Acquisition of Property Within s 51(xxxi)
123 Mr Spencer says that the imposition of a restriction on the use of land, or on the exercise of one or more of the rights that constitute the incidents of the ownership of land, is capable of constituting an acquisition of property. He argues that land is nothing more than a bundle of rights amounting to a relationship between a person with possession, or a right to possession, of those rights and the physical natural resources that comprise land, such as grass, trees, soil and water. If that relationship is sterilised or impaired by statute, an acquisition of property occurs.
124 Mr Spencer claims that his whole farming operation has been rendered unviable and that he can no longer use Saarahnlee for any reasonable purpose. He says that, therefore, his relationship with Saarahnlee has been acquired in the sense just indicated. He asserts that various incidents of his being the holder of freehold and leasehold title in respect of Saarahnlee have been lost to him, such that the benefit of those incidents has been acquired within the meaning of s 51(xxxi).
125 Mr Spencer's claim depends entirely upon the restrictions and prohibitions imposed by the State Statutes. However, neither of the State Statute imposes an absolute restriction or prohibition. Rather, each prohibits native vegetation clearance without development consent under Part 4 of the EPA Act. Even then, clearing is still permitted in certain additional circumstances, such to clear around fences, roads and other farming infrastructure.
126 On 6 March 2007, the Murrumbidgee Catchment Management Authority (the MCM Authority), a New South Wales instrumentality, wrote to Mr Spencer concerning a proposal put forward by Mr Spencer to clear 1,402 hectares of native vegetation on Saarahnlee. The MCM Authority said in its letter that, after analysis of field data, Mr Spencer's proposal failed to meet the relevant test and therefore that the proposal could not be approved. The letter also said that the MCM Authority had since assessed a number of other alternative smaller clearing sizes and that they also failed to meet the relevant test.
127 The letter went on to say that Mr Spencer had been assessed as having satisfied the initial test of eligibility for "Farmer Exit Assistance". The letter said that the next stage of assessment required an assessment of financial eligibility by the Rural Assistance Authority (the RA Authority), another New South Wales instrumentality. The letter said that, to be financially eligible for assistance, Mr Spencer would need to show that clearing of the area of land that satisfied the "Relative Hardship Test" was required to allow his farm business enterprise to meet some or all of five specified factors. Mr Spencer was invited to provide further information if he wished to proceed with an application for such assistance. He was told that, if his application met the eligibility criteria, it would be passed on to the Nature Conservation Trust, which would commission an independent valuation of Saarahnlee and provide an offer of purchase based on that valuation.
128 On 5 July 2007, the RA Authority wrote to Mr Spencer in connection with his application for assistance under the State's "Native Assistance Vegetation Package" and said that it was satisfied that Mr Spencer's farming enterprise "is not commercially viable". The letter stated that that position was a result of "the inability to clear native vegetation under the [2003 Vegetation Act]". The letter ended by saying that advice of the RA Authority's assessment had been forwarded to the Nature Conservation Trust.
129 There has been no evidence as to the outcome of Mr Spencer's application for assistance. Nevertheless, the communications of 6 March 2007 and 5 July 2007 suggest considerable support for Mr Spencer's contention that the effect of the State Statutes has been to occasion significant detriment to him. On the other hand, they also suggest some measure of compensation may be available to him in connection with the effect of the 2003 Vegetation Act. No submissions have been made directed to whether that compensation would satisfy a putative right to just terms.
130 Mr Spencer has no right to be granted development consent. Further, it appears that he has been refused development consent that would permit vegetation clearing of Saarahnlee. Such refusal of development consent may not be different from a case where, for example, development consent for proposed development is refused because the proposed development may present dangers to traffic or create undesirable effects on the surrounding community generally. There is a real question as to whether the withholding of development consent, in accordance with relevant principles for the grant or withholding of consent, entails an acquisition (see Bone v Mothershaw [2003] 2 Qd R 600 at 611 and Waterhouse v Minister for the Arts and Territories (1993) 43 FCR 175 at 180-185).
131 However, Mr Spencer contends that, in the circumstances of the restrictions and prohibitions that apply to Saarahnlee, there has been such a taking or acquisition of certain of the incidents of his ownership as to constitute acquisition or expropriation. He points specifically to all of the Rights and Interests identified in his statement of claim, including the Carbon Rights.
132 First, Mr Spencer identifies improvements consisting of timber treatment and pasture improvement. He says that, by the operation of the 1997 Vegetation Act and the 2003 Vegetation Act, he has lost the benefit of those improvements. Such improvements may well increase the value of land, so far as the improvements continues to exist. Mr Spencer appears to contend that he can no longer maintain the benefit of the improvements because he is now prohibited from clearing native vegetation so as to maintain that benefit.
133 Second, Mr Spencer says that the prohibition on clearing native vegetation prevents him from engaging in profitable undertakings consisting of the keeping of a special breed of sheep and various eco-service projects. The question of whether the effect of the prohibition on the clearing of native vegetation prevents the undertaking of those activities is a matter of fact and degree. Whether the loss of the opportunity to engage in those activities is such a restriction on the use of Saarahnlee as to prevent any reasonable use, so as to constitute an acquisition or taking will depend upon the ultimate findings of fact as to any reasonable use to which Saarahnlee can still be put, notwithstanding the prohibition on the clearing of native vegetation.
134 Third, Mr Spencer identifies wood on the terrain, timber in trees and millable timber. Mr Spencer refers more specifically to the loss of causes of action for compensation in respect of resumption rights arising under Crown leases in respect of parts of Saarahnlee. Mr Spencer's contention appears to be that New South Wales instrumentalities are entitled to take timber from Saarahnlee, but must compensate Mr Spencer for the timber taken. The effect of the prohibition on clearing native vegetation is that the timber cannot be cleared and therefore Mr Spencer has lost the opportunity of being compensated for that timber. To the extent that growing timber on Saarahnlee is capable of being harvested, any prospective value from such harvesting has been lost by reason of the prohibition on the clearing of native vegetation. Whether the loss of the opportunity of clearing further timber is a sufficient restriction on the use of Saarahnlee so as to constitute a taking or acquisition may well be a question of fact or degree.
135 No attempt has been made at this stage to place a value on the deterioration in value of Saarahnlee flowing from the consequences just described of the restriction on the clearing of native vegetation. All of the Rights and Interests, as described above, are incidents of being the holder of leasehold or freehold title in respect of Saarahnlee. Whether the loss of all of those Rights and Interests is sufficient to constitute something more than mere regulation and constitute a taking or acquisition is a question of fact and degree to be assessed after all of the evidence is in.
136 The Carbon Sequestration Rights may be in a different category. Section 88AB of the Conveyancing Act 1919 (NSW) (the Conveyancing Act) provides that a forestry right is to be deemed, for all purposes, to be a profit ŕ prendre. Under s 87A, a forestry right, in relation to land, includes:
· an interest in the land pursuant to which a person having the benefit of the interest is entitled to enter the land and establish, maintain and harvest, or to maintain and harvest, a crop of trees on the land;
· a carbon sequestration right in respect of the land;
· a combination of such an interest and such a right.
A carbon sequestration right in relation to land means a right to the legal, commercial or other benefit, whether present or future, of carbon sequestration by any existing or future tree or forest on the land after 1990. Carbon sequestration by a tree or forest means the process by which the tree or forest absorbs carbon dioxide from the atmosphere.
137 Under s 88AB(2) of the Conveyancing Act, if a forestry right consists in whole or in part of a carbon sequestration right, the profit ŕ prendre deemed to exist by the operation of s 88AB(1) in relation to the carbon sequestration rights consists of the following:
· the profit from the land is taken to be the legal, commercial or other benefit, whether present or future, of carbon sequestration by any existing or future tree or forest on the land that is the subject of the carbon sequestration right;
· the right to take something from the land is taken to be the right to the benefit conferred by the carbon sequestration right.
138 The effect of those provisions of the Conveyancing Act is that Mr Spencer could grant a carbon sequestration right in respect of Saarahnlee as a profit ŕ prendre. He would be entitled to receive consideration for such a grant. The effect of such a grant would be for Mr Spencer to confer on the grantee the legal, commercial or other benefit of the process by which trees on Saarahnlee absorb carbon dioxide from the atmosphere. Such a right may well be valuable if a mechanism for trading in such rights were to be established.
139 However, Mr Spencer's contention appears to be that it would be possible and feasible for him to confer a right to the legal, commercial or other benefit of carbon sequestration by trees on Saarahnlee after 1990 only if he continues to have the right to decide whether carbon sequestration by trees or forests on Saarahnlee should be permitted to continue. He says that the effect of the restriction on the clearing of native vegetation is that carbon sequestration is effectively compulsory on Saarahnlee. The consequence is that there is no longer any right to the legal, commercial or other benefit of carbon sequestration that is left for him to confer on a third party by a grant of a carbon sequestration right. To that extent, he says, the effect of the restriction is to deprive him of the benefit that he could derive from the granting of carbon sequestration rights in relation to Saarahnlee.
140 Mr Spencer's claim in relation to the Carbon Abatement Rights is by no means clear but appears to be based on a similar notion as that described above in relation to the Carbon Sequestration Rights. Mr Spencer says that both before and after 1990, there has been direct human induced reforestation on Saarahnlee. That reforestation led to the establishment of carbon reservoirs by sinks, of which only the reforestation after 1990 has been recognised. The pre-1990 reforestation has effectively been treated as part of the national estate. He says that a benefit would be realised by agreeing to the abatement of land clearing. However, he has been deprived of that benefit by the effect of the restriction on the clearing of native land, such that he can no longer realise the benefit of voluntarily undertaking the abatement of land clearing.
141 Mr Spencer also advances contentions concerning what he characterises as his "land use change rights", which I understand to refer to the Carbon Rights. . He says that, but for the State Statutes, the Carbon Rights would be amenable for sale on a voluntary emissions reduction market. He says that, as the actions required to provide for access to such a market have now been denied to him, there has been an acquisition of the Carbon Rights.
142 Mr Spencer concludes that all of the Rights and Interests, including the Carbon Rights, are property within the meaning of s 51(xxxi). As I apprehend the contention, Mr Spencer says that all of the Rights and Interests have been acquired by the effect of the 1997 Vegetation Act and the 2003 Vegetation Act. Mr Spencer says that his loss includes not only the loss of improvements, such as timber treatment, pasture improvement and the taking of wood and timber for commercial purposes but the linked eco-services projects that he had in mind. He says that the commercial or monetary value of those rights includes the depreciated cost of the improvements, the extinguished chose in action against the State and the lost Carbon Sequestration Rights and Carbon Abatement Rights. He says that, as a consequence of the actions taken by New South Wales, instigated and authorised by the Commonwealth through the Financial Assistance Act and the Natural Heritage Act, his whole farming operation on Saarahnlee has been rendered commercially unviable.
143 Mr Spencer also says that the combination of the Natural Heritage Act with the 1997 Vegetation Act and the 2003 Vegetation Act has resulted in Australia's being able to meet its commitments under international law that would otherwise have been impossible. Correspondingly, he contends, he has lost the benefit of recognised property interests in Saarahnlee as a consequence of the general prohibition of or restriction on clearing existing native vegetation on Saarahnlee.
144 Mr Spencer contends that, having regard to the obligations of the Commonwealth under the Kyoto Protocol, the Commonwealth derives a benefit arising from the 1997 Vegetation Act and the 2003 Vegetation Act, being a significant saving in costs and expense that would otherwise need to be incurred. Mr Spencer points to the affidavit evidence of the First Assistant Secretary, Strategies and Coordination Division, of the Department of Climate Change of the Commonwealth (the Secretary). The Secretary said that a wide variety of measures introduced in Australia are contributing to Australia's ability to meet its target under the Kyoto Protocol and that examples of measures that have a significant incidental benefit include State governments introducing vegetation management legislation, such as the 1997 Vegetation Act and the 2003 Vegetation Act, to prevent wide scale destruction of forest cover on agricultural lands, protect native species and ecosystem habit, and prevention of soil degradation and water salinity.
145 Mr Spencer also relies upon a concession made by the Commonwealth, for the purposes of the interlocutory hearing, that, if the Commonwealth did not have the ability, for the purposes of its obligations under the Kyoto Protocol, to account for the emissions reductions resulting from reducing land clearing, in the period between 2008 and 2012, the Commonwealth would need to take other measures to reduce emissions in order to meet its obligations and such measures would be likely to involve expense to the Commonwealth.
146 Mr Spencer also points to Australia's report under the Framework Convention dated 28 November 2005. In that report, the Minister for the Environment and Heritage said that Australia's size, diverse environments and above average population growth, concentrated along an extensive coastline, expose it to a wide range of potential impacts and costs arising from climate change. The Minister also said in the report that net land use, land use change and forestry emissions fell by 93.5% between 1990 and 2003. Thus, Mr Spencer says, with the benefit of land use change, the Commonwealth has achieved a very significant saving in costs that would be incurred in otherwise meeting its target under the Kyoto Protocol. He says that the only means of meeting its commitment, in the absence of actually reducing emissions in that way, would be by purchasing offsets on the international market. Mr Spencer asserts that he has suffered a corresponding loss as a consequence of the 1997 Vegetation Act and the 2003 Vegetation Act.
147 It is clearly debatable whether the comparison proposed by Mr Spencer between the alleged detriment to him, on the one hand, and the purported benefit to the Commonwealth, on the other, has validity. The so called benefit to the Commonwealth is concerned with its obligations in international law under the Framework Convention and the Kyoto Protocol. While the Kyoto Protocol has been ratified by the Commonwealth, that does not create any obligation on the part of the Commonwealth under the municipal law of Australia.
148 The Commonwealth, of course, is a polity that is capable of owning property and incurring obligations under municipal law. However, the obligation owed under international law to the other parties to the Framework Convention and the Kyoto Protocol is not an obligation that could be enforced against the Commonwealth under the law of Australia or of any State. On the other hand, the Commonwealth accepts that it derives a benefit in relation to its international obligations by reason of restrictions imposed on the clearing of native vegetation and that to achieve that benefit by other means could incur substantial expense. In the light of the conclusion that I have reached that there is an arguable case that there has been an acquisition, it is not necessary to express a final view on that question.
149 I consider that Mr Spencer has established that there is a serious question to be tried as to whether he has suffered such sufficient detriment as a consequence of the 1997 Vegetation Act and the 2003 Vegetation Act as might constitute a taking or acquisition in respect of Saarahnlee. Further, to the extent that there was a benefit to be derived from the grant of carbon sequestration rights by undertaking voluntary restraint, it is certainly arguable that Mr Spencer has been deprived of that benefit. Whether the restriction is such as to constitute a taking or acquisition or expropriation may depend upon detailed evidence of value. Nevertheless, there is at least a seriously arguable case for concluding that there has been an acquisition of property of Mr Spencer's.
150 The critical questions, however, are whether or not either the Financial Assistance Act or the Natural Heritage Act is properly characterised as a law with respect to the acquisition of Mr Spencer's property and whether the alleged acquisition or expropriation of Mr Spencer's property was effected or authorised by either of those laws or by any of the Inter-Governmental Agreements.