Australian Capital Territory (Self-Government) Act 1988 (Cwlth) ss 3, 23

ACT Civil and Administrative Tribunal Act 2008 (ACT) s 84

Court Procedures Rules 2006 (ACT)

Unit Titles Act 1970 (ACT)

Legislation Act 2001 (ACT) ss 155, 156

Planning and Development Act 2007 (ACT) ss 7, 12, 46, 50, 199, 234, 276, 277, 307

Planning and Development (Lease Variation Charges) Amendment Act 2011 (ACT)

Unit Titles Act 2001 (ACT)

Australian Tape Manufacturers Association Ltd v Commonwealth [1993] HCA 10; (1993) 176 CLR 480

Bank of New South Wales v Commonwealth [1948] HCA 7; (1948) 76 CLR 1

Cecelia Spence and Minister for Urban Services [2000] ACTAAT 37

Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1

Georgiadis v Australian Overseas Telecommunications Corporation [1994] HCA 6; (1994) 179 CLR 297 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26

JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v Commonwealth [2012] HCA 43; (2012) 291 ALR 669

Mutual Pools & Staff Pty Ltd v Commonwealth [1994] HCA 9; (1994) 179 CLR 155

Newcrest Mining (WA) Ltd v Commonwealth [1997] HCA 38; (1997) 190 CLR 513

Smith v ANL Ltd [2000] HCA 26; (2000) 204 CLR 493

Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418

The Queen v Brown (1867) LR 2 QB 630

Trade Practices Commission v Tooth & Co Ltd [1979] HCA 47; (1979) 142 CLR 397

Uniting Church in Australia Property Trust (NSW) v Immer (No 145) Pty Ltd (1991) 24 NSWLR 510

Waterhouse v Minister for the Arts and Territories [1993] FCA 548; (1993) 43 FCR 175

Explanatory Statement for the Planning and Development (Lease Variation Charges) Amendment Bill 2011

Territory Plan Multi-Unit Housing Development Code Part B - General Development Controls, Rule 28

QUESTION REFERRED FROM THE ACT CIVIL AND ADMINISTRATIVE TRIBUNAL

QUESTION REFERRED FROM THE ACT CIVIL AND ADMINISTRATIVE TRIBUNAL

Question: Whether Rule 28 of the Territory Plan Multi-Unit Housing Code Part B - General Development Controls is a law capable of applying to the Crown lease of Block 21 Section 38 Turner, having regard to Section 23(1)(a) of the ACT Self-Government Act 1988 (Clth).

Answer: Nothing in s 23(1)(a) of the Australian Capital Territory (Self-Government) Act 1988 (Cwlth) prevents Rule 28 applying to the Crown lease of Block 21 Section 38 Turner, whether Rule 28 is:

(a) a law made by the Assembly; or

(b) a provision binding the Territory, the Executive, a Minister or a territory authority under a law made by the Assembly, specifically s 50 of the Planning and Development Act 2007 (ACT).

1. This matter, although described in the court documents as a "Special Case", in fact involves a reference of a question of law from the ACT Civil and Administrative Tribunal (ACAT). The Court Procedures Rules 2006 (ACT) were amended in 2009 to replace references to special cases under the Administrative Appeals Tribunal Act 1989 (ACT) with references to questions referred under the ACT Civil and Administrative Tribunal Act 2008 (ACT) (the ACAT Act).

2. The question referred under s 84 of the ACAT Act is as follows:

Whether Rule 28 of the Territory Plan Multi-Unit Housing Code Part B - General Development Controls is a law capable of applying to the Crown lease of Block 21 Section 38 Turner, having regard to Section 23(1)(a) of the ACT Self-Government Act 1988 (Clth).

3. Christopher John Donohue, the lessee of Block 21 Section 38 Turner, is the Initiating Party. The ACT Planning and Land Authority (ACTPLA) is the Other Active Party

4. The document initiating this matter sets out an agreed statement of facts, the first five paragraphs of which are as follows:

1. The Initiating Party is the Crown lessee of Block 21 Section 38 Turner ("the subject lease"). The relevant provisions of the subject lease are clauses 1(c), 1(d) and 1(e) as set out in the copy of the Crown lease, filed herewith.
2. The Initiating Party applied under Section 113 Planning and Development Act 2007 ("the Act") to vary the subject lease to permit 11 residential units ("lease variation application").
3. The lease variation application was approved on 4 February 2011 subject to a condition requiring the Initiating Party to accept a new Crown lease limiting the Initiating Party

"to use the land for the purpose of:

a single dwelling; or

multi-unit housing not more than eleven (11) dwellings"

1. At the relevant time Section 276 of the Act prohibited the Other Active Party from executing a variation of a nominal rent lease unless the lessee paid the Territory any change of use charge worked out by the Other Active Party pursuant to Section 277 of the Act. The subject lease is a nominal rent lease.
2. The Other Active Party has worked out the change of use charge and the Initiating Party has applied to the Tribunal for review of the Other Active Party's decision.

5. Paragraph 6 is more accurately described as an assumption, possibly of law, rather than a statement of fact:

1. The working out of the change of use charge requires consideration of the value of the subject lease having regard to Rule 28 of the Territory Plan Multi-Unit Housing Code Part B - General Development Controls in force at the relevant time ("Rule 28") if it is capable of applying to the subject lease.

6. Paragraph 7 sets out a belief shared by the parties, but without an explanation of why this view is held.

1. The parties accept that if Rule 28 applies to the subject lease it has the effect that the "V2" value under section 277 of the Act is less than it would be if Rule 28 did not apply to the subject lease.

7. The final "fact" set out is a summary of the Initiating Party's argument, as follows:

1. The Initiating Party contends that Rule 28 cannot apply to the subject lease as it effects the acquisition of property otherwise than on just terms contrary to Section 23(1)(a) of the ACT Self-Government Act 1988 (Cth).

8. Except where otherwise indicated, I have worked on the basis that the relevant legislation is as in force at 4 February 2011, when Mr Donohue's variation application was approved subject to conditions (at [25] below). There is no issue about the form of the Australian Capital Territory (Self-Government) Act 1988 (Cwlth) (the Self-Government Act) at the time Rule 28 came into effect.

9. Section 23(1) of the Self-Government Act is relevantly as follows:

23 Matters excluded from power to make laws

(1) Subject to this section, the Assembly has no power to make laws with respect to:

(a) the acquisition of property otherwise than on just terms;

10. Section 3 of the Self-Government Act says that the Assembly is the Legislative Assembly for the Australian Capital Territory (the Assembly).

Planning and Development Act 2007 (ACT)

11. Section 199 of the Planning and Development Act 2007 (ACT) prohibits development without approval.

12. Section 7 of that Act defines "development" of land to include building, altering or demolishing a structure on the land, subdivision of the land, and also varying a lease relating to the land. For that purpose varying a lease includes variations under the Unit Titles Act 2001 (ACT) (definition of "subdivision" in s 7(2) of the Planning and Development Act).

Unit Titles Act 2001 (ACT)

13. The Unit Titles Act provides a scheme for subdivision of land covered by one or more leases into "units" representing residential dwellings on the land; the units may be held, and traded, individually. The Act did not at the relevant date refer to R28 at all.

14. The Territory Plan is provided for under the Planning and Development Act, s 46 of which says that "There must be a territory plan that applies to the ACT." ACTPLA, established by section 10 of that Act, has the function of preparing and administering the Territory Plan (section 12 (1)(a)), but it is not clear who or what has the power to approve or "enact" the Territory Plan (or indeed whether the Territory Plan requires any such action). The Plan is, however, enforced by way of section 50 of the Planning and Development Act, which is as follows:

The Territory, the Executive, a Minister or a territory authority must not do any act, or approve the doing of an act, that is inconsistent with the territory plan.

Note 1 The Territory, or a territory authority, is prevented from doing anything inconsistent with the national capital plan.

Note 2 The Territory, the Executive, a Minister or a territory authority are also prevented from doing anything inconsistent with some draft variations of the territory plan (see s 65 and s 72).

15. Rule 28 (R28) of the Territory Plan Multi-Unit Housing Development Code Part B - General Development Controls is as follows:

Part B - General Development Controls

This Part of the Code provides the general controls that are applicable to all development subject to this Code. Parts A and C of the Code also apply.

Element 1: Restrictions on Use

Intent:

1. to ensure future development can be accommodated on subdivided blocks

1.1 Subdivision or Consolidation of Existing Residential Leases

1. Subdivision or consolidation of an existing residential lease is only permitted where:

i) all the proposed dwellings on the land have been lawfully constructed, or

1. it is part of an integrated housing development and it is demonstrated that any building on a consequent lease is or can be designed in accordance with the relevant sections of this code.

1. Subdivision of a lease under the Unit Titles Act 2001 may only be permitted where the lease expressly provides for the number of units or dwellings provided for in the proposed subdivision

Note 1: In this rule subdivision does not include a minor boundary adjustment that does not provide for the creation of an additional residential lease.

Note 2: See also Rule R1 in relation to subdivision of a standard block in the RZ1 Zone.

Note 3: See also Rule R247A of the Multi Unit Housing Development Code in relation to subdivision of a dual occupancy block.

This is a mandatory requirement. There is no applicable criterion.

16. Thus, R28 does not apply directly to Mr Donohue. Rather, it affects Mr Donohue's lease because the relevant authorities are, under s 50 of the Planning and Development Act, precluded from responding to his application for a lease variation, or for a subdivision under the Unit Titles Act, in a manner inconsistent with the Territory Plan including R28.

17. As noted, Mr Donohue holds the Crown lease of a block of land in the inner north suburb of Turner in Canberra. The lease is of a kind known as a "nominal rent lease". It was originally issued in 1959, and contained the following conditions:

(c) That the lessee will at all times during the said term maintain repair and keep in repair all buildings and erections on the said land all to the satisfaction of the Minister;

(d) That the lessee will not without the previous approval in writing of the Commonwealth or the Minister on behalf of the Commonwealth erect any building on the said land or make any structural alterations in any building erected on the said land;

(e) To use the said land for residential purposes only;

18. The lease did not contain an explicit limit on the number of dwellings that could be erected on the land. In Cecelia Spence and Minister for Urban Services [2000] ACTAAT 37, it was held that conditions to this effect do not limit the number of residential units that can be erected on the relevant land. On the other hand, condition (d) of Mr Donohue's lease makes it clear that any building on the land subject to the lease would require some kind of official permission.

19. Planning requirements and restrictions in force at the relevant time permitted a maximum of 11 residential units to be constructed on Mr Donohue's block, subject to necessary approvals.

20. Mr Donohue proposed to develop the land subject to his lease to the current "highest and best use". He wished to construct 11 residential units on the land.

21. Mr Donohue accordingly applied for development approval. He sought permission to demolish the existing structures on the land and replace them with new structures and other improvements. The construction of these structures requires development approval, but neither that construction nor even the sub-leasing of the proposed 11 units requires a lease variation as such (see s 307 of the Planning and Development Act, which permits sub-leasing of parts of buildings on land "comprised in" a lease).

22. However, in pursuit of the "highest and best use", Mr Donohue also wished to subdivide the property under the Unit Titles Act. A subdivision under the Unit Titles Act would enable the issue of separate, and separately saleable, leases for each of the 11 units (as well as some form of lease covering the common property). It is accepted by the parties for present purposes that the developed block would be more immediately valuable if each unit could be sold separately rather than only sub-leased separately by the owner of the whole development.

23. Under R28, such a subdivision must be preceded by a variation of the original lease to specify expressly "the number of units or dwellings provided for in the proposed subdivision".

24. Accordingly, Mr Donohue also sought the variation of the purpose clause of the lease to permit 11 dwelling units on the block.

25. Mr Donohue's application to vary the purpose clause was approved on 4 February 2011, subject to a condition requiring him to surrender his existing Crown lease and accept a new Crown lease, which would limit the use of the land to "not more than eleven (11) dwellings". This condition was apparently imposed in accordance with the direction in R28(b) of the Territory Plan, specifically that:

Subdivision of a lease under the Unit Titles Act 2001 may only be permitted where the lease expressly provides for the number of units or dwellings provided for in the proposed subdivision

26. I am told that ACAT has already held that, although Mr Donohue's current lease does not limit the number of residential units that can be constructed on the land, it does not "expressly provide for" a development consisting of 11 dwellings. I also understand that leave to appeal that decision was refused by Master Harper. I do not know whether the difference between Mr Donohue's application for a variation to permit 11 dwelling units and the invitation to vary the lease to permit "not more than 11 dwellings" is significant in the current context, in that I do not know whether Mr Donohue saw a variation simply permitting "11 dwelling units" as leaving scope for more than 11 dwelling units at some time in the future. Clearly, there would be no room for subsequent argument that "not more than 11 dwellings" in fact also permitted a number of dwellings greater than 11.

27. Lease variations for nominal rent leases were at 4 February 2011 subject to a Change of Use Charge (CUC) worked out under s 277 of the Planning and Development Act as in force on that date. Variations were not to be executed, and had no effect, until the CUC was paid (s 276 of that Act).

28. The Dictionary to the Planning and Development Act defines "variation" of a lease (for the purposes of that Act; Legislation Act 2001 (ACT), ss 155 and 156 (1)) to include surrendering a lease and receiving a new lease subject to different provisions over all or part of the land subject to the original lease, and also to include subdivision of the lease except (because of s 234 of the Planning and Development Act) subdivision under the Unit Titles Act.

29. CUC is calculated, in general terms, by comparing the capital value of the lease immediately before the variation takes effect (disregarding the possibility of variation), and that of the lease if sold immediately after the lease variation takes effect. CUC is a percentage (relevantly 75%) of any increase in the value of the lease identified through that comparison (s 277(1)).

30. ACTPLA assessed the applicable CUC for the lease variation in reliance on advice from the Australian Valuation Office. The assessed values are as follows:

32. One interpretation of the ACTPLA valuation, if it is correct, is that the capacity to subdivide the property under the Unit Titles Act to reflect the maximum number of residential units currently permissible on the relevant land increases the value of the lease beyond the value it has while the lessee has only the capacity to erect that maximum number of dwelling units and to sublease them, but not to obtain separate Unit Titles Act leases for each unit. However, it is also implicit in the valuation that the lease carrying, on Mr Donohue's argument, unlimited development potential, albeit subject to having the upper limit of that development potential fixed at some point because of R28, is worth less than the lease with the development potential fixed in such a way as to allow Unit Titles Act subdivision to the current maximum density.

33. These possible inferences from the CUC assessment do not prove that the claimed unlimited development potential, absent R28, has no value, only that there is no basis on which I could conclude that the claimed unlimited development potential has any particular value, let alone that it has a value that will always be greater than the value of the lease with a particular development potential locked in but with the likelihood that a CUC will be payable for any future lease variation.

34. Mr Donohue argues that R28 cannot apply to leases in the nature of his lease, because:

(a) R28 is a law made by the Assembly;

(b) it effects an acquisition of property;

(c) this acquisition is not on just terms;

(d) R28 is therefore beyond the law-making power of the Assembly under the Self-Government Act;

(e) R28 is therefore invalid (at least in relation to leases with conditions equivalent to those of Mr Donohue's lease); and

(f) R28 therefore does not apply to Mr Donohue's lease.

35. Before considering this argument, it is useful to consider relevant authorities about the acquisition of property. Most of them, of course, refer to s 51(xxxi) of the Constitution, which confers power on the Commonwealth Parliament to make laws with respect to:

the acquisition of property on just terms ... for any purpose in respect of which the Parliament has power to make laws.

36. Neither party argued that the provision affecting the legislative power of the Legislative Assembly (s 23(1)(a) of the Self-Government Act) should be interpreted differently.

37. There is no suggestion that "just terms" are provided for any acquisition of property effected by R28. If R28 does effect an acquisition of property within the meaning of s 23(1)(a) of the Self-Government Act, then R28 would be beyond the legislative power of the Legislative Assembly.

38. First, counsel for Mr Donohue noted comments by Gummow J in Newcrest Mining (WA) Ltd v Commonwealth [1997] HCA 38; (1997) 190 CLR 513 (Newcrest) describing the process by which land surrendered to the Commonwealth under s 111 of The Constitution was dealt with by the Commonwealth and later the Northern Territory at 634-635:

Further, the history of the Territory, beginning with the surrender and acceptance effected pursuant to s 111 of the Constitution, shows that the Commonwealth (or the Crown in right of the Commonwealth) acquired a radical title in the sense known to the common law and thereafter the Commonwealth dealt with the subject land in exercise of its rights of dominion over it. This involved the use of statute to carve out interests from the particular species of ownership enjoyed by the Commonwealth and, after self-government, by the Territory in the manner identified earlier in these reasons. It is not correct, for the purposes of the application of s 51(xxxi), to identify the property held by Newcrest as no more than a statutory privilege under a licensing system such as that considered in such decisions as Minister for Primary Industry and Energy v Davey and Bienke v Minister for Primary Industries and Energy. (citations omitted)

39. No submission was made to the effect that the Australian Capital Territory (the Territory) is relevantly in any different position from the Northern Territory, and I accept these comments as indicating that Mr Donohue's interest under his lease is a property interest and not simply "a statutory privilege under a licensing system".

40. Counsel for Mr Donohue cited Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418 (Spencer) as authority for the proposition that the value of land includes its development potential. In that case, Isaacs J at 441 relied on The Queen v Brown (1867) LR 2 QB 630, in which it was said at 631 that:

A jury... have to consider the real value of the land, and may take into account not only the present purpose to which the land is applied, but also any other more beneficial purpose to which in the course of events at no remote period it may be applied, just as an owner might do if he were bargaining with a purchaser in the market. That is the mode in which the land would be valued.

41. Counsel relied on this comment in support of the proposition that the value of Mr Donohue's lease includes development potential, but I note in particular the reference in the extract to "any other more beneficial purpose to which in the course of events at no remote period it may be applied" (emphasis added).

42. I note also that counsel for Mr Donohue offered no authority for his fundamental premise that Mr Donohue's interest under the lease included the right to develop the land to its "highest and best use". The concept of the highest and best use is commonly referred to in connection with valuing property; however, if there is authority for the recognition of a right, attaching to any particular kind of interest in land in any particular way, to develop land to its highest and best use irrespective of legal constraints applicable from time to time, it was not drawn to my attention.

43. In support of a general proposition that there were no precise limits on the nature of an interest or entitlement that could be identified as property being acquired in circumstances in which just terms were required, counsel for Mr Donohue cited several other authorities. He referred to comments by Dixon J in Bank of New South Wales v Commonwealth [1948] HCA 7; (1948) 76 CLR 1 (the Banks Case), which were subsequently referred to by Mason J in Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1 (the Tasmanian Dam Case) at 145, who said:

The emphasis in s. 51(xxxi) is not on a "taking" of private property but on the acquisition of property for purposes of the Commonwealth. To bring the constitutional provision into play it is not enough that legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be. The effect of s.51(xxxi) was correctly stated by Dixon J. in Bank of N.S.W. v. The Commonwealth ("the Banks Case") [1948] HCA 7; (1948) 76 CLR 1, at p 349:

"I take Minister of State for the Army v. Dalziel ((1944) [1944] HCA 4; 68 CLR 261) to mean that s.51(xxxi) is not to be confined pedantically to the taking of title by the Commonwealth to some specific estate or interest in land recognized at law or in equity and to some specific form of property in a chattel or chose in action similarly recognized, but that it extends to innominate and anomalous interests and includes the assumption and indefinite continuance of exclusive possession and control for the purposes of the Commonwealth of any subject of property. Section 51(xxxi) serves a double purpose. It provides the Commonwealth Parliament with a legislative power of acquiring property: at the same time as a condition upon the exercise of the power it provides the individual or the State, affected with a protection against governmental interferences with his proprietary rights without just recompense. In both aspects consistency with the principles upon which constitutional provisions are interpreted and applied demands that the paragraph should be given as full and flexible an operation as will cover the objects it was designed to effect."

44. Counsel for Mr Donohue mentioned the decisions in Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26 at 32 and Uniting Church in Australia Property Trust (NSW) v Immer (No 145) Pty Ltd (1991) 24 NSWLR 510 at 511, in which the right to transfer what were in effect air space rights under NSW planning laws was recognised as a proprietorial right, like goodwill, patents or shares. In the High Court decision at 32, the description of these rights as set out in the first instance judgment was repeated, as follows:

It would appear that, under the town planning codes of this city, provisions have been made for buildings to have a maximum floor space ratio. However, there is also a provision that where there is an historic building, which cannot utilize the ratio to advantage, it is possible to transfer the overplus to some other site, either an adjacent site or a site in the same precinct. It would appear that the reason for this is that funds can be provided to the owner of the historic site to preserve the building and at the same time other land in the city will become more valuable because it will be able to bear a higher building. It would seem that there is a market in the city for these bonus floor site ratios and the present transaction is an illustration of what happens.

45. In relation to the identification of the property acquired, counsel for Mr Donohue also mentioned the headnote to the authorised report of Newcrest, which includes the following:

There was no reason why the identifiable benefit or advantage relating to the ownership or use of acquired property should correspond precisely to that which was taken.

46. Also relevant to the identification of the property acquired are the remarks of Deane and Gaudron JJ in Mutual Pools & Staff Pty Ltd v Commonwealth [1994] HCA 9; (1994) 179 CLR 155 (Mutual Pools) at 184:

Similarly, the word "acquisition" is not to be pedantically or legalistically restricted to a physical taking of title or possession. Once it is appreciated that "property" in s.51(xxxi) extends to all types of "innominate and anomalous interests", it is apparent that the meaning of the phrase "acquisition of property" is not to be confined by reference to traditional conveyancing principles and procedures. Nonetheless, the fact remains that s.51(xxxi) is directed to "acquisition" as distinct from deprivation. The extinguishment, modification or deprivation of rights in relation to property does not of itself constitute an acquisition of property. For there to be an "acquisition of property", there must be an obtaining of at least some identifiable benefit or advantage relating to the ownership or use of property. On the other hand, it is possible to envisage circumstances in which 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 as a result. Indeed, the extinguishment of a chose in action could, depending upon the circumstances, assume the substance of an acquisition of the chose in action by the obligee. (citations omitted)

47. As to the significance of the particular legislative structure under consideration, Kirby J in Smith v ANL Ltd [2000] HCA 26; (2000) 204 CLR 493 said at [94]:

To characterise the impugned legislation solely as a limitations provision is once again to focus attention on form rather than substance. From the point of view of the person whose "property" (in the form of choses in action) is denuded of practical enforceability, and thus of real content, it matters not that the means chosen were those of imposing an abridged limitations period. The Parliament cannot "by statutory modification or change of rights", in this way, "do by circuitous means what it could not successfully do directly". (citations omitted)

48. The extract from Gummow J's judgment in Newcrest quoted at [38] above fell in the middle of the following longer passage (at 633-635), which is also relevant to the current issues:

None of the provisions relied upon by the appellants is expressed in direct language as effecting an acquisition of any property. However, the question is whether, even if not formally, the appellants effectively have been deprived of "the reality of proprietorship" by the indirect acquisition, through the collective operation of the provisions of the Conservation Act, of "the substance of a proprietary interest". I have referred earlier in these reasons to the passage in the judgment of Dixon J in Bank of NSW v The Commonwealth which supports these propositions.

...

The appellants say that, in substance, the Commonwealth and the Director acquired identifiable and measurable advantages. In the case of the Director, those advantages were the acquisition of the land freed from the rights of Newcrest to occupy and conduct mining operations thereon and, in the case of the Commonwealth, the minerals freed from the rights of Newcrest to mine them. In accordance with the authorities, that is sufficient derivation of an identifiable and measurable advantage to satisfy the constitutional requirement of an acquisition.

There is no reason why the identifiable benefit or advantage relating to the ownership or use of property, which is acquired, should correspond precisely to that which was taken. This is not a case in the category considered in Health Insurance Commission v Peverill where what was in issue were rights derived purely from statute and of their very nature inherently susceptible to the variation or extinguishment which had come to pass. I have referred to the proviso in the prescribed forms under the Mining Regulations made under the 1939 Ordinance. They disclose that there was an inherent but limited liability to impairment of the rights conferred by the mining tenements. But what was done was not in exercise of the rights of the Crown under that proviso and went far beyond that which could have been brought about by those means.

...

Nor is this a case where there was merely an impairment of the bundle of rights constituting the property of Newcrest. An example of such impairment is found in Waterhouse v Minister for the Arts and Territories. There, the prohibition on export of the painting in question left the owner free to retain, enjoy, display or otherwise make use of the painting and left him free to sell, mortgage or otherwise turn it to advantage subject to the requirement of an export permit if the owner or any other person desired to take it out of Australia. Here, there was an effective sterilisation of the rights constituting the property in question. That this is so is only emphasised upon a consideration of the contrary submission made by the Commonwealth and the Director. It is true, as they submit, that the mining tenements were not, in terms, extinguished. It is true also that Kakadu extended only 1,000 m beneath the surface. But, on the surface and to that depth, s 10(1A) of the Conservation Act forbade the carrying out of operations for the recovery of minerals. The vesting in the Commonwealth of the minerals to that depth and the vesting of the surface and balance of the relevant segments of the subterranean land in the Director had the effect, as a legal and practical matter, of denying to Newcrest the exercise of its rights under the mining tenements. (citations omitted)

49. In Waterhouse v Minister for the Arts and Territories [1993] FCA 548; (1993) 43 FCR 175 (Waterhouse), the plaintiff challenged a decision to refuse an export permit for a painting determined to be subject to the Protection of Moveable Cultural Heritage Act 1986 (Cth), thereby effectively precluding the owner from selling it to a buyer who wished to export it from Australia permanently. In answering the question whether the decision constituted an acquisition of property for the purposes of paragraph 51(xxxi) of the Constitution, Black CJ and Gummow J said at 182-185:

Counsel for the applicant invited the Court to infer from the disparity between the price paid by the applicant to an Australian seller in 1985 and the price obtained by him from a foreign buyer in 1989, that the practical effect of the operation of the legislation upon the painting was to diminish its market value by restricting what otherwise would have been his client's unimpeded right to sell it and export it for delivery to a foreign purchaser, or himself to take the painting outside Australia for sale by him.

...

In the present case, accepting that it be a fact that the refusal of the export permit produces a commercial disadvantage to the applicant because he may be unable to obtain the same price for the painting from a purchaser who is content for it to remain in this country, it does not follow that thereby there has been an acquisition by the Commonwealth of an interest in the painting in the relevant sense. There has not been, for example, "the assumption and indefinite continuance of exclusive possession and control [of the painting] for the purposes of the Commonwealth..." to repeat the phrase used by Dixon J in Bank of New South Wales v Commonwealth (the Bank Nationalisation case) [1948] HCA 7; (1948) 76 CLR 1 at 349.

...

As we have indicated, this conclusion was one not reached by the other members of the Court who considered the point. In any event, in the Tasmanian Dam case the relevant regulations prohibited any activity on the subject land, effectively sterilising the exercise of rights which are bound up with ownership. In the present case the prohibition on export leaves the applicant free to retain and enjoy, display or otherwise make use of the painting and leaves him free to sell, mortgage, or otherwise turn it to advantage, subject to the requirement of an export permit if he or any other party desires to take it out of the country.

50. Finally, I note the comments of French CJ in JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v Commonwealth [2012] HCA 43; (2012) 291 ALR 669 at 684 (the Plain Packaging Case) as follows:

Whether there is an acquisition of property

[41] Section 51(xxxi) embodies a constitutional guarantee of just terms "and is to be given the liberal construction appropriate to such a constitutional provision." Broad constructions of "property" and "acquisition" were linked by Dixon J in the Bank Nationalisation case. Section 51(xxxi) was said to extend to "innominate and anomalous interests" and to include "the assumption and indefinite continuance of exclusive possession and control for the purpose of the Commonwealth of any subject of property." There is, however, an important distinction between a taking of property and its acquisition.

[42] Taking involves deprivation of property seen from the perspective of its owner. Acquisition involves receipt of something seen from the perspective of the acquirer. Acquisition is therefore not made out by mere extinguishment of rights. In an observation quoted and approved by the majority in Australian Tape, Mason J said in the Tasmanian Dam case:

"To bring the constitutional provision into play it is not enough that legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be."

Importantly, the interest or benefit accruing to the Commonwealth or another person must be proprietary in character. On no view can it be said that the Commonwealth as a polity or by any authority or instrumentality, has acquired any benefit of a proprietary character by reason of the operation of the TPP Act on the plaintiffs' property rights. In this respect I agree with the reasons of Gummow J and the reasons of Hayne and Bell JJ. (citations omitted)

51. That decision was handed down at a point when this matter was adjourned part-heard, and the parties had the opportunity to make further submissions about it. Counsel for the respondent noted Gummow J's remarks in that case (at 685):

[47] ...that s 51(xxxi) gives protection against acquisition of property without just terms but "not to the general commercial and economic position occupied by traders" and ... to treat this commercial and economic position as if it had a distinct proprietary character would be to repeat what in Truax v Corrigan Holmes J identified in a similar context as the fallacy of "delusive exactness". His Honour said:

"Delusive exactness is a source of fallacy throughout the law. By calling a business "'property"' you make it seem like land, and lead up to the conclusion that a statute cannot substantially cut down the advantages of ownership existing before the statute was passed. An established business no doubt may have pecuniary value and commonly is protected by law against various unjustified injuries. But you cannot give it definiteness of contour by calling it a thing."

52. Counsel for Mr Donohue referred to Gummow J's reference to Georgiadis v Australian Overseas Telecommunications Corporation [1994] HCA 6; (1994) 179 CLR 297 (Georgiadis) in the Plain Packaging Case at [136], where his Honour noted that, in contrast to the position in Australian Tape Manufacturers Association Ltd v Commonwealth [1993] HCA 10; (1993) 176 CLR 480, "the defendant tortfeasor in Georgiadis was, pro tanto, relieved of liability".

53. In the Plain Packaging Case, Crennan J said at 735:

[278] In Commonwealth v Tasmania, when explaining the difference between a "taking" (the subject matter of the fifth amendment to the United States Constitution) and an "acquisition", with which s 51(xxxi) is concerned, Mason J said:

"The emphasis in s 51(xxxi) is not on a "'taking"' of private property but on the acquisition of property for purposes of the Commonwealth. To bring the constitutional provision into play it is not enough that [the] legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be." [Original emphasis.]

[279] The enduring authority of this statement of principle has been confirmed by this Court on numerous occasions, most recently in Wurridjal and ICM Agriculture Pty Ltd v Commonwealth. (citations omitted)

54. For present purposes, I rely on the following propositions drawn from those authorities:

(a) that an ACT residential lease represents more than "a statutory privilege under a licensing system" (at [39] above);

(b) that in valuing Mr Donohue's lease, some development potential is appropriately accounted for (at [40] and [41] above);

(c) that there are no particular kinds of property that are necessarily excluded from being the subject of an acquisition requiring just terms under s 51(xxxi) of The Constitution or s 23(1)(a) of the Self-Government Act (at [43] and [44] above);

(d) that there will not be an acquisition unless the person holding a proprietary interest has been "effectively deprived" of "the reality of proprietorship" or "the substance of a proprietary interest" (at [48] above);

(e) that such effective deprivation is not constituted merely by an impairment of the bundle of rights constituting the property said to have been acquired (at [48] above);

(f) that a reduction in the value of property caused by a restriction on how it may be used or disposed of does not necessarily mean that there has been an acquisition of any interest in the property (at [49] above);

(g) that it is necessary for a court to identify what is acquired in order to find that there has been such an acquisition (at [45] and [46] above);

(h) that what is acquired need not be identical with what has been lost (at [45] and [48] above);

(i) that what is acquired must be "an identifiable benefit or advantage relating to the ownership or use of property" (at [46] above); "proprietary in character" (at [50] above); "an interest in property" (at [53] above);

(j) that what is acquired may be relief from an existing liability to the holder of a vested cause of action (at [52] above);

(k) that the form of the legislation said to constitute an acquisition of property without just terms will not be determinative of whether there has been such an acquisition, and that the legislature "cannot do by circuitous means what it could not successfully do directly" (at [47] above).

55. There is a real question whether R28 is a law made by the Assembly, so as to be caught by s 23 of the Self-Government Act, at all. As already noted, the existence of the Territory Plan is required by s 46 of the Planning and Development Act, but it is not clear that s 46 or any other legislation provides for the process by which it comes into existence (at [14] above). Section 50 of the Planning and Development Act enforces the Territory Plan by precluding the Territory, the Executive or its officials or authorities acting, or approving action, that is inconsistent with the Territory Plan, but the Territory Plan does not seem to be "enacted" either directly or indirectly by the Assembly.

56. There is no definition of "law" in the Self-Government Act, nor any relevant definition in the Acts Interpretation Act 1901 (Cth). Nor is there a definition of "made by the Assembly".

57. Given the rather curious source and status of the Territory Plan, it may in fact be correct to say that the Territory Plan is not a law. It may also be the case that the Territory Plan is not "made by the Assembly" for the purposes of s 23 of the Self-Government Act. However, these issues were not the subject of substantial submissions, and it is not necessary to pursue them any further, because answering the question whether the Territory Plan is a law made by the Assembly would not provide an answer to the question asked in this case (although it might require the question to be reframed).

58. The Territory Plan, and R28 in particular, acquire their efficacy from the Planning and Development Act, specifically s 50, which is undoubtedly a law made by the Assembly. R28's impact on subdivisions under the Unit Titles Act is given effect by s 50 of the Planning and Development Act.

59. If the combined effect of R28 and s 50 of the Planning and Development Act was to acquire property otherwise than on just terms, then it would not in my view matter that R28's status is somewhat obscure. The question referred from ACAT might need to be reframed as whether s 50 of the Planning and Development Act, to the extent that it operates to restrict the approval of subdivisions under the Unit Titles Act by reference to R28, is a law capable of applying to the relevant lease. However, as noted by Kirby J (quoted at [47] above), the Assembly cannot "do by circuitous means what it could not successfully do directly".

60. The central issue for Mr Donohue, then, is to identify both the proprietary interest of which he has been "effectively deprived", and the proprietary interest that has been acquired by the Territory as a result of so depriving him.

61. In the course of the hearing of this matter, which was adjourned part heard on two occasions, counsel for Mr Donohue made several attempts at formulating a description of what he had been deprived of as a result of the operation of R28.

62. Counsel for Mr Donohue explained his argument in his first written submissions as follows:

1. The question arises in the context of the valuation of the subject lease for the purposes of Section 277 Planning and Development Act 2007 ("P&D Act"). In determining the V2 ("Before") Value, it must be assumed that the lease will not be varied over its term. The Before Value will be greater if the lease is capable of subdivision under the Unit Titles Act 2000 ("unit subdivision").
2. If the challenged Rule 28 applies to the subject lease it will preclude unit subdivision because it makes variation of the lease a pre-condition. Since it must be assumed that variation will not occur, the lease must be valued on the basis that unit subdivision is not possible.

1. The subject Crown lease is one of a number of residential Crown leases issued in the same terms which have no restriction on the number of dwellings which may be constructed on the land. The majority of residential leases do have a restriction, e.g., "not more than one single unit private residential dwelling".
2. The market value of a lease for the purposes of Section 277 is predicated on development of the leased land to its highest and best use and includes development potential. The highest and best use of residential land is achieved when individual dwellings may be sold off under separate Crown leases consequent on unit subdivision.
3. The market value of a restricted lease is a function of the number of permitted dwellings. The potential for future increase in the number adds little value because it is known that the lease must first be varied and 75% of that increase must be paid to the Territory - the rights to increase development must be bought from the Territory.
4. The market value of an unrestricted lease, on the other hand, reflects the number of dwellings that are permitted by the planning controls of the time. The potential for future increase (as would occur when controls are relaxed) adds substantially to the value because no variation of the lease is involved - the whole of the development rights are already held by the lessee and no charge is payable to the Territory.

1. Rule 28 requires the number of dwellings proposed in a unit subdivision to be stated in the Crown lease. If the number stated in a restricted lease is not enough the lease will have to be varied by increasing to the number proposed. As no number is stated in an unrestricted lease it will have to be varied so as to state the proposed number.
2. Such variation of the unrestricted lease converts it into a restricted lease with the result that any future increase in the permitted number of dwellings will have to be bought from the Territory.
3. Rule 28 places the lessee of an unrestricted lease on the horns of a dilemma - the lessee must choose between development with, and development without, unit subdivision. The latter will not achieve the highest and best use of the land, and the former entails handing back to the Territory all future development rights. Both have the effect of reducing the market value of the lease. The further alternative of foregoing [sic] development altogether (Hobson's choice) reduces value even further.

63. The next explanation of the property acquired as a result of R28 was:

1. It is common ground that
   • The highest and best use of the subject land under the current rules is as a residential apartment building subdivided under the Unit Titles Act into 11 units.
   • Use as a residential apartment building consisting of 11 units but not subdivided under the Unit Titles Act is a lesser use
   • the subject lease contains no limits on the intensity of residential use.
2. Absent a statutory provision to the contrary, the lessee would not need to increase the level of development intensity permitted under the subject lease in order to achieve the highest and best use, as determined by current or future rule settings. Correspondingly, as the Crown lessor in the case of this lease has not retained control over the increased development intensity it is not able to charge for a grant of additional rights. The value of the lease thus comprises the highest and best use under the current rule settings plus an additional amount reflecting the ability to utilise increased development opportunities in the future without additional payment.

1. Rule 28 has the effect that unit title subdivision is not available in respect of the subject lease unless the lease is varied so as to limit the permitted development intensity to 11 units. If the lessee varies the lease in this way it will in the future have to pay the Crown lessor for additional rights in order to utilise increased development opportunities as they arise. If the lease is not varied in this way, the lessee cannot undertake unit title subdivision. Rule 28 thus forces the lessee to choose between
   • Achieving the highest and best use under the current rule settings; or
   • Retaining the ability to utilise increased development opportunities in the future.
2. Whichever course the lessee takes results in a loss of use rights - either the ability to develop more intensively in the future, or the ability to undertake unit title subdivision now. The resulting diminution in the package of use rights available to the lessee results in a commensurate reduction in the value of the land in the hands of the lessee.

64. After further argument, I ordered Mr Donohue to file further submissions identifying the property said to be acquired by R28. Counsel submitted as follows:

Rule 28 has the effect of immediately denying the lessee his ability to undertake unit subdivision unless he chooses to give up his future rights - his choice is not whether, but which, to give up. That curtailment of his freedom to exercise his rights of ownership is a taking of property.

The loss of rights is reflected in a reduction in the value of the Crown lease. There would be no acquisition if the legal relation of the Territory to the lease remained unaffected after the taking. But the lower value operates in favour of the Territory enabling it to collect a Change of Use Charge which it would not have done otherwise. The financial interest which the Territory retains through the Change of Use Charge mechanism is thus augmented - a beneficial change in the legal relation with the lease acquired in the same way as the benefit to the Commonwealth in Newcrest or the financial benefit flowing to the employer in Georgiadis.

65. There are in my view a number of weak links in the various forms of Mr Donohue's argument.

66. First, counsel asserts some kind of fundamental right to develop land to its "highest and best use" (see [42] above). Assuming that this is in fact a right attaching to some or all interests in land, it is subject to planning and other restrictions as in force from time to time, as well as to condition (1)(d) of the lease (at [17] above), which explicitly prevents any development by the lessee without approval. Such requirements, and changes to them, even where they restrict rather than expand the development options, are not as such acquisitions of property; in the Tasmanian Dams Case, Deane J said at 283:

On the other hand, laws which merely prohibit or control a particular use of, or particular acts upon, property plainly do not constitute an "acquisition" of property for purposes of the Commonwealth. Commonly, such laws are of general application and apply to property by reason of its being property of a particular description or by reference to the nature of the use or act prohibited or controlled. While a law which restricts or controls the use or enjoyment of property by means of specific identification of the property affected comes closer to the area of acquisition of property, it is, as a matter of ordinary language, impossible to say that there has been any acquisition of property if all that is involved is restriction of what can be done upon it; see, e.g., Belfast Corporation v. O.D. Cars Ltd. [1960] AC 490. The mere extinguishment or deprivation of rights in relation to property does not involve acquisition.

67. See also Stephen J in Trade Practices Commission v Tooth & Co Ltd [1979] HCA 47; (1979) 142 CLR 397 at 413-414.

68. Secondly, while Spencer may provide a basis for taking account of development potential, it does not justify a claim that the value of the lease at any point necessarily reflects all possible development, in any possible planning or other context, for an indefinite time into the future. To the extent that such a claim may be logically sound, the actual value at any point will presumably reflect a substantial discount having regard to the uncertainty of, among other things, planning and other relevant regimes over time.

69. At this point, for instance, the vast majority of the pre-variation value of Mr Donohue's lease seems likely to reflect the potential for development into an 11-unit complex, with the potential for development into, say, a 100-unit residential tower having at most a minor incidental impact. Under Spencer, that more distant potential, even if identifiable, should probably be excluded in valuing the lease, with or without R28.

70. One of the themes running through counsel's explanation of the claimed acquisition is that R28 requires a lessee who holds a lease with no direct restriction on the number of units that can be built to make a choice between:

(a) realising the current "highest and best use" (by subdividing to reflect the maximum number of units currently permitted by planning rules, which under R28 requires first an acceptance of an upper limit on the number of residential units permissible on the land); and

(b) retaining the option to take advantage of a future increase in the total number of units permitted (while also being able to redevelop the land subject to the lease to the same maximum dwelling load, albeit without the ability to subdivide and sell off the dwellings individually).

71. This focus on the curtailment of what counsel called the lessee's "freedom to exercise his rights of ownership" is also not convincing.

72. The argument seems to be that the property that Mr Donohue loses by the operation of R28 is in fact the right not to have to make a choice about how and when he develops the leased property.

73. There are several odd aspects to this argument.

74. First, to the extent that the argument focuses not on the lessee's property but on the need for a lessee to make a choice about how to deal with the property, it is hard to work out what property is said to be acquired. Neither an entitlement to, in the vernacular, have one's cake and eat it nor, alternatively, an entitlement not to have to make hard decisions, is obviously a proprietary right, in relation to a lease, of the kind protected by section 23(1)(a) of the Self-Government Act or section 51(xxxi) of The Constitution. However, there may be a more serious conceptual problem with the argument.

75. The choice Mr Donohue complains about is between:

(a) realising the maximum current value of his lease (by subdividing and selling off the subdivided leases); and

(b) accepting a lower immediate return (by developing the land and subleasing it without subdivision) in order to retain the possibility of extracting further value from the land as a result of legislative, planning or other changes in the future.

76. The basic choice between taking the profit now, and holding in the hope that the profit will be disproportionately better later, is faced at all times by anyone who holds an interest in land or indeed most other tradeable property. In any such case, once the holder chooses to take the profit, the holder's ability to profit from that property in the future is gone.

77. That is, the choice facing Mr Donohue is not created, or imposed on Mr Donohue, by the operation of R28; at most, R28 might from time to time slightly adjust the weight of relevant considerations in making that choice (between holding on the one hand and subdividing and selling on the other).

78. Even if the right not to have to make a choice could be identified as property, it is not a right that is taken away from the lessee by R28.

79. Despite the tenor of the submissions quoted above, Mr Donohue's real argument seems to be that the operation of R28 affects the current value of his lease because of its impact on the potential value of that lease (this is the significance of the comment in Spencer that potential value is to be taken into account in assessing the value of an interest in land: at [40] above).

80. Paragraph 7 of the agreed statement of facts records the parties' agreement that R28 reduces the value of Mr Donohue's lease below what it would be if R28 did not apply.

81. However, this does not mean that R28 effects any kind of acquisition of property. Other planning laws also reduce the value of Mr Donohue's lease below what it would be in the absence of those rules (the obvious example is that Mr Donohue's lease would presumably be significantly more valuable if planning laws currently permitted the construction of, say, 25 residential units on the land concerned rather than only 11 units).

82. As noted in Waterhouse, a reduction in the value of property caused by a restriction that may diminish the market for, or the market value of, the property is not necessarily an acquisition of the property or even of an interest in the property.

83. Importantly, the capacity to subdivide under the Unit Titles Act 2001 is clearly not a right that attached to the lease when it was granted in 1959. Nor was the capacity to subdivide under the Unit Titles Act 1970 (ACT) (originally the Unit Titles Ordinance 1970). I have not examined whether there was a predecessor to the 1970 Ordinance, but that Ordinance and the current Act are sufficiently different to satisfy me that whatever subdivision opportunities were available in 1959, they were unlikely to be identical to the current ones.

84. As well, the opportunities under the Unit Titles Act depend on compliance with a variety of rules or conditions set out in that Act (for instance, that the units proposed will be suitable for separate occupation (s 20(1)(b)), that the proposed schedule of unit entitlements is reasonable (s 20(1)(c)), and that any encroachment on a public space is in general terms acceptable (s 20(1)(d)).

85. It is apparent that each of these conditions might also require the lessee/developer of the original lease to abandon a more lucrative development in favour of a development and subdivision that will obtain Unit Titles Act registration. The more lucrative development, moreover, is one which may otherwise be immediately available, rather than one which might or might not be available at some unspecified time in the future. I cannot see that the fact that the restriction imposed on Mr Donohue's dealing with his lease by R28 is not included in the Unit Titles Act differentiates it from the various restrictions imposed either by that Act itself or by other planning rules such as the one that limits current development on the land to 11 units.

86. Finally, it is worth emphasising again that under condition (d) of Mr Donohue's lease (at [17] above), development on the land subject to the lease has always been subject to approval. I can see no basis for saying that despite this restriction on development that has been in the lease since it was issued, the lease somehow came with a separate entitlement to deal with the land under any current statutory scheme (even one that did not apply to the lease when it was issued), and that such entitlement cannot be limited except (presumably) by restrictions currently (or perhaps from time to time) included in the legislation for that statutory scheme. Apart from anything else, to the extent that the argument seems to distinguish between restrictions contained in the Unit Titles Act and those sought to be applied by other means (specifically by R28 and s 50 of the Planning and Development Act), it would seem to fall foul of the principle discussed at [47] above in terms that the Assembly cannot "do by circuitous means what it could not successfully do directly". That is, if valid restrictions on subdivision under the Unit Titles Act can be directly imposed by that Act, it is hard to see why restrictions on subdivision should amount to an invalid acquisition of property when imposed in the same terms but indirectly.

87. In 2011, the Unit Titles Act was amended by the Planning and Development (Lease Variation Charges) Amendment Act 2011 (ACT) to include a provision to a similar effect as R28 (now s 20(4)). The Explanatory Statement for the Planning and Development (Lease Variation Charges) Amendment Bill 2011 included the claim that R28 "is effectively a process requirement particular to the operation of the Unit Titles Act". The fact that a claim is made in an Explanatory Statement does not make it true, but nor is such a claim necessarily false. In fact, the claim is generally consistent with the conclusions I have reached independently of that claim.

88. Mr Donohue has no vested right to deal with his lease under the Unit Titles Act, nor any right to any particular operation of that Act. The statutory scheme for subdividing a lease under the Unit Titles Act can be changed by new legislation without affecting anything that could be identified as property of Mr Donohue (this is not to say that any provision could avoid the restriction on acquisitions of property merely by being included in the Unit Titles Act, only that variations in such a scheme do not on their face result in acquisitions of property). As counsel for ACTPLA submitted, the Unit Titles Act could be repealed in its entirety, excluding the possibility of any further subdivisions, without interfering with any property right of Mr Donohue (despite what would no doubt be an impact on the market value of his property).

89. As in Waterhouse, Mr Donohue has lost some kind of option in relation to what he does with his property (ie the lease), which may have an effect on its value from time to time - but he has not lost that property.

90. It is clear that R28 affects the environment in which Mr Donohue considers what to do with his lease, and in particular affects his immediate redevelopment options. It may be that R28 has some impact on the value of Mr Donohue's lease from time to time, or on his assessment of his options, but it is equally clear that he has not been deprived of "the substance of [his] proprietary interest" in his lease.

91. In summary, Mr Donohue's submissions have not identified anything that I could find to be property that might, by reason of the operation of R28, be at risk of being acquired.

92. Nor has Mr Donohue established that by virtue of the operation of R28, the Territory has acquired an interest that is proprietary in character.

93. Mr Donohue argues that what has been acquired is the chance of extracting increased CUCs in respect of any future development of his lease because of the operation of R28. The argument is that:

(a) as agreed, the value of Mr Donohue's lease is lower because of the R28 restrictions than it would be without the application of R28; and

(b) therefore, the increase in value from a lease variation will be larger because it will start from a lower base; and

(c) therefore, the CUC payable will be higher.

94. Again, there are several problems with this argument. First, it is by no means clear that the effect of a lower starting value for the lease as affected by R28 will be a larger increase in value arising out of any lease variation.

95. Mr Donohue argues that because his current lease includes all possible development rights, no lease variation will actually increase the value of the lease, thus eliminating the scope for a CUC to be collected (presumably at any stage). In contrast, if R28 applies, the value of the lease will be locked in at a value reflecting the lease variation to specify 11 residential units. On this argument, that first lease variation would if anything involve a diminution in value. From that point, any further lease variation will increase the total value of the lease and thus give rise to liability for a CUC.

96. The only information before me about whether this argument has any substance is:

(a) the parties' agreement that if R28 applies to the subject lease it has the effect that the "V2" value under s 277 of the Planning and Development Act is less than it would be if R28 did not apply to the subject lease (at [6] above);

(b) The CUC assessment for the lease variation to specify the number of residential units permissible on the leased land.

97. The parties' agreement about the effect of R28 on the lease value carries no explanation, and counsel for ACTPLA explicitly noted that in agreeing to this proposition ACTPLA did not concede any particular explanation for it. Accordingly, I am left to note that this agreed discrepancy in value might reflect a loss of what Mr Donohue says are the unlimited development rights, might reflect only the nuisance value of having to obtain the lease variation before making a Unit Titles Act subdivision application, or might reflect some other factor not so far mentioned.

98. The significance of the CUC assessment is also unclear. Again, the assessed increased value of the lease after the variation to lock in the maximum load of 11 residential units might reflect only the nuisance value of the first step in the subdivision process. If that is the case, a charge of 75% of what must represent not an increased value as a result of the variation but an increased value as a result of organising and obtaining the variation, representing largely the costs of that variation, seems an inappropriate subject for a CUC, but that is a separate issue.

99. However, if a presumably expert valuer has concluded that the value of the lease has actually increased as a result of locking in the 11-unit maximum and thereby abandoning the possibility of a higher maximum density in the future (a possibility that adheres to the lease even in the context of R28 until a lease variation is approved), this must raise questions about the validity of Mr Donohue's argument about the significance of R28. That is, it may be that as a matter of valuing theory, the value attributable to long-term development potential is significantly outweighed by the value of locking in current development potential - a result which would not be particularly surprising given:

(a) first, that theoretically unlimited development potential is at all times subject to the planning and development environment; and

(b) secondly, the very real scope for the planning and development environment (or other aspects of the environment) to change over time in any number of ways, not all of them necessarily conducive to increased values for particular property.

100. This uncertainty about the assessed values may reflect the conflict between realising current value and holding out for potential value, that, as noted at [76] above, is an attribute of most tradeable property.

101. I have already at [69] above concluded that the extra development potential that Mr Donohue argues would, absent R28, have been retained in the lease after subdivision would have had at most a minor incidental impact on the value of Mr Donohue's lease in his hands (ie before or when he subdivided and sold off the new leases) or subsequently. There is no basis in the material before me on which I could have been satisfied that over time the impact of R28 would lead to the collection of higher CUCs each time the land subject to Mr Donohue's lease is redeveloped, or that any such increase in the CUCs would be of more than incidental significance to the Territory.

102. If it cannot be said definitively that the theoretical CUC in respect of a lease variation for a lease affected by R28 will be higher than for a lease that was not affected by R28, then it cannot be said that the Territory has acquired a right or even an expectation of obtaining increased CUC revenue by enforcing R28.

103. Even if I had been satisfied that the effect of R28 would be to increase the scope for the Territory to collect more by way of CUCs from subdivisions of Mr Donohue's lease and leases with equivalent conditions, this would not have required a finding that the Territory was acquiring property from Mr Donohue. As already noted at [54(i)] above, what is acquired in a relevant "acquisition of property" must be "proprietary in character".

104. The possibility of collecting increased revenue from future development of land in the Territory as to which Crown leases have already been granted (that is, not from selling leases over unleased land) is not in my view "proprietary in character".

105. Mr Donohue, however, makes another argument in this context, which if I understand it correctly is:

(a) that his lease includes the right to unlimited development of the subject land except as restricted by planning restrictions and requirements from time to time;

(b) that by varying the lease as required by R28 he is being forced to return to the Territory the "unused" development rights (that is, in the current context, the scope for developing the land to carry more than the currently permitted maximum of 11 dwelling units); and

(c) that those rights are property which will be acquired by the Territory and may then be subsequently sold back to lessees of the land or parts of it when planning changes give some content to those unused development rights.

106. I cannot see that permission to develop is a proprietary right, especially not one that can be separated from the proprietary interest in what is to be developed.

107. To the extent that land carries an immediate right to particular development, that incident of the property interest in the land presumably has an impact on the value of that property interest. To the extent that the scope for development is expanded by changes in the regulatory environment, that too presumably affects the value of the property interest.

108. However, a right to develop land to a particular extent does not seem to be property that can be separated from the interest in the land. The lessee could not transfer it to anyone else except by a transfer of the lease, and equally that right is not property that the Territory can hold for its own purposes, or transfer to anyone except the holder of the lease. In these respects, the property that Mr Donohue claims is being acquired by the Territory differs from interests relating to land that can in fact be dealt with separately from the primary property interests (eg mining leases, or the air space rights transferrable under NSW planning laws on a basis that enabled the transferee to use the rights, although not by using the actual air space that was the source of the rights; at [44] above). That is, it makes no sense to suggest that, for instance, Mr Donohue could retain the lease but the Territory could sell enhanced development rights in respect of the land to someone else.

109. Nor are the claimed unlimited development rights so central to the lessee's enjoyment and use of the land that the restriction on future subdivision achieved as part of the price of permitting the first subdivision could be said to have in any way "sterilised" the land so as to effectively deprive Mr Donohue of his property. It is worth emphasising, again, that R28 does not affect Mr Donohue's right to develop the subject land to the maximum dwelling load from time to time - only his right to subdivide the land into separate leases each carrying, indirectly, its own right to further develop the subject of the new lease to the maximum dwelling load from time to time. The "subdivided" leases do not directly carry any such right themselves, but they do carry the potential for such a right to attach to a new lease arising as a result of a subsequent cancellation of the units plan covering the subdivided lease (Unit Titles Act, div 11.3, subject of course to changes in the that Act from time to time).

110. Finally, I note that none of the possible benefits to the Territory considered above are in the nature of that considered in Georgiadis, in which the extinguishment of a particular claim against the Commonwealth was found to confer on the Commonwealth a benefit equal to the value of the claim extinguished. Here, there is no basis for saying that any impact that R28 might have on the value of Mr Donohue's lease from time to time bears or will bear any direct relationship to any benefit by way of increased CUCs that the Territory might gain from time to time in the future, or more accurately in the circumstances, that any benefit obtained by the Territory from higher CUCs in the future will have any direct impact on the value of Mr Donohue's lease from time to time. Even if Mr Donohue is correct in claiming that the value of his lease will be affected by the possibility of a liability to CUCs, or to higher CUCs, for future developments of the relevant land, the future CUCs are not only unknown but currently unknowable (because they will depend on variables such as the nature of the developments and the rate at which CUCs are charged), and therefore cannot be said to have any mathematical or other direct relationship with any change in the value from time to time of Mr Donohue's lease.

111. I am satisfied that the effect of R28 and s 50 of the Planning and Development Act is not to permit the Territory to acquire anything that could properly be described as property. In asserting that the Territory would as a result of R28 acquire property, Mr Donohue may well have succumbed to "the fallacy of 'delusive exactness'" (at [51] above).

(a) that R28 either is, or is given effect by, a law made by the Assembly within the meaning of s 23(1)(a) of the Self-Government Act;

(b) that R28, directly or indirectly, does not deprive Mr Donohue of property; and

(c) that the Territory does not acquire property as a result of the direct or indirect operation of R28.

113. Therefore, s 23(1)(a) of the Self-Government Act has no significance for the operation of R28.

114. The question referred, and the answer, are as follows:

Question: Whether Rule 28 of the Territory Plan Multi-Unit Housing Code Part B - General Development Controls is a law capable of applying to the Crown lease of Block 21 Section 38 Turner, having regard to Section 23(1)(a) of the ACT Self-Government Act 1988 (Clth).

Answer: Nothing in s 23(1)(a) of the Australian Capital Territory (Self-Government) Act 1988 (Cwlth) prevents Rule 28 applying to the Crown lease of Block 21 Section 38 Turner, whether Rule 28 is:

(a) a law made by the Assembly; or

(b) a provision binding the Territory, the Executive, a Minister or a territory authority under a law made by the Assembly, specifically s 50 of the Planning and Development Act.

(a) the question referred is answered as set out at [114] above; and

(b) the parties be heard as to costs.

I certify that the preceding one-hundred and fifteen (115) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Penfold.

Solicitor for the initiating party: Donohue & Co Solicitors

Solicitor for the other active party: ACT Government Solicitor

Dates of hearing: 24 April, 28 September, 16 November, 17 December 2012