When is an Acquisition Of

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FACULTY OF LAW

THE UNIVERSITY OF MELBOURNE

Public Law and Legal Theory

Working Paper No. 07

2000

WHEN IS AN ACQUISITION OFPROPERTY NOTAN ACQUISITION

OF PROPERTY?

THE SEARCH FOR A PRINCIPLEDAPPROACH TO SECTION 51(XXXI)

Dr Simon Evans

This paper can be downloaded without charge from the

Social Science Research Network Electronic Library at:

http://papers.ssrn.com/paper.taf?abstract_id=237498
http://papers.ssrn.com/paper.taf?abstract_id=237498http://papers.ssrn.com/paper.taf?abstract_id=237498


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WHEN IS AN ACQUISITION OF PROPERTYNOTAN ACQUISITION

OF PROPERTY?

THE SEARCH FOR A PRINCIPLED APPROACH TO

SECTION 51(XXXI)

Dr Simon Evans

Introduction................................................................................................................................................................................. 2TheAirservices Case: a case study .........................................................................................................................................3

Facts and proceedings.........................................................................................................................................................4The lien provisions ..............................................................................................................................................................5The decision of the High Court .........................................................................................................................................6

TheAirservices Case: approaches to deciding why just terms were not required .........................................................6The lien provisions were a necessary or characteristic means of achieving an objective within power, not

being solely or chiefly the acquisition of property ........................................................................................................8The principle stated.......................................................................................................................................................8The principle applied .................................................................................................................................................... 8Assessment ...................................................................................................................................................................10

The lien provisions were a genuine adjustment of competing rights .......................................................................11The principle stated.....................................................................................................................................................11The principle applied ..................................................................................................................................................12

Assessment ...................................................................................................................................................................14Just terms were an irrelevant or incongruous not ion in relation to the lien provisions ......................................19

The principle stated.....................................................................................................................................................19

The principle applied: Gummow J.......................................................................................................................... 19

The principle applied: McHugh J ............................................................................................................................20Assessment: characterisation and section 51(xxxi) ..............................................................................................22

Assessment: laws in relation to which just terms are an irrelevant or incongruous notion........................25

The current approaches to section 51(xxxi) are unsatisfactory: Towards a new approach?......................................26Blackstone and the mythology of private property......................................................................................................28

Property as a pre-polit ical baseline .......................................................................................................................... 30Property as a civil institution.....................................................................................................................................31

Striking a balance ..............................................................................................................................................................32

Conclusion ................................................................................................................................................................................33

INTRODUCTION

Section 51(xxxi) of the Constitution empowers the Commonwealth Parliament to make laws

with respect to:

The acquisition of property on just terms from any State or person for any purpose in respect of

which the Parliament has power to make laws

Faculty of Law, University of Melbourne. I am grateful for research funding under the ARC Small Grants

Scheme; for research assistance provided by Josephine Tan; and for the invaluable comments of Melissa Conley

Tyler, Stephen Donaghue, Geoff Lindell, Adrienne Stone and George Williams.


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By explicitly conferring power to make laws with respect to the acquisition of property,

section 51(xxxi) resolves any doubt that the Commonwealth Parliaments other substantive

heads of power might not authorise laws with respect to the acquisition of property.1

However, the real significance of section 51(xxxi) lies not in the extent to which it

enlarges the Commonwealths legislative power but in the extent to which it limits it.

Brennan J summarised the dual effect of section 51(xxxi) inMutual Pools & Staff Pty Ltd v

The Commonwealth (Mutual Pools):2

First, it confers power to acquire property from any State or person for any purpose for which the

Parliament has power to make laws and it conditions the exercise of that power on the provision

of just terms. Second, by an implication required to make the condition of just terms effective, itabstracts the power to support a law for the compulsory acquisition of property from any other

legislative power.3

Section 51(xxxi) thus gives rise to an implication that limits the extent of the other heads of

power so that they do not support laws that provide for the acquisition of property.

The difficulty comes in identifying the scope of the implication. As Brennan J went on

to write inMutual Pools:4

[T]here are sundry laws providing for the acquisition of property which are supported by heads of

power other than s. 51(xxxi) and which are not affected by the requirement of just terms. For

example, laws providing for the imposition of a tax5, the compulsory payment of provisional tax

6,

the seizure of the property of enemy aliens7, the sequestration of bankrupts property

8, the

forfeiture of prohibited imports or the exaction of fines and penalties9have been held to be

unaffected by the guarantee of just terms. If the laws considered in these cases had been classifiedas laws falling within s. 51(xxxi), the acquisitions of property for which they provided would have

failed for want of the provision of just terms. Clearly there are some laws which, though they

1Debates of the Australasian Federal Convention, Third Session (Melbourne), 25 January 1898, 151 (Edmund

Barton); ibid, 4 March 1898, 1874 (Richard OConnor). See also John Quick and Robert Randolph Garran, The

Annotated Constitution of the Australian Commonwealth (first published 1901, reprinted 1976), 640-641.

2(1994) 179 CLR 155, 177.

3The extent to which section 51(xxxi) abstracts power to make laws with respect to the acquisition of property

from section 122 remains controversial: seeNewcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR

513.

4(1994) 179 CLR 155, 177-178.

5MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622, 638, 649.

6Commissioner of Taxation v Clyne (1958) 100 CLR 246, 263, 270;Federal Commissioner of Taxation v

Barnes (1975) 133 CLR 483, 494-495, 500.

7Attorney-General (Cth) v Schmidt(1961) 105 CLR 361, 372-373.

8Attorney-General (Cth) v Schmidt(1961) 105 CLR 361, 372.

9Trade Practices Commission v Tooth & Co Ltd(1979) 142 CLR 397, 408;R v Smithers; Ex parte McMillan

(1982) 152 CLR 477, 487-489.


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provide for what can properly be described as an acquisition of property, are not classified as lawsfalling within s. 51(xxxi).

One of the great challenges for section 51(xxxi) jurisprudence is to deliver a coherent and

principled account of why some laws that effect an acquisition of property do not attract the

obligation to provide just terms. Why are [t]he acquisitions of property for which they

provide not acquisitions of propertyfor the purposes ofs. 51(xxxi)?10

In this Article, I evaluate the some of the answers to this question that the most recent

decision of the High Court provides. I argue that the High Courts approach is confused and

unsatisfactory. A new approach to this aspect of section 51(xxxi) is urgently required. In the

final sections of this Article I outline and evaluate some of the issues that will arise in the

search for a new approach.

THEAIRSERVICESCASE: A CASE STUDY

Since 1993, the High Court has decided 11 cases which involve section 51(xxxi) issues.11

Unfortunately, these cases have produced no coherent approach. Rather, they are marked by

differences in approach and disagreement between the Justices on substantive outcomes.

This is well illustrated by the most recent decision,Airservices Australia v Canadian Airlines

International Ltd(theAirservices case).12

Facts and proceedings

Compass Airlines Pty Ltd (Compass) carried on business as an Australian domestic airline.

Compass leased the aircraft that it operated from Canadian Airlines International Ltd,

Monarch Airlines Ltd and Polaris Holding Company (the companies). Compass failed and

10(1994) 179 CLR 155, 178 (emphasis in original).

11Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480;Mutual Pools &

Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155;Health Insurance Commission v Peverill (1994) 179

CLR 226;Re Director of Public Prosecutions; Ex parte Lawler(1994) 179 CLR 270; Georgiadis v Australian

and Overseas Telecommunications Corporation (1994) 179 CLR 297;Nintendo Co Ltd v Centronics Systems

Pty Ltd(1994) 181 CLR 134;Newcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR 513; The

Commonwealth of Australia v Mewett(1997) 191 CLR 471; Commonwealth v WMC Resources Ltd(1998) 194

CLR 1;The Commonwealth v Western Australia (Mining Act Case) (1999) 196 CLR 392;Airservices Australia

v Canadian Airlines International Ltd(1999) 167 ALR 392; 64 ALJR 76. The High Court has reserved its

decision in a further case in the line containing Georgiadis andMewett: Smith v Australian National Line Ltd

(P56/1999) on appeal fromSmith v Australian National Line Ltd(1998) 20 WAR 219. An application for

special leave to appeal inDurham Holdings Pty Ltd v The State of New South Wales (S155/1999) (on appeal

fromDurham Holdings Pty Ltd v State of New South Wales (1999) 47 NSWLR 340) has been referred to a Full

Court of the High Court for argument.

12(1999) 167 ALR 392; 64 ALJR 76.


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went into provisional liquidation. At that time it owed the Civil Aviation Authority (the

Authority)13

substantial amounts in respect of charges and penalties that had accrued as a

result of the operations of each of the leased aircraft. The legislation that enabled the

Authority to impose the charges, Div 2 of Pt VI of the Civil Aviation Act1988 (Cth) (the

Act), also purported to enable the Authority to invoke a statutory lien over each aircraft to

secure the charges and penalties payable in relation to that aircraft.

The Authority invoked statutory liens in relation to the aircraft operated by Compass

and leased from the companies. Each of the companies paid (under protest) the charges and

penalties claimed to be owing in respect of the aircraft which it had leased to Compass. The

Authority then discharged the statutory liens it had asserted and released the aircraft to the

companies.

The companies brought proceedings to recover the amounts that they had paid to theAuthority to secure the release of the aircraft (some $13 million in all).

The first limb of the companies claim was that the charges and penalties were not

validly imposed by the Authority. Section 67 of the Act limited the amount and rate of

charges that the Authority could impose; in particular, it provided that [t]he amount or rate

of a charge shall not be such as to amount to taxation. Branson J14

at first instance and

the Full Court of the Federal Court15

on appeal agreed with the companies and held that the

charges contravened section 67 and were invalid. The Authority was ordered to repay the

amounts that the companies had paid to it to secure the release of their aircraft.

However, the Authority sought and obtained special leave to appeal to the High Court.

The High Court held that the charges did not contravene section 67 and were validly

imposed.16 I do not discuss this aspect of the case further.

13The Authority was originally the Civil Aviation Authority. Its functions, and rights and liabilities, so far as

presently relevant, were later assumed by Airservices Australia. Airservices Australia was substituted as

respondent to the proceedings originally brought by the companies.

14Monarch Airlines Ltd v Airservices Australia(1997) 72 FCR 534.

15Airservices Australia v Monarch Airlines Ltd(1998) 152 ALR 656.

16Airservices Australia v Canadian AirlinesInternational Ltd(1999) 167 ALR 392; 64 ALJR 76. Callinan J

did not express an opinion on this aspect of the case.


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It was therefore necessary for the High Court to consider the second limb of the

companies claims. This was that the lien provisions of the Act were constitutionally invalid

because they amounted to an acquisition of property on other than just terms.

The lien provisions

The lien provisions operated in the following manner. The Board of the Authority made a

determination under section 66(2) of the Act that fix[ed] charges and specif[ied] the persons

by whom, and the times when, the charges [were] payable. Under the determination, an

aircraft operator incurred charges of various kinds when an aircraft took off, flew and landed.

The aircraft operator incurred penalties when charges were not paid within the period

determined by the Board (section 66(8)). The charges and penalties were recoverable as

debts due to the Authority (section 66(11)).

Section 69 addressed the situation where charges or penalties had been incurred but had

not been paid. Under those circumstances, and if an officer of the Authority took certain

procedural steps, a statutory lien vested in the Authority in respect of the aircraft in relation to

which the charges and penalties had been incurred. The statutory lien covered:

(d) the [unpaid] charge or penalty;

(e) any penalty that [became] payable in respect of the charge after [the lien is created];

(f) any further outstanding amounts in respect of the aircraft.

Section 70(1) provided that the lien subsisted despite any dealing with the aircraft, until the

lien ceased to have effect. Section 70(2) defined the priority to be accorded to the lien:

(2) For the purposes of priorities amongst creditors and the purposes of the distribution of theproceeds of a sale made under section 73, the statutory lien has effect as a security interest in

respect of the aircraft ranking in priority:

(a) after any security interest (other than a floating charge) in respect of the aircraftcreated before the time of registration of the statutory lien, to the extent that that

security interest covers a debt incurred before that time; and

(b) before any security interest not falling within, or to the extent that it does not fallwithin, paragraph (a).

The Authority could seize (section 72) and sell (section 73) any aircraft in relation to which

charges remained unpaid after nine months.

The decision of the High Court

The companies argued that the effect of sections 69 and 70(2) was to vest in the Authority an

interest in property the statutory lien which it did not otherwise have and therefore was to

effect an acquisition of property on other than just terms contrary to section 51(xxxi) of the

Constitution. By majority (Gaudron and Callinan JJ dissenting in separate judgments) the


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High Court rejected this argument. Although each of the members of the majority at least

assumed that the liens effected an acquisition of property, each held it was not an acquisition

in relation to which section 51(xxxi) required just terms.

THEAIRSERVICESCASE: APPROACHES TO DECIDING WHY JUST

TERMS WERE NOT REQUIRED

In all, the members of the Court invoked three distinct approaches to explain why this was so

(or, in the case of the minority Justices, was not so). In general terms, the majority Justices

framed these approaches as follows:

- the lien provisions were a necessary or characteristic means of achieving an objective

within power, not being solely or chiefly the acquisition of property;

- the lien provisions were a genuine adjustment of competing rights; and

- just terms were an irrelevant or incongruous notion in relation to the lien provisions.

In this Article, I focus on these three approaches.

It is worth noting, however, that Justices have invoked at least six further approaches to

explain why the section 51(xxxi) requirement of just terms was not attracted on the facts of

particular cases. On these approaches, the requirement of just terms is not attracted if:

- the legislation is clearly directed only to the prevention of a noxious use of proprietary

rights;17

- the legislation adversely affects or terminates a persons rights (rather than effecting an

acquisition of them);18

- what is alleged to have been acquired is not property;19

- what is acquired is not acquired for any purpose in respect of which the Parliament has

power to make laws;20

17Trade Practices Commission v Tooth & Co Ltd(1979) 142 CLR 397, 415 per Stephen J. This approach

figures largely in United States takings jurisprudence. It suffers from the obvious problem of failing to identify

just what uses are noxious.

18The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1, 145 per Mason J. See also

Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297.

19Health Insurance Commission v Peverill(1994) 179 CLR 226, 243-244 per Brennan J.

20Nintendo Co Ltd v Centronics Systems Pty Ltd(1994) 181 CLR 134, 164-167 per Dawson J.


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- the right alleged to have been acquired is one that is inherently susceptible of statutory

modification or extinguishment;21

and

- the legislation is enacted under a grant of power that clearly encompass[es] the making

of laws providing for the acquisition of property unaccompanied by any quid pro quo of

just terms.22

The multiplicity of approaches to section 51(xxxi) is problematic in itself. It increases

uncertainty and decreases the ability of governments, legislators and legal advisers to predict

confidently how the High Court will respond to proposed or enacted legislation.23 However,

the prospects of a return to unanimity seem slight. Each of the approaches focuses on a

particular aspect of the underlying issues presented by section 51(xxxi). Each has a place in

section 51(xxxi) jurisprudence.

Moreover, each of the approaches has internal problems that must be addressed if it is

to be capable of reasonably certain and predictable operation. In this Section, I demonstrate

the serious problems with the approaches employed in theAirservices case. (Similar analyses

are possible in relation to the other approaches listed above.) In the final Sections, I discuss

how these problems might be addressed.

The lien provisions were a necessary or characteristic means of achieving an

objective within power, not being solely or chiefly the acquisition of property

The principle stated

InMutual Pools, Brennan J had written:24

In my view, a law may contain a valid provision for the acquisition of property without just

terms where such an acquisition is a necessary or characteristic feature of the means which thelaw selects to achieve its objective and the means selected are appropriate and adapted to

achieving an objective within power, not being solely or chiefly the acquisition of property. Butwhere the sole or dominant character of a provision is that of a law for the acquisition of property,

21Commonwealth v WMC Resources Ltd(1998) 194 CLR 1, 35; Georgiadis v Australian and Overseas

Telecommunications Corporation (1994) 179 CLR 297, 305-306;Health Insurance Commission v Peverill

(1994) 179 CLR 226, 237.

22Nintendo Co Ltd v Centronics Systems Pty Ltd(1994) 181 CLR 134, 160-161.

23This combination of an apparently absolute prohibition or guarantee and a number of (perhaps empty) verbal

formulae designed to escape the prohibition is reminiscent of the pre-Cole v Whitfield(1988) 165 CLR 360

jurisprudence of section 92. I am grateful to George Williams for pointing out the parallel.

24(1994) 179 CLR 155, 180-181. McHugh J adopted a similar approach in part of his reasoning in Mutual Pools

but not inAirservices: (1994) 179 CLR 155, 219-222.


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it must be supported by s 51(xxxi) and its validity is then dependent on the provision of justterms.

The principle applied

In theAirservices case, Gleeson CJ and Kirby J adopted this approach and wrote:25

[98] [A] grant of legislative power comprehends a power to enact provisions appropriate andadapted to the fulfilment of any objective falling within the power, and s 51(xxxi) does notabstract the power to prescribe the means appropriate and adapted to the achievement of anobjective falling within another head of power where the acquisition of property without just

terms is a necessary or characteristic feature of the means prescribed. (In that context,necessary does not mean indispensable.)

Gleeson CJ and Kirby J did not analyse Brennan Js judgment closely or follow its terms in

applying it to the facts of the present case. Rather, they emphasised four sets of factors.

First, the lien provisions had a rational objective:

[96] Aircraft operators, who may incur liability for charges and penalties, may have few assetswithin a particular jurisdiction at any given time except aircraft, and aircraft may leave a

jurisdiction very quickly. As the facts of the present case show, charges in large sums canaccumulate in a short time.

Secondly, the companies were not strangers to the relationship between Compass and the

Authority pursuant to which charges were incurred:

[96] The charges are for services related to the safety of aircraft, and those with a proprietary

interest in aircraft, as well as the operators, receive a benefit from those services. They are insome respects akin to necessaries supplied to a ship.

[101] [T]he position of the [companies] was not isolated from the conduct of Compass. Theyhad leased or sub-leased aircraft to Compass. Without the provision of their aircraft toCompass, that company would not have been in a position to accumulate the very substantial

charges which it did.

Thirdly, the companies knew or should have known about the lien provisions and could have

avoided their impact:26

[96] The regulatory regimes which apply in various jurisdictions are likely to be widelyknown to owners of aircraft who may be assumed to enter into transactions affecting title toaircraft in the light of such knowledge.

[101] By inference, [the companies leased aircraft to Compass] knowing that such aircraftwould be flown on routes to, from and within Australia, attracting charges for services and

facilities provided to all airline operators. They could be taken to know that such charges were

25 Bracketed numbers refer to the numbered paragraphs of the judgments inAirservices Australia v Canadian

AirlinesInternational Ltd(1999) 167 ALR 392; 64 ALJR 76.

26Arguably, this is inconsistent with the principle underlying part of the judgment of Brennan J in Georgiadis v

Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297, 310:

The validity of a law must be tested by reference to its legal operation on proprietary rights. If it

imposes a burden which is otherwise invalid, it does not acquire validity merely because an affected

person could have acted to avoid the burden before the law came into force.

The approach of Gleeson CJ and Kirby J is preferable: see Conclusion, below text at n 94.


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not insubstantial. Unpaid, they would accumulate to very large sums. They could readily haveascertained that provision for statutory liens existed under Australian law as under the laws of

other jurisdictions involved in civil aviation of a comparable kind. By inference, it would havebeen open to them to protect themselves (by contract, insurance, or facilities for auditing andreporting) against the kind of result that ensued.

Fourthly, the lien provisions were analogous to other statutory and non-statutory liens:

[97] Rights in rem against ships, recognized by law or granted by statute, have a long history.

So, more specifically, do maritime liens. The practical problems to which such rights are directedapply to aircraft in much the same way as they apply to ships. (internal citations omitted)

Given this pragmatic and deferential approach, it is not surprising that Gleeson CJ and

Kirby J found that the lien provisions did not effect an acquisition of property that attracted

the section 51(xxxi) requirement of just terms. In doing so, they emphasised the

reasonableness of the lien provisions:

[100] Having regard to the relationship between the services provided by the CAA and the safetyof the aircraft concerned, the reasonableness of a system which provides that those who operate

aircraft must pay charges which, in totality, will defray the cost of providing the services, thepossibility that operators will have few assets in the jurisdiction apart from aircraft, the mobilityof aircraft, and the desirability of providing adequate security for liabilities incurred, it is at least

as easy to draw a conclusion supportive of the legislation as it was inEx parte Lawler.27

[101] [I]n this case, the statutory liens are valid. They were provided to secure theeffectiveness of charges relating to aircraft which, of their very nature, could otherwise leaveAustralia with substantial debts unpaid and with no effective means for their recovery.

Assessment

This approach (at least as enunciated) requires more than merely that the law be supported by

a substantive head of power. That is, an acquisition without just terms will not be valid

unless it is a necessary or characteristic feature of the means prescribed to achieve anobjective within power; it will be invalid if it is merely appropriate and adapted to

achieving that objective.

But when is an uncompensated acquisition a necessary or characteristic feature of the

means prescribed to achieve an objective and not merely appropriate and adapted to

achieving it? Very little in the judgment of Gleeson CJ and Kirby J suggests a clear answer

(particularly as the judgment states that a necessary feature of a regulation is not necessarily

and indispensable one [98]). The distinction between (a) acquisition as a necessary or

characteristic feature of legislation pursuing a legitimate objective and (b) acquisition as

appropriate and adapted to achieving legitimate objective appears to be a dangerously

27InRe Director of Public Prosecutions; Ex parte Lawler(1994) 179 CLR 270, the High Court had upheld a

law that provided for the forfeiture of a fishing vessel operating illegally in Australian waters, even though the

owner of the vessel was not complicit in the offence.


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narrow one. There is, therefore, a real danger of conflating this approach with an approach

that merely asks whether the law is supported by the implied incidental power by reason of its

being (reasonably capable of being regarded as) appropriate and adapted to the fulfilment of

an objective falling within some substantive head of power.28

Indeed the judgment of

Gleeson CJ and Kirby J in theAirservices case appears to do just this. Their judgment

persuasively expounds the policy reasons for enacting the lien provisions and demonstrates

their reasonableness. Clearly if this were what Gleeson CJ and Kirby J intended,

section 51(xxxi)s guarantee of just terms29 would be stripped of most of its effectiveness.

That may be a desirable result; but it is not a result to which Gleeson CJ and Kirby J advert

(or one that it seems likely that Kirby J at least would be inclined to accept30

).

Accordingly, if the approach enunciated by Gleeson CJ and Kirby J is to be applied

generally, and section 51(xxxi) is to remain a guarantee of just terms, some content must be

given to the requirement that uncompensated acquisition be a necessary or characteristic

feature of a particular regulation or type of regulation. However, it is difficult to see where

28InLeaskv The Commonwealth (1996) 187 CLR 579, 593-594, Brennan CJ took pains to distinguish the

different senses in which courts refer to a proportionality requirement (or a requirement that a law be

appropriate and adapted to a purpose within power):

In the context of a challenge to a law on the ground that its operation and effect do not reveal a sufficient

connection to the subject of a head of power, proportionality is a concept used to ascertain whether an

Act achieves an effect or purpose within power. So used, proportionality has nothing to say about theappropriateness, necessity or desirability of the law to achieve an effect or purpose or to attract the

support of the power.

However, proportionality may be used in a second sense in the context of a challenge to a law on

the ground that it infringes a constitutional limitation, express or implied, which restricts a head of

power. The qualification [on the head of power effected by the constitutional limitation] leaves within

the power the capacity to support a law that affects an immunity if an exercise of the power to achieve

the legitimate effect of the law necessitates an affection of the immunity and the affection of the

immunity is merely incidental to the achievement of the legitimate effect. That criterion involves matters

of judgment and degree. In assessing these matters the terms proportionality and appropriate and

adapted have been used.

(Contrast the manner in which Mason CJ conflates the two senses of a proportionality requirement in Cunliffe v

The Commonwealth (1994) 182 CLR 272, 296-298.) It is unlikely, therefore, that Brennan J intendedinMutualPools to conflate the requirement that acquisition be appropriate and adapted to a legitimate legislative purpose

with a requirement that the acquisition be supported by the implied incidental power. If that is correct, however,

there is much work to be done by the requirement that the affection of the immunity is merely incidental to the

achievement of the legitimate effect. A requirement that acquisition be merely incidental to some legitimate

legislative purpose is as unattractive as a requirement that acquisition be a necessary or characteristic feature

of that purpose.

29See below, note 68.

30See below, note 70.


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this content will come from. Not every regulation has analogous antecedents that can be

analysed for indications that uncompensated acquisition is a characteristic feature of that type

of regulation. And the fine distinction between those uncompensated acquisitions which are

necessary-but-not-indispensable features of a type of regulation and those which are merely

appropriate-and-adapted to that type of regulation seems to invite result-oriented

characterisation of the regulation in question. This approach can rationalise existing findings

about the scope of section 51(xxxi)s negative implication but it is difficult to see it being a

useful predictive or diagnostic tool.

The lien provisions were a genuine adjustment of competing rights


The second approach employed in theAirservices case derived from the judgment of Deane

and Gaudron JJ inMutual Pools31and the joint judgment of Mason CJ, Brennan, Deane and

Gaudron JJ inAustralian Tape Manufacturers Association Ltd v The Commonwealth (the

Tape Manufacturers case).32 In the former case, Deane and Gaudron JJ described two

categories of laws which were likely to be outside s 51(xxxi) although they involved an

acquisition of property:

- laws which provide for the creation, modification, extinguishment or transfer of rights

and liabilities as an incident of, or a means for enforcing, some general regulation of the

conduct, rights and obligations of citizens in relationships or areas which need to be

regulated in the common interest;33 and

- laws defining and altering rights and liabilities under a government scheme involving

the expenditure of government funds to provide social security benefits or for other

public purposes.34

In the Tape Manufacturers case, Mason CJ, Brennan, Deane and Gaudron JJ wrote that such

laws would not be within the scope of the section 51(xxxi) guarantee if the law imposed an

obligation that involves a genuine adjustment of the competing rights, claims or obligations

31(1994) 179 CLR 155.

32(1993) 176 CLR 480.

33(1994) 179 CLR 155, 189-190.

34(1994) 179 CLR 155, 190.


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of persons in a particular relationship or area of activity.35 InNintendo Co Ltd v Centronics

Systems Pty Ltd,36

Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ endorsed a

further requirement that the law not be directed towards the acquisition of property as such.

The principle applied

In theAirservices case, Gummow J wrote:

[497] If [a] relationship need[s] to be regulated in the common interest, the law is likely tofall outside s 51(xxxi) because it is unlikely that any acquisition of property which is an incident

of the operation of that law will be capable of imparting to the law the character which attracts

s 51(xxxi).

Gummow J recognised the difficulties in applying this approach, not least that it may be said

that many laws which affect property rights are in some sense made by the legislature in an

attempt to resolve competing claims with respect to that property and its use [500].

However, in this case, the lien provisions were not invalid. First, the lien provisions were

part of a regulatory scheme for civil aviation safety created by the Act [501]. The lien

provisions adjust[ed] the respective interests of those who own, lease or operate the aircraft

and of the provider of services necessary for commercial operations of the aircraft in

Australia [501]. The companies were not strangers to the relationship to which the

statutory scheme gave rise [502]. The lien provisions provided a strong incentive to the

[companies] to see that the charges and penalties were met [502]. Finally, [t]he bundle of

rights and remedies held by the Authority constituted the exchange for the provision of the

services [503].

Hayne J substantially agreed. Despite the fact that the lien secured charges that were

not incurred by the companies,

[519] [i]t is necessary to recall, however, that the lien is a lien over the aircraft which wasused in ways that gave rise to the imposition of the charge; it is not a lien over any other propertyof the owner of the aircraft. That being so, for the reasons given by Gummow J, the statutory lien

provisions are not properly characterised as a law with respect to the acquisition of property onjust terms from any person for any purpose in respect of which the Parliament has power to makelaws. Rather, they are to be characterised as a law with respect to trade and commerce with other

countries and among the States.37

35(1993) 176 CLR 480, 510; see alsoMutual Pools (1994) 179 CLR 155, 171, 189-190;Nintendo Co Ltd v

Centronics Systems Pty Ltd(1994) 181 CLR 134, 161.

36(1994) 181 CLR 134, 161.

37Hayne J did invoke a further test for validity:

[517] To engage [the section 51(xxxi)] guarantee [of just terms], the law in question must be

characterised as a law with respect to that compound conception acquisition-on-just-terms. It is the

power to make that kind of law which is abstracted from the content of some of the other heads of


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In dissent, Gaudron J applied the same approach as Gummow J and Hayne J but

concluded that the lien provisions did not escape the section 51(xxxi) requirement of just

terms and therefore were not valid:

[154] So far as concerns aircraft owned by persons or corporations who or which have incurred

charges and penalties giving rise to a statutory lien pursuant to s 69 of the Act, the liens provisionsare, in my view, properly to be characterised as laws adjusting the competing rights and claims of

their existing and future creditors, rather than laws directed towards the acquisition of property assuch. However, that is not the case with persons or corporations who or which have not incurredthe charges or penalties concerned.

[155] A person or corporation who or which did not incur penalties or charges giving rise to a liencannot be said to be in a relevant relationship with anyone other than the person or corporationwho or which, in the course of using the first mentioned persons or corporations aircraft,

incurred the charges or penalties involved. In this case, the relevant relationship was that of lessorand lessee, a relationship which, of itself, did not give rise to rights or obligations which mightfairly be said to be in competition with the rights and obligations of others.

[160] Absent any directbenefit to the person whose property is affected, however, a lien simplyeffects an acquisition of property. The guarantee effected by s 51(xxxi) would be rendered

nugatory if Parliament could legislate pursuant to some other head of legislative power to impose

a lien where there is no direct benefit to the person whose property is affected. (emphasis addedand citation omitted)

Assessment

Given that these Justices gave apparently plausible reasons for reaching opposite conclusions

in application of the same test to the same facts, it is appropriate to step back and examine the

underlying principle they purported to apply. Gaudron J wrote:38

[153] It is well settled that a law which is not directed towards the acquisition of property as

such but which is concerned with the adjustment of the competing rights, claims or obligations ofpersons in a particular relationship or area of activity is unlikely to be susceptible of legitimate

characterization as a law with respect to the acquisition of property for the purposes of s 51 of theConstitution. (citation omitted)

The proposition certainly does seem to be well settled,39

if of comparatively recent origin.

It rests on an assumed dichotomy between two kinds of laws:

(a) laws that are directedto the acquisition of property as such (emphasis added); and

(b) laws that are concerned with the adjustment of the competing rights, claims or

obligations of persons in a particular relationship or area of activity.

power. (citation omitted)

(Compare Grace Brothers Pty Ltd v The Commonwealth (1946) 72 CLR 269, 290 per Dixon J.) Of course, this

is to restate the problem rather than to answer it.

38Hayne J referred to the same approach: (1999) 167 ALR 392, [520]-[523].

39See the cases cited by Gaudron J: (1999) 167 ALR 392, [153] note 97.


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For convenience I will refer to the first kind of laws as acquisitory laws and the second kind

as regulatory laws. Acquisitory laws are assumed to attract the section 51(xxxi)

requirement of just terms; regulatory laws do not.

There are three connected and overlapping problems with this approach to

section 51(xxxi):

- the concept of acquisitory laws is unclear;

- the two types of law do not present a dichotomy capable of supporting the conclusion

that laws of one type attract the requirement of just terms and laws of the other do not;

and

- the concept of regulatory laws is unclear and at least as applied in theAirservices

case confuses issues about the applicability of section 51(xxxi) with issues about

whether that sections requirement of just terms has been met.

(These problems are recognised to some extent in the concession that regulatory laws are

merely unlikely to be susceptible oflegitimate characterisation as laws to which

section 51(xxxi) applies ([153], emphasis added). But that concession merely adds another

level of flexibility and uncertainty to this approach.)

Acquisitory laws: laws not directed at acquisition as such

It appears that an acquisitory law must do more than effect an acquisition of property before

the section 51(xxxi) requirement of just terms applies. It must be directed at that end as

such. However, it is unclear just what these terms are meant to add to a requirement that the

law effects an acquisition of property. Perhaps these terms require acquisition to be the real

purpose or real objective of the law or that the law be one that is primarily a law for the

acquisition of property [156]. If so, it is far from clear that this presents a workable test for

whether the section 51(xxxi) requirement of just terms should apply.

For example, suppose that the following provision (the substance of which is typical of

State limitations legislation) appeared in a Commonwealth Act and applied to cases where

the Commonwealth or its agencies dispossessed the true owner of land:

At the expiration of the limitation period prescribed by this Act for any person to bring an actionto recover land, the title of that person to the land shall be extinguished.

The provision effects an acquisition of property from a dispossessed owner in favour of an

adverse possessor. Is it directed at the acquisition of property as such? Is the acquisition

the real purpose or the real objective of the provision? Or is the acquisition purely


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incidental to the adjustment of rights between dispossessed owner and adverse possessor?

Either characterisation appears equally plausible and to force one characterisation or the other

on the provision would be to encourage result-oriented decision-making.

Acquisitory laws and regulatory laws: no dichotomy

It is therefore not surprising that the High Court has recognised that some regulatory laws do

attract the section 51(xxxi) requirement of just terms notwithstanding that they are not

directed at acquisition as such. For example, in Georgiadis v Australian and Overseas

Telecommunications Corporation, Mason CJ, Deane and Gaudron JJ wrote:40

Moreover, even if s.44 [of the Commonwealth Employees Rehabilitation and Compensation Act

1988 (Cth)] is characterized as a law with respect to the rights and liabilities of Commonwealthemployees, on the one hand, and the Commonwealth and its agencies, on the other, in relation toemployment injuries, it does not follow that it lacks the character of a law with respect to the

acquisition of property for a purpose for which the Parliament has power to make laws.

(Section 44 extinguished employees common law claims against the Commonwealth for

workplace injuries and in return provided lesser statutory entitlements.41)

Regulatory laws: regulating relationships and areas of activity

The main difficulty with the definition of regulatory laws comes from the stipulation that they

regulate relationships and areas of activity. However, it is unclear exactly what

relationships and areas of activity can be regulated in a way that does not attract the

section 51(xxxi) requirement of just terms.

In theAirservices case, Gaudron J and Gummow J attempted to identify what

relationships could be so regulated.42

Gaudron J held that the companies that leased the aircraft to Compass were not in any

relevant relationship to which this principle could apply:

40(1994) 179 CLR 297, 307.

41 Mason CJ, Deane and Gaudron JJ went on to comment that if section 44 had appeared in legislation

establishing a compensation scheme applying to employers and employeesgenerally(and not just to

Commonwealth employees), it may not have been fairly characterized as a law for the acquisition of property

for a purpose for which the Parliament has power to make laws: ibid 308. If this were to be the case, the

regulatory-acquisitory dichotomy would be even less compelling than it appears at present.

42It is not clear why both Justices focused their analysis on the lien provisions as regulating relationships

rather than as regulating an area of activity. Compare Gleeson CJ and Kirby Js analysis of the reasonableness

of the system that included the lien provisions: Airservices (1999) 167 ALR 392, [100]; see also [501] per

Gummow J (a regulatory scheme for civil aviation safety).


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[155] A person or corporation who or which did not incur penalties or charges giving rise to alien cannot be said to be in a relevant relationship with anyone other than the person or

corporation who or which, in the course of using the first mentioned persons or corporationsaircraft, incurred the charges or penalties involved. In this case, the relevant relationship was thatof lessor and lessee, a relationship which, of itself, did not give rise to rights or obligations which

might fairly be said to be in competition with the rights and obligations of others.

Accordingly, the lien provisions could not be characterised as a regulatory law and escape the

section 51(xxxi) requirement of just terms. However, in her view, it was possible that a law

that seized on the lessor-lessee relationship between one of the companies and Compass

might be a regulatory law that did not attract the requirement of just terms:

[155] [A] law which postponed entitlement to recover moneys owing under the lease until

charges or penalties owing to the Authority were paid would, in my view, be a law adjustingcompeting rights and claims and not one that is properly characterised as a law for the acquisitionof property.

Presumably therefore Gaudron J would have upheld the lien provisions if they had been

limited to securing the lesser of the amount of the lease payments owing to the lessor

company in relation to an aircraft and the amount of the charges and penalties owing to the

Authority in relation to that same aircraft.43

On the other hand, Gummow J held that the lien provisions regulated or adjusted a

relevant relationship and therefore did not attract the requirement of just terms ([501]-[503];

and compare Hayne J at [519]). He found a relevant relationship between the parties in the

fact that the lien attached to individual aircraft owned or leased by the companies in respect

of charges for services provided to that aircraft.

Both Gaudron J and Gummow J gave a plausible account of the relationship that

existed (or did not exist) on the facts in theAirservices case. But what was it about the

relationship that attracted classification as a regulatory law or as an acquisitory law? For

both Justices, it appears that the relationship was one in which the person whose property was

acquired (the companies) received something of value from the acquirer (the Authority).

Thus Gaudron J wrote:

[159] At the very least, [a lien under the general law] contemplates a transaction whichdirectly benefits the person whose property is affected.

[160] Absent any directbenefit to the person whose property is affected, however, a lien simplyeffects an acquisition of property. The guarantee effected by s. 51(xxxi) would be rendered

43Gaudron J appears to have favoured the formulation from the Tape Manufacturers case (above n 35)

(requiring a genuine adjustmentof competing rights) to the formulation ofMutual Pools (above n 33) (requiring

merely modification of rights as an incident of some general regulation of the rights of citizens in relationships

or areas which need to be regulated). It is not clear what substance attaches to the different wording.


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nugatory if Parliament could legislate pursuant to some other head of legislative power to imposea lien where there is no directbenefit to the person whose property is affected. (emphasis added)

In her view, absent a directbenefit to the person whose property is acquired, there is no

relevant relationship that can be regulated by a regulatory (and therefore non-acquisitory)

law.

Gummow J adopted a wider approach to identifying what kinds of relationship could be

validly regulated without attracting the section 51(xxxi) requirement of just terms. In

particular, he did not require that there be a directbenefit to the person whose property is

acquired before such a relationship could be recognised and regulated. He did emphasise,

however, that, on the facts of theAirservices case, the companies did benefit from the

services provided by the Authority.44

In his view, the liens were part of [t]he price which

had to be provided or suffered to acquire from the Authority services to the aircraft [502] in

respect of which the [companies] were interested either as owners or head lessees [492]. Healso emphasised that the companies had been legally free as they pleased to introduce [the

aircraft] or not into Australian trade and commerce [493]. In short:

[494] It is incongruous to treat the constitutional protection of property in the aircraft asrequiring protection of the commercial and economic position of those who employed, or

permitted or required the employment of, the aircraft in operations requiring the provision ofservices which by law could come only at a particular price.

It appears, therefore, that the approach to section 51(xxxi) adopted by Gaudron J and

Gummow J transforms the difficult issues underlying that section into a debate about what

kinds of benefit must be received by a person whose property is acquired before the law isregarded as falling within Commonwealth legislative power and outside the section 51(xxxi)

requirement of just terms.

There are two problems with this.

The first problem is the lack of explanation and justification. Gaudron J and

Gummow J did not attempt to explain why a direct benefit is required, or why an indirect

benefit is sufficient, to characterise a law as a law that regulates a relevant relationship and

therefore does not attract the section 51(xxxi) requirement of just terms. This is symptomatic

of a more general problem with the whole approach. The key question Why do regulatory

laws escape the section 51(xxxi) requirement of just terms? was never answered (except in

44McHugh J also emphasised the benefit to the companies: Airservices (1999) 167 ALR 392, [352].


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the circular terms of characterisation) and accordingly it is impossible to provide a coherent

account of which laws are regulatory laws.

The second problem is more specifically related to the transformation of the debate into

one about what kinds of benefit must be received by a person whose property is acquired

before the law is regarded as a regulatory law. Clearly the relationship between any benefit

received and an acquisition is a relevant issue; but section 51(xxxi) addresses it explicitly

through its requirement of just terms. It is inappropriate to deal with the issue as Gaudron J

and Gummow J did.45 In other words, questions of benefit to the person whose property is

acquired should not be relevant to determining whether the section 51(xxxi) requirement of

just terms applies; they should be relevant (as the text of section 51(xxxi) provides) to

determining whether it issatisfied.

In summary, then, the approach adopted by Gaudron J and Gummow J strikes anintuitively appropriate balance between legitimate regulation and illegitimate uncompensated

acquisition. However, it does so by invoking terms and concepts whose meaning is unclear

and which lead Gaudron J and Gummow J to use an irrelevant proxy the kind of benefit

received by a person whose property is acquired in order to determine whether the

section 51(xxxi) requirement of just terms applied. Unless the underlying motivation of this

approach is made explicit, it is not likely to produce predictable results in hard cases.

Just terms were an irrelevant or incongruous notion in relation to the lien

provisions


This third approach was applied with somewhat different emphasis by both Gummow J

and McHugh J. This approach derived from McHugh Js judgment in Mutual Pools46

where

McHugh J wrote:

45 Gummow Js approach is particularly unusual given the strict approach to just terms that the High Court has

adopted: see for example Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179

CLR 297, 311 per Brennan J (Unless it be shown that what is gained is full compensation for what is lost, the

terms cannot be found to be just.).

46(1994) 179 CLR 155, 219-220 (internal citation omitted). See also Trade Practices Commission v Tooth &

Co Ltd(1979) 142 CLR 397, 408 per Gibbs J (It appears to me that there are cases in which s. 51 authorizes the

compulsorily divesting of property in circumstances in which no question of just terms could sensibly arise for

example, it would be absurd to say that the legislature could make provision for the exaction of a fine, or for the

imposition of a forfeiture of property used in the commission of a crime, only on just terms.)


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The compound conception of an acquisition of property on just terms predicates a compulsorytransfer of property from a State or person in circumstances which require that the acquirer should

pay fair compensation to the transferor. When, by a law of the Parliament, the Commonwealth orsomeone on its behalf compulsorily acquires property in circumstances which make the notion offair compensation to the transferor irrelevant or incongruous, s. 51(xxxi) has no operation.

For example, the notion of compensation is irrelevant or incongruous in relation to laws that

impose penalties and laws that impose taxation.

The principle applied: Gummow J

The lien provisions fell within neither of these categories. However, Gummow J and

McHugh J held that the lien provisions exemplified a further category of law in relation to

which the notion of compensation was irrelevant or incongruous.

Gummow Js route to this conclusion proceeded as follows.

First, the notion of compensation was irrelevant or incongruous in relation to laws that

imposed an obligation to pay a service provider a charge for services provided [490]: a

concomitant of the provision of services is a quid pro quo expressed as an obligation in

favour of the service provider.

Moreover, compensation was irrelevant or incongruous whether the obligation in

favour of the service provider was imposed on the person who received the services or (it

seems at least in some cases) on a person who received the benefit of the provision of those

services [490].

Gummow J observed that a charge for services may lose its character as such if there is

practical or legal compulsion to obtain the service in order to conduct a particular activity

regulated by the legislative scheme which prescribes the fee [492]. And the lien provisions

did contain elements of practical and legal compulsion designed to achieve recoupment of the

charges incurred by Compass as a necessary condition of operating the aircraft. However:

[493] [T]he accrual of the debts owed the Authority and the subsequent imposition of thestatutory liens to facilitate payment were not the product of any compulsion exerted by theAuthority. Those having control of the operations of the aircraft as operator or lessee or owner

(such as, respectively, Compass and the [companies]) had been legally free as they pleased tointroduce them or not into Australian trade and commerce, in particular for the conduct of

commercial passenger operations.

Although Compass had operated the aircraft, the companies derived benefit from the services

and facilities provided to them in return for the charges because those services and facilities

were necessary for the conduct of commercial operations using those aircraft in Australia

[492]. This benefit was sufficient to render just terms irrelevant or incongruous.


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The principle applied: McHugh J

Gummow Js approach should be contrasted with the two-stage approach adopted by

McHugh J. For McHugh J, in order to answer the general question whether an acquisition of

property was within federal power but outside section 51(xxxi) (and so did not require just

terms), it was necessary to answer two distinct questions:

[339] First, is the impugned law a law within s 51(xxxi)? Second, if no, is the law otherwisewithin the legislative power of the Commonwealth as a law with respect to another head of federal

power? It is incorrect to seek to answer the second question and treat it as determining the answerto the first.

And a law, even though it provides for an acquisition of property, will not be within

section 51(xxxi) if the notion of fair compensation [is] irrelevant or incongruous [340].

(I discuss the reasons for McHugh Js insistence on this two stage process below.47

)

In the present case, the notion of compensation was irrelevant or incongruous:

[345] [T]he debt secured by the lien was the quid pro quo accruing to the Authority as theresult of its prior supply of valuable services to the aircraft operator. If fair compensation

were to be paid to those having a proprietary interest in an aircraft upon the imposition of a lien, itwould mean that the Authority would have an interest in the aircraft which on sale could berealised to satisfy the operators previously incurred debt to the Authority, but on the other hand

the Authority would incur a liability to pay fair compensation to those having a proprietaryinterest in the aircraft. The amount of this liability for fair compensation would be at least equalto the amount secured by the lien (as the fair value of the lien in the sense of the amount

required to be paid before it will be discharged), and may be greater than the amount secured bythe lien (if fair compensation involved an amount for loss of profits consequent upon the loss ofuse of the aircraft). Thus, the entire purpose of the lien would be frustrated as the Authority

would be no better off, and indeed may be worse off, in terms of net recovery of the chargeslevied as a quid pro quo for the provision of the services. Fair compensation would not be

incongruous or irrelevant if there were no services provided. But that is not this case. (citationsomitted)

Accordingly, the section 51(xxxi) requirement of just terms was not attracted.

This conclusion led to McHugh Js second question: Were the lien provisions

otherwise within the legislative power of the Commonwealth as a law with respect to another

head of federal power? In his view the liens were within the legislative power of the

Commonwealth; specifically, they were within the legislative power incidental to section

51(i) and/or section 51(xxix) because they were reasonably capable of being seen as

appropriate and adapted to achieving some object or purpose within48

those sections

[347]. In particular:

47See Assessment: characterisation and section 51(xxxi), below page 22.

48Re Director of Public Prosecutions; Ex parte Lawler(1994) 179 CLR 270, 286.


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(a) The companies knowledge that they could lose their aircraft pursuant to the lien

provisions assist[ed] in enforcing the Act because it [made] it likely that the owner

[would] exercise vigilance to ensure that the charges were paid by Compass [350]-

[351].

(b) The companies as owners and lessors of aircraft benefited from the provision of

services by the Authority to Compass in that:

1. without acquiring the services, the operator of the aircraft could not fly the aircraftcommercially in Australia and therefore would not have taken the lease; and

2. the services, being largely directed to safety, protected the physical integrity of their

valuable assets which were the aircraft. [352]

(c) The imposition of liens over the aircraft was one of the commercial risks that should

have been (and in fact was) evaluated by the companies when negotiating the lease of

the aircraft to Compass [353].

(d) The imposition of liens upon aircraft for non-payment of air service charges was part of

legislation in the United Kingdom and Canada and was a non-exceptional legislative

measure in international aviation [354].

(e) There was a close analogy between the rights granted by the liens provisions and the

rights under maritime liens in admiralty law [354].

(f) The Authority might have been left without an effective manner of recovering the

charges incurred by Compass if it did not have any rights in rem against the only asset

of its debtor which may be present in Australia [355].

These factors are, of course, similar to the factors invoked by Gleeson CJ and Kirby J and by

Gummow J in concluding that the lien provisions did not attract the section 51(xxxi)

requirement of just terms. It is important to note, however, that for McHugh J these factors

were notrelevant to whether or not the lien provisions attracted the section 51(xxxi)

requirement of just terms (in his view, the lien provisions did not attract that requirement

because the notion of just terms was simply irrelevant or incongruous). Rather, these factors

were relevant to determining whether or not the lien provisions were supported by some otherhead of power.

Assessment: characterisation and section 51(xxxi)

The first issue to be considered is methodological rather than substantive. McHugh J pointed

out that the approaches adopted by the other Justices often seem to indicate that laws of


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certain types are unlikely to be capable of being legitimately characterised as falling within

section 51(xxxi) because they are more properly characterised as being supported by

another substantive head of power [333]. McHugh J analysed this as involving an

assumption that there is a most correct characterisation of these laws [333]. He argued:

[334] [T]he only logical way in which a generally described category of laws can be held to

be unlikely to bear a particular characterisation is if the characterisation suggested by its generaldescription can be said to preclude that other characterisation.

In his view, this distorted traditional learning on the process of characterisation. It is for this

reason that McHugh J adopted his two stage approach outlined above, under which the first

step is to determine whether or not the law can be characterised as being a law with respect to

the subject matter of section 51(xxxi) rather than to determine whether the law has another

more proper or more legitimate characterisation.

McHugh J is correct to observe that the current approaches to section 51(xxxi) (other

than his own) are unusual in the way they use characterisation.49

The fact that a law is

supported by one head of power is not usually regarded as a reason for denying it the

character of being a law with respect to another head of power even though it lies outside the

core of that other power. In such cases, the law has both characters. So, for example,

section 52 of the Trade Practices Act1974 (Cth) in its application to misleading telephone

calls made by a trading corporation is both a law with respect to the subject matter of

section 51(xx) of the Constitution and also (because of the operation of section 6(3)(a) of the

Trade Practices Act) a law with respect to the subject matter of section 51(v) of theConstitution.

Such an approach is unproblematic when both heads of power have only a positive

operation; that is, they both authorise the making of laws that have a practical or legal

operation with respect to the persons, activities or purposes referred to in the relevant

placitum of section 51. It does not matter that the law has two characters because each

supports the making of the law. Nor is there any problem when a law is supported by one

49The most strikingly unusual approach to characterisation in connection with section 51(xxxi) is that of

Gaudron J inNewcrest Mining (WA) Limited v The Commonwealth (1997) 190 CLR 513, 567-569, in deciding

that a law that is supported by section 122 of the Constitution must comply with section 51(xxxi) if it can also

be characterised as a law with respect to a section 51 head of power. See George Williams,Human Rights

under the Australian Constitution (1999), 150-151.


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head of power but can also be characterised as being with respect to a subject matter that is

outside power. It is sufficient that one head of power supports the making of the law.50

A problem does arise, however, where a head of power has a negative operation. This

occurs when a power is conferred in general terms but subject to an excision or condition that

removes particular persons, activities or purposes from the scope of Commonwealth

legislative power generally. For example, section 51(xiii) authorises laws with respect to

bankingother than State bankingand, of course, section 51(xxxi) authorises laws with

respect to the acquisition of property on condition that just terms are provided.51

In the

course of discussing section 51(xiii) inBourke v State Bank of New South Wales, the High

Court said:52

In this context, some qualification must be made to the general principle that a law with respect

to a subject-matter within Commonwealth power does not cease to be valid because it affects a

subject outside power or can be characterized as a law with respect to a subject-matter outsidepower . The principle cannot apply when the second subject-matter with respect to which the

law can be characterized is not only outside power but is the subject of a positive prohibition orrestriction. If a limitation is found to be of general application, then the fact that it is contained

within one of the paragraphs of s.51 does not deny it a wider operation; the remaining paragraphs

are then to be construed as being subject to the limitation.

So, for example, the excision of State banking from section 51(xiii) affects not only the scope

of section 51(xiii); it has a negative operation that removes the power to make laws with

respect to State banking from other Commonwealth heads of power. One of the issues that

arose inBourke was to identify the scope of that negative operation. The Court answered that

question as follows:53

[T]he words of s.51(xiii) require that, when the Commonwealth enacts a law which can be

characterized as a law with respect to banking, that law does not touch or concern State banking,except to the extent that any interference with State banking is so incidental as not to affect thecharacter of the law as one with respect to banking other than State banking . Put another way,

the connection with State banking must be so insubstantial, tenuous or distant that the lawcannot be regarded as one with respect to State banking . So, if a law is not one with respect tobanking, it is not subject to a restriction that it must not touch or concern State banking.

50Actors and Announcers Equity Association v Fontana Films Pty Ltd(1982) 150 CLR 169, 192, 201-204, 221-

222; The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1, 150-152, 179-180, 200,

215, 270.

51The second condition contained in section 51(xxxi), that property must be acquired for a purpose in respect of

which the Parliament has power to make laws, is not discussed in this article.

52(1990) 170 CLR 276, 285 (internal citations omitted).

53(1990) 170 CLR 276, 288-289.


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The limitations on other legislative powers brought about by section 51(xiii) and

section 51(xxxi) are quite different in scope and nature.54

The principles of characterisation

applicable in relation to one are not necessarily applicable in relation to the other.

Nonetheless, McHugh J could have derived some support from Bourke for his approach in

theAirservices case. According toBourke,a law that can be characterised as a law with

respect to State banking (or as a law with respect to banking that has more than an

insubstantial connection with State banking) is not saved from invalidity by the fact that it

has a stronger connection with some other head of power. Accordingly, sections 52 and 52A

of the Trade Practices Act were invalid in so far as they were applicable to the State Bank of

New South Wales. Although these sections were laws with respect financial corporations

within the meaning of section 51(xx) of the Constitution, that did not preclude their

characterisation as laws with respect to State banking (or as laws with respect to banking that

had more than an insubstantial connection with State banking); that was sufficient to establish

that they were invalid. There was no question of searching for the most proper or most

legitimate characterisation of the law.55

However, the real problem with the approaches to section 51(xxxi) that McHugh J

criticised in theAirservices case is not that they are inconsistent with ordinary principles of

characterisation or even that they are inconsistent withBourke. It is that these approaches use

the language of characterisation to rationalise a conclusion drawn from other sources.56

Stating that a law is more properly or more legitimately characterised as a law with

respect to a head of power other than section 51(xxxi) states a conclusion and says nothing

useful about how that conclusion is reached. The question remains why a law that provides

for an acquisition of property should be regarded as not attracting the section 51(xxxi)

requirement of just terms. The approaches employed in theAirservices case (including

McHugh Js preferred approach) do attempt to answer that question. Those attempts should

be assessed on their merits.

54As the High Court recognised in Bourke (1990) 170 CLR 276, 289-290.

55However, there is a vestigial trace of such reasoning in the statement that if a law is not one with respect to

banking, it is not subject to a restriction that it must not touch or concern State banking: (1990) 170 CLR 276,

289.

56As Callinan J pointed out: Airservices (1999) 167 ALR 392, [543].


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Assessment: laws in relation to which just terms are an irrelevant or incongruous notion

As seen above, McHugh Js preferred approach to deciding whether or not a law is one that

attracts the section 51(xxxi) requirement of just terms was to ask whether the law was one in

relation to which just terms were an irrelevant or incongruous notion.

When will just terms be an irrelevant or incongruous notion?

McHugh J did not provide a general answer to this question in theAirservices case.

Rather, he expressed the narrow conclusion that just terms were irrelevant or incongruous in

relation to the lien provisions because of the relationship between those provisions and the

fees charged by the Authority for the services provided to the aircraft operated by Compass.

McHugh J provided a slightly more general answer in Mutual Pools,57 where he first

used this approach. InMutual Pools, McHugh J said that just terms would be irrelevant or

incongruous (or absurd) in relation to laws with respect to taxation;58 laws that confiscated

property for breach of Commonwealth laws;59

and laws that confiscated the property of

enemy aliens.60

Unfortunately, however, this is no answer. This catalogue of examples is pressed into

service to support each of competing approaches to section 51(xxxi). Practically all Justices

agree that laws in relation to these subject matters do not attract the requirement of just

terms.61 Accordingly, they cannot be used to delimit or explain any particular formulation

about which laws fall outside section 51(xxxi). Exactly when just terms are an irrelevant orincongruous notion approach is made no clearer by referring to them.

To date, McHugh J has not expounded a more detailed set of principles about when just

terms are an irrelevant or incongruous notion. Rather, his approach appears to rest on an

intuitive sense about which acquisitions require compensation and which do not. It is likely

that many people would share an understanding that just terms are irrelevant or incongruous

57(1994) 179 CLR 155. McHugh J also said that just terms would not be required where the taking of property

is an inevitable consequence of the exercise of a power conferred by s.51 or where the particular

implementation of a valid exercise of s.51 power necessarily involves an acquisition of property: (1994) 179

CLR 155, 219, 222. These formulations are clearly question-begging.

58(1994) 179 CLR 155, 220-221.

59(1994) 179 CLR 155, 221. McHugh J referred toBurton v Honan (1952) 86 CLR 169.

60(1994) 179 CLR 155, 221. McHugh J referred toAttorney-General (Cth) v Schmidt(1961) 105 CLR 361.

61See the examples and authorities cited by Brennan J inMutual Pools (1994) 179 CLR 155, 177-178, above


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in relation to laws that impose taxation; laws that confiscate the proceeds or instruments of

crime from an offender; and laws that charge the recipient of services fees for those services.

But it is unlikely that there is a shared understanding of whether just terms are irrelevant or

incongruous in relation to laws that confiscate the proceeds or instruments of crime when

that property belongs to a person other than the offender. It is also unlikely that there is a

shared understanding of whether just terms are irrelevant or incongruous in relation to laws

that impose fees for services on person other than the recipient of the services. In the absence

of some more basic criteria it is not possible to use McHugh Js approach to resolve hard

cases likeLawlerand theAirservices case in a predictable manner.

THE CURRENT APPROACHES TO SECTION 51(XXXI) ARE

UNSATISFACTORY: TOWARDS A NEW APPROACH?

This survey and analysis of the approaches to section 51(xxxi) employed in theAirservices

case reveals that each of the approaches has a major shortcoming. Despite their neat

formulations and consistency with the decided cases, they lack predictive power. All rest on

problematic intermediate concepts or verbal formulae; all involve assumptions about what

acquisitions require compensation that are not elaborated in the judgments.

Judicial exegesis of the bare text of section 51(xxxi) has produced the present

unsatisfactory position. An answer to the problems is unlikely to be found by further

combination and permutation of the formulae thus far distilled from the text of the section.

Moreover, the Convention Debates provide little help in determining the meaning of the

section. The provision that was to become section 51(xxxi) was discussed twice.62

The

intended meaning of the section and the scope of what was to become its negative

implication were not debated in any detail on either occasion.63

What, then, is the way forward?64 In the remainder of this Article I sketch one possible

approach that may prove more useful. I suggest that the Court begin by identifying more

n 4.

62See above note 1.

63The Debates do reveal an assumption that the section would be relied on to enact legislation for the

acquisition of land for the use of the Commonwealth (ibid). But it is apparent that the then contemporary

meaning of property was not confined to land.

64I assume that it is too late to decide that section 51(xxxi) does not give rise to any negative implication

affecting the scope of the other heads of legislative power. Nonetheless, the advantages of de-

constitutionalising property should be noted: Jennifer Nedelsky, Should Property be Constitutionalized? A


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explicitly the objects of section 51(xxxi). Section 51(xxxi) involves fundamental issues

about the proper role of the state in distributing and redistributing property: it determines the

extent of the Commonwealths legislative power to redistribute property directly65

and

without compensation. And yet these issues rarely figure in the Courts discussion of

section 51(xxxi). On the occasions when Justices have written about the purpose of

section 51(xxxi), it has generally been in rhetorical form and in unjustifiably absolute terms,

with unarticulated qualifications about the meaning of just terms. For example, in Trade

Practices Commission v Tooth & Co Ltd, Barwick CJ wrote:66

The constitutional purpose is to ensure that in no circumstances will a law of the Commonwealthprovide for the acquisition of property except upon just terms.

The statement must be rhetorical unless Barwick CJ intended to reject cases67 which

established that some acquisitions do not require just terms. The High Court has recognised

that uncompensated redistribution is sometimes authorised by section 51(xxxi). Yet nothingin Barwick CJs statement suggests that the protection of property holdings effected by

section 51(xxxi) knows any limits, let alone on what principles it might be limited.

However, identifying those principles and debating them is a large and controversial

step.

Blackstone and the mythology of private property

The bare text of section 51(xxxi) provides few clues regarding the objects of the section.

Nonetheless, the High Court has felt able to say in a series of cases over the last half -centurythat the section has the status of a constitutional guarantee of just terms

68and that as such is

Relational and Comparative Approach in G E van Maanen and A J van der Walt (eds),Property Law on the

Threshold of the 21stCentury (1996) 417-432.

65That is, without invoking its power to make laws with respect to taxation.

66(1979) 142 CLR 397, 403.

67Such as those referred to above nn 6-8.

68

Clunies-Ross v The Commonwealth (1984) 155 CLR 193, 201-202 per Gibbs CJ, Mason, Wilson, Brennan,Deane and Dawson JJ;Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR

480, 509 per Mason CJ, Brennan, Deane and Gaudron JJ. Similar statements have appeared inMinister of State

for the Army v Dalziel(1944) 68 CLR 261, 276 per Latham CJ, 284-285 per Rich J; Trade Practices

Commission v Tooth & Co Ltd(1979) 142 CLR 397, 403 per Barwick CJ (a very great constitutional

safeguard);Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155, 168 per Mason CJ, 184

per Deane and Gaudron JJ;Re Director of Public Prosecutions; Ex parte Lawler(1994) 179 CLR 270, 285;

Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297, 303 per Mason,

Deane and Gaudron JJ, 320 per Toohey J;Newcrest Mining (WA) Limited v The Commonwealth of Australia

(1997) 190 CLR 513, 602-603 per Gummow J. Contrast Commonwealth v WMC Resources Ltd(1998) 194


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to be construed liberally and not pedantically.69 Kirby J has even referred to the section as

reflecting basic or universal and fundamental rights.70

Clearly the foundations for these

statements are mostly non-textual. Rather, they appear to derive from the mythic place of

property in the common law.71 One aspect of property mythology, deeply embedded in the

common law, is its presumptive inviolability. Sir William Blackstone wrote:72

CLR 1,49 per McHugh J.

69Minister of State for the Army v Dalziel(1944) 68 CLR 261, 276 per Latham CJ;Bank of NSW v The

Commonwealth (1948) 76 CLR 1, 349-350 per Dixon J;Attorney-General (Cth) v Schmidt(1961) 105 CLR 361,

370-371 per Dixon CJ; Trade Practices Commission v Tooth & Co Ltd(1979) 142 CLR 397, 402 per Barwick

CJ;Clunies-Ross v The Commonwealth (1984) 155 CLR 193, 201-202 per Gibbs CJ, Mason, Wilson, Brennan,

Deane and Dawson JJ;Australian Tape Manufacturers Association Ltd v The Commonwealth(1993) 176 CLR

480, 509 per Mason CJ, Brennan, Deane and Gaudron JJ;Mutual Pools & Staff Pty Ltd v The Commonwealth

(1994) 179 CLR 155, 184 per Deane and Gaudron JJ; Georgiadis v Australian and Overseas

Telecommunications Corporation(1994) 179 CLR 297, 303 per Mason CJ, Deane and Gaudron JJ, 320 per

Toohey J;Newcrest Mining (WA) Limited v The Commonwealth of Australia (1997) 190 CLR 513, 568 per

Gaudron J; Commonwealth v WMC Resources Ltd(1998) 194 CLR 1, 35 per Gaudron J, 49 per McHugh J, 90

per Kirby J.

The same approach is taken in interpreting grants of legislative power: The Queen v Public Vehicles

Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd(1964) 113 CLR 207, 225-226;

Actors and Announcers Equity Association v Fontana Films Pty Ltd(1982) 150 CLR 169, 207 per Mason J.

70Newcrest Mining (WA) Limited v The Commonwealth of Australia(1997) 190 CLR 513, 660. It would be

more accurate to say that section 51(xxxi) jurisprudence reflects but one strand of the property rights that are

recognised by international human rights instruments. Section 51(xxxi) says nothing about the individuals

right to have and receive the property that is necessary in order to survive and participate in his or her society:

see, for example, the International Covenant on Economic, Social and Cultural Rights. That right is of

considerably greater importance for many millions of people than any right to retain property.

The Preamble to the 13 April 2000 Resolution of the United Nations Commission on Human Rights

(E/CN.4/RES/2000/5) on the

Right to Development expresses the Committees concern more than 50 years after the adoption of the

Universal Declaration of Human Rights, that the unacceptable situation of absolute poverty, hunger, disease,

lack of adequate shelter, illiteracy and hopelessness remains the lot of over 1 billion people. Article 3 reiterates

that:

(a) The essence of the right to development is the principle that the human person is the central subject

of development and that the right to life includes within it existence in human dignity with the minimum

necessities of life;

(b) The existence of widespread absolute poverty inhibits the full and effective enjoyment of human

rights and renders democracy and popular participation fragile;

(c) For peace and stability to endure, national action and international action and cooperation are required

to promote a better life for all in larger freedom, a critical element of which is the eradication of poverty.

These aspects of property rights and property holdings should not be forgotten when extolling section 51(xxxi)

as a fundamental protection of the rights of those who have property.

71See generally Jennifer Nedelsky,Pr

When is an Acquisition Of

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