little blue house

On 17-19 April this year the High Court heard challenges by several tobacco companies to the validity of the Commonwealth’s tobacco packaging legislation, the Tobacco Plain Packaging Act 2011 (Cth) (Act).  The tobacco companies sought to rely upon a requirement in Section 51 (xxxi) of the constitution to the effect that the power of the Federal Parliament to make laws which provide for the ‘acquisition’ of property is limited by a requirement that it be exercised on ‘just terms’.  The companies argued that relevant provisions of the Act were invalid because they constitute an acquisition of the their intellectual property, otherwise than on just terms. The Commonwealth Constitutional power to make legislation to acquire and its concomitant ‘just terms’ qualification do not distinguish between different types of property. We can have property in shares, mining tenements, water and various other things, as well as land.

The Court found in favour of the Government. The decision was published on 15 August 2011[1] and the full reasons for that decision on 5 October. The relevant property in that case comprised various kinds of intellectual property, such as trademarks, patents and designs in the packaging and brands of the companies.

The Tobacco Packaging Case is now one of a long line in which a wide range of litigants have tested the meaning the Commonwealth Government’s constitutional power to make legislation providing for the acquisition of property. Many of the legal principles considered in the case are relevant to all types of property, including land.

The High Court has accumulated a formidable body of legal precedent decisions on the property acquisition power.  At issue, for example, have been laws concerning the marketing of apples and pears, a hydroelectric scheme, a car park, mining tenements and oil exploration rights in the Timor Sea, to name a few.

In all of these cases some kind of property was directly or indirectly taken or acquired in a way that the plaintiff clamed was beyond the power granted to the Commonwealth by section 51(xxxi).

It must be understood that the Constitution generally only says what the Commonwealth Government can do. Section 51(xxxi) the Constitution is not a direct statement of the citizens’ rights. It simply empowers the Commonwealth to make a particular kind of law. In contrast the Constitution of the United States of America (USA) in its Fifth Amendment, gives all citizens the right not to have their property taken by the Government, unless they are compensated. Therefore in the USA, anyone can challenge an action of a Government, State or Federal, which deprives them of property rights.

In Australia there is now a complex body of legal principles applicable to both Federal and State Laws, with a pedigree that goes back at least a thousand years in the English law we have inherited in Australia. We have added to this dense mass our own peculiar permutations, particularly through Commonwealth Constitutional law. For example, the simple idea in section 51(xxxi) of the Constitution that the Commonwealth can make laws to ‘acquire’ property provided it does so on just terms has been bedeviled by a number of complications.

The word ‘acquire’, for example, does not simply mean ‘take’. The Government must benefit in some way from the taking for it to be an ‘acquisition’ which triggers the constitutional requirement to provide just terms.  It follows that if the Commonwealth makes laws to take or extinguish property and it does not at the same time benefit from its actions, it does not have to provide for compensation to the property owner on just terms.   This is just an example which is illustrative of a confusing and difficult to penetrate area of law.

Property rights, however, have not been overlooked by the common law. When it comes to land, State law is much broader than Federal law.  What is not commonly appreciated is that the laws of the States arguably include a common law right, similar to the US Fifth amendment, to claim compensation for a taking, without the complication of showing that the taking was also an acquisition[2]. For a State to take property without paying compensation, it must be very specific in its legislation and not simply so it by ‘the back door’. The law requires honesty and transparency. Unsurprisingly, direct examples of a State trying to take property without compensation while complying with that requirement cannot be found. Unfortunately, various examples have been seen of the ‘backdoor’ method, including the taking of conservation areas and forcing subdividers to give up excessive areas of public open space.

There is a paucity of relatively recent judicial decisions on the State law in this area. However, perhaps with the ever widening reach of environmental law and policy and its effect on private property, there will be a ‘showdown’ between the State and a private land owner. The likelihood of that happening will be increased if environmental legislation does not have inbuilt mechanisms to protect private property, including ‘just terms’ compensation provisions and independent appeal rights.  Legal certainty about the rights attached to property is one of the essential features of a successful national economy and is bound up in the related legal subject, the rule of law[3].

The social and political reach of the Tobacco Packaging Case and the issues that are associated with it therefore go well beyond the immediate interests of the parties involved. The cause of big tobacco is hardly an easy one to progress in ‘polite society’ and few outside of that industry are likely to feel more than a momentary pang of regret for the loss of the alluring packaging that has been synonymous with tobacco retailing. The broader issues are not always that clear, however.

The famous Tasmanian Dams[4] case, for example, was a direct consequence of the Hawke Government’s designation as a National Park of a large area of Tasmania, following the ALP’s 1983 election win. A large part of Tasmania was declared a National Park and the High Court by only a four to three majority upheld the legislation, partly because it took the view that a taking of land which does not involve a benefit accruing to the Commonwealth, is not, for the purposes of the Constitution, an ‘acquisition’. It is noted that the question of whether or not there is a benefit is very fact specific and is likely to be an issue of contention in many cases.  Debate over the narrow win for the Government in the Tasmanian Dams case still arises from time to time.

There is little doubt that the Tobacco case will not be the last word on this subject. Given the volume and complexity in State environmental and town planning Law, it will not be surprising if a major case arises in one of the States’ Courts. The importance of these cases was summarized by Justice Michael Kirby when he was on the High Court. He said:

‘One of the institutional strengths of the Australian Economy is the Constitutional guarantee of just terms where the property interests of investors are required under Federal law. This Court should not undermine that strength by qualifying the guarantee. Neither the Court’s past authority nor economic equity requires such a result. If it can happen here it can happen again and investors will draw their inferences.’ [5]

It is to be hoped that this warning is remembered by future courts and governments.

[1] JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited & Ors v Commonwealth of Australia [2012] HCA 30.

[2] R. v Compensation Court of WA ex parte State Planning Commission and Anr (1990) 2WAR 242 and see first instance opinion of Pidgeon J: unreported, Compensation Court of WA, 1988-BCC 8800828

[3] See for example, Hernando de Soto, The Mystery of Capital, Why Capitalism Works in the West and Fails Everywhere ElseBasic Books, 2000 and Niall Ferguson, The Rule of Law And Its Enemies, BBC, 2012 Reith Lectures.

[4]The Commonwealth v. Tasmania  (1983) 158 CLR 1

[5]The Commonwealth v WMC Resources Ltd (1998) 194 CLR1 at p.102

boy on a ladder

The idea that development decisions should not be linked to the vagaries of local government decision-making has some appeal. Anyone who has had experience of the risk and frustration which can attend planning decision-making by local governments is likely to consider an alternative with a benign eye. The development assessment panel (DAP) system provided for under Part 11A of the Planning and Development Act 2005 (P&D Act), may therefore be attractive to developers. Under that system, generally major development applications and others delegated to DAP’s, must be determined by a DAP.* But be careful what you wish for. The council as decision-maker represents the entire community from which developers today arguably need a ‘community consent’ as much as their statutory consents. Disempowering the council may leave the locals with a feeling of disenfranchisement and frustration not consistent with expectations of modern citizens. Longer term that could make the system more complicated for applicants for development approval. This is not intended to raise an argument against the concept of DAPs, but rather to share some thoughts borne of recent experience, bearing in mind that under section 171F of the P&D Act the regulations implementing the system are to be reviewed  ‘as soon as practicable’ after the expiry of 2 years from the day on which the regulations were made. The relevant regulations are the Planning and Development Act (Planning and Development) Regulations 2005 (Regulations), which became effective on 1 July 2011.

Developers are potentially in a bind here. On the one hand many, at least in private, cavil at the local government decision making process. Yet most, these days, recognise that community approval of a project is necessary.

There will always be an intransigent minority in a local community who will say ‘no’ to any proposal, while uttering platitudes about not being against development. However, experience shows us that most people who initially oppose a particular development, may be more inclined to accept a decision to approve made by their elected representatives.

Calls for members of the local community to have a ‘third party’ right of appeal against an approval, could be rejected justifiably, so long as the final decision at a local level is in the hands of an elected body. The case for third party appeals could become stronger if the decision is made by a DAP.

Early experience of the new DAP system in WA suggests that it also has the potential to alienate the locals and it may not have sufficient legal robustness to withstand a court challenge by disaffected members of the community.

One problem I have seen so far with DAPs, which may lead to court action, is confusion by the DAP as to its role. At this early stage, there is evidence to suggest that some DAP members may think that their role is to make good planning decisions. In a sense that is correct. At the same time the decision must comply with the local planning scheme and that should not be covered over by too strong a desire to make what the DAP considers to be a good planning decision.

Compliance will be enhanced by following well-established written and unwritten processes, for example adhering to the rules of natural justice and ensuring that everyone who at law has a right to be heard is given a proper opportunity to exercise that right. If the DAP goes straight to its view of the best outcome, despite the local planning scheme, then the decision runs the risk of being flawed and susceptible to legal challenge.

Unfortunately, it also seems the legal regime under which DAPs were established may be built on unstable foundations. This is because local planning schemes have, under the P&D Act the status of parliamentary legislation.  They are not mere guidelines. Some members of the local community are likely to have a legal right, or ‘standing’, to challenge a DAP decision which is at variance with a local planning scheme.

The DAP system was established largely by the Regulations. Legally, they cannot conflict with a local town planning scheme and if they do, they may be struck down by a court: section 43(1) of the Interpretation Act 1984. For example, currently, the Regulations allow a DAP to amend its final decision.  See regulation 17 of the Regulations. The Regulations are legislatively inferior to town planning schemes. See Section 87(4) of the P&D Act. For at least that reason it is legally impossible for regulations to provide for the amendment of a decision made under a planning scheme, once the decision has been made.

Ultimately, these concerns will have to be tested in a court and the prospect of that happening is likely to be hastened if a community is disaffected and feels it has not been given an adequate opportunity to have its say. While the DAP procedure allows for community members to be present when decisions are made and, indeed, to make comments, their calls for third-party rights of appeal would be understandable if the final decision is not made by their elected representative.

If a system lacks an adequate means by which a local community can have its say, those who oppose a development may be forced to seek other avenues of redress, including the law, or even direct action. Needless to say, such consequences are unlikely to promote the happiness of most people involved, including the developer.

Niall Ferguson in one of this year’s, BBC Reith lectures made the case against the reflexive use of more regulation as a way of addressing complex issues, on the ground that it leads to a subversion of the rule of law, in favor of the rule of lawyers. Most lawyers are well aware of the likely unpopularity of that prospect.

Experienced lawyers also know, as a general rule, that more regulation does not necessarily lead to better outcomes. Regulation which transfers power from an elected to an unelected body is unlikely to be immediately attractive to many people in a local community. While democracy is a very bad form of government, to paraphrase a famous Churchillian aphorism, all the others are so much worse. Although the WA DAP system is now enshrined in law, it would be fair to say that for many ‘the jury is still out’ on its longer term effectiveness. This is not to say that it is beyond redemption but it may need some improvement.

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* Generally, development which has an estimated cost of $7 million must be decided by a DAP and, at the election of the Applicant, a proposal which costs $3 million or more may be decided by the DAP. These figures are respectively $15 million and $7 million for developments in the City of Perth’s municipal district.

house with trees

Glen was featured in the 5-11 July issue of WA Business News. The article referred to the recent growth of some of Perth’s larger and well known legal and accounting firms. It made specific mention of Glen’s move against this trend to meet the market need for “the boutique niche operator, who can enhance the capacity of other professionals.” Subscribers to WA Business News can read the article here

Planning Institute of Australia

I was pleased to be the speaker and discussion leader at this Planning Institute of Australia WA (PIA) event, hosted and sponsored by Squire Sanders. The notes I used to lead the discussion can be found here. An article entitled Climate Change Law and the Real World , which I co-authored, with Professor Peter Newman is referenced in the notes and can be found here. It was a continuing education event and well attended by a strong body of town planners from the public and private sectors.

The event was video recorded and will soon be uploaded onto this website.

As is usually the case, the planners present were very responsive to the material and provided me with useful comments, some of which are noted at the end of the notes.

My thanks to the Chair of the event Chris Wark of Squire Sanders, Joel Gilman, the Chair of PIA’s Legal Chapter, who is responsible for the Programme and Emma de Jäger, PIA’s Executive Officer.