Australia: When a detriment is not a punishment - High Court delivers judgment against coal exploration licensees

On 15 April 2015 the Full Bench of the High Court unanimously upheld the validity of the Mining Amendment (ICAC Operations Jasper and Acacia) Act 2014 (NSW) (Amendment Act) which amended the Mining Act 1992 (NSW) (Mining Act) to cancel three coal exploration licences at Doyles Creek and in the Bylong Valley; without compensation.1 The Amendment Act also had the effect of voiding associated applications (including applications for renewal) and immunising the State from all civil liability.

In doing so, the High Court affirmed that State governments are authorised to enact legislation that is directed to specific rights, duties, liabilities or immunities and where a right granted by statute is terminated by the enactment of a law, the detriment that flows is unlikely to amount to a punitive exercise of judicial power where the individuals involved were not directly targeted and remain subject to the ordinary processes of criminal and civil law.


ICAC findings

The three special cases came before the Court as part of a broader series of legal battles arising out of widely publicised investigations and reports by the Independent Commission Against Corruption (ICAC), which found that the Minister administering the Mining Act at that time (Minister) and various individuals had engaged in corrupt conduct in relation to the award and exploitation of the three exploration licences.

In its Operation Jasper report, ICAC made findings of criminal and corrupt conduct against the Minister and various individuals relating to the award of exploration licences to Mt Penny Coal Pty Limited (MPC) and Glendon Brook Coal Pty Limited (GBC) (subsidiaries of Cascade Coal Pty Limited (Cascade)). ICAC also found that directors of Cascade had been deliberately misleading during negotiations relating to the sale of the totality of Cascade Coal's shares, which is covered in our earlier article here.

In its report in relation to Operation Acacia, ICAC made findings of criminal and corrupt conduct against the Minister and various individuals relating to the grant of an exploration licence to Doyles Creek Mining Pty Limited (DCM), which had been issued without a tender and against departmental advice. NuCoal Resources Limited (NuCoal), which subsequently acquired DCM, was found by ICAC in a further report to have been aware of the alleged corruption surrounding the licence at that time.

In a final report, ICAC recommended that legislation be enacted to expunge mining authorities granted to MPC, GBC and DCM as they were "so tainted by corruption" and "such legislation would have the benefit of reducing risks arising from challenges in the courts to any ministerial decision to cancel or not renew current [licences]."

NSW legislative response

Following submissions made by NuCoal and Cascade, the New South Wales Parliament (Parliament) passed the Amendment Act to insert a new Schedule 6A into the Mining Act. As well as having the effect of cancelling the three licences without compensation and protecting the State from liability, the Amendment Act imposed a continuing obligation on the licensee to lodge annual and final reports of all prospecting undertaken and that the use or disclosure of any information in respect of the cancelled licences would not be prevented by duties of confidentiality or intellectual property rights.


MPC and GBC, together with their parent company, Cascade (Cascade Parties), one of Cascade's former directors, Mr Travers Duncan, and Nu Coal commenced three separate proceedings against the State of New South Wales in the original jurisdiction of the High Court. The Attorneys-General of the Commonwealth, Victoria, Queensland, Western Australia and South Australia intervened in the proceedings.

The validity of Schedule 6A to the Mining Act was challenged on the three primary grounds examined below.

  1. Is the Amendment Act a legislative exercise of judicial power?

The parties submitted that the Amendment Act determined rights and imposed punishment, amounting to an exercise of judicial power. They argued that such exercise of judicial power is beyond the law making power of the Parliament by an implied limitation on State legislative power derived from Chapter III of the Commonwealth Constitution. Alternatively, they argued that there existed a historical limitation on State legislative power that was not displaced by section 2(2) of the Australia Act 1986 (Cth), which effectively gives unqualified power to the legislatures of the States.

The arguments presented focused on the punitive nature of the text of the Amendment Act and particularly on the language of the purposes and objects, which stated that the grant of the exploration licences was "tainted by serious corruption". This was alleged to be akin to a "bill of pains and penalties".2 NuCoal submitted that the text indicated that Parliament was satisfied that the conduct amounted to one or more of the criminal offences identified by ICAC and constituted a punishment. A slightly different approach was adopted by Mr Duncan and the Cascade Parties who submitted that the Parliament had retrospectively imposed a novel norm of conduct, being the "norm of not being involved in 'serious corruption'", had found contravention by the licensees of that norm and imposed a penalty. The parties also argued that the predominant purpose of cancelling licences without compensation was to punish transgression and the explicit reference to "deterring future corruption" amongst other provisions, demonstrated the punitive nature of the Amendment Act.

In finding that the Amendment Act was not an exercise of judicial power, rather a termination of rights previously conferred by statute, the Court stated that the detriment that flowed could not be equated with punishment and the reason for termination did not change the characterisation of the exercise of power. The High Court found the emphasis placed by the plaintiffs on the words of deterrence was unfounded and instead found that the overarching purpose of the Amendment Act, when read as a whole, was to promote integrity in public administration and ensure the processes tainted by corruption had no continuing impact.

The Court considered case law on the features of a "bill of pains" and found that the Amendment Act did not conform to those features. Parliament had considered the ICAC reports and, having regard to other factors, made its own determination as to the probity of the administrative processes by which the exploration licences were issued. The Amendment Act did not articulate a connection between ICAC's findings of individual misconduct, declare guilt or impose legal burdens on those individuals. The individuals remained subject to ordinary processes of criminal or civil law.

As the Amendment Act was not properly classified as a legislative exercise of judicial power, the Court did not proceed to consider the existence or extent of any implied limitation on State legislative power.

  1. Is the Amendment Act a "law"?

The parties submitted in the alternative that the Amendment Act was not a "law" within the competence of the NSW Parliament to enact under s 5 of the Constitution Act 1902 (NSW) as the Amendment Act "does not merely vary existing rights but destroys them by way of punishment for what the Parliament has judged to be 'serious corruption'". However, the High Court cited well established precedent that the law making power of the State was "ample and plenary" and that the word "laws" implies no relevant limitation as to the content or purpose of enactment or in relation to specificity of duties, rights, liabilities or immunities.

  1. Are the provisions of the Amendment Act, relating to the use and disclosure of information, inconsistent with provisions of the Copyright Act 1968 (Cth)?

Clause 11 of Schedule 6A authorises the use of information obtained under the Mining Act in respect of the cancelled licences and provides that use is not precluded by intellectual property rights or duties of confidentiality. In the circumstances, the Court determined that there was no real issue for the Court to determine. The existence of copyright was merely asserted in the special cases, but there was no evidence that the Government had or threatened to infringe copyright interests.


While a mining authorisation may be cancelled or not renewed by the Minister under Part 7 of the Mining Act, such cancellation or non renewal may only be made for specified reasons and by a specified process (with appeal rights to the Land and Environment Court or on administrative law grounds). The effect of the Amendment Act was to determine, post facto, that a mining authorisation should be cancelled for reasons determined subsequent to the granting of the authorisation. This occurred without compensation or a right of appeal.

From a legal point of view, the decision demonstrates that targeted and remediating legislation is not easily challenged on the ground of being punitive. In this case, the applicant parties could not demonstrate the requisite connection between the conduct of the individual and the burden imposed to be characterised as punitive.

The case also sparks an interesting discourse about sovereign risk. Nucoal maintains that it was unaware that DCM had engaged in corrupt behaviour, prior to being acquired by NuCoal, and that the legislature had effectively compulsorily expropriated the property of shareholders without fair compensation. Nucoal is reportedly seeking legal redress for its US shareholders (comprising over one third) under the Australia-United States Free Trade Agreement. However, it is arguable that corruption in the public sector poses the greater sovereign risk. On this point, it is salient to note that Australia's rating on Transparency International's Corruptions Perception Index has been sliding since 2012. A legislature which proactively prevents corruption and market manipulation should increase commercial certainty and create a more stable environment for investment.

Amidst increasing calls for the implementation of a national anti-corruption strategy and investigatory bodies similar to NSW's ICAC in every State and at a Federal level, and particularly now that the legislature's targeted action against the licensees has been upheld by the High Court, corporations should implement appropriate due diligence measures whenever statutory licences are acquired independently or as part of the assets of a target company.


1 Duncan v New South Wales; NuCoal Resources Limited v New South Wales; Cascade Coal Pty Limited v New South Wales [2015] HCA 13

2 A bill of pains and penalties refers to legislation which decrees that a person (or persons) is guilty of an offence and inflicts punishment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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