Spencer v Commonwealth of Australia [2010] HCA 28
Peter James Spencer owned a farm at Shannons Flat in New South Wales. Restrictions had been imposed on the clearing of vegetation on his farm by reason of the Native Vegetation Conservation Act 1997 (NSW) and the Native Vegetation Act 2003.
On 12 June 2007, he commenced proceedings against the Commonwealth in the Federal Court of Australia claiming the restrictions constituted an acquisition of property from him other than on just terms and that the acquisition was made in furtherance of agreements between the State of New South Wales and the Commonwealth that were made for the purpose of acquiring property other than on just terms, and therefore were invalid by reason of s 51(xxxi) of the Constitution.
s 51 of the Australian Constitution relevantly provides that:
“The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:–
(xxxi.) 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.”
s 31A of the Federal Court of Australia Act 1976 (Cth) relevantly provides that:
Summary judgment
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
In Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 at 260 [94]-[95], Lord Hope of Craighead discussed the scope of the inquiry on an application for summary disposition under r 24.2 of the the British Civil Procedure Rules:
“The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, … that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”
In Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99; [1983] HCA 25, the High Court said:
“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried”.
In Agar v Hyde (2000) 201 CLR 552 at 575-576 [57]; [2000] HCA 41 it was said that:
“Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.”
In ICM Agriculture Pty Ltd v The Commonwealth [2009] HCA 51, a case decided after Spencer sought special leave to appeal in the High Court, it was held that replacement of the plaintiffs’ bore licences did not constitute an acquisition of property within the meaning of s 51(xxxi) of the Constitution. However, the majority left open the question of whether or how, ss 51(xxxi), 61 and 96 of the Constitution intersect where there is an informal arrangement or understanding between the Commonwealth and a State, falling short of an intergovernmental agreement. Yhe joint judgment of French CJ, Gummow and Crennan JJ in ICM, observed of the Ministerial correspondence disclosed in Gilbert, that:
“The assumption being made was that the terms and conditions attached to a s 96 grant may sufficiently be disclosed in an informal fashion, falling short of an intergovernmental agreement of the kind seen in this case in the Funding Agreement. It is unnecessary to consider whether that reflected a correct understanding of s 96 and of its relation to s 61 of the Constitution…
“the legislative power of the Commonwealth conferred by ss 96 and 51(xxxvi) does not extend to the grant of financial assistance to a State on terms and conditions requiring the State to acquire property on other than just terms.”
On 28 August 2008, Emmett J dismissed a motion for interlocutory injunctive relief filed by Mr Spencer and the proceedings pursuant to s 31A of the Federal Court of Australia Act on the basis that Spencer had no reasonable prospect of successfully prosecuting the proceedings.
Emmett J held that:
1. There was a serious question to be tried as to whether the detriment suffered by Mr Spencer resulting from the restrictions imposed by the State Acts constituted an acquisition in respect of his farm. Whether the restrictions imposed by the State Acts were such as to constitute an acquisition might depend upon “detailed evidence of value”.
2. Neither of the Commonwealth Acts, by its direct, legal and practical operation, affected any vested proprietary right or cause of action of Mr Spencer in any way.
3. Neither of the Commonwealth Acts authorised the making of any agreement with a State “requiring the State to acquire property on unjust terms as a condition of receiving a grant of financial assistance from the Commonwealth”. The Acts were not laws with respect to the acquisition of property under s 51(xxxi) of the Constitution.
4. The 1997 agreement did not “require or affect or authorise the exercise of any discretion under the State Statutes to refuse development consent for the clearing of native vegetation on any land”
Emmett J concluded that:
“I do not consider that there is a reasonable basis on which Mr Spencer can establish that any alleged acquisition of his property by reason of the enactment of the State Statutes, coupled with the exercise of discretions by officers of New South Wales, was authorised or effected by either of the Commonwealth Statutes or any of the Inter-Governmental Agreements.”
Spencer was subsequently granted leave by a judge of the Federal Court to appeal from the decision of Emmett J and on 24 March 2009 the Full Court of the Federal Court dismissed his appeal with costs.
The Full Court dismissed Mr Spencer’s appeal on 24 March 2009, several months before the hearings in this Court of ICM and Arnold.
Jagot J, with whom Black CJ and Jacobson J agreed, held that Spencer’s case faced three fundamental problems which he was unable to overcome. They were:
1. The High Court’s decision in Pye v Renshaw (1951) 84 CLR 58; [1951] HCA 8 concerning the operation of s 51(xxxi) and s 96 of the Constitution.
2. The decision of the New South Wales Court of Appeal in Arnold v Minister Administering the Water Management Act 2000 which was indistinguishable from Spencer’s case.
3. Spencer’s acceptance of the validity of the State Acts, which had the consequence that, even if the Commonwealth Acts and intergovernmental agreements were invalid, the NV Act 2003 would continue in force as the source of the prohibitions and restrictions of which he complained.
French CJ And Gummow J
French CJ And Gummow J said of s 31A of the Federal Court of Australia Act:
“The section authorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are “frivolous or vexatious or an abuse of process”. The application of s 31A is not, in terms, limited to those categories…
Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
French CJ And Gummow J concluded as follows:
“The question that arises is whether Mr Spencer’s pleading left open the possibility, requiring factual exploration and possible amendment, of an informal arrangement between the Commonwealth and the State of New South Wales conditioning the relevant Commonwealth funding upon acquisition by the State of Mr Spencer’s property rights on other than just terms. On the face of the pleading before Emmett J and the Full Court that possibility was open, even if not fully formulated or adequately particularised. Given the existence of the Commonwealth Acts and the relevant intergovernmental agreements, it is likely that there are negotiations and communications between the Commonwealth and the State of New South Wales, records of which might flesh out or cast light upon the practical operation of the Commonwealth and State funding arrangements. Documentary and electronic records of such negotiations and communications may be amenable to discovery and ancillary processes in the Federal Court which could be invoked by Mr Spencer.
It is not necessary for present purposes to determine whether a law of the Commonwealth, providing for grants to be made to a State under s 96 of the Constitution, or for agreements under which such grants could be made, might be characterised by reference to informal arrangements between the Commonwealth and the State as a law with respect to the acquisition of property. There are complex and difficult questions of both law and fact raised by that possibility, which was at least open on the amended statement of claim before the primary judge.
The majority
The majority, Hayne, Crennan, Kiefel and Bell JJ, held it was apparent Spencer was seeking to mount a case having two principal elements:
“First, that there has been some arrangement or understanding made or reached between the Commonwealth and New South Wales beyond what appears in the relevant Acts and intergovernmental agreements. Second, that by or under that arrangement or understanding, some relevant connection can be drawn between the Commonwealth making a grant or grants of money to New South Wales under s 96 of the Constitution and the State exercising its legislative and other powers in the manner, and with the consequences, of which the applicant complains.”
The majority held that the case of ICM Agriculture Pty Ltd v The Commonwealth [2009] HCA 51 left open the real possibility that such an arrangement could be constitutionally relevant, and “The constitutional question may be affected by, even depend upon, the resolution of the factual question”.
They concluded as follows:
“Even if it is not directly affected by what particular facts are found, it is not a question suitable for determination on a summary judgment application This was not a case in which the Federal Court could be satisfied that the applicant had “no reasonable prospect of successfully prosecuting the proceeding”.
In obiter, the majority analysed s 31A of the Federal Court of Australia Act 1976. They held that:
– the phrases “no real prospect” in England and “no reasonable prospect” in s 31A convey very different meanings.
– because it is not necessary to show a proceeding is bound to bail, s 31A “departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered”.
– therefore, “it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes” and “it is dangerous to seek to elucidate the meaning of the statutory expression “no reasonable prospect of successfully prosecuting the proceeding” by reference to what is said in those earlier cases”.
– full weight must be given to the expression “no reasonable prospect” in s 31A as a whole rather than by reference to proceedings described as “frivolous”, “untenable”, “groundless” or “faulty”.
Heydon J
Heydon J concurred with the result, noting that had had the courts below been aware of what was to be said in ICM Agriculture Pty Ltd v The Commonwealth, they would not have regarded summary dismissal under s 31A as appropriate.
Heydon J opined that it would be necessary and undesirable to consider the correct approach to s 31A as almost no submissions about it had been advanced by the parties.
(a) The appeal be allowed with costs.
(b) Orders 2 and 3 of the orders made by Emmett J on 28 August 2008 be set aside and in lieu thereof it be ordered that:
(i) The respondent’s motion of 26 July 2007 be dismissed.
(ii) The respondent pay the applicant’s costs of the motion.
