Decision
Reasons for decision
The primary judge concluded that Mr Spencer had no reasonable prospect of successfully prosecuting the proceeding (essentially because Mr Spencer could not identify any Commonwealth law with respect to the acquisition of property). Accordingly, the Commonwealth’s motion was granted and Mr Spencer’s dismissed (Spencer v Commonwealth of Australia [2008] FCA 1256). Mr Spencer sought and obtained leave to appeal against the decision of the primary judge. As Mr Spencer abandoned his claim for interlocutory relief, the issue on appeal is the primary judge’s summary dismissal of the proceeding under s 31A of the Federal Court of Australia Act.PRIMARY JUDGMENTMr Spencer’s claims The primary judge summarised the assertions in Mr Spencer’s statement of claim (by reference to the paragraph numbering in that document) as follows (at [6]):(1.1)Mr Spencer holds freehold or leasehold title to the whole of Saarahnlee.(2.2)Prior to the enactment of the State Statutes, Saarahnlee was valuable, marketable and productive farming and grazing land on which Mr Spencer conducted a farming enterprise and Mr Spencer’s rights and interests in Saarahnlee included the following (the Rights and Interests):(a)Improvements, including timber treatment, pasture improvement, wood on the terrain, timber in trees and millable timber;(b)A farming enterprise that included various eco-services projects, including the farming of a special breed of high country fine wool sheep, a trout farm project, a wind farm project, a eucalyptus oil project, a spring water bottling project and an Australian oak furniture project;(c)Causes of action for compensation in respect of the loss or resumption of rights arising under the Crown leases relating to Saarahnlee;(d)Carbon sequestration rights, including the legal, commercial or other benefits or advantages of carbon sequestration by existing trees or future trees or forests on Saarahnlee after 1990 (the Carbon Sequestration Rights); and(e)Carbon abatement rights arising from land use change and forestry conservation, including the legal, commercial or other benefits or advantages retained by carbon sinks by sequestration by any existing or future trees or forests or other herbaceous vegetation on Saarahnlee (the Carbon Abatement Rights). (2.3)Saarahnlee is well wooded, with excellent herbaceous vegetation cover, ample trees and forests including native vegetation.(2.4)Saarahnlee is a terrestrial ecosystem or carbon sink with significant amounts of vegetation and soils that are available for immediate carbon sequestration.(2.5)The rights to the legal, commercial or other benefits of carbon sequestration by such vegetation and soils and of carbon abatement arising from retention of sinks in or arising from such vegetation and soils constitute property within the meaning of s 51(xxxi) of the Constitution.(2.6)The said vegetation and soils, including carbon rights, are a natural resource within the meaning of s 4 of the Financial Assistance Act and s 17 of the Natural Heritage Act and are native vegetation within the meaning of s 8 of the Natural Heritage Act.(2.7)By the State Statutes, a prohibition or general restriction was placed on the reasonable use of Saarahnlee, including the vegetation and soils and the carbon offset rights arising from the Carbon Sequestration Rights and Carbon Abatement Rights (together the Carbon Rights). (2.8)Upon that prohibition or general restriction taking effect, some or all of the Carbon Rights were expropriated or acquired by the Commonwealth and an identifiable and measurable benefit or advantage was obtained by the Commonwealth for its purposes.(2.9)New South Wales assigned the Carbon Rights to the Commonwealth for the purposes of the Commonwealth.(2.10)No compensation has been paid or offered to Mr Spencer by the Commonwealth for the said expropriation or acquisition and just terms have not been provided to Mr Spencer in respect of such expropriation or acquisition and Mr Spencer has received no compensation from the Commonwealth for the taking of the Carbon Rights.(4)The Commonwealth passed the Financial Assistance Act for the purposes of giving effect to a proposed resource agreement contemplated between the Commonwealth and New South Wales called National Greenhouse Response Strategy and other agreements for the establishment of a cooperative statutory and administrative framework, arrangement or partnership between the Commonwealth and New South Wales.(5)The Commonwealth passed the Natural Heritage Act for the purpose of giving effect to the National Framework for the Management and Monitoring of Australia’s Native Vegetation, the National Vegetation Initiative, and other agreements for the establishment of a cooperative statutory and administrative framework, arrangement or partnership between the Commonwealth and New South Wales so as to meet Australia’s commitments under the Kyoto Protocol to the United Nations Framework Convention on Climate Change of 11 December 1997 (the Kyoto Protocol).(6.1)As a party to the Kyoto Protocol, Australia:(a)assumed responsibility for ensuring or attempting to ensure that its emissions of greenhouse gases will not exceed annually, during the period 2008 to 2012 inclusive, 108% of the emissions of greenhouse gases during 1990, and(b)may transfer emissions to, or acquire emissions from, other parties to the Kyoto Protocol by a process of debiting and crediting in national greenhouse accounts, for the purpose of increasing or reducing emissions for the purposes of determining progress against targets under the Kyoto Protocol.(7.1)The Commonwealth is in a position to benefit from trading the Carbon Rights only by virtue of the ‘regulatory’ reduction of native vegetation clearing in Australia pursuant to the Commonwealth Statutes.(9.1)Authorised by the Commonwealth Statutes, the Commonwealth established a national framework of laws, being the State Statutes and the Inter-Governmental Agreements, relating to the management and use of land within Australia, which included provisions effecting the compulsory acquisition of land and rights to the reasonable use of land. (9.2)If the said acquisition or expropriation of Saarahnlee and the Carbon Rights were carried out by the Commonwealth directly, it would be required to provide just compensation to Mr Spencer.(9.2)The Commonwealth Statutes formed part of a scheme or device designed to avoid or over-reach the restrictions on the exercise of law making powers of the Commonwealth under s 51(xxxi) of the Constitution. (9.3)Accordingly, the Commonwealth Statutes and the Inter-Governmental Agreements were made for the purpose of taking property other than on just terms and are not authorised by s 51(xxxi) or any other provision of the Constitution.(10)New South Wales passed the State Statutes in furtherance of the Inter-Governmental Agreements and the provisions of the Commonwealth Statutes.(11)Since the passage of the State Statutes, Mr Spencer has been prevented and restricted from clearing native vegetation on Saarahnlee by reason of the State Statutes and the refusal of New South Wales to grant permission for any such clearing.(12.1-12.3)The provisions of the State Statutes, the Commonwealth Statutes and the Inter-Governmental Agreements have effected an acquisition of the Rights and Interests and have imposed a prohibition or restriction that has prevented the reasonable use of Saarahnlee by Mr Spencer, with the consequence that Saarahnlee is no longer commercially viable.(12.4-12.5)The Commonwealth has acquired the Carbon Rights and is using or threatening to use the Carbon Rights to its advantage, in that, if the Commonwealth did not have the ability to account for emission reductions from reducing land clearing in the period 2008 to 2012, it would need to take other measures to reduce emissions in order to meet its obligations under the Kyoto Protocol, which measures are likely to involve expense to the Commonwealth.(13)The acquisition of the Rights and Interests occurred pursuant to or as a result of the operation or effect of the Commonwealth Statutes otherwise than on just terms pursuant to the legislative and associated intergovernmental relationships described above.(14)The Commonwealth has taken no steps to ensure that the taking of the Rights and Interests and the Carbon Rights without Mr Spencer’s consent or permission has been on just terms.(15)Accordingly, each of the Commonwealth Statutes is invalid in so far as it fails to provide for just terms for the acquisition of the Rights and Interests. (16)By virtue of the expropriation, trespass on, detinue in relation to, or conversion of the Rights and Interests by the Commonwealth under invalid legislation, Mr Spencer has suffered loss and damage in that he has been prevented from trading carbon property rights on any market and the Commonwealth has acquired the Carbon Rights.