By Michele Muscillo, Partner and Ben Ricketts, Solicitor
Earlier this month, the High Court ruled in favour of Peter Spencer, the New South Wales farmer who came to fame last summer after he undertook a 52 day hunger strike to protest limitations on his right to clear his own land.
Mr Spencer sued the Federal Government for compensation, claiming that the Federal Government and the NSW Government acted together to prevent him from clearing land on his property, and more importantly, avoided paying him compensation in the process. The Federal Court had dismissed Mr Spencer's claim in March 2010, on the basis that he had no reasonable prospects of success. The High Court has now overruled that decision and returned the case to the Federal Court.
During the hunger strike, Mr Spencer lived on a platform six metres above the ground on his property Saarahnlee, north of Cooma in NSW, and survived on a diet of water, lemon juice, vitamins and painkillers.
Mr Spencer claimed that the Native Vegetation Conservation Act 1997 and Native Vegetation Act 2003 had effectively locked up vast tracts of his and other properties throughout NSW, preventing farmers from clearing and earning a living from their land. While the NSW Government had no obligation to pay him compensation, had the Federal Government enacted similar laws, then, under the Constitution, the Federal Government would have to pay Mr Spencer compensation on just terms for the acquisition of his property rights.
Mr Spencer claimed that the State and Federal Governments imposed bans on land clearing through an informal joint venture to allow Australia to meet its greenhouse gas obligations under the Kyoto Protocol. He claimed that in doing so, the Federal Government avoided paying compensation to Mr Spencer and hundreds of other farmers, while enabling the country to meet Australia's international obligations under the Kyoto Protocol as the result of carbon sequestration and abatement of the now-protected land.
The Federal Court summary dismissal
Mr Spencer's case was summarily dismissed by a single judge of the Federal Court for being untenableaccording to Section 31A of the Federal Court Act, which had allowed the Federal Government to apply for the early dismissal of Mr Spencer's claims on thebasis that they had no reasonable prospects of success. This provision of the Act was introduced in 2005 to deal with cases that lack in merit, and allows the courts to dispose of unsustainable cases.
Mr Spencer appealed to the full bench of the Federal Court, and was again unsuccessful. At the time the decision in ICM Agricultural Pty Ltd v The Commonwealth , which may have changed the outcome in Mr Spencer's case, had not been handed down. Mr Spencer then took his case to the High Court.
The decision in ICM Agriculture Pty Ltd v The Commonwealth
In the High Court, the Court looked at the decision in ICM Agricultural Pty Ltd. The plaintiffs, ICM and Hillston, held bore licences which had been granted under the Water Act 1912 (NSW). These bore licences were converted by the NSW Government, and replaced with water access licences granted under the Water Management Act 2000. The plaintiffs' water entitlement decreased overall by between 66 and 70 percent.
In 2004, an Intergovernmental Agreement on a National Water Initiative was reached between the Federal Government and the State governments of NSW, Victoria, Queensland, ACT, the Northern Territory and South Australia. This agreement led to the National Water Commission Act and the creation of the National Water Commission, which awarded federal funding to particular State projects that related to water.
The NSW Government received funding to commence a project which involved replacing the Water Act 1912 bore licences with water access licences, and in doing so, achieved an overall 56 percent reduction in water entitlements of the lower Lachlan groundwater system. The plaintiffs contended that replacing their bore licences with access licences (and reducing their entitlements) involved an acquisition of property other than on just terms, in contravention of the Constitution.
Section 51(xxxi) of the Constitution provides that the Federal Government has the power to make laws about the acquisition of property on just terms. Over the years, this has meant that compensation has been paid to expropriated owners of both real and personal property acquired by the Federal Government. However, there is no requirement for State governments to compensate on just terms.
The plaintiffs contended that the National Water Commission, by administering Federal financial assistance to the States, provided evidence of a funding agreement necessary to implement the Agreement reached between the Federal Government sustainability objectives of the Intergovernmental and the States. The High Court found in favour of the plaintiffs, and held that the funding agreement did not mean that the NSW Government could acquire property on other than just terms.
The High Court decision
In the High Court, Mr Spencer argued that the Federal Natural Resources Management (Financial Assistance) Act 1992 and the National Trust of Australia Act 1997 represented an informal agreement between the NSW State and Federal Government, which provided for Federal funding conditional upon the NSW Government's acquisition of property.
Mr Spencer argued that in entering into an arrangement with the NSW Government, the Federal Government had attempted to circumvent the just terms provision of the Constitution to avoid paying him compensation. Mr Spencer argued that the Federal Government then benefited from the carbon sequestration and abatement in the now-protected land. In doing so, the Federal Government was able to meet its international Kyoto Protocol obligations for greenhouse gas abatement without compensating farmers.
The High Court made it clear that in light of the recent decision of ICM Agricultural Pty Ltd (which, at the time, was not available to the Federal Court), it could no longer be said the Mr Spencer had no reasonable prospects of successfully conducting proceedings against the Commonwealth.
The High Court ruled in Mr Spencer's favour, finding that there are important questions of constitutional law and fact at stake relating to informal arrangements between the Commonwealth and the State. Accordingly, the decision of the Full Federal Court was set aside, and Mr Spencer was awarded costs.
Mr Spencer's case has been supported by the NSW Farmers' Association, who were granted leave to intervene in support on his behalf. The Attorney-Generals of Western Australia, Victoria, South Australia and NSW also intervened on behalf of the Commonwealth against Mr Spencer.
Mr Spencer claims that there are millions of hectares of land
that have been "stolen" from farmers in circumstances
similar to his own. The High Court decision means that Mr
Spencer's case will be returned to the Federal Court. Given the
amount of land and potential for compensation that is at stake,
this case will continue to receive careful attention from
landholders and government at both State and
For more information, please contact HopgoodGanim's Climate Change specialists.
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