The acquisition argument
107 Section 51(xxxi) of the Constitution provides:
51 Legislative powers of the Parliament
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
…
(xxxi) the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws;
108 The issue is one of characterisation of the law.
109 It is plain that s 33ZF itself does not have the character of a law with respect to the acquisition of property. In its terms it is an express power given to the Court, in any representative proceeding, to make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
110 The argument for Westpac is that the common fund order effects an acquisition of property other than on just terms and that s 33ZF should be read down by reference to s 51(xxxi) so as to preserve its validity. The consequence of the argument is that the common fund order was invalid.
111 In our opinion the dominant considerations which lead to the conclusion that neither the section nor the order effect an acquisition of property other than on just terms are: first, the legislative power involved; secondly, that the exercise and nature of the power concerns interlocutory orders made by the Court in representative proceedings; thirdly, that each group member stands to benefit from the carrying forward of the action; and, fourthly, that JKL did not by the order acquire a group member's property. We also consider that Westpac has not established that any acquisition has been other than on just terms. We consider those elements in turn.
112 We accept for present purposes that part of the future proceeds (if any) of each group member's cause or causes of action may be property within s 51(xxxi).
113 First, as to the legislative power, we have already explained at [97]-[106] above that the power in question is judicial and stems from Ch III of the Constitution. In particular, Parliament has exercised its legislative power under ss 71, 76(ii) and 77(i), which support the conferral of such incidental powers as are necessary or convenient to the exercise of the judicial power of the Commonwealth vested in this Court by s 71, as a federal court created by the Parliament. The property in issue is a chose in action dependent for its realisation on the exercise of the judicial power and on the Court's processes, including interlocutory orders.
114 Section 33ZF of the Act forms part of those processes and is incidental to the exercise of Commonwealth judicial power - it is concerned with the terms on which contested legal rights and liabilities in a matter are to be determined and enforced (see also our reasoning at [100] above) - and for that reason is not a law with respect to the acquisition of property. To the extent that it permits orders acquiring property, that is "subservient and incidental to or consequential upon the principal purpose and effect sought to be achieved by the law so that the provision respecting property [has] no recognizable independent character": Mutual Pools 179 CLR at 171, see also 189-191; as to the proper characterisation of the common fund order, see [91] and [105] above. This is a matter going to the characterisation of s 33ZF in particular; it does not imply a broader proposition that what would otherwise be an acquisition of property is immunised because the power to acquire is conferred on a court.
115 Secondly, as to the nature of the power concerning interlocutory orders made by the Court in representative proceedings, we accept the submission that the Court is exercising a power that is directed to the realisation of disputed choses in action in circumstances where those choses in action are in issue between Westpac and the group members and each of them. The impugned order is made pursuant to a power to manage the procedural course of the litigation in order, in the exercise of judicial power, to do justice in the matter. Necessarily the power is capable of affecting, on an interlocutory basis, the rights of a group member in respect of their chose in action.
116 We see a parallel in, and adopt, the reasoning of the Full Court in Davis v Insolvency and Trustee Service Australia [2010] FCAFC 141 at [20]:
The fourth matter said to be triable was whether the actions of the Registrar in taking Mr Davis' interest in the Gold Coast land caused his wife economic harm and whether it also conferred upon the Commonwealth a benefit. These two propositions had as their terminus the notion that the child support legislation thereby operated as a law with respect to the acquisition of property which was not accompanied by just terms and was, therefore, invalid by reason of s 51(xxxi) of the Constitution. The learned primary judge rejected this as an issue worth trying on the basis that enforcement provisions designed to allow admitted debts to be recovered could not possibly be an acquisition of property to which s 51(xxxi) of the Constitution was directed. We agree. The proposition that the enforcement and execution provisions of statutes governing the civil process of courts involves an acquisition of property to which the language of s 51(xxxi) is directed is without merit. Execution by civil process is properly to be seen as being in the same category, for s 51(xxxi) purposes, as the making of a sequestration order: Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 at 372 per Dixon CJ; Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 at 170-171 per Mason CJ, 187-188 per Deane and Gaudron JJ. The acquisition of an asset as part of the process of the curial enforcement of debts is an acquisition of a kind which "is inconsistent or incongruous with the notion of just terms" (Mutual Pools 179 CLR at 187). Such execution provisions are to be seen as a means of "resolving or adjusting competing claims, obligations or property rights of individuals as an incident of the regulation of their relationship, e.g., the relationship between a bankrupt and the creditors in the bankruptcy" (Mutual Pools 179 CLR at 171).
117 Thirdly, as to each group member standing to benefit from the carrying forward of the action, the starting point is that each group member was a person interested in the litigation in which the order was made. It may be taken that each group member, unless they opt out, has an interest in the proceeding being carried forward so as to realise their claim. It may also be taken that carrying the litigation forward and realising that claim involves substantial cost and also risk borne by the funder.
118 We accept the submission that s 33ZF authorised the common fund order and that order was directed to an appropriate reward to JKL, being the person providing what was necessary for the maintenance of the proceedings; as to the proper characterisation of the order, see also at [91] and [105]. We also accept that JKL was not relevantly a stranger to the proceedings.
119 The relevant principle from Australian Tape Manufacturers v Commonwealth [1993] HCA 10; 176 CLR 480 is that a law is unlikely to involve any question of an "acquisition of property" within s 51(xxxi) if it imposes an obligation that involves "a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship". Mason CJ, Brennan, Deane and Gaudron JJ said, at 509-510:
The answer to the question whether a legislative imposition of an obligation to pay money involves an "acquisition of property" for the purposes of s. 51(xxxi) of the Constitution must depend upon the context in which the obligation is imposed. … Section 51(xxxi)'s guarantee of just terms is not to be avoided by "a circuitous device to acquire indirectly the substance of a proprietary interest" (Bank of New South Wales v. The Commonwealth [[1948] HCA 7;] (1948) 76 CLR 1 at p. 349, per Dixon J). In a case where an obligation to make a payment is imposed as genuine taxation, as a penalty for proscribed conduct, as compensation for a wrong done or damages for an injury inflicted, or as a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity, it is unlikely that there will be any question of an "acquisition of property" within s. 51(xxxi) of the Constitution (See, generally, Attorney-General (Cth) v. Schmidt [[1961] HCA 21;] (1961) 105 CLR 361, at pp 372-373.). On the other hand, the mere fact that what is imposed is an obligation to make a payment or to hand over property will not suffice to avoid s. 51(xxxi)'s guarantee of "just terms" if the direct expropriation of the money or other property itself would have been within the terms of the sub-section. Were it otherwise, the guarantee of the section would be reduced to a hollow facade.
120 If that relationship "need[s] to be regulated in the common interest", as a matter of characterisation the law is likely to fall outside s 51(xxxi): Georgiadis v Australia and Overseas Telecommunications Corporation [1994] HCA 6; 179 CLR 297 at 306-307 per Mason CJ, Deane and Gaudron JJ.
121 In Nintendo 181 CLR at 161, Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ said:
The cases also establish that a law which is not directed towards the acquisition of property as such but which is concerned with the adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity is unlikely to be susceptible of legitimate characterization as a law with respect to the acquisition of property for the purposes of s. 51 of the Constitution. The [Circuits Layouts Act 1989 (Cth)] is a law of that nature. It cannot properly, either in whole or in part, be characterized as a law with respect to the acquisition of property for the purposes of that section. Its relevant character is that of a law for the adjustment and regulation of the competing claims, rights and liabilities of the designers or first makers of original circuit layouts and those who take advantage of, or benefit from, their work. Consequently, it is beyond the reach of s. 51(xxxi)'s guarantee of just terms.
(Footnote omitted.)
122 Airservices 202 CLR 133, so far as presently relevant, concerned whether provisions imposing statutory liens on aircraft, for which charges for services provided by the Civil Aviation Authority were unpaid, were a law with respect to the acquisition of property within s 51(xxxi). Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ, held that they were not. Gaudron and Callinan JJ dissented.
123 Gleeson CJ and Kirby J said, at 180-181 [98]-[101]:
98 The principles which determine whether a law providing for a statutory lien, with the incidents specified in the [Civil Aviation Act 1988 (Cth)], in support of a scheme of charging for services and facilities, is within the reach of the requirement of just terms stipulated by s 51(xxxi) have been considered in many recent cases. In Mutual Pools & Staff Pty Ltd v The Commonwealth, Brennan J, referring to earlier authority, pointed out that a grant of legislative power comprehends a power to enact provisions appropriate and adapted to the fulfilment of any objective falling within the power, and that s 51(xxxi) does not abstract the power to prescribe the means appropriate and adapted to the achievement of an objective falling within another head of power where the acquisition of property without just terms is a necessary or characteristic feature of the means prescribed. (In that context, "necessary" does not mean "indispensable".) That was the explanation of decisions that laws providing for the imposition of a tax, the compulsory payment of provisional tax, the seizure of the property of enemy aliens, the sequestration of bankrupts' property, the forfeiture of prohibited imports or the exaction of fines and penalties are not affected by s 51(xxxi). His Honour said:
"In my view, a law may contain a valid provision for the acquisition of property without just terms where such an acquisition is a necessary or characteristic feature of the means which the law selects to achieve its objective and the means selected are appropriate and adapted to achieving an objective within power, not being solely or chiefly the acquisition of property. But where the sole or dominant character of a provision is that of a law for the acquisition of property, it must be supported by s 51(xxxi) and its validity is then dependent on the provision of just terms."
99 In Re Director of Public Prosecutions; Ex parte Lawler [[1994] HCA 10; 179 CLR 270] a law providing for the forfeiture of a fishing vessel operating illegally in Australian waters was held not to contravene s 51(xxxi), even though the owner of the vessel was not complicit in the offence. The considerations relevant to whether the forfeiture of property of an innocent third party, where such property has been used in the commission of an offence, is "appropriate and adapted to the enforcement of the offence-creating provision", are not identical to those relevant to whether the creating of a statutory lien over an aircraft is appropriate and adapted to the provision, on a commercial basis, of services and facilities such as those provided by the CAA. However, the test is the same.
100 Having regard to the relationship between the services provided by the CAA and the safety of the aircraft concerned, the reasonableness of a system which provides that those who operate aircraft must pay charges which, in totality, will defray the cost of providing the services, the possibility that operators will have few assets in the jurisdiction apart from aircraft, the mobility of aircraft, and the desirability of providing adequate security for liabilities incurred, it is at least as easy to draw a conclusion supportive of the legislation as it was in Ex parte Lawler.
101 Concepts of "innocence", lack of "complicity" or "culpability" are difficult to relate to the present issue. However, the position of the respondents was not isolated from the conduct of Compass. They had leased or sub-leased aircraft to Compass. By inference, they did so knowing that such aircraft would be flown on routes to, from and within Australia, attracting charges for services and facilities provided to all airline operators. They could be taken to know that such charges were not insubstantial. Unpaid, they would accumulate to very large sums. They could readily have ascertained that provision for statutory liens existed under Australian law as under the laws of other jurisdictions involved in civil aviation of a comparable kind. By inference, it would have been open to them to protect themselves (by contract, insurance, or facilities for auditing and reporting) against the kind of result that ensued. Without the provision of their aircraft to Compass, that company would not have been in a position to accumulate the very substantial charges which it did. We accept that s 51(xxxi) of the Constitution must not, in accordance with the authority of this Court, be given a pedantic or narrow construction. We also accept that the taking of property under a federal law is not removed from "acquisition" simply because it is described as "forfeiture". It is not the name, but the character of the taking, that controls the outcome of constitutional characterisation. But, in this case, the statutory liens are valid. In our opinion they bear no similarity to outmoded notions of deodand. They were provided to secure the effectiveness of charges relating to aircraft which, of their very nature, could otherwise leave Australia with substantial debts unpaid and with no effective means for their recovery.
(Footnotes omitted.)
124 McHugh J gave extensive reasons, at [320]-[357], to the effect that the imposition of a statutory lien in the circumstances was irrelevant to, or incongruous with, the notion of fair compensation, given that services were provided. His Honour also found that the liens provisions were supportable under either or both of the trade and commerce power in s 51(i) and the external affairs power in s 51(xxix) of the Constitution.
125 At 298-299 [497] and 300 [501] Gummow J said:
497 It was said in their joint judgment in Australian Tape Manufacturers by Mason CJ, Brennan, Deane and Gaudron JJ, that a law may be supported by a head of power outside the operation of s 51(xxxi) if it imposes an obligation that involves "a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship". If that relationship "need[s] to be regulated in the common interest", the law is likely to fall outside s 51(xxxi) because it is unlikely that any "acquisition of property" which is an incident of the operation of that law will be capable of imparting to the law the character which attracts s 51(xxxi).
…
501 However, the line drawn in Australian Tape Manufacturers is to be drawn in the present case. The statutory lien provisions are part of the regulatory scheme for civil aviation safety created by the Act. The lien provisions adjust the respective interests of those who own, lease or operate the aircraft and of the provider of services necessary for commercial operations of the aircraft in Australia. The interests of security holders are, to the extent discussed above, not displaced. The services were provided by the Authority to the aircraft, in the sense that it was particular operations using the aircraft which provided the incident for the attraction of the charges.
(Footnotes omitted.)
126 At 304-305 [517]-[519] Hayne J agreed with the reasons given by Gummow J, while adding some further short reasons, citing Nintendo 181 CLR at 161.
127 Airservices shows that it does not necessarily follow that there is a law with respect to the acquisition of property where charges for the provision of necessary services support a lien enforceable against persons who may not have contractually consented to those services or to pay for them, but who nevertheless benefited from those services.
128 In the present case, the order makes an interlocutory, and thus provisional, but genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity, even where each group member does not have a contractual relationship with JKL or with other group members. We have determined the process by which that adjustment is undertaken at [102] above. The particular relationship or area of activity is provided by the representative action itself, brought in the interest of each group member in the potential realisation of their chose in action through necessary expenditure on legal services to pursue the claim (see also our observations and reasoning at [26] and [105] above). We accept that the relationship needed to be regulated in the common interest.
129 We do not accept Westpac's submission that the concept of the adjustment of competing rights is limited to rights created under a statutory scheme enacted by Parliament. In our opinion, there is no basis in principle for such a limitation.
130 Further, we do not accept Westpac's submission that, for this purpose, a genuine adjustment of competing rights, claims or obligations arises only where there are existing competing claims over particular property or amounts of money. Again, we see no basis in principle for such a limitation.
131 Fourthly, as to whether the order effected an acquisition of property, we do not accept that JKL obtained an "identifiable benefit or advantage relating to the ownership or use of property": Mutual Pools 179 CLR at 185; ICM 240 CLR at 179-180 [82]-[84]. In our opinion the benefit to JKL was not proprietary in nature. We accept that nothing in the nature of property has passed from the group members to the funder as a result of the order: cf our explanation of the order's operation at [20]-[28] above. Further, unlike Georgiadis and Smith v ANL Ltd [2000] HCA 58; 204 CLR 493, no benefit is conferred on the obligee of the identified chose in action. While, therefore, there may have been deprivation of rights in relation to property, of itself that does not constitute an acquisition of property: Mutual Pools at 185.
132 Finally, and in any event, we do not accept Westpac's submission that any acquisition of property was not on just terms. Although we have accepted that part of the future proceeds (if any) of each group member's cause or causes of action may constitute property for this purpose, we note that its value, if any, has not yet been established. Thus Westpac has not shown that a group member will not receive "the pecuniary equivalent of the property acquired": Bank Nationalisation Case 76 CLR at 300.
133 We conclude that s 33ZF supports the common fund order and that the order does not have the effect that the section is a law with respect to the acquisition of property other than on just terms, within the meaning of s 51(xxxi).