that the doctrine is ultimately concerned with the question of what procedural fairness requires in a given instance.96 Nonetheless, the risk associated with losing sight of its true nature as a public-law estoppel is that of being deceived by the doctrine’s surface formalism, forgetting its underlying purpose or purposes and the values that the doctrine serves to protect.
The question posed by s 51(xxxi) is analogous in that it asks, what does ‘just terms’ require be done to remedy or prevent injustice to a property owner whose interests might be adversely affected by Parliamentary decision making, that is, legislation. It might be ventured that an expectation-based approach reminds us that legislation and the common law do not operate in a vacuum but rather operate as representations to the community in the context of a relationship between citizens, States and the Commonwealth. In the context of property rights in particular, an objective expectation-based approach identifies instances where the principle of non-retrospectivity has been breached. Bentham’s observations, made in the context of a discussion about the role of expectation in English common law, are particularly apt:
The views of jurists must have been extremely confused, since they have paid no particular attention to a sentiment so fundamental in human life: the word expectation is scarcely to be found in their vocabulary; an argument can scarcely be found in their works, founded upon this principle. They have followed it, without doubt, in many instances, but it has been from instinct, and not from reason.
What is notable about the Telstra case discussed above was the staged process the Court adopted in carefully considering the nature of the interest in dispute in terms of the original grant – an approach that is absent in many other decisions. The only difference between the Court’s approach in construing the legislation in Telstra and that suggested here is the drawing of an express link to the substantive purposes of s 51(xxxi) and a conception of property as a function of the relationship between Parliament and the citizen which gives rise to objectively ascertainable expectations. In more difficult cases such an approach is likely to provide greater assistance to litigants and the courts than the ‘bundle of rights’ theory of property or the notion that property is some kind of concentration of legal power.
Such an approach is also in conformity with the decisions in, ICM Agriculture v Commonwealth97 and Minister for Primary Industry and Energy v Davey,98 where the interests
96 Ibid. 97 (2009) 240 CLR 140. 97 in dispute were defeasible at the discretion of the executive. In each instance an expectation of stability or permanence would have been unreasonable. It is also capable of explaining the decisions in Georgiadis,99 Commonwealth v Mewett 100 and Smith v ANL Ltd101 for the reason that the plaintiff’s interests, strictly construed, were capable of giving rise to a reasonable expectation of stability. It is also in conformity with the decision in the ‘Bank Nationlisation Case’102 where the Commonwealth seized possession of the rights of shareholders to appoint directors and was thereby put in a position to control its assets and the payment of dividends, even though formal title remained in the shareholders’ hands.
The High Court’s decision in Tape Manufacturers, however, bucks this trend.103 In that case the Court found that even the Commonwealth’s legislative assumption and transfer to third parties of the copyright owners’ negative right to prevent others from making copies of copyrighted works did not constitute an acquisition of property. As the majority observed, ‘the Act deprives the relevant copyright owners of what was formerly an exclusive right.’104 In this respect the Court’s analysis in Tape Manufacturers is in direct conflict with the approach taken in JT International and Dalziel.105
Michelman’s Approach
Drawing on Bentham, Michelman explored how an expectation-based model of property might operate or justify compensation in the context of a ‘taking’ under the Fifth Amendment. Adopting a strict utilitarian approach he conceived of frustrated expectations in terms of ‘demoralisation’ and ‘demoralisation costs’ being the ‘responses we must impute to ordinarily cognizant and sensitive members of society.’106 Thus, in doctrinal terms, Michelman’s approach is to ask what a hypothetical ‘reasonable person’ might expect of their property entitlements. The result is that a ‘legitimate expectation’ might extend beyond the strict confines of the interest actually granted. It is not a subjective test as such but includes a subjective element.
98 (1993) 47 FCR 151. 99 (1994) 179 CLR 297. 100 (1997) 191 CLR 471. 101 (2000) 204 CLR 493. 102 (1948) 76 CLR 1. 103 Allen, 'The Acquisition of Property on Just Terms', above n 25, 357. 104 Tape Manufacturers (1993) 176 CLR 480, 499 (Mason CJ, Brennan, Deane and Gaudron JJ). 105 Dalziel (1944) 68 CLR 261, 285 (Rich J). 106 Michelman, above n 66, 1215-1216. 98
Such an approach bears some similarity to a Waltons Stores (Interstate) Ltd v Maher107 type estoppel in that it would ‘grant relief to a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it.'108 This would be so in the sense that an estoppel/right to compensation might arise where there is no promise of stability or positive representation to point to but the plaintiff had acted in reliance on the interest and the Parliament intended that they do so.
Michelman’s approach meets several of the available criticisms of a strictly objective approach, the first being that it embodies a formalistic109 approach to a constitutional guarantee. The second available critique met by Michelman’s approach is that people very often rely on and make substantial investments of time and money even in circumstances where they possess no positive proprietary right, the legal interest is clearly defeasible or it fails to offer any promise of stability or permanence: that is, in circumstances where there are no materials, strictly construed, capable of giving rise to a reasonable expectation of stability.
Michelman’s approach is properly understood as an extension or broadening of a strictly objective approach and in many circumstances the dichotomy does not arise. For instance, where the Commonwealth takes actual possession or otherwise uses the property or allows others to use the property, the Commonwealth is exercising an owner’s right to exclude others by permitting its agents or others to enter. It has ousted the proprietor as gatekeeper110 and thereby, is effectively exercising and acquiring the owner’s negative right to exclude them. In such a situation the negative right, strictly construed, would give rise to an objectively reasonable expectation which has then been defeated and an estoppel would be made out. The decision in Dalziel illustrates the point clearly.111 In Dalziel the Commonwealth took effective possession of a piece of land leased by Dalziel which he used in the course of his business operating a parking station. In taking possession of the land and using it for its own purposes the Commonwealth had ousted Dalziel as gatekeeper and permitted its own agents to enter and use the land. Irrespective of Dalziel’s personal expectations regarding use of the land, an objectively reasonable expectation of being able to exercise his rights as leaseholder
107 (1988) 164 CLR 387. 108 Foran v Wight (1989) 168 CLR 385, 412 (Mason J); Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, 675; Thompson v Palmer (1933) 49 CLR 507, 547. 109 JT International (2012) 250 CLR 1, 31 [37]( French CJ). 110 Thomas W Merrill, 'Property and the Right to Exclude' (1998) 77(4) Nebraska Law Review 730. 111 See also ‘Bank Nationalisation Case’ (1948) 76 CLR 1, 349 (Dixon J). 99 and so exclude Commonwealth agents and others had been defeated. The same analysis would hold true under Michelman’s approach in the sense that reasonable persons would always expect to be able to rely on the stability of their express proprietary rights.
In Australia, with the exception of the dissenting judgments of Heydon J in JT International, ICM Agriculture and Chaffey, Michelman’s approach has been rejected by the High Court. It could be said that the distinction between the two approaches represents one of the central differences between Australia’s approach to an ‘acquisition’ and the US Supreme Court’s approach to a ‘taking.’
Positive and Negative rights
The starkest distinction between the two approaches is in how each deals with negative rights. Many proprietary rights are often understood only as conferring a right to exclude rather than a positive right to use or exploit the property.112 A well-known scenario is where a person purchases a piece of land on which to build a house and the legislature then passes a law prohibiting any buildings being constructed on that land.113 Because the property right in the land does not encompass a positive right to do any particular thing to or on the land, on a strictly objective approach there is no defeat of a reasonable expectation and no estoppel arises.
On the other hand, Michelman, again following Bentham, would conclude that an estoppel had been made out for the reason that title implies some degree of use and an expectation of use or exploitation. As Bentham wrote:
But this expectation, this persuasion, can only be the work of the law. I can reckon upon the enjoyment of that which I regard as my own, only according to the promise of the law, which guarantees it to me. It is the law alone which allows me to forget my natural weakness: it is from the law alone that I can enclose a field and give myself to its cultivation, in the distant hope of the harvest.114
112 Felix S Cohen, 'Dialogue on Private Property', above n 48; Merrill, 'Property and the Right to Exclude', above n 110; J E Penner, 'The "Bundle of Rights" Picture of Property' (1996) 43(3) UCLA Law Review 711. 113 Lucas v South Carolina Coastal Council, 505 US 1003 (1992); Gray, 'Can Environmental Regulation Constitute A Taking Of Property At Common Law?', above n 88; Slattery v Naylor (1888) 13 App Cas 446. 114 Bentham, 'Principles of the Civil Code', above n 40, 308. 100
It is difficult to argue against this position for the reason that common sense tells us that people purchase property or make other productive investments so that they can use, derive financial benefits from or otherwise exploit the resource which is the subject of the property right. Further, for the reason that many property rights have been developed by the common law in circumstances where the interests are being determined in an adversarial contest between two individuals, the questions as to how a particular right ought to be determined as against a polity,115 or whether it does include a positive use entitlement, would typically never arise. It is not always the case that the Commonwealth can be ‘considered as an individual, treating with an individual for an exchange.’116
The decision in JT International provides a good example of a case where the Commonwealth sought to restrict use rather than exercise the right to exclude. In that case the interests in dispute included a right or freedom to use or exploit trademarks, patents and registered designs. In JT International it was accepted by a majority of the Court to the effect that:
Intellectual property is ... a purely negative right, … Thus, if someone owns the copyright in a film he can stop others from showing it in public but it does not in the least follow that he has the positive right to show it himself.117
The truth is that letters patent do not give the patentee any right to use the invention — they do not confer upon him a right to manufacture according to his invention.118
Accordingly, the Commonwealth submitted that:
…the imposition of restrictions on their use would take nothing away from the rights granted. Therefore, … no property had been taken by the TPP Act.119
This argument was not accepted by any member of the Court other than as a consideration relevant to whether or not the property had been acquired.120 The focus in JT International on
115 The same problem arises in litigation between a citizen and the Commonwealth which involves the operation of s 64 of the Judiciary Act 1903 (Cth) which stipulates that ‘the rights of parties shall as nearly as possible be the same, … as in a suit between subject and subject. Working out the extent to which it is possible to apply general law principles ‘as nearly as possible’ is no straight forward task; see generally Paul Finn, 'Claims Against the Government Legislation' in PD Finn (ed), Essays on Law and Government, Vol 2: The Citizen and the State in the Courts (Law Book, 1996) 53. 116 William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), 134. 117 Laddie, Prescott and Vitoria, The Modern Law of Copyright and Designs, (Butterworths Law, 4th ed, 2011), Vol 1, 3 [1.1]; JT International (2012) 250 CLR 1, 31 [36] (French CJ). 118 JT International (2012) 250 CLR 1, 31 [36] (French CJ) citing Steers v Rogers [1893] AC 232, 235 (Lord Herschell LC); The Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479, 513-514. 119 JT International (2012) 250 CLR 1 31 [37]( French CJ). 101 the acquisition question rather than the property question is typical of the High Court’s sidestepping of the ‘property’ issue and approach to the Proviso generally. Although, as French CJ observed:
…the negative character of the plaintiffs' property rights leaves something of a logical gap between the restrictions on their enjoyment and the accrual of any benefit to the Commonwealth or any other person.121
The ‘logical gap’ is the impossibility of acquiring from a person something which they do not possess. Adopting a strictly objective approach it is irrelevant whether or not the interest in dispute is ‘property’ if the plaintiff does not have a legal interest in that right or indeed if the property held by a plaintiff does not encompass the usage or usufructory right which is said to have been acquired. Had the Commonwealth granted to itself or others permission to use the plaintiffs’ copyrighted designs, trademarks or patents, the right to prevent others from using the intellectual property would have been relevantly ‘acquired.’ The Commonwealth would in that circumstance have taken ‘all the rights of an owner in possession.’122
On a strictly objective approach there is no reasonable expectation because the right actually possessed was a negative right and the plaintiffs were never in possession of a positive right to use the patents and trademarks. Of course the same result could have been achieved without recourse to notions of expectation by way of a strict formalist approach to construing the boundaries of the interest granted but, as discussed above, this approach was not adopted either. Even if such an approach had been adopted the Court would have failed to construe the plaintiffs’ intellectual property interests and the Parliament’s actions in diminishing those interests in terms of any substantive purpose or purposes of s 51(xxxi).
On Michelman’s approach, a reasonable person might expect that some positive right to use a trademark of great value would be within the right granted and its sterilisation deserving of compensation - particularly where a great deal of money had been invested in making it well known to the community in circumstances where it had previously been permissible to do so.
JT International is not the perfect example in some respects because the common law has always placed limits on publication whether the works are copyrighted or not and to propound
120 Ibid, 34 [43] (French CJ); 59-60 [137]-[141] (Gummow J); 99 [277], 106 [296] (Crennan J), 67 [166] (Hayne and Bell JJ). 121 Ibid, 34, [43] (French CJ). 122 Ibid, 128 [358] (Kiefel J). 102 the alternative case is to argue for an unlimited right to free speech. The jarring consequences of such a doctrine would be that the grant of any intellectual property over any novel idea, process or image entitles the owner to indefinite and unregulated used of it. An argument that the owner of a patent over narcotic drugs or a newly synthesised poison must be compensated such that the Commonwealth had legislative power to regulate their manufacture, distribution or use, would never be entertained. As the US Supreme court noted in Penn Central Transportation Co v New York City:123
Government could hardly go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.124
The same consideration has come to play a role in the UK’s doctrine of substantive legitimate expectation. As Lord Hoffman held in Regina v East Sussex County Council Ex parte Reprotech (Pebsham) Ltd:
There is of course an analogy between a private law estoppel and the public law concept of a legitimate expectation created by a public authority, the denial of which may amount to an abuse of power. But it is no more than an analogy because remedies against public authorities also have to take into account the interests of the general public which the authority exists to promote…125
However, the same argument cannot be mounted against many other interests constituted by a purely negative right.
Though logically consistent, Michelman’s approach suffers from a number of intractable difficulties. As against a strictly objective approach which is largely predictable in its operation, Michelman’s is indeterminate and unpredictable. As discussed by Stephen J in Trade Practices Commission v Tooth and Co Ltd126 referred to in the previous chapter, any given species of property interest must be examined on a case-by-case basis to determine the reasonable expectations it is capable of giving rise to. As Singer observed:
123 260 US 393 (1922). 124 Pennsylvania Coal Co v Mahon, 260 US 393, 413 (1922); Mutual Pools (1994) 179 CLR 155, 203 (Dawson and Toohey JJ). 125 [2002] 4 All ER 58, [34}-{35]; ‘Public law can also take into account the hierarchy of individual rights which exist under the Human Rights Act 1998, so that, for example, the individual's right to a home is accorded to a high degree of protection while ordinary property rights are in general far more limited by considerations of public interest…’ . 126 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 414-415. 103
The investment model, … focuses on the protection of justified expectations based on possibly shifting judgments of legitimacy that may vary over time as social conditions and values change.127
Legitimacy of expectations comes partly from custom, tradition, and precedent and also partly from democratic lawmaking and normative judgments about fairness and welfare.128
The question for the investment model is whether the owner's expectations are justified, and this question cannot be answered without resort to a normative conception that can distinguish between justified and unjustified expectations.129
As Gray rightly observed, determining ‘[t]he precise location of the threshold where regulation shades into confiscation (ie effects a “regulatory taking”) is one of the most difficult questions of modern law.’130 Gray described the approach as requiring:
…an examination of the inner meaning of property,131 …the interaction of human rights and civic duties, ... [ascertaining] the correct political balance between individual and community interests, … exploring ‘the implicit content of citizenship … and ‘working out a modern civic morality of property… 132 [a task that] has rightly been called the ”lawyer’s equivalent of the physicist’s hunt for the quark.”133
Tracing the many difficulties that Michelman’s approach gives rise to is well beyond the scope of this thesis. For our purposes it is sufficient to observe that on either a strictly objective approach or that of Michelman the question of whether there is a reasonable or legitimate expectation is logically prior the question of whether it has been defeated because it is the boundaries of the expectation which define the scope of the interest/property worthy of
127 Joseph William Singer, 'The Ownership Society And Takings Of Property: Castles, Investments, And Just Obligations' (2006) 30(2) Harvard Environmental Law Review 309, 325. 128 Ibid, 326. 129 Ibid, 326. 130 Gray, 'Can Environmental Regulation Constitute A Taking Of Property At Common Law?', above n 88, 175. 131 Ibid, 181. 132 Ibid, 161. 133 Charles M Haar, Land-Use Planning (Little, Brown & Co, 3rd ed, 1976) cited in Williamson County Regional Planning Commission v Hamilton Bank of Johnson City 473 US 172, 199 (Blackmun J) (1985) quoted in Gray, 'Can Environmental Regulation Constitute A Taking Of Property At Common Law?', above n 88, 171. 104 compensation. Only then can the question be answered of whether the legislation in dispute defeats, frustrates, acquires or merely takes the underlying right.
In rejecting a US style regulatory takings doctrine the High Court has rejected Michelman’s approach. The scenarios presented in Minister for Primary Industry and Energy v Davey134 and ICM Agriculture v Commonwealth135 usefully demonstrate the contrast between the two approaches. Both decisions dealt with market-based Commonwealth schemes designed to promote environmental outcomes. In each, the plaintiffs were granted transferable usage entitlements (positive rights) and in each it was clearly the case that the Commonwealth intended (or indeed forced)136 the plaintiffs to invest heavily in the statutory interests in question in order to carry on their commercial activities. The interests themselves were both valuable and transferable and yet, in that the substance of the interests were expressly defeasible at the hands of the executive, they did not promise any degree of stability or permanence.
In contractual terms, the interests granted by such schemes are an illusory promise.137 That is:
a promise … accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all.138
Indeed, to bring such interests within the scope of s 51(xxxi) would be to make the Commonwealth an insurer against a risk that investors voluntarily undertake. As the High Court held in Kakavas v Crown Melbourne Limited:139
A plaintiff who voluntarily engages in risky business has never been able to call upon equitable principles to be redeemed from the coming home of risks inherent in the business.140
134 (1993) 47 FCR 151. 135 (2009) 240 CLR 140. 136 Margaret Brock, 'Restitution of Invalid Taxes - Principles and Policies' (2000) 5(1) Deakin Law Review 127, 131 discussing Bell Brothers Pty Ltd v Serpentine-Jarrahdale Shire (1969) 121 CLR 137. 137 Sir Anthony Mason and S J Gageler, 'The Contract', in P D Finn (ed), Essays on Contract (Lawbook, 1987) 1, 13-14, 25-26; Denis Rose, 'The Government and Contract', in P D Finn (ed), Essays on Contract (Lawbook, 1987) 233, 241. 138 Placer Development Ltd v Commonwealth (1969) 121 CLR 353, 356; Broome v Speak {1903) 1 Ch 586, 599. 139 (2013) 250 CLR 392. 140 Kakavas v Crown Melbourne Limited (2013) 250 CLR 392, 401-402. 105
It could be said of such schemes that they do not grant a property right at all but merely confer a discretion on the Executive.141 Of note in this context is the joint judgment of Black CJ and Gummow J in Davey. In finding for the Minister their Honours largely adopted the Ministers submission that:
…if the units are found to be defeasible, in the sense of being subject to alteration by the Minister, then no acquisition can have occurred at all.142
When the rights were altered, the fishermen were not losing anything with which they had been indefeasibly invested by the statutory scheme.143
It is necessary …for the administering authority to be able to alter the rights of unit holders. And that this was envisaged has been clear on the face of the legislation since 1985…144
The making of such amendments is not a dealing with the property; it was the exercise of powers inherent at the time of its creation and integral to the property itself.145
Similar considerations appear in the joint judgment of Hayne, Kiefel and Bell JJ in ICM Agriculture. In finding that the relevant legislation did not effect an acquisition of property their Honours observed that:
…the measure of control which the State has over the resource was unaltered by the cancellation of any particular entitlements to extract groundwater.146
Another problem with characterising such schemes as embodying some kind of definitive representation or promise is what in contractual terms would be their indeterminacy or uncertainty in the sense that, year to year, the schemes do not entitle a license holder to extraction of any specific quantity or, in the case of welfare benefits, any particular sum of money. In contractual terms, the nature of the guarantee or promise by the Commonwealth
141 R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327; Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 March 1993), 106. 142 Davey (1993) 47 FCR 151, 163. 143 Ibid, 164. 144 Ibid, 164. 145 Ibid, 165. 146 ICM Agriculture (2009) 240 CLR 140, 203; and see Andrew Macintosh and Jancis Cunliffe, 'The Significance of ICM in the Evolution of s 51(xxxi)' (2012) 29 Environmental and Planning Law Journal 297. 106 cannot be definitely stated, an essential term of the promise defining those obligations having been left for determination to some future point in time, the promise would be void for uncertainty.147
Nonetheless, the withdrawal of such interests by the Commonwealth in circumstances where individuals have no real alternative148 but to invest in them in order to carry on their ordinary business activities appears to visit a tangible injustice on the holders of the interest.149
As Heydon J demonstrates in ICM Agriculture, the interests litigated in that case and in Davey may well have fallen within the scope of s 51(xxxi) were it determined by way of an application of Michelman’s approach. The decision in Newcrest Mining (WA) Ltd v Commonwealth150 also gives some limited support to the approach. In that case the plaintiffs were in possession of a lease granted by the Commonwealth granting a positive right to mine and exploit the mineral resources in the subject land. However the lease contained the following proviso;
PROVIDED FURTHER 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.151
However, as McHugh J held:
…what was done by the Proclamations differed markedly from that which was allowed by the proviso in the prescribed forms. The Crown (assuming the Commonwealth may be so regarded for this purpose) did not, in the terms of that proviso, "resume possession ... of the surface of the land" in question for any public purpose. Rather, the Proclamations brought about a result whereby there were acquisitions of the land and the minerals to a
147 Placer Development Ltd v Commonwealth (1969) 121 CLR 353, 359-60; see generally H K Lucke, 'Illusory, Vague and Uncertain Contractual Terms' (1977-1978) 6(1) Adelaide Law Review 1. 148 Brock, 'Restitution of Invalid Taxes', above n 136, 131. 149 One of the problems with these types of transferrable licencing schemes is the way in which they expose licensees to precipitous losses. Because the market price for a licence will be determined in large measure by speculative rates of return relative to the cash rate – in the same way that shares are valued - the defeat or withdrawal of a licence may deliver a precipitous loss to a purchaser who has bought at market rates. On the other side of the ledger, those with initial allocations may make a windfall profit on the sale of a licence (as might a promotor or underwriter). Such schemes turn businesses engaged in basic productive labour such as fishing, farming or taxi driving into market speculators and exposes them to an additional source of risk over and above that associated with the market for the commodity or service they provide. See Charles A Reich, 'The New Property' (1964) 73(5) The Yale Law Journal 733, 735. 150 (1997) 190 CLR 513. 151 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 618. 107
depth of 1,000 metres and, by force of s 7(7) of the Conservation Act, there was vested in the Director the interest of the Commonwealth in the land save that in respect of minerals.152
Arguably, legislative schemes of the sort in dispute in ICM Agriculture and Davey enable the Commonwealth Parliament to reap the political advantages associated with espousing both free market ideology and a commitment to protection of the environment. However, these political gains come at the expense of licensees. These two cases also demonstrate rather well that markets can only function properly where tradable interests have some degree of stability. As Lord Mansfield stated in Vallejo v Wheeler:153
In all mercantile transactions the great object should be certainty ... [I]t is of more consequence that a rule should be certain, than whether the rule is established one way rather than the other.154
Indeed, it could be argued that property interests are created by the state for the very purpose of creating some semblance of economic order and stability.155
Such schemes offend these principles and it has been argued also fail to achieve their regulatory ends.156 They stand as a political fix whose cost is visited upon individuals. Carbon trading schemes exhibit the same flaws and in all instances taxation is an alternative route to the same end. If one of the purposes of the Proviso is ‘to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole'157 these schemes offend that purpose.
152 Ibid, 618. 153 (1774) 1 Cowp 143. 154 Vallejo v Wheeler (1774) 1 Cowp 143, 153, quoted in T H Bingham, The Rule of Law (Allen Lane, 2010), 38; cited in Jeremy Waldron, The Rule of Law and the Measure of Property: The 2011 Hamlyn Lectures (Cambridge University Press, 2012), 15-16. 155 Of course Locke made a similar argument claiming that; ‘THE great end of men's entering into society, being the enjoyment of their properties in peace and safety,…’ John Locke, The Second Treatise of Government (Basil Blackwell, 1948), 66. 156 Anitra Nelson, ‘Carbon Emissions: Prices and Values’ (2010/2011) 66 Journal of Australian Political Economy 268; Shona Stevens, ‘The Carbon Unit: Is it Personal Property and Would Repeal of the Clean Energy Act Demand Acquisition on Just Terms under the Constitution?’ (2011/2012) 17(79) Queensland Environmental Practice Reporter 252; Samantha Hepburn, 'Carbon Rights As New Property: The Benefits of Statutory Verification' (2009) 31(2) Sydney Law Review 239. 157 Armstrong v United States, 364 US 40, 49 (Black J) (1960). 108
However, these distributional fairness and equality of burden arguments, as echoed Heydon J in ICM Agriculture,158 are in direct conflict with a strictly objective approach to the Proviso. Such arguments require the Court to engage in a consideration of the harshness or merits of the legislation in dispute. The issue no longer strictly centres on formal questions of legal certainty but strays into questions of substantive equality and there is no coherent middle position between the two approaches in such circumstances. It is worth pointing out, however, that although Michelman’s approach might derive support from equality of burden arguments, it does not rest on them. They are distinct and entirely severable approaches.
Another point to be made is that the issues thrown up by transferable licencing schemes are not easily solved by reference to traditional notions of property. The problems that these schemes create illustrate quite vividly the concerns that Reich expressed and warned about in his article ‘The New Property.’159 They embody something of a historical regression in that they revest the executive with a range of discretionary powers - albeit that the Parliament is the instigator of such schemes. Inasmuch as the defeat of the interests created by such legislative schemes does not give substantive offence to the principle of non-retrospectivity they do not comfortably fit within the Proviso’s scope nor even a regulatory takings type doctrine. The Proviso is not easily moulded to address issues associated with executive discretions.
Their evil, like the Waltons Stores (Interstate) Ltd v Maher160 type estoppel which would protect them, is entirely novel. Inasmuch as the Parliament intends that licensees will rely on such interests, these types of schemes leave individuals in a permanent state of uncertainty in conducting their businesses. Nonetheless one can envisage a time when the High Court recognises such interests as within the Proviso’s scope in the same way that the High Court came to recognise that estoppel can be a sword operating outside the confines of a contractual promise. Arguably however, the mechanisms by which governments can act arbitrarily against citizens’ interests are multiplying at a faster rate than the judiciary’s ability or willingness to curtail them. An entrenched property protection has no work to do in a system where all valuable interests are constituted by various forms of regulatory property.161
Subjective approach
As McHugh and Gummow JJ stated in Lam:
158 ICM Agriculture (2009) 240 CLR 140, 209. 159 Reich, above n 149. 160 (1988) 164 CLR 387. 161 See Reich, above n 149, 771. 109
In Australia, the observance by decision-makers of the limits within which they are constrained by the Constitution and by statutes and subsidiary laws validly made is an aspect of the rule of law under the Constitution. It may be said that the rule of law reflects values concerned in general terms with abuse of power by the executive and legislative branches of government. But it would be going much further to give those values an immediate normative operation in applying the Constitution.162
A purely subjective approach represents an attempt to give immediate normative operation to the expectations of individuals in the community.
In contrast, a strictly objective approach is only indirectly concerned with individual expectations by focusing on questions of what the decision or law maker has or has not done and how their powers ought to be constrained.163 As the Privy Council stated in Attorney- General (Hong Kong) v Ng Yuen Shiu:164
…when a public authority has promised to follow a certain procedure, it is in the interests of good administration that it should act fairly and implement its promise, so long as implementation does not interfere with its statutory duty.165
A strictly subjective approach
The problems with a strictly subjective approach are threefold. Firstly, in some circumstances it would place an insuperable evidential hurdle before a plaintiff seeking to enforce their constitutionally protected interests. When one considers that acts of reliance are the most cogent evidence of an expectation, where the relevant act of reliance is one of forbearance, it may well be that there would be no objective evidence of a plaintiff’s expectations to put before a Court. For the reason that a forbearance loss may be equally explicable by a plaintiff’s ignorance of the law rather than an expectation and reliance founded on the law, a plaintiff would be unlikely to succeed in such circumstances.166 A plaintiff would need to prove that they knew the law and the nature and extent of any interest they possessed at law to receive
162 Lam (2003) 214 CLR 1, 23. 163 Minister for Immigration and Border Protection v WZARH (2015) 326 ALR 1, 7 [30]. 164 [1983] 2 AC 629. 165 Attorney General of Hong-Kong v Ng Yuen Shiu [1983] 2 AC 629, 638; see also A-G (NSW) v Quin (1990) 170 CLR 1. 166 An estoppel by convention will not arise when ‘a course of dealing [is] explainable by reference to some other equally plausible assumption.’ Dal Pont, above n 71, 286; Queensland Independent Wholesalers Ltd v Coutts Townsville Ltd [1989] 2 Qd R 40, 46 (McPherson J); Republic of India v India Steamship Co Ltd AC 878, 913 (Lord Steyn). 110 full compensation. Quantum would be determined by reference to proved detrimental reliance.
The second set of problems with a strictly subjective approach is that it places at large the Commonwealth’s liability for legislative change. Such an approach is entirely indeterminate and only justiciable on a case-by-case basis. Individuals’ idiosyncratic expectations regarding their entitlements would operate to modify the scope of the Commonwealth’s legislative competence.
The third problem with such an approach is that it would transform the Proviso into an individual right rather than a limit on power. Clearly, such an approach is in direct conflict with the overwhelming weight of authority that the Proviso does not create or operate as an individual right.
As against an objective approach, a subjective approach would benefit some plaintiffs as much as it would disadvantage others and comes perilously close to the argument advanced in The Castle that where money cannot compensate the proprietors for the loss of their property, the Commonwealth may not acquire it.167
Such an approach represents an inversion of Bentham’s position such that expectation is the foundation of property and the law merely recognises or operates as a gloss on pre-existing relationships, what some would describe as a Lockean position.168
Mixed approach
There are ways of integrating some strictly subjective elements into an estoppel based approach to the Proviso without necessarily transforming it from a limit on legislative power into an individual right. Taking an objective assessment of the reasonable expectations the law is capable of giving rise to as a cap on eligibility and quantum, a subjective assessment of expectation and reliance could be utilised as a mechanism to limit either or both.
It has always been the case that a statute which effects an acquisition of property will be invalid if it fails to provide the requisite degree of compensation to any individual title holder.
167 Wurridjal v Commonwealth (2009) 237 CLR 309, 434 (Heydon J) describing it as a ‘novel suggestion’ .. ‘which would require a closeness of examination’, 471 (Kiefel J), ‘Such a proposition should not be readily accepted.’ 168 Pamela O'Connor, 'The Changing Paradigm of Property and the Framing of Regulation as a "Taking"' (2010) 36(2) Monash University Law Review 50. 111
So long as the legislation gives effect to the principles relevant to determining a subjective assessment of compensation, the validity of the legislation would not be open to challenge.169 Further, with the High Court’s approval of Historic Shipwrecks clauses,170 so long as a statute grants to a plaintiff an appropriate avenue by which to seek compensation, it will be valid and the possibility of a statute being valid as against some individuals and not others is avoided.
A Historic Shipwrecks clause operates as something of an ‘insurance clause’ against the operation of s 51(xxxi).171 Because of ‘the constitutional uncertainty over whether s 51(xxxi) will be infringed’172 by any given piece of legislation, the Commonwealth Parliament has adopted a practice of including general compensation clauses into contentious legislation in ‘order to avoid a legislative vacuum caused by the total invalidity of [an] Act.’173 The Historic Shipwrecks Act 1976 (Cth) was the first Act to contain such a clause.
An example of such a clause is the now repealed ss 60(2) and (3) of the Northern Territory National Emergency Response Act 2007 (Cth) which read as follows;
(2) However, if the operation of this Part, … would result in an acquisition of property to which paragraph 51(xxxi) of the Constitution applies from a person otherwise than on just terms, the Commonwealth is liable to pay a reasonable amount of compensation to the person.
(3) If the Commonwealth and the person do not agree on the amount of the compensation, the person may institute proceedings in a court of competent jurisdiction for the recovery from the Commonwealth of such reasonable amount of compensation as the court determines.
Provisions of this nature have been challenged on a number of occasions but in each instance have received the approval of a majority of the High Court.174
169 Wurridjal v Commonwealth (2009) 237 CLR 309; Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210. 170 Wurridjal v Commonwealth (2009) 237 CLR 309, 470 (Kiefel J); Sean Brennan, 'Wurridjal v Commonwealth: The Northern Territory Intervention and Just Terms for the Acquisition of Property Case Note' (2009) 33 Melbourne University Law Review 957. 171 Brennan, above n 170, 980. 172 Davey (1993) 47 FCR 151, 165 (Black CJ and Gummow J). 173 Ibid, 167 (Black CJ and Gummow J). 174 Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210; Wurridjal v Commonwealth (2009) 237 CLR 309; see also JT International (2012) 250 CLR 1.
112
2.4.1 Conclusion
In summary, principles of estoppel, were they to have some operation in determining the Proviso’s scope, do not suggest a single doctrinal formula or approach though they do assist in mapping out the issues at stake. Some estoppel-based approaches suggest outcomes which are congruent with a number of s 51(xxxi) decisions. It could be argued that the outcomes in these decisions reflect higher-order concerns about substantively retrospective legislative impacts on proprietary interests. Such principles appear to explain a number of exceptions as much as they explain the inclusions. However, many cases are not explained by reference to this approach.
113
2.5 The Retrospective Nature of Judicial Decision Making
"It is the judges that make the common law. Do you know how they make it? Just as a man makes laws for his dog. When your dog does anything you want to break him of, you wait till he does it, then beat him for it. And this is the way the judges make law for you and me."175
As Enid Campbell observed in discussing the consequences of the retrospectivity of judicial decision making:
Particular problems can arise when a court adjudges the action of an agent or agency of government to be invalid or illegal and in so doing the court applies, retrospectively, a version of the law which is different from the law understood by the governmental agent at the time it acted. The case could be one in which action has been taken in reliance on a statute and in which the court decides that the statute is unconstitutional or does not authorise the action which was taken. The statute could be one under which considerable sums of money have been collected from taxpayers. It could be one authorising detention of persons in custody or affecting the period of time during which persons may lawfully be detained in custody. It could be one authorising seizure and destruction of private property...176
These are not uncommon scenarios in modern times177 and a number of s 51(xxxi) High Court decisions, considered in detail in the next chapter, deal with what might be called ‘retrospective interests,’ that is, interests arising by way of the retrospective operation of judicial decision making.
For our purposes, the issue arises in two contexts. The first is where a judicial decision renders a statute void either for want of legislative competence or for breaching some other substantive or procedural constitutional limitation. The issue is generally framed as a question
175 Jeremy Bentham, ‘Truth versus Ashhurst; or, law as it is, contrasted with what it is said to be’ in John Bowring (ed) The Works of Jeremy Bentham Vol V (William Tait, 1843) 231, 235. 176 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 49-50. 177 DPP (Cth) v Keating (2013) 248 CLR 459; DPP (Cth) v Poniatowska (2011) 244 CLR 408; Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] 1 AC 70; Kleinwort Benson Ltd v Lincoln City Council [1998] 3 WLR 1095; Kentwell v The Queen (2014) 252 CLR 601. 114 of whether or not an unconstitutional law ought to be considered void ab initio.178 The second context is where a Court alters the common law or gives an interpretation to a Constitutional or statutory provision that is different from how individuals or government bodies or agents understood it. In either context the decision may be one of first impression or where a Court is reversing a previous decision.
Though the declaratory theory of law, being the proposition that judges do not make law but merely declare it,179 may no longer have any currency180 no satisfactory replacement has been developed which might guide courts through the competing policies and doctrinal tensions that arise when faced with the consequences of the retrospectivity of their own decisions.
On the one hand, that judicial decisions have retrospective operation underpins the central conception of the rule of law being that government ought to be conducted according to law rather than by the arbitrary will of an individual or group.181 Where a Parliament purports to enact an ultra vires statute or the executive acts outside the scope of its statutory or prerogative powers they operate in clear breach of this principle. Such actions take place without any legal authority and, in a strict sense, are arbitrary. That is not to suggest that such actions will necessarily be unfair, harsh, unjust, unwise or are performed with any malice, self- interest or even any intention to act or legislate outside of power.
Nonetheless, were judicial decisions not to have retrospective effect, courts would arguably be condoning clear breaches of the rule of law. Prospective rulings might involve not merely condoning the passing of void laws or the ultra vires acts of the executive but the application of purported laws which the Courts themselves have deemed wrong or unconstitutional.182 Similar considerations apply in excluding the admission of illegally obtained evidence.183
178 Enid Campbell, 'Unconstitutionality and its Consequences' in Geoffrey Lindell (ed), Future Directions in Australian Constitutional Law (Federation Press, 1994) 90; Brian F Fitzgerald 'When Should Unconstitutionality Mean Void Ab Initio?' (1994) 1(2) Canberra Law Review 205. 179 See generally Ronald Sackville, 'Why Do Judges Make Law? Some Aspects of Judicial Law Making' (2001) 5(1) University of Western Sydney Law Review 59; M H McHugh, 'The Law-Making Function of the Judicial Process -Part 1' (1988) 62 Australian Law Journal 15; Chief Justice JJ Doyle, 'Judicial Law Making' (1995) 17 Adelaide Law Review 161. 180 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 49 citing Kleinwort Benson Ltd v Lincoln City Council [1998] 3 WLR 1095, 1100; see also Esso Australia Resources v Commissioner of Taxation (1999) 201 CLR 49 (Callinan J). 181 Dicey, above n 4; Keith Mason, 'The Rule of Law', above n 4. 182 Campbell, 'Unconstitutionality and its Consequences', above n 178; United States v Estate of Donnelly, 397 US 286, 295-7 (1970). 183 Ridgeway v The Queen (1995) 184 CLR 19. 115
As the majority stated in Ha v New South Wales:184
If an earlier case is erroneous and it is necessary to overrule it, it would be a perversion of judicial power to maintain in force that which is acknowledged not to be the law.185
In this way, it can be argued that prospective ruling undermines the integrity of the Constitution and the courts’ own role and authority as shapers of the common law and final arbiters of constitutional and statutory interpretation. It is arguable that non-retrospective judicial decision making constitutes an abdication of the judicial function186 in accordance with the separation of powers. Again, in Ha the majority held:
A hallmark of the judicial process has long been the making of binding declarations of rights and obligations arising from the operation of the law upon past events or conduct. The adjudication of existing rights and obligations as distinct from the creation of rights and obligations distinguishes the judicial power from the non judicial power. Prospective overruling is thus inconsistent with judicial power on the simple ground that the new regime that would be ushered in when the overruling took effect would alter existing rights and obligations.187
It has also been said that prospective or selective retrospective ruling ‘violates the principle of treating similarly situated defendants the same’…. ‘[t]he "integrity of judicial review requires that" the Court applies the new rule "to all similar cases pending on direct review ..."’188
Against the principle that judicial decisions ought to operate retrospectively is the principle of non-retrospectivity itself. Retrospective decision making cannot be anticipated or planned for; this is all the more so where a court overrules its own previous decisions. As Harlan J stated in US v Estate of Donnelly:189
184 (1997) 189 CLR 465. 185 Ha v New South Wales (1997) 189 CLR 465, 504 (Brennan CJ, McHugh, Gummow and Kirby JJ). 186 See Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 75-76 citing R v Governor of Brockhill Prison; Ex parte Evans (No 2) [2001] 2 AC 19 (Lord Hobhouse). 187 Ha v New South Wales (1997) 189 CLR 465, 503-504 (Brennan CJ, McHugh, Gummow and Kirby JJ). 188 Griffith v Kentucky, 479 US 314, 323 (1987) quoted in Campbell, 'Unconstitutionality and its Consequences', above n 178, 100. 189 397 US 286 (1970). 116
The impulse to make a new decisional rule non-retroactive rests, …upon the same considerations that lie at the core of stare decisis, namely to avoid jolting the expectations of parties to a transaction.190
As Lord Browne-Wilkinson stated in Boddington v British Transport Police,191 a judicial decision cannot ‘rewrite history’ as to all the actions taken in reliance on a state of the law which was presumed to be correct before the judicial decision was handed down.192
Individuals as much as government bodies and office holders and indeed Courts themselves, tend to regulate their affairs on the basis that laws are valid.193 Certainly it is judicial policy and in the interests of the rule of law itself that people act in this way and do not take the law into their own hands. As the Court held in R v Kirby; Ex parte Boilermakers' Society of Australia:194
Undesirable as it is that doubtful questions of validity should go by default, the fact is that the Court usually acts upon the presumption of validity until the law is specifically challenged.195
Also discussed in that case was the question of whether concerns about jolting the expectations of parties ought to influence the Court when interpreting a statute or deciding whether a law is within the Commonwealth’s legislative competence. In that decision the Court was faced with a challenge to legislation that had been in operation for many years and which had itself given rise to a number of cases which had come before the High Court. On no prior occasion had there been any challenge to the validity of the statute itself. Speaking of the prior decisions of the Court dealing with the challenged legislation the majority held that they:
…no doubt add weight to the general considerations arising from lapse of time… and the very evident desirability of leaving undisturbed assumptions that have been accepted as to the validity of the provisions in question. At the same time, the Court is not entitled to place very great reliance upon the fact that, in the cases before it where occasion might have been made to raise the question for argument and decision, this was not done by
190 United States v Estate of Donnelly, 397 US 286, 295-7 (1970), quoted in Campbell, 'Unconstitutionality and its Consequences', above n 178, 103. 191 [1999] 2 AC 143. 192 Boddington v British Transport Police (1999) 2 AC 143, 164 (Lord Browne-Wilkinson); Chicot County Drainage District v Baxter State Bank, 308 US 371 (1940); ‘The past cannot always be erased by a new judicial declaration.’ 374 (Hughes CJ) quoted in Campbell, 'Unconstitutionality and its Consequences', above n 178, 91. 193 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 56-57. 194 (1956) 94 CLR 254. 195 R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254, 295. 117
any member of the Court and that on the contrary all accepted the common assumption of the parties and decided the case accordingly.196
The judges went on to say that:
If, as is the case here, the principle or the particular application of principle that is in question has not been settled by the authority of a judicial decision in which it has been raised, considered and dealt with, the judges must give effect to the Constitution according to the interpretation which on proper consideration they are satisfied that it bears. But in arriving at a conclusion they are not only entitled, but ought, to attach weight to such matters as are dealt with in the foregoing discussion, treating them as considerations which should influence their judgment upon the meaning and application of the Constitution. Such matters as judicial dicta, common assumptions tacitly made and acted upon, and the fact that legislation has passed unchallenged for a considerable period of time, may be regarded as raising a presumption which should prevail until the judicial mind reaches a clear conviction that consistently with the Constitution the validity of the provisions impugned cannot be sustained. But they cannot be regarded as doing more.197
By way of contrast, in Newcrest Mining (WA) Ltd v Commonwealth concerns regarding the possible consequences of overruling the decision in Teori Tao v Commonwealth198 and thereby retrospectively subjecting the s 122 territories power to the Proviso loomed large in the reasons of the dissenting minority.199
Inasmuch as courts strive not to jolt the expectations of people,200 the retrospectivity of their decisions means that in some situations they inevitably do have this effect.
Not infrequently Parliaments enact retrospective legislation which seeks to ameliorate, reverse or remedy, in one way or another, the retrospective effect of a court’s decision with direct or
196 Ibid, 295; see also Henry Burrnester, 'The Presumption of Constitutionality' (1983) 13 Federal Law Review 277. 197 'Boilermakers' Case' (1956) 94 CLR 254, 295-296; see also J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case' in Mitchell McInnes (ed), Restitution: developments in unjust enrichment (LBC Information Services, 1996) 117, 129. 198 (1969) 119 CLR 564. 199 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 545 (Brennan CJ), 552 (Dawson J), 576 (McHugh JJ), but see 652 (Kirby J). 200 Esso Australia Resources v Commissioner of Taxation (1999) 201 CLR 49, (Callinan J); Brodie v Singleton Shire Council (2001) 206 CLR 512, (Kirby J); Airservices Australia (1999) 202 CLR 133, (Gleeson CJ, Kirby J). 118 indirect impacts on retrospective interests. In such situations s 51(xxxi) may have some operation.
As a practical matter, any general public law estoppel approach to s 51(xxxi) derived from the principle of legal certainty cannot directly address the issues to which the defeat of retrospective interests gives rise for the reason that it cannot be readily ascertained to what reasonable expectations the relevant law was capable of giving rise. Nor can such interests provide any sensible basis for a presumption that people have relied on them. One answer is that the reasonable expectation is that based on the interpretation (or decision) ultimately arrived at by the appellate Court. However, what if one or more of the relevant parties had been acting on some other understanding of the law? An equally plausible, though unhelpful, answer is that because reasonable people acted on some other interpretation, the assumed state of the law ought to determine the Proviso’s operation in such circumstances.
If any general principle governing the operation of s 51(xxxi) were to be found, an exception or series of exceptions would have to operate in the context of retrospective interests.
In the context of s 51(xxxi), the problem can be approached from a number of different perspectives as follows;
1. Is a retrospective interest ‘property’ or its defeat an ‘acquisition’ for the purposes of s 51(xxxi)?
2. Ought the antecedent judicial decision operate only prospectively?
3. In what circumstances ought a court grant or deny a remedy to a plaintiff for the retrospective defeat of a retrospective interest?
4. Ought the Parliament be permitted to legislate (retrospectively) to the effect that the antecedent judicial decision operates prospectively only?
Though a yes or no answer to any one of these questions would be determinative of the outcome each represents a distinct doctrinal or policy approach to the same intrinsic problem of dealing with the consequences of the retrospectivity of judicial decision making. However, the issues overlap to such a great extent that it is often impossible to delineate neatly between them.
119
These issues arise in a range of circumstances and courts have developed a number of doctrines that address both the practical problems and policy tensions that arise.
1. Is a retrospective interest ‘property’ or its defeat an ‘acquisition’ for the purposes of s 51(xxxi)?
A strict application of High Court doctrine as it currently stands would suggest that retrospective interests are capable of being property for the purposes of s 51(xxxi) and where such interests are transferred to the Commonwealth or another, the retrospective legislation must provide just terms. Kirby J, speaking of this precise circumstance in Newcrest remarked:
…the history of constitutional interpretation in this country, as elsewhere, has been marked by several instances when the holding of the Court has obliged significant rearrangements and readjustments in the rights and duties of those affected by its decisions. This is no more than the application of the rule of law in the constitutional context.201
Whether, in practice, the Courts deal with retrospective interests and legislation which purports to defeat them in this manner is the subject of the following chapter. Certainly, in cases dealing with retrospective interests, the High Court rarely addresses the issue in these terms.
However, logic would dictate that where a judicial decision is deemed to have retrospective effect there is no basis on which to argue that the retrospective interest is prima facie outside the scope of s 51(xxxi). Other factors aside, such interests must be considered property and their acquisition compensable for the reason that denying them this status would be to deny the retrospectivity of the judicial decision which brought them into existence.
2. Ought the antecedent judicial decision operate prospectively only?
On a hypothetical assumption that the High Court may reconsider its rejection of its authority to overrule prospectively202 the question of the Proviso’s operation in the context of retrospective interests might not arise at all. If it were determined as a preliminary issue that the antecedent decision had only prospective operation, there would be no retrospective interest. One might say that there was no ‘property’ in existence that might be the subject of
201 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 651-2. 202 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49,70; cf Ha v New South Wales (1997) 189 CLR 465, 503 (Brennan CJ, McHugh J, Gummow J, Kirby J). 120 an acquisition by the Commonwealth. Approached from this perspective, it could be said that retrospective interests have nothing to do with s 51(xxxi) and the issue at hand ought to be determined according to general principles governing the temporal or special operation of judicial decisions.
In other jurisdictions courts have adopted various techniques to moderate the retrospectivity doctrine. One such technique, adopted by the European Court of Justice, is that of limiting the retrospective effect of a judicial decision only to the party bringing the action.203 As will be discussed in the next chapter, legislation which achieves the same effect has been passed in various Australian jurisdictions.
The European Court of Justice has developed a second doctrine limiting the temporal operation of its decisions. Campbell described it as follows:
The conditions which must be satisfied before the Court is prepared to impose a temporal limitation are twofold. The first is that a state or other party must show a reasonable belief that a provision of Union law was either not directly effective or did not apply to the case in question. The second condition is that it must be shown that, unless the temporal operation of the ruling is limited, severe harm will be done to the interests of those who have relied in good faith on a previous understanding of Union law.204
This doctrine very nearly describes the doctrine of ‘estoppel by convention.’ For an estoppel by convention to arise the party claiming the benefit of the estoppel must establish the following:205
(1) The parties have proceeded on the basis of an underlying assumption of fact, law or both of sufficient certainty to be enforceable (the assumption).
203 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 73, citing Defrenne v Sabena [1976] ECR 455. 204 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 72, citing M Brearly and M Hoskins, Remedies in European Community Law (Sweet and Maxwell, 1994), 133-4, 200-2; Clive Lewis, Remedies and the Enforcement of European Community Law (Sweet and Maxwell, 1996), 25-8; R v Secretary of State; Ex parte Richardson (C–137/94) [1995] ECR I-3407. 205 Dal Pont, above n 71, 286, citing Matthew N C Harvey, 'Estoppel by Convention - An Old Doctrine with New Potential' (1995) 23(1) Australian Business Law Review 45; Rory Derham, 'Estoppel by Convention: Part 1' (1997) 71(11) Australian Law Journal 860; Ray Mulholland, 'Estoppel by Convention' (2002) New Zealand Law Journal 395; Queensland Independent Wholesalers Ltd v Coutts Townsville Ltd [1989] 2 Qd R 40; Republic of India v India Steamship Co Ltd AC 878, 913 (Lord Steyn); National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548, 550; Thompson v Palmer (1933) 49 CLR 507, 547 (Dixon J); Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 244. 121
(2) Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction.
(3) Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them.
(4) The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being true and binding.
(5) The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption
(6) In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.
3. In what circumstances ought a court grant or deny a remedy to a plaintiff for the retrospective defeat of a retrospective interest?
While estoppel type doctrines have been adopted as a mode of limiting the retrospective operation of judicial decisions, almost identical approaches have been used as a way of limiting remedies to persons in possession of retrospective interests.206 Estoppel by res judicata is but one example and achieves a similar effect as limiting the retrospective operation of a judicial decision to the party bringing the action.207
It can be observed in numerous decisions that the High Court readily refuses to grant remedies to plaintiffs who would otherwise become retrospectively so entitled and that such an approach has the same substantive effect in many instances as a prospective judgment.
An estoppel based approach to retrospective interests which operates by limiting remedies has the advantage that it does not give prospective effect to a judicial decision and:
206 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 50; Campbell, 'Unconstitutionality and its Consequences', above n 178, 103, citing United States v Estate of Donnelly, 397 US 286, 295-7 (Harlan J) (1970), ‘To the extent that equitable considerations, for example "reliance", are relevant, I would take this into account in determination of what relief is appropriate in any given case.’ 207 Cf Kentwell v The Queen (2014) 252 CLR 601; - in the criminal field the courts lean the other way. 122
…does not give effect to unconstitutional laws. It recognises and gives effect only to the justified expectations of those who have relied upon the acts of those administering the invalid laws and to the existence and efficacy of public and private bodies corporate…208
As Deane J held in A-G (NSW) v Quin:209
…the fact that the courts cannot turn back time or rewrite the past does not, in an appropriate case, preclude the moulding of relief in a way which will provide partial protection from the continuing injustice…210
Thus, were the Courts to explicitly recognise retrospective interests as property and their retrospective defeat as an acquisition the question as to the operation of the Proviso to such interests could be resolved by way of a more nuanced approach to the question of what just terms requires in such circumstances. The possibility that the acquisition of some retrospective interests might be deserving of less than full or no compensation can be contemplated. That is, one might argue that such interests are within the scope of s 51(xxxi) but that legislation which provides for more limited or focused remedies or which takes into account the individual circumstances of a plaintiff would satisfy the requirement of just terms. Where the legislation embodies the appropriate principles in determining compensation it would be valid. What principles then might be appropriate for determining a just level of compensation for the acquisition of retrospective interests?
In the context of s 51(xxxi) the estoppel would be assessed against the promise made by the law as ultimately found by the appellate court and not any assumed state of the law for the reason that a retrospective interest can only exist by way of the retrospective ruling. As previously discussed, any type of objective approach is inappropriate firstly, because of the indeterminacy of the reasonable expectation and secondly, because there is no sensible basis to presume the existence of any expectation or reliance. The only available alternative and that utilised in other doctrines dealing with the issue is some kind of subjective estoppel. As
208 Re Language Rights under Manitoba Act 1870 (1985) 19 DLR (4th) 1, 28, cited in Campbell, 'Unconstitutionality and its Consequences', above n 178, 96. 209 (1990) 170 CLR 1. 210 A-G (NSW) v Quin (1990) 170 CLR 1, 48. 123 averred to by McHugh and Gummow JJ in Lam such an approach merely represents a raising of the evidentiary bar to a remedy.211
The mixed approach referred to above would ensure that legislation which acquires retrospective interests that would not ordinarily be within the Proviso’s scope are excluded while remedies are limited to those who can demonstrate some degree of reliance on the retrospective interest and who suffer detriment stemming from that reliance.
Such a doctrine could operate as a rebuttable presumption that the person has relied on the retrospective interest. Alternatively, the evidentiary onus to establish reliance and detriment could be placed on a plaintiff. Were the Commonwealth in a position to prove that itself and/or the plaintiff had been acting on the basis of some assumed state of the law along the lines of the doctrine of estoppel by convention, a plaintiff would fail.
Formulated as a doctrine that places a limit on legislative power one would say that Commonwealth legislation which acquires property in the nature of a retrospective interest will be valid only where just terms are provided to the person being a provision made for compensation where a person has relied to their detriment on the retrospective interest.
4. Ought the Parliament be permitted to legislate (retrospectively) to the effect that the antecedent judicial decision operates prospectively only?
As discussed above, one of the bases on which the High Court refuses to rule prospectively is that this is a legislative act and a breach of the separation of powers.212 Thus, the principle which prevents the Court from ruling prospectively does not impinge upon the Parliament’s power to legislate to the same end, so long as the legislation is itself within power aside from s 51(xxxi).
From a s 51(xxxi) perspective, however, this doesn’t really address the problem when the ultimate question is one of legislative competence and that competence is limited by s 51(xxxi) itself. Other than in a limited number of circumstances, there is no strict limitation on the Parliament’s power to enact retrospective legislation so as to reverse the effect of a judicial
211 Lam (2003) 214 CLR 1, 27 citing Mount Sinai Hospital Center v Quebec (Minister of Health and Social Services) [2001] 2 SCR 281, 305 (Binnie J) ‘one would normally expect more intrusive forms of relief to be accompanied by more demanding evidentiary requirements.’ 212 Ha v New South Wales (1997) 189 CLR 465 503-4. 124 decision. The question then is of the general and specific exceptions to the operation of s 51(xxxi) in the context of other constitutional considerations, limitations and powers. Legal certainty is but one of a number of strictures demanded by a commitment to the rule of law.
2.6 Exceptions
A whole series of constitutional and common law doctrines and provisions intersect, interact or even conflict with the Proviso’s ‘ordinary’ operation.
Some of these interactions are specific to retrospective interests while others operate more broadly. Indeed, the doctrines referred to above dealing with retrospective judicial decision making (including the de facto officer doctrine and res judicata) operate subject to a number of exceptions and, it would be reasonable to assume, that were analogous doctrines operating with respect to s 51(xxxi) analogous exceptions would also operate.
2.7 Legal and Fiscal Chaos
In certain circumstances, the retrospectivity of judicial decisions can work to the detriment of the Commonwealth Treasury with particular implications for the Proviso’s operation and scope. As Campbell observed, ‘[o]ne consequence of retrospective invalidation of governmental acts may be that substantial civil liabilities are incurred.’213
Just as a judicial decision may give rise to a retrospective interest in the hands of a plaintiff, it may simultaneously give rise to a retrospective Commonwealth liability. Just as retrospectivity can undermine an individual’s ability to make rational decisions about his or her financial affairs, so the visiting of unexpected and unplanned for liabilities on the Commonwealth can undermine a government’s capacity to manage government expenditures.
In the context of retrospective interests and liabilities, the Proviso potentially operates in a very unusual way.
By way of example, in respect of legislation which acquires an interest in land, a positive application of the Proviso effectively voids the acquisition. In these circumstances the Commonwealth is faced with a number of options. Firstly, the Parliament could simply enact fresh legislation which did provide just terms and thereafter proceed with the acquisition. Secondly, the Parliament could walk away from the attempted acquisition and associated
213 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 50. 125 liability, abandoning the policy objective altogether. The third option open to the Parliament would be to pursue the policy objective by some other method permitted under the Constitution. In this way, the Commonwealth is not forced to complete the transaction or incur any liability; the ultimate decision as to whether a liability will be incurred is effectively referred back to the Parliament.
In contrast, in cases dealing with retrospective interests and retrospective liabilities, striking down the curative legislation would have the effect that the Commonwealth could not escape the relevant liability and would be required to expend funds to meet the relevant obligation; it would be obliged to complete the transaction.214 Though the curative legislation may result in an acquisition by the Commonwealth, such transfers are not directly analogous to those between private individuals.215 It is not always the case that the Commonwealth can be ‘considered as an individual, treating with an individual for an exchange.’216
In such instances an issue is likely to arise as to any ‘fiscal chaos’217 the striking down of the curative legislation may cause.218 As discussed below, this same issue arises with respect to the Commonwealth’s liability to suits in tort and contract and in the area of restitution against the Commonwealth.
Retrospectively imposed liabilities, be they statutory, contractual, tortious or restitutionary, cannot be absolutely protected under the Proviso as the Commonwealth could be made entirely bankrupt by an open ‘floodgate’219 of such claims.220 As Latham CJ held in the Communist Party Case:
The continued existence of the community under the Constitution is a condition of the exercise of all the other powers contained in the Constitution, whether executive, legislative or judicial. The preservation of the existence of the Commonwealth and of the
214 Wurridjal v Commonwealth (2009) 237 CLR 309, 391 (Kirby J); cf Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 35-36; New South Wales v Bardolph (1934) 52 CLR 455. 215 Keith Mason, 'Money Claims By and Against the State', above n 7, 101. 216 William Blackstone, Commentaries on the Laws of England (Clarendon Press, 1765), 134. 217 Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539, 1204, 1207 (La Forest J); Keith Mason, 'Money Claims By and Against the State', above n 7, 117, 122-123. 218 British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, 45 (Gleeson CJ) ‘the extent of claims may have significant budgetary implications.’ 219 See Jaensch v Coffey (1984) 155 CLR 549; Chester v Waverley Corporation (1939) 62 CLR 1. 220 Keith Mason, 'Money Claims By and Against the State', above n 7, 130. 126
Constitution of the Commonwealth takes precedence over all other matters with which the Commonwealth is concerned. As Cromwell said, "Being comes before well-being.”221
As the Supreme Court of Canada held in Re Language Rights under Manitoba Act 1870:222
…the courts will recognise unconstitutional enactments as valid where a failure to do so would lead to legal chaos and thus violate the constitutional requirement of the rule of law…223
This exception falls into what might be loosely categorised as a doctrine of necessity224 although it would appear that the exception is wider than necessity per se. It would be a very rare case that could lead to the bankruptcy of the Commonwealth and a breakdown of the normative order.225 Perhaps reflecting a judicial attitude of deference on most matters of expenditure, it would appear that the bar is set at a much lower point than actual necessity and includes what might be described as mere inconvenience. It is one of a number of curious features of the Proviso that it potentially places the judiciary on the treasury benches.226
There are two particular difficulties that arise in dealing with these issues. The first is that the question of whether any particular retrospective interest is likely to cause fiscal chaos can only be determined on a case-by-case basis. There is no way of laying down any clear principles on which a party or litigant might assess the matter other than taking the matter before a court. They are also matters on which reasonable minds may well differ. As McInnes argued:
…such a concept defies precise formulation. Certainly, the state cannot be immune from all liability. Where, however, is the line to be drawn between liability which merely inconveniences a government and liability which intolerably requires the imposition of a new tax or which creates fiscal chaos?227
In Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd,228 Mason CJ described as ‘vague and amorphous’229 the notion of avoiding disruption to public finances. Of course,
221 'Communist Party Case' (1951) 83 CLR 1, 141 (Latham CJ); 188 (Dixon J). 222 (1985) 19 DLR (4th) 1. 223 Re Language Rights under Manitoba Act 1870 (1985) 19 DLR (4th) 1, 35. 224 Campbell, 'Unconstitutionality and its Consequences', above n 178, 93. 225 Re Language Rights under Manitoba Act 1870 (1985) 19 DLR (4th) 1, 35. 226 See generally Keith Mason, 'The Rule of Law', above n 4, 140. 227 Mitchell McInnes, 'Mistaken Payments Return to the High Court: Commissioner of Revenue v Royal Insurance' (1996) 22(2) Monash University Law Review 209, 227. 228 (1994) 182 CLR 51 (‘Royal Insurance’). 229 Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, 68. 127 the degree to which a given retrospective interest might cause fiscal chaos will be far more readily apparent in some circumstances than in others.
A second difficulty with these issues is that they are readily conflated with an approach to the Proviso which directly balances the cost of compensation with the public interest being served by the relevant legislation. The facts arising in cases such as JT International or the Bank Nationalisation Case provide a good example. Were the Court balancing the overwhelming burden on the treasury for the cost necessarily encompassed by the provision of just terms for the acquisition as against the public interest served by the policy objectives of the scheme, a conclusion may well be reached that the Proviso’s operation overly restricts the ‘legitimate’ exercise of other heads of power.
Other than in the most extreme of circumstances such as during wartime and the like, such issues arise only in cases involving potentially inescapable retrospective liabilities already incurred and not to prospective liabilities as were in issue in JT International and the Bank Nationalisation Case. The principled approach in such circumstances appears to be that if the government cannot afford to purchase the property or compensate a title holder for an acquisition it may not acquire it. As Kirby J stated in Smith v ANL Ltd:
To [a] complaint that [such a] construction of s 51(xxxi) shackles the legislative freedom of the Parliament, the answer is simply that that is precisely what the paragraph was intended to do, by being defensive of the property rights of individuals and the States when those property rights are relevantly acquired under federal law.230
230 Smith v ANL Ltd (2000) 204 CLR 493, 530. 128
2.8 Restitution
The operation of the Proviso in the context of restitutionary claims is both conceptually and doctrinally a problematic area of the law, particularly where retrospective interests are involved. Taken alone, the law of unjust enrichment remains in a state of flux and as matters stand it lacks a degree of conceptual coherence. These difficulties are only exacerbated by their interaction with the Proviso.
At a basic level there appears to be no controversy in characterising restitutionary actions as property and their legislative defeat an acquisition.231 Thus, whether held directly against the Commonwealth or third parties one would expect the retrospective defeat of such actions to fall within the Proviso’s scope.
What is controversial, however, is Parliament’s ability to limit or extinguish actions for restitution of money collected pursuant to an unconstitutional tax or otherwise not due by law. Actions to recover such sums are retrospective interests by nature and raise some of the same doctrinal and policy considerations and problems as arise with other retrospective interests.
The issue is particularly pointed both for its potential consequences and the competing principles and policies at stake. As Campbell observed, considerable sums of money may have been collected from taxpayers under an invalidated statute or on the basis of an interpretation of statute that is subsequently found to be erroneous.232 The issue of fiscal chaos looms large in the case law and academic literature.
However, in Royal Insurance fiscal chaos was rejected as a possible defence. As Mason CJ declared:
The remedy for any disruption of public finances occasioned by the recovery of money in conformity with the law of restitution lies in the hands of the legislature. It can determine who is to bear the burden of making up any shortfall in public funds.233
One available interpretation of his Honour’s remarks is that there is no need for restitutionary doctrines to embrace fiscal chaos as a relevant consideration simply because the legislature is
231 Georgiadis (1994) 179 CLR 297; Smith v ANL Ltd (2000) 204 CLR 493; Brock, 'Restitution of Invalid Taxes', above n 136, 150-153. 232 Campbell, 'The Retrospectivity of Judicial Decisions', above n 49, 49-50. 233 Royal Insurance (1994) 182 CLR 51, 68. 129 itself free to impose limits on or extinguish such actions. Such a view is reflected in the judgements of Lord Slynne and Lord Goff in Woolwich Equitable Building Society v Inland Revenue Commissioners.234 However, Royal Insurance dealt with neither unconstitutional imposts nor with any subsequent attempt by the Commonwealth legislature to bar recovery of such funds involving as it did an action in restitution against the Victorian State Government where there was nothing to prevent it from legislatively defeating the action. It is unclear how the High Court would deal with a situation in which the Commonwealth was faced with a potentially inescapable burden.235
Though not definitively determined, the current position appears to be that the Commonwealth may retrospectively defeat claims for restitution of money collected pursuant to an invalid tax statute so long as it has the power to impose the impost,236 that is, where the invalidated act was unconstitutional only because of a procedural defect and not for want of power. The position would be the same for unconstitutional imposts purportedly levied by a State that the Commonwealth has the power to impose as arose in Ha v New South Wales.237
It appears that the same would hold true of money collected on the basis of an interpretation of a statute that was subsequently found to be erroneous. In each case the Commonwealth could enact a tax statute with retrospective effect re-imposing the otherwise invalid exaction.238 The exemption of taxation (even when retrospectively imposed) from the Proviso’s scope239 renders it impotent in the face of legislation which would defeat an action in restitution which otherwise might succeed.
Where it would be outside the Commonwealth’s legislative power to enact the statute the Commonwealth may retrospectively impose time limits on recovery but not so as to deny a
234 [1993] 1 AC 70, 174, 200; cf Derek Wong, 'The High Court and the Woolwich principle: Adoption or Another Bullet that Cannot be Bitten?' (2011) 85(9) Australian Law Journal 597, 598 - ‘In relation to the practical difficulties that may arise, Lord Goff suggested that the legislature could introduce stricter laws relating to defences and limitations statutes should there truly be an issue’. Lord Slynn took this argument further, indicating that the principle is for the courts to “declare”, and the limitations statutes and other defences for the legislature to create . 235 See Air Canada v British Columbia [1986] 2 SCR 539; cf Werrin v Commonwealth (1938) 59 CLR 150. 236 Campbell, 'Unconstitutionality and its Consequences', above n 178; Mutual Pools (1994) 179 CLR 155, 167 (Mason CJ), 183 (Deane and Gaudron JJ); Brian F Fitzgerald, 'Unjust Enrichment as a Principle of Australian Constitutionalism' (Paper presented at Inaugural Meeting of the Constitutional Law Interest Group, Queensland, 1994)
Procedural limitations aside, the Proviso may have some scope of operation where either the Commonwealth does not have the power to enact or re-enact the ultra vires exaction or the Parliament elects to extinguish the action by some other legislative mechanism.
Complexities arise at this point because of the uncertain operation of restitutionary doctrines to such claims. Historically, under the common law, other than in limited circumstances, funds paid to the authorities pursuant an obligation that was subsequently found by a court not to exist, that is, under a retrospective mistake of law, were not recoverable.244
In overturning the rule against recovery of payments made under a mistake of law the courts have sought to explain or reconcile rather than overrule decisions in which it was applied. As Dickson J explained in Hydro Electric Commission of Nepean v Ontario Hydro,245 speaking of mistake of law as a bar:
The rule though is often used as a handy means of disposing of cases where, in fact, recovery of money should be barred, and would be, under a more searching analysis of the case.246
As Brennan J identified in David Securities Pty Ltd v Commonwealth Bank of Australia 247 the primary problem for the courts in removing mistake of law as a bar to recovery is that it:
240 Brock, 'Restitution of Invalid Taxes', above n 136, 143, 147 -149 discussing Antill Ranger & Co Pty Ltd v Commissioner of Road Transport; Deacon v Grimshaw (1955) 93 CLR 83, 99, 101; Commissioner of Road Transport v Antill Ranger & Co Pty Ltd (1956) 93 CLR 177, 180. 241 Brock, 'Restitution of Invalid Taxes', above n 136, 140-44; Barton v Commissioner for Motor Transport (1957) 97 CLR 633, Antill Ranger & Co Pty Ltd v Commissioner of Road Transport; Deacon v Grimshaw (1955) 93 CLR 83. 242 (2000) 204 CLR 493. 243 Mutual Pools (1994) 179 CLR 155, 183 (Deane and Gaudron JJ). 244 Bilbie v Lumley (1802) 2 East 469; Jane Convery, 'Lord Goff's Swansong: Restitution, Mistake of Law, and the Restrospective Effect of Judicial Decisions' (1999) 3(2) Edinburgh Law Review 202, 206. 245 [1982] 1 SCR 347. 246 Hydro Electric Commission of Nepean v Ontario Hydro [1982] 1 SCR 347, 362 cited with approval in Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539, 1199-1200 (La Forest J). 247 (1992) 175 CLR 353, 394, 398. 131
…would render many payments insecure even in cases where both parties expected the payment to be final: the uncertainty of the law and the overruling of decisions by later cases or on appeal would infect many payments with a provisional quality incompatible with orderly commerce. Moreover, while mistakes of fact are specific to particular relationships, the revealing of a mistake of law in one case could throw into uncertainty the finality of payments made in a great variety of cases.248
The High Court has attempted, some would say unsuccessfully,249 ‘to articulate some other basis upon which to deny relief in such circumstances’250 which simultaneously coheres with the general scheme of restitutionary principles.
Difficulties arise for a number of reasons. Firstly, there are very real tensions between private law restitutionary doctrines that focus on the subjective state of mind of the parties as against objective public law approaches which focus on the wrongfulness or otherwise of an authority’s exercise of its powers.251 The overlay of the Proviso’s potential operation only aggravates these tensions. Secondly, retrospective interests play just as much havoc with the normative bases and coherence of restitutionary doctrines as they do with s 51(xxxi) doctrine.
2.8.1 Objective Public Law Approach
In light of the analysis suggested previously in this chapter there are two alternative analytical approaches to be explored. Firstly, if the Proviso operates as a general and objective rule of law protection for property interests and payments of money are made pursuant to an ultra vires demand (be it unconstitutional or mistaken) one might expect the Proviso to operate so as to strike down attempts by the legislature to extinguish such restitutionary claims.
As Mason J explained the justification for actions in restitution for money paid as tax under a mistake as to liability:
There is the fundamental principle of public law that no tax can be levied by the executive government without parliamentary authority, a principle which traces back to the Bill of Rights 1688 (Imp.). In accordance with that principle, the Crown cannot assert an entitlement to retain money paid by way of causative mistake as and for tax that is not payable in the absence of circumstances which disentitle the payer from recovery. It would be subversive of an important constitutional value if this Court were to endorse a
248 (1992) 175 CLR 353. 249 Cf McInnes, 'Mistaken Payments Return to the High Court', above n 227, 233-235. 250 Ibid, 215. 251 J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 123. 132
principle of law which, in the absence of such circumstances, authorized the retention by the executive of payments which it lacked authority to receive and which were paid as a result of causative mistake.252
However, from this perspective it is hard to see how the Proviso has any work to do. As Antill Ranger & Co Pty Ltd v Commissioner of Road Transport253 demonstrates, other constitutional principles operate to limit Parliament’s power to enact such laws. By the same token, if the right to restitution is founded on constitutional principle or ‘arises under the constitution’254 it is hard to see how private or general law restitutionary actions have anything to do with the matter either.255 As Brock observed, existing categories of restitution leave gaps which would fail to vindicate the principles articulated by Mason J above.256 Such an action is a novel and distinct form of restitution with its own normative foundations.257 However, the law in this area appears to be moving to fill these ‘private law’ gaps with suggestions that the ‘absence of any legitimate basis for retention’258 or ‘improper demand’259 can enliven a prima facie right to
252 Royal Insurance (1994) 182 CLR 51, 69 (citations omitted). 253 (1955) 93 CLR 83. 254 British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, 52 (McHugh, Gummow and Hayne JJ), 75-76 (Kirby J). 255 J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 123; Simone Degeling, 'Restitution of Unlawfully Exacted Tax in Australia' in Steven Elliott, Birke Häcker, Charles Mitchell (eds), Restitution of Overpaid Tax, (Hart Publishing, 2013) 313, 315; Mason v New South Wales (1959) 102 CLR 108, 116 (Dixon J). 256 Brock, 'Restitution of Invalid Taxes', above n 136, 129, 131-32; Degeling, 'Restitution of Unlawfully Exacted Tax in Australia', above n 255, 326. 257 There are two secondary issues involved being firstly whether the action is an implied constitutional right or arises from the general law. It may be that restitutionary doctrines merely confer ‘a remedy where none would otherwise exist’. J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 124. The problem, referred to below in this chapter, is the general view that the Constitution is incapable of giving rise to a cause of action. The irony of such a position is that while the Constitution may strike down a piece of legislation for barring recovery of taxes paid pursuant to an ultra vires Act because it achieves circuitously that which is proscribed, there is no constitutional action available to enable the return of the money –in short, no action protected by the constitutional prohibition. Arguably, the notion that any restitutionary action for recovery is not one derived from the Constitution is a fiction. Degeling, 'Restitution of Unlawfully Exacted Tax in Australia', above n 255, 315-316, 319-322; British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, 79-80 (Kirby J). The second issue is that if restitutionary actions are no longer (quasi) contractual in nature they arguably do not fall with ss 56-58 of the Judiciary Act 1903 (Cth) and as discussed below there would be no statutory right to proceed. 258 McInnes, 'Mistaken Payments Return to the High Court', above n 227, 222; Royal Insurance (1994) 182 CLR 51, 67, 74 (Mason CJ ); Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539, 1216 (Wilson J). 259 McInnes, 'Mistaken Payments Return to the High Court', above n 227, 223-224; Wong, above n 234; Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] 1 AC 70. 133 recovery without the need to show any causative mistake on the part of the plaintiff.260 Also pointing in this direction was the majority’s approach in Roxborough being that a restitutionary action is primarily concerned with establishing which party has the superior legal claim to the funds rather than any kind of fault or wrong doing by either party.261 It has been suggested however that such an approach is an ill fit with the general scheme of ‘unjust enrichment’ doctrine.262
As matters stand, however, various legal fictions have been employed which deem or imply a vitiation of the plaintiff’s intention to pay to get around the difficulty that in most circumstances263 a payment made by a person labouring under a retrospective mistake of law as to liability will have done so voluntarily.264
Subjective considerations, fictional or real, are arguably irrelevant when a constitutional principle rather than an individual right is being vindicated. Likewise, it is hard to see what relevance the state of mind of the Parliament or executive officers purporting to enforce the non-existent obligation would have. Private-law approaches are ill-suited in many respects and analogies to private-law doctrines repeatedly threaten to break down.265
While an objective public-law approach to restitution against State or Commonwealth authorities appears to work well within its own sphere of operation,266 it runs aground in dealing with retrospective interests.
Indeed, looking to the circumstances in the cases of Ha v New South Wales,267 Antill Ranger & Co Pty Ltd v Commissioner of Road Transport,268 Barton v Commissioner for Motor Transport269
260 Royal Insurance (1994) 182 CLR 51, 67 (Mason CJ); McInnes, 'Mistaken Payments Return to the High Court', above n 227, 222-223. 261 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 529-530 (Gleeson CJ, Gaudron and Hayne JJ) discussing Royal Insurance (1994) 182 CLR 51, 75, 78 (Mason J). 262 McInnes, 'Mistaken Payments Return to the High Court', above n 227, 224 citing Mason v New South Wales (1959) 102 CLR 108, 117 (Dixon CJ); Payne v The Queen (1901) 26 VLR 705, 719 (Madden CJ); Brian F Fitzgerald, 'Ultra Vires as an Unjust Factor in the Law of Unjust Enrichment' (1993) 2(1) Griffith Law Review 1. 263 Antill Ranger type cases excluded. 264 cf David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, (Brennan J). 265 J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 128. 266 Roxborough (2001) 208 CLR 516. 267 (1997) 189 CLR 465; the previous decisions of the Court overruled in that case include Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529 and Capital Duplicators Pty Ltd v Australian Capital Territory (No 2) (1993) 178 CLR 561. 268 (1955) 93 CLR 83; Commissioner of Road Transport v Antill Ranger & Co Pty Ltd (1956) 93 CLR 177. 269 (1957) 97 CLR 633. 134 and Mason v NSW270 the invalidity of the legislation stemmed from a reversal by the Courts of their interpretation of section 90271 or 92272 of the Constitution. Thus, the Parliament had every reason to believe its enactments were valid and as far as could be ascertained, were dutifully acting within their constitutional limits.
There are serious difficulties in characterising such conduct as a form of intentional wrong doing or even a breach of the rule of law when the courts themselves would implore the Parliament and Executive to abide by the courts’ own rulings. The absurd conclusion one is forced to is that the duress, coercion,273 implied vitiation of the plaintiff’s intention to pay, breach of the rule of law or ‘unjust factor’ must have been emanating from the courts themselves.274 Such circumstances bear little if any resemblance to an exaction colore officii described by Windeyer J as ‘carrying a stale odour of mediaeval complaints of corruption and abuse of power by officials’275 and ‘a form of extortion.’276 In the terminology adopted by the Court in Mason, such an action ought to be characterised as a response to an unlawful exaction under the colour of judicial authority.277
The idea that the courts must act to deter the Parliament and executive from acting outside their powers in such circumstances,278 that is, deter them from dutifully abiding by the decisions of constitutional courts by awarding remedies against them, is equally absurd.
Perhaps more importantly, the trade-off for the retrospective vindication of one rule of law principle - the separation of powers and the subjugation of the executive to the Parliament - comes at the expense of another - legal certainty and the frustration of parties actual
270 (1959) 102 CLR 108; Antill Ranger, Mason and Barton were of course decided on a private law basis before mistake of law ceased to be a bar to recovery and there is no reason to question their correctness on this basis. 271 R v Vizzard; Ex parte Hill (1933) 50 CLR 30; Bessell v Dayman (1935) 52 CLR 215; O Gilpin Ltd v Commissioner for Road Transport & Tramways (NSW) (1935) 52 CLR 189; Duncan v Vizzard (1935) 53 CLR 493; Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327. 272 See also Hughes and Vale Pty Ltd v New South Wales (1954) 93 CLR 1; Editors, 'The Transport Cases and the Privy Council: Hughes and Vale Pty Ltd v NSW' (1954) 1(3) Sydney Law Review 429 273 Brock, 'Restitution of Invalid Taxes', above n 136, 155. 274 Mason v New South Wales (1959) 102 CLR 108, 118 (McTiernan J). 275 Ibid, 139 (Windeyer J). 276 Ibid. 277 Contra British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, 41 (Gleeson CJ). 278 cf Mitchell McInnes, ''Passing On' in the Law of Restitution: A Reconsideration' (1997) 19(2) Sydney Law Review 179, 196-197; British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, 69 (Kirby J); McInnes, 'Mistaken Payments Return to the High Court', above n 227, 241. 135 expectations of their dealings; this being precisely one of the consequences that the rule against recovery was established to avoid.279
Arguably, it is neither the principle that no tax can be levied by the executive government without parliamentary authority nor the division of power between Parliament and executive which is relevant to such disputes. With respect to cases involving unconstitutional Acts, the Parliament will have given de facto authority for the exaction and the principle at stake is really one of the legalistic vindication of judicial authority under a written constitution. Clearly, this is the basis on which the retrospective enactment or re-enactment of a procedurally ultra vires tax would be permitted.280
The relevant structural ‘check’ on arbitrary executive power under the Australian Constitution in such circumstances are the courts themselves. Accordingly, another problem with the application of objective approaches to restitution of retrospective interests is that whereas an ordinary mistake of law is at least discoverable (like mistakes of fact) a retrospective mistake of law is unknowable except to the extent that the tax payer challenges the obligation - which said taxpayer failed to do. As Gibbs J stated in Brisbane v Dacres:281
…there are many doubtful questions of law: when they arise, the defendant has an option, either to litigate the question, or to submit to the demand, and pay the money. I think, that by submitting to the demand, he that pays the money gives it to the person to whom he pays it, and makes it his, and closes the transaction between them. He who receives it has a right to consider it as his without dispute: he spends it in confidence that it is his; and it would be most mischievous and unjust, if he who has acquiesced in the right by such voluntary payment, should be at liberty, at any time within the statute of limitations, to rip up the matter, and recover back the money.282
As Brennan J explained in David Securities:
279 Convery, above n 244, 206. 280 Cf Wilson J’s dissenting view in Air Canada that constitutional principle would invalidate even the retrospective imposition of an otherwise ultra vires tax on the basis that it represents an attempt by Parliament to do indirectly what it cannot do directly. 281 (1813) 128 ER 641. 282 Brisbane v Dacres (1813) 128 ER 641, 645 cited in Mason v New South Wales (1959) 102 CLR 108, 123 (McTiernan J). 136
…once a mere mistake of law is admitted as a prima facie ground for recovery of a payment, the payer has, so to speak, reserved a right to impeach the finality of the payment if it should turn out that the payee had no right to receive it.283
Again, where some reasonable recourse to the courts to challenge the impost is available to a plaintiff there is neither a breach of the rule of law nor any constitutional principle. It is not the Parliament’s role to ensure its enactments are valid or the executive’s role to ensure it acts within the authority granted to it. Under the Australian Constitution it is individual litigants and the Courts who are tasked with this responsibility.284 As Dixon J stated in James v Commonwealth:285
The courts are established by and under the Constitution for the purpose, among others, of determining whether the Executive is or is not mistaken in its view of the law which it seeks to enforce against the individual, and judicial process is the appointed means for bringing the question up for decision. To treat a proposal or threat to institute proceedings as a wrongful procurement of a breach of duty is to ignore the fact that, assuming bona fides, the law always countenances resort to the courts, whether by criminal or civil process, as the proper means of determining any assertion of right.286
Until such time as legislation is challenged the courts do as they implore others to do being that they assume their validity.287 State and Commonwealth governments cannot seek advisory opinions from the High Court as to the validity or the proper interpretation of an Act. 288
The inherently retrospective view point adopted by restitutionary doctrines in cases involving ordinary mistakes of fact and law appears, prima facie, to be a neat fit with mistakes of law which arise because of the retrospective operation of a judicial decision. However, the analogy is apt to deceive as retrospective interests give rise to a very different set of considerations.
283 David Securities (1992) 175 CLR 353, 396-7. 284 Re Judiciary Act 1903-1920 & In re Navigation Act 1912-1920 (1921) 29 CLR 257. 285 (1939) 62 CLR 339. 286 James v Commonwealth (1939) 62 CLR 339, 373. 287 'Boilermakers' Case' (1956) 94 CLR 254, 295. 288 Re Judiciary Act 1903-1920 & In re Navigation Act 1912-1920 (1921) 29 CLR 257; Mellifont v A-G (Qld) (1991) 173 CLR 289. 137
Passing On
Another problem or set of problems arise because in many cases a tax payer labouring under a retrospective mistake of law may, to a greater or lesser extent, have passed onto a third party the cost of the payment.
As La Forest J explained in Air Canada v British Columbia:289
The law of restitution is not intended to provide windfalls to plaintiffs who have suffered no loss. Its function is to ensure that where a plaintiff has been deprived of wealth that is either in his possession or would have accrued for his benefit, it is restored to him.290
If the basis of the action is simply to establish as between the parties who has better title (and it cannot be the Crown in such circumstances) it should not matter whether a third party may also have an interest.291 Conversely, if its justification is vindication of a constitutional principle (no tax without parliamentary approval) arguably the principle is not vindicated by returning the money to a taxpayer who hasn’t borne the burden of the tax.
In Roxborough v Rothmans of Pall Mall Australia Ltd292 Kirby J gave some expression to these irreconcilable tensions in holding that:
For reasons of constitutional principle, the unwillingness or inability of a plaintiff to make a refund to consumers from any sum recovered by it from a government party might give way to the importance of requiring the government to disgorge moneys unlawfully collected.293
In Australia, in both Royal Insurance and Roxborough passing-on was rejected as a possible defence to a claim in restitution.294 At the same time it has been recognised that the ultimate bearer of the burden of the tax would have a right to then recover the money from a
289 [1986] 2 SCR 539. 290 Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539, 1202-1203. 291 J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 126. 292 (2001) 208 CLR 516. 293 Roxborough (2001) 208 CLR 516, 572. 294 Royal Insurance (1994) 182 CLR 51, (Mason CJ, Brennan Toohey and Dawson JJ); Roxborough (2001) 208 CLR 516, (Gleeson CJ, Gaudron, Hayne and Gummow JJ). 138 successful plaintiff.295 Notably however, neither case involved attempts by the Commonwealth to limit recovery for moneys paid under unconstitutional legislation.
As Mason J explored in his judgment in Royal Insurance, such a position raises a number of problems, including that it would deter actions being brought for recovery because neither traders who collect and make payments nor individuals who paid small (possibly indivisible) sums would have any incentive to do so.296 Claimants are also likely to face significant evidential hurdles and often will not be in a position to establish their claims.297
Conclusion
Arguably, the constitutional principle that tax should not be levied without Parliamentary authority does not speak to the circumstance of the creation of a retrospective interest under a written and fixed constitution. An objective approach founded on such a principle ultimately fails to vindicate it and/or undermines other rule of law principles. The absence of any demonstrable fault on the part of the legislature, a plaintiff’s failure to exercise the opportunity afforded him or her to challenge the exaction in the courts and the impracticalities of unscrambling the transactional egg by restoration of the funds to those who have borne the burden of the tax all weigh against such a position.
Legislative action which bars such actions, rather than being a cynical and circuitous attempt by the legislature to do indirectly what cannot be done directly, may be better characterised as a fair balancing of the interests created by a retrospective judgment. The mistake of law doctrine, to the extent that it denied recovery in such circumstances was not entirely without some principled basis and could be characterised as a mechanism permitting recovery for the most deserving plaintiffs without the possibility of imperilling the treasury.
The distinction and any interaction between the Proviso’s operation and any underlying restitutionary action are significant. If the legislature is left with the power to limit such actions
295 In Roxborough Kirby J, following Mason J in Royal Insurance, held that such funds would be recoverable by a plaintiff but would be subject to a constructive trust such that the plaintiff would be obliged to refund them to the ultimate bearers of the tax’s burden. See Roxborough (2001) 208 CLR 516, 571 (Kirby J); Royal Insurance (1994) 182 CLR 51, 78 (Mason CJ); Mutual Pools (1994) 179 CLR 155, 177, 191 (Brennan, Deane and Gaudron JJ). 296 See Royal Insurance (1994) 182 CLR 51, 72 (Mason CJ); See also J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 127. 297 Royal Insurance (1994) 182 CLR 51, 72 (Mason CJ); Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539, 1207 (La Forest J). 139 there is no harm in leaving public law restitutionary remedies wide open. Conversely, if the Proviso prevented the legislature from limiting recovery, such limits may need to be embedded within restitutionary doctrines themselves. The problem with this approach is that restitutionary doctrines would then be different depending on whether the action was brought against a State or the Commonwealth.
Alternatively, taking the view that there ought not to be any limits on recovery in such circumstances, the Proviso can be seen either as redundant, with other Constitutional principles taking precedence or its operation determined by the stance taken by the courts as to the proper application of rule of law principles as are to be implied from the Constitution itself or more broadly.
2.8.2 Subjective Proprietary Expectation Approach
The Proviso may have a more direct role to play in protecting restitutionary actions for recovery of money paid pursuant to ultra vires demands or taxes were they formulated as a policy motivated common law restitutionary action298 and the operation of s 51(xxxi) approached more specifically as a protection against legislative interference with various types of proprietary expectation.
However, bearing in mind that here we are dealing with retrospective interests, a subjective approach which grants restitution to the measure of the subjective expectation loss of a plaintiff would rarely grant any substantial remedy for either one of two reasons.
The first is that generally, where a payment is made and the payer is not aware of the invalidity of the impost, the plain inference to be drawn is that there is no subjective expectation loss. They will have demonstrably acted and structured their affairs on the basis that the invalid legislation is in fact valid. Repayment of the collected tax would constitute a windfall gain in that a repayment would represent a gain they never expected to receive, nor would the plaintiff have ever held an expectation of being able to use such funds for their own purposes. In the case of a purchaser who has paid for goods or services which included a component of the invalidated tax, by making the purchase they implicitly demonstrate a willingness to pay the total price for goods or services received. Their payment is voluntary; they get what they bargain for, that is, what they expect to receive for the purchase price.
298 Degeling, 'Restitution of Unlawfully Exacted Tax in Australia', above n 255, 314. 140
Payment under protest or at a time when a challenge to the impost is underway in the courts299 might rebut such an inference being drawn.
The second reason that such a claim may fail is that in circumstances where a trader has passed onto a third party the cost of the payment not only will there be no subjective expectation loss but the payer will not have borne the cost of the impost and in restitutionary terms the Commonwealth’s enrichment will not have been ‘at the plaintiffs expense’. Furthermore, and in any event, had the unconstitutional statute never been passed, the plaintiff would not have been in a position to pass on or retain the money. In such a case, recovery would deliver a plaintiff a windfall both in the sense of it being un-earned and unexpected.
A subsidiary issue is that in many circumstances the true cost to a trader is the loss of sales or profit because of an increase in the total purchase price. Thus, even where it can be shown that the cost was passed on in full, the plaintiff may have suffered some consequential loss on sales volume or the opportunity to charge the same price with higher profit margins. Establishing such matters retrospectively creates an evidential nightmare300 and as McInnes surmised, in many circumstances ‘the true effects of passing on generally must remain unknown.’301
Arguably, such losses are not within the domain of a restitutionary claim302 but rather are in the nature of a tort of a kind rejected by the High Court in Northern Territory v Mengel303 and James v Commonwealth.304 In any event, it is said that the Proviso does not operate to protect ‘the general commercial and economic position occupied by traders’305 and may not operate to protect such a claim.
299 The executive cannot claim any sort of estoppel by convention where it is put on notice as to the potential invalidity of an impost. Subjective approaches can also take into account any demonstrable wrong-doing by a member of the executive or the Parliament in the nature of duress, colore officii or an attempt by parliament to pass a law which a constitutional court has already ruled would be ultra vires or based on an interpretation of the Constitution not clearly open. 300 See generally J D Merralls, 'Restitutionary Recovery of Taxes After the Royal Insurance Case', above n 197, 126-127. 301 McInnes, 'Mistaken Payments Return to the High Court', above n 227, 241. 302 Royal Insurance (1994) 182 CLR 51, 75 (Mason CJ) ‘Restitutionary relief, as it has developed to this point in our law, does not seek to provide compensation for loss.’ 303 Northern Territory v Mengel (1995) 185 CLR 307. 304 (1939) 62 CLR 339. 305 Cases of compromise are functionally equivalent to a voluntary sale. 141
Even so, an all or nothing approach to the operation of the Proviso may not be the most appropriate in such circumstances. Rather, it may be more fruitful to ask whether, for a piece of legislation to pass the just terms test, to whom and in what circumstances must compensation be paid and by what mechanism or formulae must quantum be assessed.
Conclusion
While the Proviso may have some scope of operation to ordinary restitutionary claims its role in protecting from legislative defeat claims for restitution of retrospectively ultra vires exactions is rather limited. That is either because other constitutional principles perform the necessary work or because, as suggested, the operation of s 51(xxxi) in the context of retrospective interests would deny a remedy. In any case, the overlay of a s 51(xxxi) approach to retrospective interests sheds some light on some of the difficulties courts have faced in formulating a restitutionary doctrine which deals with these types of interests.
Cases of demonstrable wrong doing by the Executive or Parliament aside, a subjective expectation-based approach, would deny a remedy ‘in cases where both parties expected the payment to be final’,306 a doctrine that could be explained as a defence of estoppel by convention307 or an approach to the Proviso in similar terms. Similarly, voluntary payments can be excluded as a function of the operation of restitutionary doctrines308 or the Proviso (either because there is no action/property acquired or because voluntary acquisitions are outside its scope).
Arguably, at least with respect to claims against the treasury, restitutionary doctrines can be relieved of the work of avoiding fiscal chaos and imperilling receipts if s 51(xxxi) can do that work. There is no need for the courts to pre-emptively intervene and deny claims where the legislature is content for such actions to succeed.
306 David Securities (1992) 175 CLR 353, 394 (Brennan J). 307 Ibid, 372-3 discussing South Australian Cold Stores Ltd v Electricity Trust of South Australia (1957) 98 CLR 65. 308 David Securities (1992) 175 CLR 353, 395 (Brennan J). 142
2.9 Crown Immunity from Suits in Tort and Contract
The relationship between s 51(xxxi) and doctrines of Crown immunity from suit is another area in which rule of law principles find direct application; in particular the principle that government action ought to be bound by law. As with s 51(xxxi) doctrine generally, historic UK common law doctrines of Crown immunity309 have had to adapt to the strictures of limited government under a written and fixed constitution.
As is now generally accepted, express and implied provisions of the Australian Constitution conflict with the notions that the King can do no wrong and cannot be sued in his own courts. As Gummow and Kirby JJ held in Mewett:
The establishment of the judicial power of the Commonwealth as an essential element in the federal system meant that doctrines of executive immunity from curial process which had been developed in England could not be carried immediately into the federal system. … Moreover, the acceptance in Australia of the principle in Marbury v Madison as "axiomatic", placed a fundamental limitation upon any general acceptance in the exercise of federal jurisdiction of the maxim that the Sovereign could do no wrong. To the contrary, it was for the judicial branch of government to determine controversies as to whether the legislative or executive branches had exceeded their constitutional mandates.310
Accordingly, a majority of the Court in that case went onto hold that s 75 of the Constitution operates both as a grant of jurisdiction to the High Court and a removal of the government's immunity from suit as a defence to a cause of action,311 at least in some circumstances.
Where Commonwealth legislation operates so as to bar or extinguish certain actions being brought against it, s 51(xxxi) may have some operation with respect to three distinct categories of suit.
The first involves actions having some constitutional basis not directly involving the Proviso where a bar to action has been enacted so as to circuitously avoid the operation of some other
309 See generally Susan Kneebone, 'Claims Against the Commonwealth and States and their Instrumentalities in Federal Jurisdiction: Section 64 of the Judiciary Act' (1996) 24 Federal Law Review 93. 310 Commonwealth v Mewett (1997) 191 CLR 471, 545-546 (citations omitted). 311 See generally Graeme Hill, 'Private Law Actions Against the Government Part 1-Removing the Government's Immunity from Suit in Federal Cases' (2006) 30(3) Melbourne University Law Review 716. 143 constitutional prohibition or guarantee. These typically involve restitutionary actions as discussed in the previous section. The second category are those that involve the Proviso directly and arise where the defeat of the action would itself constitute an acquisition of that action, the action itself comprising the property acquired. The third category involves bars to action which operate so as to circuitously avoid the Proviso’s operation.
With respect to the second category, up until Georgiadis and Mewett the dominant view was that expressed by Dixon J in Werrin being that:
…the Federal Parliament ha[s] complete authority over all ordinary causes of action against the Commonwealth and over the remedies for enforcing them. I should have thought that the right of the subject to recover from the Crown in right of the Commonwealth, whether in contract or in tort, is the creature of the law which the Federal Parliament controls.312
Accordingly, it can be understood that in order for the plaintiff in Georgiadis to succeed under s 51(xxxi) the Court had to abandon this approach. In Georgiadis it was accepted that common law actions are capable of being property for the purposes of s 51(xxxi). Subsequently in Mewett the majority found that the right to proceed against the Commonwealth was to be found in s 75 of the Constitution and that legislation was not required in order that any Crown immunity be abrogated. Accordingly, s 75 itself limited the Parliament’s power to grant itself immunity from suit. In this way, the question of any inherent modifiability of sections of the Judiciary Act 1903 (Cth) which purport to abrogate Crown immunity was avoided.313
In the general run of cases and retrospective interests aside, an application of objective expectation-based doctrines in the context of s 51(xxxi) would have the effect that the Commonwealth’s liability in suit could be abolished prospectively but not retrospectively. Such an approach accords with the decisions in Georgiadis,314 Smith v ANL Ltd and Commonwealth v Mewett discussed above, wherein the Court effectively decided that the plaintiffs’ common law rights to proceed against the Commonwealth and others in tort could not be retrospectively extinguished or barred by the Commonwealth Parliament without the provision of just terms as to do so would be in breach of s 51(xxxi).315
312 Werrin v Commonwealth (1938) 59 CLR 150, 167 (Dixon J). 313 Judiciary Act 1903 (Cth), ss 56-59, 64. 314 Georgiadis (1994) 179 CLR 297. 315 Ibid, 305 (Mason CJ, Deane and Gaudron JJ). 144
The third category of suit within the Proviso’s scope are those which, if barred, would enable the Commonwealth Parliament to circumvent the Proviso’s operation; in the case of voluntary acquisitions, by way of legislation barring an action for payment under the contract or in the case of forced acquisitions, the barring of recovery of damages in tort. Certain common law actions and remedies must themselves be protected by the Proviso to avoid its own circumvention.
As Williams J held in Australasian United Steam Navigation Co Ltd v Shipping Control Board:316
The placitum does not itself give a right of action. But it requires that legislation of the Commonwealth Parliament providing for the acquisition of property shall provide for the acquisition on just terms. Otherwise the legislation will not comply with the Constitution, and will be void, so that, if the Commonwealth takes possession of the property, it will commit a tort for which it will be liable in damages.317
The reference in the passage quoted above to s 51(xxxi) not itself giving rise to a cause of action is properly understood as it not giving rise to an action in damages for its breach per se (that is outside an established ground of tortious action).318
Were the Commonwealth able to bar entirely any litigation brought against it for its tortious actions committed against a plaintiff’s property, the executive could circumvent the Proviso without repercussions. The Royal prerogative exclusions aside,319 these common law actions underpin and maintain the fundamental principle that forced acquisitions must be authorised by legislation and must therefore run the gauntlet of s 51(xxxi).
If it is not to be ‘decorative rather than significant’320 it must be the case that by implication the Proviso of itself protects these actions.321 As McHugh J observed in Mutual Pools:
It seems almost absurd to think that… the Commonwealth could bar the right to bring an action for the recovery of, or damages for, property acquired by the Commonwealth otherwise than on just terms, contrary to s 51(xxxi) of the Constitution.322
316 (1945) 71 CLR 508. 317 Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508, 527-528. 318 Kruger v Commonwealth (1997) 190 CLR 1; James v Commonwealth (1939) 62 CLR 339, cf Bivens v Six Unknown Federal Narcotics Agents, 403 US 388 (1971); British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30. 319 See generally A-G (Cth) v Schmidt (1961) 105 CLR 361. 320 ICM Agriculture (2009) 240 CLR 140, 227 (Heydon J). 321 Georgiadis (1994) 179 CLR 297, 305 (Mason CJ, Deane and Gaudron JJ). 145
2.10 Contractual interests
Contractual interests held against the Commonwealth raise distinct issues some of which are presently unresolved. The decision in Ludeke323 has been said to stand for the principle that contractual interests are not protected at all by the Proviso.324 However, the contract in question in that decision was a contract of employment between an employee and his union employer. The dissolution of the union body by the relevant legislation unavoidably extinguished the contract of employment. As the Court made clear, the issue in that case was that there had been no ‘acquisition’ by the Commonwealth of that contractual interest; it had merely terminated the plaintiff’s subsisting contractual rights.325
However, where a contractual interest is held directly against the Commonwealth, the issue is not so clear cut. As Mason CJ observed in Mutual Pools:
…it may be that in some circumstances the extinguishment of a chose in action against the Commonwealth would amount to an acquisition of property. The extinguishment of such a cause of action could have the same effect as an assignment of the chose in action to the Commonwealth. It has been said that what the Constitution forbids directly cannot be achieved indirectly or by means of some circuitous device.326
Similarly, in Health Insurance Commission v Peverill327 McHugh J held to the effect that once a right held against the Commonwealth becomes contractual in nature it falls within the Proviso’s scope.328
In respect of a contract for the sale of land or chattels or some other tradable asset to the Commonwealth, an extinguishment of the entitlement to payment under the contract could fairly be construed as a circuitous means of acquiring the asset without compensation.329 Thus, as discussed above, it must surely be the case that the Proviso, by implication, protects these actions to prevent its own circumvention.
322 Mutual Pools (1994) 179 CLR 155, 216. 323 Ludeke (1985) 159 CLR 636. 324 Mutual Pools (1994) 179 CLR 155, 173 (Mason J). 325 Ludeke (1985) 159 CLR 636, 653. 326 Mutual Pools (1994) 179 CLR 155, 173. 327 (1994) 179 CLR 226. 328 Peverill (1994) 179 CLR 226, 266. 329 Georgiadis (1994) 179 CLR 297, 305 (Mason CJ, Deane and Gaudron JJ). 146
However, what of the situation where the subject of the contract is the provision of services? It would appear that the provision of services per se does not constitute property.330 Indeed, the general law imposes obligations to act and/or provide services without remuneration in a range of circumstances.331 However, the same cannot be said of a contractual interest in payment being a chose in action.
Nonetheless, were a contract for the provision of services not within the definition of property it follows that there would be no evil in the Commonwealth seeking to legislate retrospectively to avoid a contract which procured services already performed.
Against this argument, there is no principled distinction to be made between the defeat of entitlements to payment for the resumption of an interest in land as against the defeat of entitlements to payment for services contractually procured.332 Such was the view expressed by Callinan J in Smith v ANL Ltd discussed in Chapter One.333 In both instances, voluntary consent to a course of action of significant economic consequence is undermined in an arbitrary and capricious manner and the Commonwealth is consequentially enriched. A fortiori in circumstances where ordinarily the Commonwealth would need to raise taxes to pay for the benefit of the services. As Gummow J held in Re Smith Kline and French Laboratories (Australia) Limited:334
…one should lean towards a wider rather than narrower concept of property, and look beyond legal forms to the substance of the matter.335
2.11 The Separation of Powers - the fettering of Parliament’s law making power by the Executive
A second issue with contractual interests held against the Commonwealth being protected under s 51(xxxi) is that it puts the executive in a position whereby its agreements effectively
330 'Political Advertising Case' (1992) 177 CLR 106, 166 (Brennan J), 245 (McHugh J), 198 (Dawson J); Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508. 331 James v Commonwealth (1939) 62 CLR 339, 367-8 (Dixon J) citing Lane v Cotton (1701) 88 ER 1458, 1464-5 (Holt CJ); see generally Gray, 'Regulatory Property', above n 94. 332 contra Rose, 'The Government and Contract', above n 137, 253-4. 333 Smith v ANL Ltd (2000) 204 CLR 493, 552, [183]. 334 (1990) 22 FCR 73. 335 Smith Kline & French Laboratories (Australia) Ltd v Secretary of Department of Community Services & Health(1990) 22 FCR 73, 136. 147 bind the Parliament in firstly, making appropriations to meet contractual obligations336 and secondly, in limiting its legislative capacity to abolish those interests without providing just terms. Thus, such agreements indirectly limit the Parliament’s law making power and its exclusive power to authorise appropriations from the Treasury. In this way the Proviso has direct implications for the way in which the separation of powers operates under the Australian Constitution.
These issues were canvased in two decisions, namely Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation337 and Magrath v Commonwealth.338 It has been said that these decisions stand for the principle that ‘…where the Executive enters into a contract with a citizen, that contract may be overridden by subsequent legislation without the need for the provision of just terms.’339
As Brennan J expressed his view of the principle in Perpetual Executors, ‘legislative authority is not bargained away by executive contracts.’340
These cases, though they did not deal with s 51(xxxi) in any sense, deserve particular attention because they have been misread or misunderstood by commentators and members of the High Court alike in the context of the question of the Proviso’s scope of operation.
2.11.1 Perpetual Executors and Magrath
2.11.1.1 Facts
In both Perpetual Executors and Magrath, the Commonwealth, by certain bonds that it had issued, had promised that it would pay interest on the bonds but that the interest would not form part of the assessable income of the bondholder. Subsequent to the issue of the bonds to the bondholders, the Commonwealth made amendments to the Income Tax Assessment Act 1936 (Cth) (the ‘new tax’) which levied income tax upon interest paid on the bonds.
336 Wurridjal v Commonwealth (2009) 237 CLR 309, 391 (Kirby J); cf Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 35-36; New South Wales v Bardolph (1934) 52 CLR 455. 337 (1948) 77 CLR 1 (‘Perpetual Executors’). 338 (1944) 69 CLR 156 (‘Magrath’). 339 Mutual Pools (1994) 179 CLR 155, 174 citing Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation (1948) 77 CLR 1; Magrath (1944) 69 CLR 156; Rose, 'The Government and Contract', above n 137, 252-254. 340 Mutual Pools (1994) 179 CLR 155, 180. 148
In Magrath, a majority of the Court held that this promise amounted to a term of the contract between the Commonwealth and a bondholder.341 The Court was not asked to decide the validity of the term as the Commonwealth had indicated that, if the Court found it a term of the contract, it would honour the promise.
As in Magrath, in Perpetual Executors, the Commonwealth had decided to honour this term of the contract by making a payment to the bondholder in the sum of the tax levied and paid. However, the ‘refund,’ as it was described by the Commissioner of Taxation, was received by the bondholder’s executors post mortem.
The question for the Court in Perpetual Executors was the proper characterisation of the payment actually received from the Commonwealth as being either, the satisfaction of a contractual debt held inter vivos (and therefore property and taxable under the Estate Duty Assessment Act 1914-1942 (Cth)) or alternatively, if the term in the contract was unenforceable or voided by the new tax, represented a mere gratuitous payment by the Commonwealth and not the property of the deceased at the time of her death and therefore not taxable.
It was argued by the executors that, as at the date of death, there was no legal claim nor any contractual debt held by the deceased against the Commonwealth for the taxes paid. As such, it was argued that the ‘refund’ money was not part of the deceased estate and not subject to estate duty. The Commissioner’s argument was that the contractual term exempting the bondholder from tax on the interest was valid and as such, there remained a residual proprietary interest in the nature of a contractual debt and pursuant to the Estate Duty Assessment Act 1914-1942 (Cth), the legal claim was ‘property of the deceased’ inter vivos and therefore subject to estate duty.342
A majority of the Court held the payment to be in the nature of a gratuity343 and therefore not the property of the deceased inter vivos and therefore not subject to estate duty.344 The reasoning of the majority was largely consistent. Dixon J held that the Commonwealth ‘was under no liability either to refund the tax or to pay damages for imposing the tax
341 Magrath (1944) 69 CLR 156(Rich, McTiernan and Williams JJ). 342 Section 8(1) of the Estate Duty Assessment Act 1914-1942 provided that duty shall be levied and paid upon the value as assessed under the Act of the estates of deceased persons. The estate of a deceased person was defined as comprising ‘his personal property.’ 343 Perpetual Executors (1948) 77 CLR 1, (Latham CJ, McTiernan and Dixon JJ, Stark and Williams JJ in dissent). 344 Ibid. 149 legislatively.’345 In substance, his Honour affirmed the decision in Reilly v The King346 that ‘if further performance of a contract becomes impossible by legislation having that effect the contract is discharged.’347 Latham CJ reached the same conclusion adding that ‘there can be no objection on purely legal grounds to the abolition by Parliament of the freedom from taxation promised by the bonds.’348
2.11.1.2 Discussion
Perpetual Executors was an unusual case in that the plaintiff was arguing that the benefit obtained under the contract was voided by the new tax and not property while the Commissioner was arguing that the new tax did not defeat the contract which, ordinarily, would have meant that the Commonwealth was liable to make a refund. No discussion of s 51(xxxi) took place because it was not in issue, nor raised by any of the parties or the bench.349 An argument by the plaintiff that the new tax was in breach of s 51(xxxi) would have been against their interests. That the Commissioner of Taxation would have raised s 51(xxxi), arguing for the invalidity of a statute imposing taxation, need not even be considered. On these grounds alone there is no support to be found in either Perpetual Executors or Magrath for the statement by Mason CJ that those decisions support the very wide proposition that ‘…where the Executive enters into a contract with a citizen, that contract may be overridden by subsequent legislation without the need for the provision of just terms.’350
However, these two decisions do highlight the problem that the operation of s 51(xxxi) might have the retrograde consequence that the Commonwealth Executive could interfere with Parliament’s exclusive power to levy taxes. Such a result could not be sustained in terms of the separation of powers envisaged by the Constitution. Several expressions of this conclusion can be found in Magrath.351 As Rich J held:
The Executive Government has no more dispensing power in relation to Commonwealth legislation than had James II. in relation to English legislation. It cannot, without legislative
345 Ibid, 32. 346 (1934) AC 176 347 Reilly v The King (1934) AC 176, 180. 348 Perpetual Executors (1948) 77 CLR 1, 18. 349 Cf Rose, 'The Government and Contract', above n 137, 254. 350 Mutual Pools (1994) 179 CLR 155, 174. 351 See Magrath (1944) 69 CLR 156, 175 (McTiernan J) ‘The promise in the bonds has not, of course, the force of a constitutional guarantee: it is not capable of binding the Parliament not to impose tax upon the bond interest if it should think fit to do so.’ 150
authority, exempt a bondholder, or anybody else, from obligations imposed by existing legislation, much less can it tie the hands of future Parliaments.352
Dixon J characterised the dicta in Magrath as ‘the Executive Government did not have power to bind the Parliament not to impose tax upon the bond interest.’ Another way of expressing this principle would be to say that a promise of this nature, if made by the executive, is ultra vires.
Against the bedrock principle of the separation of powers envisaged by the Constitution353 the next question which arises is whether the principle requires that all contracts entered into by the executive be outside the scope of s 51(xxxi) and as such, extinguishable without the provision of just terms?
Outside the very particular circumstances that arose in Magrath and Perpetual Executors it would seem that the principle has a very narrow scope. Indeed, the limits of this doctrine were identified by Mason CJ in suggesting that the extinguishment of contractual rights in respect of land or goods would still attract the operation of the Proviso.354
To a complaint that s 51(xxxi) might operate such that the Parliament’s legislative powers are fettered when property is acquired for public use - that is clearly what it was intended to do.
However, a possibility raised by this doctrine is that there may be instances in which a legislatively enabled proprietary interest may be fundamentally inconsistent with the executive’s exclusive right to negotiate and enter into treaties, cede or acquire territory or perform some other role reserved to the Crown’s prerogative.355 Such an interest, to the extent that it is granted indefeasibly by the Parliament or otherwise, might be ultra vires and voided (or voidable) on that basis and so exclude the operation of s 51(xxxi).356 Such a doctrine may in part explain the High Court’s decision in WMC Resources.
352 Ibid, 169-170 and see Keith Mason, 'Money Claims By and Against the State', above n 7, 103. 353 See generally Victorian Stevedoring & General Contracting Company Pty Ltd v Dignan (1931) 46 CLR 73; New South Wales v Commonwealth (1915) 20 CLR 54. 354 Mutual Pools (1994) 179 CLR 155, 173 n 62, citing Rose, 'The Government and Contract', above n 137, 252-254; and see Allen, 'The Acquisition of Property on Just Terms', above n 25, 377. 355 William B Stoebuck, 'A General Theory of Eminent Domain' (1971) 47 Washington Law Review 553; Allen, 'The Acquisition of Property on Just Terms', above n 25, 380; Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314, 318-319 (Latham CJ). 356 A-G (Cth) v Schmidt (1961) 105 CLR 361, 372-373, 376-377. 151
2.12 Generality
The arbitrary use of power for personal gain, out of vengeance or favouritism is … drastically restricted by close adherence to the rule of law.357
Alongside the principle of non-retrospectivity, a primary rule of law principle offended by a resumption of a property interest is that of generality.
In a formal sense, a resumption singles out an individual or narrow community of proprietors and nullifies their legal interests in respect of a proprietary entitlement. In the present context the concern is not whether such an action creates an unequal economic burden but rather that it imposes an unequal legal burden or the effective imposition of positive discrimination infringing the principle of equality before the law.
As a question of the Proviso’s scope of operation, concerns as to the generality of a law have found expression in a number of doctrines and decisions.
The adjustment of competing claims test is the central example. Though framed as an exclusionary doctrine it only operates with respect to laws concerned with the ‘general regulation of the conduct, rights and obligations…’ of persons. In Mutual Pools Deane and Gaudron JJ held that if ‘a law is of general operation, it is unlikely’358 that it would fall within the Proviso’s scope. Similarly, it has been held that property acquired as a criminal penalty is only excluded where it is imposed ‘for breach of some general rule of conduct.’ As discussed above, in Smith v ANL Ltd Kirby J held that ‘a special law’ is not to be excluded from its scope.
Of note was the characterisation of the forfeiture provisions in dispute in Burton v Honan which Dixon J characterised as ‘imposed on all persons in derogation of any rights such persons might otherwise have in relation to the goods’359
In the central case of the acquisition of property for the building of a new road or highway it might be expected that geographical or engineering considerations would determine the specific piece of property acquired. Thus, in many instances there may be no intention on the part of a legislature to impose some discrimination on a particular landholder. In a sense it is pure infelicity that the particular property owner’s land lies in the path of the most suitable route for the new road. In other circumstances however, property might be acquired not
357 Raz, above n 4, 203. 358 Mutual Pools (1994) 179 CLR 155, 190. 359 Burton v Honan (1952) 86 CLR 169, 181 (emphasis added). 152 because of the nature of the property but on the basis of the identity of its owner.360 Thus, the arbitrariness of the acquisition, inherent in the inequality of legal burden that it creates, might arise intentionally rather than infelicitously.
Indeed, the central instances of non-general laws are Acts of Attainder and Acts of Pains and Penalties. As Mason CJ explained in Polyukhovich:
The distinctive characteristic of a bill of attainder, marking it out from other ex post facto laws, is that it is a legislative enactment adjudging a specific person or specific persons guilty of an offence constituted by past conduct and imposing punishment in respect of that offence.361
Dawson J in that same decision quoted with approval the remarks of Marshall CJ, speaking for the US Supreme Court in Fletcher v Peck:362
A bill of attainder may affect the life of an individual, or may confiscate his property, or may do both.363
While such laws are impermissible under the Australian Constitution for the reason that they usurp the judicial function in breach of the separation of powers, they also potentially interact or intersect with the express limitation in s 51(xxxi).
As the majority suggested in Tape Manufacturers:
If a law did no more than provide that a particular named person was under an obligation to pay to the Commonwealth an amount of money equal to the total value of all his or her property, the law would effect an aquisition of property for the purposes of s 51(xxxi), notwithstanding the fact that it imposed merely an obligation to pay money and did not directly expropriate specific notes or coins.364
Speaking of the Bill of Attainder clause in the US Constitution in United States v Brown,365 Marshall CJ held that ‘the evil the Framers had sought to bar: legislative punishment, of any
360 See for eg Clunies-Ross v Commonwealth (1984) 155 CLR 193. 361 Polyukhovich (1991) 172 CLR 501, 535. 362 10 US 87 (1810). 363 Fletcher v Peck, 10 US 87, 138 (1810) cited in United States v Brown, 381 US 437, 447 (1965) quoted in Polyukhovich (1991) 172 CLR 501, 645 (Dawson J). 364 Tape Manufacturers (1993) 176 CLR 480, 509-510. 365 381 US 437 (1965). 153 form or severity, of specifically designated persons or groups.’366 In Polyukhovich three members of the Court took the view that such Acts are forbidden only because they usurp judicial power and not because of their retrospectivity per se.367 As Dawson J explained:
Legislation will amount to a bill of attainder only where it is apparent that the legislature intended the conviction of specific persons for conduct engaged in in the past.368
It is when the legislature itself, expressly or impliedly, determines the guilt or innocence of an individual that there is an interference with the process of the court.369
Thus, there are a range of circumstances left open in which the Proviso might have some work to do because in some instances the distinction between an uncompensated acquisition and the imposition of some form of collective or individual property based punishment or discrimination lies only in the Parliament’s purpose in enacting the law.
It would be a very straight forward exercise for the Parliament to circumvent the prohibition on Bills of Attainder by doing all but naming the individual or group to which such a law applied or by simply not framing it in terms of a finding of criminal guilt.
Thus, legislation could be passed which in substance imposes collective punishment on a group or is designed as a means of discriminating against them. That is, it seizes their property because they are a member of the group and not because of any act or other intention on their part. The distinction between such a law and an Act of Attainder would be one of mere formality. It is the intention or purpose behind the legislation often typified by ‘a disguised description of group membership’370 which sets it apart from a general law.
Of note in this context are several judgments of Dawson J rejecting any role for the operation of the Proviso in such circumstances. Taking the view that the Proviso protects only specific property his Honour held that both money and causes of action were not within its scope.371
Nonetheless, bringing such legislation within the Proviso’s scope of itself places some sort of limit on self-interested bias (on the Parliament’s part) because personal enrichment and/or
366 United States v Brown, 381 US 437, 447 (1965) cited in Polyukhovich (1991) 172 CLR 501, 645-6 (Dawson J). 367 Polyukhovich (1991) 172 CLR 501, 540 (Mason CJ), 648 (Dawson J), 721 (McHugh J). 368 Ibid, 687 (Dawson J). 369 Ibid, 649. 370 Ibid, 686 (Toohey J). 371 Mutual Pools (1994) 179 CLR 155, 198; Peverill (1994) 179 CLR 226; Georgiadis (1994) 179 CLR 297. 154 political gain without a corresponding political cost (ie. having to raise taxes) is avoided. The problem whereby ‘majorities may seize property of their opponents as a means of financing public goods or rents instead of raising taxes’372 is limited. As would be the practice of majorities excluding minorities from political participation and subjecting them to arbitrary punishments and exactions because they oppose or hold a different view from the majority. It also removes, as a motive for aspiring to political office, acquiring the property of political opponents.
A public purpose test, as is found in the US Constitution’s Fifth Amendment takings clause, is one mechanism available to limit the use of eminent domain for personal or factional gains but it is not one adopted under the Australian Constitution.
372 Jacobi, Mittal and Weingast, 'Creating a Self-Stabilizing Constitution', above n 87, 618. 155
2.13 Chapter 2 Conclusion
‘Rule of law’ principles and issues can be seen to have arisen at all levels of the High Court’s interpretation and approach to the application of the Proviso. Arguably, it is these principles which have guided the court in many instances and give weight to the argument that s 51(xxxi) operates primarily as a rule of law protection.
If Allan was correct to observe that ‘[i]t seems that so long as the legislation does not offend the judges' sense of what is fair or reasonable … the legislation can stand’373 it is not much of a stretch to suggest that compliance with the rule of law might be informing what the judiciary regard as fair or reasonable. Indeed, Keith Mason QC expressed the view that ‘[t]o most jurists the rule of law is the bedrock of civilised society.’374
Nonetheless, in its operation s 51(xxxi) can produce some quite unexpected and unintuitive consequences on a number of levels.375 In a number of respects it has potential impacts on the ‘standard model’ of the separation of powers. On occasion it appears to reverse the roles between the executive and Parliament, and between the Judiciary and Parliament. That is not to suggest that approaches to the Proviso which have these consequences must be abandoned. Rather, that they must be carefully balanced keeping in mind the Proviso’s role in the overall constitutional structure. To dismiss them is to adhere to a clichéd understanding of the purposes the separation of powers performs and the Constitution’s sometimes unstated division of powers between the organs of government and the citizenry. If both serve to mitigate or prevent the exercise of arbitrary governmental powers such consequences can be accommodated.
In line with criticisms of an entrenched bill of rights, on occasion, the Proviso makes it very difficult for the judiciary to avoid engaging in merits type analyses or deciding political or policy issues generally left to the Parliament. A formalistic approach, while certainly viable, is open to criticism and the fact that the overwhelming majority of land resumptions take place under the States’ jurisdiction has meant that Federal Courts are rarely confronted with the most difficult ‘regulatory taking’ type cases.376
373 Allen, 'The Acquisition of Property on Just Terms', above n 25, 367. 374 Keith Mason, 'The Rule of Law', above n 4, 114. 375 Cf Allen, 'The Acquisition of Property on Just Terms', above n 25, 380. 376 O'Connor, 'The Changing Paradigm of Property', above n 168. 156
The foregoing chapters perhaps also reveal how any one rule of law principle implies others and the difficulty in drawing any sharp line between them. A single entrenched rule of law protection is something of a slippery slope to many other rule of law implications and suggests that the Proviso has the potential to ‘act as a catalyst for change in the interpretation of rights generally.’377
Even so, the rule of law does not present simple answers or suggest easily formulated or applied doctrines and in many instances suggests at least two conflicting answers.
In particular, retrospective interests provide a particular challenge for the operation and interpretation of s 51(xxxi) and a number of other doctrines. Removing these thorny cases from the mainstream of s 51(xxxi) jurisprudence affords an opportunity to clarify s 51(xxxi) doctrine generally and, given that these issues are not often addressed in these terms, provide some insight into why it has proven so difficult to formulate a generalised set of doctrines. It is perhaps a necessary first step in untangling what has come to be a confusing bundle of doctrines.
In light of the analysis undertaken, the next chapter considers in more detail a number High Court cases involving retrospective interests and the scope of s 51(xxxi) and explores possible alternative explanations for the outcomes in those decisions.
377 George Williams, Human Rights under the Australian Constitution (Oxford University Press, 1999), 154. 157
3 Chapter 3 – Case Studies
3.1 Introduction
This chapter takes the form of four case studies, each exploring a significant High Court decision dealing with the application of s 51(xxxi), being the decisions in Werrin v Commonwealth,1 Mutual Pools & Staff Pty Ltd,2 Health Insurance Commission v Peverill3 and Attorney-General for the Northern Territory v Chaffey.4 In each case, the relevant Legislature5 had enacted retrospective legislation to defeat a retrospective interest held by the plaintiffs. In each case, the High Court refused to find the entitlements within the Proviso’s scope of protection.
As Dawson J remarked in Polyukhovich:
…the injustice which might be inflicted by construing an enactment so as to give it a retrospective operation may vary according to its subject matter. Indeed, justice may lay almost wholly upon the side of giving remedial legislation a retrospective operation where that is possible…6
In relation to retroactive laws Fuller observed:
Taken by itself, and in abstraction from its possible function in a system of laws that are largely prospective, a retroactive law is truly a monstrosity. Law has to do with the governance of human conduct by rules. To speak of governing or directing conduct today by rules that will be enacted tomorrow is to talk in blank prose. …
If … we are to appraise retroactive laws intelligently, we must place them in the context of a system of rules that are generally prospective. Curiously, in this context situations can arise in which granting retroactive effect to legal rules not only becomes tolerable, but may actually be essential to advance the cause of legality.
1 (1938) 59 CLR 150. 2 (1994) 179 CLR 155. 3 (1994) 179 CLR 226. 4 (2007) 231 CLR 651. 5 Chaffey concerned legislation of the Northern Territory Legislative Assembly. The other three cases concerned Acts of the Commonwealth Parliament. 6 Polyukhovich (1991) 172 CLR 501, 642-3 (citation omitted). 158
Like every other human undertaking, the effort to meet the often complex demands of the internal morality of law may suffer various kinds of shipwreck. It is when things go wrong that the retroactive statute often becomes indispensable as a curative measure…’7
An approach to retrospective interests in these terms bears some similarity to the US doctrine of ‘curative legislation.’8 A minimalist interpretation of the four cases to be considered might suggest that the High Court has carved out an exception to its definition of ‘property’ or ‘acquisition’, the extinguishment of ‘windfall gain’ type interests which come about by the retrospective operation of judicial decisions. Whilst a normative argument of this nature is persuasive, the devil is in the detail and, as already explored, retrospective interests give rise to a series of complex subsidiary issues.
At this point it is important to note that there are several possible connotations of a characterisation of the receipt of an amount of money as a ‘windfall’ gain. A windfall might be an unexpected gain, an unearned gain or both unexpected and unearned. Unexpected gains have implications in terms of doctrines of estoppel while unearned gains have implications for the application of restitutionary doctrines. A third definition might be that of an ‘undeserved gain’ representing an assessment of the merits of a claimant’s entitlement. In a number of the judgments discussed below it is often not clear which of these meanings is intended.
The cases to be considered raise critical questions as to the nature of entitlements to various cash payments from Commonwealth bodies and in particular, at what point those entitlements actually crystalize into a proprietary right that would be protected under s 51(xxxi). Another feature of these cases is that a positive application of the Proviso would have had the effect that the Commonwealth could not have escaped the relevant liability and would have been required to expend funds to meet the relevant obligation; it would have been obliged to complete the transaction.
The key distinguishing features of each case are as follows:
1. In contemporary terms, the interest in dispute in Werrin was one in restitution for money paid to the Commonwealth under a mistake of law. 2. In Mutual Pools the interest in dispute was in the nature of a contractual right to repayment.
7 Lon L Fuller, The Morality of Law (Yale University Press, revised ed, 1969), 53. 8 See generally Charles B Hochman, 'The Supreme Court and the Constitutionality of Retroactive Legislation' (1959-1960) 73 Harvard Law Review 692. 159
3. In Peverill the interest might best be categorised as a statute-based contract for services. 4. The interest in Chaffey was a purely statutory interest relating to periodic payments of a component of workers compensation. 5. In Peverill and Mutual Pools the plaintiffs had themselves brought the relevant antecedent legal proceedings which gave rise to the retrospective interest whereas in the other two cases the prior litigation had been brought by others.
The purpose of the case studies is to consider how the doctrines and approaches explored in the previous chapter would or might have applied, what insights they can bring to the decisions and whether they are able to offer a better explanation for the outcomes overall than the reasons delivered by the Court.
160
3.2 Werrin v Commonwealth (1938) 59 CLR 150
3.2.1 Facts
The plaintiff operated a business selling and manufacturing glass. After incorporating a company, the plaintiff sold the business’s assets including plant, machinery, office furniture and the like to the company. All of the assets comprised second-hand goods. The plaintiff was subsequently informed by the Deputy Commissioner of Taxation (“the Commissioner”) that sales tax was payable on the transaction. The plaintiff contended that the transaction was not a sale within the meaning of the relevant Acts (‘the Sales Tax Acts’) and that he was not liable to pay. Nonetheless, he reluctantly made payments by instalment over a period of years. At the time the payments were made the Commissioner believed that, under the relevant statutes, sales tax was payable on the transaction.
Three years after the sale, in other proceedings not involving the plaintiff, the High Court found that sales tax was not payable on the sale value of second hand goods.9
Several months later, the plaintiff, relying upon this decision, claimed from the Commissioner a refund of the amount of the tax paid by him on the transaction. In the meantime, Parliament had passed the Sales Tax Procedure Act 1934-1935 (Cth). This Act prohibited the Commissioner from repaying money collected prior to the handing down of the decision in the other proceedings where payment had not been promptly made.
Some eight months after the Commissioner’s refusal to accede to the plaintiff’s claim, the plaintiff commenced an action in the High Court to recover the sum. The plaintiff argued inter alia, that the Proviso invalidated the relevant section of the Sales Tax Procedure Act 1934-1935 (Cth) which barred his right to recover the taxes paid by him on the sale. The High Court unanimously rejected the plaintiff’s claim.
3.2.2 Judgment
Werrin is an interesting case for a number of reasons not least of which because it begs the questions as to whether it would be decided the same way today. It would seem that nearly all of the doctrines which underpinned the various lines of reasoning in the judgments have been
9 Deputy Federal Commissioner of Taxation (SA) v Ellis & Clark Ltd (1934) 52 CLR 85. 161 overruled in one case or another. Nonetheless, it is still held up as good law10 with Gleeson CJ in British American Tobacco Australia Ltd v Western Australia holding that:
It stands as authority for the proposition that the Parliament has legislative power ‘‘to say that a sum of money erroneously collected under a tax Act by administrative officers acting in good faith should be retained.”11
Amongst the various judgments in the case, three distinct reasons were advanced for refusing to grant the plaintiff’s claim, none of which are necessarily in conflict with each other. The separate judgments and divergent approaches reflect the multiplicity of levels on which such claims operate as follows:
1. Whether Werrin had a good cause of action; 2. Whether the Proviso operates to protect ‘causes of action’ and/or rights to proceed; and 3. Whether the Commonwealth could claim immunity from suit and bar the action by denying a right to proceed.12
3.2.3 Restitutionary approach – No cause of action
One approach, primarily advanced by Latham CJ, but supported by McTiernan J, proceeded from the view that, at common law, the Commonwealth is under no obligation to repay money paid voluntarily and under a mistake of law. Though neither Latham CJ nor McTiernan J gave any express consideration to the operation of the Proviso, it follows that if there is no subsidiary action in restitution available, it has no property interest on which to fix and protect from legislative defeat.
Of course, now that a payment made under a mistake of law is no longer of itself a bar13 the question arises as to whether Werrin was wrongly decided. Squarely raised by the decision is whether a Woolwich type doctrine would be accepted in Australia, that is whether the, ‘absence of any legitimate basis for retention’ or an ultra vires demand are sufficient to found a restitutionary claim. If it is a sufficient basis, Werrin would have at least established a prima
10 See David Securities (1992) 175 CLR 353. 11 British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, 46-47 citing Werrin v Commonwealth (1938) 59 CLR 150, 161; see also David Securities (1992) 175 CLR 353, 372 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ), 392 ( Brennan J). 12 Hill, above n 311, 718. 13 David Securities (1992) 175 CLR 353. 162 facie right to restitution (thereby potentially enlivening the operation of s 75 and/or the Proviso).
However, just as in Woolwich, it is arguable that, from a strictly factual standpoint, Werrin did not make the payments on the basis of any mistake of law.14 The evidence suggested he did not believe the tax was due and payable but rather made the decision to pay rather than contest the Commissioner’s demand. Certainly, on Brennan J’s approach in David Securities, which permits of a defence of voluntary payment, Werrin would still not succeed. With the Court in Werrin making a positive finding that the payments were neither made under duress nor demanded colore officii, absent the adoption of a Woolwich type principle he would still fall between one of the restitutionary gaps identified by Brock.15
McTiernan J in agreeing with Latham CJ summarised the position:
The plaintiff was at liberty to refuse the demand. But he gave up his right to refuse to pay. The payment of the sums demanded has the character of a voluntary payment made by the plaintiff under a mistake of law about his liability to pay the sums.16
However, the success of a restitutionary claim does not necessarily define the Parliament’s power to defeat such interests. Accordingly, even today Werrin would have several higher- order doctrinal hurdles to surmount so as to recover his payments.
3.2.4 Operation of the Proviso to Legislation which Bars Restitution
The second approach, advanced by Starke J, was that the Commonwealth may validly enact legislation which bars recovery of money paid pursuant to an ultra vires demand by the executive without infringing the Proviso.17 Though argued by the plaintiff to the contrary, Werrin was not a case where the Commonwealth purported to enact a retrospective tax to validate the exaction; rather it sought to simply bar recovery.
While Starke J provided a number of good reasons why the Sales Tax Procedure Act 1934-1935 (Cth) was otherwise within power the only suggestion as to why it might not offend the Proviso, that is, why, in terms of the workings of s 51(xxxi) it was not engaged, was a doctrine
14 Derek Wong, 'The High Court and the Woolwich principle: Adoption or Another Bullet that Cannot be Bitten?' (2011) 85(9) Australian Law Journal 597, 602; Margaret Brock, 'Restitution of Invalid Taxes - Principles and Policies' (2000) 5(1) Deakin Law Review 127, 132. 15 Brock, 'Restitution of Invalid Taxes', above n 14, 130-132; cf British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30. 16 Werrin v Commonwealth (1938) 59 CLR 150, 168. 17 Ibid, 161 (Rich J). 163 of necessity. His honour gave explicit consideration to the possibility of the ‘fiscal chaos’ that might ensue were the Parliament not to have power to bar such claims:
The prompt collection of revenue is of the utmost public importance both for the performance of the functions of government and the meeting of public liabilities. It would upset public finance unless some safeguards were provided against mistakes in assessment or the illegal exaction and collection of taxes. …. Public mischief might easily result if taxpayers on some legal decision. which they might themselves have obtained if sufficiently alert, were allowed to reclaim taxes paid by them. It might be necessary, as in the present case, where apparently large sums of money were involved, to safeguard revenue that had been paid and collected and protect it in the manner prescribed by sec. 12A and of that Parliament alone can judge.18
It can be noted that his Honour’s observations are also mindful of the possibility of limiting any remedy to those who brought the action challenging the tax. However, inasmuch as Starke J appears to posit fiscal chaos as a defence to the operation of the Proviso in the context of restitutionary claims, the soundness of his Honour’s judgment, in light of subsequent authority, remains an open question. Moreover, inasmuch as the Commonwealth was willing to grant refunds to a large number of individuals, the inference was available that fiscal chaos was not a live issue in the circumstances but rather that Parliament had chosen to single out only a particular class of taxpayer against which recovery would be withheld or denied. One might fairly characterise his Honour’s judgment as a somewhat loose application of proportionality of a sort which came to be applied in subsequent decisions dealing with s 51(xxxi).19
It is noteworthy that the provision barring recovery was not absolute. If the money was paid promptly by the taxpayer it was recoverable subject to the exception where the cost of the tax had been passed on to a third party.20 Further, if a prompt payment not passed on was made under formal protest an action could be brought within 6 months. However, in that Werrin had not paid promptly the Court did not have to go on to consider these other limitations; a majority of the Court finding the provision operated so as to totally bar his claim.21
18 Ibid, 163 (Starke J). 19 Tom Allen, 'The Acquisition of Property on Just Terms' (2000) 22(3) Sydney Law Review 351, 367. 20 Werrin v Commonwealth (1938) 59 CLR 150, 163 (Starke J). 21 Ibid, (Rich, Starke and Dixon JJ). 164
3.2.5 Crown Immunity from Suit
The third approach, taken by Dixon J22 and supported by Rich J, proceeded on an entirely different basis, being a consideration of the relationship between s 51(xxxi) and the Commonwealth’s common law immunity from suits in tort and contract. Dixon J doesn’t explicitly aver to s 51(xxxi) at any point in his judgment other than to hold that:
There is, I think, no constitutional provision preventing the Parliament from extinguishing a cause of action against the Commonwealth, unless implications be discovered in s 75 which do so.23
Clearly, Dixon J took the view that causes of action were not property for the purposes of the Proviso.24 However, the central issue in Werrin according to the judgment of Dixon J was whether or not s 75 of the Constitution, of itself, abrogates the Commonwealth’s common law immunity from suits in tort and contract. If s 75 did abrogate the immunity then the Commonwealth Parliament could not defeat what, in effect, would be a constitutional right to bring such actions.25 Alternatively, if the right to bring such actions was not entrenched within the Constitution, it was dependent upon Commonwealth legislation abrogating the immunity. In carefully considering an earlier High Court decision on the matter26 his Honour came to the latter view, being that the immunity was not abrogated by s 75 itself but rather, only by way of legislation abrogating that right. His Honour’s preferred view was that:
… the Federal Parliament ha[s] complete authority over all ordinary causes of action against the Commonwealth and over the remedies for enforcing them. I should have thought that the right of the subject to recover from the Crown in right of the Commonwealth, whether in contract or in tort, is the creature of the law which the Federal Parliament controls.27
In conclusion, his Honour stated:
22 Ibid and see also 161 (Rich J). 23 Ibid, 165 (Dixon J). 24 Cf Mutual Pools (1994) 179 CLR 155, 173 (Mason CJ). 25 Werrin v Commonwealth (1938) 59 CLR 150, 166 ‘If s 75, a constitutional provision, operates as a source of liability, it is not easy to see how parliamentary legislation could extinguish, qualify, or limit the liability thence arising.’ 26 Commonwealth v New South Wales (1923) 33 CLR 1. 27 Werrin v Commonwealth (1938) 59 CLR 150, 167 (Dixon J). 165
I am not prepared to interpret the joint judgment as deciding that sec. 75 provides a source of substantive liability so that no Act of the Commonwealth Parliament can extinguish a cause of action which has accrued against the Commonwealth.28
Though not stated in these terms, the effect of his Honour’s ruling was that, any right to sue the Commonwealth pursuant to the relevant sections of the Judiciary Act 1903 (Cth) was inherently subject to modification. Thus, his Honour’s holding can be seen to be in direct agreement with the holding of Latham CJ in Allpike to the effect that:
In the case of the Commonwealth, therefore, such right as there is, is the creation of Commonwealth statute or Commonwealth regulation. That right may be altered by the authority which created it.29
As discussed above, the subsequent decisions in Georgiadis and Mewett overruled the doctrine as formulated by Dixon J and recognised that the Proviso may prevent the Commonwealth from retrospectively extinguishing common law actions against it. Nonetheless, what we do see in Dixon J’s judgment is a rejection of any possibility of the existence of inescapable burdens, at least in respect of a retrospective interest as was in issue in Werrin itself.
Dixon Js approach also rests on a clear rejection of the notion that an action in restitution may actually emanate from the Constitution itself. Interestingly, Rich J suggested that, in other circumstances, he may have taken the opposite view:
As to the validity of the section, I should have thought it was clearly within the competence of the Federal Parliament to say that a sum of money erroneously collected under a tax Act by administrative officers acting in good faith should be retained. There may be obligations or liabilities resulting in a money claim which have a constitutional basis but if there be such this is not one of them.30
Rich J appears to be averring to a circumstance in which a payment was made under an unconstitutional statute or in circumstances where the administering officials may be on notice as to their lack of legal authority to make a demand for payment.
28 Ibid. 29 Allpike v Commonwealth (1948) 77 CLR 62, 69. 30 Werrin v Commonwealth (1938) 59 CLR 150, 161. 166
3.2.6 Discussion
The judgments in this case enable us to parse the issues fairly neatly. While Werrin’s action in restitution may or may not succeed today, several members of the court clearly took the view that the Constitution, be it directly via the Proviso’s operation or more broad constitutional considerations, would not act to bar the Parliament from extinguishing claims for recovery of an ultra vires demand made in good faith - at least where the demand was made on the basis of a clearly open, if incorrect, interpretation of a statute and not in reliance on an unconstitutional statute.
Such a doctrine raises the question that if recovery of money collected in good faith by the executive on the basis of a clearly open, if incorrect, interpretation of statute can be barred, why should the Parliament not be able to bar recovery of money collected pursuant to a statute passed in good faith on a clearly open31 interpretation of the Constitution; a fortiori where the law had been enacted in conformity with a previous decision of the High Court as to its proper interpretation.
3.2.7 The Tax Problem
An issue which arose in Werrin and a number of the other cases to be considered in this chapter was the operation or otherwise of s 55 of the Constitution. To summarise the problem, if the substantive effect of the Act was to validate retrospectively the collection of the funds and the validity of the otherwise ultra vires demand it ought to be characterised as a law imposing taxation. One might additionally characterise it as imposing a penalty for failure to make prompt payment. Either way, in order to be valid it ought to have satisfied the procedural requirements under s 55 of the Constitution which it did not.
While Werrin made a submission to this effect it was not met by the Court. Interestingly, Starke J refused to commit to a characterisation of the Act as imposing a tax or not.32 Inasmuch as Werrin’s interest today would qualify as property and that the Commonwealth, by the operation of the Act, took the full benefit of the interest, short of characterising the Sales Tax Procedure Act 1934-1935 (Cth) as a tax, the only logical route left open to explain its validity as against the Proviso is that there was no substantive injustice imposed by it such that Werrin was not denied just terms or that for some other reason internal to the Proviso’s operation it was not engaged.
31 Mutual Pools (1994) 179 CLR 155, 212 (McHugh J). 32 Werrin v Commonwealth (1938) 59 CLR 150, 163. 167
3.2.8 An Alternative approach
From the perspective of the Proviso’s operation, the finding that the payment was made voluntarily has two legal implications. Firstly, voluntary payments are typically not within the Proviso’s scope. If Werrin ultimately believed the tax was not due but paid anyway the payment is indistinguishable from a compromise settlement.33 Thus it could be said that a bargain of sorts was struck which Werrin then sought to avoid by resort to the Proviso. Similarly, Werrin, unlike the plaintiffs in the other proceedings, elected not to contest the demand and declined the opportunity afforded him to do so in the courts.
Secondly, if Werrin became resigned to the belief that the Acts did impose a tax on his transaction the defeat of any right to recovery did not unsettle any proprietary expectation on his part. As a case involving a retrospective interest Werrin could also be explained by the application of a subjective expectation-based approach to the Proviso. That is, he suffered no detrimental reliance on the barring of his right to recover taxes paid on second-hand goods as, at all relevant times, he had acted and structured his affairs on the basis that the ultra vires demand was in fact within power. Both parties held this erroneous view and repayment would have constituted a windfall gain because Werrin, when the payments were made, would have had no expectation that he would ever be able to use the funds for his own purposes. Furthermore, Werrin’s payments and tardiness in bringing the claim constituted prima facie evidence that he had never held any such expectation, rather, it was evidence that at the time the payments were made, he believed that that the law did impose the tax and the demand was within power.
Both approaches speak against the arbitrariness of any subsequent attempt by the Parliament to defeat a right to recovery. However, a defence of voluntary payment, as put forward by Brennan J was not accepted by the majority in David Securities nor Roxborough. If such a defence is not a function of restitutionary doctrines it must therefore operate as a defence to the operation of the Proviso.
The effect of such an approach is that any loss falls either on those who have no expectation of being able to put the funds to any other use or on parties voluntarily undertaking the risk of incurring it while any gain is to consolidated revenue where it can be (or already will have been) put to public use.
33 David Securities (1992) 175 CLR 353, 394 (Brennan J), 374 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). 168
The upshot, however, is that one rule of law principle - no tax without parliamentary authority - given force by restitutionary doctrines is trumped by another being the principle of legal certainty via the Proviso’s operation. The two principles are irreconcilable in these circumstances and a choice between them must be made. More recent High Court decisions including British American Tobacco Australia Ltd v Western Australia,34 would suggest that the former is likely to win out against the latter in any future litigation.
Nonetheless, the decision in Werrin demonstrates how fiscal chaos, to the extent that it can operate as a distinct policy consideration is a far better fit within s 51(xxxi) doctrines than it is within restitutionary doctrines. It may be that in many circumstances, as was the case in Werrin, the legislature is content for some classes of plaintiff to recover in part or in full. So long as the legislature has the last say there is no imperative for the courts to pre-emptively shape the common law so as to deny relief.
34 (2003) 217 CLR 30; see also Kentwell v The Queen (2014) 252 CLR 601. 169
3.3 Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155
3.3.1 Facts
In September 1986 the Sales Tax Laws Amendment Act 1986 (Cth) (the ‘In situ pool tax’) came into effect. This Act imposed a tax on the construction of in situ swimming pools. In August 1990 proceedings were launched in the High Court seeking a declaration that the tax was invalid on the ground that it contravened s 55 of the Constitution. The High Court ultimately found that the In situ pool tax was invalid, handing down its decision in Mutual Pools & Staff Pty Ltd v Federal Commissioner of Taxation35 (‘the Swimming Pools Sales Tax case’) in February 1992.36 In November 1990, after the proceedings to have the tax declared invalid had commenced, but before the Court had handed down its decision, the plaintiff in the present proceedings (the ‘builders’) entered into an agreement (the ‘agreement’) with the Commissioner of Taxation (the ‘Commissioner’) to the effect that, notwithstanding the builders’ challenge, its members would pay the In situ pool tax to the Commissioner, but that if the challenge was successful, all amounts paid would be refunded. The agreement made provision for the payment of interest and the like on the amounts withheld by the Commissioner.
In December 1990, whilst the agreement was in effect, a builder entered into a contract with a customer to build an in-situ swimming pool for them. Pursuant to the agreement, the builder paid the then applicable In situ pool tax to the Commissioner and passed on the cost to the customer.
After the High Court handed down its decision in February 1992, declaring that the In situ pool tax was invalid, the Commonwealth enacted the Swimming Pools Tax Refund Act 1992 (Cth) ("the Refund Act") with a commencement date of 21 September 1992.
The effect of the Refund Act was to extinguish a builder’s right to an unconditional refund of the tax paid under the agreement.37 In its place, the Refund Act created a statutory scheme making the Commonwealth liable to make a payment to a builder only in the following circumstances;
35 (1992) 173 CLR 450. 36 Mutual Pools & Staff Pty Ltd v Federal Commissioner of Taxation (1992) 173 CLR 450. 37 Swimming Pools Tax Refund Act 1992 (Cth) ss 4(1), 7. 170
• Where the builder had not passed on the cost to the customer,38 • Where the builder had passed on the cost to the customer but refunded the customer themselves.39
A builder was denied any entitlement to a payment where the builder had passed on the cost to the customer.40 Where the builder had passed on the cost to the customer and the customer had not been refunded by the builder, the customer was entitled to a refund payment directly from the Commonwealth.41
In accordance with the Refund Act, the Commonwealth refused the builder's request for a refund of the payment it had forwarded to the Commissioner pursuant to the agreement, the cost having been passed on in full to the customer.
3.3.2 Questions for the Court
The builder brought proceedings in the High Court to have the Refund Act declared invalid. The only live issue in the proceedings was the validity or invalidity of the Refund Act itself. The builder argued that either it was outside the Commonwealth’s legislative power or that it acquired the plaintiff’s right to be repaid under the agreement in contravention of s 51(xxxi), such a right being in the nature of a proprietary chose in action. It was conceded by the Commonwealth that, prior to the enactment of Refund Act, the Commonwealth was legally obliged to make refunds to the builders in accordance with the agreement under which the payments were made.
A submission by the builder that the Refund Act was invalid on the grounds that it imposed a tax and did not comply with s 55 of the Constitution was abandoned by Counsel in argument. In that s 55 would have had the effect of validating the defeat of the builders’ contractual interest but invalidating the provisions which granted entitlements to repayment to a builder where they had not passed on the cost to the customer or refunded the customer themselves, the course taken makes sense.42
38 Ibid s 4. 39 Ibid s 4. 40 Ibid s 4. 41 Ibid s 4(5). 42 An interesting possibility not explored would have been the question of whether the payment provisions were severable or not such that s 55 would have invalidated the entirety of the Refund Act. See Tape Manufacturers (1993) 176 CLR 480. 171
The Commonwealth argued the case on the basis that the legislative defeat of the builder’s ‘windfall’ contractual interest did not acquire the property of any person within the meaning of s 51(xxxi) but that if it did, ‘it was manifestly on just terms.’43 The Commonwealth also submitted that doctrines of unjust enrichment could provide a principled approach to the application of s 51(xxxi) in the circumstances.
3.3.3 Judgment
In five separate judgments (two of which were joint judgments) the High Court found unanimously that s 51(xxxi) did not operate in such a way as to invalidate the Refund Act.
Though the Refund Act itself was only comprised of some 13 sections and the facts were uncontested, the application of extant s 51(xxxi) doctrine to the builder’s retrospective interest made Mutual Pools a very difficult case. Despite the unanimity of the Court regarding the outcome, a multiplicity of unrelated approaches were employed both within and amongst the individual judgments. Indeed Callinan J, considering the case in the subsequent decision of Airsevices Australia v Canadian Airlines some years later, was wary of drawing any particular principle from the decision observing that ‘[t]he circumstances of that case are very special.’44
The reasons provided by the Court, as to why the Refund Act was valid as against s 51(xxxi), can be categorised as falling into one or more of the following approaches. One approach was a formal interpretive approach, that is, the Refund Act’s provisions did not fall within the plain words of the Proviso or its compound conceptions. A second approach was to hold that the Refund Act was analogous to laws for the imposition of taxation, fines, civil penalties and forfeitures and so was outside the scope of s 51(xxxi). A third approach was an application of proportionality in the form of the adjustment of competing claims test and a more conventional proportionality test posited by Brennan J. A fourth approach was an argument from authority regarding the Proviso’s scope with respect to contractual interests and the Commonwealth’s immunity from suit in contract.
The case is notable for being the first in which the Incongruity test was posited and Brennan J’s proportionality analysis. Several of the judgments also evidence an attempt to reconcile the existing case law and doctrine as it stood at that time. It is also clear that there was a
43 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 40 (D J Rose QC). 44 Airservices Australia (1999) 202 CLR 133, 311. 172 significant divergence of approach between that taken by Dawson and Toohey JJ in their joint judgment and the rest of the Court. In line with their dissents in Georgiadis handed down at the same time as the decision in Mutual Pools, their Honours adopted Dixon J’s approach in Werrin to the effect that the Proviso does not operate to limit the Commonwealth’s powers to control or extinguish its liability in suit.45 As discussed in the previous chapters, since Georgiadis at least this position has not held majority support in the High Court. Apparently not content that this doctrine provided a full answer to the case their honours went on to approach the validity of the Refund Act by simultaneously applying nearly all of the established interpretative approaches to s 51(xxxi).
Each of the judgments evidences a genuine struggle to reconcile the Refund Acts obvious merit as a mechanism to refund an unconstitutional impost with established s 51(xxxi) doctrines which pointed to its invalidity.
3.3.4 The Merits
In order to understand the conundrum faced by the Court in Mutual Pools it is necessary to have some understanding of the mechanisms and purposes of the Refund Act and some of the broader legal doctrines relevant to the case.
3.3.5 The Scheme
In essence, the scheme enabled by the Refund Act had three elements. The first element was the grant to pool owners of a statutory right to payment.46 Though the Refund Act did not technically effect a ‘refund’ of taxes paid by customers, its substantive effect was the same as if it had been a refund.47
The second element was the grant of a compensation payment to a builder where they had made payments to the Commissioner pursuant to the agreement but had not passed on the tax to a customer or had repaid a customer themselves.48 In these circumstances, a builder would receive full repayment of the amount forwarded by them to the Commissioner under
45 Mutual Pools (1994) 179 CLR 155, 204. 46 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 35 (D J Rose QC). 47 Mutual Pools (1994) 179 CLR 155, 223-224 (McHugh J). 48 Swimming Pools Tax Refund Act 1992 (Cth), ss 4(2)(a)-(b); Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 17 (Brennan J). 173 the agreement, though the right to receive the monies was burdened by way of further administrative requirements and procedures.
The third element was the extinguishment of the contractual debt owed to a builder where a builder had passed on the cost of the In situ pool tax to the customer.49 A useful way of characterizing the latter two elements of the scheme is as follows:
• The scheme extinguished a builder’s contractual right without full compensation only in the circumstance that a builder had not incurred any detriment flowing from any reliance on that right.
Thus, the Refund Act was specifically drafted so as to avoid ‘windfall gain’ payments while at the same time compensating the detriment which would have flowed from a builder’s reliance on the agreement.
3.3.6 Restitutionary Analysis
Leaving aside for a moment the existence of the agreement and any operation of the Proviso, a restitutionary analysis of the facts provides some insight into the way the court approached the case.
Having made a payment pursuant to an unconstitutionally levied tax the builders would have had a prima facie right to recover if they could establish some vitiating factor. Having mounted a challenge to the In situ pool tax the plaintiffs were not labouring under a mistake of law in making the payment and would have had to establish either a Woolwich or Antill Ranger type ground of recovery.50 Customers who had paid the tax might also have had some rights in restitution either against the Commonwealth or the builders, depending on who ultimately had possession of the funds. Arguably, a customer’s right to repayment, as the party that had borne the cost of unconstitutional impost, stood on firmer ground than any that might be held by a builder. From both an equitable and legal standpoint, a customer had the strongest claim on the funds with the builders second and the Commonwealth last.
From this perspective, the Refund Act did no more than put in place statutory framework which gave effect to this order of priorities. The only circumstance in which this order would
49 Swimming Pools Tax Refund Act 1992 (Cth), s 4(1). 50 Mutual Pools (1994) 179 CLR 155 176 (Brennan J), 176, ‘That debt (whether it be regarded as owing under the agreement made by the Swimming Pool & Spa Association of Australia Ltd. and the Commissioner of Taxation or in restitution) was … a common law chose in action vested in the plaintiff and assignable by it.’ 174 not be effected under the Refund Act was where a customer failed to claim a refund. In such circumstances the funds would remain with the Commonwealth rather than a builder as the second-in-line creditor.
From the perspective of Royal Insurance and Roxborough, with the one exception described above, the Act achieved precisely the policy objective that a public law restitutionary action aims for – a divesting of illegally collected funds from the executive and their return to the bearer of the burden of the illegal impost.
3.3.7 The Retrospective interests
There are a number of problems with the foregoing simplified restitutionary analysis. The first is its artificiality not least because neither David Securities, Roxborough nor Royal Insurance had been decided at the time the agreement was entered into and the relevant transactions took place. Furthermore, the Woolwich principle has still not been expressly adopted in Australia. Mason J’s finding that the customers ‘have an interest in the refund of the taxes collected’51 constitutes a retrospective application of David Securities in particular. That the builders would have been unlikely to recover unconstitutionally levied taxes as the law stood at that time explains, in large measure, why the agreement was entered into at all.
The legal position as at the time the Swimming Pools Tax Case was handed down had the result that a builder became entitled to a refund under the agreement while, simultaneously, customers were left with no right against the Commonwealth or a builder to recover taxes they themselves had paid.52 As the Commonwealth conceded, there was ‘no question of any liability to the pool owners;’53 the payments to customers under the Refund Act were in the nature of ‘grants.’54 Thus, any restitutionary interest held by a customer was either retrospective in nature or in Deane and Gaudron JJ words, a mere ‘possibility.’55
The agreement itself was also quite unusual in that the right to repayment was a retrospective interest. Had the Swimming Pools Tax Case had only prospective effect, the in situ pool tax would have been validly collected and no liability to repay a builder under the agreement
51 Ibid, 175. 52 Werrin v Commonwealth (1938) 59 CLR 150. 53 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 35 (D J Rose QC). 54 Ibid, 35. 55 Mutual Pools (1994) 179 CLR 155, 191. 175 would have arisen. Further, the agreement itself would not have been binding because the actions of the builder in collecting and forwarding the monies to the Commissioner constituted the builder’s consideration.56 These acts would no longer be acts of consideration but only acts a builder would have been required to perform by law, whether there was an agreement or not. The enforceability of the agreement was contingent on the retrospective operation of the decision in the Swimming Pools Tax Case.
3.3.8 The Dilemma
The real dilemma arose because while the Refund Act both fell within one or more heads of power and achieved a policy objective that the High Court itself came to support, in defeating and acquiring the value of a contractual right it prima facie fell afoul of the Proviso on a number of levels. Two substantive rule of law protections, one on the side of the builders and one on the side of the customers (and Commonwealth) were on course for a head-on collision.
The literal application of the ‘adjustment of competing claims’ test by various members of the Court is best understood in this context despite the fact that the test was formulated to deal with regulatory takings which were not in issue in the case.
3.3.8.1 Why Refund Act is not valid
The cogency of the case for the Refund Act’s invalidity is a powerful demonstration of the problems that retrospective interests give rise to and in particular, the way in which they put a spanner in the works of otherwise already problematic s 51(xxxi) doctrine.
As counsel for the Commonwealth submitted, ‘The whole purpose of the Act was to prevent windfall gains…’57 The Refund Act’s primary purpose was to divest the builders of their legal entitlements for the Commonwealth government’s political gain. From the perspective of the Commonwealth, the only benefit accruing to it under the agreement was the right to receive an immediate payment subject to a contractual right requiring the payment’s return. As counsel for the builders conceded, the agreement did not reflect a ‘common sense’ judgment
56 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 53 (McHugh J) ‘But what consideration did the SPASA members give to the promise of the Commissioner? I mean, they seem to have done no more than a promise to carry out what were then perceived to be their legal obligation.’ 57 Ibid, 41. 176
on the Commonwealth’s part.58 The purpose of the Refund Act was a political one in that, by preventing ‘windfall’ payments out of consolidated revenue, it demonstrated a responsible attitude towards the use and disbursement of taxpayers’ money and effective and responsible political control over the executive. By disclaiming any direct interest in the funds collected by purporting to disperse them as a refund the Commonwealth had no other direct interest in the matter.
In purporting to refund the collected monies to customers the Refund Act was a political necessity but not a fiscal necessity. The Refund Act was effectively revenue neutral for the Commonwealth; the treasury was left in exactly the same position as if it had never been enacted. As would be the case with any contractual liability held against the Commonwealth, which by their nature are known or foreseeable, no issue of fiscal chaos arose. Whether or not the Refund Act’s undoing of the agreement constituted a compelling public benefit or legitimate government end is open to debate.
Further, as the plaintiffs rightly argued, in extinguishing a valuable contractual proprietary interest so as to directly gain a financial advantage, the Refund Act represented a clear breach of the Proviso.
On this view, that the entitlement stripped from a builder would then be delivered to a pool owner was either irrelevant or clear evidence of the injustice of the scheme. As counsel for the plaintiff submitted:
Mr Bloom QC: It is not appropriate, with respect, for the Commonwealth in exercising its power of acquisition to in effect do a Robin Hood, to say, “Well, we’re going to take it from you and we’re going to give it back to someone else.”59
On a strictly legalistic analysis, a builder would lose a valuable legal entitlement while a pool owner, who, as the Commonwealth conceded, had no prior legal entitlement to the funds, would be granted a statutory right to payment.60
58 Ibid, 28 (D H Bloom QC). 59 Ibid, 30. 60 Ibid, 35 (D J Rose QC). 177
One might reasonably ask how the forced delivery to another of one’s own property has any bearing on the justice or otherwise of the acquisition itself. As Brennan J expressed the proposition:
A law does not provide just terms for the acquisition of property by the Commonwealth from A if it provides for the payment of the price to B.61
On this view, there existed no relevant connections among the Refund Act’s three mechanisms (the acquisition from builders, the gratuitous payment to customers and the compensation payments to builder where they had not passed on the tax). Thus, the acquisition must stand or fall against the Proviso on its own terms and the fact that the money would ultimately be forwarded (or returned) to those most likely to have borne the burden of the invalid tax is irrelevant.
On this approach, the Refund Act, prima facie, effected not merely an ‘adjustment’ of competing interests, but a wholesale redistribution of wealth between private individuals. Further, the ‘net’ loss incurred by the builder constituted the entire value of the extinguished contractual interest.
As articulated by McHugh J, wealth redistribution effected other than via the tax system, directly offends the purposes of s 51(xxxi).62
It is also no answer to argue that because the Commonwealth had the power to reimpose the tax it ought to be able to extinguish the builder’s contractual interest by some other legislative mechanism.63
McHugh J posed the question: ‘Does it make any difference that the Refund Act does not impose a retrospective tax…’64 From a practical perspective perhaps it made no difference at all - from a doctrinal perspective, however, it makes a great deal of difference. Though it was agreed between the parties that the Refund Act did not impose a tax the Court appeared to struggle with this characterisation and, as was evident in the judgment of Starke J in Werrin, all one can take from the judgments is that the Refund Act occupied some grey middle ground between laws that impose taxation and those that do not. Indeed, Dawson and Toohey JJ
61 Mutual Pools (1994) 179 CLR 155, 177. 62 Ibid, 219. 63 Contra ibid, 209 (McHugh J) ‘If it wished, federal Parliament could have re-enacted the substance of the Amending Act and given it a retrospective operation. 64 Ibid, 218. 178 appeared to suggest that it both was and was not a tax.65 As their Honours pointed out, once the acquisition of money is brought within the Proviso’s scope, distinguishing between a tax and an acquisition other than on just terms becomes very difficult.
Another compelling argument against the Refund Act’s validity was the principle that the Commonwealth executive ought to be held to its word when its promises give rise to proprietary interests. It is worth noting the concession by the Commonwealth that the agreement was legally binding and that the builders gave good consideration to the Commonwealth for the interests granted by it. In effect the Commonwealth had procured the builders’ voluntary agreement to a course of conduct which suited it and then refused to pay for the benefit of those services. As McHugh J observed of the agreement:
…it enabled the Commonwealth to receive moneys which might otherwise have been withheld and … avoided the possibility of lengthy and expensive enforcement proceedings.66
It would be misleading to characterise a builder’s contractual right to repayment as a windfall in the sense that it was unearned. Only by giving the Swimming Pools Tax Case only prospective effect could the builder’s consideration be undermined and it truly be said that the agreement delivered a windfall.
Further, in circumstances where a customer failed to make a claim the funds would have remained with the Commonwealth and not with a builder. In such circumstances not only would the Commonwealth have effectively circumvented the Proviso but any public law justification for the validity of the scheme or reason why the agreement ought not to take precedence falls away.
Though it is easy to make an argument that the redistribution achieved by the Refund Act was a fair or preferable one, fundamentally this is a merits type assessment rather than one of principle. Though the Court was clearly of the view that the Refund Act was in the public interest and was otherwise within power, these two factors have generally not been considered sufficient to displace the operation of s 51(xxxi). As Kirby J held in Smith v ANL Ltd:
65 Ibid, 198; ‘the acquisition of money or value…is a tax’, 205 ‘The Refund Act may not itself impose a tax but it is a law with respect to taxation…’. 66 Ibid, 209. 179
…the mere fact that the legislation in question is otherwise valid, and that the law is indeed made for a purpose that has recommended itself to the Parliament and is apparently within power, is not sufficient to take such law outside the requirements of s 51(xxxi).67
3.3.8.2 Why Refund Act is valid
With such a compelling catalogue of reasons as to why the Refund Act ought to have been held invalid as against s 51(xxxi) it is no wonder the court struggled to articulate a coherent basis for finding to the contrary. No doubt the decision can be explained as one made purely on the merits or an intuitive sense of the justice of the case.
The Commonwealth’s submissions invited the Court to do just that arguing that the Court ought to look behind the formal legal relationships between the parties to the substantive justice of the Refund Act’s impact upon both pool owners and builders. Taken as a whole, the judgments make a great deal more sense if one ignores the existence of the agreement altogether; the problem being that the only direct way of ruling out the validity of the agreement was to give the Swimming Pools Tax Case only prospective effect.
The Commonwealth submitted that the substantive effect of the Refund Act was to ‘undo the burden of the invalid tax by restoring both the builders and the owners to their pre-tax positions.’68 The payments under the Refund Act to a builder who had not passed on the tax and the grants to pool owners were in substance ‘refunds’ to those who had ‘borne the burden’69 of the invalid tax. Any extinguishment of the builders contractual interest was merely ‘preventing a windfall’70 to the builders. As such, the acquisition, if there was one, ‘was manifestly on just terms.’71
What makes this line of reasoning so interesting is that it points to several largely unexplored questions in s 51(xxxi) jurisprudence. Firstly, it raises the possibility of what might be called an inverse application of the Dalziel doctrine. That is, rather than a court examining whether in substance there has been an acquisition of property in circumstances where there is no formal
67 Smith v ANL Ltd (2000) 204 CLR 493, 77. 68 Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993), 41 (D J Rose QC) 69 Ibid, 58 (D J Rose QC). 70 Ibid. 71 Ibid, 40 (D J Rose QC). 180 transfer of a proprietary interest, the Court instead is looking at a situation where formally there is an acquisition of property but finding that, in substance, there is no such acquisition. Such an approach is consistent with an approach to Constitutional interpretation that ‘requires looking past matters of legal form to the practical effect of laws.’72
Furthermore, it squarely raises the possibility that in some instances ‘51(xxxi) could have some application in cases where no monetary compensation was payable.’73 Deanne and Gaudron JJ at least averred to this possibility observing that:
…even if the requirement of just terms had been applicable, it would seem to us to be arguable that Mutual Pools suffered no compensable or measurable detriment by reason of the operation of the Refund Act. Such an argument would depend upon the proposition that, if Mutual Pools had obtained a refund of the amount paid in respect of Mr. and Mrs. Chaplin's pool, the principles of unjust enrichment would have required it to pass on the amount of the refund to Mr. and Mrs. Chaplin. The validity of that proposition was not, however, examined in argument and it is unnecessary that we express any view in relation to it.74
The question raised by such a doctrine is the nature of the injustice to which s 51(xxxi) is directed and more to the point, why the Court found no injustice worthy of remedy in Mutual Pools.
The judgments do not provide a satisfactory answer to this question and with the exception noted above, the lines of reasoning suggested by the Commonwealth’s submissions are nowhere to be found in any of the judgments. The Court did not adopt the submission that restitutionary doctrines ought to inform the Proviso’s operation and scope.
Accordingly, in order to reach their intuited conclusions being that the Refund Act was valid as against s 51(xxxi), the members of the Court were forced to ‘move the goal posts’ and reformulate existing doctrine, distortion and increasing incoherence being the inevitable effect of attempting to force retrospective interests into the mainstream of s 51(xxxi) doctrine where they simply do not fit.
72 Stephen Lloyd, 'Compulsory Acquisition and Informal Agreements: Spencer v Commonwealth' (2011) 33 Sydney Law Review 137, 142; ICM Agriculture (2009) 240 CLR 140, 169 (French CJ, Gummow and Crennan JJ) citing Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 433; Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 633-635. 73 Allen, 'The Acquisition of Property on Just Terms', above n 19, 370; see also Phonographic (2012) 246 CLR 561, 595 [111] (Crennan and Kiefel JJ). 74 Mutual Pools (1994) 179 CLR 155, 191. 181
One example was the need for Gaudron and Deane JJ, in applying the adjustment of competing claims test, to expand its range from excluding actual subsisting competing legal claims to ‘possibly competing claims.’75
The revision of the test by Mason CJ involved expanding its scope from excluding adjustments of competing claims between individuals in the community, to the adjustment of competing claims between individuals and the Commonwealth. Thus, Mason CJ explicitly held that the Refund Act represented a genuine resolution of the competing claims between the Commonwealth and the builders. But the explanation proffered as to why this was the case, was his Honour’s finding that ‘pool owners … have an interest in the refund of the taxes collected.’76
Also unconvincing was his Honour’s application of Perpetual Executors and Magrath and holding that those decisions:
…support the proposition that, where the Executive enters into a contract with a citizen, that contract may be overridden by subsequent legislation without the need for the provision of just terms.77
There is a very real difference between:
75 Ibid, 191. 76 Ibid, 175. 77 Ibid, 174; Perpetual Executors is clearly distinguishable from Mutual Pools on the basis that, even prior to the enactment of the relevant provisions of the of the Income Tax Assessment Act 1936 (Cth), the term in the contract, to the extent that it promised that the interest received on bonds would not be taxed pursuant a subsequent law passed by the Parliament, was unenforceable or invalid ab initio. Thus, unlike in Mutual Pools where it was common ground that the agreement obliged the Commonwealth to make repayments, in Perpetual Executors there was no obligation on the Commonwealth to return the amounts received by the Commissioner. Thus, had Perpetual Executors or Magrath involved any s 51(xxxi) issue (and neither of them did) there would have been no interest acquired or defeated by the Commonwealth upon the enactment of the amendments to the Income Tax Assessment Act 1936 (Cth), because there was no proprietary interest to acquire; the contractual interest never existed in the first place; the promise made by the executive was a nullity. Applying the narrower principle extracted from Perpetual Executors and Magrath to the facts in Mutual Pools, the Proviso would only have been displaced on policy grounds had the agreement with the Commissioner purported to fetter the Parliaments power to impose a tax and the Refund Act actually imposed a tax such that their operation was inconsistent with each other and with the separation of powers envisaged by the Constitution. The finding of the majority of the High Court in Mutual Pools was that the Refund Act did not impose a tax. As such, neither of these cases provide any support for an argument that s 51(xxxi) ought to have been excluded from protecting the contractual proprietary right held by builders against the Commonwealth. The ready of adoption of the two decisions as a basis for denying the plaintiff’s claim in Mutual Pools presents as a central instance of the Court’s tendency to explain away difficult cases by characterising them as fitting into one of the ‘traditional exclusions.’ 182
a) A contractual term to the effect that the Parliament will not exercise its legislative powers in the future; and b) A contract that gives rise to a proprietary right such that s 51(xxxi) limits the Parliament’s capacity to retrospectively defeat that interest and thereby to circuitously acquire it.
Though cases may arise where the distinction may not be entirely clear, Mutual Pools was not one of those cases.
McHugh J, though taking a different route, was also forced into a shifting of the goal posts, holding that:
An enactment can fall within s 51(ii) and outside the operation of s 51(xxxi) even though it provides for the acquisition of property and does not itself impose a tax, provided that it is a law with respect to taxation.78
McHugh J’s incongruity test also fails to account for the decision. Arguably, what his Honour’s reasons really come down to is a finding that;
a) It was clearly within the competence of the Federal Parliament to provide for the refund of a sum of money collected under an unconstitutional tax Act: b) The Commonwealth should have the power to effect a ‘fair’ redistribution of the illegally collected funds; and c) It would be wrong or absurd were the Proviso to prevent such an outcome.
Such also was the substance of Brennan J’s application of his Honour’s proportionality test and Deane and Gaudron JJ’s application of the adjustment of competing claims test.
Having reached this conclusion it was simply a matter for the Court to explain why this characterisation led to the conclusion that, as against s 51(xxxi), the Refund Act was valid. However, none of the judgments really provide an answer nor address what arguably was the central issue being why it was fair as against the builders for the legislature to rip up the agreement. Filling these logical gaps, what we find in the judgments are numerous hollow characterisations of the Refund Act as outside the Proviso’s scope because it lacked some
78 Ibid, 224. 183
‘additional element’79 or a ‘distinct additional character’80 or because the acquisition was ‘but an incident of the operation of the law.’81
The decision reached can be rationalised on the basis that a majority of the Court was either determining the applicability of s 51(xxxi) by way of a merits review of Commonwealth legislation or the more preferable view that the Court was intuitively applying an expectation- based approach to the issues before it and resolved that such an approach afforded justice to the builders.
3.3.9 Expectation-based approach to Mutual Pools
An alternative explanation for the Court’s decision would be one that recognises the inherent problems that arise with the application of s 51(xxxi) doctrine to retrospective interests.
If an assessment of the Refund Act’s proportionality, relative public interest or characterisation proceeded from a finding that there was no real injury or substantive loss incurred by a builder, there still remained the task of identifying or characterising in what sense no loss was sustained. An expectation-based analysis captures precisely the injury not done to a builder, being the absence of any detriment which arose from the undermining of a positive proprietary expectation actually relied upon. Without resort to sophistry, this is the only coherent characterisation of the builders’ loss not substantively worthy of monetary compensation and a rendering of the facts in Mutual Pools through the lens of a subjective expectation-based doctrine provides a far more cogent explanation for the decision than the reasons provided by the Court.
The agreement reached between the builder and the Commissioner vested in the builder a recognised proprietary right. As Brennan J explained ‘Th[e] debt was not a claim created or governed by a statute. It was a common law chose in action vested in the plaintiff.’82 So much was conceded by the parties.
The enforceability of the Commissioner’s undertaking before a common law court gave ample grounds for a reasonable assumption or expectation on a builder’s part that a refund would be paid. As stipulated by the agreement, the only circumstance in which the Commissioner would
79 Ibid, 175 (Mascon CJ). 80 Ibid, 192 (Deane an Gaudron JJ). 81 Ibid, 191 (Deane and Gaudron JJ); 224 (McHugh J). 82 Ibid, 176. 184 not become liable to make a refund was a holding by the High Court that the in-situ pool tax was valid.
On the High Court ruling that the in-situ pool tax was invalid, the right to be paid a refund under the agreement vested in the builders. On the enactment of the Refund Act, this vested chose in action was defeated and the builder’s assumption or expectation, that the contractual undertaking could be enforced before the courts, was repudiated or frustrated. The Refund Act constituted an abandonment of the law’s promise on which the builders were entitled to rely in structuring their affairs.
In order to establish an estoppel however, it would be necessary for a plaintiff to establish detriment in reliance on the assumption or expectation. On the facts in Mutual Pools the question then is whether the builders incurred some loss or prejudice in structuring their affairs on the basis of their belief or expectation that the Commissioner’s undertaking was indefeasible.
3.3.10 Evidence of expectation and detrimental reliance
The plaintiff’s state of mind regarding their actual expectations can be ascertained with a significant degree of precision as it was reduced to writing in the form of the agreement with the Commissioner. The right to be repaid any amounts forwarded to the Commissioner pursuant to the agreement was contingent on the in-situ pool tax being found to be invalid. To that extent, the clear inference can be drawn that the plaintiffs considered it a real possibility that the In situ pool tax would be found valid and that they would not receive a refund. If a builder had structured their affairs in reliance on an expectation of receiving a repayment, such reliance would not have been reasonable.
To paraphrase Windeyer J in Mason v NSW, the plaintiffs could have had, and in fact had, nothing more than a hope that their challenge to the In situ pool tax would succeed.83
More broadly speaking, the nature of the agreement was such that it provided a real benefit to builders who made payments under it. It enabled them to validly collect or pass onto customers the amount of the tax, thereby hedging against the possibility that the tax would be found valid and they themselves landed with an outstanding tax liability; a route not open to them had they point blank refused to acknowledge the validity of the tax as enacted. In
83 Mason v New South Wales (1959) 102 CLR 108, 138. 185 entering into the agreement with the Commissioner and making payments under it, they were in a position to, and did in fact, structure their affairs so as to protect themselves from any loss that might arise on the In situ pool tax being found valid. Indeed, the agreement required nothing more from a builder than would have been required by law had the In situ pool tax been found valid. Implicit in the agreement was a recognition of the possibility that the In situ pool tax might be found valid.
On the Commonwealth withdrawing the enforceable promise of a refund by the enactment of the Refund Act, no detriment was incurred by the plaintiff. The plaintiffs had relied on the agreement so as to protect their interests. There was no evidence that the builders had altered their position or structured their affairs in the expectation of receiving any payment greater than the costs they themselves had borne in meeting their obligations under the agreement.
There remained the possibility, during the 7-month period between the High Court handing down its decision in the Swimming Pools Sales Tax Case and the commencement of the Refund Act, during which time the contractual interest had vested and become non contingent, of a builder acting in reliance on a reasonable expectation of receiving the promised repayment under the agreement. No evidence of this nature was before the Court nor any argument to this effect presented. The builders also failed to present evidence or mount any argument in respect of any secondary or consequential losses they may have sustained in passing on the In situ pool tax to their customers.
The Refund Act compensated a builder where, in reliance on the agreement, they had not passed on the tax to their customers or who had refunded a customer themselves and would otherwise have incurred a financial loss. The Refund Act was specifically drafted so as to avoid windfall gain payments while at the same time compensating the detriment which would have flowed from a builder’s reliance on the agreement. Though the builders were entitled to rely on their contractual rights and structure their affairs in accordance with the laws in existence at that time, the facts before the Court failed to disclose any uncompensated detriment arising out of any reliance on the right defeated by the Refund Act.
That an expectation-based analysis appears a neat fit with the case is not a co-incidence or merely convenient, but rather it is in the nature of retrospective interests that their defeat rarely defeats or frustrates settled expectations. Further, the Act was specifically drafted so as to extinguish a builder’s contractual right without full compensation only in the circumstance that a builder had not incurred any detriment flowing from any reliance on that right. 186
3.4 Health Insurance Commission v Peverill (1994) 179 CLR 226
3.4.1 Facts
Peverill was a pathologist who, amongst other activities, performed a test for individuals known as the ELISA test. As was the procedure under the Health Insurance Act 1973 (Cth) (the Act), by agreement with Peverill, patients would assign their right to the payment of Medicare benefits to him and he would accept the assignment in full payment for the tests performed. This is what is commonly known as the practice of ‘bulk billing.’
The amount paid to Peverill for each test by the Health Insurance Commission (‘the Commission’) was determined by reference to a table of benefits set out in a schedule to the Act (‘the Schedule’) minus 15% as per s 10(2)(a) of the Act. In 1984 the Schedule was purportedly amended by an advice issued by the Medical Benefits Advisory Committee. Pursuant to section 11 of the Act it was thought by both the Commission and pathologists that the issuing of these advices validly effected an adjustment of the rates in the Schedule. Initially, the scheduled fee for the ELISA test was set at $15.40. By November 1987, after several more advices had been issued, the fee had been increased to $18.40. Peverill received payment at these rates from the Commonwealth for the tests performed.
In September 1988, the Minister for Health, acting on an advice from the Pathology Services Advisory Committee, purported to amend the fee structure in the Schedule by making a determination under s 4A of the Act. However, in proceedings before the Federal Court, it was determined that the purported amendments to the Schedule, under both s 11 and s 4A were ineffective.84
A dispute then arose between Peverill and the Commission as to which item and corresponding fee in the un-amended Schedule was appropriate to cover the ELISA tests being performed by Peverill and other pathologists. The Schedule, absent the purported amendments, was by 1987-88 very much out of date, there having been significant technological advances made, both in terms of a greater range of tests being available and faster, more efficient methods having been developed for performing the tests.
The failure of the purported amendments meant that only two items in the un-amended schedule were potentially available to cover ELISA tests. Pathologists and the Commission
84 Queensland Medical Laboratory v Blewett (1988) 84 ALR 615. 187 were left with the ‘stark choice’85 of dealing with ELISA tests under either the un-amended item number 2294 with a fee of $4.60 or item number 1345 with a fee of $34.50. Had the higher fee been payable, the Commonwealth would have been retrospectively liable to pay out an additional 100 million dollars to pathologists.
Proceedings were instituted by Peverill in the Federal Court with Burchett J finding that item number 1345 with a fee of $34.50 was the appropriate item number for the ELISA test.86 Peverill then launched proceedings claiming that, for ELISA tests performed by him between 3 December 1984 and 31 July 1989, he was owed the difference between what he had actually received (between $15.40 and $18.40) and the much higher rate of $34.50 owed under item number 1345.87 While those proceedings were still underway, the Commonwealth passed the Health Insurance (Pathology Services) Amendment Act 1991 (Cth)(“the Amending Act”) which had the effect of retrospectively validating the otherwise invalid amendments to the Schedule and extinguishing Peverill’s right to recover the difference. Section 6 of the Amending Act also specifically validated payments already made to pathologists by the Commission. Peverill amended his statement of claim in those proceedings to further claim that the retrospective abolition of his right to the higher rate of payment constituted an acquisition of his property otherwise than on just terms. He also argued that the Amending Act constituted a tax and as such was invalid on the basis that it was in breach of s 55 of the Constitution. In the Federal Court Burchett J upheld Peverill’s claim on the s 51(xxxi) issue and the matter was removed on appeal to the High Court.
3.4.2 Judgment
In five separate judgments (one of which was a joint judgment of three members of the Court) the High Court found unanimously that s 51(xxxi) did not operate so as to invalidate the Amending Act.
3.4.3 The Reasons
Peverill is another decision in which the attempt to apply mainstream s 51(xxxi) doctrines to a retrospective interest went terribly awry. As with Mutual Pools, extant s 51(xxxi) doctrines left the High Court ill-equipped to deal with the retrospective interest in question and the policy
85 Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993), 14. 86 Peverill v Meir (1990) 95 ALR 401. 87 Peverill v Health Insurance Commission (1991) 32 FCR 133; the schedule was amended effectively, in accordance with the Act, in 1989. 188 issues at stake in the dispute. One gets the distinct impression that the Court was struggling to articulate its unanimous intuition as to the defeasibility of Peverill’s right to payment as against s 51(xxxi) in light of doctrine and argument which, prima facie, suggested otherwise.
The logical contortions and distortion of existing doctrine to be found in the judgments can be understood as the direct result of the attempts to explain the defeasibility of Peverill’s retrospective interest in terms of ordinary s 51(xxxi) doctrine.
Difficulties arose at all levels of the Court’s analysis and even subsequent critiques of the decision, discussed below, have failed to recognise this factor as the primary source of the problem. Though Courts, including the High Court, have considered the decision on a number of occasions, they have struggled to articulate the principle for which it stands.
3.4.3.1 Nature of the right to payment – Was it Property for the purposes of s 51(xxxi)?
The first difficulty faced by the Court was characterising Peverill’s interest and right to payment under the Act. Was it a statutory benefit or contractual or both? Was it a gratuity in the same sense that a Medicare benefit paid to a patient is a gratuity?
As Seddon writes:
When the government enters into agreements with commercial entities then the presumption… is that there is a contract. It would be futile to argue that a procurement agreement for goods or services was not a contract.88
However, this is precisely what the High Court ruled with a majority comprising Brennan,89 Dawson and Toohey JJ characterising the interest as a mere statutory gratuity. McHugh J took something of a half-way position in finding that, while Peverill’s interest was not a gratuity, the interest ‘did not differ in substance from the patient's entitlement’90 which his Honour did characterise as a gratuity.
The first problem with this characterisation is that Peverill gave good consideration to both his patients and the Commonwealth in exchange for his entitlement to payment.
88 Nicholas Seddon, Government Contracts: Federal, State and Local (Federation Press, 3rd ed, 2004), 95. 89 Peverill (1994) 179 CLR 226, 244-245. 90 Ibid, 268. 189
As one would find in circumstances involving the creation of a unilateral contract, the relevant provisions of the Act took the form of a standing offer to properly qualified and registered practitioners. Once an offer was accepted, by way of acceptance of the assignment and services performed for properly referred members of the community, a practitioner, engaged in their professional livelihood, could reasonably expect payment at the promulgated rate.
Indeed, the bulk billing system is not exclusive and a practitioner can demand upfront payment at the time of consultation with the patient then claiming the benefit themselves directly from the Commission.91 From a practitioners perspective, bulk billing requires them to forgo the opportunity of up-front payment and any opportunity to recover further sums from a patient, what in estoppel terms constitutes an unambiguous ‘change of position.’
It is difficult to reconcile the Court’s characterisation of that relationship as one involving a gratuity to the practitioner in light of the fact that a practitioner gives good consideration in a number of forms including performance of the service, the relinquishment of the right to recover any money from a patient and recovery from the Commonwealth of only 85% of the scheduled fee. As Callinan J stated in the context of a discussion of Peverill in Smith v ANL Ltd:
I do not think that legislation which withdraws or alters pension entitlements provides a true analogy. Those entitlements arise as a result of general revenue raising for those purposes and are not entitlements arising out of any identifiable payment, forbearance or service made or performed by any particular person. It is highly unlikely that Dr Peverill would have done the professional work that he did or have done it in the way that he did but for the statutory promise by the Commonwealth to make payment in respect of it.92
In describing the relationship between the Commonwealth and Peverill as having all the features of a contract but then concluding that no such contract existed, the judgment of McHugh J bears witness to the great struggle faced by the Court in characterising the nature of Peverill’s right to payment in such a way as to explain its defeasibility as against s 51(xxxi).
Other than the statutory form taken by Peverill’s interest, the interest itself had clear common law antecedents and was neither novel nor unknown to the general law. Though a practitioner’s interest may be a narrowly defined interest, as Burchett J carefully reasoned in
91 Health Insurance Act 1973 (Cth), s 20; see generally Danuta Mendelson, 'Devaluation of a Constitutional Guarantee: The History of Section 51(xxiiiA) of the Commonwealth Constitution' (1999) 23 Melbourne University Law Review 308; Peter Hanks, 'Adjusting Medicare Benefits: Acquisition of Property?' (1992) 14(4) Sydney Law Review 49Hanks, above n . 92 Smith v ANL Ltd (2000) 204 CLR 493, 552 [183]. 190 the Federal Court below, extant s 51(xxxi) doctrines suggested that Peverill’s interest was well within the Proviso’s scope of operation.
3.4.3.2 Gratuity - The General Law
While the exclusion of welfare benefits and the like from the Proviso’s scope is well founded in policy, such considerations were of no more relevance to the case than to the purchase of land for a Centrelink office or the payment of contractors to maintain such offices. Parliament’s power to prospectively amend the fee schedule was not a live issue in the case.
An explanation of why gratuities ought to be excluded from the protection afforded by s 51(xxxi) can be approached from several angles. One approach is by way of analogy with the common law doctrine of gifts.93
At common law, property in the nature of a gift does not vest in the donee until such time as it is delivered. The characterisation of an interest as a mere gratuity then suggests that until such time as a gratuity is paid by the Commonwealth it is not property in the hands of the donee. Any withdrawal of the gratuity by the Commonwealth before payment or delivery does not constitute an acquisition of property for the reason that a person has no vested interest in the property at any prior point in time. The phraseology adopted by Brennan J in Peverill was that:
…such a right is susceptible of enjoyment only at the moment when the duty to pay is discharged94
McHugh J used the following formulation:
Once the right or entitlement to payment is transformed into a payment … The Commonwealth can only acquire it by paying the price demanded by s 51(xxxi).95
If the right to Medicare benefits in the hands of a patient is a gratuity, at common law once a gift is delivered to the donee the character of the donee’s interest shifts from that of either no interest or an unenforceable interest to a full legal right to possession in the hands of that
93 Tom Allen, The Right to Property in Commonwealth Constitutions (Cambridge University Press, 2000) , 158. 94 Peverill (1994) 179 CLR 226, 244. 95 Ibid, 266. 191 party.96 The donor can no longer take back the interest at this point as legal title has passed. Once delivered, a gift is no longer a gratuity. One possibility suggested by this analogy is that when a patient has received the Commonwealth’s gift of subsidized medical care and assigned the interest to a pathologist, thereby becoming indemnified from any further liability to the practitioner, the interest solidifies in the hands of a practitioner into good title to a legal right to payment.
A number of the judgments held to the effect that the interest in payment is one and the same as is assigned from patient to practitioner. However, unlike an ordinary gift of real or personal property, the gift to a patient, which includes a right of indemnity against a pathologist, can never really be reversed by the Commonwealth as donor. Shy of actual reimbursement, a pathologist stands exposed to loss by the transaction in a way that a donee in other circumstances would not. In effect, from a practitioner’s perspective the delivery of the Commonwealth’s gift is irreversible. Further, the indemnity granted to a patient is not passed on to a pathologist such that the gift given to each is not identical. One might also ask whether the gift to a patient vests at any point if indeed the gift is not the delivery of services itself or the indemnity. In short, the analogy is far from perfect and creates more confusion than clarity. As McHugh J held, it ‘would be a misuse of language’97 to describe a practitioner’s right to payment under the scheme as a ‘gratuity.’98
3.4.3.3 Inherently subject to modification
A majority of the Court found Peverill’s right to payment outside the scope of s 51(xxxi) on the basis of an application of one or other formulations of the ‘inherently subject to modification’ test. McHugh J posited something of a hybrid ‘general law’/’inherently subject to modification’ test.
…a right or entitlement to a payment created by federal law may be altered or abolished at any time without infringing the provisions of s 51(xxxi) … [up] until [such time as] the right or entitlement has been [paid or has been] transformed into some other form of
96 Aubrey L Diamond, 'When Is a Gift...?' (1964) 27(3) The Modern Law Review 357; Aubrey L Diamond, 'An Ineffective Gift' (1961) 24(6) The Modern Law Review 789; Samuel Stoljar, 'The Delivery of Chattels' (1958) 21(1) The Modern Law Review 27. 97 Peverill (1994) 179 CLR 226. 98 Ibid, 265. 192
property not dependent upon federal law for its substance, recognition or protection but recognized and enforceable under the general law.99
His Honour’s analysis of the facts and a number of US Supreme Court decisions led him to the conclusion that, while the right was properly characterisable as a chose in action and property for the purpose of s 51(xxxi),100 the statute did not create an enforceable contract between Peverill and the Commonwealth and as such was dependent on federal law for its substance, recognition or protection.101 In finding Peverill’s interest non-contractual in nature102 it followed that the right was inherently subject to modification and the Amending Act therefore valid.103
Mason CJ and Deane and Gaudron JJ proceeded from the proposition that Peverill’s interest formed part of a ‘regulatory scheme for the provision of welfare benefits from public funds’104 and that such rights are; ‘as a general rule …inherently susceptible of variation….’105
Brennan J was the only member of the Court to find Peverill’s interest a mere administrative right and not proprietary in nature. However, his Honour’s remarks concerning the lack of any ‘permanence or stability’106 to a pathologist’s right to payment, that ‘the continuity of the right [was] dependent on the will of the parliament’107 and that Peverill's claim was ‘susceptible to defeat by the Amending Act’108 indicate that his Honour was also applying a reformulated version of the inherently subject to modification doctrine.109
Toohey J concluded that the nature of a patient’s right to payment (being a gratuity) did not change in the process of its transfer from a patient into a pathologist’s hands and therefore in accordance with the test laid out in Allpike v The Commonwealth, was inherently subject to modification:
…the Parliament may alter, whether by way of increase or decrease, prospectively or retrospectively, the benefits it pays as part of that scheme. The language of Latham CJ in
99 Ibid, 266. 100 Ibid, 263. 101 Ibid. 102 Ibid, 266. 103 Ibid, 266, 268. 104 Ibid, 237. 105 Ibid, 237. 106 Ibid, 241. 107 Ibid 244, 245. 108 Ibid 246. 109 Ibid, 242. 193
Allpike v The Commonwealth is apposite: "In the case of the Commonwealth, therefore, such right as there is is the creation of Commonwealth statute or Commonwealth regulation. That right may be altered by the authority which created it."110
The characterisation of a gratuity as inherently subject to modification poses no particular logical or legal difficulties. However, in this case, as in others discussed in Chapter One, it merely announced the result rather than providing the reason for the defeasibility of Peverill’s interests as against s 51(xxxi). It added nothing to the reasons otherwise provided.
Nonetheless, it is difficult to account for the Court’s finding that Peverill’s interest in being paid for professional services already provided by him in the course of earning his livelihood was inherently subject to modification - particularly in light of the legislation which did not plainly invite such an interpretation.111 The better view is not that a person’s right to be paid for the services they have provided to earn a living can be arbitrarily and retrospectively legislated away by the Commonwealth but rather that the particular legal and factual matrix in Peverill presented a plaintiff who had suffered no injustice at the hands of the Commonwealth Parliament and had no basis for complaint worthy of a remedy.
3.4.3.4 Was there an Acquisition?
A further difficulty facing the court was placing a characterisation on the retrospective withdrawal or extinguishment of only the unpaid part of Peverill’s interest. Was it merely an ‘adjustment’ or ‘regulation’ of the interest or was it an acquisition of that interest? Finally, if it was acquired, was it acquired for a Commonwealth purpose?
The High Court’s reasoning in this respect is particularly hard to reconcile with the finding of Burchett J in the Federal Court below that:
In the present cases, the Commonwealth gained the whole benefit of what it took from the applicant. For its purposes, it had procured the rendering of the pathology services for which it owed the statutory debt, of which it obtained retrospective reduction. Nor could the legislation be regarded, in any sense, as a regulation or restriction of the applicant’s use of his property.112
110 Ibid, 256 (Toohey J) (citation omitted). 111 Hanks, above n 91, 498. 112 Peverill v Health Insurance Commission (1991) 32 FCR 133, 458. 194
Primarily advanced by Dawson and Toohey JJ, their Honours’ separately reasoned that, however one might characterise the effect of the Amending Act, it did not effect an acquisition ‘for any Commonwealth purpose’113 as per the test laid out by Dixon J in Schmidt. The Amending Act was unhelpfully characterised as ‘altogether outside the scope of s 51(xxxi)’.114
Their Honours’ reasoning proceeded from a construal of the issues in dispute as a question regarding the effect of the Amending Act as between the rights of patients and pathologists. The substance of their Honours’ reasoning appears to be that the nature of the interest defeated by the Amending Act was not to be put to any use by the Commonwealth but rather constituted a regulation of the relationship between patients and pathologists (but not the Commonwealth). Thus, the interest acquired was not ‘acquired’ in the sense the Proviso provides for.
While the bulk billing scheme was advantageous to practitioners, overall its primary purpose was a Commonwealth purpose of facilitating ‘the provision of… medical services’ to the community pursuant to s 51(xxiiiA) of the Constitution.115 Peverill’s time and money were applied to that purpose. Peverill’s complaint was that the Commonwealth now did not wish to pay for the services procured for its purposes and had legislated accordingly with retrospective effect to ensure that it was liable to pay only the amount it so decided.
3.4.3.5 Voluntary Payment ?
Perhaps the least plausible of the lines of reasoning put forward in both the joint judgment and by Dawson J was that which sought to explain the non-engagement of s 51(xxxi) on the basis that Peverill’s acceptance of the assignments of Medicare benefits from his patients was voluntary.116
The problem with this analysis is the lack of any support to be found for it in the authorities which were cited for that purpose. The authority principally relied upon in both judgments was the dictum of Dixon J in British Medical Association v Commonwealth.117
113 Peverill (1994) 179 CLR 226, 250 (Dawon J), 256 (Toohey J). 114 Ibid, 255 (Toohey J); citing A-G (Cth) v Schmidt (1961) 105 CLR 361, 373 (Dixon CJ); Burton v Honan (1952) 86 CLR 169, 180-181 (Dixon CJ); Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270. 115 Contra, Peverill (1994) 179 CLR 226, 250; see also Allen, 'The Acquisition of Property on Just Terms', above n 19, 379; Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134, 167-9. 116 Peverill (1994) 179 CLR 226, 249. 117 (1949) 79 CLR 201. 195
The BMA Case was relevantly concerned with the validity of various provisions of the Pharmaceutical Benefits Act 1947-1949 (Cth); in particular those provisions which fixed the price at which chemists could sell prescribed medications and which also stipulated that payment had to be recovered from the Commonwealth rather than from a patient. It was argued that the scheme involved ‘a degree of compulsion’ upon a chemist ‘that amounted to an acquisition of property from him upon terms that are not just.’118 The relevant and oft- quoted passage of Dixon J is set out below:
There is here no compulsory acquisition by the customer of the drugs he obtains from the chemist when he presents a medical prescription. The chemist is legally free to supply them or not as he pleases. I do not think that the risk he may run of his approval being revoked if he refuses, or the business consequences of the revocation, can make the acquisition compulsory. Its legal character is a voluntary sale. The protection which s 51(xxxi) gives to the owner of property is wide. It cannot be broken down or avoided by indirect means. But it is a protection to property and not to the general commercial and economic position occupied by traders. The essence of a chemist's relation to the plan is that, as a trader, he must decide whether at the prices fixed by the Commonwealth he will or will not supply a commodity which he buys and sells, the law having brought about a situation in which it is likely that there will be little or no other trade for him in that commodity. If the prices are too low he may suffer in his trade, but that is not within the protection of s 51 (xxxi). But it does not appear to me that it is a case of taking his property from him against his will without just compensation.119
The position, as between a chemist under the Pharmaceutical Benefits Act 1947-1949 (Cth) and a pathologist under the Health Insurance Act 1973 (Cth), is analogous. Indeed, Peverill had even more discretion in running his practice than did a chemist under the Pharmaceutical Benefits Act 1947-1949 (Cth). Peverill was free to demand upfront payment from his patients at any rate he chose and no real argument is available that Peverill’s decision to supply pathology services to his patients and accept the assignment of Medicare benefits from them in payment for those services was anything other than a voluntary act. At the relevant time, Peverill, as a pathologist, had to ‘decide whether at the prices fixed by the Commonwealth’ he would or would not supply his services under the bulk billing scheme.
118 British Medical Association v Commonwealth (1949) 79 CLR 201, 268 (‘the BMA case’). 119 Ibid, 271. 196
Now, whist it is the case that a vendor cannot, after having voluntarily entered into an agreement with the Commonwealth, complain that the agreement is not on just terms and so have resort to s 51(xxxi), the corollary must be that the Commonwealth cannot, by legislative means, retrospectively alter the terms of that agreement and expect to be able to escape the Proviso’s operation.120 Such was the tenor of the observations of Callinan J in Smith v ANL Ltd in holding that:
The Commonwealth, in order to undertake the ordinary business of government enters into innumerable commercial engagements. This is a matter of heightened significance in current times in which some corporations are either wholly or partly owned and controlled by government but are exhorted to deal and act commercially, and in which "outsourcing" is strongly encouraged. The capacity of the Commonwealth to engage and act in this way, and the attractiveness of it as a contracting party to others, must depend, even without recourse to the Constitution, upon an underlying assumption that the Commonwealth will neither arbitrarily nor otherwise generally repudiate its obligations, however created, without compensation. The Constitution should, and in my opinion does, by s 51(xxxi) underpin that assumption as a literal guarantee of it.121
Were this not the case, the Commonwealth executive could enter into contracts for land, goods or services and then refuse payment if the Parliament passed legislation defeating any right to a remedy under the contract.122 As McHugh J explained in Mutual Pools, it would permit the Parliament to do indirectly what it cannot do directly.123
Peverill was not arguing that he was forced into entering into any agreement with his patients nor that he was forced to accept any particular mode or rate of payment nor even that the rates listed in the schedule were too low for him maintain his practice. The substance of Peverill’s complaint was that the rate at which he was legally entitled to be paid had, without his agreement and after he had provided the service, been retrospectively reduced by the Commonwealth Parliament.
A related issued not addressed at all in Peverill was the circumstance that by undermining the agreement for the provision of medical services, his consent to the arrangement was vitiated; thus the provision of services by Peverill may have become retrospectively involuntary. Section
120 Denis Rose, 'The Government and Contract', in P D Finn (ed), Essays on Contract (Lawbook, 1987) 233, 252. 121 Smith v ANL Ltd (2000) 204 CLR 493, 554, [188] (citation omitted). 122 Rose, 'The Government and Contract', above n 120, 252. 123 Mutual Pools (1994) 179 CLR 155, 212, 214. 197
51(xxiiiA) of the Constitution arguably prohibits the involuntary procurement of medical services by the Commonwealth by expressly excluding ‘any form of civil conscription’. Arguably, the retrospective defeat of a contractual payment to a medical practitioner is a form of conscription by stealth or a means of circumventing the limitation.
3.4.3.6 Adjustment of Competing claims test
The adjustment of competing claims test was applied by Mason CJ, Deane and Gaudron JJ in the joint judgment as a basis for their finding that s 51(xxxi) was not engaged and the Amending Act therefore valid.
The Amending Act seeks to correct a defect in the administration of the Principal Act … What the Amending Act does in this situation is to bring about the position that was thought by the Commission to have existed before the Federal Court decision. By achieving that result, the Amending Act brought about a genuine legislative adjustment of the competing claims made by patients, pathologists including Dr Peverill, the Commission and taxpayers. Clearly enough, the underlying perception was that it was in the common interest that these competing interests be adjusted so as to preserve the integrity of the health care system and ensure that the funds allocated to it are deployed to maximum advantage and not wasted in "windfall" payments.124
Though the adjustment of competing claim test is largely indeterminate, in Peverill it appeared to operate as an umbrella under which a number of specific issues came to be considered. On its face the majority judgment reads as a series of public interest factors which weighed against the operation of the Proviso. However a more careful analysis reveals a series of substantive issues which perhaps ought to underpin more concrete and determinate doctrinal approaches.
3.4.3.7 Fiscal chaos
One of the substantive issues considered under the test was the unexpected liability being landed on the Commonwealth by way of the retrospective operation of the Federal Court’s decision in Peverill v Health Insurance Commission.125 The majority judgment specifically recited the estimated cost of the liability and the Parliament’s purposes in enacting the Amending Act.
124 Peverill (1994) 179 CLR 226, 236. 125 (1991) 32 FCR 133. 198
It is perhaps wrong to ascribe the majority’s approach as one giving specific weight to any fiscal chaos that might have been caused by the Federal Court’s decision. There was no suggestion that the liability would have caused any major disruption to the treasury. The issue was addressed more in terms of the public interest being served by a more preferable deployment of public funds – particularly in respect of ‘welfare benefits’ which call for ‘a carefully considered assessment … having regard to the community's need for assistance, the capacity of government to pay and the future of health services.’126
The majority judgment carries a faint but definite suggestion of what might be called a doctrine of curative legislation, though the details provided were vague:
Where such change is effected by a law which operates retrospectively to adjust competing claims or to overcome distortion, anomaly or unintended consequences in the working of the particular scheme, variations in outstanding entitlements to receive payments under the scheme may result.127
However, as we saw in Mutual Pools, what is missing from the judgments in Peverill is an explanation as to why it was fair as against Peverill for the legislature to retrospectively validate an underpayment for services already rendered. Again, filling the void was a hollow characterisation of the Amending Act such that it lacked:
…the distinct character of a law with respect to the acquisition of property for the purposes of s 51(xxxi) of the Constitution.128
Clearly, the circumstance which neutralized its potential prejudice to Peverill and seemingly arbitrary operation was that the rate of payment retrospectively provided for was, as far as the evidence revealed, precisely that amount which, it would be reasonable to expect, was in Peverill’s contemplation at the time his decision was made to supply the relevant services and accept the assignment of Medicare benefits. Thereby, Peverill’s consent and decision to enter into the voluntary arrangement that he did was not undermined by the Amending Act.
Again, as in Mutual Pools, one must be careful in describing as a ‘windfall’ the interest that Peverill was seeking to recover. Strictly speaking it was not ‘unearned’ and the only way that it
126 Peverill (1994) 179 CLR 226, 237. 127 Ibid, 237. 128 Ibid, 237 (citation omitted). 199 could be entirely ignored was by giving the decisions in QML v Blewett129 and Peverill v Meir130 only prospective effect. Peverill’s interest was a windfall only in the sense that it was unexpected as at the time the services were actually rendered.
3.4.4 Expectation-based approach
A number of the judgments made specific reference to the elements of an expectation-based approach. In order to make sense of some of these remarks it is necessary to appreciate that both parties made submissions on the point. The Commonwealth put forward an expectation- based argument as one of the reasons why the Court ought to reject Peverill’s claim. As Counsel for the Commonwealth stated in oral argument:
In our submission… Parliament, … having… reasonably taken the view that the… applicant has been paid a reasonable fee by reference to their expectations at the time… does have power to correct [the administrative error] without exposing itself to the obligation of paying just terms in the form of a sum equal to the amount of the correction…131
Counsel for Peverill also made an argument along these lines, putting forward Peverill’s reliance on the right to payment as a basis for arguing that s 51(xxxi) ought to be engaged.
Spigelman: [The property of my client consists of more than a voluntary claim against the Treasury] it consists of more in this sense, that in the past there have been transactions by other parties based on the existence of that promise, if you like, and in that respect the – one hesitates to use the word ‘expectations’ in yet another area of the law but there are expectations - - -
Brennan J: A kind of constitutional estoppel.
Spigelman: Yes. Well I have resisted using the word “legitimate” in front of it, Your Honours, but there are expectations and they are created in a manner which, if parliament does not wish to have that effect it does not create rights, it creates discretions.132
129 (1988) 84 ALR 615. 130 (1990) 95 ALR 401. 131 Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993), 67 (G Griffith QC). 132 Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 March 1993), 106. 200
While, on the facts before the Court, Peverill was correct to argue that he had relied on the right to the lower rate of payment, there was no evidence of his reliance on the higher rate of payment, the difference being that element of his right for which he sought to invoke the Proviso’s protection. While McHugh J was right to reject reliance as a basis for the engagement of s 51(xxxi),133 as demonstrated below however, his Honour could have accepted a strict test of detrimental reliance as a basis for the operation of s 51(xxxi) to retrospective interests but found that the test was not met on the facts of the case.
The facts before the Court were that Peverill performed the tests and accepted the assignment from his patients in the expectation that he would receive payment at a given rate. The schedule as promulgated, though strictly invalid, was followed by the Commission and for many years Peverill accepted those payments without protest. With respect to the payments actually received at the lower rate (between $15.40 and $18.40), his expectations were satisfied. Peverill’s disappointment arose retrospectively on discovering what he had missed out on, that is, receiving the much higher rate of payment ($34.50) for performing ELISA tests for his patients. There was no evidence before the Court of a frustrated expectation on Peverill’s part nor that the Amending Act constituted a repudiation of a prior expectation held by Peverill as to some future rate of payment or other state of affairs. Both Peverill and the Commission had acted on the common assumption that Peverill’s rate payment would be that ultimately provided for by the retrospective legislation. As the majority noted:
…the Commission, the public and many pathologists acted on the basis that the Committee's advices were effective to vary the table of benefits in the schedule.134
Peverill led no evidence to the effect that at the relevant time he had ‘changed his position’ or acted in reliance on an expectation that he would receive some greater measure of remuneration than he had already received.135 As counsel for the Commonwealth submitted: ‘…the purpose of the 1991 Act is not to deny that expectation but to vindicate it.’136
133 Peverill (1994) 179 CLR 226, 266-267; and see generally Joseph William Singer, 'The Reliance Interest in Property ' (1987) 40(3) Stanford Law Review 611. 134 Peverill (1994) 179 CLR 226, 234 (Mason CJ, Deane and Gaudron JJ). 135 There was some suggestion in oral argument that at some point, perhaps as early as 1986, Peverill had formed the view that the advices were ineffective to vary the schedule and had begun submitting claims to the Commission under item number 1345. However, this was not explored in any of the judgments. Even so, while it may evidence some degree of expectation on Peverill’s part, it goes no way to demonstrating detrimental reliance. 136 Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993) 32 (G Griffith QC). 201
Indeed, Peverill’s tardiness in bringing the action provided prima facie evidence that no expectation as to a higher rate of payment than that actually received was ever held.
The effect of the new legislation was ‘to bring the legislation into line with the general practice in fact adopted at that time.’137 The Amending Act specifically validated payments already received by pathologists.
As counsel for the Commonwealth submitted:
…when one has legislation that is expressed retrospectively to .. in effect, to enact what were the expectations of all participants … such legislation is valid and outside the acquisitions power - even if it has the effect of depriving a person of a cause of action…138
Reverse application of Michelman
In contrast, under the banner of the inherently subject to modification doctrine, the majority’s approach appeared to involve a reverse application of Michelman’s approach. In view of the ‘community's need for assistance, the capacity of government to pay and the future of health services in Australia’ which are all ’susceptible of change’ it was held that it was ‘to be expected that the level of benefits [would] change from time to time.’139
However, such considerations do not substantively address the injustice of a legislative amendment with retrospective effect and it is to this aspect of the case which the Court and extant doctrines could provide no substantive answer. It is one thing to say that it may be expected that an entitlement may be prospectively subject to change but another thing altogether to say it may be expected to change retrospectively - each gives rise to distinct, though in some respects overlapping, considerations.
That the scheme was necessarily subject to change in order to maintain its affordability (and to adapt to rapid technological advances) addresses directly the justice of a prospective alteration of rates payable to practitioners. That the schedule was repeatedly prospectively amended (albeit defectively) without a complaint issuing form Peverill, of itself evidences his expectations in this respect. Even taking a non-subjective approach to the question of
137 Peverill (1994) 179 CLR 226, 234 (Mason Deane and Gaudron JJ). 138 Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993), 21. 139 Peverill (1994) 179 CLR 226, 237. 202 expectation, that is, to ask what would be the reasonable expectations of a person in Peverill’s position, the same conclusion would be reached.
With respect to a retrospective amendment the situation is quite different. A counterfactual demonstrating extreme detrimental reliance brings this distinction to the fore.
Consider a situation whereby the Commonwealth adds a new item to the schedule for a gene test that requires extraordinarily expensive testing equipment. A practitioner purchases the machine with bank credit, performs tests for patients for five months and 28 days, then, in accordance with the Act, submits the claims to the Commission. Three months after purchase, an election is held and a new government elected. Five months and 29 days after the new item was added to the schedule, the scheduled fee is retrospectively changed from $1000 to $2.50 as the new Government believes it politically expedient to save money and thinks practitioners are making too high a profit.
Despite the essentially arbitrary nature of the Parliament’s actions in this scenario, what appears to be good grounds for an application of s 51(xxxi), the doctrine as expounded in Peverill would grant a practitioner no relief.
The contrary view renders the facts in Peverill as a scenario whereby a Practitioner, years after having rendered various tests and receipt of payment, learns of an administrative error in the amendment of the fee schedule, identifies an opportunity to realize a windfall gain and then embarks upon a course of litigation to secure it. When performing the relevant services for his patients Peverill could not have structured his business affairs on the basis that he would be paid the higher rate. The judicial decision which held him to be so entitled was handed down years later and it was only its nominally retrospective effect which gave rise to the Commonwealth’s outstanding liability to him.
The normative distinction between these two scenarios is the presence or absence of a frustrated yet reasonably founded expectation induced by the Commonwealth Parliament. The quotation by McHugh J of a US Supreme Court takings case is direct to the point.
To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient
203
institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined.140
Of equal relevance is a passage from the decision of Rich J in Dalziel that:
You take my house, when you do take the prop That doth sustain my house; you take my life, When you do take the means whereby I live.141
In a similar vein, as Callinan J held In Chaffey:
Many rights and interests, as well as obligations, are the creature of statute, but people coming to possess the former outlay money, time and effort by and on the faith of that possession. Others dealing with the possessor similarly do so.142
3.4.5 Conclusions Re Peverill
One of the central issues for the Court in the case was the proper characterisation of Peverill’s interest under the Health Insurance Act. That the characterisations proffered were such an ill fit with the substantive legal relationships underlying the dispute gives the impression that the judges were working backwards from their conclusion that s 51(xxxi) ought not apply towards a characterisation that would support that conclusion. The multitude of approaches taken by the Court in addressing this issue, even within individual judgments, provides good grounds for an argument that the judges themselves sensed that the extant doctrinal options could not address the substantive issues before them. The resort by Dawson and Toohey JJ to the positing of ad hoc exclusions to, rejection or contortion of various established doctrines concerning the definition of property and acquisition and the applicability of the Proviso to third party and voluntary acquisitions are particularly instructive.
Against a backdrop of extant doctrine, the Court was left with few options to explain the defeasibility of the interest against later Parliamentary revision. The characterisations of the interest as a gratuity, non-contractual in nature or the same as the interest held by a patient can be understood in this light. Nevertheless, it is worth reflecting on how readily the Court
140 Board of Regents v Roth, 408 US 564, 577 (Stewart J) (1972), cited in Peverill (1994) 179 CLR 226, 264 n 12. 141 William Shakespeare, The Merchant of Venice, Shylock, Scene Iv.i.374. cited in Dalziel (1944) 68 CLR 261, 286. 142 A-G (NT) v Chaffey (2007) 231 CLR 651, 671. 204 might have settled on a contractual characterisation of the interest had they reached an opposite view on the s 51(xxxi) issue.
As in Mutual Pools the High Court refused to adopt either the Plaintiff’s or the Commonwealth’s submissions as to how the Court ought to approach the issues in dispute. Though in some circumstances a lack of doctrinal clarity may have no particular impact, the Court’s approach in Peverill created some unintended, though in some respects entirely predictable, problems.
A critical aspect of the scheme created by the Health Insurance Act 1973 (Cth) is that it facilitates ‘the provision of… medical services’143 to the community irrespective of a person’s capacity to pay at the time of the consultation. The bulk billing scheme’s purpose of promoting public health is enabled in some instances by encouraging persons to undergo medical testing and treatment who, though they may have the capacity to pay at the time of consultation, might, for other financial reasons, choose to defer prescribed treatment.
On the doctrines put forward by the High Court in Peverill, the bulk billing scheme places the risk of the entitlement’s defeasibility entirely in the hands of a practitioner. To hold then, that the entitlement is a mere gratuity and inherently subject to modification works against and not for the policy objectives of the scheme because it is likely to discourage practitioners from bulk billing their patients and instead demand upfront payment. The approach adopted by the Court had the potential not to strengthen the policy objects of the scheme but to fundamentally undermine them and indeed this proved to be the case. As Mendelson noted, the Health Insurance Commission’s Annual Report 1997–98 (1998) reported declining rates of bulk billing and that:
One of the reasons for the decision not to bulk-bill is the growing understanding from medical professionals that by assigning the benefits under s 20A of the Health Insurance Act 1973 (Cth), they exchange a proprietary right which they have earned by providing medical services for a mere expectation of an uncertain gratuity.144
Though ultimately, an expectation-based approach would have delivered the same conclusion, namely that the Amending Act was valid as against the Proviso, such a finding would have
143 Australian Constitution s 51(xxiiiA). 144 Danuta Mendelson, 'Devaluation of a Constitutional Guarantee: The History of Section 51(xxiiiA) of the Commonwealth Constitution' (1999) 23 Melbourne University Law Review 308, 324 n 82. 205 avoided the unintended consequences. Propelling the Court towards such a broad brush approach were extant doctrines which of their nature are insensitive to the fundamental policy issues and principles underlying disputes involving retrospective interests.
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3.5 Attorney-General for the Northern Territory v Chaffey (2007) 231 CLR 651
The Chaffey case concerned workers compensation legislation. The legislation in question was made by the Northern Territory Legislative Assembly (‘the Assembly’) that, on identical terms to the Commonwealth Parliament, is bound by a just terms Proviso.145
3.5.1 Facts
In the latter half of 2003, Chaffey suffered an injury in the course of his employment. Under the Work Health Act 1986 (NT) (‘the Act’) Chaffey was entitled to compensation in the form of weekly payments for so long as he suffered a relevant disability. Under the Act, the quantum of the payments was calculated by reference to the worker’s ‘normal weekly earnings’146 and by reference to the ‘remuneration’147 of the worker.
When Chaffey’s entitlements were calculated and paid under the scheme, his employer funded superannuation contributions were not included as part of his ‘normal weekly earnings’ or ‘remuneration.’ After Chaffey had been in receipt of payments for about a year, the Northern Territory Court of Appeal handed down its decision in Hastings Deering (Australia) Ltd v Smith (No 2)148 (to which Chaffey was not a party) which held that, on the Act’s true construction, the ‘remuneration’ of a worker and their ‘normal weekly earnings’ did include superannuation contributions. Despite this ruling, at no time before or after it was handed down, were Chaffey’s compensation payments paid or calculated so as to include a superannuation component.
The Assembly then passed the Work Health Amendment Act 2004 (NT) (‘the Amending Act’) with a commencement date of 26 January 2005. The effect of the Amending Act was to retrospectively provide that ‘remuneration’ and ‘normal weekly earnings’ and a worker’s periodical compensation payments were to be calculated so as to exclude any superannuation contributions paid during the course of employment.149
145 Northern Territory (Self-Government) Act 1978 (Cth) s 50. 146 Work Health Act 1986 (NT) s 65. 147 Ibid, s 49(1). 148 (2004) 18 NTLR 1. 149Work Health Amendment Act 2004 (NT) ss 49(1A)-(1B). 207
The facts are analogous to those in Peverill, in that for the period of time between when Chaffey first received compensation payments up until the decision in Hastings Deering, all relevant parties were acting on the assumption that superannuation was not to be included in calculating the quantum of the weekly payments. Indeed, in introducing the Bill for the Amending Act, the responsible Minister made clear to the Assembly that its purpose was to ‘restore the status quo.’150 Had the Amending Act not been passed, employers, insurers and the Northern Territory government would have been liable to make significant arrears payments.
Chaffey then launched proceedings claiming that the retrospective abolition of his right to have his superannuation entitlements included in the relevant calculations and payments constituted an acquisition of his property and that, given that the amendments to the Act did not provide just terms for the purported acquisition, the relevant amendments were invalid. The Full Court of the Supreme Court of the Northern Territory ruled in favour of Chaffey’s claim.151 The Attorney-General for the Northern Territory then appealed to the High Court.
3.5.2 Judgment
The question put before the Court, as to whether there had been an acquisition of Chaffey’s property, was split into two time periods, one representing the prospective and the other, the retrospective operation of the Amending Act.
The High Court unanimously upheld the appeal with the majority joint judgment (delivered by Gleeson CJ, Gummow, Hayne and Crennan JJ) and the individual judgments of Kirby, Callinan and Heydon JJ finding that s 51(xxxi) did not impinge upon the validity of the Amending Act.
The case was argued and decided on the basis that the obligation to make payments to an injured worker under the s 53 of the Act was couched in terms ‘naturally’152 suggesting that the quantum of payments could and would be amended from time to time.153
The Act made compensation payable ‘subject to’154 and ‘in accordance with’155 the quantum provisions in Part V of the Act or alternatively in reference to ‘such compensation as is prescribed.’156
150 Northern Territory, Parliamentary Debates, Legislative Assembly, 14 October 2004 (Sydney Stirling). 151 Chaffey v Santos Ltd (2006) 18 NTLR 22. 152 A-G (NT) v Chaffey (2007) 231 CLR 651, 662. 153 Ibid. 208
It followed that:
on the proper construction of [the Act] the method prescribed for quantification of the amount of compensation payable to a worker by an employer had not been fixed in permanent form at the date of the injury to Mr Chaffey and was always subject to variation.
[Chaffey’s’] rights to compensation under [the Act] were of a nature which rendered them liable to variation by a provision such as that made by the [Amending] Act.157
Thus, the holding, by a majority of the Court, that the obligation to make compensation payments under the Act was defeasible by the legislature at will without compensation, was based primarily on the construal of a number of legislative drafting techniques, principally what are fairly standard legislative drafting shortcuts.
The majority and other judgments also considered of relevance the historical context of legislative workers’ compensation schemes which, it was suggested, have adapted and by necessity must adapt to prevailing economic conditions.
The separate judgments of Callinan and Heydon JJ each gave some consideration to expectation-based considerations. Heydon J, applying Michelman’s approach, held that the Amending Act was inherently subject to modification because:
It is … unlikely that persons affected by workers compensation legislation will commonly have any expectation that it will remain immune from amendment in a way which can alter existing rights.158
That the reasoning employed by Callinan J proceeded at least in part on a reliance or expectation basis was signified somewhat more obliquely:
Many rights and interests, as well as obligations, are the creature of statute, but people coming to possess the former outlay money, time and effort by and on the faith of that possession. Others dealing with the possessor similarly do so.159
154 Work Health Act 1986 (NT) s 52. 155 Ibid, s 52. 156 Ibid, s 52. 157 A-G (NT) v Chaffey (2007) 231 CLR 651, 662-3. 158 Ibid, 673. 159 Ibid, 671. 209
3.5.3 Discussion of Chaffey
The case of Chaffey again presents the combination of an unexpected liability arising from the nominally retrospective operation of a judicial decision and the High Court refusing to apply s 51(xxxi) to protect that liability from extinguishment by way of subsequent retrospective legislation .
The central problem with the judgments in Chaffey is the explanatory void left by the application of the ‘inherently subject to modification’ doctrine.
In the process of the doctrine’s application by the Court, two entirely distinct issues became conflated and confused. The first was the affordability/expenditure or fiscal chaos issue being the degree to which the legislature must retain power to amend the scheme to ensure its ongoing viability and the viability of the bodies and businesses that had to fund the scheme. The second issue was whether there was any injustice visited upon Chaffey on the retrospective and prospective diminution of his periodic payments of worker’s compensation. The Court’s overriding focus on the amended and amending legislation largely ignored any effect the amendment might have on a person in receipt of workers compensation.
As was evident also in Peverill, any relevant or principled differences between the two time periods, being the periods covering the retrospective and prospective amendment, were entirely ignored or sidestepped by the Court despite being clearly brought into dispute by the questions framing the case.
An expectation-based analysis draws out and puts into focus all of these issues. Interestingly, Chaffey presents a scenario in which both objective and subjective expectation-based approaches would deny relief.
3.5.3.1 Objective expectation-based analysis
An objective expectation analysis gives objective consideration to the expectations the legislation is capable of giving rise to. This requires a careful consideration of the nature and terms of the interest granted under the legislation. In this respect there were two key aspects of the legislation each of which give rise to distinct considerations. Notably the ‘context’ of the legislation, as articulated by the Court has no role to play in this analysis beyond a construal of otherwise ambiguous terms in the Act.
210
The first aspect of the legislation of relevance was the form of the interest granted and how far into the future a person in Chaffey’s position might reasonably expect to rely on the entitlement. In this instance, each payment was assessed periodically on an ongoing basis and Chaffey’s entitlement to periodic payments would cease were he to be fully rehabilitated, his work capacity restored or alternative work with equivalent remuneration found.
The scheme and entitlements paid under it had much in common with government social security payments which are assessed, and payments made, periodically on the basis that a person continues to be unemployed or continues to suffer a relevant disability. An unemployed person could not expect to continue to receive payments indefinitely inasmuch as the possibility exists that a person may find employment or become otherwise disentitled within a given time frame.
Such schemes provide little or no basis for a proprietary expectation beyond an expectation that their entitlements will be properly assessed and paid at the appropriate time (which is properly categorized as an administrative rather than proprietary right). The Act as structured provided exactly that via the inclusion of a whole series of measures designed to enforce Chaffey’s right to have his entitlements properly calculated and paid at the appropriate time.160
The very distinction between common law damages which is a once and for all time fixed proprietary right which may over- or under-compensate an individual, versus a periodic payment compensation scheme covering actual medical expenses and loss of wages, clearly illustrates the difference between proprietary and mere administrative rights. A person’s reasonable expectation of, or reasonable reliance on, such an entitlement could extend only to receipt of the next periodic payment at the time it is due and no further.
The analogy drawn upon in this analysis is that of the common law gift, given voice to in Peverill, where arguably the doctrine was wrongly applied. However, the limits of the analogy, even in this scenario, are evident. There is some incongruity in describing workers compensation as a gift. Although technically a worker does not earn workers compensation as part of their remuneration, the entitlement does arise out of the employment relationship.
However, what is captured by this analogy and the foregoing analysis and entirely neglected by the High Court in Chaffey is a scenario whereby the entitlement had already been paid and the
160 Work Health Act 1986 (NT) ss 14, 84, 85A, 88, 125, 126, 130, 175. 211
Parliament sought to retrospectively create a debt for amounts which retrospectively become wrongly paid. On the reasons provided by the Court such a course of action would be permissible on the basis that the legislation and the interests created by it were prospectively and retrospectively subject to modification.
The absurdity of this result gives rise to the clear inference that entitlements under this and similar schemes only vest when actually paid and at no earlier time. Such a view is consistent with comments made by McHugh and Brennan JJ in Peverill that:
The right so conferred … is not property: … On analysis, such a right is susceptible of enjoyment only at the moment when the duty to pay is discharged.161
Once the right or entitlement to payment is transformed into a payment … The Commonwealth can only acquire it by paying the price demanded by s 51(xxxi).162
Executive modification
The second aspect of the legislation relevant to an objective expectation-based assessment of the interest held by Chaffey was the degree to which it was capable of giving rise to some reasonable expectation of the stability or permanency of the interest. This analysis closely mirrors the analysis undertaken by the Justices of the High Court in the various judgments. However, by shifting the enquiry from the abstract and arguably empty question of whether or not the Act ‘fixed in permanent form’163 ... ‘the amount of compensation payable to a worker by an employer ‘164… at the date of the injury or ‘was always subject to variation’165 to that of what (objectively) reasonable expectations of permanency the Act might give rise to, the enquiry takes on some relevant and principled content.
The issue then is whether the Act (pre-amendment) contained any express indication that entitlements granted by it were defeasible on any specific or particular basis.166 If Chaffey’s entitlements were specifically defeasible under the terms of the Act (outside of legislative action) there could have been no reasonable basis for any expectation as to permanency in
161 Peverill (1994) 179 CLR 226, 243. 162 Ibid, 266. 163 A-G (NT) v Chaffey (2007) 231 CLR 651, 662. 164 Ibid, 662. 165 Ibid. 166 Davey (1993) 47 FCR 151. 212 that there would have been no adequate materials to support such an expectation.167 The inference would not be available that, even had Chaffey, in the circumstances, turned his mind consciously to the matter, he would reasonably have believed and expected his entitlements to be indefeasible.
An analogy would be with exceptions to the indefeasibility of land title under the Torrens system of land title registration which are expressly provided for in the relevant state legislation.168 No rational expectation as to the indefeasibility of a right can arise when the terms of that property right specifically provide for its extinguishment and the relevant circumstance brings the exception into operation.
Clearly relevant then was whether the Act itself give Chaffey any basis on which to expect that, once injured, his rights to compensation payments were fixed as at that time until, and for as long as, the legislation allowed at that time or for as long as his injury continued to require treatment or impair or diminish his earning capacity.
The Act granted an entitlement to ‘such compensation as is prescribed.’ The expression, ‘prescribed under the Act’ was interpreted as meaning ‘prescribed by the Work Health Act or by an instrument of a legislative or administrative character made under that statute’.169 Further section 187(g) of the Act conferred on the Administrator of the Territory the power to make regulations ‘prescribing the amount of compensation payable or by reference to which compensation is to be calculated’. Thus a decision of the executive promulgating regulations pursuant to the Act might reduce the amount of a worker’s compensation entitlements.
Inasmuch as Chaffey’s entitlements were defeasible at the will of the executive, the entitlement might scarcely be called property at all and could provide Chaffey with no reasonable basis for a belief that his entitlements were indefeasible. To adopt the words of Spigelman QC from Peverill, the Act created a ‘discretion’ in the hands of the Minister administering the Act, not a proprietary entitlement in the hands of injured workers.170
167 Teoh (1995) 183 CLR 273, 291. 168 For eg Land Title Act 1994 (Qld) ss 184-185. 169 Interpretation Act (NT) s 18; A-G (NT) v Chaffey (2007) 231 CLR 651, 660 (Gleeson CJ, Gummow, Hayne and Crennan JJ). 170 Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993), 106; Allen, The Right to Property in Commonwealth Constitutions, above n 93, 153-161. 213
The case in this regard is directly analogous to Davey. In finding that the Proviso did not protect the plaintiff’s entitlement Black CJ and Gummow J largely adopted the Ministers submission that:
…if the [interests] are found to be defeasible, in the sense of being subject to alteration by the Minister, then no acquisition can have occurred at all.171
When the rights were altered, the [plaintiffs] were not losing anything with which they had been indefeasibly invested by the statutory scheme.172
There is something of a disjuncture between a unilateral evisceration of an interest by the executive as permitted by the enabling legislation and a legislative amendment which extinguishes or diminishes the interest that requires further explanation. However, the substantive loss on an expectation basis is identical because once an Act is incapable of giving rise to any expectation that the substance of the interest has some degree of permanency it becomes irrelevant by what mechanism the interest is ultimately defeated. The same effect could be achieved by not repealing or amending the old scheme while promulgating regulations which reduced entitlements to zero and bringing in an entirely new legislative scheme with a smaller entitlement. Raz might suggest that there is a formal violation of the principle of non-retrospectivity but not of its spirit.173
In that the substance of the interest is discretionary and by definition can be diminished in such a way as to render it of no value and without content, there is no additional prejudice to the defeat of the interest by legislative means; the interest has no inherent value as property, the loss of which is susceptible of being compensated for.
Such was the tenor of the submissions by Counsel for the State of New South Wales in ICM Agriculture v The Commonwealth:174
The range of mechanisms provided by the Water Act to restrict usage were sufficient to enable the government to achieve similar reductions of entitlements to those now achieved. A decision was made instead to adopt a consultation process. Hence neither the administrative instruments nor the Funding Agreement effected or required an acquisition of property on other than just terms. The statutory licences were inherently susceptible to
171 Davey (1993) 47 FCR 151, 164. 172 Ibid, 164. 173 Joseph Raz, 'The Rule of Law and It's Virtue' (1977) 93 The Law Quarterly Review 195, 199. 174 ICM Agriculture (2009) 240 CLR 140. 214
variation. There was never a guarantee that any volumetric allocation would continue without restriction.175
In that case the water allotments under the scheme were variable on the unilateral act of the Minister administering the scheme. On the wholesale repeal of the legislation granting the entitlement to an allotment of water (which was subsequently replaced with another similar scheme) the High Court found the Proviso did not protect the plaintiff’s entitlement. As discussed in the previous chapter, the best analogy to these kinds of interests are the illusory promise.
This analysis also makes some sense of the otherwise incoherent holding in the majority judgment in Chaffey itself as follows:
…these appeals do not turn upon the notion of “acquisition”. They depend upon the identification of the “property” to which s 50 of the Self-Government Act is said to apply.176
In WMC, as with Pt V of the Work Health Act, by express legislative stipulation in existence at the time of the creation of the statutory “right”, its continued and fixed content depended upon the will from time to time of the legislature which created that “right”.177
Once this nature of the “property” involved is understood it is apparent that there was no “acquisition” spoken of in s 50 of the Self-Government Act.178
Prima facie, the above extracts from the judgment are contradictory. The first proposition is that the notion of ‘acquisition’ is irrelevant while the conclusion is that the Proviso is not engaged because there was no acquisition in the relevant sense. There is also an inherent contradiction in the Court’s dual characterisation of Chaffey’s interest under the scheme as both analogous to social security type benefits and property for the purposes of s 51(xxxi).
In light of the decision of the Court, a more coherent approach would hold not that there was no acquisition but rather that the rights conferred on Chaffey under the scheme gave no basis for any expectation of a continuing entitlement to benefits and accordingly were not proprietary rights at all but only administrative rights. Thus, ultimately there was no
175 Ibid, 155 (citations omitted). 176 A-G (NT) v Chaffey (2007) 231 CLR 651, 663. 177 Ibid, 664. 178 Ibid, 666. 215
‘acquisition’ in the relevant sense because there was no transfer of property in the process of its legislative extinguishment; the substance of the interest merely dissolved in the hands of the plaintiff as it was always liable to do. Nothing was taken that was indefeasibly granted or guaranteed.
Alternatively, one might say that, as a property right with no fixed content or value, though it was acquired, no compensation would be payable for its defeat by the legislature.
In place of this analysis the Court continued to ‘pay lip service’ to a liberal interpretation of the concept of property within the Proviso’s terms179 while shifting the focus, somewhat inconherently, onto the notion of ‘acquisition.’
3.5.3.2 Subjective expectation-based analysis
A mixed objective/subjective expectation-based approach to retrospective interests, as discussed in Chapter Two would, strictly speaking, not go on to consider subjective expectations where the relevant interest was incapable of giving rise to any objective expectation of stability or permanence. Nonetheless, it can be seen that a consideration of Chaffey’s subjective expectations regarding the quantum of his payments would also deny relief.
The inference to be drawn from the facts in evidence before the Court was that Chaffey never did hold any expectation, nor even turn his mind to the question of whether or not his superannuation entitlements would be taken into account when calculating his weekly compensation payments. For the relevant period, all relevant parties, including private insurers, employers and the relevant government agencies, were acting on the assumption that the definitions under the Act did not encompass employer funded superannuation contributions.180
That Chaffey's expectations, as to the quantum of his payments, had been vindicated was implicit in the evidence that over almost a 12 month period he had received numerous payments, excluding a superannuation component, without complaint or protest. It provided a reasonable inference that Chaffey had turned his mind consciously to the matter and was satisfied that the procedures he believed and expected to be followed were in fact followed.181
179 A J Van der Walt, Constitutional Property Clauses: A Comparative Analysis (Juta, 1999), 63 -66. 180 As discussed in footnote n 182 below, this was a not unreasonable assumption. 181 Lam (2003) 214 CLR 1, 47 [145] (Callinan J). 216
Perhaps the most damning evidence against Chaffey in this regard was his tardiness in bringing the action he did.
In order to refute such an inference Chaffey would have needed to lead evidence that, during the period he was in receipt of payment, he had relied financially on some greater measure of compensation than he actually received.182 Such evidence would conclusively demonstrate that Chaffey suffered detriment in reliance on the expectation (founded on a correct interpretation of the relevant statutory provisions) of receiving that specific portion of compensation representing his superannuation contributions. As a matter of common sense no such evidence would have existed as all parties had acted on the assumption since the Act had originally come into force, that superannuation contributions were irrelevant to the calculation of compensation entitlements.
Chaffey’s complaint was in substance his retrospective disappointment stemming from a discovery of what he had missed out on, not on the frustration/repudiation of a prior expectation as to some future state of affairs. In retrospectively legislating to provide for the amount of compensation actually received by Chaffey and other workers, the Northern Territory government did no more than vindicate the expectations held by both themselves and others at the relevant time.
Nonetheless, the case clearly demonstrates the difficulty with which a plaintiff is faced in proving the existence of an expectation or detrimental reliance when the change of position is constituted by a forbearance.
Without any evidence that the relevant expectation was ever held, the analysis concludes before consideration of any act of reliance or detriment becomes relevant. A reliance type argument (absent either an objective or subjective expectation) of the type rejected by McHugh J in Peverill would nonetheless be available.
182 There is some artificiality to this argument inasmuch as it is somewhat absurd to imagine that Chaffey would have structured his financial affairs on the basis of some portion of a weekly payment which he never received and apparently never knew he was entitled to. However, there is an air of unreality to the whole case which arises from the decision in Hastings Deering (Australia) Ltd v Smith (No 2) (2004) 18 NTLR 1. In finding that the ‘remuneration’ or ‘normal weekly earnings’ of a worker under the Act might contemplate superannuation contributions, the Court read an intention into the statute it could not possibly have held. The Act was passed in 1987. Compulsory employer funded superannuation payments did not commence until 1992 with the passing by the Commonwealth Parliament of the Superannuation Guarantee (Administration) Act 1992 (Cth). An interesting procedural note; the High Court special leave hearings for both Chaffey v Santos Ltd (2006) 18 NTLR 22 and Hastings Deering (Australia) Ltd v Smith (No 2) (2004) 18 NTLR 1 were heard on the same day and the Court gave some consideration to the interrelationship between the two cases. 217
An interesting feature of the Amending Act was that it validated payments of otherwise defeated superannuation entitlements where a plaintiff had not acquiesced in the non- payment of the entitlement but challenged it in the Courts.183 That is, it limited the effect of the decision in Hastings Deering (Australia) Ltd v Smith (No 2)184 to the party that had brought the action. It could be said that the Northern Territory government was preserving the entitlements of persons who had expected their compensation payments to include compensation for lost superannuation entitlements and had taken the necessary action to secure those entitlements.
3.5.3.3 Fiscal Chaos
The disruption to public finances issue, of no less significance in this matter, was perhaps best expressed by Angel J, the lone dissenting Judge in the Court below. As his Honour held in Chaffey v Santos Ltd and as was cited with approval by Heydon J in Chaffey,185 a workers’ compensation scheme, which otherwise extinguishes a right in tort against the Commonwealth:
…balances the rights of the worker to proper compensation for work injury irrespective of fault against the employer’s ability to pay that compensation. It is a compromise between payer and payee, on the one hand providing an adequate level of compensation to injured workers, on the other containing that level to one which is affordable by employers, and, ultimately, by society at large.186
However, such considerations are arguably redundant when it becomes apparent that more concrete doctrinal approaches can deliver a principled outcome.
3.5.4 Chaffey Conclusion
The decision in Chaffey again presents a case in which the reasons provided by the Court failed to give cogent expression to the principles which necessarily underpinned the conclusion reached and substantive issues again came to be addressed in the garb of other doctrines
In some respects the decision is analogous to the case of Werrin in that both concerned a tardy plaintiff seeking to capitalize on the retrospectivity of a judicial decision they themselves might
183 Work Health Act 1986 (NT) s 195(1)(b). 184 (2004) 18 NTLR 1. 185 A-G (NT) v Chaffey (2007) 231 CLR 651, 674. 186 Chaffey v Santos Ltd (2006) 18 NTLR 22, 29 [12]. 218 have obtained. In both cases, the High Court denied the plaintiffs the remedies which their retrospective interests at least prima facie entitled them to.
The case also illustrates how many factors are at play in any s 51(xxxi) litigation and that any number of issues may exclude its operation. In Chaffey, the fiscal chaos issue, with its necessarily subjective and unpredictable operation, need not even have been considered by the Court. The Court need not even have considered matters outside the plain words of the statute – there being ample scope for a finding that the Proviso was excluded by way of determination as to whether Chaffey had ever been in possession of, or been granted, a compensable interest deserving the designation of property.
219
3.6 Chapter 3 Discussion
The element common to all four cases analysed is that the interest for which the respective plaintiffs sought the protection of s 51(xxxi) was an interest that arose from the retrospective operation of an antecedent judicial decision. In each case the relevant legislature passed retrospective legislation to defeat the retrospective interest and in each case the High Court held that legislation valid as against s 51(xxxi).
Common to all four cases is that each plausibly gives effect to a subjective expectation-based approach to the application or operation of s 51(xxxi) in respect of retrospective interests. The facts as disclosed in each case have the common feature that there was no uncompensated detriment suffered by the plaintiffs flowing from any reliance on their defeated retrospective interests. The arguments of the parties and some of the judgments in the four cases made direct or indirect reference to the relevance of such considerations.
In the ordinary run of cases a subjective expectation-based approach runs aground and would have the effect of transforming the Proviso into an individual right and not a limit on power. Identifying that a particular case involves a retrospective interest would be essential before a subjective approach could be coherently applied.
Had an objective expectation-based approach been applied in each of the four cases, only in Chaffey would the Proviso’s operation have been denied. From a strictly objective standpoint, the plaintiff’s interests in Werrin, Mutual Pools and Peverill were neither unexpected nor unearned and in this sense were not windfall gains.
In that the relevant legislation in each case preserved certain entitlements highlights how sensitive the Parliament is to the expectations of holders of common law and statutory interests. Where some detrimental reliance on those interests was demonstrated, the challenged legislation contained compensatory provisions to the measure of that reliance. A similar attitude is evidenced by the ex gratia payments made to the plaintiffs in Davey and ICM Agriculture.
The prejudice ordinarily brought about by retrospective legislation does not arise in circumstances such as those presented in the four cases where the only subjective loss is an unexpected gain. Affected parties are unlikely to incur any detriment arising out of any act of reliance on the antecedent judicial decision which itself is then legislatively overruled with retrospective effect. In other circumstances, retrospective legislation has the potential to ‘pull 220 the rug out from under people’s feet’ and a make a charade of an individual’s capacity to make commercially relevant decisions about how, or even if, they conduct their business affairs. The plaintiffs in each of the four cases however, in all sincerity, could not make out an argument that any positively held subjective expectation was in any way undermined by the subsequently enacted legislation.
3.6.1 Retrospective Interests
Retrospective interests appear in all fields of law and give rise to a catalogue of sui generis legal issues.
On one view, a court dealing with a retrospective interest must treat it as it would any other and must apply the law whatever ‘rearrangements and readjustments’ it entails no matter to what extent parties’ expectations of the transaction are frustrated and history is rewritten.
However, a more careful consideration of the courts’ actual responses to retrospective interests and what the rule of law might actually demand of a court in dealing with such interests would suggest that ‘it ain’t necessarily so.’
Looking to the four decisions considered in this Chapter, all of which involved the operation of the Proviso to cases involving one or more retrospective interests, it would seem that Courts are actually very reluctant to treat retrospective interests in the same way as ordinary legal or equitable interests. As was explored in chapter two, a case can be made that it is possible to treat them differently in a way that is consistent with rule of law principles.
In the same way that granting restitutionary relief in respect of such interests may ‘infect many payments with a provisional quality incompatible with orderly commerce’187 the ordinary operation of the Proviso to such interests has the potential to infect many laws with a provisional quality incompatible with orderly governing.
As we saw in Newcrest, things start to get very strange indeed when you end up with a situation in which, potentially, two competing retrospective interests unravel transactions that took place many decades ago such that they void (and rewrite) a good proportion of the Northern Territory’s history of governance. As can be seen from a range of decisions they can also require a judge, in determining the measure of restitution, compensation or damages, to select from among a seemingly infinite number of alternative histories which may have come
187 David Securities (1992) 175 CLR 353, 394 (Brennan J). 221 to pass had the invalid law never received Royal assent. The impossibility of the task is made more evident when one considers that in some of those alternative histories legislation with the same effect as the invalid law may have been validly enacted.188
As Newcrest also highlights, not only do retrospective interests present technical challenges to legal doctrine, they stand in the way of Courts giving a more expansive interpretation to, or recognition of, rights under the Constitution, common law and statute.189
Retrospective interests call for a very careful application and re-examination of constitutional theory and standard doctrine. Several examples can be given.
To assume that the English Bill of Rights doctrine which demands no tax without parliamentary approval190 would apply under the Australian Constitution to a retrospective interest is to ignore the constitutional context in which the English Bill of Rights arose, being one in which Parliament was assuming supremacy, the judiciary was not substantially independent from the Crown and had no power to rule on the validity of statutes. To assume therefore that the rule of law and/or s 51(xxxi) ought to limit the Parliament’s power to deny restitution for money collected pursuant to a statute declared invalid by the judiciary is perhaps a step too far.
As Kirby J discussed in Roxborough:
The problem of what to do when the private legal relationships of parties have been conducted upon assumptions undermined by a supervening court decision of retrospective operation is one to which a federation, or similar interjurisdictional arrangement, is inherently susceptible.191 … The [answer to the] problem [is] more likely to be discovered by a consideration of the contemporary experience of other developed legal systems than by analysis of the reasoning of English courts before Australia was settled. Such courts were not obliged to solve the legal problem that [arises] by reference to the constitutional invalidation of a taxation statute.192 …
188 James v Commonwealth (1939) 62 CLR 339. 189 Keith Mason, 'Prospective overruling' (1989) 63(8) Australian Law Journal 526, 530. 190 (1688) 1 Will and Mar, Sess. 2, c. 2 ("That levying Money for or to the Use of the Crowne by pretence of Prerogative without Grant of Parlyament for longer time or in other manner than the same is or shall be granted is Illegal."). 191 Roxborough (2001) 208 CLR 516, 563. 192 Ibid, 560-61, citing Moses v Macferlan (1760) 97 ER 676. 222
This is a constitutional context that did not need to be considered by English judges in earlier times. It is therefore not reflected in their reasons.193
Ultimately, … constitutional context shapes the applicable legal rules.194
The history of the ‘transport cases’ is particularly instructive. In Hughes and Vale Pty Ltd v New South Wales195 not only did the Privy Council overrule a string of High Court decisions stretching back over a period of 20 years but as was pointed out at the time:
The overruling of these cases is all the more remarkable because three of them had been brought to the Privy Council on petitions for special leave to appeal and in each instance the Judicial Committee refused to grant leave.196
To use inflammatory language to suggest that not to grant restitution mocks the Constitution or that the Parliament is engaging in extortionate behaviour in following the rulings of superior courts is to fail to recognise the constitutional context and to deny the judiciary’s role in the creation of such interests.
As Gibbs J stated in Brisbane v Dacres;197 ‘there are many doubtful questions of law’ and a government cannot suspend its duty to govern every time someone challenges an executive decision or the validity of a law or on the mere prospect that the High Court may change its interpretation of the Constitution.
There is little dignity in the judiciary making whipping boys of the Parliament and executive for its own vacillations, assertions of authority and the ‘errors’ of differently constituted Courts.
In various contexts and at various times doctrines have been developed to deal with the retrospective interest problem. These include res judicata, mistake of law as a bar to restitution and ‘constitutional necessity.’ However, the diversity of circumstances in which they arise and the difficulty of moulding a diverse range of legal doctrines to the specific problems they present call for a unified response.
193 Ibid, 563. 194 Ibid, 569. 195 (1954) 93 CLR 1. 196 Editors, 'The Transport Cases and the Privy Council: Hughes and Vale Pty Ltd v NSW' (1954) 1(3) Sydney Law Review 429. 197 (1813) 128 ER 641. 223
The Proviso’s interaction with retrospective interests cannot be explained by resort to the mainstream of s 51(xxxi) doctrine and have it remain coherent for the reason that these doctrines simply have no purchase or descriptive value in terms of the normative issues to which retrospective interests give rise. Retrospective interests do not sit easily within any of the ‘traditional exclusions’ from the Proviso’s operation. Nor could it be said that they are ‘wholly outside’ or have ‘nothing to do with it’ – their interactions with the Proviso require an explanation or they will continue to dog the appellate courts. Resisting the urge to brush them away is the only way s 51(xxxi) doctrine can develop in a way that is congruent or integrated with other constitutional doctrines and interpretive approaches.
For the judiciary retrospective interests present something of a hall of mirrors in which they are confronted with the consequences of the retrospectivity of their own decisions. However judges must avoid being spooked by their own reflections and confront the reality that retrospectivity has consequences which potentially injures the ‘cause of legality.’ Problems arise as much from the making of retrospective laws as the retrospective unmaking of laws. In Fuller’s terms, retrospective interests appear as a shipwreck against the rocks of ordinary common law and constitutional law doctrines. A unified approach would make for a far smoother landing.
3.6.2 The Acquisition Question
Another key feature of the four cases considered in this Chapter case is that, from a contemporary standpoint at least, all the interests were ‘acquired’ in the relevant sense. Accordingly, these were not cases in which the ‘acquisition’ issue arose and it can be seen that the ‘acquisition’ doctrine was called into service to explain the non-applicability of s 51(xxxi) in circumstances where the Commonwealth took the full benefit of the property interest in dispute. Though it may be accepted that the High Court has rejected a regulatory takings doctrine, and that the Proviso does not protect restrictions on the use of property constituted by a negative right, the concept is being used to cover a much broader range of exclusions.
Looking to the US experience, the adoption of a regulatory takings doctrine has been pointed to as the primary source of the ‘mess’198 and unpredictability of US takings law. Whatever one’s view on the acquisition question, the debate over the importation of a US-style
198William Treanor, 'The Original Understanding of the Takings Clause and the Political Process' (1995) 95(4) Columbia Law Review 782, 782 citing Daniel A Farber, Public Choice and Just Compensation, (1992) 9 Constitutional Commentary 279, 279; Saul Levmore, 'Just Compensation and Just Politics' (1990) 22 Connecticut Law Review 285, 287. 224 regulatory taking’s doctrine is a rare instance where both sides articulated a clear position. However, having rejected such a doctrine, thereby excising the most difficult and inherently problematic question posed by a constitutional property clause, it is hard to excuse or account for the incoherence s 51(xxxi) doctrine exhibits. While regulatory takings of their nature require a case-by-case determination, in their absence there is little reason why it is the case in Australia that:
Expressions of conclusion in one case as to the deprivation of property, and, if so, the existence of an acquisition of property, do not necessarily provide a sufficient guide to the outcome in later disputes.199
It would seem that, in the Australian context, a ‘taking’ is often used merely as a synonym for ‘regulation’ being any law that does not effect an ‘acquisition of property other than on just terms.’
3.6.3 Conclusion
As discussed in Chapter Two, the courts only really have four routes open to them to explain the defeasibility of a retrospective interest as against the Proviso.
1. Retrospective interests are not ‘property’ nor their defeat an ‘acquisition’ for the purposes of s 51(xxxi);
2. The antecedent judicial decision operates only prospectively;
3. The circumstances of the case are such that the court ought not to grant a remedy to a plaintiff being the holder of a defeated retrospective interest; and
4. The Parliament has power to legislate (retrospectively) to the effect that the antecedent judicial decision operates only prospectively.
Prima facie, options 1 and 2 are not available so long as the High Court denies itself the power to make prospective rulings. Option 4 is available only where the Parliament, in legislating that the antecedent decision is to operate only prospectively, complies with other constitutional limitations including ss 55, 90 and 92. Where Parliament has failed to comply with any one of these provisions the High Court, if it is to provide a coherent set of reasons, cannot avoid
199 JT International (2012) 250 CLR 1, 54 [119]. 225 explaining the validity of Parliament’s defeat of the interest other than in accordance with the third option.
The nature of the remedy for the defeat of a retrospective interest is compensation for the defeat of the ‘justified expectations’200 of those who have relied upon them to their detriment. In Mutual Pools we have the example of the Refund Act providing such a remedy where a builder was able to furnish relevant evidence to the Commissioner. In Peverill and Chaffey there was the specific validation of prior payments. In Werrin we have the entitlement to repayment where the original payment was made within time but under protest subject to an exception where the cost was ‘passed-on’.
Extracting these types of cases from the mainstream of s 51(xxxi) doctrine provides a real opportunity to clarify and reconcile many other decisions and identify where the real points of difficulty and contest arise.
200 Re Language Rights under Manitoba Act 1870 (1985) 19 DLR (4th) 1, 28, cited in Campbell, 'Unconstitutionality and its Consequences', above n 178, 96. 226
4 Chapter 4 – Possible Purposes of the "Just Terms" Guarantee
4.1 Introduction
In Chaffey, Kirby J suggested that ‘[t]he way to bring clarity to this area of discourse would seem to be by attempting to identify more explicitly the purposes of the "just terms" guarantee.’1
The purpose of this Chapter is to consider the purposes or functions of the Proviso that have been proposed by various judges and commentators and identify the extent to which they can be reconciled or are in fact in conflict with each other. Further considered is the extent to which they appear to have been given some positive operation in s 51 (xxxi) cases.
One of the proposed purposes has been that of directing acquisitions through the tax system. This poses the problem of the Proviso’s place within the broader constitutional structure and its relationship with other constitutional limitations. The problems with this proposed purpose expose one of the great paradoxes at the heart of the Proviso’s operation and is considered in some detail. A possible solution is proposed and disussed is the light it sheds on a number of cases.
Finally, the Chapter identifies and discusses the major obstacles in the way of a full reconciliation of s 51(xxxi) jurisprudence and the limitations various purposive approaches to the Proviso have in terms of explaining or clarifying existing case law.
4.2 Purposes or Functions of the Proviso - What is the Evil?
There are several ways of approaching the question of the Proviso’s purposes. One is to ask what evil or injustice the Proviso could or ought to be directed at preventing or remedying. Another is to ask what function(s) it performs in relation to other constitutional provisions and in the overall constitutional structure.
In addressing these questions it is also important to differentiate between any primary function(s) and any secondary effects or results of its application in a given circumstance.
1 A-G (NT) v Chaffey (2007) 231 CLR 651, 667; Simon Evans, 'When is an Acquisition of Property not an Acquisition of Property? The Search for a Principled Approach to Section 51(xxxi)' (2000) 11(3) Public Law Review 183, 199. 227
Indeed, to the extent that the Proviso is capable of serving different functions, each might have different or coterminous secondary effects and implications.
The two primary approaches dealt with in the previous chapters were those proposed by Dixon J and Gageler J respectively being either to:
1. ‘prevent arbitrary exercises of the power at the expense of a State or the subject’ or
2. ‘Prevent arbitrary acquisitions’
On either view the Proviso is a ‘rule of law’ protection which operates to limit the Parliament’s powers to enact laws which arbitrarily interfere with legally recognised proprietary interests. The significance of the Proviso then hangs on the virtues one ascribes to the rule of law in its minimalist formulation.2 Either approach can either support or not support a regulatory takings type doctrine.
In Chapter Two it was suggested that the two key rule of law principles of relevance to s 51(xxxi) are those of generality and non-retrospectivity. Their role, in terms of informing the content of s 51(xxxi) doctrine, is controversial. Other rule of law principles dealing with natural justice, judicial review, access to the courts and the subjection of the executive to Parliamentary control and oversight are already embedded and operating within the mainstream of s 51(xxxi) jurisprudence.
Another function considered was that the Proviso gives some stability to the Constitutional system of government by denying the Parliament the ability to defeat the legal interests of economically powerful groups within society who have the resources to undermine it. Inasmuch as a factor such as this may explain why the Proviso exists it would be difficult if not objectionable to give it immediate normative operation. The Proviso would only protect the rich and powerful. Indeed, it may be that the stability thesis merely comes down to the proposition that the rule of law promotes political stability. The same could be said of the suggestion that the Proviso places some kind of limit on opportunities for political corruption; this is merely a secondary effect rather than a purpose and not a very strong or effective limit at that.
By the same token one does not find in the case law any great support for the proposal that direct normative operation should be given to the idea that the Proviso is ‘intended for the
2 Joseph Raz, 'The Rule of Law and It's Virtue' (1977) 93 The Law Quarterly Review 195. 228 protection of the subject’3 and so be interpreted as an individual right. Again, one would say that the Proviso, to the extent that it protects subjects, does so by way of limiting the Parliament’s power to enact arbitrary laws. One sees this same dichotomy in other areas of constitutional interpretation. As Deane J discussed in the context of the interpretation of s 109 of the Constitution:
…s 109 is not concerned merely to resolve disputes between the Commonwealth and a State as to the validity of their competing claims to govern the conduct of individuals in a particular area of legislative power. It serves the equally important function of protecting the individual from the injustice of being subjected to the requirements of valid and inconsistent laws of Commonwealth and State Parliaments on the same subject.4
One does not necessarily undermine the Proviso’s purpose in protecting the subject by erecting the barrier around the Parliament rather than around each individual’s personal possessions and entitlements.
Similarly, to the extent that the Proviso encourages investment and gives stability to a market based price system this is perhaps a necessary corollary or effect of any limitation on legislative power which recognises the expectations that courts and legislatures generate in promulgating laws and what Fuller described as the internal morality of law. As Lord Mansfield stated in Vallejo v Wheeler,5 ‘[i]t is of more consequence that a rule should be certain, than whether the rule is established one way rather than the other.’6 The values of non- retrospectivity and legal certainty, derived from the rule of law, are intimately bound up with notions of ‘legitimate’ or reasonable expectations and both public and private law estoppels give these values some concrete operation within the legal sphere.
The equality of burden thesis is an altogether different proposition. The central authority for this approach is the decision in Armstrong v United States where it was held that the central purpose of the Fifth Amendment takings clause is ‘to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.'7
3 Dalziel (1944) 68 CLR 261, 276 (Latham J); Mutual Pools (1994) 179 CLR 155, 168 (Mason CJ). 4 University of Wollongong v Metwally (1984) 158 CLR 447, 477. 5 (1774) 1 Cowp 143. 6 Vallejo v Wheeler (1774) 1 Cowp 143, 153; Jeremy Waldron, The Rule of Law and the Measure of Property: The 2011 Hamlyn Lectures (Cambridge University Press, 2012), 15-16. 7 Armstrong v United States, 364 US 40, 49 (Black J) (1960). 229
The equality of burden thesis rests on notions of substantive rather than formal equality before the law.8 As discussed in Chapter One, such arguments call for a balancing of private and public interests,9 that is, a consideration of merit and policy, a function ordinarily left to the Parliament under the Australian Constitution. The notion of substantive equality as a principle of Australian constitutional law enjoys little if any judicial support.
Subject to the express powers which discriminate between persons there is however limited acceptance of the principle of legal equality. As Toohey and Deane JJ discussed in Leeth v Commonwealth:10
The doctrine of legal equality is not infringed by a law which discriminates between people on grounds which are reasonably capable of being seen as providing a rational and relevant basis for the discriminatory treatment. In one sense, almost all laws discriminate against some people since almost all laws operate to punish, penalize or advantage some, but not all, persons by reference to whether their commands are breached or observed. While such laws discriminate against those whom they punish or penalize or do not advantage, they do not infringe the doctrine of the equality of all persons under the law and before the courts. To the contrary, they assume that underlying legal equality in that they discriminate by reference to relevant differences. Again, laws which distinguish between the different needs or responsibilities of different people or different localities may necessarily be directed to some, but not all, of the people of the Commonwealth.11
As Wilson J observed in Mabo [No 1] ‘formal equality before the law does not always achieve effective and genuine equality.’12 And nor would one want it to in some circumstances.
The equality of burden thesis is also at odds with the Proviso in that it is concerned with the protection of individual rights whereas the Proviso operates as a limit on legislative power. Of course, the US Fifth Amendment does operate as an individual right and, other matters aside, the argument is valid in that context.
8 Pamela O'Connor, 'The Changing Paradigm of Property and the Framing of Regulation as a "Taking"' (2010) 36(2) Monash University Law Review 50, 68. 9 Kurtovic (1990) 21 FCR 193, 221 (Gummow J); Margaret Allars, 'Tort and Equity Claims Against the State' in PD Finn (ed), Essays on Law and Government, Vol 2: The Citizen and the State in the Courts (1996) 49, 93. 10 (1992) 174 CLR 455. 11 Leeth v Commonwealth (1992) 174 CLR 455, [208] 488-9; see also Kartinyeri v Commonwealth (1998) 195 CLR 337, 365 (Gaudron J); Kruger (1997) 190 CLR 1, (Toohey J). 12 Mabo [No 1] (1988) 166 CLR 186, 206 (Wilson J). 230
Similarly, in the face of sub-sections 51(xxiii) and (xxiiiA) an argument cannot be sustained that the Australian Constitution envisages the Commonwealth as some kind of nightwatchman state such that it is offended by laws which effect the redistribution of wealth.
In that a formal approach (legal but not substantive equality) involves only the balancing of public interests, the judiciary is relieved of engaging in merits review of legislation. By way of contrast, the equality of burden thesis is an open door to political arguments from both ends of the political spectrum. The rejection of these modes of argument is one of the primary modifications of the principle in Marbury v Madison13 as it applies under the Australian Constitution.14
4.3 The Tax and Criminal Penalties Problem
In Chapter One we encountered a number of doctrines and judicial statements which appear to give effect to a conception of the Proviso’s purpose as ensuring that any property to be acquired by the Commonwealth must be purchased with tax revenues rather than being directly appropriated by the Parliament from an individual or State. As explored in Chapter Two, this approach is congruent with an interpretation of ‘just terms’ as signifying a measure of compensation.
In apparent conformity with such a view, the orthodox approach to the operation of the Proviso in respect of taxes, fines and forfeitures is that of total exclusion. It is reasoned to the effect that the relationship between the powers necessarily involves an ‘antinomy’15 such that the Proviso’s negative implication must be excluded.
Obviously the primary concern of the orthodox approach is the result whereby the Proviso would render nugatory the tax power by requiring the Commonwealth to return all revenue collected.16
Nonetheless, the orthodox view of the relationship between these powers, being the primary mechanisms by which the property of citizens can become vested in the Commonwealth, raises a number of fundamental contradictions and appears to produce some unusual consequences.
13 5 US 137 (1803). 14 'Communist Party Case' (1951) 83 CLR 1, (Fullagar J). 15 Tape Manufacturers (1993) 176 CLR 480, 508-9. 16 Mutual Pools (1994) 179 CLR 155, 186 (Dawson and Toohey JJ). 231
The Tax Power
Conceptually, the problem with the orthodox model is that of distinguishing an acquisition from a tax. As Dawson and Toohey JJ correctly observed in Mutual Pools:
‘…if money were property for the purposes of s. 51(xxxi), no distinction could be drawn between an acquisition of property and a tax.’17
Similarly, as Heydon J oberseved in ICM Agriculture:
‘…taking private property without compensation is functionally equivalent to fulfilling those purposes by levying specific taxes on the owners of that property…’18
Indeed, in Tape Manufacturers the majority expressed the orthodox view but then went on to suggest that the ‘levy’ imposed, were it not a tax would have been an ‘acquisition of property’ within the terms of the Proviso. Were this holding not of itself contradictory, the majority, perhaps inadvertently, went on to identify that there were no indicia of the law in question that distinguished it as a tax (albeit that it did not comply with s 55) as apart from being an acquisition of property other than on just terms.19 Thus, in this case the law was categorised both as a tax and an acquisition of property and invalid on both grounds.
One might fairly ask how it can be that the powers are mutually exclusive but that it might not be possible to ascertain whether a piece of legislation ought to be characterised as enabled under one or the other.
Another surprising implication of the orthodox approach is that the tax power could be used to circumvent the Proviso. In Nelungaloo, three members of the Court gave implicit recognition to this possibility in taking the view that a tax which reduced the measure of compensation payable for a breach of s 51(xxxi) was likewise invalid;20 quite an astonishing result when one considers the orthodox position that taxes operate entirely outside its scope.
The only way to resolve the contradiction and reconcile the decisions is an approach to the Proviso as a limit on all arbitrary legislative interferences with proprietary interests. In this scenario the Proviso would not undermine the tax power but merely limit Parliament’s power to impose arbitrary taxes.
17 Mutual Pools (1994) 179 CLR 155, 201. 18 ICM Agriculture (2009) 240 CLR 140, 209. 19 Tape Manufacturers (1993) 176 CLR 480, 509. 20 Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495, (Rich, Starke and Dixon JJ). 232
Were the Proviso to be interpreted in this way the problem of distinguishing between an acquisition of property and a tax21 and resolving any ‘incongruity’ would largely disappear because both would be subject to the same limiting criteria being that the laws which impose or effect them must not be arbitrary in any relevant sense. A non-arbitrary legislative interference with property is valid – an arbitrary interference is void. In this way a non- arbitrary legislative taking of money could enjoy a dual characterisation as both a law imposing taxation and an acquisition of property on just terms and the machinery provisions in ss 53-56, 81-83 and the inherent limitations in s 51(ii) itself would operate as normal.
In the same way, a law that ‘did no more than provide that a particular named person was under an obligation to pay to the Commonwealth an amount of money equal to the total value of all his or her property’22 could be characterised as both an ‘arbitrary tax’ and an ‘acquisition of property other than on just terms.’ From this perspective it can be appreciated that each characterisation is a functionally equivalent label for an offence against the principle of generality in respect of a property interest.
A further benefit of this approach is the insight it provides into the Proviso’s relationship to the taxation and other acquisitiory powers.
Though the tax power is already subject to a range of limitations which curtail Parliament’s ability to impose arbitrary taxes, it can nonetheless be seen that if the Commonwealth Parliament could impose entirely arbitrary taxes and penalties it would never need to rely on the s 51(xxxi) power. Indeed, nothing would be advanced by channelling acquisitions through the tax system if arbitrary taxes could be imposed. The Proviso would serve no function beyond dictating the manner and form in which such laws are passed23 and Parliament would have a choice as to whether it would pay compensation or not. It would be mere sloganeering to say that ‘[i]f the Parliament wishes to acquire property belonging to a State or individual, the cost of the acquisition has to be borne by the taxpayers of the Commonwealth and not by the owner of the property.’24
21 Mutual Pools (1994) 179 CLR 155, 198 (Dawson and Toohey JJ); See generally Eric A Kades, 'Drawing the Line Between Taxes and Takings: The Continuous Burdens Principle, and Its Broader Application' (2002) 97 Northwestern University Law Review 189. 22 Tape Manufacturers (1993) 176 CLR 480, 509-510. 23 See Australian Constitution s 55. 24 Mutual Pools (1994) 179 CLR 155, 219. 233
In this way it can be understood that the Proviso cannot provide any greater protection to property interests than the protections established by the limits imposed on the tax and penalty powers. The Parliament can follow the path of least resistance, exploiting the weakest link in the limitations imposed on its legislative competence to take property.
Utlimately, the critical problem with the ‘mutually exclusive’ approach is its inability to logically account for a number of decisions. In a series of cases including Werrin25, Mutual Pools26 and Federal Commissioner of Taxation v Clyne27, there appears to have been created a grey category of laws which, though they vest property in the Commonwealth and are enabled under the tax power, are neither taxes nor acquisitions of property and for that reason are not subject to the limitations on either.
Utilising the proposed approach these apparent paradoxes evaporate. With respect to both Werrin and Mutual Pools it could be argued that the real issue in these cases was not that the tax or acquisition of property effected by the relevant acts’ retrospective operation would have been arbitrary (taking into account the manner in which they dealt with a retrospective interest) but the potential operation of s 55 had they been characterised as a tax. Indeed, while the parties in Mutual Pools agreed that the Refund Act did not impose a retrospective tax this can be seen as a purely arbitrary characterisation chosen only because it suited their arguments.
In Federal Commissioner of Taxation v Clyne28 the validity of the Commonwealth’s provisional tax regime was brought into dispute. The argument for its invalidity, well desribed by Howard, was not an unreasonable one:
The opinion may be ventured that to require the payment of interest on sums of money retained by the Commonwealth against the possibility that a tax liability may arise in the future is by no means self-evidently absurd, and that to decide against such a requirement on the unelaborated basis that taxation is not acquisition is merely arbitrary.’29
In finding the relevant provisions valid, Dixon J (with whom the majority agreed) found that the liability imposed was not in fact a tax but merely an ‘ancillary’ liability.30 However, the
25 (1938) 59 CLR 150 26 (1994) 179 CLR 155 27 (1958) 100 CLR 246. 28 (1958) 100 CLR 246. 29 Colin Howard, Australian Federal Constitutional Law (Lawbook, 2nd ed, 1972), 402. 30 Federal Commissioner of Taxation v Clyne (1958) 100 CLR 246, 260. 234 decision is easily reconcilable with the proposed approach when one considers that the provisional tax regime operated prospectively and did not offende the principle of generality.
The proposed approach also sheds light on the decision in Magrath. In that case it can be seen that a critical issue at play was that the new tax on the bonds operated retrospectively to directly reduce their effective rate of return. The bonds, as a financial instrument, had no inherent value other than their redemption value. As such, the exemption from tax that they promised would have been a primary factor in any investor’s decision to purchase them because it had the effect of increasing their redemption value. It is not at all surprising then that the Commonwealth agreed to honour the promise. Government bonds would not be considered a safe investment were the Parliament in the habit of wiping out their value by imposing a retrospective tax on them. The consequence would be that the Commonwealth would have to offer higher rates of return reflecting the higher risk associated with the investment. Although not relevant to the litigation in those cases, there was nothing to distinguish an acquisition of some portion of the bonds from the enactment of a retrospective tax on them.
In light of these decisions, one is led to the conclusion that for s 51(xxxi) to truly operate as a limit on arbitrary legislative interferences with property it must drag up with it the limits on other acquisitory powers. Indeed, one can see that it already does this by implication in limiting executive powers to take property and in preventing the Parliament from barring tortious claims against the executive which would otherwise circumvent its operation.31
Criminal and Civil Penalties and Forfeitures
Applying this same approach, the Proviso’s scope of operation could be expanded such that it required the grant of rights to natural justice where property-based penalties and civil forfeitures are imposed. Any antinomy between the Proviso and the penalty and forfeiture powers only arises if Parliament is empowered to impose them in such a way that they operate arbitrarily.
The problem of permitting the Parliament to determine the measure of compensation under the Proviso or imposing mandatory property-based punishments is not that an individual right is prejudiced but, rather, that it makes the Parliament a judge in its own cause. Inasmuch as the Parliament ought to be left alone to strike the balance between public and private
31 See [2.9]. 235 interests – when it has a direct financial interest itself in a matter and its purpose is not to raise revenue,32 it might be argued that an independent judicial officer ought to be interposed in the process of determining the measure of a fine or forfeiture. Only then can it be truly said that ‘there is nothing unjust in a provision forfeiting the property of the offender as part of the punishment for the offence.’33
As matters presently stand, the great contradiction and tension between the Proviso and other ‘acquisitory’ powers and the limits placed on them is not their potential to cancel each other out but rather that retrospectivity is one of the key evils against which the Proviso operates while simultaneously the Parliament has the power to enact retrospective taxes34 and criminal penalties.35
4.4 Not so Neat
The main argument advanced in the preceding two chapters is that a significant number of decisions dealing with the Proviso can be reconciled or explained on the basis that the Proviso’s requirement that compensation be paid has been determined by the question of whether or not the acquisition effected by the legislation operates arbitrarily against a holder of property rights, that is, whether the legislation which defeats the interests breaches a tenet of the rule of the law in its minimalist formulation. Thus, no arguments have been advanced that any particular case has been decided wrongly - only that the reasoning adopted could not support the conclusion or that a better explanation was available for the decision reached.
To the extent that it has been argued that a subset of cases exhibit some degree of coherence or semblance of order, such a proposition can be overstated. Both over time and between individual judges widely divergent views can be found as to the proper approach to be taken in interpreting and applying the Proviso. And while some of these differences represent merely
32 Inasmuch as tax liabilities are dealt with by way civil procedure and criminal penalties by way of criminal procedure the two are mutually exclusive at least in a formal sense. 33 R v Smithers; Ex parte McMillan (1982) 152 CLR 477, 488. 34 Ibid, but see Raz, above n 2, 199; ‘Knowledge of at least the general outlines and sometimes even of details of tax law and company law are often important for business plans which will bear· fruit only years later. Stability is essential if people are to be guided by law in their long term decisions.’ The current political debates over changes to negative gearing and the ‘grandfathering’ of capital gains tax exemptions demonstrates the principle rather well; see also Australian Law Reform Commission, Traditional Rights and Freedoms - Encroachments by Commonwealth Laws, Report No 127 (2016), 377- 83. 35 Polyukhovich (1991) 172 CLR 501. 236 differences in terminology others represent substantively conflicting stances as to its role and scope.
A good proportion of what might be called ‘doctrine’ consists of little more than a collection of imprecise pointers which fail to engage with the substantive legal and policy issues which s 51(xxxi) presents. They are called into service when they appear to fit and rejected when they do not produce the desired outcome. The courts wavering position on the place of proportionality as a test of the Proviso’s scope is but one example. Indeed, the numerous dissents in Airservices Australia suggest very deep divisions in the Court over very basic concepts which are likely to arise again. Today’s apparent certainty, on such questions as the scope of the acquisition doctrine, ought to be approached with caution.
Another apparent trend, which defeats attempts to suggest a degree of coherence, is that the High Court consistently rejects both parties’ submissions in reaching its decisions. Very often it can be seen that the Commonwealth’s submissions embody the only logical explanation for a stream of authority and reflect the logically necessary reasons that the Court must adopt in order to reach a decision favourable to it. Despite then finding for the Commonwealth the Court takes its own, largely incoherent path of reasoning to the conclusion. It would seem that the Court’s approach can be characterised as a process whereby it asks whether or not the impugned law ought to be within power and then works backwards to an interpretation of the Proviso which would justify that result. One might say of any decision ‘that there is a proportionality test in operation, but that it is applied with a high level of deference to the judgment of Parliament.’36
Predictability aside, this presents serious challenges for litigants and, arguably, denies them procedural fairness. As Freeman wrote:
One cannot direct an effective argument into a vacuum. Lawyers must be able to experience vicariously the judge's process of reasoning. Adjudication according to established rules and principles enables them to do this: adjudication "in the air" … rob[s[ them of any sense of participation, of real ability to influence the decision.37
Knowing what arguments are likely to carry weight is crucial and explains why, as discussed in the introduction, even QCs find that ‘this is a difficult area of the law in which to present oral
36 Tom Allen, 'The Acquisition of Property on Just Terms' (2000) 22(3) Sydney Law Review 351, 369. 37 M D A Freeman, 'Standards of Adjudication, Judicial Law-Making and Prospective Overruling' (1973) 26 Current Legal Problems 166, 184. 237 submissions’.38 For litigants and legal practitioners alike it really may as well be a question of the ‘vibe’ in many instances.
Another unusual trend is the way in which doctrine has developed not on an incremental, case-by-case basis, but rather in the abstract by way of dicta. Propositions about the Proviso’s scope, of no relevance to the case at hand, come to be applied in a subsequent decision not by way of a process of analogising but by way of bare declaration or recitation. This is particularly evident in respect of the development of the ‘adjustment of competing claims’ test. Another instance is the frequent citing of Mutual Pools for authority as to the scope of an ‘acquisition’, a decision in which the doctrine was not in dispute and which in no sense involved a ‘regulatory taking’.
This phenomenon is in opposition to the ordinary process of common law adjudication, where general principles are ‘…derived from judicial decisions upon particular instances…’.39 This has the consequence that the usual mode of legal argumentation by inductive reasoning cannot be utilised and advocates must resort to stringing together ‘expressions in the cases’40 into an argument which supports their claim. That is not to suggest that the Court has engaged in ‘top down’ reasoning either.41
4.4.1 Tape Manufacturers
A convenient example of a number of these trends is the decision in Tape Manufacturers.42 As discussed in Chapter Two, the case clearly stands out as being at odds with a number of other decisions in terms of the High Court’s approach to the acquisition of negative rights.
In that case Parliament had passed amendments to the Copyright Act 1968 (Cth), which granted to private and domestic users of copyrighted material the right to make copies of copyrighted recordings onto blank tapes.43 The legislation also purported to impose a royalty on vendors of blank tapes with the proceeds being forwarded to a copyright collecting society for distribution to owners of copyrighted works.
38 Transcript of Proceedings, A-G for the NT v Chaffey [2007] HCATrans 203 (16 May 2007) (T I Pauling QC). 39 Roxborough (2001) 208 CLR 516 544 [72] (Gummow J). 40 Transcript of Proceedings, A-G for the NT v Chaffey [2007] HCATrans 203 (16 May 2007) (T I Pauling QC). 41 Roxborough (2001) 208 CLR 516, 544 [73] (Gummow J). 42 See generally Darren Challis, 'Ejecting the Blank Tape Levy: Australian Tape Manufacturers Association Ltd v Commonwealth of Australia' (1994) 16(4) Sydney Law Review 537. 43 Copyright Amendment Act 1989 (Cth). 238
The Court made a unanimous finding to the effect that the amending Act did not effect an acquisition of the copyright owners’ property. Now, while the decision can be explained on public interest grounds or that the acquisition effected was only a de minimis44 interference with the rights in dispute, a straight doctrinal explanation, that there was no ‘acquisition of property’45 puts the decision at odds with a long stream of other authority and proceeds on no intelligible conception or theory of property yet developed.
To draw an analogy with the subsequent decision in JT International, it would be as if the plain packaging legislation carried with it an exemption such that it granted to a third party or the Commonwealth a right such that the third party or the Commonwealth could sell tobacco using a tobacco company’s intellectual property on its own products. That is, the legislative assumption and transfer to the Commonwealth or a third party a copyright owner’s negative right to prevent others from making use of copyrighted works would not constitute an acquisition of property.
Inasmuch as the amendments to the Copyright Act 1968 (Cth) were designed to deal with the widespread practice of private and domestic taping of sound recordings the scheme clearly had merit and the Court accepted as much. But one would not expect the merits of the scheme to have any bearing on the question of whether or not there was an ‘acquisition of property’. However, in a discussion of Tape Manufacturers in Phonographic, Crennan and Kiefel JJ explained that the conclusion that s 51(xxxi) was not attracted in that case was because:
First, there is a discernible public interest, analogous to the public interest in familiar fair dealing provisions, in permitting incidental use of copyright material in respect of new technology for private or domestic purposes. Secondly, such use is a use which a copyright owner could not realistically control or practically license. The first point readily fits within the recognition that a degree of impairment to a property right may be insufficient to attract the operation of s 51(xxxi). The second point is relevant to testing whether what is acquired is ‘proprietary in nature’; it is also relevant because the extent of the
44 de minimis non curat lex ("The law does not concern itself with trifles"); Williams v R (1978) 140 CLR 591. 45 JT International (2012) 250 CLR 1, 135 [59], Gummow J expressed the view that; ‘[i]n Australian Tape Manufacturers Association Ltd v The Commonwealth, the Court unanimously upheld the validity of a law which provided that copyright in a published sound recording was not infringed by the making on private premises of a copy of the recording on blank tape for the private and domestic use of the maker. This result was reached on the basis that, although the law reduced the content of the exclusive rights given to copyright owners, there was no “acquisition of property.”’ 239
disadvantage to a property owner may be a material matter in deciding whether just terms have been, or should have been, provided.46
As McHugh J observed in Tape Manufacturers itself; ‘for practical purposes the right was worthless.’47 Though Crennan and Kiefel JJ are no doubt correct in their characterisation of the decision being that the need to provide ‘just terms’ was the primary issue and not whether there was an ‘acquisition of property,’ the case itself exhibits a profound ontological confusion or blurring.
Though it would have made no difference to the outcome, as between JT international and Tape Manufacturers there is a clear misalignment in the approaches taken by the Court in applying the Proviso. However, to overrule a doctrine or clarify an approach adopted in a particular case it is necessary to have some firm grasp of the doctrine or approach being overruled or clarified and the principle for which a case stands - something which is simply not possible when dealing with many s 51(xxxi) cases. 48
Tape Manufacturers also stands as a central example of a case where doctrine was developed by way of abstract dicta (and the consequences of doing so)49 with the Court making a range of pronouncements on the ‘adjustment of competing claims test’ and the Proviso’s operation in respect of laws that offend against the principle of generality.
4.5 Problem Cases
Inasmuch as the previous chapters have critiqued ‘problematic reasoning’ but not ‘problematic decisions’ it would be remiss not to bring into focus the decision in Schmidt. The case defies any attempt at a rationalisation on grounds that the confiscation of the plaintiffs’ property was not arbitrary50 and of all the High Court’s s 51(xxxi) jurisprudence it gives most offence to modern sensibilities and understandings of the rule of law.
In Schmidt the assets and business of a German wool trading company had, during the war, been placed under the control of an appointed person under the Trading with the Enemy Act
46 Phonographic (2012) 246 CLR 561, 595 [111]. 47 Tape Manufacturers (1993) 176 CLR 480, 531. 48 Allen, 'The Acquisition of Property on Just Terms', above n 42, 379. 49 In Phonographic the Commonwealth not unreasonably submitted that Tape Manufacturers provided a full answer to the appellant’s case. 50 Murray J Raff, 'Planning Law and Compulsory Acquisition in Australia' in Tsuyoshi Kotaka, David L Callies (eds) Taking Land: Compulsory Purchase and Regulation in Asian-Pacific Countries (University of Hawai'i Press, 2002) 27, 50-55. 240
1939-1957 (Cth) (‘the Act’) so that none of the property of the firm would pass directly or indirectly to enemy subjects. The assets of the business were liquidated and the proceeds paid into Court. Some four months after hostilities had ceased, amendments made to the Act had the effect of vesting the money paid into court in a ‘Controller of Enemy Property’ who was to pay the money into an ‘Enemy Subjects Trust Account.’ The account was to be charged against the Commonwealth’s reparation share in accordance with Article 6 of the Agreement on Reparation from Germany. The descendants of the owners of the company who had a testamentary interest in the company brought the action.
Thus, the effect of the amendment was to strip the assets of German civilians and vest them in the Commonwealth for the use and service of the Crown.
The tack adopted by both Dixon CJ and Taylor J in their judgments was to demonstrate that - the Proviso aside - the seizure of civilians’ property was undeniably within the defence and external affairs powers, that to Provide compensation for such seizures was inconsistent with the exercise of such powers and that therefore the Proviso’s operation was excluded.
Having established that such laws were within the Commonwealth’s ordinary legislative competence the sole explanation proffered by Dixon CJ as to why the Proviso did not operate to prevent the uncompensated acquisition of the plaintiff’s property was that ‘[t[he whole subject is altogether outside the scope of s 51 (xxxi).’51 As his Honour explained:
If first we put aside par. (xxxi) of s 51 altogether and consider on that footing whether s 13C and s 13D are within the subjects of the legislative power of the Parliament the answer would seem to be clear enough that the provisions do lie within the subjects of Commonwealth legislative power.52
Taylor J similarly held that compensation for the acquisition by the Commonwealth for the seizure of their property would be ‘the height of absurdity’.53
The effect of their Honours’ judgments was to read s 51(xxxi) out of the Constitution and deny its negative implication. In line with Gleeson CJ’s criticism of the approach in Theophanous their Honours ‘stated a conclusion rather than a reason for the conclusion’.54
51 A-G (Cth) v Schmidt (1961) 105 CLR 361, 373. 52 Ibid, 370. 53 Ibid, 377. 54 Theophanous v Commonwealth (2006) 225 CLR 101, 115. 241
To paraphrase Howard’s criticism of Dixon J’s judgment in Clyne, that s 51(xxxi) might deny the Parliament the power to seize arbitrarily people’s property is by no means self-evidently absurd, and that to decide against such a requirement on the unelaborated basis that such seizures would otherwise be within power is merely arbitrary.55
The decision also points to the possible use of the external affairs power as a mechanism by which the Proviso or even ss 92 or 80 could be circumvented. On one reading of their Honour’s judgments the Commonwealth Parliament could avoid the operation of the Proviso by entering into a treaty with another country under which Australia agreed to acquire the property of persons or the states without providing just terms. It is interesting to note, however, that the treaty itself provided that ‘the right to seize, retain, liquidate or otherwise dispose of property’ … ’should be exercised in accordance with the laws of the Allied power concerned.’
The decision is congruent only with the political prejudices of the day. Alongside measures including forced internment, the legislation operated against a group with no political or economic power: the citizens and offspring of a vanquished power. In this sense it gave immediate normative operation to a purposive interpretation of the Proviso as ensuring political stability by denying its protection to those with no capacity to undermine it.
4.6 Rhetoric vs. Reality
The rhetoric employed by the various judges of the High Court suggests that s 51(xxxi) has a wide scope of operation and has been and is interpreted liberally. It is described as ‘a constitutional guarantee, which was designed to protect citizens’ and ‘a very great constitutional safeguard.’56 Many cases and a great deal of commentary begin by reciting these statements.
However, there is a very great gap between the rhetoric and the reality. Section 51(xxxi) has not been interpreted in such a way as to allow it a wide scope of operation and the High Court’s rejection of any kind of regulatory takings doctrine stands in stark contrast to the approach taken by other constitutional courts around the world which have tackled the
55 ‘The opinion may be ventured that to require the payment of interest on sums of money retained by the Commonwealth against the possibility that a tax liability may arise in the future is by no means self- evidently absurd, and that to decide against such a requirement on the unelaborated basis that taxation is not acquisition is merely arbitrary.’ Howard, above n 33, 402. 56 Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397, 402 (Barwick J). 242 problem.57 Even the proposition that the Court has taken a wide view of the concept of ‘property’ is misleading when one takes stock of the numerous other doctrines which narrow the types of interest that fall with the Proviso’s scope.58
These issues aside, there are a range of areas in which the Proviso could be given some scope of operation so as to limit the Parliament’s capacity to interfere arbitrarily with citizens’ and States’ property interests. On a number of occasions the High Court has declined the opportunity to allow the Proviso to fulfil its potential in this respect.
The rhetoric is apt to mislead students of the law and litigants alike and the opacity of the accreted doctrine perhaps conceals the reality from view.59
57 See generally Kevin Gray, 'Can Environmental Regulation Constitute a Taking of Property at Common Law?' (2007) 24 Environmental and Planning Law Journal 161. 58 Howard, Australian Federal Constitutional Law, above n 33, 394. 59 Australian Law Reform Commission, Traditional Rights and Freedoms - Encroachments by Commonwealth Laws, Report No 127 (2016), 477-8. 243
5 Conclusion
5.1 Introduction
The project undertaken in this thesis has been twofold. Firstly, the existing cases and doctrines dealing with s 51(xxxi) were reviewed and their various shortfallings identified and critiqued. Secondly, a positive argument was made that, despite all the problems identified, a good proportion of cases can be reconciled. Woven throughout the analysis was an exploration of the relevant historical, ideological and theoretical issues which have informed the debate or support particular doctrinal approaches.
This concluding chapter summarises the key critiques made and the reasons why various problems have arisen. Drawing together the positive arguments in previous chapters, the doctrinal model that emerges is presented and analysed for its ability to account for the outcomes in a majority of cases.
Having summarised the conceptual framework, the chapter then summarises the various proposals to expand the Proviso’s operation that have not received majority support in the High Court. A consideration of various boundary points brings into further relief the workings of the proposed model.
5.2 The Negative Critique
Without a doubt, the Proviso throws up some difficult and complex questions. The Proviso is not obviously grounded in any particular ideological position or conception of property, its terms are vague and its intended scope of operation unclear. The approaches adopted by the High Court over the past century and more have failed to resolve many of these ambiguities.
The analysis undertaken in this thesis and by other commentators clearly demonstrates that, if anything, the reasoning found in much of the case law lacks a degree of logical rigour. In particular, the case law as a whole reveals that the accreted doctrines are not applied in a logically coherent or consistent fashion. Key examples include:
244
a) A persistent ‘moving of the goal posts’ whereby the judiciary engages in a process of reformulating an apparently stable doctrine to generate the desired outcome in the case before them;1 b) Doctrine developed in one case being subsequently applied to a non-analogous situation; c) The citing of doctrine as a mere label to declare a result rather than as a mode of explanation or justification.2
Searching for an explanation for these problems, several candidates emerge.
One significant factor is that, overall, the accreted doctrines are not grounded in any constitutional or legal norm, ideal or conceptual model. Where established doctrinal approaches are utilised, such as doctrines of characterisation, they prove to be ill adapted to meet the challenging questions the Proviso presents and we find them being distorted into unrecognisable shapes or their logical coherence undermined.3
Various theoretical justifications provided by the High Court have proven to be as unstable and as likely to shift as the shape of the doctrines themselves. When some higher level theorising is encountered in the judgments themselves, it often does not seriously inform the doctrine and the theorising itself is incomplete or lacks integration. For instance, the notion that the Proviso exists in part to funnel acquisitions through the tax system is without substance in the absence of a coherent and comprehensive theory of the Proviso’s relationship to the tax power. In a similar vein, the ‘equality of burden’ thesis sits uneasily within Australia’s constitutional landscape on many levels.4 In other instances one finds a significant mismatch between theory and doctrine. A good example is Heydon J’s citing of Bentham’s theory of property in ICM Agriculture5 to justify the applicability of the Proviso to what in that case was regulatory property. As explored in this thesis, Bentham’s writings do not necessarily support such an approach and some interpretations would point to the opposite conclusion.
The result in many instances is that the judiciary’s theorising reads as mere rhetoric and provides no solid framework capable of guiding the decisions of lower courts or subsequent High Court cases.
1 [1.8.4];[3.3.8.2]. 2 [1.8.1]. 3 [1.3];[1.5]. 4 [4.2]. 5 (2009) 240 CLR 140, 211. 245
A further significant shortcoming of the existing doctrines is that very often the confusion that they generate actively distracts attention away from the key constitutional issues at stake in a case with the result that the most important issues are not identified or addressed. The doctrines almost entirely fail to engage with the Proviso’s active interactions with other constitutional doctrines and provisions. A good proportion of the existing doctrines have no purchase or analytic value in dealing with retrospective interests or the manner in which the Proviso interacts or interferes with doctrines surrounding the separation of powers.
These various shortcomings lead to the result that, in many cases, the reasons provided cannot explain or account for the outcome. To find some consistent theme (by way of outcomes) one must cast the reasons aside to a certain extent and look for clues which reveal the intuitions on which the Court was acting.
In two separate decisions, Kirby J addressed some of the criticisms that had been levelled at the s 51(xxxi) doctrines developed by the High Court. While acknowledging various problems, his Honour ultimately sought to defend their opacity. As his Honour stated in Leask v Commonwealth:6
‘The verbal tests afforded by the Court's past authority are not precise enough to command a single, simple solution. The most that they can offer are techniques by which to test the impugned law. They provide expressions which point the decision-maker in the direction of some of the considerations which, in the past, have been found to be useful for the ultimate judgment which has to be made.’ 7
Again, in Chaffey his Honour observed:
I realise that expressions such as “inherently susceptible to variation” or “inherently provisional”, like the equivalent phrase of disqualification “inherently incongruous” (74), are not wholly satisfactory. They postulate as self-evident a disqualifying feature that needs to be established convincingly when it is challenged. Moreover, the feature is assumed to act as a disqualification from the “just terms” entitlement without necessarily explaining why it has that effect. However, this may be another illustration of the fact that, in legal reasoning and in constitutional elaboration especially, a point may ultimately be reached where the decision is sustained by considerations of impression and judgment. Verbal explanations, in such instances, can only go so far. Expressions such as “inherently
6 (1996) 187 CLR 579. 7 Leask v Commonwealth (1996) 187 CLR 579, 636-7. 246
variable” or “inherently incongruous” may still be useful for reaching the judgment necessary to decision-making.8
Kirby J’s denial that the judiciary ought to be providing clear reasons for their decisions is somewhat remarkable even as it acknowledges the practical challenge of articulating judicial intuitions. In any event, the more important rebuttal is that the case law demonstrates not the utility of such vague doctrines but their disutility: generating confusion, distracting from, and failing to engage with, the substantive and fundamental issues being litigated.
Section 51(xxxi) litigation generates a whole catalogue of substantive and fundamental issues. Whether dealt with expressly or not, the Court, by its decisions, is implicitly making choices and providing answers to these issues and in some way reconciling the inherent historical and ideological tensions within it. The issues are not avoided simply because they are not directly addressed.
5.3 The Emergent Model
In Chapter 2 it was argued that an objective expectation-based approach drawing on the principle of non-retrospectivity, when coupled with the principle of generality, can explain a good proportion of the case law dealing with s 51(xxxi).
An expectation-based model of property has a sound theoretical foundation and expectation- based doctrines are well developed in several areas of law. An expectation-based approach is utilised in US doctrines dealing with the Fifth Amendment.9 This thesis has sought to demonstrate that such doctrines are also very useful in modelling many s 51(xxxi) disputes. They do not provide a single solution but rather offer a range of doctrinal possibilities that nonetheless all retain a purposive and theoretical clarity. The question of how such a doctrine might be operating in the context of s 51(xxxi) ultimately comes down to a question of the detail, in particular, whether subjective elements are incorporated into the approach.
At its core, the use of an expectation-based doctrine within the context of s 51(xxxi) addresses the issue of what types of interest constitute ‘compensable property’.
8 A-G (NT) v Chaffey (2007) 231 CLR 651, 669. 9 Daniel R Mandelker, 'Investment-Backed Expectations in Taking Law' (1995) 27 Urban Lawyer 215. 247
An expectation-based approach does not determine the ‘acquisition’ issue, that is, whether or not compensable property has been transferred to the Commonwealth. The recurring conflation of these two distinct concepts has been critiqued at several points in this thesis. The existing acquisition doctrine operates as a distinct and additional test with its own exclusionary operation. It does not interfere with or cut across an expectation-based test for the existence of compensable property. Even so, it can be observed that a large proportion of cases can be explained by resolving the question of the existence of compensable property and only in very few need resort be had to the transfer issue.10
From an analysis of the existing case law, it seems clear that regulatory property, being statute-based property which, by its terms, is substantively defeasible by executive action, does not constitute compensable property.11 Nor do legally undefined freedoms outside the strict confines of a negative right.12 In both instances the result appears to come about because such interests are not capable of giving rise to an objectively ascertainable expectation of stability. Of course, utilising some other approach, such as that developed by Michelman, might have brought about a different result.
Another key element of the proposed model is concerned with the generality of the impugned law. It has been argued that another key feature of the Proviso’s archetypal scope of operation, being an acquisition of land by the Commonwealth, is that it singles out an individual or narrow community of proprietors and nullifies their legal interests in respect of a proprietary entitlement. It thereby imposes an unequal legal burden or positive discrimination infringing the principle of equality before the law. It seems clear that, in most circumstances, retrospective legislation of this type, that does not also provide compensation, would infringe s 51(xxxi) and be void. The corollary is that legislation which operates prospectively, indiscriminately and applies to all persons is unlikely to infringe the Proviso.
In line with Bentham’s writing on property, a primary argument advanced in this thesis was that property is, in an important sense, innately tied up with the public’s perceptions of the stability of their economic interests. High Court decisions, whether expressly dealing with these issues or not, have real-world impacts in terms of how the community perceives the
10 For eg Ludeke (1985) 159 CLR 636. 11 ICM Agriculture (2009) 240 CLR 140; Davey (1993) 47 FCR 151; A-G (NT) v Chaffey (2007) 231 CLR 651. 12 JT International (2012) 250 CLR 1; Waterhouse v Minister of the Arts and Territories (1993) 43 FCR 175. 248 stability of their property interests. One can point to the consequences of the decision in Peverill13 in particular.14 Again, the issues are not avoided simply because they are not addressed in High Court judgments. As Kirby J rightly observed in Commonwealth v WMC Resources Ltd, ‘investors will draw their inferences.’15
5.3.1 The Exceptions
For all the elegant simplicity of an objective expectation-based approach to the question of what constitutes ‘compensable property’, it cannot account for the outcomes in a significant body of the case law. The analysis in Chapter 2 in particular identified a series of other threshold issues and ‘exceptions’ which, in a principled way, must shape and define the Proviso’s scope.
5.3.1.1 Commonwealth / State Acquisitions
As explored in Chapter 1, it is hard to avoid the conclusion that the High Court treats acquisitions of property by the Commonwealth from the States in a very different way than it does acquisitions from private individuals, at least where un-alienated and unimproved Crown land is in issue.16 Such acquisitions have no bearing on the purposive considerations underpinning the protection of a private individual’s property entitlements. To the extent that the Proviso is intended to provide some protection to the States, it is fitting that in such circumstances a State/Commonwealth acquisition doctrine appears to take on the character of the implied prohibition against the Commonwealth exercising its legislative powers to impose ‘some special burden or disability upon a State or inhibit or impair … its capacity to function.’17
As a question going to the fundamental character of the Federal system and its distribution of powers such an exception or threshold qualification does not require further justification even if reasonable minds might differ on where the lines ought to be drawn.
13 (1994) 179 CLR 226. 14 [3.4.5]. 15 WMC Resources (1998) 194 CLR 1, 102 [259]; see also ICM Agriculture (2009) 240 CLR 140, 209 (Heydon J). 16 'Tasmanian Dam Case' (1983) 158 CLR 1; Commonwealth v Western Australia (1999) 196 CLR 392. 17 Koowarta v Bjelke-Petersen (1982) 153 CLR 168, 216; Austin v The Commonwealth (2003) 215 CLR 185; 'Tasmanian Dam Case' (1983) 158 CLR 1. 249
5.3.1.2 Retrospective interests
In Chapters 2 and 3, the thesis considered in some detail how the High Court might, and does in fact, approach the question of the Proviso’s interaction with retrospective interests. With one exception18 the High Court has not addressed the issue in these terms. The cases in which they arise present as some of the most problematic s 51(xxxi) decisions: the main reason being that existing doctrines are not adapted to tackle the specific set of problems to which retrospective interests give rise.
Retrospective interests raise fundamental questions surrounding both the nature of judicial power and the principle of legal certainty. Accordingly, both principle and logic demand that they be given some differential treatment.
The solution proposed, which accords both with the treatment of retrospective interests in other areas of the law and produces outcomes in conformity with relevant s 51(xxxi) decisions, is the adoption of a subjective expectation-based approach to the question of quantum of compensation.
Taking an objective assessment of the reasonable expectations the law is capable of giving rise to as a cap on eligibility and quantum, a subjective assessment of expectation and reliance could be utilised as a mechanism to limit either or both. This would ensure that legislation which acquires retrospective interests that would not ordinarily be within the Proviso’s scope is excluded while remedies are limited to those litigants who can demonstrate some degree of reliance on the retrospective interest and who suffer detriment stemming from that reliance.
In the context of s 51(xxxi), the estoppel would be assessed against the promise made by the law as ultimately found by the appellate court and not any assumed state of the law for the reason that a retrospective interest can only exist by way of the retrospective ruling.
Thus, the operation of the Proviso to such interests could be resolved by way of a more nuanced approach to the question of what just terms requires in such circumstances. Legislation that provides for more limited or focused remedies or which takes into account the individual circumstances of a plaintiff would satisfy the requirement of just terms.
Formulated as a doctrine that places a limit on legislative power, one would say that Commonwealth legislation which acquires property in the nature of a retrospective interest
18 Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513, 651-2 (Kirby J). 250 and operates in breach of the principle of generality will be valid only where just terms are provided to the person being a provision made for compensation where a person has relied to their detriment on the retrospective interest
5.3.1.3 Restitutionary actions
Prima facie, ordinary restitutionary actions need not be given any differential operation in terms of their interaction with the Proviso. Difficulties arise, however, with restitutionary actions held against the Commonwealth which arise by way of the retrospective operation of a judicial decision. Such actions are of particular interest for the reason that the issues which have arisen in that context map almost precisely onto the issues which have arisen in the context of the interaction between s 51(xxxi) and retrospective interests. In both instances there emerges a strong division between the use of either objective or subjective approaches.
Furthermore, in the context of restitutionary actions against the Commonwealth, s 51(xxxi) may itself have some role to play. Again, one sees parallel doctrines operating in both spheres with voluntary payment and estoppel-type doctrines operating to deny a remedy. The result is that any role the Proviso may play in protecting from legislative defeat claims for restitution of retrospectively ultra vires exactions is rather limited.
Thus, the difficulties the Proviso encounters in dealing with retrospective interests shed some light on many of the difficulties courts have faced in formulating a restitutionary doctrine which deals with these types of interests. On the other side of the ledger, the relevant rule of law issues are made explicit in decisions dealing with restitution for ultra vires exactions;19 something which is missing in the relevant decisions dealing with the Proviso.
The conclusion reached was that the Proviso’s interaction with restitutionary actions of this nature may relieve restitutionary doctrines of the work of avoiding fiscal chaos and imperilling receipts such that courts need not pre-emptively intervene and deny claims where the legislature is content for such actions to succeed.
19 Royal Insurance (1994) 182 CLR 51; Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] 1 AC 70 .
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5.3.1.4 Interactions and Interferences with the Separation of Powers
The numerous circumstances in which the Proviso potentially interferes or interacts with the separation of powers perhaps represent the unintended or unforeseen consequences of its operation. In a particular case, such potentially significant consequences of necessity generate a basic threshold issue: can the Proviso be permitted to operate if it undermines in some fundamental way the ordinary distribution of powers between the various organs of government? In other circumstances, the Proviso’s operation can act to buttress the separation of powers and its application may be enlivened or extended.
One cannot make blanket assumptions about how a court will deal with these novel types of interactions and, if properly ventilated before a court, require determination in light of the complex issues that arise.
Five distinct types of interference or interaction with the ordinary operation of the separation of powers were identified and analysed in this thesis.
5.3.1.4.1 Executive v Parliament - Contract
The first interference considered was the circumstance whereby a contract entered into by the executive has the effect of limiting the Commonwealth Parliament’s legislative competence.
In the ordinary course of the Commonwealth executive entering into a contract to purchase land, it can be appreciated that the Commonwealth’s legislative competence is thereby limited. That is so because, by implication, the Proviso then prevents the Parliament from legislatively extinguishing the entitlement to payment under the contract because such legislation would be construed as a circuitous means of acquiring the asset without compensation. Such a result appears uncontroversial.
Similarly, contracts entered into by the executive for the purchase of property oblige the Parliament to make appropriations to meet contractual obligations thereby interfering with the Parliament’s exclusive power to authorise appropriations from the Treasury. Again, this result appears to be an uncontroversial, if a somewhat unexplored, consequence of the Proviso’s operation.
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By way of contrast, a promise in a contract by the executive not to levy a tax in the future was deemed unenforceable for the reason that it was inconsistent with the separation of powers, albeit that the Proviso was not invoked to support the alternative argument.20
5.3.1.4.2 Parliament v Executive
A second instance whereby the Proviso can interfere with the distribution of powers between the various organs of government is where legislative action purports to limit executive powers.
Circumstances may arise in which a legislatively enabled proprietary interest may be fundamentally inconsistent with the executive’s exclusive power to negotiate and enter into treaties, cede or acquire territory or perform some other role reserved to the Crown’s prerogative. Such an interest, to the extent that it is granted indefeasibly by the Parliament or otherwise, might be ultra vires and voided (or voidable) on that basis and so exclude the operation of s 51(xxxi).
5.3.1.4.3 Judiciary v Executive
A third instance of the Proviso interfering with the distribution of powers between the various organs of government can occur when judicial decisions impact upon executive decision making.
As discussed at several points in the thesis, in the context of retrospective interests and liabilities the Proviso potentially operates in a very unusual way. Rather than merely voiding the acquisition, the striking down of the curative legislation by the Courts would have the effect that the Commonwealth could not escape the relevant liability and the executive would be required to expend funds to meet the relevant obligation; it would be obliged to complete the transaction.
Such consequences give rise to the spectre of fiscal and/or legal chaos and, be it a function of judicial deference or the real or even mere possibility of the Commonwealth being bankrupted by an open ‘floodgate’ of such claims, the Proviso’s operation is likely to be limited or excluded. Being matters on which reasonable minds may differ and in light of the evidential difficulties which arise, the laying down of any firm doctrines dealing with the matter is unlikely if not impossible.
20 Magrath (1944) 69 CLR 156. 253
5.3.1.4.4 Executive v Judiciary
Though perhaps of only historical interest now, up until the decisions in Georgiadis21 and Mewett22 the operation of the Proviso in the context of tortious claims against the Commonwealth was determined by reference to the principle that the King could do no wrong and could not be sued in his own courts; that is, Crown immunity from suit. A seismic shift in the High Court’s stance regarding the subjection of the executive to the curial process was required such that the Proviso could operate to defeat attempts by the Commonwealth Parliament to deny liability for the tortious actions of executive officers.
5.3.1.4.5 Parliament v Judiciary
The last of the threshold issues considered in this thesis deals with the situation whereby legislation trespasses on the judicial function.
At an uncontroversial level, it remains trite law that any attempt to oust the judicial function to review the quantum of compensation owed for an acquisition would infringe s 51(xxxi).23
Further, it is already the case that legislation which adjudges a specific person or specific persons guilty of an offence constituted by past conduct and imposes punishment in respect of that offence is invalid on the basis that it usurps the judicial function.24 It is perhaps a moot point whether the Proviso’s scope overlaps with this prohibition.
Though not a well-developed area of doctrine, it appears that the Proviso works in conjunction with and extends this protection into the civil sphere.25
5.3.2 Predictive Power
Excluding the decision in Teori Tao which has been explicitly over-ruled, of the not insignificant body of case law touching on the Proviso’s scope only the decision in Schmidt26 cannot be explained by the proposed model. The decision in Schmidt was considered in the previous
21 (1994) 179 CLR 297. 22 Commonwealth v Mewett (1997) 191 CLR 471. 23 ‘Bank Nationalisation Case’ (1948) 76 CLR 1; 'Tasmanian Dam Case' (1983) 158 CLR 1; Commonwealth v Western Australia (1999) 196 CLR 392, 463 (Kirby J), 491 (Callinan J); Wurridjal v Commonwealth (2009) 237 CLR 309. 24 Polyukhovich (1991) 172 CLR 501, 535. 25 Tape Manufacturers (1993) 176 CLR 480, 509-510. 26 A-G (Cth) v Schmidt (1961) 105 CLR 361. 254 chapter and stands as an example of a decision congruent only with the political prejudices of the day.
5.4 A Rule of Law Protection?
The primary question posed in this thesis is whether the Proviso’s protective scope can be coherently described as a function of whether or not a given acquisition operates arbitrarily or breaches various tenets of the rule of law. That is, whether the Proviso, at its core, is a rule of law protection.
In light of the proposed model and its ability to account for the overwhelming majority of decisions it is suggested that, in practice, the Proviso has been operating as a rule of law protection; its primary scope of operation is determined by an assessment, intuitive or otherwise, of the arbitrariness of the acquisition in question. Thus, it could be said that ‘just terms’ has been operating so as to condition the validity of legislation which acquires property in an arbitrary or capricious manner on the inclusion of a mechanism for the payment of compensation. A breach of both the principles of non-retrospectivity and generality comprise the primary signifiers of arbitrariness.
In light of this analysis, it follows that in most instances the Proviso’s scope has not been determined by its interaction with other heads of power and that most exceptions to its operation come about by reference to the exercise of Commonwealth executive or judicial power or by other constitutional implications or provisions outside of s 51. In particular, the separation of powers was identified as a key element in the balance requiring principled modifications to the Proviso’s scope.
Such an approach can provide a sensible answer to the questions: from what is the Proviso protecting private individuals and States and why, as discussed below, economic harm or loss is not and ought not to be a criterion determining the scope of an ‘acquisition.’ Taken as a whole, these principles offer a model to approach a dispute or resolve a particular issue. The approach identifies with a high degree of clarity the sensible and logically coherent range of doctrinal possibilities and formulae.
Of course, utilising such high-level principles as a guide to the Proviso’s interpretation frequently does not provide a single simple solution. Rather, in many instances, such an approach presents a clash between two distinct rule of law principles or a clash between rule
255 of law principles and democratic principles. For example, retrospective interests present a clash between the principle of ‘rule by law’ which underpins the retrospectivity of judicial decisions, as against the principle of legal certainty which prima facie mandates the making of legal rules only prospectively. In other circumstances the principles of legal certainty and generality clash with other limits on arbitrary government such as the separation of powers doctrine.
Nonetheless, such an approach steers a principled middle path between an absolutist imprescriptible right of property and a majoritarian ‘public good’ approach27 and, in the Australian context at least, sidesteps the Proviso’s political dimensions so studiously avoided by the High Court.
5.5 Possible Expansions
As Waldron correctly observes in The Rule of Law and the Measure of Property, the use of ‘rule of law’ principles as a guide to the protection property rights brings with it a series of problematic and difficult to ignore implications. As Waldron writes:
…if we are really to pay attention to the security of expectation that individuals need in the autonomous conduct of their lives, if that is the substantive direction in which the formal requirements of the Rule of Law steer us, then we have to think also about the guarantees that are associated with these new forms of "property" too and that means guarantees in relation to public as well as private provision, or guarantees in relation to the stability of public licensing and regulation.28
…a special connection between the Rule of Law and private property via the stabilization and securing of expectation, … seems to prove a lot more than the defenders of private property want, since it directs our attention to a myriad of areas in which this security is important, not all of which involve private ownership as it is ordinarily conceived.29
These implications present as a discrete set of potential expansions to the Proviso’s scope, being areas which, not coincidentally, have received only minority support in the High Court or
27 Michael J DeMoor, 'Aristotle and Hegel on Private Property and the Common Good' (Paper presented at Canadian Political Science Association 82nd Annual Conference, Concordia University, 2 June 2010). 28 Jeremy Waldron, The Rule of Law and the Measure of Property: The 2011 Hamlyn Lectures (Cambridge University Press, 2012), 64-5. 29 Ibid 65. 256 have only been advanced by commentators or in argument before the Courts. Six of these areas were explored in this thesis:
• Constitutionalisation of criminal procedure • Exclusion of power to impose retrospective taxation • Regulatory property • Regulatory takings • Protection of profit • Reliance interests
5.5.1 Constitutionalisation of Criminal Procedure
Viewed as a limit on arbitrary interferences with property rights, a possible application of the Proviso arises in the criminal sphere involving property-based forfeitures and penalties.
An implication of subjecting such measures to an entrenched test of arbitrariness might be the constitutionalisation of the procedures by which an offender is convicted (on indictment or otherwise) and subsequently sentenced . A further implication is that retrospective criminal laws imposing property-based penalties or mandatory minimum proprietary penalties which exclude judicial discretion upon which procedural fairness in sentencing hearings ought to operate could fall foul of the Proviso.
There is some asymmetry in the result that a person whose property is being forcibly acquired cannot be forced to accept the Parliament’s judgment as to the appropriate measure of compensation but an offender must accept its judgment as to the measure of punishment. In both instances the Commonwealth has a vested financial interest in the outcome. The same considerations apply to the grant or exclusion of procedural rights in matters involving criminal forfeitures that operate not against the offender themselves but against third parties.
This argument can be extended beyond a mere procedural protection. However, as Waldron rightly argues:
… it will not do to turn the tables and say that property rights constrain the development of the criminal law and place limits on what uses of material goods the legislature may criminalize.30
30 Waldron, above n 39, 70. 257
Novel criminal laws which diminish or abolish property rights will not typically offend the principle of generality where procedural protections are otherwise in place and so, under this approach, would not enliven the Proviso’s operation. Questions going to the fairness or harshness of a given penalty are also unlikely to trespass on such principles.
5.5.2 Retrospective taxation
Inasmuch as retrospectivity appears to be one of the primary evils against which the Proviso is operating and that, in large measure, it is impossible to differentiate between an acquisition of property and the imposition of a tax, the High Court’s current position that the Commonwealth Parliament has power to enact narrowly targeted retrospective taxes, exhibits a significant degree of incongruity. The numerous existing limits on the federal tax power have the result that its operation is otherwise in harmony with the Proviso’s operation under the proposed model.
5.5.3 Regulatory Property
The extension of the Proviso to protect regulatory property, being statute-based property which, by its terms, is substantively defeasible by executive action, is also, to a limited degree, implied by the use of rule of law principles as a mode of protecting property rights.
The problems with regulatory interests are twofold. In short, such interests offer no promise of stability and yet the Parliament expects and anticipates that individuals will rely on them. In many cases Parliament forces individuals to rely on such interests in order to carry on their ordinary business activities as if they did have some degree of stability. The withdrawal of such interests by the Commonwealth appears to visit a tangible injustice on the holders of the interest. This is precisely where, in other areas of the law, a Waltons Stores (Interstate) Ltd v Maher31 type estoppel would step in and provide a remedy.
The retort to such an expansion is to ask why ought the Proviso be stepping in and providing that remedy. The issues thrown up by transferable licensing schemes are not easily solved by reference to traditional notions of property and the Proviso is not easily moulded to address issues associated with executive discretions. Such schemes and their repeal typically infringe neither the principle of generality nor retrospectivity; if anything the issues they raise go to the separation of powers. Furthermore, to bring such interests within the scope of s 51(xxxi) would be to make the Commonwealth an insurer against a risk that investors voluntarily undertake.
31 (1988) 164 CLR 387. 258
A more expansive conception of arbitrariness would need to be adopted were the Proviso to protect regulatory property, one that potentially trespasses into merits based assessments of the harshness or otherwise of the operation of the impugned law.
5.5.4 Regulatory Takings
The expansion of the Proviso’s scope to include interests outside of an objectively ascertained expectation-based approach, what in a US context would be called a ‘regulatory taking,’ has been repeatedly rejected by the High Court despite a number of notable minority voices.
Michelman’s approach extends the definition of compensable property so as to go beyond the strict confines of the interest actually granted to include rights that a hypothetical ‘reasonable person’ might expect of their property entitlements. Strictly speaking, this approach does not result in the protection of regulatory property for the reason that express grounds of defeasibility could not cultivate an expectation of stability in a reasonable person.
The strongest argument in favour of Michelman’s approach is that common sense tells us that people purchase property or make other productive investments so that they can use, derive financial benefits from or otherwise exploit the resource which is the subject of the property right.32 Further, for the reason that many property rights have been developed by the common law in circumstances where the interests are being determined in an adversarial contest between two individuals, the questions as to how a particular right ought to be determined as against a polity, or whether it does include a positive use entitlement, would typically never arise.
The principle which underpins Michelman’s approach is not undermined by the problems which flow from its indeterminacy. Nonetheless, the political questions it generates creates a particular problem for Australia’s judicial culture and existing approaches to constitutional interpretation.
5.5.5 Expectation of profit
The notions that the Proviso could or ought to protect the value of property or expectations of profit have been rejected by the High Court. Nonetheless, such arguments persist in the context of both regulatory takings and regulatory property .
32 Waldron, above n 39, 67. 259
There are several refutations as to why rule of law principles do not support such a position. The first is that, apart from specific types of interest held against the Commonwealth, expectations of profit or value are not part of the promise comprising the property right. In Bentham’s words, there is no true expectation of profit or redemption of value but merely ‘the distant hope of the harvest’.33 The distinction between a hope and an objective or subjective expectation is an important one.
Furthermore, as Waldron points out:
The Rule of Law cannot possibly be cited as a ground for stabilizing prices – certainly not under the auspices of a conception that privileges free markets!34
The argument for such compensation is premised on the underwriting of all regulatory risk by the Commonwealth.
These considerations appear to underpin the High Court’s doctrine that the Proviso does not protect ‘the general commercial and economic position occupied by traders’35 though it has never made such considerations explicit.
5.5.6 Reliance interests
A reliance interest as defined by Singer need not be a legal or equitable interest at all.36 In some senses a reliance interest is a normative argument that a relationship of mutual dependence on which people rely37 ought to be recognised as giving rise to some kind of legal or equitable interest or ought to enliven the Proviso’s operation. Reliance-based arguments are not based on objective or subjective expectations.
A key example would be arguments that social security rights ought to be recognised as property. Another example arose in Peverill where it was argued that Peverill’s reliance on his
33 Jeremy Bentham, 'Principles of the Civil Code' in John Bowring (ed) The Works of Jeremy Bentham Vol 1 (William Tait, 1838) 297, 308. 34 Waldron, above n 39, 72-3. 35 British Medical Association v Commonwealth (1949) 79 CLR 201, 270 (Dixon J); JT International (2012) 250 CLR 1, 67 [167] (Hayne and Bell JJ), 35 [47] (Gummow J), 128 [357] (Kiefel J). 36 Joseph William Singer, 'The Reliance Interest in Property ' (1987) 40(3) Stanford Law Review 611. 37 Ibid, 636. 260 interest in being paid for the services that he provided ought to be grounds for bringing them within the Proviso’s scope.38
These types of interest or this mode of argument raise broad questions of social stability and ordering and the role the law ought to play in promoting them. While in the s 51(xxxi) context they appear frequently as a rhetorical device, such arguments do not appear to have played any significant role in the development of s 51(xxxi) doctrine or in determining the outcome in any s 51(xxxi) decisions. On occasion they have been explicitly rejected.39
5.6 Conclusion Regarding the Emergent Model
The utility of the proposed model is demonstrated not only by its capacity to explain a large number of outcomes but also its ability to provide insights into minority positions on a number of issues. Furthermore, the model provides insights into the Proviso’s place in the overall constitutional structure. It can been seen that, while at times the Proviso operates to buttress various limits on executive and legislative powers, it can also interfere or conflict with other express and implied constitutional doctrines.
5.7 Concluding Remarks
When the delegates at the Constitutional convention inserted what became s 51(xxxi) into the then draft of the Australian Constitution it might be speculated that they were only dimly aware of how significant a break it represented in terms of its departure from English ‘constitutional law.’ In Sir Owen Dixon’s words it was a ‘bold experiment to minds moulded in the common law.’40
At Federation a great number of friction points between the Proviso and English common law doctrines which had been received into the colonies were created; doctrines which continued to influence Australia’s own common law and approach to constitutional interpretation.41
38 Peverill (1994) 179 CLR 226, 266-7 (McHugh J); Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 March 1993), 106. 39 Ibid; c/f Dalziel (1944) 68 CLR 261, 286 (Rich J). 40 Sir Owen Dixon, 'Marshall and the Australian Constitution' (1955) 29 Australian Law Journal 420 , 420. 41 Chief Justice Robert S French, 'Procedural Fairness - Indispensable to Justice?' (Speech delivered at Sir Anthony Mason Lecture, University of Melbourne Law School Law Students' Society, 7 October 2010), citing Dixon, 'Marshall and the Australian Constitution', above n 55, 424-425. 261
Of its nature, s 51(xxxi) presents a challenge to doctrines of Crown immunity, Parliamentary sovereignty, the reach of Royal Prerogative powers and our very understanding of the separation of powers. Arguably, it represents one of the most radical breaks from the English common law tradition in the Constitution; a departure made all the more stark and incongruous by the continued role such doctrines play in relation to the acquisition of property by the States which remain unbound by the Proviso’s operation.
At the same time, s 51(xxxi) (and the Constitution generally) assumes the existence of a whole range of common law doctrines including contract, tort and various limits placed on executive power. Working out which doctrines can be accommodated and which must be rejected is a process that is ongoing. No doubt the passing of the Australia Act 1986 (Cth) and freeing the High Court from the shackles of the Privy Council and English common law approaches was an important step in this process.
Not only does the Proviso occupy an awkward place within s 51 but at a fundamental level it is an awkward fit within Australia’s mainstream legal and judicial culture. It is the closest thing to a bill of rights in the Australian Constitution and lawyers as much as judges don’t quite seem to know what to do with an express limit on legislative power intended for the protection of the citizen. They are more often than not ready to deny its applicability and narrow its scope than to explain why that might be the case.42
Interpreting the Proviso’s scope remains unfinished business for the High Court and it may always be the case. But having created more mess than clarity along the way there is an awful lot of tidying up to do.
Ultimately however, the contests which underlie any litigation over the Proviso’s scope are not between Locke and Bentham or Nozick and Marx but between competing judicial visions of the rule of law under the Australian Constitution and the inherent tensions and contradictions within them.
42Transcript of Proceedings, A-G for the NT v Chaffey [2007] HCATrans 203 (16 May 2007) (T I Pauling QC). ‘… in trying to analyse the cases and come to a coherent line of principle one meets an undisclosed process of reasoning…’ 262
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6.1.2 B Cases
A-G (Cth) v Schmidt (1961) 105 CLR 361
A-G (NSW) ex rel Tooth & Co Ltd v Brewery Employees' Union of NSW (1908) 6 CLR 469
A-G (NSW) v Quin (1990) 170 CLR 1
A-G (NT) v Chaffey (2007) 231 CLR 651
A-G (NT) v Emmerson (2014) 253 CLR 393
Air Canada v British Columbia (Attorney General) [1986] 2 SCR 539
Airservices Australia v Canadian Airlines (1999) 202 CLR 133
270
Al-Kateb v Godwin (2004) 219 CLR 562
Allpike v Commonwealth (1948) 77 CLR 62
Andrews v Howell (1941) 65 CLR 255
Antill Ranger & Co Pty Ltd v Commissioner of Road Transport; Deacon v Grimshaw (1955) 93 CLR 83
APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322
Armstrong v United States, 364 US 40 (1960)
Attorney General of Hong-Kong v Ng Yuen Shiu [1983] 2 AC 629
Austin v The Commonwealth (2003) 215 CLR 185
Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508
Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106
Australian Communist Party v Commonwealth (1951) 83 CLR 1
Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480
B v DPP (2000) 2 AC 423
Bank of New South Wales v Commonwealth (1948) 76 CLR 1
Barton v Commissioner for Motor Transport (1957) 97 CLR 633
Bell Brothers Pty Ltd v Serpentine-Jarrahdale Shire (1969) 121 CLR 137
Bessell v Dayman (1935) 52 CLR 215
Betfair Pty Ltd v Racing New South Wales (2012) 249 CLR 217
Bilbie v Lumley (1802) 2 East 469
Bivens v Six Unknown Federal Narcotics Agents, 403 US 388 (1971)
Board of Regents v Roth, 408 US 564 (1972)
Boddington v British Transport Police (1999) 2 AC 143
Brisbane v Dacres (1813) 128 ER 641
British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30
British Medical Association v Commonwealth (1949) 79 CLR 201
271
Brodie v Singleton Shire Council (2001) 206 CLR 512
Broome v Speak {1903) 1 Ch 586
Burton v Honan (1952) 86 CLR 169
Capital Duplicators Pty Ltd v Australian Capital Territory (No 2) (1993) 178 CLR 561
Chaffey v Santos Ltd (2006) 18 NTLR 22
Chester v Waverley Corporation (1939) 62 CLR 1
Chicot County Drainage District v Baxter State Bank, 308 US 371 (1940)
Clunies-Ross v Commonwealth (1984) 155 CLR 193
Cole v Whitfield (1988) 165 CLR 360
Commissioner of Road Transport v Antill Ranger & Co Pty Ltd (1956) 93 CLR 177
Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51
Commonwealth v Australian Capital Territory (2013) 250 CLR 441
Commonwealth v Huon Transport Pty Ltd (1945) 70 CLR 293
Commonwealth v Mewett (1997) 191 CLR 471
Commonwealth v New South Wales (1923) 33 CLR 1
Commonwealth v Tasmania (1983) 158 CLR 1
Commonwealth v Verwayen (1990) 170 CLR 394
Commonwealth v Western Australia (1999) 196 CLR 392
Commonwealth v WMC Resources Ltd (1998) 194 CLR 1
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Daniels Corporation v ACCC [2002] 213 CLR 543
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Defrenne v Sabena [1976] ECR 455
Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529
Deputy Federal Commissioner of Taxation (SA) v Ellis & Clark Ltd (1934) 52 CLR 85
272
Deputy Federal Commissioner of Taxation v Brown (1958) 100 CLR 32
DPP (Cth) v Keating (2013) 248 CLR 459
DPP (Cth) v Poniatowska (2011) 244 CLR 408
Duncan v Vizzard (1935) 53 CLR 493
Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399
Entick v Carrington (1765) 19 St Tr 1029
Esso Australia Resources v Commissioner of Taxation (1999) 201 CLR 49
Federal Commissioner of Taxation v Clyne (1958) 100 CLR 246
Flemming v Nestor, 363 US 603 (1960)
Fletcher v Peck, 10 US 87 (1810)
Foran v Wight (1989) 168 CLR 385
Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297
Goldberg v Kelly, 397 US 254 (1970)
Grace Brothers Pty Ltd v Commonwealth (1946) 72 CLR 269
Griffith v Kentucky, 479 US 314 (1987)
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Ha v New South Wales (1997) 189 CLR 465
Hastings Deering (Australia) Ltd v Smith (No 2) (2004) 18 NTLR 1
Health Insurance Commission v Peverill (1994) 179 CLR 226
Hughes and Vale Pty Ltd v New South Wales (1954) 93 CLR 1
Hydro Electric Commission of Nepean v Ontario Hydro [1982] 1 SCR 347
ICM Agriculture v Commonwealth (2009) 240 CLR 140
In the Marriage of Gould (1993) 115 FLR 371
International Finance Trust Co Ltd v NSW Crime Commission (2009) 240 CLR 319
Jaensch v Coffey (1984) 155 CLR 549
273
James v Commonwealth (1939) 62 CLR 339
Jenkins v Commonwealth (1947) 74 CLR 400
John Cooke & Company Pty Ltd v Commonwealth (1922) 31 CLR 394
Johnston Fear & Kingham & Offset Printing Company Pty Ltd v Commonwealth (1943) 67 CLR 314
JT International SA v Commonwealth (2012) 250 CLR 1
Kakavas v Crown Melbourne Limited (2013) 250 CLR 392
Kartinyeri v Commonwealth (1998) 195 CLR 337
Kentwell v The Queen (2014) 252 CLR 601
Kleinwort Benson Ltd v Lincoln City Council [1998] 3 WLR 1095
Koowarta v Bjelke-Petersen (1982) 153 CLR 168
Kruger v Commonwealth (1997) 190 CLR 1
Lane v Cotton (1701) 88 ER 1458
Lange v Australian Broadcasting Corporation (1997) 189 CLR 520
Leask v Commonwealth (1996) 187 CLR 579
Leeth v Commonwealth (1992) 174 CLR 455
Legione v Hateley (1983) 152 CLR 406
Lucas v South Carolina Coastal Council, 505 US 1003 (1992)
Mabo v Queensland [No 1] (1988) 166 CLR 186
MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622
Magaming v The Queen (2013) 252 CLR 381
Magrath v Commonwealth (1944) 69 CLR 156
Marbury v Madison, 5 US 137 (1803)
Mason v New South Wales (1959) 102 CLR 108
McClintock v Commonwealth (1947) 75 CLR 1
Mellifont v A-G (Qld) (1991) 173 CLR 289
274
Minister for Immigration and Border Protection v WZARH (2015) 326 ALR 1
Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193
Minister for Primary Industry and Energy v Davey (1993) 47 FCR 151
Minister of State for Immigration & Ethnic Affairs v Teoh (1995) 183 CLR 273
Minister of State for the Army v Dalziel (1944) 68 CLR 261
Moorgate Mercantile Co Ltd v Twitchings [1976] 1 QB 225
Mount Sinai Hospital Center v Quebec (Minister of Health and Social Services) [2001] 2 SCR 281
Murphyores Inc Pty Ltd v Commonwealth (1976) 136 CLR 1
Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155
Mutual Pools & Staff Pty Ltd v Federal Commissioner of Taxation (1992) 173 CLR 450
National Provincial Bank Ltd v Ainsworth [1965] AC 1175
National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548
Nationwide News Pty Ltd v Wills (1992) 177 CLR 1
Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495
Nelungaloo Pty Ltd v Commonwealth (1952) 85 CLR 545
New South Wales v Bardolph (1934) 52 CLR 455
New South Wales v Commonwealth (1915) 20 CLR 54
Newcrest Mining (WA) Ltd v Commonwealth (1997) 190 CLR 513
Ngati Apa Ki Te Waipounama Trust v The Queen (2000) 2 NZLR 659
Nintendo Co Ltd v Centronics System Pty Ltd (1994) 181 CLR 134
O Gilpin Ltd v Commissioner for Road Transport & Tramways (NSW) (1935) 52 CLR 189
P J Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382
Payne v The Queen (1901) 26 VLR 705
Pennsylvania Coal Co v Mahon, 260 US 393 (1922)
Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation (1948) 77 CLR 1 275
Peverill v Health Insurance Commission (1991) 32 FCR 133
Peverill v Meir (1990) 95 ALR 401
Phonographic Performance Company of Australia Limited v Commonwealth (2012) 246 CLR 561
Placer Development Ltd v Commonwealth (1969) 121 CLR 353
Plaintiff S157/2002 The Commonwealth (2003) 211 CLR 476
Polyukhovich v Commonwealth (1991) 172 CLR 501
Poulton v Commonwealth (1953) 89 CLR 540
Pye v Renshaw (1951) 84 CLR 58
Queensland Independent Wholesalers Ltd v Coutts Townsville Ltd [1989] 2 Qd R 40
Queensland Medical Laboratory v Blewett (1988) 84 ALR 615
R v Governor of Brockhill Prison; Ex parte Evans (No 2) [2001] 2 AC 19
R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254
R v Ludeke; Ex parte Australian Building Construction Employees' & Builders Labourers' Federation
(1985) 159 CLR 636
R v Secretary of State for the Home Department; Ex parte Brind [1991] 1 AC 696
R v Secretary of State for the Home Department; Ex parte Simms (2002) 2 AC 115
R v Secretary of State; Ex parte Richardson (C–137/94) [1995] ECR I-3407
R v Smithers; Ex parte McMillan (1982) 152 CLR 477
R v Taylor; Ex parte Federated Ironworkers Assn of Australia (1949) 79 CLR 333
R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327
R v Vizzard; Ex parte Hill (1933) 50 CLR 30
Re DPP (Cth); Ex parte Lawler (1994) 179 CLR 270
Re Judiciary Act 1903-1920 & In re Navigation Act 1912-1920 (1921) 29 CLR 257
Re Language Rights under Manitoba Act 1870 (1985) 19 DLR (4th) 1
Re Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1
276
Re State Public Services Federation; Ex Parte A-G (WA) (1993) 178 CLR 249
Reilly v The King (1934) AC 176
Republic of India v India Steamship Co Ltd AC 878
Ridgeway v The Queen (1995) 184 CLR 19
Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327
Rowe v Electoral Commissioner (2010) 243 CLR 1
Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516
Slattery v Naylor (1888) 13 App Cas 446
Smith Kline & French Laboratories (Australia) Ltd v Secretary of Department of Community Services &
Health(1990) 22 FCR 73
Smith v ANL Ltd (2000) 204 CLR 493
South Australia v Totani (2010) 242 CLR 1
South Australian Cold Stores Ltd v Electricity Trust of South Australia (1957) 98 CLR 65
Spencer v Commonwealth (2010) 241 CLR 118
Steers v Rogers [1893] AC 232
Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210
Teori Tau v Commonwealth (1969) 119 CLR 564
The Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479
The Vera Cruz (1884) 10 App Cas 59
Theophanous v Commonwealth (2006) 225 CLR 101
Thomas v Mowbray (2007) 233 CLR 307
Thompson v Palmer (1933) 49 CLR 507
Trade Practices Commission v Tooth and Co Ltd (1979) 142 CLR 397
Unions NSW v New South Wales (2013) 252 CLR 530
United States v Brown, 381 US 437 (1965)
277
United States v Estate of Donnelly, 397 US 286 (1970)
University of Wollongong v Metwally (1984) 158 CLR 447
Vallejo v Wheeler (1774) 1 Cowp 143
Victorian Stevedoring & General Contracting Company Pty Ltd v Dignan (1931) 46 CLR 73
W H Blakeley & Co Pty Ltd v Commonwealth (1953) 87 CLR 501
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Waterhouse v Minister of the Arts and Territories (1993) 43 FCR 175
Werrin v Commonwealth (1938) 59 CLR 150
White v DPP (WA) (2011) 243 CLR 478
Williams v R (1978) 140 CLR 591
Williamson County Regional Planning Commission v Hamilton Bank of Johnson City 473 US 172 (1985)
Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] 1 AC 70
Wurridjal v Commonwealth (2009) 237 CLR 309
Yanner v Eaton (1999) 201 CLR 351
6.1.3 C Legislation
Australian Constitution
Bill of Rights 1689 (UK) 1 William & Mary Sess 2 c 2
Copyright Amendment Act 1989 (Cth)
Estate Duty Assessment Act 1914-1942 (Cth)
Family Law Act 1975 (Cth)
Health Insurance Act 1973 (Cth)
Interpretation Act (NT)
Judiciary Act 1903 (Cth)
Lands Acquisition Act 1906 (Cth)
Land Title Act 1994 (Qld)
Northern Territory (Self-Government) Act 1978 (Cth)
278
Property for Public Purposes Acquisition Act 1901 (Cth)
Sales Tax Procedure Act 1934-1935 (Cth)
South African Constitution
Swimming Pools Tax Refund Act 1992 (Cth)
Work Health Act 1986 (NT)
Work Health Amendment Act 2004 (NT)
6.1.4 D Other
The Castle (Directed by Robert Sitch,Working Dog, 1997)
Declaration of the Rights of Man and of the Citizen
French, Chief Justice Robert S, 'Procedural Fairness - Indispensable to Justice?' (Speech delivered at Sir Anthony Mason Lecture, University of Melbourne Law School Law Students' Society, 7 October 2010)
Kirby, Justice Michael, ‘Is There Hope? Law And Economics’ (Speech delivered at Melbourne University Law School, 4 July 1997)
Knight, Dean, Estoppel (Principles?) in Public Law: The Substantive Protection of Legitimate Expectations (Masters Thesis, University of British Columbia, 2004)
Northern Territory, Parliamentary Debates, Legislative Assembly, 14 October 2004 (Sydney Stirling)
Shakespeare, William, The Merchant of Venice
Spigelman, Chief Justice J J 'The Principle of Legality and the Clear Statement Principle' (Speech delivered at New South Wales Bar Association Conference, Sydney, 18 March 2005)
Transcript of Proceedings, A-G for the NT v Chaffey [2007] HCATrans 203 (16 May 2007)
Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 9 March 1993)
Transcript of Proceedings, Health Insurance Commission v Peverill (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 March 1993)
Transcript of Proceedings, Mutual Pools and Staff Pty Ltd v Commonwealth (High Court of Australia, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, 10 February 1993)
Universal Declaration of Human Rights, GA Res 217A (III), UN GAOR, 3rd sess, 183rd plen mtg, UN Doc A/810 (10 December 1948)
US Constitution 279
280