PJ Magennis Pty Ltd v Commonwealth

PJ Magennis Pty Ltd v Commonwealth - [1949] HCA 66 - HCA 1949 case summary — Zoe

[43]

The Closer Settlement (Amendment) Act 1907 N.S.W. as it stood when the agreement was ratified by the State Parliament, gives power to the Governor of the State to resume land for closer settlement - s. 4: before this power can be exercised to resume any land, it is necessary for the Governor to notify that he proposes to consider the advisableness of acquiring the land for the purposes of closer settlement. A notification was made on 23rd August 1945 under s. 4 with respect to the plaintiff's land. That indeed was the date of the conference of Ministers at which the proposals embodied in the agreement were approved. Assent was given to the Commonwealth Act authorizing the execution of the agreement on 11th October 1945 and to the State Act ratifying it on 7th January 1946. In consequence of the approval and ratification of the agreement by the State Parliament, that legislature amended the State's War Service Land Settlement Act 1941 and the Closer Settlement (Amendment) Act 1907. These amendments were made by the War Service Land Settlement and Closer Settlement (Amendment) Act 1945, to which assent was given on 17th January 1946. The most important for present purposes of these amendments was made in consequence of clause 11 of the agreement. The material parts of this clause provide that the State shall (a) set apart or resume, as the case may be, for settlement such land comprised in an approved plan of settlement as is Crown land; and (b) acquire compulsorily or by agreement and at a value not exceeding that ruling on 10th February, 1942, private land or lands held under lease from the Crown comprised in an approved plan of settlement. The State had legislative and administrative machinery to purchase or compulsorily acquire land and it could by setting that machinery in motion carry out the part assigned to it by these parts of clause 11. There was no provision in any State law limiting value by reference to the rule laid down in clause 11. Section 3 of the War Service Land Settlement and Closer Settlement (Amendment) Act 1945, to which assent was given on 17th January 1946, made an amendment in s. 4 of the Closer Settlement (Amendment) Act 1907 which imposes a limitation upon value in accordance with the rule laid down in clause 11 in any case where land is resumed "for the purpose of the scheme contained in the Agreement approved and ratified by the War Service Land Settlement Agreement Act, 1945." This is the State Act to which reference has been made.

[49]

These are demurrers by the defendants to an action in which the plaintiff claims declarations that the War Service Land Settlement Agreements Act 1945 Cth., the War Service Land Settlement Agreement Act 1945 N.S.W., the Closer Settlement (Amendment) Act 1907 N.S.W. as subsequently amended and in particular ss. 4 (1) (b) and 5, and the War Service Land Settlement Agreement are all invalid, and consequent injunctions. Paragraph 14 of the statement of claim alleges, and these allegations must be taken to be true for the purposes of the demurrers, that the State of New South Wales has threatened and intends to resume the plaintiff's land for the purposes of the War Service Land Settlement Agreement. This is an agreement made between the Commonwealth and the State of New South Wales. Section 3 (1) of the War Service Land Settlement Agreements Act 1945 Cth., which came into operation on 11th October 1945, provides that the execution by or on behalf of the Commonwealth of agreements between the Commonwealth and the State of New South Wales, the Commonwealth and the State of Victoria, and the Commonwealth and the State of Queensland, substantially in accordance with the form contained in the First Schedule to this Act, is hereby authorized. This Act also provides, s. 3 (2), that the execution by or on behalf of the Commonwealth, of agreements between the Commonwealth and the State of South Australia, the Commonwealth and the State of Western Australia, and the Commonwealth and the State of Tasmania, substantially in accordance with the form contained in the Second Schedule to this Act, is hereby authorized. The most important variation between the two forms of agreement for the purposes of the present case is that the first agreement provides (clause 11), that the State shall set apart or resume, as the case may be, for settlement such land comprised in an approved plan of settlement as is Crown land; and acquire compulsorily or by agreement and at a value not exceeding that ruling on the 10th February 1942, private land or lands held under lease from the Crown comprised in an approved plan of settlement; whereas the second agreement provides (clause 11), that the State shall set apart Crown land or with funds provided by the Commonwealth resume for settlement Crown land and acquire compulsorily or by agreement private land comprised in an approved plan of settlement at a value to be approved by the Commonwealth and will hold the same for use for the purposes of the scheme. There is therefore in the second agreement no limitation of the value at which the land is to be acquired to that ruling on 10th February 1942.

[52]

The agreement is a joint scheme entered into by the Commonwealth and the State to settle discharged members of the Forces on land in New South Wales. The agreement is not for a fixed term. It is dated 28th November 1945 and will continue until 15th August 1950 at least, and may continue for an indefinite period afterwards. Yet, whenever the State acquires private land by agreement or compulsion for the purposes of the scheme, it must do so at a value not exceeding that ruling on 10th February 1942. It is therefore immaterial what changes in the value of the land may occur between 10th February 1942 and the date of acquisition, even assuming that no improvements are made in the meantime, and if they are made, there is no provision for the owner receiving compensation for any increase in the value of the land on this account. The compensation is therefore obviously inequitable and the agreement provides for the compulsory acquisition of land from private owners on a semi-confiscatory basis. Section 51 (xxxi.) of the Constitution provides that Parliament shall have power to make laws with respect to 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. Whenever, therefore, the Commonwealth Parliament legislates with respect to the acquisition of property for a purpose in respect of which the Parliament has power to make laws, the legislation must provide just terms, that is the legislation must provide that the owner shall receive the full equivalent in money for the value of the property of which he is deprived. The agreement attempts to escape this constitutional requirement by providing that the State and not the Commonwealth shall make the acquisition and become the owner of the land. The State legislation relied upon is contained in the Closer Settlement (Amendment) Act 1907, s. 4 as amended by s. 3 of the War Service Land Settlement and Closer Settlement (Amendment) Act 1945 N.S.W. and s. 7 of the War Service Land Settlement and Closer Settlement (Amendment) Act 1948 N.S.W. The method of acquisition provided for by s. 4 is that where an advisory board reports that any land is suitable to be acquired for closer settlement the Governor may, subject to the Act, purchase it by agreement from the owner; or, failing such agreement, resume it under the Act. Before resuming any land, the Governor shall, by proclamation in the Gazette , notify that he proposes to consider the advisableness of acquiring such land for the purposes of closer settlement. Section 3 (b) of the amending Act of 1946 inserted at the end of s. 4 of the Act of 1907 a new sub-s. 4 (1) and (b), of which (b) provides in a proviso that where any resumption is made for the purposes of the scheme contained in the agreement approved and ratified by the War Service Land Settlement Agreement Act 1945, the value of the land as so assessed or determined (that is assessed by an advisory board or determined by the Land and Valuation Court) shall not exceed the value that would have been so assessed or determined in respect of an identical resumption as at 10th February 1942, excepting the value of any improvements effected on such land since that date. This proviso was amended by s. 3 of the amending Act of 1948. The effect of the amendment is that an advisory board can now add fifteen per cent to the value ruling on 10th February 1942, and in the case of compulsory acquisition, if the dispossessed owner agrees not to claim compensation in excess of the value of the land as assessed by an advisory board, the value of the land as so assessed shall not exceed by more than fifteen per cent the value ruling on 10th February 1942 excepting the value of any improvements effected on such land since that date. But in the case of any resumption other than a resumption where the owner agrees not to claim compensation in excess of the value of the land as assessed by an advisory board, the value of the land is still, as under the previous proviso, to be the value ruling on 10th February 1942, excepting the value of any improvements effected on such land since that date. The proviso in its latest form therefore provides an inducement to owners who are prepared to forego their statutory right to appeal to the Land and Valuation Court from an assessment of an advisory board by providing that such owners are to have their compensation assessed at a higher rate than those owners who are not prepared to forego this right. Such an inducement is not provided for in the agreement so that presumably the State is prepared to finance the whole of it. But it is immaterial on these demurrers, for the plaintiff is not prepared to accept the rate ruling on 10th February 1942, even plus fifteen per cent, and has not been induced not to challenge the whole scheme.

[54]

A number of arguments were addressed to the Court on behalf of the plaintiff. The substantial question is whether the War Service Land Settlement Agreements Act 1945 Cth. is invalidated by s. 51 (xxxi.) of the Constitution, and if it is invalidated, what effect the invalidation has upon the proviso to s. 4 (b) of the Closer Settlement (Amendment) Act 1907 as amended by the Acts of 1946 and 1948. It is submitted for the plaintiff that s. 3 of the Commonwealth Act is a law with respect to the acquisition of property for a purpose of the Commonwealth, that is the rehabilitation of discharged members of the Forces, within the meaning of s. 51 (xxxi.) of the Constitution. Legislation for the rehabilitation of discharged members of the Forces is, of course, authorized by the defence power of the Commonwealth, s. 51 (vi.) of the Constitution, and legislation for this purpose is therefore legislation for a purpose in respect of which the Commonwealth Parliament has power to make laws within the meaning of par. (xxxi.). Section 3 (1) of the War Service Land Settlement Agreements Act 1945 Cth. merely authorizes the execution of the agreement so that, in order to determine its real effect, it is necessary to turn to the agreement itself. The party which resumes the land under the agreement is the State. The State agrees to resume the land at a sum not exceeding its value on 10th February 1942, but the agreement does not intend the settler to repay the State even on this basis for he is placed on the land at a valuation which will enable him to earn a reasonable living after meeting such financial commitments (excluding principal repayments under any agreement between the State and the settler for the purchase of land) as would be incurred by a settler possessing no capital. If this value is less than the value for which the land was acquired, plus the cost of developing and improving the land for settlement under the terms of the agreement, the State shall contribute one-half of the excess of this total cost and the other half of the excess shall be contributed by the Commonwealth.

[55]

Further, applicants may require training, or settlers, that is the persons who have been allotted holdings under the scheme, may require further experience to fit them to work their holdings, and so the agreement makes provision for such training and for an assistance period of one year (subject to extension in special circumstances) during which the settler is to receive a living allowance from the Commonwealth and during which he shall not be required to pay any rent or interest in respect of the holding or make any payment on account of principal or interest in respect of advances (other than certain advances for working capital). It is the Commonwealth which provides the training and pays to applicants selected for training, living allowances and transport incidental to their training, and which provides living allowances for settlers during the assistance period. The Commonwealth also meets one-half of the cost involved in the remission of rent and interest during the assistance period. The selection of the settlers is important. Clause 12 (c) provides that an applicant for settlement shall apply to the appropriate State authority which shall on behalf of the Commonwealth determine whether an applicant is an eligible person, and classify eligible persons as suitable (either immediately or after training or further experience) or as unsuitable for settlement. Clause 15 provides for the State making arrangements approved by the Commonwealth for making advances to settlers for the purposes of providing working capital and paying for and effecting improvements and acquiring stock, plant and equipment. The agreement provides that any losses incurred in respect of these advances shall be equally borne by the Commonwealth and the State. Finally the agreement provides that the State shall subdivide, develop and improve the land to a stage where it can be brought into production by a settler within a reasonable time having regard to the type of production proposed, and that the form and conditions of tenure on which a holding is to be held by a settler shall be determined by the State.

[56]

It is apparent that the agreement is a joint scheme by the Commonwealth and the State to settle on the land discharged members of the Forces selected by a State authority on behalf of the Commonwealth. The scheme requires valid Commonwealth and State legislation to make it effective. The Commonwealth legislation is s. 3 (1) of the War Service Land Settlement Agreements Act 1945. It is legislation for a purpose in respect of which the Commonwealth Parliament has power to make laws because its purpose is to enable the executive government of the Commonwealth to carry out the terms of the agreement. It is also legislation with respect to the acquisition of property from, inter alia, private persons for this purpose. It is true that the property is acquired from these persons by the machinery of State legislation, and it is only Commonwealth legislation with respect to the acquisition of property which must comply with s. 51, par. (xxxi.) of the Constitution. But the immediate question concerns the validity of s. 3 (1) of the War Service Land Settlement Agreements Act and this is Commonwealth legislation. In McClintock v. The Commonwealth [1] , Starke J. said: "That the constitutional power to make laws for 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 is not confined to laws for the acquisition of property by the Commonwealth alone as it contended. The only limitations upon the constitutional power are "just terms" and a "purpose in respect of which the Parliament has power to make laws." And there is no reason for further limiting the power. Authorities, independent of the Commonwealth, may be set up for various purposes under the constitutional powers of the Commonwealth and endowed with authority to acquire property. There is no constitutional provision denying this power to the Commonwealth." I said, in a judgment with which Rich J. was in substantial agreement, that "section 51, placitum (xxxi.) of the Constitution is not limited to the acquisition of property by the Commonwealth but extends to the acquisition of property for any purpose in respect of which the Commonwealth Parliament has power to make laws. The placitum requires that whenever the Parliament exercises such a legislative power, and the legislation provides for the acquisition of property from any State or person, the legislation must provide just terms for the acquisition, otherwise the acquisition is unlawful" [1] . In Bank of New South Wales v. The Commonwealth [2] it is said in the joint judgment of Rich J. and myself that "s. 51 (xxxi.) of the Constitution requires that laws for the acquisition of property shall provide for the acquisition on just terms. The requirement applies whether the law authorizes the Commonwealth or some person or corporation to acquire the property: McClintock v. The Commonwealth [3] ; Jenkins v. The Commonwealth [4] ." It was contended by Mr. Hardie that the only Commonwealth legislation which falls within par. (xxxi.) is legislation which effects or authorizes an acquisition of property or provides machinery for effecting the acquisition of property authorized by Commonwealth legislation, and that the agreement does not effect or authorize such an acquisition or provide such machinery. But there are no express words in the paragraph which limit its width in this way, and there is nothing in its subject matter or context from which such a limitation can be applied. In my opinion the paragraph applies to all Commonwealth legislation the object of which is to acquire property for a purpose in respect of which the Commonwealth Parliament has power to make laws. It is immaterial whether the acquisition is to be made by the Commonwealth or some body authorized to acquire property by the Commonwealth or by a State by agreement with the Commonwealth. The Commonwealth legislation is invalid unless it provides for the acquisition of the property on just terms by whatever machinery the acquisition is to be brought about. In order to be legislation with respect to the acquisition of property within the meaning of s. 51 (xxxi.) of the Constitution, the Commonwealth or some body authorized by the Commonwealth must no doubt have an interest in the acquisition of the property. Otherwise the acquisition could not be for a purpose in respect of which the Commonwealth Parliament has power to make laws. But the interest need not be a proprietary interest. Any legal interest including a contractual interest would be sufficient if it made the acquisition one for such a purpose. The present agreement confers on the Commonwealth a number of legal rights which are at least contractual rights with respect to the use and disposal of the land acquired by the State. When the land is so acquired it must be disposed of in accordance with the agreement and not otherwise. The land is acquired by the State on behalf of the Commonwealth and itself. Half the excess cost of acquiring, improving and developing the land, and more than half the other expenses incidental to carrying out the scheme are to be borne by the Commonwealth. The scheme would be in substance the same if the land was acquired jointly by the Commonwealth and the State. Under the scheme the State acquires the land solely but it is then dealt with on account of the Commonwealth and State jointly. The whole transaction is a joint venture entered into between the Commonwealth and the State to settle discharged members of the Forces on the land. The acquisition of the necessary land is of the essence of the scheme. The purpose of the Commonwealth is to settle discharged members of the Forces on this land. Commonwealth legislation authorizing the executive government of the Commonwealth to enter into such an agreement is, in my opinion, legislation with respect to the acquisition of land for a purpose in respect of which the Commonwealth Parliament has power to make laws. Section 3 (1) of the War Service Land Settlement Agreements Act is, therefore invalid.

[61]

In June 1945 the Commonwealth Parliament enacted the Re-establishment and Employment Act 1945, of which s. 103 provided that the Commonwealth might, in accordance with any agreement, make advances or payments to a State to enable it to acquire land for settlement by discharged members of the Forces, to develop and improve land for that purpose, and to settle discharged members of the Forces thereon; and for such other purposes relating to the settlement of such members of the Forces as might be prescribed. In August 1945 a conference of Commonwealth and State Ministers was held at Canberra. This conference agreed on certain proposals, which, from the recital of the agreement hereinafter referred to, appear to have been in the terms of that agreement. Before an agreement was entered into between the Commonwealth and any State, the Commonwealth Parliament in October 1945 enacted the War Service Settlement Agreements Act 1945 (No. 52 of 1945).This Act authorized the execution of agreements between the Commonwealth and the States of New South Wales, Victoria and Queensland substantially in accordance with the form contained in the first schedule to the Act. Authority was also given for the execution by the Commonwealth of agreements with the three remaining States substantially in accordance with the form in the second schedule, but we are concerned only with that in the first schedule. On 28th November 1945, in pursuance of this authority, the Prime Minister of the Commonwealth executed an agreement with the Premier of New South Wales in the form contained in the first schedule. The recital to this agreement refers to the conference of August 1945 at Canberra and states that certain proposals were agreed to with a view to the settlement on land in the State of New South Wales of discharged members of the Forces and other eligible persons. Clause 1 provided that the agreement should not be binding until approved by the State Parliament. By clause 2 "eligible person" was defined to include a discharged member of the Forces and also a person included in a class which the Commonwealth, with the State's concurrence, determined to be eligible to participate in the land settlement. By clause 4 the Commonwealth was to provide financial and other assistance, and the State was to initiate proposals for settlement, but the Commonwealth might do so in matters in respect of which it had power to make laws. By clause 5 the State was to provide capital moneys for acquiring, developing and improving the land. By clause 6 the State was to bear the cost of all State administration and to make a capital contribution in respect of each holding equal to one-half of the excess of the total cost over the valuation made by Commonwealth and State officers who in making the valuation were to allow for a reasonable living for the settler after meeting financial commitments other than land purchase. By clause 7 the Commonwealth was to bear its costs of administration, provide training and pay to trainees, living allowances and other training expenses. Both Commonwealth and State were to bear half the cost of rent and interest remissions and of certain losses and make a capital contribution of half the amount of the excess referred to in clause 6. By clause 10, after the State had selected land suitable for settlement, it was to prevent that land being otherwise dealt with. By clause 11 the State was to set apart or resume approved lands and by sub-clause (1) (b) acquire compulsorily or by agreement and at a value not exceeding that ruling on 10th February 1942 private land or land held under Crown lease. By clause 13 a living allowance might be granted to a settler during an assistance period on terms fixed by the Commonwealth. There were other provisions in the agreement not necessary to refer to, except perhaps clause 15 which with clause 7 made the Commonwealth and State each liable for half the loss on certain advances to settlers.

[65]

The proposals of the Canberra conference appear to have been beyond the power conferred by s. 103 of the Re-establishment and Employment Act 1945 and that may have been the reason why the proposals were made the subject of further legislation authorizing the agreement in the form in the schedule to Act No. 52 of 1945. The proposals appear to have gone beyond the authority of the first-mentioned Act in that they made provision for persons other than discharged soldiers, and also for the resumption of lands at February 1942 prices. Under reg. 6 of the National Security (Economic Organization) Regulations (see Manual of National Security Legislation, 6th ed., pp. 283-285) the compensation payable on resumptions was not subject to such regulations. There may have been other provisions in the proposal which required authority not possessed by the Ministers. It may have appeared reasonable to the Ministers that lands resumed for discharged soldiers should not be paid for at a higher price than lands purchased by agreement in the ordinary way; and it may have been their intention and that of the Prime Minister and Premier of New South Wales, as well as of both Parliaments, that the provision for resumption at February, 1942 prices should operate only so long as the National Security Regulations in respect of the price of land. The date 10th February 1942 indicates that all the Ministers and both Parliaments had these regulations in view. They were repealed as regards land as from 20th September 1948 (see the Declaration of the Commonwealth Treasurer of 17th idem made under Statutory Rule 1948 No. 121). Moreover it would be impossible to assume that the Ministers and the Parliament contemplated that the National Security Regulations would be followed by State legislation along the same lines. But counsel for the defendants submitted that the February 1942 prices still operated under the agreement and under the New South Wales legislation. They made an alternative submission that if these prices did not obtain the agreement and the New South Wales legislation was in any event valid as to the balance, although Mr. Barwick for the plaintiff asserted, and this was not denied, that there would be no resumption unless it could be made at the February 1942 prices. However, whatever may have been in fact the intention of the Ministers or Parliament there is no justification in law for imputing to them an intention that these prices should cease to operate with the regulations.

[66]

Then taking these prices as intended to continue in operation after 20th September 1948, I think that the Commonwealth legislation authorizing the agreement was contrary to par. (xxxi.) of s. 51 of the Commonwealth Constitution. Subject to this, I think that the agreement could be sustained under par. (vi.) of s. 51 and under s. 96 of the Commonwealth Constitution. As regards discharged soldiers it could be sustained under both sections, and as regards "eligible persons" not being discharged soldiers, it could be sustained under s. 96. I do not see why a provision for payments by the Commonwealth direct to settlers would render s. 96 inapplicable if the State desired or agreed to such payments direct. Both State and Commonwealth might benefit by direct payments, but that would be consistent with financial benefit to the States. However, clause 11 (1) (b), if it is still in operation as the defendants submit, does not provide for just terms. The courts will not readily deny that terms provided by the Commonwealth Parliament are just, and in this matter regard will be had to the interest of the public as well as to the interest of the owner. The question is whether the terms provided can reasonably be regarded as just. I can see no ground upon which clause 11 (1) (b) can be justified, seeing that it discriminates against a particular class of owners. I can suggest no reason or justification for such discrimination. It may be that there are lands which are not worth more than their value in February 1942, but it is safe to say that most lands would be worth considerably more. Any justification for the February 1942 values being maintained ceased with the repeal of the price-fixing regulations, so called not because of their precise terms but because of their effect in practice. It was not submitted that the terms were just. But it was submitted by Mr. Hardie for the New South Wales defendants that the Commonwealth statute No. 52 of 1945 merely authorizes the agreement. There is no substantive independent power in the Commonwealth Parliament to authorize agreements with the States. The power if it exists must be found in some section of the Constitution authorizing legislation to the effect of the agreement. I think the power is found in par. (vi.) of s. 51 and in s. 96. The agreement deals with matters with respect of which the Commonwealth Parliament has power to make laws: i.e. the settlement of discharged soldiers and financial assistance to the States. Further it is an agreement for the acquisition of property for such purposes. The question is whether the agreement and the Commonwealth statute authorizing it constitute a law with respect to the acquisition of property for such purposes. It is submitted for the defendants that it is not such a law because the acquisition is not made by the Commonwealth Parliament or by any body or person deriving the power of acquisition from that Parliament. In my opinion par. (xxxi.) of s. 51 is not so limited. It speaks of a law with respect to the acquisition of property. As the Commonwealth Parliament is a plenary legislature these words should be given their fullest meaning consistent with other provisions of the Constitution. They are broad enough to include an acquisition by the State exercising its powers of acquisition by agreement with the Commonwealth, and should, I think, be held to extend to such acquisition (see McClintock v. The Commonwealth [1] ).

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