Spencer v Commonwealth - [2008] FCA 1256

FEDERAL COURT OF AUSTRALIA
Spencer v Commonwealth of Australia [2008] FCA 1256
CONSTITUTIONAL LAW – acquisition of property on just terms – s 51(xxxi) – validity of Commonwealth statutes providing for grants of financial assistance to the States under s 96 – whether the Commonwealth statutes effect or authorise the acquisition of property – whether the Commonwealth statutes are laws with respect to the acquisition of property
CONSTITUTIONAL LAW – acquisition of property on just terms – s 51(xxxi) – validity of Inter-Governmental Agreements made pursuant to Commonwealth statutes providing for grants of financial assistance to the States under s 96 – whether the Inter-Governmental Agreements effect or authorise the acquisition of property – whether the Inter-Governmental Agreements are ultra vires the power to enter into them conferred on the Commonwealth by the Commonwealth statutes – whether the Inter-Governmental Agreements are laws with respect to the acquisition of property
PRACTICE AND PROCEDURE – summary judgment – s 31A of the Federal Court of Australia Act 1976 (Cth) – whether reasonable prospect of successfully prosecuting the proceeding – whether reasonable prospect of successfully obtaining the relief sought
PRACTICE AND PROCEDURE – application for interim relief – injunction and damages – whether serious question to be tried – whether balance of convenience favours granting interim relief
ESTOPPEL - issue estoppel – whether final or interlocutory judgment
Commonwealth of Australia Constitution Act (Imp), ss 51(xxxi), 96
Federal Court of Australia Act 1976 (Cth), s 31A
Financial Management and Accountability Act 1997 (Cth)
National Parks and Wildlife Conservation Act 1975 (Cth)
Native Vegetation Act 2003 (NSW)
Native Vegetation Conservation Act 1997 (NSW)
Natural Heritage Trust of Australia Act 1997 (Cth)
Natural Resources Management (Financial Assistance) Act 1992 (Cth)
Soil Conservation (Financial Assistance) Act 1985 (Cth)
Attorney-General of Victoria v Andrews (2007) 230 CLR 369
Bone v Mothershaw [2003] 2 Qd R 600
Castlemaine Tooheys Limited v The State of South Australia (1986) 161 CLR 148
Combet v The Commonwealth (2005) 224 CLR 494
Evans v State of New South Wales [2008] FCAFC 130
Fairfax v Federal Commissioner of Taxation (1965) 114 CLR 1
Huddart Parker Ltd v The Commonwealth (1931) 44 CLR 492
Jefferson Ford Pty Limited v Ford Motor Company of Australia Limited [2008] FCAFC 60
Re The Judiciary Act 1903-1920 and Re The Navigation Act 1912-1920 (1921) 29 CLR 257
Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1
Re McBane; Ex parte Australian Catholic Bishops Conference (2001) 209 CLR 372
Newcrest Mining Co v The Commonwealth (1997) 190 CLR 513
New South Wales v The Commonwealth (2006) 229 CLR 1
PJ Magennis Pty Ltd v The Commonwealth (1949) 80 CLR 382
Pye v Renshaw (1951) 84 CLR 58
Smith v ANL Limited (2001) 204 CLR 493
South Australia v The Commonwealth (1942) 65 CLR 373
Spencer v The Australian Capital Territory [2007] NSWSC 303
State of Victoria v The Commonwealth (1957) 99 CLR 575
Truth About Motorways Pty Ltd v MacquarieInfrastructure Investment Management Limited (1999) 200 CLR 591
Waterhouse v Minister for the Arts and Territories (1993) 43 FCR 175
PETER JAMES SPENCER v COMMONWEALTH OF AUSTRALIA
ACD 24 OF 2007
EMMETT J
26 AUGUST 2008
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY

ACD 24 OF 2007

BETWEEN:

PETER JAMES SPENCER
Applicant

AND:

COMMONWEALTH OF AUSTRALIA
Respondent

JUDGE:

EMMETT J

DATE:

21 AND 22 MAY, 2, 3 AND 27 JUNE, AND 26 AUGUST 2008

PLACE:

SYDNEY

INDEX

THE PROCEEDING........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......

[1]

The Allegations in the Statement of Claim........ ........ ........ ........ ........ ........ ........ ........

[6]

The Motions........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........

[7]

THE PRESENT ISSUES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........

[17]

THE KYOTO PROTOCOL........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...

[22]

THE COMMONWEALTH STATUTES........ ........ ........ ........ ........ ........ ........ ........ ......

[35]

The Financial Assistance Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....

[36]

The Natural Heritage Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[43]

THE INTER-GOVERNMENTAL AGREEMENTS........ ........ ........ ........ ........ ........ ...

[53]

The 1997 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[55]

The 2000 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[68]

The 2002 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[72]

The 2003 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[77]

THE STATE STATUTES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......

[83]

The 1997 Vegetation Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....

[85]

The 2003 Vegetation Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....

[91]

SERIOUS QUESTION TO BE TRIED / REASONABLE PROSPECT OF SUCCESS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........

[99]

Some Legal Principles Concerning ss 51(xxxi) and 96........ ........ ........ ........ ........ .....

[110]

Acquisition of Property Within s 51(xxxi)........ ........ ........ ........ ........ ........ ........ ........ ..

[123]

Laws With Respect to the Acquisition of Property........ ........ ........ ........ ........ ........ ...

[151]

Whether Acquisition or Expropriation Effected or Authorised........ ........ ........ ........

[159]

Standing/Matter........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[178]

Conversion by the Commonwealth........ ........ ........ ........ ........ ........ ........ ........ ........ ....

[182]

Res Judicata/Issue Estoppel........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......

[186]

Conclusion as to Mr Spencer’s Prospects........ ........ ........ ........ ........ ........ ........ ........ .

[193]

BALANCE OF CONVENIENCE........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..

[194]

CONCLUSION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......

[211]

REASONS FOR JUDGMENT
THE PROCEEDING

The Court has two motions before it. The first is an application by the respondent, the Commonwealth of Australia, for summary dismissal of the proceeding. The second is an application by the applicant, Mr Peter Spencer, for interlocutory relief. Since there is considerable overlap in the questions raised by the two applications, they have been heard together.
Mr Spencer is the holder of freehold or leasehold title in respect of some sixteen separate contiguous parcels of land that together comprise the property known as “Saarahnlee”, situated at Shannons Flat in New South Wales. He says that the effect of the Native Vegetation Conservation Act 1997 (NSW) (the 1997 Vegetation Act) and the Native Vegetation Act 2003 (NSW) (the 2003 Vegetation Act) (together the State Statutes) has been to impose a prohibition or general restriction on the reasonable use of Saarahnlee, with the consequence that certain of his interests in Saarahnlee have been expropriated or acquired.
Mr Spencer claims that that expropriation or acquisition was effected or authorised by the Natural Resources Management (Financial Assistance) Act 1992 (Cth) (the Financial Assistance Act) and the Natural Heritage Trust of Australia Act 1997 (Cth) (the Natural Heritage Act) (together the Commonwealth Statutes). He says that, therefore, they are laws with respect to the acquisition of property. However, because they do not provide for just terms, they are not authorised by s 51(xxxi) of the Commonwealth of Australia Constitution Act (Imp) (the Constitution). He says that therefore they are both invalid in so far as they effect or authorise an acquisition of his property.
In the proceeding Mr Spencer claims final relief as follows:
·Declarations that the Financial Assistance Act and the Natural Heritage Act are invalid to the extent that they effected or authorised acquisitions of property from Mr Spencer other than on just terms.
·Declarations that certain inter-governmental agreements (the Inter-Governmental Agreements) between the Commonwealth and New South Wales are invalid to the extent that they effected or authorised acquisitions of property from Mr Spencer other than on just terms.
·An order that the Commonwealth return to Mr Spencer the private property said to have been acquired.
Mr Spencer also claims damages for conversion of and trespass to his private property and damages arising from an alleged ‘Constitutional tort’ said to have been committed by the Commonwealth in taking Mr Spencer’s private property.
As I understand Mr Spencer’s contentions, his claims are wholly dependent upon the proposition that the Natural Heritage Act and the Financial Assistance Act are invalid to some extent. Before dealing with Mr Spencer’s contentions, it is desirable to outline the allegations made by Mr Spencer in the current version of his statement of claim.
The Allegations in the Statement of Claim
The assertions made in the current version of Mr Spencer’s statement of claim, as I apprehend them, can be summarised as follows, using the numbering in the statement of claim:
(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 Spender 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.
The Motions
As I have said, there are two applications before the Court. Mr Spencer asks for interlocutory orders that the Commonwealth be restrained from:
·Taking steps to establish a carbon sequestration or carbon trading market that precludes access to Mr Spencer in respect of the Rights and Interests or that values the Rights and Interests in respect of the entry price at less than what are just terms.
·Using the Rights and Interests in any way without compensation on just terms.
The Commonwealth, on the other hand, seeks summary dismissal of the proceeding under s 31A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), on the basis that Mr Spencer has no reasonable prospect of successfully prosecuting the proceeding. Both motions raise essentially the same legal question, namely, whether or not the Commonwealth Statutes are invalid to some extent, as being laws with respect to the acquisition of property without providing just terms.
The Commonwealth’s motion was filed on 26 July 2007. I first heard the motion on 31 August 2007, when I ordered that the then current statement of claim be struck out. However, I granted leave to Mr Spencer to file an amended statement of claim and adjourned the Commonwealth’s motion part heard. An amended statement of claim was filed on 18 October 2007. On 1 November 2007, I ordered that the amended statement of claim be struck out but gave leave to Mr Spencer to file a further amended statement of claim. One was filed on 3 December 2007.

On 20 December 2007, I again granted leave to Mr Spencer to file a further version of the statement of claim and directed the Commonwealth to file a defence on or before 1 February 2008. I also directed the parties to endeavour to formulate separate questions of law thrown up by the pleadings and to exchange suggested questions. I stood over the proceeding and the Commonwealth’s motion for further directions on 14 February 2008.
I gave those directions in the expectation that questions of law as to whether the Commonwealth Statutes are laws with respect to the acquisition of property could be formulated for determination on a final basis, rather than continuing to hear the Commonwealth’s summary dismissal application. I considered that the then form of statement of claim disclosed a sufficiently arguable case that there had been an acquisition of property to enable separate determination of a question of law as to whether any such acquisition had been effected or authorised by the Commonwealth Statutes. I considered that the substantial costs that would be involved in a trial would be saved if the proceeding were ultimately disposed of on the basis of such a question of law.
A further amended statement of claim was filed on 24 December 2007 and the Commonwealth filed a defence on 1 February 2008. When the matter came on for directions on 14 February 2008, Mr Spencer opposed the formulation, for separate determination, of a pure question of law as to the validity of the Commonwealth Statutes. Rather, he formulated several factual questions that would have involved substantial hearing of the proceeding. I therefore considered that it was inappropriate to proceed further with the formulation of any separate questions. I granted Mr Spencer leave to file a further amended statement of claim no later than 28 February 2008 and directed the Commonwealth to file a defence to that statement of claim no later than 17 March 2008. The matter was listed for further directions on 2 April 2008.
Mr Spencer filed another version of his statement of claim on 28 February 2008. The Commonwealth filed a defence to that statement of claim on 17 March 2008.
However, in the meantime, Mr Spencer moved ex parte on 12 March 2008 for interlocutory relief pursuant to a motion purportedly filed on 11 March 2008. Mr Spencer claimed an order restraining the Commonwealth from:
·Using its national greenhouse office accounts, or national greenhouse inventory, or national carbon trading carbon accounts or otherwise from claiming any property or benefit of other measurable advantage by reference to carbon emissions reductions or benefits achieved on or from any land that includes Saarahnlee.
·Marking any claim or statement that it has achieved emission reduction levels that includes references to carbon emissions reductions or benefits achieved on or from private land, including Saarahnlee.
·Using or otherwise dealing with carbon emissions reductions and offsets for the purposes of the Kyoto Protocol on any land other than State owned land or by means other than land affected by the Governments forced land use change on private land, including Saarahnlee.
·Using the rights of or in respect of any carbon emission scheme, carbon sink, carbon trading scheme or market, which in any way incorporates, applies or uses or has any impact whatsoever on the Carbon Rights or Mr Spencer’s property in the Carbon Rights or the ownership, or use, or possession of Saarahnlee, including the Commonwealth’s claimed share of the greenhouse gas emissions reductions in respect of Saarahnlee.
·Trading in carbon until the property rights of Mr Spencer in the carbon sequestered on or in relation to Saarahnlee are determined or offsetting or using as security any of such carbon.
·Submitting greenhouse accounts to the Framework Convention (as described below) claiming emission levels that include the Carbon Rights.
·Making any media statement regarding any of the carbon sequestered on or in relation to Saarahnlee other than to announce the new levels of the 1990 baseline 30% above by 2010 after deducting the entire reductions achieved by land use change on private land.
Mr Spencer also claimed interim payments in respect of keeping his flock of sheep alive.
I indicated to counsel for Mr Spencer, in the course of hearing the application for ex parte relief, that I considered that the relief claimed in the motion may be misconceived. However, I gave Mr Spencer leave to file his motion returnable, for directions only, on 2 April 2008. Following directions hearings on 2 April 2008 and 10 April 2008, I directed that the Commonwealth’s motion for summary dismissal and Mr Spencer’s motion for interlocutory relief be heard together on 21 May 2008. I heard evidence and argument on both motions over several days in May and June 2008.
On 2 June 2008, in the course of the hearing, counsel for Mr Spencer provided to the Court and to the Commonwealth a form of proposed order which he said was a refinement of Mr Spencer’s notice of motion. In response to a specific enquiry put to him, counsel for Mr Spencer confirmed that the only relief sought on the motion was that claimed in the form of proposed order. On that basis, I granted leave to Mr Spencer to file an amended notice of motion seeking relief in terms of that order. For reasons that have not been explained, Mr Spencer has not filed an amended motion. However, the interlocutory hearing has been conducted on the basis that the only interlocutory relief claimed by Mr Spencer is that set out in the form of proposed order. I have set out that relief above at [7].
In the course of the hearing, Mr Spencer was also granted leave on several occasions to make further amendments to his statement of claim. The current version of the statement of claim was filed on 3 June 2008.
THE PRESENT ISSUES
For Mr Spencer to obtain interlocutory relief, he must show that there is a serious question to be tried as to whether or not he is entitled to the final relief he claims in the statement of claim. On the other hand, for summary dismissal, the Commonwealth must show that Mr Spencer has no reasonable prospect of obtaining the relief so claimed. They are opposite sides of the same question. If there is a serious question to be tried, Mr Spencer must also show that the balance of convenience lies with the grant of the interlocutory relief claimed.
Where there are purely legal questions upon which a claimant for interlocutory relief must succeed in order to obtain final relief, it may be appropriate to determine those questions in the course of an interlocutory hearing. On the other hand, it would certainly be unusual to determine disputed factual questions at an interlocutory hearing. The Court will normally proceed on the basis that the evidence adduced by the claimant for interlocutory relief is accepted at its highest. Nevertheless, there must be evidence capable of supporting the ultimate findings of fact that must be made for the claimant to obtain final relief.
Section 31A of the Federal Court Act requires the Court to consider the question of whether there is a real issue of law or fact to be decided. The Court must conduct an enquiry into the merit of issues of law. While the enquiry should not necessarily be for the purposes of resolving the legal questions, that can be done. The object is not simply to determine whether the argument is hopeless but whether the argument is sufficiently strong to warrant the proceeding’s going to trial. If the Court can resolve contested legal issues at a summary hearing, without undue delay, it may be preferable to do so in the interests of saving costs and time. Where there are real issues of law, the appropriate course is to accept submissions and hear argument, whereupon the Court can decide the issues without the need for a trial. Once the issues of law are resolved, it may be clear, one way or the other, whether the proceeding should be allowed to go to trial (see Jefferson Ford Pty Limited v Ford Motor Company of Australia Limited [2008] FCAFC 60, at [23] and [131]).
I propose to deal first with the question of Mr Spencer’s prospects of success and then with the balance of convenience. In relation to his prospects of success, the essence of Mr Spencer’s claim appears to be contained in paragraph (15) of his current statement of claim as summarised above. That is to say, an essential plank in his case is that each of the Commonwealth Statutes is a law with respect to the acquisition of property and is invalid because it provides for acquisition otherwise than on just terms. The allegation of invalidity is tied to the prayers for relief summarised in paragraph [4] above.
However, before dealing with the question of Mr Spencer’s prospects of success, it is necessary to explain the following in some detail, in order to place Mr Spencer’s arguments in context:
·The Kyoto Protocol.
·The Commonwealth Statutes.
·The Inter-Governmental Agreements.
·The State Statutes.
I shall say something about each in turn.
THE KYOTO PROTOCOL
Australia is a party to the Montreal Protocol on Substances that Deplete the Ozone Layer 1987 as adjusted and amended on 29 June 1990 (the Montreal Protocol). The Montreal Protocol resulted from the Vienna Convention for the Protection of the Ozone Layer 1985.
Australia is also a party to the United Nations Framework Convention on Climate Change of 9 May 1992 (the Framework Convention). By the Framework Convention, the parties to it determined to protect the climate system for present and future generations. Article 2 provides that the ultimate object of the Framework Convention, and any related legal instruments that the Conference of the Parties may adopt, is to achieve stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.
By Article 4 of the Framework Convention, the parties relevantly agreed to:
·Develop and publish national inventories of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol.
·Formulate, implement and update programs containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol.
·Promote and cooperate in the development, application and diffusion of technologies, practices and processes that control, reduce or prevent anthropogenic emissions of greenhouse gases not controlled by the Montreal Protocol.
·Promote sustainable management and promote and cooperate in the conservation and enhancement of sinks and reservoirs of all greenhouse gases not controlled by the Montreal Protocol.
·Take climate change considerations into account in relevant social, economic and environmental policies and actions and employ appropriate methods with a view to minimising adverse effects on the economy, on public health and on the quality of the environment of projects or measures undertaken by them to mitigate or adapt to climate change.
By Article 4.2, the developed country parties, including Australia, committed themselves specifically as follows:
·To adopt national policies and take corresponding measures on the mitigation of climate change by limiting anthropogenic emissions of greenhouse gases and protecting and enhancing greenhouse gas sinks and reservoirs.
·To communicate periodically, in accordance with Article 12, detailed information on its policies and measures on the mitigation of climate change.
By Article 12.1 of the Framework Convention, each party agreed to communicate to the Conference of the Parties a national inventory of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol. By Article 12.2, each developed country party, including Australia, was to incorporate, in its communication, a detailed description of the policies and measures that it had adopted to implement its commitment under Article 4 and a specific estimate of the effects that those policies and measures would have on anthropogenic emissions by its sources and removals by its sinks of greenhouse gases.
By Article 7 of the Framework Convention, a Conference of the Parties was established. The Conference of the Parties, as the supreme body of the Framework Convention, was to keep under regular review the implementation of the Framework Convention and any related legal instruments that the Conference of the Parties may adopt. The Conference of the Parties was also to make, within its mandate, the decisions necessary to promote the effective implementation of the Framework Convention.
Australia is also a party the Kyoto Protocol, which was made pursuant to the Framework Convention. Australia ratified the Kyoto Protocol on 12 December 2007.
By Article 3.1 of the Kyoto Protocol, together with Annexes I, A and B, Australia agreed to ensure that its aggregate anthropogenic carbon dioxide equivalent emissions of greenhouse gases would not exceed 108 per cent of its emissions in the base year or period, with a view to reducing overall emissions of such gases by at least 5% below 1990 levels in the commitment period 2008 to 2012.
By Article 3.3, the net changes in greenhouse gas emissions by sources and removals by sinks resulting from direct human-induced land-use change and forestry activities, limited to aforestation, reforestation and deforestation since 1990, measured as verifiable changes in carbon stocks in the commitment period of 2008 to 2012, were to be used to meet the commitments under Article 3 of each party. The greenhouse gas emissions by sources and removals by sinks associated with those activities were to be reported in a transparent and verifiable manner.
By Article 13, the Conference of the Parties was to serve as the meeting of the parties to the Kyoto Protocol. The Conference of the Parties is to keep the implementation of the Kyoto Protocol under regular review and is to make, within its mandate, the decisions necessary to promote its effective implementation. The Conference of the Parties is to perform the functions assigned to it by the Kyoto Protocol. In particular, it is:
·To promote and guide, in accordance with the objective of the Framework Convention and the provisions of the Kyoto Protocol, the development and periodic refinement of comparable methodologies for the effective implementation of the Kyoto Protocol (Article 13.4(e)).
·Make recommendations on matters necessary for the implementation of the Kyoto Protocol (Article 13.4(f).
By Article 17, the Conference of the Parties is to define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading. Article 17 also provides that certain of the parties, including Australia, may participate in emissions trading for the purposes of fulfilling their commitments under Article 3. Any such trading is to be supplemental to domestic actions for the purpose of meeting quantified emission limitation and reduction commitments under Article 3.
By clause 1(d) of Decision 16/CMP.1, taken at the Conference of the Parties held at Montreal from 28 November 2005 to 10 December 2005, which deals with ‘land use, land use change and forestry’, the Conference of the Parties affirmed that one of the principles governing the treatment of land use, land use change and forestry activities was that ‘the mere presence of carbon stocks be excluded from accounting’. In the same decision, the Conference of the Parties adopted the definitions, modalities, rules and guidelines relating to land use, land use change and forestry activities under, inter alia, Article 3 of the Kyoto Protocol, contained in an annex to Decision 16/CMP.1.
That annex provided, inter alia, the following definitions:
·“Afforestation” is the direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human induced promotion of natural seed sources.
·“Reforestation” is the direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land. For the first commitment period, reforestation activities will be limited to reforestation occurring on those lands that did not contain forest on 31 December 1989.
·“Deforestation” is the direct human-induced conversion of forested land to non-forested land.
THE COMMONWEALTH STATUTES
I shall outline the relevant provisions of the two Commonwealth Statutes separately.
The Financial Assistance Act
Section 3 of the Financial Assistance Act provides that its primary object is to facilitate the development and implementation of integrated approaches to natural resources management in Australia that are for the purpose of achieving efficient, sustainable and equitable management of natural resources in Australia and that are consistent with the principles of ecologically sustainable development.
Section 5(1) provides that the Commonwealth may enter into an agreement with a State on financial assistance, whether by way of grant or otherwise, to be provided by the Commonwealth to the State, for amounts spent by the State in respect of:
·projects approved by Ministers of the Commonwealth and the State acting jointly; or
·projects specified in the agreement.
Any such agreement must be in writing and, subject to ss 8, 9 and 10, financial assistance is payable to a State in accordance with such an agreement. Section 5(6) provides that payments under s 5 must be paid out of money appropriated by the Commonwealth Parliament for that purpose.
Section 6 of the Financial Assistance Act provides that the Commonwealth may enter into an agreement with a person for the person to carry out a project relating to natural resources management. Such an agreement must be in writing and payments made under such an agreement must be made out of money standing to the credit of the Natural Resources Management Account. Section 11 provides for the existence of the Natural Resources Management Account, which is a Special Account for the purposes of the Financial Management and Accountability Act 1997 (Cth). As originally enacted, the Financial Assistance Act provided for the Natural Resources Management Fund, which was a continuation under a new name of the National Soil Conservation Program Fund established by section 8 of the Soil Conservation (Financial Assistance) Act 1985 (Cth). However as a consequence of s 5(3) of the Financial Management Legislation Amendment Act 1999 (Cth) (the 1999 Financial Management Act) the Natural Resources Management Fund was replaced by the Natural Resources Management Account and the balance of money standing to the credit of the former was credited to the latter. For the purposes of this proceeding, the distinction is immaterial and, for the sake of convenience, I shall refer to the funds and account as the Natural Resources Management Account in all guises.
Section 7 of the Financial Assistance Act provides that an agreement entered into pursuant to s 5 or s 6 must include provisions relating to the following matters:
·The object of the project or projects to which the agreement relates.
·The conditions subject to which payments under the agreement are to be made.
·The monitoring and evaluation of the project or projects.
·The review of the operation of the agreement.
·The amendment of the agreement by a further agreement as a result of such a review.
It is relevant to note that there is no requirement for an agreement to provide for the acquisition of any property or the imposition of restrictions on land use or the clearing of native vegetation. It is equally relevant to note that there is no express provision preventing an agreement from providing for the acquisition of property other than on just terms.

Section 10 of the Financial Assistance Act provides that an agreement made under ss 5 or 6 may provide for:
·The payment by the payee to the Commonwealth of an amount equal to the whole or part of income derived by the payee from property acquired or produced in the course of carrying out a project or patents for inventions made in the course of carrying out a project.
·The assignment by the payee to the Commonwealth of any such property or patents or any interest that the payee may have in any such invention.
Again, it is significant that none of the provisions referred to contains a requirement for the acquisition of any property or the imposition of a restriction on land use or the clearing of native vegetation, nor is there an express provision preventing an agreement from providing for the acquisition of property on unjust terms.
Section 8(2) of the Financial Assistance Act provides that, in addition to any conditions provided for in an agreement made under ss 5 or 6, a payment by the Commonwealth under such an agreement is subject to specified conditions. Under s 9, such an agreement is, except so far as otherwise provided for in the agreement, subject to certain further conditions. None of those conditions is concerned with the acquisition of any property or the imposition of a restriction on land use or the clearing of native vegetation.
Part 3 of the Financial Assistance Act deals with the Natural Resources Management Account. Sections 11(3) and 11(4) provide for the crediting of certain amounts to the Natural Resources Management Account. Section 11(5) provides for the debiting of amounts for the following purposes:
·Making payments, including advances, in accordance with an agreement under s 6 of the Soil Conservation (Financial Assistance) Act 1985 (Cth) or an agreement made under s 6 of the Financial Assistance Act.
·Making payments in respect of the expenses incurred by the Australian Land Care Council established by s 13.
·Making payments in respect of other costs of administration of the Financial Assistance Act.
The Natural Heritage Act
The Natural Heritage Act provides for the Natural Heritage Trust of Australia Account, a Natural Heritage Trust Advisory Committee and a Natural Heritage Ministerial Board. The Natural Heritage Trust of Australia Account is a Special Account for the purposes of the Financial Management and Accountability Act 1997 (Cth). As originally enacted, the Natural Heritage Act established the Natural Heritage Trust of Australia Reserve. However, as a consequence of s 5(3) of the 1999 Financial Management Act, the Natural Heritage Trust of Australia Reserve was replaced by the Natural Heritage Trust of Australia Account and the balance of money standing to the credit of the former was credited to the latter. For the purposes of this proceeding the distinction is immaterial and, for the sake of convenience, I shall refer to both as the Natural Heritage Account.
The main source of the money for the Natural Heritage Trust Account is $1.35 billion from the partial sales of shares in Telstra Corporation Limited (Telstra). The main objective of the establishment of the Natural Heritage Account is to conserve, repair and replenish Australia’s natural capital infrastructure. Amounts standing to the credit of the Natural Heritage Trust Account are to be spent on the environment, sustainable agriculture and natural resources management.
The Natural Heritage Act contains a preamble, which relevantly provides to the following effect:
·There is a need to conserve Australia’s environmental infrastructure, to reverse the decline in Australia’s natural environment and to improve the management of Australia’s natural resources.
·There is a need for the Commonwealth to provide national leadership and work in partnership with all levels of government and the whole community, recognising, among other things, that many environmental issues and problems are not limited by State and Territory borders.
·There is a need to integrate the objectives of environmental protection, sustainable agriculture and natural resources management consistent [sic] with the principles of ecologically sustainable development.
·The Commonwealth Government should work cooperatively with State governments to achieve effective outcomes in matters relating to environmental protection, natural resources management and sustainable agriculture. Those cooperative working relationships should involve entering into inter-governmental agreements which reflect the support of the States for the purposes of the Natural Heritage Account and promote the development of complementary policies and programs.
·Australia’s rural community should have a key role in the ecologically sustainable management of Australia’s natural resources.
Under s 8 of the Natural Heritage Act, the purposes of the Natural Heritage Account relevantly include the following:
·the National Vegetation Initiative,
·environmental protection,
·supporting sustainable agriculture,
·natural resources management,
·a purpose incidental or ancillary to those purposes,
·the making of grants of financial assistance for any of those purposes.
Section 9(1) of the Natural Heritage Act provides that amounts standing to the credit of the Natural Heritage Account, which represent proceeds of the sales of shares in Telstra, may only be debited for specified purposes, relevantly including:
·the National Vegetation Initiative;
·supporting sustainable agriculture;
·natural resources management;
·a purpose incidental or ancillary to any of those purposes;
·the making of grants of financial assistance for any of those purposes.
Section 10 provides that the primary objective of the National Vegetation Initiative is to reverse the long term decline in the extent and quality of Australia’s native vegetation cover by conserving remnant native vegetation, conserving Australia’s biodiversity, and restoring, by means of revegetation, the environmental values and productive capacity of Australia’s degraded land and water.
Section 19 is a critical provision of the Natural Heritage Act for present purposes. Section 19 applies if an amount is to be debited from the Natural Heritage Account for the purpose of making a grant of financial assistance to a State. Under s 19(2), the terms and conditions on which such financial assistance is granted are to be set out in a written agreement between the Commonwealth and the State. Section 19(4), which does not limit s 19(2), provides that an agreement may establish a framework under which the Commonwealth and the State are to work cooperatively to achieve both common and complementary outcomes in relation to:
·environmental protection;
·natural resources management; and
·sustainable agriculture.
The terms “environmental protection”, “natural resources management” and “sustainable agriculture” are defined by ss 15, 17 and 16 respectively. The precise terms of those definitions do not appear to be presently relevant.
Section 21 applies to a decision of a Minister to approve a proposal to spend an amount standing to the credit of the Natural Heritage Account for a purpose of the Natural Heritage Account as set out in s 8. In making such a decision, the Minister concerned must have regard to:
·the principles of ecologically sustainable development; and
·such other matters as the Minister concerned considers relevant.
Under s 21(3), the principles of ecologically sustainable development consist of certain stated core objectives and some seven guiding principles.
Part 4 of the Natural Heritage Act deals with the crediting of amounts to the Natural Heritage Account. Part 4 consists of ss 22 to 29, which deal with credits from the following sources:
s 22:     $1.1 billion derived from the initial partial sale of Telstra.
s 22A: $250 million derived from the subsequent partial sale of Telstra.
s 23:     Budget appropriations.
s 24:     Gifts and bequests.
s 25:     Repayments of grants.
s 26:     Commonwealth receipts under funding agreements.
s 27:Income from assets acquired using amounts credited to the Natural Heritage Trust Account.
s 28:Proceeds of disposal of assets acquired using amounts credited to the Natural Heritage Trust Account.
s 29:Income from projects and related activities funded with amounts credited to the Natural Heritage Trust Account.
None of the provisions of the Natural Heritage Act contains a requirement for the acquisition of any property or the imposition of a restriction on land use or the clearing of native vegetation; nor is there an express provision preventing an agreement from providing for the acquisition of property on unjust terms.
THE INTER-GOVERNMENTAL AGREEMENTS
Mr Spencer’s statement of claim refers to four Inter-Governmental Agreements, between the Commonwealth and New South Wales as follows:
·A bilateral Agreement between the Commonwealth and the State of New South Wales to deliver the Natural Heritage Trust, made on 31 October 1997 (the 1997 Agreement).
·The Inter-Governmental Agreement on a National Action Plan for Salinity and Water Quality in Australia (the Salinity Action Plan), made on 3 November 2000 (the 2000 Agreement).
·A bilateral Agreement between the Commonwealth of Australia and the State of New South Wales Relating to the Salinity Action Plan, made on 17 May 2002 (the 2002 Agreement).
·A bilateral Agreement between the Commonwealth of Australia and the State of New South Wales to deliver the extension of the Natural Heritage Trust, made on 14 August 2003 (the 2003 Agreement).
I shall say something about each of them in turn.
The 1997 Agreement
The 1997 Agreement begins as follows:
Australia, as a Federation, relies upon all levels of government working cooperatively based on their respective roles, responsibilities and interests. The Natural Heritage Trust is a major capital initiative aimed at conserving and managing Australia’s biodiversity, land, water, vegetation and sea on an ecologically sustainable basis. This agreement sets out the roles and responsibilities of the Commonwealth and New South Wales for the delivery of the objectives of the Natural Heritage Trust and any associated programs.
The preamble to the 1997 Agreement relevantly provides that the Commonwealth and New South Wales:
·Recognise the need for urgent action to enhance and improve the condition and management of Australia’s natural heritage.
·Recognise that the Natural Heritage Trust provides a basis for further cooperative and integrated approaches to dealing with Australia’s environmental problems.
·Note that the Commonwealth’s objectives for the Natural Heritage Trust are to:
(i)provide a framework for strategic capital investment, to stimulate additional investment in the natural environment;
(ii)achieve complementary environmental protection, sustainable agriculture and natural resources management outcomes consistent with agreed national strategies; and
(iii)provide a framework for cooperative partnerships between communities, industry and all levels of government.
·Agree that the 1997 Agreement establishes a framework within which the parties will work cooperatively towards common and complementary environmental protection, sustainable agriculture and natural resources management outcomes, acknowledging that these outcomes can best be achieved through strategic planning, streamlined administration and integrated implementation.
·Recognise the appropriate and different roles of the Commonwealth and the States.
By clause 3 of the 1997 Agreement, the parties agree to give effect to a number of principles, which underpin the implementation of the Natural Heritage Trust programs and other Commonwealth or State programs agreed by the parties to be covered by the 1997 Agreement. The principles include the following:
·Priority will be given to activities that are derived from strategies to address the fundamental causes of Australia’s environmental and natural resources problems.
·The involvement of local communities and regional organisations in relation to Natural Heritage Trust programs should be through State agencies and should be simple, readily understood and based on the “one-stop-shop” concept, that is, a single application form incorporating relevant Commonwealth and State programs, a single assessment process, single payments, and a single evaluation process.
·The parties agree that their cooperation will be focussed on achieving outcomes at the program level.
·Implementation of the 1997 Agreement will occur within the strategic framework of:
-the Inter-Governmental Agreement on the Environment,
-the National Strategy for Ecologically Sustainable Development,
-the National Strategy for the Conservation of Australia’s Biodiversity,
-the National Greenhouse Response Strategy,
-the water reform framework of the Council of Australian Governments,
-the National Water Quality Management Strategy,
-the National Principles For the Provision of Water for Ecosystems,
-the National Forest Policy Statement,
-the Decade of Landcare Plan,
-the Murray-Darling Basin Initiative, or
-other national or state strategies as agreed by the parties.
Clause 4 of the 1997 Agreement establishes a framework under which the parties propose to work cooperatively for the purposes of s 19 of the Natural Heritage Act. The 1997 Agreement is to apply to those Natural Heritage Account funds provided to New South Wales for programs set out in the Natural Heritage Act and any additional State or Commonwealth programs that are included from time to time in attachments to the 1997 Agreement, as agreed by the parties. Clause 4 expressly provides that the 1997 Agreement allows for the future inclusion of other related programs in the Natural Heritage Trust, additional mechanisms and innovative approaches for the protection and management of Australia’s natural heritage, the inclusion of which is agreed by the parties.
Clause 5 of the 1997 Agreement provides for attachments consistent with 1997 Agreement to be developed and to become part of the 1997 Agreement. Attachment A is to relate to the arrangements for managing particular programs or other activities agreed by the parties, and is to include, but is not limited to, the strategic framework in which progress towards identified outcomes is to be achieved. Attachment B contains provisions for financial assistance to the States in accordance with the 1997 Agreement. Attachment C outlines the approach to integrated delivery in New South Wales. By reason of Clause 5.1 of the 1997 Agreement, Attachments A, B and C all form part of the 1977 Agreement itself.
By clause 6 of the 1997 Agreement, the parties agree, in accordance with the principles outlined in Clause 3, to plan, develop and support jointly the implementation of strategies to achieve the purposes of the 1997 Agreement. The specific roles of the Commonwealth and New South Wales are set out in Clauses 6.2 and 6.3 respectively. None of those provisions is concerned in terms with the acquisition of any property or the imposition of restrictions on the use of land or the clearing of native vegetation.
Clause 7 deals with financial arrangements. Under Clause 7.2, financial arrangements are to be determined in accordance with principles therein stated. Clause 8 deals with financial administration. Clause 8.2 provides that financial assistance will be provided in accordance with the provisions of Attachment B.
Attachment A consists of a description of Commonwealth programs and delivery arrangements. The programs are as follows:
·Bushcare: The National Vegetation Initiative.
·National Rivercare Program;
·National Landcare Program;
·Murray-Darling 2001;
·Farm Forestry Program;
·Fisheries Action Program;
·National Wetlands Program;
·Endangered Species Program;
·National Reserve System Program;
·National Feral Animal Control Program;
·National Weeds Program.
Mr Spencer draws attention particularly to the Bushcare: The National Vegetation Initiative and the National Land Care Program.
The national objectives of the Bushcare: The National Vegetation Initiative are stated as being to:
·conserve remnant native vegetation;
·conserve Australia’s biological diversity; and
·restore, by means of revegetation, the environmental values and productive capacity of Australia’s degraded land and water.
The national objectives of the National Landcare Program are said to be to:
·assist and enhancing the long term productivity of natural resources in Australia;
·promote community, industry and governmental partnership in the management of natural resources in Australia;
·assist in establishing institutional arrangements to develop and implement policies, programs and practices that will encourage sustainable use of natural resources in Australia;
·assist in developing approaches to help to resolve conflicts over access to natural resources in Australia; and
·assist in raising the natural resource and business management skills of landholders.
Clause 4.1-3 of the Bushcare: The National Vegetation Initiative section of Attachment A provides as follows:
[4.1] New South Wales will adopt a state-wide “whole of government” approach to the conservation and sustainable management of native vegetation in the social, economic and environmental interests of the State. There will be a shift from the current situation where there are a range of different existing permit and licensing procedures, to a situation whereby clearing is allowed without a permit if it conforms to a Regional Vegetation Management Plan which has been prepared by stakeholders and approved by the Government. These Plans will be specific to regions, but underpinned by state-wide thresholds, consistent with the approach outlined in Objective 1.2 of the National Strategy for the Conservation of Australia’s Biological Diversity and section 4.2 below.
[4.2] Consistent with relevant legislation and strategies including the national strategies for ecologically sustainable development and biological diversity, New South Wales will:
(a) encourage and promote sustainable native vegetation management;
(b) protect remnant native vegetation of high conservation value;
(c) improve the condition of existing native vegetation;
(d) encourage revegetation of land with appropriate native vegetation; and
(e) prevent inappropriate native vegetation clearing.
[4.3] Measures to be undertaken to achieve the aims of 4.2 include:
(a) enactment of native vegetation conservation legislation which will repeal/rationalise existing native vegetation controls and provide for a coordinated State-wide approach;
(b) promotion of regional vegetation management plans with a biogeographic basis which have legislative status;
(d) ongoing state-wide monitoring program using satellite technology and supplemented by strategic on-ground, assessments which will provide information for monitoring and compliance;
(e) encouragement of a whole property planning approach where native vegetation management is integrated with all relevant aspects of property management;
(f) consideration of property agreements (voluntary) with covenants to qualify landholders for incentive schemes;
(g) assessment and consent for clearing under native vegetation legislation consistent with that proposed in the Integrated Development Assessment system; and
(h) promotion of codes of practice to undertake clearing for particular land uses which specify environmental, social and economic criteria consistent with the aims and principles of State native vegetation legislation.

Clause 4.6(b) of the National Landcare Program section of Attachment A provide as follows:
New South Wales is committed to the conservation and sustainable management of native vegetation. The statutory basis for this will be a new Native Vegetation Conservation Act which will require that native vegetation clearing is subject to comprehensive environmental assessment and permit clearing where consistent with a Regional Vegetation Management Plan.
Attachment B to the 1997 Agreement contains standard terms and conditions of financial agreements between the Commonwealth and New South Wales for the purpose of financial assistance. The 1997 Agreement is described in Attachment B as “the Partnership Agreement”. That term is defined as meaning an agreement made between the Commonwealth and the State under s 19 of the Natural Heritage Act of the type referred to in s 19(4) of that Act.
Clause 3 of Attachment B provides that payments made to New South Wales will be in accordance with a signed financial agreement as outlined in the pro forma annexed to Attachment B, for defined projects or programs with specified outputs, outcomes and reports. The pro forma attached recites that the agreement is made for the purpose of providing Commonwealth financial assistance to the State under s 19 of the Natural Heritage Act, s 16 of the National Parks and Wildlife Conservation Act 1975 (Cth) and s 5 of the Financial Assistance Act. It also recites that the agreement is made for the purposes of linking Commonwealth and State priorities and programs agreed between the parties as outlined in Attachments A and C of the Partnership Agreement and for specified activities to enable the State, within the financial assistance provided, to achieve, in part, the outcomes sought in Attachment A.
Attachment C consists of the New South Wales Integrating Framework. Clause 1 provides that it sets out the integrating framework in New South Wales, which facilitates the integrated planning and implementation of Natural Heritage Trust projects and programs. Clause 2 provides that implementation of the Partnership Agreement is to occur within the framework of the policies and strategies then set out.
The 2000 Agreement
The 2000 Agreement was entered into by the Commonwealth and the six States and two Territories on 3 November 2000. The preamble provides that, in recognition of Australia’s critical salinity and water quality problems, the parties agree to the Salinity Action Plan, which is set out as Attachment A to the 2000 Agreement. Attachment A is not in evidence. The purpose of the 2000 Agreement was to establish the arrangements between governments, in accordance with the Salinity Action Plan, that are necessary to motivate and enable regional communities to prevent, stabilise and reverse trends in salinity and improve water quality and secure reliable allocations for human uses, industry and the environment. By Clause 10, the parties agree on twenty-one catchments or regions which are said to be priority regions for block funding for accreditation plans under the 2000 Agreement. The priority regions are said to be shown in an indicative map contained in Attachment B, which is not in evidence.
By Clause 25 of the 2000 Agreement, the parties agreed:
…on need for an improved policy framework, including clarifying property rights, establishing appropriate pricing of water, and introducing regulatory reforms for water and land use, to secure government investments and to motivate best practice in land and water resource management.
By Clause 27, the States and Territories agreed:
…to institute controls on land clearing by June 2002 or as otherwise agreed in Bilateral Agreements, which at minimum prohibit land clearing in the land priority catchments / regions where it would lead to unacceptable land or water degradation. For the purposes of this clause ‘unacceptable land and water degradation’ will be defined in conjunction with the development of interim standards … under Clause 20.
Clauses 37 to 46 concern Commonwealth financial assistance to the States. By clause 37, the Commonwealth financial contribution of $700 million over 7 years is stated to be ‘matched’ by State and Territory contributions. By Clause 39, Commonwealth financial contributions are stated to be available to a State or Territory once agreement is reached with that State or Territory on the implementation of the whole package of measures through the signing of the 2000 Agreement.
The 2000 Agreement goes on to describe some principles for the funding of ‘catchment / regional bodies’. By clause 47 the parties agree that compensation to assist adjustment where property rights are lost will be addressed in developing catchment/regional plans noting that, while such compensation is the responsibility of the States and Territories, the Commonwealth is prepared to consider making an additional contribution, separate from the $700 million mentioned above.
The 2002 Agreement
The preamble to the 2002 Agreement refers to rising salinity in soils and waterways that poses a significant challenge to the people of New South Wales. The preamble recites that the parties are committed to implementing the Salinity Action Plan endorsed by the 2000 Agreement, which established the framework for implementation for the Salinity Action Plan.
In clause 4.11 of the 2002 Agreement, in dealing with land, the parties noted that the objects of the 1997 Vegetation Act were based on the principles of ecologically sustainable development. By Clause 4.12, the parties recognised that New South Wales had in place a legislative and regulatory framework under the 1997 Vegetation Act that meets the requirements of Clause 27 of the 2000 Agreement. By Clause 4.14, the parties recognised that the regulatory and planning framework established by the 1997 Vegetation Act formed an appropriate mechanism for assessing applications to clear land in New South Wales. By Clause 4.15, the parties noted that New South Wales was currently reviewing the assessment and compliance procedures under the 1997 Vegetation Act and that, in particular, land clearing assessment guidelines were currently being updated to incorporate a more comprehensive process for assessing potential salinity impacts.
By Clause 4.1 of the 2002 Agreement, the parties acknowledged that New South Wales was significantly advanced in land and water reforms and had natural resource management priorities and strategies that are consistent with the overall national policy approach outlined in the Salinity Action Plan. Clause 4.1 provided that implementation of the 2002 Agreement would occur within the existing framework of State legislation, policies and strategies described in Schedule 2 but recognised that the State framework would be refined and updated from time to time.
Schedule 2 relevantly provided that a range of legislation and regulation affects land and water management in New South Wales. One of the three principal pieces of legislation is the 1997 Vegetation Act, the other two being the Catchment Management Act 1989 (NSW) and the Water Management Act 2000 (NSW). Schedule 2 stated that the provisions of those principal pieces of legislation relate to:
·natural resource management planning by means of government and community partnerships and based on best available information;
·control over certain activities such as vegetation clearance and the use of water resources; and
·incentives for certain activities such as salinity, vegetation and water management.
Clause 5.1 of the 2002 Agreement provides as follows:
Subject to this Agreement and appropriation by the Commonwealth and New South Wales Parliaments of funds, each Party will allocate $198 million over the life to this Agreement for the implementation of the [Salinity Action Plan] in New South Wales, unless terminated earlier in accordance with Clause 20.
Clause 21.1 states as follows:
The parties agree that compensation to assist adjustment where property rights are lost will be addressed in developing catchment/regional plans noting that, while such compensation is the responsibility of the States and Territories, the Commonwealth is prepared to consider making additional contribution, separate from that noted at Clause 5.1.
The 2003 Agreement
On 14 August 2003, the Commonwealth and New South Wales entered into the 2003 Agreement “to deliver the extension of the Natural Heritage Trust”. The preamble to the 2003 Agreement provides that the Commonwealth and New South Wales wish to reflect their intent to work as joint investment partners, with the community and other stakeholders, in natural resource management activities and that, in particular, the Commonwealth and New South Wales jointly seek to fulfil three overarching objectives of the Natural Heritage Trust as follows:
·Biodiversity conservation;
·Sustainable use of natural resources; and
·Community capacity building and institutional change.
The preamble recited that Natural Heritage Trust investment would occur at three levels, namely:
·National/State,
·Regional, and
·Local.
Clause C of the preamble recites that the role of the parties in implementing the 2003 Agreement is to ensure that the Natural Heritage Trust investment is strategic, high priority and consistent with regional, State-wide and national priorities.
The preamble also recites that the Natural Heritage Trust consists of four programs, Landcare, Bushcare, Rivercare and Coastcare. Those programs are set out in more detail in Attachment 1 to the 2003 Agreement. In Attachment 1, the national goal of the Landcare Program is said to be to reverse land degradation and promote sustainable agriculture. The national goal of the Bushcare Program is to conserve and restore habitat for Australia’s unique native flora and fauna that underpin the health of landscapes. One of the priorities in seeking to achieve that goal is to reverse the decline in the extent and quality of Australia’s native vegetation.
Clause M of the preamble states that the 2003 Agreement is made pursuant to s 19(2) of the Natural Heritage Act and s 5 of the Financial Assistance Act. By clause 2.1, the 2003 Agreement is to commence on the day of signing and continue in force until 30 June 2007.
By clause 4.1, the parties acknowledge that New South Wales is significantly advanced in land, water and biodiversity reforms and has natural resource management and biodiversity conservation priorities and strategies that are consistent with the overall national policy approach outlined in the Natural Heritage Trust, by which, it seems reasonable to infer, is meant that they are consistent with the objects of the Natural Heritage Account.
Clauses 4.4 to 4.8 deal with “vegetation management and biodiversity conservation”. By clause 4.6, New South Wales agrees to pursue measures:
·to prevent clearance of ecological communities with an extent below 30% of that present pre-1750;
·to assess native vegetation condition; and
·to continue to reducing the national net rate of land clearance to zero.
The parties agree to review progress of the implementation of measures arising from the above periodically, but by no later than June 2004. By clause 4.7, the parties recognise the need to accelerate the development of an integrated native vegetation system that will improve the ability of government agencies, catchment boards, land holders and the community to make informed vegetation management decisions. While those provisions may have some marginal relevance to the issues in the proceeding, no reference was made to them by Mr Spencer.
THE STATE STATUTES
The 1997 Vegetation Act received Royal Assent on 16 December 1997. It was repealed on 1 December 2005 by operation of s 52 of the 2003 Vegetation Act. The 2003 Vegetation Act received Royal Assent on 11 December 2003. However, it did not commence until 1 December 2005. It remains in force.
I shall describe separately the relevant provisions of the State Statutes.
The 1997 Vegetation Act
Section 3 of the 1997 Vegetation Act provided that its objects were relevantly to:
·provide for the conservation and management of native vegetation on a regional basis;
·encourage and promote native vegetation management;
·protect native vegetation of high conservation value;
·improve the condition of existing native vegetation;
·encourage the revegetation and rehabilitation of land, with appropriate native vegetation;
·prevent the inappropriate clearing of vegetation;
·promote the significance of native vegetation;
in accordance with the principles of ecologically sustainable development. Section 6 defines native vegetation as meaning indigenous vegetation consisting of trees, understorey plants, groundcover and plants occurring in a wetland.
Part 2 of the 1997 Vegetation Act deals with clearing native vegetation and clearing protected land. Under s 5(1) clearing native vegetation includes cutting down, felling, thinning, logging or removing native vegetation, killing, destroying, poisoning, ringbarking, uprooting or burning native vegetation, severing topping or lopping branches, limbs, stems or trunks of native vegetation and substantially damaging or injuring native vegetation in any way. Under s 5(2) clearing protected land means doing any one or more of those things in relation to any vegetation on protected land, as defined in s 4. Protected land means regional protect land (land that is identified in a regional vegetation management plan as regional protected land) or State protected land (land that is identified in an order under s 7 as State protected land, and any land that was defined as protected land under s 21AB of the Soil Conservation Act 1938 (NSW) before its repeal).
The object of Part 2 is to apply the development consent process under Part 4 of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act) in relation to clearing native vegetation and clearing protected land. Division 2 of Part 2 deals with the requirement for development consent for clearing native vegetation on land that is subject to a regional vegetation management plan, while Division 3 generally requires development consent for clearing native vegetation on land that is not subject to a regional vegetation management plan.
Section 21, which is in Division 3, provides that a person must not clear native vegetation on any land except in accordance with a development consent that is in force or a native vegetation code of practice. Development consent means development consent under Part 4 of the EPA Act. However, s 21 does not apply to land to which a regional vegetation management plan applies or to land which is State protected land.
Part 3 deals with regional vegetation management plans. Under s 25, which is in Part 3, a regional vegetation management plan may contain provisions specifying whether or not development consent is required to clear native vegetation and may adopt or incorporate the provisions of a native vegetation code of practice as part of the plan. Part 4 of the 1997 Vegetation Act deals with vegetation codes of practice.
Section 38, which is in Part 4, provides that a vegetation code of practice may contain provisions relating to the clearing of native vegetation on land for a purpose specified in the code. A native vegetation code of practice is to include the aims and objectives of the code and is to specify the extent to which the native vegetation may be cleared in accordance with the code.
The 2003 Vegetation Act
The objects of the 2003 Vegetation Act are essentially the same as those of the 1997 Vegetation Act.
Part 3 of the 2003 Vegetation Act deals with clearing native vegetation. Native vegetation is defined in terms similar to the definition in the 1997 Vegetation Act and clearing has a similar meaning, with the exception that severing, topping or lopping branches, limbs, stems or trunks of native vegetation and substantially damaging or injuring native vegetation in any way have been removed from the definition of clearing. Section 12(1) of the 2003 Vegetation Act, which is in Part 3, provides that native vegetation must not be cleared except in accordance with a development consent granted in accordance with the Act or a property vegetation plan. Section 12(2) makes it a criminal offence to carry out or authorise clearing of land in contravention of s 12. Under s 14, if development consent is required to clear native vegetation, Part 4 of the EPA Act applies to the granting of the development consent.
Division 2 of Part 3 deals with permitted clearing. Under s 19, which is in Division 2, clearing of native vegetation that is only regrowth, but not protected regrowth, is permitted, subject to any exclusion in a property vegetation plan. Under s 9, regrowth means any native vegetation that has regrown, relevantly, since 1 January 1990. Under s 10, protected regrowth means any native vegetation that is identified as such in a property vegetation plan, an environmental planning instrument, a natural resource management plan or an interim protection order made under s 10.
Division 3 of Part 3 deals with permitted activities and sets out the activities that do not constitute the clearing of native vegetation for the purposes of Part 3 and, accordingly, are permitted to be carried out without the authority conferred by a development consent or a property vegetation plan. Section 22, which is in Division 3, provides that clearing for “routine agricultural management activities” is permitted.
Under s 11, routine agricultural management activities means any of the following activities:
·the construction, operation and maintenance of rural infrastructure;
·the removal of noxious weeds;
·the control of noxious animals;
·the collection of fire wood, except for commercial purposes;
·the harvesting or other clearing of native vegetation planted for commercial purposes;
·the lopping of native vegetation for stock fodder;
·any activity reasonably considered necessary to remove or reduce an imminent risk of serious personal injury or damage to property.
Under s 11(2), regulations may make provision for or with respect to extending, limiting or varying the activities that are routine agricultural management activities.
The Native Vegetation Regulation 2005 (the 2005 Regulation) deals with routine agricultural management activities. Regulation 16 provides that the activities that comprise routine agricultural management activities are extended to include the clearing of native vegetation on land for use in the construction or maintenance of rural infrastructure during limited periods. Regulation 17 deals with the clearing of feral native plant species. Regulation 20 deals with infrastructure buffer distances. Regulations 20(1) and 20(3) impose distance clearing restrictions on the activities listed and do not limit the kinds of activities that can be carried out in the areas mentioned in those provisions. Regulation 20(2), in addition, limits the kinds of activities that can be carried on in certain areas that are specified. The area in which Saarahnlee is located is covered by Regulation 20(3) and not by Regulation 20(2).
Section 23 of the 2003 Vegetation Act, which is in Division 3 of Part 3, deals with the continuation of farm activities. Under s 23, the continuation of existing cultivation, grazing or rotational farming practices is permitted if it does not involve the clearing of remnant native vegetation. Existing means existing at the commencement of the 2003 Vegetation Act. Under s 9, remnant native vegetation is any native vegetation other than regrowth.
It may be of significance that the prohibitions contained in the 2003 Vegetation Act are not absolute. Rather, the 2003 Vegetation Act prohibits or restricts the clearing of native vegetation without first obtaining development consent in accordance with Part 4 of the EPA Act. However, it is common ground that no such development consent has been granted in respect of Saarahnlee. Accordingly, there are, at present, significant restrictions on the clearing of native vegetation on Saarahnlee.
SERIOUS QUESTION TO BE TRIED / REASONABLE PROSPECT OF SUCCESS

Mr Spencer contends that it is unnecessary to decide whether the State Statutes, which formed part of the National Vegetation Initiative, and effected the acquisition of his property, are invalid. He says that, by the Natural Heritage Act, and presumably the 1992 Financial Act, which established a national scheme, the Commonwealth wrongfully obtained Mr Spencer’s property. He says that, if it be accepted that the Commonwealth has derived a benefit and he has suffered a corresponding or correlative detriment, there is a case of conversion or trespass in relation to his property. Further, Mr Spencer says, the Commonwealth has constituted a Constitutional tort in relation to Mr Spencer’s property interests. Mr Spencer’s submissions do not expand on those propositions.
However, Mr Spencer’s claim for an order that the Commonwealth return to him any property expropriated or acquired and his claim for damages must depend upon a finding that the Commonwealth has itself or by its servants or agents, in some way, acquired property of Mr Spencer’s. The Commonwealth could not be required to return property that may have been expropriated or acquired by New South Wales, albeit that the Commonwealth has derived some benefit under international law.
I do not comprehend how it can be said that the Commonwealth has committed any conversion of, or trespass to, any property of Mr Spencer. It is difficult to see how either the passing of a statute, albeit an invalid statute, or the making of an agreement between the Commonwealth and New South Wales, even on the assumption that it is an unauthorised agreement, could possibly constitute conversion of, or trespass to, any property, without some interference with that property by the Commonwealth or its servants or agents. None is alleged.
In any event, the allegations, as I understand them, are wholly dependent on the proposition that each of the Commonwealth Statutes is invalid. For the reasons given above, I have concluded that there is no arguable case for supporting that proposition.
Res Judicata/Issue Estoppel
In its defence to the current version of the statement of claim, the Commonwealth says that the doctrines of res judicata or issue estoppel are a complete bar to Mr Spencer’s claims. That assertion is based on a decision of the Supreme Court of New South Wales in which a proceeding brought by Mr Spencer against the Australian Capital Territory, the State of New South Wales and the Commonwealth was summarily dismissed (see Spencer v The Australian Capital Territory [2007] NSWSC 303).
The Commonwealth asserts that, in the Supreme Court proceeding, the following issues of fact or law were determined so as to bar Mr Spencer’s claims:
·whether any alleged actions on the part of the Commonwealth and New South Wales to procure a result that benefited the Commonwealth in relation to its actual or potential obligations under the Kyoto Protocol could give rise to any claim against the Commonwealth, whether under the Constitution or otherwise;
·whether the alleged provision of funds by the Commonwealth to New South Wales for the purpose of implementing legislative based controls on land clearing could engage s 51(xxxi) of the Constitution;
·whether the claiming of political credit by the Commonwealth for a result that has been brought about by the imposition of a burden on a citizen can found any cause of action against the Commonwealth;
·whether the Commonwealth appropriated any proprietary interest held by Mr Spencer so as to engage s 51(xxxi) of the Constitution.
The Commonwealth contends that the cause of action pleaded in this proceeding is identical to that pleaded in the Supreme Court proceeding. Alternatively, the Commonwealth says that the cause of action relied on in the present proceeding is critically dependent upon an alleged state of fact or state of law, the existence of which was a matter necessarily decided unfavourably to Mr Spencer in the Supreme Court proceeding.
The Commonwealth says that the orders made by the Supreme Court of New South Wales determine the whole of the principal cause of action as between Mr Spencer and the Commonwealth in that proceeding. Accordingly, it says, the orders are final and not interlocutory in nature (see Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60 at [2], [16], [164] and [180]-[182]).
Mr Spencer has foreshadowed a reply to the Commonwealth’s defence, in so far as it raises the doctrines of res judicata and issue estoppel. He says that the proceeding in the Supreme Court did not resolve, on a final basis, or at all, any of the issues raised in the present proceeding. Mr Spencer’s counsel informed the Court that Mr Spencer has appealed from the orders of the Supreme Court and that that appeal is yet to be resolved. Clearly, if such an appeal were to be successful, there could be no issue estoppel or res judicata arising out of the decision at first instance. So long as there is still a competent appeal on foot, no question has been finally determined by the Supreme Court proceeding.
In addition, Mr Spencer says that it would be unconscionable for the Commonwealth to rely on the orders of the Supreme Court because Mr Spencer was not legally represented and the divisional judge in the Supreme Court made factual errors and did not have before him all of the evidence that will be tendered in the present proceeding. Those matters appear to me to have no substance. It is no answer to a plea of res judicata or issue estoppel that the evidence is different or that an error of fact was made in the first proceeding. One purpose of the doctrines of res judicata and issue estoppel is to prevent the relitigation of the same issue with the possibility of different outcomes because the evidence is different. No such reply should be permitted since it would be futile.
The question of whether or not a plea of res judicata or issue estoppel is otherwise available to the Commonwealth will depend upon an examination of the precise facts and issues before the Supreme Court and the reasoning that led to its conclusion. It may be a question that could be appropriately dealt with as a separate question. However, I would not be disposed to dismiss Mr Spencer’s present claim solely on the basis of the defence of res judicata or issue estoppel postulated by the Commonwealth.
Conclusion as to Mr Spencer’s Prospects
For the reasons indicated above, I consider that there is no serious question to be tried as to whether Mr Spencer is entitled to the final relief he currently claims in the proceeding. Putting it the other way, I do not consider that there is a reasonable prospect that Mr Spencer will succeed in obtaining the final relief that he currently claims in the proceeding. It may be arguable that property of Mr Spencer’s has been acquired. However, I do not consider that Mr Spencer has shown that he has a reasonable prospect of establishing that any acquisition that may have occurred in respect of any property of his was effected or authorised by either of the Commonwealth Statutes or any of the Inter-Governmental Agreements. The Commonwealth Statutes and the Inter-Governmental Agreements do no more than authorise the making of financial grants to the States under s 96. Whether Mr Spencer has standing to seek to impugn any of the Inter-Governmental Agreements and the financial grants make under them is a question for another proceeding. Even if he were to be successful in that endeavour, it would do nothing to restore any property acquired from Mr Spencer as a result of the State Statutes for the reasons explained above.
BALANCE OF CONVENIENCE
In the light of my conclusion in the last section, the balance of convenience does not arise. However, I shall say something about that question.
In considering the balance of convenience, the Court must assess the inconvenience to the respondent of the grant of interlocutory relief, on the assumption that ultimately the respondent is successful, and compare that with the inconvenience of the refusal of interlocutory relief to the applicant, on the assumption that the applicant ultimately succeeds. Factors to be assessed in making that comparison include:
·the relative hardships that would be visited upon the parties;
·whether there would be irreparable harm to the applicant if the interlocutory relief is not granted and the applicant ultimately succeeds;
·whether damages are an adequate remedy to the applicant.
Special considerations may apply where the interlocutory relief sought would adversely affect the public interest. Clearly enough, restraining the Commonwealth from taking any steps to establish a domestic emissions trading scheme, unless Mr Spencer’s alleged interests are accommodated within the scheme, would have a significant effect on the public interest. In such circumstances, Mr Spencer may need to show a probability, even a distinct probability, of success in order to obtain interlocutory relief (see Castlemaine Tooheys Limited v The State of South Australia (1986) 161 CLR 148 at 154-156).
Mr Spencer contends that the balance of convenience favours him because he claims that he has carbon sequestration rights in relation to Saarahnlee and that the Commonwealth has, by its actions to date, assumed those rights by including them in its national greenhouse account figures for the purpose of reporting its obligations in international law under the Kyoto Protocol. He says that, if interlocutory relief is not granted, the Commonwealth will continue to receive the benefits of his intangible property rights without providing compensation. He says that, while the question is being litigated, the property in question should not be used.
Mr Spencer wants to retain the right to participate in a carbon trading market and to trade the Carbon Rights at the market rate when trading on any such a market commences. He says that, if the market mechanism that the Commonwealth creates does not allow his rights to be traded, he will lose the benefit of those rights. Mr Spencer says that the existence of his rights needs to be assessed before any such market comes into existence, so that both he and the Commonwealth know that the rights exist and that the Commonwealth is required to provide compensation for them. He says that, if a carbon trading market is created without that question being resolved by the Court, the Commonwealth may create a scheme that gives no credit to Mr Spencer’s rights and he will suffer loss. Mr Spencer contends that, if the Commonwealth is not enjoined, in the terms claimed by him, the Commonwealth will continue to assume the benefit of the Carbon Rights and will have no reason to compensate him for the loss of those rights should a carbon trading market come into existence that does not recognise carbon sequestration rights arising from agriculture.
Mr Spencer’s evidence of the threat of irreparable damage is based on a media release published by the Minister for Climate Change and Water on 17 March 2008. By the media release, the Minister announced the Commonwealth’s detailed timetable for introduction of emissions trading. The timetable includes the following stages:
·March to June 2008: preliminary consultations on technical issues with industry and non-government groups.
·July 2008: public release of a Green Paper on emissions trading design, drawing on preliminary consultations.
·December 2008: public release of exposure draft legislation.
·March – Mid 2009: Bill considered by parliament.
·2009: consultation on emissions trading regulations.
·Third quarter 2009: Act enters into force, regulator established.
·2010: emissions trading scheme will commence.
The media release asserts that the introduction of emissions trading will constitute the most significant economic and structural reform undertaken in Australia since the trade liberalisation of the 1980s. It says that emissions trading will place a limit on the amount of emissions that will be allowed to be produced and asserts that the Commonwealth will take a careful and methodical approach to finalising the design of emissions trading in order to get the best results for Australia’s climate while minimising the risks for the economy.
The media release also says that the Minister for Climate Change and Water and the Minister for Agriculture, Fisheries and Forestry will begin discussions with leaders in the agriculture sector soon. The media release also says that the proposed Green Paper will canvas options and preferred approaches on issues, such as which industry sectors will be covered and how emission caps will be set. It will also include ways to address the impacts of emissions trading on Australian households, emissions-intensive trade-exposed industries and other strongly affected sectors.
The Secretary of the Department gave evidence that the Commonwealth has decided that it will implement a legislative based emissions trading scheme in 2010, as a key part of its domestic emissions reduction policy framework. The Secretary said that the Commonwealth had not yet taken decisions as to which sectors of the economy would be included and who would be the liable parties that are required to reduce their emissions under the Emissions Trading Scheme. She also said that the Commonwealth has not decided whether or not forest plantation owners or individual land holders will be liable parties under the Emissions Trading Scheme and therefore be required to hold emissions permits for the greenhouse gases that they emit.
The Secretary also said that the Commonwealth has not decided on the nature of the emissions reductions trajectory or the scheme caps that would undermine the scheme or whether there will be a link between emissions permits traded under the emissions trading scheme and the Kyoto Protocol assigned amount units. It is possible the two systems will be separate with no or limited fungability between the two.
Finally, the Secretary said that the Commonwealth has announced that it will consult with the agriculture and forestry sectors on the question of their inclusion in the scheme and the time frame for that inclusion. However, the Commonwealth is yet to take decisions on whether forest-related offsets would be allowed in the emissions trading scheme. If offsets were allowed, in principle, landholders could receive credit for establishment of new forests or for maintaining or enhancing the existing forests on their land. Whether or not existing forests on private land would be eligible to generate offsets for the emissions trading scheme is yet to be the subject of decision by the Commonwealth.
Assuming, for the purpose of considering the question of balance of convenience, that Mr Spencer has demonstrated that there is a serious question to be tried as to whether he is entitled to final relief, I have a difficulty in understanding how it can be said that the interlocutory relief claimed by Mr Spencer is related to the final relief that he claims in the proceeding. In effect, Mr Spencer appears to be contending that the Commonwealth should not be permitted to legislate with respect to the establishment of an emissions trading scheme until such time as the Court has determined whether or not Mr Spencer has the rights that he claims in the proceeding. That contention appears to me to be quite misconceived.
Mr Spencer’s claim for interlocutory relief does not depend upon the effect of either of the Commonwealth Statutes. He effectively says that he fears that a new statutory regime or scheme may be introduced that might affect his rights. That is really a matter for a quite separate proceeding seeking quite different final relief. If there is a threat that the Commonwealth’s proposed scheme will be a law with respect to the acquisition of property otherwise than on just terms, it is possible that Mr Spencer may have a cause of action in relation to that matter. However, on the present state of the proposals, which are really no more than speculation, it is impossible to say that such a cause of action will arise. More importantly, however, it does not bear on what has been the effect of either of the Commonwealth Statutes.
In the proceeding, Mr Spencer claims declarations concerning the invalidity of the Commonwealth Statutes and the Inter-Governmental Agreements. He also seeks an order that the Commonwealth return to him property that he claims has been expropriated or acquired without just terms. Finally, he claims damages for wrongful interference with that property. Whether or not Mr Spencer is entitled to that relief has no bearing on whether or not Mr Spencer will have access to any emissions trading scheme that might be established by future legislative acts of the Commonwealth Parliament.
If the legislation foreshadowed by the media release published by the Minister for Climate Change and Water has the effect of expropriating or acquiring property of Mr Spencer’s, that may have some bearing on the validity of that legislation. However, Mr Spencer does not in the present proceeding seek to impugn, otherwise than by his claim for interlocutory relief, the validity of legislation foreshadowed by the Minister for Climate Change and Water. Indeed, as is apparent from the media release, the design of any proposed emissions trading scheme has not yet been finalised. A fortiori, the terms of the legislation are quite unknown.
The purpose of interlocutory relief is to preserve the status quo until final determination of the issues raised in the proceeding. Whether or not an emissions trading scheme is established by the Commonwealth at some time during 2009 or 2010 can have no bearing on the enjoyment by Mr Spencer of the fruits of this proceeding, even assuming he were totally successful. Whether or not the Commonwealth establishes an emissions trading scheme, the declarations claimed by Mr Spencer could still be made in this proceeding. Whether or not such a scheme is established by the Commonwealth, if legislation upon which the expropriation or acquisition depends is shown to be ineffective, the property expropriated or acquired from Mr Spencer would still exist and would continue to exist. Finally, whether or not the Commonwealth establishes an emissions trading scheme, Mr Spencer could be awarded any damages to which he is entitled for any wrongful interference with his property rights in this proceeding.
It must follow that, whether or not there is a serious question to be tried as to whether Mr Spencer is entitled to the relief he claims and whether or not there is a reasonable prospect of his succeeding in the proceeding, his application for interlocutory relief must fail.
CONCLUSION
One cannot but feel the utmost sympathy for Mr Spencer if it be the case that Saarahnlee has been effectively sterilised by the State Statutes, with the effect that he can no longer carry on at Saarahnlee the activities which he was able to carry on prior to the enactment of the State Statutes. The question before the Court, however, is whether he has demonstrated that there is a serious question to be tried as to whether he is entitled to the final relief that he claims against the Commonwealth. Putting it the other way, the question is whether he has any reasonable prospect of obtaining that relief against the Commonwealth. Each question depends upon establishing that the Financial Assistance Act, the Natural Heritage Act or one of the Inter-Governmental Agreements is invalid in so far as it effects or authorises an acquisition or expropriation of part of Mr Spencer’s property in relation to Saarahnlee.
I have concluded that neither the Financial Assistance Act nor the Natural Heritage Act is a law with respect to the acquisition of property. Further, neither of those laws effects or authorises any acquisition of property of Mr Spencer’s that has been identified by him in the statement of claim. Similarly, none of the Inter-Governmental Agreements effects or authorises any such acquisition. It follows, in my opinion, that there is no reasonable prospect that Mr Spencer can obtain the final relief claimed in the proceeding. It also follows that there is no serious question to be tried as to whether Mr Spencer is entitled to that relief.

Accordingly, Mr Spencer’s application for interlocutory relief must be dismissed. Further, the proceeding itself must be dismissed.
However, before making any orders, I propose to give the parties the opportunity of considering my conclusions and the reasons for those conclusions. In particular, I have suggested above that there are at least rational arguments that could be advanced in support of the conclusion that certain of the Inter-Governmental Agreements may be invalid in some respects. While Mr Spencer’s claim that the Inter-Governmental Agreements are invalid to the extent that they effect or authorise an acquisition of his property must be rejected, he has advanced no arguments to the effect that the Inter-Governmental Agreements may be invalid in some other respects. I express no view about such arguments, since they have not been the subject of submission on either side.
I have referred to provisions of the Inter-Governmental Agreements that provide for compensation. As I have also observed above, no reliance has been placed on those provisions by the Commonwealth. Further, there may be a question as to whether Mr Spencer would have standing to put in question the validity of the Inter-Governmental Agreements, in circumstances where they do not either indirectly or directly effect or authorise an acquisition of his property. The essential difficulty for Mr Spencer’s contentions, as they are presently formulated, is that any acquisition of property of his is effected or authorised by the State Statutes and he does not, in this proceeding, put in issue the validity of either of the State Statutes. No basis for invalidity has been suggested. In any event, New South Wales would be a necessary party to the proceeding if the question of validity were in issue.
Accordingly, I propose to list the matter for the making of orders, and to deal with the question of costs at a time convenient to the parties after they have had an opportunity of considering these reasons.

I certify that the preceding two hundred and sixteen (216) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 26 August 2008

Counsel for the Applicant: Mr P King and Mr T Anderson

Solicitor for the Applicant: McKELLS Solicitors

Counsel for the Respondent: Mr C Lenehan

Solicitor for the Respondent: Australian Government Solicitor

Date of Hearing: 21 and 22 May, 2, 3 and 27 June 2008

Date of Final Submissions: 1 July 2008

Date of Judgment: 26 August 2008

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACD 24 OF 2007

BETWEEN:	PETER JAMES SPENCER Applicant
AND:	COMMONWEALTH OF AUSTRALIA Respondent
JUDGE:	EMMETT J
DATE:	21 AND 22 MAY, 2, 3 AND 27 JUNE, AND 26 AUGUST 2008
PLACE:	SYDNEY

THE PROCEEDING........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[1]
The Allegations in the Statement of Claim........ ........ ........ ........ ........ ........ ........ ........	[6]
The Motions........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[7]
THE PRESENT ISSUES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[17]
THE KYOTO PROTOCOL........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[22]
THE COMMONWEALTH STATUTES........ ........ ........ ........ ........ ........ ........ ........ ......	[35]
The Financial Assistance Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[36]
The Natural Heritage Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[43]
THE INTER-GOVERNMENTAL AGREEMENTS........ ........ ........ ........ ........ ........ ...	[53]
The 1997 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[55]
The 2000 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[68]
The 2002 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[72]
The 2003 Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[77]
THE STATE STATUTES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[83]
The 1997 Vegetation Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[85]
The 2003 Vegetation Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[91]
SERIOUS QUESTION TO BE TRIED / REASONABLE PROSPECT OF SUCCESS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[99]
Some Legal Principles Concerning ss 51(xxxi) and 96........ ........ ........ ........ ........ .....	[110]
Acquisition of Property Within s 51(xxxi)........ ........ ........ ........ ........ ........ ........ ........ ..	[123]
Laws With Respect to the Acquisition of Property........ ........ ........ ........ ........ ........ ...	[151]
Whether Acquisition or Expropriation Effected or Authorised........ ........ ........ ........	[159]
Standing/Matter........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[178]
Conversion by the Commonwealth........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[182]
Res Judicata/Issue Estoppel........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[186]
Conclusion as to Mr Spencer’s Prospects........ ........ ........ ........ ........ ........ ........ ........ .	[193]
BALANCE OF CONVENIENCE........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[194]
CONCLUSION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[211]

Counsel for the Applicant:	Mr P King and Mr T Anderson
Solicitor for the Applicant:	McKELLS Solicitors
Counsel for the Respondent:	Mr C Lenehan
Solicitor for the Respondent:	Australian Government Solicitor

Date of Hearing:	21 and 22 May, 2, 3 and 27 June 2008
Date of Final Submissions:	1 July 2008
Date of Judgment:	26 August 2008