Commonwealth v WMC Resources Ltd

The Commonwealth of Australia appealed to the High Court against a decision of the Full Court of the Federal Court concerning the extinguishment of petroleum exploration rights. The dispute arose when the Parliament enacted legislation that reduced the area covered by a permit held by WMC Resources Ltd ("WMC") to explore for petroleum in the Timor Gap, an area of disputed sovereignty between Australia and Indonesia. WMC contended that this legislative action constituted an acquisition of property by the Commonwealth without just terms compensation, contrary to section 51(xxxi) of the Constitution.

The High Court was required to determine whether the rights granted under the petroleum exploration permit constituted "property" for the purposes of section 51(xxxi) of the Constitution, and if so, whether the legislative reduction of the permit area amounted to an acquisition of that property by the Commonwealth. A further issue was whether, if an acquisition had occurred, it was on "just terms" as mandated by the constitutional provision. The court also considered the geographical scope of section 51(xxxi), specifically whether it applied to areas outside Australia's territorial limits where Australia asserted sovereign rights.

The High Court allowed the appeal, holding that the rights conferred by the petroleum exploration permit were not "property" within the meaning of section 51(xxxi) of the Constitution. The majority reasoned that the permit created a statutory licence to explore for petroleum, which did not confer exclusive proprietary rights over the permit area itself, but rather a right to engage in specific activities and to claim any petroleum recovered. The legislative reduction of the permit area was therefore not an acquisition of property, but rather a modification of the statutory licence. Consequently, the constitutional guarantee of just terms compensation was not enlivened. The court set aside the orders of the Federal Court and dismissed WMC's application.