ICM Agriculture Pty Ltd v The Commonwealth - [2009] HCA 51

HIGH COURT OF AUSTRALIA
FRENCH CJ,
GUMMOW, HAYNE, HEYDON, CRENNAN, KIEFEL AND BELL JJ
ICM AGRICULTURE PTY LTD
ABN 32 006 077 765 & ORS PLAINTIFFS
AND
THE COMMONWEALTH OF AUSTRALIA & ORS DEFENDANTS
ICM Agriculture Pty Ltd v The Commonwealth [2009] HCA 51
9 December 2009
S24/2009
ORDER
Order that the questions stated in the special case be answered as follows:
Question 1:By reason of s 51(xxxi) of the Constitution:
(a)did the Commonwealth lack executive power to enter into the Funding Agreement?

(b)is the [National Water Commission Act 2004 (Cth)] invalid insofar as it authorised the CEO to enter into the Funding Agreement on behalf of the Commonwealth?

Answer:The replacement of the plaintiffs' bore licences did not constitute an acquisition of property within the meaning of s 51(xxxi) of the Constitution. Accordingly, the questions of invalidity posed in paragraphs (a) and (b) of Question 1 do not arise.

Question 2:If the answer to either part of Question 1 is "yes", are all or any of:
(a)the Amendment Regulation;

(b)the Proclamation;

(c)the Amendment Order;

invalid or inoperative as a consequence?

Answer:Does not arise.

Question 3:Do the plaintiffs remain the holders of all or any of the bore licences issued to them under the [Water Act 1912 (NSW)]?
Answer:No.
Question 4:If the answers to Questions 2 and 3 are "no", do the plaintiffs have an implied right under the Constitution to recover from the Commonwealth such compensation for the loss of their bore licences as would constitute "just terms" within the meaning of s 51(xxxi) of the Constitution?
Answer:Does not arise.
Question 5:Who should pay the costs of this Special Case?
Answer:The plaintiffs.

Representation
R J Ellicott QC with M G McHugh and W A D Edwards for the plaintiffs (instructed by Martine Anderson Legal Counsel for ICM Australia Pty Ltd)
S J Gageler SC, Solicitor-General of the Commonwealth with A Robertson SC and C L Lenehan for the first and second defendants (instructed by Australian Government Solicitor)
M G Sexton SC, Solicitor-General for the State of New South Wales with J K Kirk for the third and fourth defendants (instructed by Crown Solicitor (NSW))
Interveners
R J Meadows QC, Solicitor-General for the State of Western Australia and R M Mitchell SC intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor for Western Australia)
P M Tate SC, Solicitor-General for the State of Victoria with K L Emerton SC and G A Hill intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor)
W Sofronoff QC, Solicitor-General of the State of Queensland with G J D del Villar intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Law (Qld))
M G Hinton QC, Solicitor-General for the State of South Australia with S T O'Flaherty intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor (South Australia))
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

ICM Agriculture Pty Ltd v The Commonwealth
Constitutional law (Cth) – Powers of Commonwealth Parliament – Agreement between Commonwealth and a State – National Water Commission Act 2004 (Cth) authorised Chief Executive Officer ("CEO") of National Water Commission to enter into funding agreement with State – Whether CEO authorised to enter into funding agreement with State for purpose of State acquiring property on other than just terms – Whether legislative power conferred by s 96 of Constitution, or by s 96 with s 51(xxxvi), is subject to limitations contained in s 51(xxxi) – Relevance of distinction between coercive and non-coercive legislative power.
Constitutional law (Cth) – Powers of Commonwealth Parliament – Acquisition of property on just terms – Plaintiffs held bore licences under Water Act 1912 (NSW) ("Water Act") – Plaintiffs' licences replaced with aquifer access licences under Water Management Act 2000 (NSW) – Whether Water Act divested common law rights with respect to extraction of groundwater – Whether plaintiffs' Water Act licences property within s 51(xxxi) of Constitution – Whether replacement of licences amounted to acquisition of property.
Words and phrases – "abstraction", "acquisition", "coercive and non-coercive power", "control", "just terms", "property", "the use and flow".
Constitution, ss 51(xxxi), 51(xxxvi), 61, 96.
Irrigation, Water, Crown Lands and Hunter Valley Flood Mitigation (Amendment) Act 1966 (NSW), s 3.
National Water Commission Act 2004 (Cth), s 24.
Water Act 1912 (NSW).
Water Management Act 2000 (NSW), s 45(1), Sched 10, item 3.
Water Rights Act 1896 (NSW), s 1(I).
FRENCH CJ, GUMMOW AND CRENNAN JJ.
Introduction

The Lower Lachlan Groundwater System ("the LLGS") in central New South Wales covers some 29,770 square kilometres, extending from the upper limits of the Wyangala Dam to the junction of the Lachlan River with the Murrumbidgee River. Agricultural enterprise in the LLGS is dependent on a combination of groundwater and surface water. Groundwater is water occurring under the surface of the ground, regardless of whether it is moving or still, and regardless of the geological structure in which it is contained. The expression can also include artesian and sub‑artesian water. Surface water is water occurring naturally that is not groundwater and includes water occurring in the whole or part of a river, lake or estuary.
Demand for water for agricultural purposes in the LLGS, as in many other agricultural regions in Australia, has been affected from time to time by water shortages. Water in these areas also has an important part to play in the maintenance of environmental balance and natural ecosystems.
Successive governments of the State of New South Wales ("the State") have long monitored, regulated and restricted access to and use of both groundwater and surface water. Policies have been formulated and pursued so as to achieve equitable access among water users, to mitigate adverse effects on the environment, and to ensure that water, as a finite and fluctuating natural resource, is able to be replenished for future use. The extraction and use of water has been regulated by statute since 1896, and, in particular, from 1912 principally by the Water Act 1912 (NSW) ("the 1912 Act" or "the Water Act"). The Water Management Act 2000 (NSW) ("the 2000 Act") provided[1] for the repeal of the 1912 Act. This litigation follows upon the replacement of the one statutory regime with the other.
[1]Section 401 and Sched 7.
The three plaintiffs conduct farming businesses on land in the State which is near the Lachlan River and within the LLGS. Extraction of groundwater from the LLGS began in the early 1960s. Before the changes to the law of the State the plaintiffs used for irrigation groundwater extracted pursuant to a number of "bore licences" issued under the 1912 Act.
Water for irrigation also was drawn by the plaintiffs under licences issued pursuant to the 1912 Act for the drawing of surface water. These licences are not in issue in this case. However, when dealing with submissions respecting the nature of water rights as understood both at common law and in the statute law of the State, it will be necessary to consider the legal character of both groundwater and surface water.
On 1 February 2008 the bore licences were replaced by a new system of licences issued under the 2000 Act and styled aquifer access licences. These permit the plaintiffs to take less water than had been allowed under the bore licences. The loss represents a decrease in entitlements under the bore licences of about 70 per cent in the case of the first and second plaintiffs (together "ICM") and 66 per cent in the case of the third plaintiff ("Hillston"). Reference will be made later in these reasons to the steps by which the State introduced this new system.
The proceedings
On 6 February 2009 the plaintiffs were offered by the State what were called structural adjustment payments. These comprised a total of $818,730 to ICM and $93,830 to Hillston. The plaintiffs complain of the inadequacy of the proposed structural adjustment payments. It is conceded by the Commonwealth that the making of these payments would not amount to "just terms" within the meaning of s 51(xxxi) of the Constitution.
By action commenced in the original jurisdiction of this Court, the plaintiffs contend that the steps taken under the 2000 Act to reduce their access to groundwater amount to an acquisition of their property otherwise than on just terms, contrary to the constitutional guarantee found in s 51(xxxi) of the Constitution and interpreted by decisions of this Court. Pursuant to r 27.08 of the High Court Rules 2004, there is before the Full Court a special case posing five questions for determination. The questions are so expressed as not immediately to reflect all of the issues debated before the Full Court. It is convenient to defer setting out the text of the questions, and to deal first with the circumstances of the case and the legislation of the Commonwealth and the State, and then with the fate of the submissions of the parties and interveners.
The starting point is the text of s 51(xxxi), which is directed to laws made by the Parliament of the Commonwealth with respect to the acquisition of property on just terms from any State or person for any purpose in respect of which that Parliament has power to make laws. In the present case, where is there in play any relevant law of the Commonwealth? The answer the plaintiffs give to that question requires attention to dealings between the Commonwealth and the State which preceded the replacement of the bore licences on 1 February 2008.
The National Water Commission
The offers of structural adjustment payments were made to ICM and Hillston by the State acting pursuant to provision in the Schedule to an instrument ("the Funding Agreement") dated 4 November 2005. The parties to the Funding Agreement are the Commonwealth (the first defendant) "as represented by and acting through the National Water Commission" ("the NWC") (the second defendant) and the State (the third defendant) "as represented by and acting through the Department of Natural Resources". The Schedule stated requirements that the State, relevantly: (a) implement Water Sharing Plans, as provided for in the 2000 Act, that reduce over a 10 year period the water entitlements of licence holders to ensure sustainable future use of a number of groundwater systems including the LLGS; and (b) make "up‑front ex gratia structural adjustment payments" to licence holders. The Minister administering the 2000 Act ("the Minister") is the fourth defendant.
Provision of funds for the structural adjustment payments under the Funding Agreement is to be shared equally by the State and the Commonwealth. Clause 4.1 stated that, subject to sufficient appropriations and compliance by the State with the Funding Agreement, the Commonwealth would provide the State with the funding detailed in the Schedule. The term "Commonwealth" was so defined as to mean the Commonwealth as represented by and acting through the NWC.
The NWC was established by s 6 of the National Water Commission Act 2004 (Cth) ("the NWC Act" or "the National Water Commission Act"). Its functions include (s 7(1)(a)) assisting with the implementation of an intergovernmental agreement first entered into on 25 June 2004 and known as the National Water Initiative ("the NWI"). The Funding Agreement recites the provision of funding by the NWC for activities that assist in implementing the NWI and the requirement for the provision of Commonwealth funding that the State be actively implementing the NWI. One of the key objectives of the NWI was to return currently overallocated or overused water systems to environmentally sustainable levels of extraction.
Section 40 of the NWC Act established "the Australian Water Fund Account" ("the Account"). The Account is a Special Account for the purposes of s 21 of the Financial Management and Accountability Act 1997 (Cth). There is thus a standing appropriation for s 83 of the Constitution, from the Consolidated Revenue Fund established by s 81, for expenditure for the purposes of the Account. Under the NWC Act, the functions of the Chief Executive Officer ("the CEO") of the NWC include (s 24) the administration by debits from the Account of financial assistance awarded by the Minister under s 42 to particular projects relating to Australia's water resources.
Section 42 of the NWC Act states:
"The purposes of the Special Account, in relation to which amounts may be debited from the Account, are:
(a) to provide financial assistance that is:
(i)awarded by the Minister to particular projects relating to Australia's water resources; and
(ii)determined by the Minister to be provided from the Account; or
(b)to pay or discharge the costs, expenses or other obligations incurred by the Commonwealth in the performance of the NWC's functions under this Act or the regulations; or
(c)to pay any remuneration or allowances payable to any person under this Act."
On 9 June 2005, that is to say before the date of the Funding Agreement, the Prime Minister announced the provision of moneys from the Australian Water Fund as an equal contribution to that of the State with the objective, in accordance with the aims and objectives of the NWI, of achieving sustainable groundwater systems including the LLGS.
The Premier of the State previously had nominated for such funding a project including a plan for the LLGS to achieve sustainable levels of groundwater extraction by significantly reducing over a 10 year period the water access entitlements of licence holders. This was consistent with the State's Groundwater Policy, announced in 1997, which recognised the stress placed upon groundwater extraction in some areas, jeopardising the long‑term sustainability of supply.
The 2008 Order, the Proclamation and the 2008 Regulation
On 11 January 2008 the Minister, acting pursuant to s 45(1) of the 2000 Act, made an order ("the 2008 Order" or "the Amendment Order") amending the existing Water Sharing Plan for the LLGS ("the Lower Lachlan Plan"). The Minister did so after written advice by Departmental Minute dated 19 December 2007 to the effect that the amendments were necessary to align the plan with approvals under the Funding Agreement. The phrase in the advice "the joint $130 million" refers to the total amount to be provided by the Commonwealth to the State pursuant to the Funding Agreement.
By Proclamation dated 30 January 2008[2], the provisions of Pt 2 (dealing with access licences) and Pt 3 (dealing with approvals) of Ch 3 of the 2000 Act were applied to the LLGS ("the Proclamation"). A regulation made under the 2000 Act, with a commencement date of 1 February 2008, the Water Management (General) Amendment (Lower Lachlan) Regulation 2008 ("the 2008 Regulation" or "the Amendment Regulation"), established the new water access licence system for the LLGS in place of the bore licences under the 1912 Act. The Proclamation and the 2008 Regulation are so drawn as to assume and depend upon the validity of the 2008 Order.
[2]Expressed to be made pursuant to ss 55A and 88A of the 2000 Act, and to have effect on and from 1 February 2008.
The Lower Lachlan Plan had been made by the Minister by order published 26 February 2003, but its commencement had been deferred on a number of occasions prior to 1 February 2008. An effect of s 45(1) of the 2000 Act was to empower the Minister to make the 2008 Order amending the Lower Lachlan Plan "if satisfied it is in the public interest to do so".
The term "in the public interest" is one of broad import. When used in a statute, the term classically imports a discretionary value judgment to be made by reference to undefined factual matters confined only by the subject matter, scope and purpose of the statute in question[3]. As employed in s 45(1), the term must include, in its application to the circumstances obtaining when the Minister made the 2008 Order, the implementation of the Funding Agreement with respect to the LLGS. At that stage the State had not taken, within the times stipulated in the Funding Agreement, various steps required on its part to secure the federal funding in respect of the LLGS. Notwithstanding that delay, the Commonwealth intends to make payments in respect of the LLGS upon being satisfied of other matters stipulated in the Funding Agreement. These Commonwealth payments will be in the amount of $2.7 million.
[3]O'Sullivan v Farrer (1989) 168 CLR 210 at 216; [1989] HCA 61.
The plaintiffs' case
It is against this background that the plaintiffs submit that from the operation of s 51(xxxi) of the Constitution two conclusions follow. The first is that the executive power of the Commonwealth under s 61 of the Constitution did not extend to its entry into the Funding Agreement. The second is that the NWC Act is invalid insofar as it authorised the CEO to enter into the Funding Agreement on behalf of the Commonwealth and to administer the financial assistance pursuant to the Funding Agreement.
If either or both of those submissions be accepted, the plaintiffs then submit that, as a consequence, the 2008 Order, and therefore the Proclamation and the 2008 Regulation, are invalid or inoperative. This appears to be on the footing that, given the operation of the Constitution, it was beyond the scope of the power conferred upon the Minister by s 45(1) of the 2000 Act to exercise the power by treating implementation of the Funding Agreement by the State as "in the public interest". The result is said to be that the introduction of the new licensing system, of which the plaintiffs complain, miscarried and they could not be deprived of their bore licences issued under the 1912 Act. The plaintiffs contend that they remain the holders of those licences.
In the course of oral argument, the plaintiffs sought to develop a further argument directed to the New South Wales legislation. Section 6 of the 2000 Act provides for the making of a State Water Management Outcomes Plan ("SWMOP") for the development, conservation, management and control of the water resources of the State in furtherance of the objects of the 2000 Act set out in s 3. SWMOP was established by order of the Governor made 18 December 2002. In the structure of the 2000 Act SWMOP sits above management plans, of which the Lower Lachlan Plan is one.
The making of SWMOP preceded the making of the Funding Agreement in 2005. The plaintiffs complained that SWMOP was not then revised so as explicitly to refer to the Funding Agreement. This complaint was made for the first time in oral argument.
A management plan is required by par (a) of s 16(1) of the 2000 Act to be consistent with SWMOP. SWMOP is designed "to set out the over‑arching policy context, targets and strategic outcomes". It did not cease to do so by reason of the subsequent entry by the State into the Funding Agreement.
A management plan also is required (by par (e) of s 16(1)) to "be consistent with ... government policy ...". It may be that a New South Wales policy connected with infringement by federal law of s 51(xxxi) would not answer the description of "government policy" in that paragraph of s 16(1). But, even if so, what would follow would be that such a policy was not a mandatory consideration dictated by s 16(1)(e). It would not necessarily follow that such a policy would be an irrelevant consideration in making a management plan. There is no occasion here to pursue the matter, because, as will appear, there is no engagement of s 51(xxxi) in this case.
The Commonwealth case

The Attorneys‑General for Victoria, Queensland, South Australia and Western Australia intervened and presented submissions generally supportive of those of the defendants.
The Commonwealth Solicitor‑General, who appeared for the first and second defendants, analysed the relevant operation of the NWC Act as follows: (i) the Prime Minister as Minister administering that statute made a decision under s 42(a)(i) to award financial assistance, as indicated by his announcement of 9 June 2005; (ii) the CEO had the function conferred by s 24 of administering that financial assistance and the Funding Agreement was entered into to further that end; (iii) further, s 61 of the Constitution authorised the Commonwealth to enter into the Funding Agreement as a principal; (iv) the legislative power of the Commonwealth under s 96 or s 96 with s 51(xxxvi)[4] extends to the grant of financial assistance to a State for the purpose of the State acquiring property on other than just terms; (v) the power of the CEO under s 24 of the NWC Act to administer financial assistance is to be read down, if necessary, to financial assistance which it is within the legislative power of the Commonwealth to provide; (vi) but by reason of (iv), no such occasion for reading down arises.
[4]This reads: "matters in respect of which this Constitution makes provision until the Parliament otherwise provides". Section 96 states: "During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit."
With respect to the executive power to enter the Funding Agreement, the Commonwealth Solicitor‑General correctly accepted that if, contrary to his submission (iv) respecting legislative power, s 96 was relevantly qualified by s 51(xxxi), an agreement to facilitate such a grant which could not be authorised by s 96 would not be supported by s 61. In this way, limitations upon legislative power may indicate whether the ends of an agreement are consistent with the
Constitution[5]. The Solicitor‑General properly emphasised the reference in the joint reasons in R v Hughes[6] to the statement by Mason J[7]:
"It is beyond question that [the executive power] extends to entry into governmental agreements between Commonwealth and State on matters of joint interest, including matters which require for their implementation joint legislative action, so long at any rate as the end to be achieved and the means by which it is to be achieved are consistent with and do not contravene the Constitution." (emphasis added)
[5]See Saunders, "Intergovernmental agreements and the executive power", (2005) 16 Public Law Review 294 at 306.
[6](2000) 202 CLR 535 at 554‑555 [38] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ; [2000] HCA 22.
[7]R v Duncan; Ex parte Australian Iron and Steel Pty Ltd (1983) 158 CLR 535 at 560; [1983] HCA 29.
In further elaboration of his argument respecting the relationship between s 96 and s 51(xxxi), the Solicitor‑General emphasised that (a) s 51(xxxi) operates by abstracting the power of compulsory acquisition from the subject of other "coercive" grants of power that, in the absence of s 51(xxxi), would permit compulsory acquisition by force of Commonwealth law, (b) whether read alone or with s 51(xxxvi), s 96 is a "non‑coercive" power, and (c) "terms and conditions" within the meaning of s 96 may extend to the exercise of State legislative power in a coercive way, but, being supported by s 96, will be outside the reach of s 51(xxxi).
Coercive and non‑coercive powers
The classification of legislative authority by a dichotomy between coercive and non‑coercive powers may have its antecedents in observations made by Dixon CJ in the Second Uniform Tax Case[8]. After expressing some disquiet at the course of authority indicating that the power conferred by s 96 "is susceptible of a very wide construction in which few if any restrictions can be implied", the Chief Justice continued:
"For the restrictions could only be implied from some conception of the purpose for which the particular power was conferred upon the Parliament or from some general constitutional limitations upon the powers of the Parliament which otherwise an exercise of the power given by s 96 might transcend. In the case of what may briefly be described as coercive powers it may not be difficult to perceive that limitations of such a kind must be intended. But in s 96 there is nothing coercive. It is but a power to make grants of money and to impose conditions on the grant, there being no power of course to compel acceptance of the grant and with it the accompanying term or condition."
[8]The State of Victoria v The Commonwealth (1957) 99 CLR 575 at 605; [1957] HCA 54.
Of that passage, three things may be said. The first concerns the nature of the terms or conditions which accompany a grant. These may, as is the case here with the Funding Agreement, be expressed in terms of an agreement between the polities involved. Such agreements may take many forms, with some but not all of the characteristics of a contract between the executive government and a private party, citizen or corporation, and of a treaty between sovereign powers. Secondly, for many years the incidental power conferred by s 51(xxxix) has been used to create offences to support the making of grants under s 96 and the implementation of intergovernmental agreements[9]. Thirdly, in P J Magennis Pty Ltd v The Commonwealth[10] Latham CJ rejected the proposition that a federal statute giving financial assistance to States was for that reason not a law with respect to the acquisition of property. The Court did not accept the submission for the defendants[11] that a law could not be with respect to the acquisition of property unless it (a) directly acquired property by force of its own terms, (b) created a previously non‑existing power in some person to acquire property, or (c) came into operation upon the acquisition of property. Latham CJ said[12]:
"All such laws doubtless would be laws with respect to the acquisition of property. But there is nothing in the words of s 51(xxxi) of the Constitution which supplies any warrant for limiting the application of this provision to laws which fall within the classes mentioned."
[9]Examples are ss 12 and 13 of the Commonwealth Grants Commission Act 1933 (Cth); and s 8A of the States Grants (Petroleum Products) Act 1965 (Cth), as introduced by the States Grants (Petroleum Products) Amendment Act 1985 (Cth).
[10](1949) 80 CLR 382 at 403; [1949] HCA 66.
[11](1949) 80 CLR 382 at 402.
[12](1949) 80 CLR 382 at 402.
Magennis
To the extent that his submissions were contrary to Magennis, the Commonwealth Solicitor‑General contended that that case should be re‑considered and overruled. The better view, he submitted, is that indicated subsequently in Pye v Renshaw[13]. There, in rejecting the plaintiff's argument, the Court noted the absence of any allegation that the moneys to fund the impugned acquisitions had not been duly appropriated or that their payment for any reason would be unlawful. The proposition of law, rejected by the Court, was that "an appropriation by the Commonwealth Parliament for the purposes mentioned is unconstitutional". The Court said that proposition could not be supported. It explained why:
"The argument really comes to this. The Commonwealth cannot itself acquire land except upon just terms. A State can resume land on any terms, just or unjust, authorized by its Parliament. But the Commonwealth is not authorized by s 96 or any other provision of the Constitution to provide money for a State in order that the State may resume land otherwise than on just terms. This is the very argument which was rejected in Victoria v The Commonwealth[14]: see also South Australia v The Commonwealth[15], where Latham CJ said: 'The Commonwealth may properly induce a State to exercise its powers ... by offering a money grant'." (emphasis added)
[13](1951) 84 CLR 58 at 83; [1951] HCA 8.
[14](1926) 38 CLR 399; [1926] HCA 48.
[15](1942) 65 CLR 373 at 417; [1942] HCA 14.
However, the two earlier authorities referred to in the last sentence do not require rejection of the particular argument respecting s 96 which was in issue in Pye v Renshaw. The unsuccessful submission presented by Mr R G Menzies for Victoria in Victoria v The Commonwealth[16] had been that the Federal Aid Roads Act 1926 (Cth) was not supported by s 96 because (i) it attached to the grant conditions which in substance amounted to the exercise of legislative power with respect to road construction, a subject beyond s 51, (ii) the terms and conditions referred to in s 96 must be of a financial character unless they are terms and conditions falling within a head of power in s 51, and (iii) the terms and conditions must be imposed by the Parliament and cannot be fixed by executive authority. In the second case, the First Uniform Tax Case[17], Latham CJ, who later was in the majority in Magennis, took Victoria v The Commonwealth as establishing that by offering a money grant under s 96 the Commonwealth may properly induce a State to exercise its powers with respect to a particular subject (eg road making) or to abstain from exercising its powers with respect to, for example, banking or insurance.
[16](1926) 38 CLR 399 at 405.
[17](1942) 65 CLR 373 at 417.
Counsel for the present plaintiffs correctly submitted that what was said in Victoria v The Commonwealth and the First Uniform Tax Case did not address "the very argument" which was put in Pye v Renshaw[18]. This concerned the application to the exercise of the legislative power conferred by s 96 (read with s 51(xxxvi)) of the restriction found in s 51(xxxi).
[18](1951) 84 CLR 58 at 83.
Counsel for the plaintiffs also pointed to the use in the critical passage in Pye v Renshaw set out above of the phrase "in order that" when encapsulating the argument the Court was rejecting. It is significant that from the legislation under consideration in Pye v Renshaw any arrangement or agreement with the Commonwealth had been, as Professor Saunders has said, "decoupled"[19] in 1950 upon the repeal of the War Service Land Settlement Agreement Act 1945 (NSW)[20]. The argument rejected in Pye v Renshaw was that the exercise of the power to grant financial assistance under s 96 would be vitiated if shown to be for the purpose of inducing the State to exercise its powers of acquisition on less than just terms. The concept of improper purpose as a vitiating characteristic was rightly rejected. Section 96 says nothing about purpose. It authorises the making of grants on "such terms and conditions as the Parliament thinks fit". The constraints imposed by constitutional prohibitions or guarantees will be directed to the range of permissible terms and conditions rather than their underlying purpose.
[19]Saunders, "Intergovernmental agreements and the executive power", (2005) 16 Public Law Review 294 at 301.
[20]By s 2 of the War Service Land Settlement and Closer Settlement Validation Act 1950 (NSW).
That there was some understanding or arrangement reached between the Commonwealth and the State after Magennis later appeared from Gilbert v Western Australia[21]. There, Dixon CJ, Kitto and Windeyer JJ in the course of explaining the sequel to Magennis referred to correspondence at the Ministerial level and went on:
"In one letter (dated 19th December 1951) the Prime Minister [Mr Menzies], having in mind that the decision in Magennis's Case[22] was regarded as having struck down Commonwealth participation in the 1945 Agreement, said: 'The Commonwealth wishes to avoid, for constitutional reasons disclosed by the Magennis Case, any arrangement of a formal character.' ... And 'In all the circumstances we feel strongly that the best legal foundation for future action can be provided by means of a grant of financial assistance pursuant to s 96 of the Constitution supplemented by an informal arrangement (in the form say of an exchange of letters) between governments setting out the conditions to be observed.' This proposal was adopted."
[21](1962) 107 CLR 494 at 505; [1962] HCA 7.
[22](1949) 80 CLR 382.
The assumption being made was that the terms and conditions attached to a s 96 grant may sufficiently be disclosed in an informal fashion, falling short of an intergovernmental agreement of the kind seen in this case in the Funding Agreement. It is unnecessary to consider whether that reflected a correct understanding of s 96 and of its relation to s 61 of the Constitution.
Further, it is significant – as the Victorian Solicitor‑General stressed – that, in Pye v Renshaw, Magennis was not said to be overruled and that the reason why the Court found it unnecessary to do so is to be found in the "decoupling" effected by the changes to the legislation in the intervening period. In Pye v Renshaw[23] the Court referred to the deletion from all relevant State legislation of all reference to any agreement with the Commonwealth and all reference to any direct or indirect participation of the Commonwealth in any scheme of soldier settlement. In the companion decision upon the Victorian soldier settlement legislation, Tunnock v The State of Victoria[24], Williams and Webb JJ, who had been in the majority in Magennis, concluded[25] that the Victorian Parliament had not intended the power of acquisition conferred by its statute "to be mere machinery" for carrying out the agreement with the Commonwealth.
[23](1951) 84 CLR 58 at 79.
[24](1951) 84 CLR 42; [1951] HCA 55.
[25](1951) 84 CLR 42 at 56.
Leave to re‑open Magennis should be refused because, in particular, the reasoning upon which it was based is sound, all the more so in the light of developments in interpretation of the Constitution since Magennis was decided.
Several developments since the decision in Magennis tend to support the view taken by the majority of the relationship between s 51(xxxi) and s 96. First, it is now settled[26] that the provisions, referred to above, in s 81 of the Constitution for establishment of the Consolidated Revenue Fund and in s 83 for Parliamentary appropriation, do not confer a substantive spending power and that the power to expend appropriated moneys must be found elsewhere in the Constitution or the laws of the Commonwealth.
[26]Pape v Federal Commissioner of Taxation (2009) 238 CLR 1; [2009] HCA 23.
Secondly, it is settled since Trade Practices Commission v Tooth & Co Ltd[27] that s 51(xxxi) is not confined to the acquisition of property by the Commonwealth or its instrumentalities. In particular, Mason J[28] said that remarks by Sir Owen Dixon which might be thought to throw doubt on that proposition should not be accepted[29]. In his dissenting reasons in Magennis, Dixon J had said that "perhaps" s 51(xxxi) applied to acquisition by persons standing in no such position as the Commonwealth, its agencies and instrumentalities[30].
[27](1979) 142 CLR 397 at 403, 407‑408, 426, 451‑452; [1979] HCA 47. See also Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 197; [1992] HCA 45.
[28](1979) 142 CLR 397 at 426.
[29]Mason J referred to Attorney‑General (Cth) v Schmidt (1961) 105 CLR 361 at 372‑373; [1961] HCA 21; and Andrews v Howell (1941) 65 CLR 255 at 281‑282; [1941] HCA 20.
[30](1949) 80 CLR 382 at 411.
Thirdly, in Tooth Barwick CJ described s 51(xxxi) as "a very great constitutional safeguard"[31] and shortly thereafter, in the joint reasons of six Justices in Clunies‑Ross v The Commonwealth[32], it was said that s 51(xxxi) "has assumed the status of a constitutional guarantee of just terms ... and is to be given the liberal construction appropriate to such a constitutional provision".
[31](1979) 142 CLR 397 at 403.
[32](1984) 155 CLR 193 at 201‑202 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ; [1984] HCA 65. Subsequent statements to like effect are collected in New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 211 [501]; [2006] HCA 52.
Fourthly, that construction involves looking beyond matters of legal form and to the practical effect of the law in question[33]. Indeed, shortly before the decision in Magennis, in Bank of NSW v The Commonwealth[34], Dixon J had used the expression "circuitous device" when concluding that the effect of the federal law was that the banks and their shareholders, in a real sense, albeit not formally, were stripped of the possession and control of their entire undertaking, without compliance with s 51(xxxi).
[33]See, for example, Tooth (1979) 142 CLR 397 at 433; Newcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR 513 at 633‑635; [1997] HCA 38; and, as to s 92, Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 464 [47]; [2008] HCA 11.
[34](1948) 76 CLR 1 at 349; [1948] HCA 7.
Finally, passages in the reasons of several members of the Court in Attorney‑General (Vict); Ex rel Black v The Commonwealth[35], respecting the relationship between s 96 and the guarantee or prohibition provided by s 116 with respect to matters of religion, suggest that s 96 and s 51(xxxi) also should be read together. Wilson J said that Magennis remained a persuasive analogy respecting s 96 and s 116[36]. Gibbs J said he considered[37]:
"that ss 96 and 116 should be read together, the result being that the Commonwealth has power to grant financial assistance to any State on such terms and conditions as the Parliament thinks fit, provided that a law passed for that purpose does not contravene s 116."
[35](1981) 146 CLR 559; [1981] HCA 2.
[36](1981) 146 CLR 559 at 650.
[37](1981) 146 CLR 559 at 593; see also at 618 per Mason J.
Conclusions respecting s 96 and s 51(xxxi)
The result is that the legislative power of the Commonwealth conferred by s 96 and s 51(xxxvi) does not extend to the grant of financial assistance to a State on terms and conditions requiring the State to acquire property on other than just terms. The plaintiffs' case, to that extent, should be accepted.
But that is not the end of the matter. It is necessary now to consider whether the replacement of the plaintiffs' bore licences issued under the 1912 Act involved the acquisition of property other than on just terms within the meaning of s 51(xxxi).
The plaintiffs placed heavy reliance upon what they said were the rights, recognised at common law in England and applicable to Australian conditions, of an overlying landowner to take and use groundwater. They relied upon English authorities, particularly Chasemore v Richards[38], which were referred to in Perth Corporation v Halle[39]. These rights were said to amount to an interest in land with an existence apart from statute. The statutory intervention by the 1912 Act was but a particular form of regulation in the perceived public interest, and, in any event, the bore licences held by the plaintiffs themselves created rights which were "property" within the meaning of s 51(xxxi).
[38](1859) 7 HLC 349 [11 ER 140].
[39](1911) 13 CLR 393 at 398‑399, 403‑407, 410‑411, 413; [1911] HCA 57.
It is convenient first to consider the position at common law both in England and Australia and, in doing so, to detail the development of the statute law, particularly in New South Wales.
Water use
Water is a finite and fluctuating natural resource. Both within Australia[40] and internationally[41], the need for sustainable and efficient management of water resources has attracted a good deal of attention. Questions of the ownership[42] and the need for the conservation of water resources[43] were serious legal issues in Australia even prior to Federation. The first statutes significantly regulating water resources were passed by New South Wales and Victoria during the 1880s and 1890s[44]. Since that time, the regulation of water has developed as understanding of the resource has progressed, and the need for irrigation has intensified. The regulation of groundwater extraction in New South Wales, particularly in recent decades, discloses a growing awareness of the need to carefully manage water for agricultural use. Nevertheless, it appears that there is "no single understanding or definition of sustainable yield across Australia"[45].
[40]See, for example, Agriculture and Resource Management Council of Australia and New Zealand, Standing Committee on Agriculture and Resource Management, Allocation and Use of Groundwater, Occasional Paper 2, December 1996; Gray, "Legal Approaches to the Ownership, Management and Regulation of Water from Riparian Rights to Commodification", (2006) 1(2) Transforming Cultures eJournal 64; Gardner, "The Administrative Framework of Land and Water Management in Australia", (1999) 16 Environmental and Planning Law Journal 212.
[41]See, for example, Hardin, "The Tragedy of the Commons", (1968) 162 Science 1243; Blomquist et al, "Institutional and Policy Analysis of River Basin Management: The Murray Darling River Basin, Australia", World Bank Policy Research Working Paper 3527, February 2005; Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action, (1990); Barnes, Property Rights and Natural Resources, (2009).
[42]Second Reading Speech, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 2 July 1896 at 1282, 1283, 1288, 1290, 1292, 1293, 1301-1303 and 1307; New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 8 July 1896 at 1408; Second Reading Speech, New South Wales, Legislative Council, Parliamentary Debates (Hansard), 2 September 1896 at 2798-2801 and 2806; see also Second Reading Speech of Mr Alfred Deakin, Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 24 June 1886 at 432-433, 436 and 440.
[43]Second Reading Speech, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 2 July 1896 at 1282, 1286-1287, 1291-1292 and 1295; Second Reading Speech, New South Wales, Legislative Council, Parliamentary Debates (Hansard), 2 September 1896 at 2798; New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 10 June 1897 at 1038; Second Reading Speech, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 11 August 1897 at 2888; see also Second Reading Speech of Mr Alfred Deakin, Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 24 June 1886 at 432‑433, 436 and 440.
[44]Water Rights Act 1896 (NSW); Artesian Wells Act 1897 (NSW); Irrigation Act 1886 (Vic).
[45]Agriculture and Resource Management Council of Australia and New Zealand, Standing Committee on Agriculture and Resource Management, Allocation and Use of Groundwater, Occasional Paper 2, December 1996, par 4.1.
The common law

Early explorers of the inland geography of Australia discovered "that strange phenomenon of Australia" where even apparently substantial rivers evaporated, especially during drought, "from the intense heat of the plains"[46].
[46]Scott, A Short History of Australia, 7th ed (1947) at 121.
Partly as a result of water scarcity during recurrent droughts[47], access to and use of water in New South Wales has long been regulated by statute. However, it is useful to consider aspects of the common law position before the passing of pre‑Federation water legislation, as such statutes were expressly intended to move away from the common law.
[47]As to which see the Second Reading Speech, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 2 July 1896 at 1295:
"There are many persons now living in New South Wales who remember the drought of 1837, 1838, and 1839, and anyone remembering the great drought of 1850-51 must know that it would be much better to conserve water for the purposes of averting such a great calamity, and that it is desirable a fair amount of public money should be spent on works of water conservation."
For example, the Irrigation Act 1886 (Vic) provided: "The right to the use of all water at any time in any river stream watercourse lake lagoon swamp or marsh shall … be vested in the Crown …"[48] (emphasis added). The relevant Minister, Mr Alfred Deakin, explained that the provision was designed to overcome perceived difficulties with riparian rights developed in England by the common law[49].
[48]Section 4.
[49]Second Reading Speech of Mr Alfred Deakin, Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 24 June 1886 at 440-441.
New South Wales followed suit. The Water Rights Act 1896 (NSW) ("the 1896 Act") provided: "The right to the use and flow and to the control of the water in all rivers and lakes … shall … vest in the Crown."[50] Section 6 of the 1912 Act retained this language. Similar language was adopted in water legislation in other parts of Australia[51]. Of significance for this case is that the vesting of rights to the "use" and "control" of water constituted an exercise of sovereignty in the sense that the rights so vested were based on the political power of the State. Accordingly, the reasoning of the Full Court of the Supreme Court of New South Wales in Hanson v The Grassy Gully Gold Mining Co[52], that the 1896 Act vested in the Crown the common law rights of riparian owners, is to be preferred to the slightly delphic observation of Fullagar J in Thorpes Ltd v Grant Pastoral Co Pty Ltd[53] suggesting that riparian rights survived those vesting provisions. The assertion of control over water was assumed to include the power to issue licences[54].
[50]Section 1(I).
[51]Rights in Water and Water Conservation and Utilization Act 1910 (Q); Rights in Water and Irrigation Act 1914 (WA); Control of Waters Act 1919 (SA); Control of Waters Ordinance 1938 (NT); Lake Burley Griffin Ordinance 1965 (ACT).
[52](1900) 21 NSWR (L) 271.
[53](1955) 92 CLR 317 at 331; [1955] HCA 10. These observations were not followed by Cohen J in Van Son v Forestry Commission of New South Wales (1995) 86 LGERA 108, and the reasoning in Hanson was preferred.
[54]See discussion relating to the proposed Water Rights Bill, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 13 November 1895 at 2597:
"The bill we propose to introduce will be a very short one. It will deal in the first place with riparian rights. The Government will take power to issue licences in respect of all works which have already been constructed upon proper inquiry being made. We propose in respect of other works to take power to issue a licence for a period of five years, with the right of renewal for a further term if the Minister thinks it advisable in the public interest."
The second point of interest is that the language of the 1896 Act and the 1912 Act does not disturb the common law notion that water, like light and air, is common property not especially amenable to private ownership and best vested in a sovereign state[55]. The common law position in relation to flowing water, which adapted Roman law doctrine[56], was settled in Embrey v Owen[57]. Baron Parke adopted the view of Chancellor Kent[58] that flowing water is publici juris in the sense that no‑one has "property in the water itself, but a simple usufruct while it passes along"[59]. This reflected Blackstone's classification of water as a "moveable, wandering thing" which was "common"[60] property. As such it is "beyond individual appropriation and alienation"[61]. Riparian rights did not depend on ownership of the soil of a stream; they attached to land in either lateral or vertical contact with a stream[62].
[55]Blackstone, Commentaries on the Laws of England, (1766), bk 2, c 1 at 14‑15.
[56]For a detailed account see Rodger, Owners and Neighbours in Roman Law, (1972) esp at 1-37 and 141-166.
[57](1851) 6 Ex 353 [155 ER 579].
[58]Commentaries on American Law, (1828), vol 3, Lecture 51 at 353.
[59]Embrey v Owen (1851) 6 Ex 353 at 370 [155 ER 579 at 586].
[60]Blackstone, Commentaries on the Laws of England, (1766), bk 2, c 2 at 18.
[61]Getzler, A History of Water Rights at Common Law, (2004) at 66.
[62]Lyon v Fishmongers' Company (1876) 1 App Cas 662 at 683 per Lord Selborne.
This can be contrasted with the common law position in relation to groundwater settled in England in Chasemore v Richards[63]. Lord Chelmsford distinguished between "water flowing in a definite channel, and water whether above or underground not flowing in a stream at all, but either draining off the surface of the land, or oozing through the underground soil in varying quantities"[64]. Such water could be intercepted by a landowner.
[63](1859) 7 HLC 349 [11 ER 140].
[64](1859) 7 HLC 349 at 375 [11 ER 140 at 150].
The proposition that water in general cannot form the subject matter of property had the consequence that the grant by a landowner to another of a watercourse did not mean the grant of the water itself[65]. The grant of "a watercourse" meant, as Sir George Jessel MR explained in Taylor v Corporation of St Helens[66], an easement or right to the running of water, or, if there was a relevant context, either the channel, pipe or drain containing the water, or the land over which the water flowed.
New South Wales legislation
[65]Halsbury's Laws of England, 1st ed, vol 11, title "Easements and Profits a Prendre", par 603.
[66](1877) 6 Ch D 264 at 271.
Groundwater
In 1895, the need for legislation dealing with artesian bores was linked to the need to conserve water[67]. The Artesian Wells Act 1897 (NSW) provided for government involvement in sinking bores. The Water and Drainage and Artesian Wells (Amending) Act 1906 (NSW) required that artesian bores not sunk by the Crown be licensed. From 1912 bore licences were governed by Pt 5, Div 3 of the 1912 Act.
[67]New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 13 November 1895 at 2600 and 2601. It can be noted that the then Department of Water Conservation had completed some works on the Lower Lachlan.
From 1930, a bore was not to be sunk, enlarged, deepened or altered to increase its flow without a licence[68], and by 1955 a licence under the 1912 Act was required for all bores[69]. Such licences were generally issued without limitation as to time and other conditions, although on occasion licences were issued subject to a variety of conditions. From 1973 to 1984, it was the usual practice to issue licences for new bores for renewable periods of five years and to impose conditions which were set out in those licences. The conditions typically restricted the purpose for which water could be extracted and typically permitted extraction for irrigation of an area of up to 162 hectares on any one property. The conditions also typically did not impose a volumetric restriction. This policy was applied by the Department administering the relevant parts of the 1912 Act ("the Department") or the Water Resources Commission ("the Commission")[70].
[68]Section 112(1) of the 1912 Act, inserted by Water (Amendment) Act 1930 (NSW).
[69]Irrigation, Water and Rivers and Foreshores Improvement (Amendment) Act 1955 (NSW), s 12.
[70]First constituted as the Water Conservation and Irrigation Commission under ss 4 and 4A of the Irrigation Act 1912 (NSW) (as amended by s 6 of the Irrigation (Amendment) Act 1916 (NSW)) and reconstituted as the Water Resources Commission (being a continuation of the same legal entity as the Water Conservation and Irrigation Commission) under s 4 and cl 1 of Sched 4 of the Water Resources Commission Act 1976 (NSW).
From March 1984, the Department, and later the Ministerial Corporation constituted by s 7 of the Water Administration Act 1986 (NSW) ("the 1986 Act"), concerned to avoid resource exhaustion, adopted a policy of imposing on all licences, except those used to access domestic and stock requirements, a condition limiting the volume of water that could be extracted in a particular year. The policy outlined a need to modify allocation policies on the basis of continued monitoring of particular groundwater systems.
In each case, a condition was imposed on bore licences in the following, or similar, terms:
"The [authority/person administering the 1912 Act] shall have the right during the currency of this licence to vary at any time the volumetric allocation, or the rate at which this allocation is taken."
From 1981, on top of the volumetric allocation under each licence (known as an "entitlement"), "allocations" specifying the actual amount of water that could be taken out of each entitlement were from time to time notified to licence holders.
In 1966, amendments were made to the 1912 Act empowering the entity administering the 1912 Act (later the Ministerial Corporation) to make declarations regarding areas, which would then have implications for the way in which water in those areas could be managed[71]. Section 117A(3)(a) provides that, in respect of a "restricted sub-surface water area", the Ministerial Corporation may:
"by order in writing direct the licensee of any bore, whether sunk or commenced to be sunk before or after the proclamation of the restricted sub-surface water area:
(i)to restrict or control the rate of flow or pumping or the manner of extraction of water from the bore, or the quantity of water which may be allowed to flow or be pumped therefrom in any stated period of time or its usage;
(ii)to take such measures or precautions as may be specified in the order for the protection of the quality and prevention of pollution or contamination of any sub-surface water …;
(iii)to furnish the Ministerial Corporation at such intervals as may be specified in the order a report of static water level in the bore from a point of measurement predetermined by the Ministerial Corporation and of the quantities of water pumped from the bore;
(iv)to provide, fit and maintain a metering or measuring device acceptable to the Ministerial Corporation which will adequately and continuously record the quantity of water flowing or pumped from a bore from which water is used,
and may, in any such order, set forth such requirements as it deems necessary for proper compliance with a direction contained therein".
[71]Irrigation, Water, Crown Lands and Hunter Valley Flood Mitigation (Amendment) Act 1966 (NSW), s 4.
In 1985, the "sub-surface water basin known as the Lachlan River Basin" was declared to be a "prescribed area" under s 117B(2). Section 117B permits the Ministerial Corporation to fix a charge upon licensees of any bore within the prescribed area. From June 1996, the Ministerial Corporation imposed, in respect of each licence, a fixed charge per megalitre of entitlement, plus a fixed charge for each megalitre used, under s 117B(4) of the 1912 Act.
In 1994, all sub-surface water basins in New South Wales were declared to be "restricted sub-surface water areas" under s 117A.
Surface water
Licences entitling the holder to construct works for the extraction of surface water have been issued in New South Wales since the commencement of the 1912 Act. From 1981, surface water was allocated volumetrically for "Regulated Rivers", including the Lachlan River. Pursuant to s 20W of the 1912 Act, the Governor declared that each surface water licence in respect of a Regulated River was subject to the relevant volumetric water allocations scheme, by orders published in the Gazette. Volumetric allocations were prepared by the Commission, which assessed the total quantity of water likely to be available to be taken from a Regulated River in a given year and the total quantity of water that should be reserved for other uses or future uses, and determined in respect of each surface water licence the maximum quantity of water that could, subject to Pt 2, Div 4B, be taken from the Regulated River that year. These announced allocations were notified to licence holders, and a condition limiting the maximum volume of water that could be extracted in a particular year to the amount so determined was added to each surface water licence when next renewed.
Conjunctive use
From March 1984 to July 1998, the Department adopted a policy applying where licences in respect of both groundwater and surface water had been issued in respect of the same property. If the announced surface water allocation for the relevant surface water licence was, as at 1 October of a particular year, less than 100 per cent of the surface water licence entitlement, the conditions of the relevant bore licence were to permit extraction of the "Conjunctive Use Amount", being the shortfall between the surface water licence entitlement and the surface water allocation. It should be here noted that it is generally more expensive to pump groundwater to the surface than it is to use surface water. This policy was applied to the plaintiffs' bore licences. The policy was revoked from 23 July 1998. New bore licences would not include a Conjunctive Use Amount, and existing licences would be amended to remove any entitlement to a Conjunctive Use Amount. This policy was implemented in the LLGS, and in respect of the plaintiffs' licences, in or around 2002.
Conclusions respecting "replacement" of bore licences
The 2000 Act provided for the repeal[72] of the 1912 Act and the 1986 Act. The effect of other provisions[73] of the 2000 Act was to replace licences under Pt 5 of the 1912 Act, including the bore licences of the plaintiffs, with aquifer access licences under the 2000 Act. This was to be taken to occur on "the appointed day" fixed by proclamation under s 55A of the 2000 Act. This day was 1 February 2008.
[72]Section 401 and Sched 7.
[73]Section 403 and Sched 10.
On the assumption that all other conditions for the engagement of s 51(xxxi) thus were satisfied, can it be said that on 1 February 2008 there was an acquisition of property of the plaintiffs on other than just terms? The answer is that on that date: (i) the plaintiffs had no common law rights with respect to the extraction from the land of groundwater for the purposes of their businesses, (ii) whatever proprietary characteristics the bore licences of the plaintiffs may have had, there was no acquisition of property within the meaning of s 51(xxxi), and (iii) these conclusions make it unnecessary further to consider the conceded insufficiency of the offered structural adjustment payments as just terms.
We turn to explain the answer in point (i) and then that in point (ii).
Common law rights
The subject of common law rights (point (i)) has been considered earlier in these reasons[74], but further reference to statute is necessary. This puts beyond dispute the absence of such rights in the plaintiffs.
[74]At [51]-[57].
By additions made in 1966[75] the 1912 Act vested in what was then the Commission and "for the benefit of the Crown" the right "to the use and flow and to the control of all sub‑surface water" (s 4B) and it was made an offence, except in accordance with the 1912 Act or with written permission of the Commission, to "interfere in any way with sub‑surface water or obstruct its flow" (s 4C). The vesting effected by s 4B for the benefit of the Crown was apt to divest any common law rights, whether otherwise existing and whether classified as an interest in land, as the plaintiffs would have it. That conclusion is consistent with the reasoning in Hanson v The Grassy Gully Gold Mining Co[76] to which reference was made earlier in these reasons[77].
[75]By the Irrigation, Water, Crown Lands and Hunter Valley Flood Mitigation (Amendment) Act 1966 (NSW).
[76](1900) 21 NSWR (L) 271.
[77]At [54].
Section 4B was repealed in 1986[78]. Thereafter the rights to "the use and flow" and "the control" of groundwater vested in the Ministerial Corporation under s 12(1) of the 1986 Act. It will be noted that the language used in s 4B and repeated later is the same as the language used in respect of surface water in the late 19th century as described earlier; it is language consonant with a recognition that water is a common resource[79].
[78]Water (Amendment) Act 1986 (NSW), Sched 1(4).
[79]Cf Chasemore v Richards (1859) 7 HLC 349 [11 ER 140].
The character of the bore licences
The remaining issues with respect to the possible engagement of s 51(xxxi) concern the constitutional character of the plaintiffs' bore licences and their alleged "acquisition" on 1 February 2008.
The bore licences operated for the benefit of the lawful occupier for the time being of the land whereon the bores were sunk (s 117). From 15 October 2003, s 117J applied to the area in which the plaintiffs' licences were granted. Section 117J provided for the transfer (permanently or for a period) of the whole or part of the water allocations for a licence, whether or not the transferee held another licence. In New South Wales, the assessment of the value of irrigable land takes into account rights to take water[80]. Bore licences attached to irrigable land enhanced its market value and were commonly taken into account by lenders when assessing the value of security to be provided. But the approval of the Ministerial Corporation was necessary to any transfer and it might impose such conditions in relation to the transfer as it thought fit (s 117J(11)).
[80]Valuation of Land Act 1916 (NSW), s 6A(3).
It often has been remarked that the facility given by statute for the transfer of rights created by or pursuant to that statute is an indication that for the general purposes of the law the rights may be classified as proprietary in nature. An example is provided by the speech of Lord Wilberforce in National Provincial Bank Ltd v Ainsworth[81]. But as Mason J, in the course of discussing Ainsworth, observed in R v Toohey; Ex parte Meneling Station Pty Ltd[82], where a licensing system is subject to Ministerial or similar control with powers of forfeiture, the licence, although transferable with Ministerial consent, nevertheless may have an insufficient degree of permanence or stability to merit classification as proprietary in nature.
[81][1965] AC 1175 at 1247‑1248.
[82](1982) 158 CLR 327 at 342; [1982] HCA 69.
The Commonwealth and New South Wales Solicitors‑General, in particular, emphasised the presence in the 1912 Act of provisions which rendered the bore licences, it was said, inherently susceptible of variation within the meaning of authorities upon s 51(xxxi) of the Constitution. These include The Commonwealth v WMC Resources Ltd[83]; Attorney‑General (NT) v Chaffey[84]; Minister for Primary Industry and Energy v Davey[85] and Bienke v Minister for Primary Industries and Energy[86].
[83](1998) 194 CLR 1; [1998] HCA 8.
[84](2007) 231 CLR 651; [2007] HCA 34.
[85](1993) 47 FCR 151.
[86](1996) 63 FCR 567.