Bernard Pulle
Economics, Commerce and Industrial Relations Group
7 March 2000
Contents
Glossary
Major Issues
Introduction
Legislative Scheme for the Deregulation of
the Dairy Industry
Legislation by the Commonwealth
Legislation by the States
Joint Commonwealth-State Package
Minister to Formulate DSAP Scheme
Discretionary nature of DSAPs
Are the DSAPs and DEPs Bounties for the Purpose
of Section 51(iii) of the Constitution?
Are the DSAP Scheme and the DEP Scheme Based on
Section 51(i) of the Constitution?
Implications of Section 99 of the
Constitution
Does the Bill authorise the Acquisition of
Property on Terms that are not just Contrary to Section 51(xxxi) of
the Constitution?
Endnotes
Glossary
DAA
|
Dairy Adjustment Authority
|
DEP
|
Dairy Exit Permit
|
DMS
|
Domestic Market Support
|
DPA 1986
|
Dairy Produce Act 1986
|
DSAP
|
Dairy Structural Adjustment Payment
|
Major Issues
The Dairy Industry Adjustment Bill 2000 (the
Bill) provides eligible dairy farmers with Dairy Structural
Adjustment Payments (DSAPs) over 8 years in quarterly instalments,
or the option of up to a $45 000 tax free Dairy Exit Payments
(DEPs) in the first two years of the program, where a farmer wishes
to leave farming. These will replace the market milk and
manufacturing milk support payments under Commonwealth and State
legislation respectively. The Bill only provides the guidelines for
the formulation by the Minister of the DSAP and DEP schemes. The
DSAP which an entity may be entitled to, will have three
components:
-
- standard payment right
-
- exceptional events supplementary payment rights, and
-
- anomalous circumstances payment rights.
The Bill provides guidelines for the calculation
of the face value of an entity's payment rights. The details will
only be known when the Minister formulates these schemes in writing
which will be disallowable instruments. The grant of the
exceptional events supplementary payment right and the anomalous
circumstances payment right will be at the discretion of the Dairy
Adjustment Authority (DAA). The Explanatory Memorandum to the Bill
states that the impact of deregulation will be that there would be
an average annual per farm fall in income of $28 350. Under
the proposed package the national average payment in compensation
will be $118 192 per farm. Levels of payment to individuals
will vary between States. The average in Victoria is expected to be
$95 000 while in Western Australia it is expected to be
$240 000.
This paper examines the constitutional basis for
making these different and discretionary payments against the power
of the Commonwealth to make laws with respect to bounties under
section 51(iii) of the Constitution as well as with respect to the
trade and commerce under section 51(i).
The bounties power requires that such bounties
shall be uniform throughout the Commonwealth. This paper makes the
point that such uniformity of payment may be achieved by a uniform
payment per farm based on an estimated national average of farm
losses or by a payment that covers a predetermined percentage of
the estimated loss that farms are expected to incur in the period
covered by the DSAP scheme. The discretionary nature of the
exceptional events supplementary payment right and the anomalous
circumstances payment right element may not make the bounty or
actual monetary payment uniform as required by section 51(iii) of
the Constitution.
Any payments under the trade and commerce power
is subject to the requirement in section 99 of the Constitution
that the Commonwealth shall not by any law or regulation of trade,
commerce or revenue give preference to one State or any part
thereof over another State or any part thereof. This paper makes
the point that a payment that covers a percentage of the loss
expected to be incurred by each farm may meet this constitutional
requirement of non-preferential treatment. While a discretionary
payment may meet the requirements of equity such a payment may not
meet the requirement of non-preferential treatment in section 99 of
the Constitution. In Elliott v The Commonwealth of
Australia(1) Dixon J took the view that any law or regulation
which is designed to produce some tangible advantage obtainable in
the course of trading or commercial operations, or some material or
sensible benefit of a commercial or trading character is forbidden
by section 99.
This paper indicates that these constitutional
hurdles of uniformity of payment of bounties under section 51(iii)
and non-preferential grants required by section 99 may be cleared
by the Commonwealth acting under the grants power in section 96 of
the Constitution. This will require the Commonwealth to provide
grants to the States to be distributed to farms on an equitable
basis to meet the losses that farms will incur as a consequence of
deregulation.
This paper also examines the question whether
any of the provisions of the Bill amount to the acquisition of
property on terms that are not just in contravention of section
51(xxxi) of the Constitution. It concludes that while the statutory
rights that entities in the dairy farming industry have to receive
payments under Commonwealth and State legislation will be property
for the purposes of section 51(xxxi), the termination of those
rights by statute may not amount to the acquisition of property in
the meaning of 'acquisition' in that section.
Introduction
The current dairy industry regulatory
environment can be divided into two broad categories based on
whether milk is used as liquid milk for human consumption (market
milk) or in the manufacture of dairy products (manufacturing
milk).
Market milk arrangements are underpinned by
State and Territory legislation and provide a guaranteed producer
price for milk used as market milk that is about double the
producer price for manufacturing milk. The mechanisms for
guaranteeing this premium are governed by State and Territory
legislation which vary between each State and Territory. Separate
quota arrangements operate in New South Wales, Queensland and
Western Australia while Victoria, South Australia and Tasmania
operate different schemes which provide for equitable sourcing and
payment for market milk.
Manufacturing milk arrangements are underpinned
currently by Commonwealth legislation under the Dairy Produce
Act 1986. It provides for the operation of the Domestic Market
Support (DMS) scheme, which assists producers of manufacturing milk
through monthly payments (0.95 cents per litre in
1999-2000).(2)
The Federal Government agreed to provide the
adjustment package for dairy farmers by measures in the Dairy
Industry Adjustment Bill 2000 (the Bill) provided that all States
and Territories decide to remove their market milk farm gate
pricing arrangements.
The adjustment package in the Bill, which is
expected to cost up to $1.74 billion, provides eligible dairy
farmers with:
-
- quarterly Dairy Structural Adjustment Payments (DSAPs) over
eight years in quarterly instalments, or
-
- the option of up to a $45 000 tax free Dairy Exit Payments
(DEPs) in the first two years of the deregulation program, where a
farmer wishes to leave farming.(3)
The impact on over 13 000 dairy farmers of
deregulation is that they will experience a fall in income as they
will no longer receive either the premium on market milk through
State-Territory arrangements or a DMS payment on manufacturing
milk. Projections of price falls vary from 10 cents per litre
(around 19 per cent of the current producer price for market milk)
up to 25 cents per litre (48 per cent of the current producer price
for market milk). ABARE estimates, taking the mid-range between
these projections (at 15 cents per litre) that the impact of
deregulation would be an average annual per farm fall in income of
$28 350.
The beneficiaries of deregulation will be the
manufacturers, processors and exporters of dairy products. This
sector of the dairy industry is expected to benefit directly from
lower input prices. Processors will no longer be subject to a
complex set of regulations governing the purchase of fresh milk for
human consumption from State dairy industry authorities.
Manufacturers will also not be required to pay the manufacturing
milk levy imposed under the Commonwealth's DMS scheme nor will they
be involved in the dispersal of market support payments to
manufacturing milk producers.(4)
The Bills Digest on the Bill should be referred
to for background and main provisions.
Legislative Scheme for the Deregulation of
the Dairy Industry
The legislative scheme for the deregulation
requires action at Commonwealth and State level.
Legislation by the
Commonwealth
Section 108G of the Dairy Produce Act
1986 (DPA 1986) provides for the winding up of the Domestic
Market Support Fund (DMS Fund) as soon as practicable after 1 July
2000.
In consequence Part VII of the DPA 1986 and
relevant parts of Schedule 6 of the Primary Industry (Excise)
Levies Act 1998 and Schedule 4 of the Primary Industry
(Customs) Levies Act 1998 would cease to operate with the end
of the DMS scheme.
The measures in the Dairy Industry Adjustment
Bill 2000 provide the outlines of the DSAP scheme and the DEP
scheme to be formulated by the Minister in writing. Clause 35 of
Schedule 1 provides that the DSAP scheme formulated by the Minister
in writing will be a disallowable instrument for the purposes of
section 46A of the Acts Interpretation Act 1901.
Proposed subsection 52C(4) to the Farm
Household Support Act 1992 provides that the DEP scheme
formulated by the Minister will be a disallowable instrument for
the purposes of section 46A of the Acts Interpretation Act.
The funding of the DSAP scheme and the DEP
scheme is provided by a levy to be imposed on all retail sales of
milk. The following Bills provide for the imposition of the
levy:
-
- The Dairy Adjustment Levy (Excise) Bill 2000
-
- The Dairy Adjustment Levy (Customs) Bill 2000, and
-
- The Dairy Adjustment Levy (General) Bill 2000.
Legislation by the
States
The Explanatory Memorandum to the Dairy Industry
Adjustment Bill 2000 states that deregulation will involve State
government decisions to remove regulation that currently impacts on
the Australian dairy industry.(5) It adds that it will involve the
repeal of all or substantial parts of the :
Dairy Industry Act 1979 (NSW)
Dairy Industry Act 1992 (Vic)
Dairy Industry Act 1993 (Qld)
Dairy Industry Act 1992 (SA)
Dairy Industry Act 1983 (WA), and
Dairy Industry Act 1994 (Tas).
Joint Commonwealth-State
Package
It is clear that the package of measures for the
deregulation of the dairy industry is a joint Commonwealth-State
initiative as will be seen from the legislative measures now in
train and those on the part of the States that are to follow. The
Explanatory Memorandum sums it up as follows:
For the package to be fully implemented, State
governments are required to repeal those parts of their legislation
that embodies the current market milk arrangements. The agreement
of State Ministers for Agriculture to the package is being sought,
including their commitment to amend or repeal relevant state
legislation.(6)
Minister to Formulate
DSAP Scheme
The details of the DSAP scheme will only be
known when the Minister formulates the scheme in writing.
Clause 10 of the Bill requires the Minister to
formulate in writing a scheme for the implementation of DSAP after
the commencement of Schedule 1 on the general lines set out in
Schedule 1.
Clause 11 of Schedule 1 states that the DSAP
scheme must be directed towards ensuring the policy objectives set
out in clauses 12 to 23 of Schedule 1.
Clause 12 requires the DSAP scheme to provide 3
types of payment rights, as follows:
-
- standard payment rights,
-
- exceptional events supplementary payment rights, and
-
- anomalous circumstances payment rights.
The guidelines for the basis of the three types
of payment rights are set out as follows in clause 9 of Schedule
1.
-
- Standard payment rights will be based on milk deliveries in
1998-99 and will be worked out by reference to a rate of 46.23
cents per litre for market milk and a national average of 8.96
cents per litre for manufacturing milk.
-
- Exceptional events supplementary payment rights may be granted
in cases where, because of exceptional events, the volume of milk
deliveries in 1998-99 is less that 70 per cent of the average milk
deliveries in the three previous financial years.
-
- Anomalous circumstances payment rights may be granted to
entities which have been affected by anomalous circumstances.
Clause 13 of Schedule 1 links an entity's
standard payment right to the 'overall enterprise amount' in
relation to a dairy farm enterprise. This expression is defined in
clause 2 of Schedule 1 as follows:
Overall enterprise amount, in relation to a
dairy farm enterprise, means the sum of:
-
- the amount calculated at the rate of 46.23 cents per litre of
market milk delivered by the enterprise in the 1998-99 financial
year; and
- the amount calculated at the rate of 76.03 cents per kilogram
of the milk fat content of manufacturing milk delivered by the
enterprise in the 1998-99 financial year; and
- the amount calculated at the rate of 178.77 cents per kilogram
of the protein content of manufacturing milk delivered by the
enterprise in the 1998-99 financial year.
Note 1: It is expected that the result of
applying the rates mentioned in paragraphs (b) and (c) will be a
national average of 8.96 cents per litre of manufacturing milk.
Note 2: See also clause 30 (which deals with the
transfer of the whole or part of market milk delivery rights).
The reference to a national average standard
payment right gives the impression that all dairy producers will
receive uniform standard payment rights. Whether this will be the
case will only be known when the details of the DSAP scheme are
formulated by the Minister. The details will indicate whether the
following constitutional issues may arise.
Discretionary nature of
DSAPs
The Bill by subclause 14(4) provides that
exceptional events supplementary payment right is a grant at the
discretion of the DAA. The Bill also provides by subclause 15(4)
that the anomalous circumstances payment right is also a grant at
the discretion of the DAA.
Further, clause 16 sets a cap of $350 000
on the total face value of payments rights granted to a particular
entity in respect of a particular dairy farm enterprise, unless the
entity passes the 70 per cent dairy income test. This test requires
that the entity derived more than 70 per cent of the total gross
income from eligible dairy income in the 1998-99 financial
year.
Thus there is a discretion in the DAA to top up
payments attributable to the standard payment right by exceptional
events supplementary payments and anomalous circumstances payments
until the cap of $350 000 is reached. Considering that the
anticipated maximum payment is likely to be $240 000 in
Western Australia and the average throughout Australia is to be
$118 192, the majority of DSAPs are likely to depend on the
discretion of the DAA. Such discretionary payments made under the
bounties power in section 51(iii) or the trade and commerce power
under section 51(i) of the Constitution may raise questions of lack
of uniformity and discrimination respectively prohibited by these
constitutional provisions.
Are the DSAPs
and DEPs Bounties for the Purpose of Section 51(iii) of the
Constitution?
Section 51(iii) of the Constitution gives the
Commonwealth power to make laws with respect to bounties on the
production or export of goods. It provides:
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:-
(iii) Bounties on the production or export of
goods, but so that such bounties shall be uniform throughout the
Commonwealth.
A bounty is monetary aid, a direct pecuniary
grant.(7) The package is designed to assist farmers adjust to fall
in income which ABARE estimates would be an average annual per farm
fall in income of $28 350.(8) DSAPs will be bounties under
section 51(iii) of the Constitution as they will be paid in respect
of the production or export of dairy products although based on the
1997-98 farm numbers. The Explanatory Memorandum points out that
nearly 50% of the milk production is exported.(9)
It will be noted that section 51(iii) requires
that bounties shall be uniform throughout the Commonwealth. This is
a more stringent requirement than the requirement in section 51(ii)
of the Constitution that laws with respect to taxation must not
discriminate between States or parts of States. Menzies J in
Conroy v Carter(10) brought home this difference when he
stated:
The requirement of s. 51(ii) of the Constitution
that laws with respect to taxation must not discriminate between
States or parts of States does not mean that such laws must operate
with complete uniformity throughout the Commonwealth. This is clear
from a comparison between s. 51(ii) and s. 51(iii). The latter
provision requires bounties to "be uniform throughout the
Commonwealth". Nor does s. 51(ii) require that taxation laws must
operate uniformly throughout the States of the Commonwealth; had
this been meant it would no doubt have been said in the language
similar to that used in s. 51(iii).
If the DSAP scheme formulated by the Minister
achieves the expected national average of 8.96 cents per litre of
manufacturing milk throughout Australia the bounty may be said to
be uniform throughout the Commonwealth. Questions may also arise
whether the exceptional events supplementary payment rights and the
anomalous circumstances payment rights will be uniform in their
application throughout the Commonwealth.
The Explanatory Memorandum to the Bill whilst
stating that the national average payment will be $118 192 per
farm indicates that that levels of payments to individuals will
vary between States.(11)
Under the proposed package, it is estimated that
the national average payment will be $118 192 per farm (table
1). Levels of payments to individuals will vary between States
(table 1). For example, the average in Victoria is expected to be
$95 000 while in Western Australia it is expected to average
$240 000.
The Explanatory Memorandum also gives a table of
indicative estimates of payments which shows the disparity in
annual fall in farm income throughout Australia.(12)
Table 1: Indicative estimates of
adjustment payments
|
Current Farm Income
|
Annual fall in income (a)
|
Adjustment payment (b)
|
|
$ per farm
|
$ per farm
|
$ per farm
|
New South Wales
|
83 510
|
-46 210
|
169 408
|
North Coast
|
49 450
|
-32 760
|
-
|
Central/South Coast
|
107 840
|
-55 290
|
-
|
Riverina
|
100 070
|
-54 740
|
-
|
Victoria
|
44 690
|
-21 590
|
95 061
|
Western Districts
|
39, 840
|
-16 270
|
-
|
Goulburn Murray
|
45 000
|
-23 370
|
-
|
Gippsland
|
43 270
|
-17 890
|
-
|
Other Victoria
|
61 010
|
-24 020
|
-
|
Queensland
|
56 470
|
-32 940
|
123 914
|
South Australia
|
55 520
|
-31 550
|
160 159
|
Western Australia
|
89 510
|
-53 500
|
237 254
|
Perth Metropolitan
|
103 480
|
-66 890
|
-
|
South-West
|
77 160
|
-41 650
|
-
|
Tasmania
|
58 300
|
-22 230
|
100 315
|
AUSTRALIA
|
53,740
|
-28,350
|
118,192
|
(a) Source: ABARE.
(b) Source: ADC using ABARE 1997- 98 farm
numbers.
The use of the bounties power in section 51(iii)
of the Constitution to design a scheme for the payment of DSAPs
with a limit of $350,000 per farm will require that the payments be
uniform.
This may be achieved by:
-
- the payments being uniform for each farm throughout Australia
based on an estimated national average of farm losses regardless of
the fall in farm income for each farm, or
-
- the payments being uniform to the extent that they make good a
specified proportion of the fall in farm income for each farm
throughout Australia.
The same considerations will apply to the scheme
for the payment of DEPs up to $45 000 per farm.
The details of the DSAP scheme and the DEP
scheme to be formulated by the Minister will require to be examined
for compliance with the requirement of uniformity in section
51(iii) of the Constitution, if that section is being relied upon
for establishing the payments under the DSAP scheme.
The requirement of uniformity does not arise if
the Commonwealth makes an appropriation under section 81 of the
Constitution for the purposes of the Commonwealth. This would
generally be purposes appropriate to the Commonwealth as a nation
and international person (A-G (Vic) v Commonwealth
(Pharmaceutical Benefits)).(13) Whether the deregulation
of the dairy industry falls into this category of purposes is
doubtful.
Are the
DSAP Scheme and the DEP Scheme Based on Section 51(i) of the
Constitution?
Section 51(i) of the constitution provides:
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:-
(i) Trade and commerce with other countries, and
among the States:
Regulation of, or government engagement in,
overseas or interstate trade is a power conferred on the
Commonwealth by section 51(i). The High Court has also invoked the
implied incidental power in order to extend section 51(i) to take
in an intrastate act. The underlying principle was stated by
Fullagar J in O'Sullivan v Noarlunga Meat Ltd (No 1) as
follows.
Where any power or control is expressly granted,
there is included in the grant, to the full extent of the capacity
of the grantor and without special mention, every power and every
control the denial of which would render the grant itself
ineffective. (14)
In Noarlunga Meat the High Court
permitted federal control of premises where beasts were slaughtered
for export.
Implications of Section 99 of the
Constitution
The Commonwealth may be able to rely on the
trade and commerce power to support the payment of the DSAPs and
the DEPs as part of a scheme to deregulate the dairy industry, 50
per cent of whose produce is also exported.
The main obstacle to the use of the trade and
commerce power for the deregulation of the dairy industry lies in
section 99 of the Constitution which requires that the Commonwealth
should not show a preference to one State or a part thereof in any
law regulating trade or commerce.
Section 99 provides:
The Commonwealth shall not, by any law or
regulation of trade, commerce, or revenue, give preference to one
State or any part thereof over another State or any part
thereof.
This is somewhat similar to the requirement in
section 51(ii) of the Constitution that taxation laws should not
discriminate between States or parts thereof which was referred to
earlier, although the meanings of discrimination and preference are
not identical.
A benchmark of what is prohibited by section 99
in relation to showing a preference to one State or a part thereof
was set by Dixon J in Elliott v. The Commonwealth of
Australia as follows.(15)
What is forbidden by sec. 99 is, in a matter of
advantage to trade or commerce, the putting of one State or part of
a State before another State or part thereof. But the section does
not call upon the Court to estimate the total amount of economic or
commercial advantage which does or will actually ensue from law or
regulation of trade or commerce. It is enough that the law or
regulation is designed to produce some tangible advantage
obtainable in the course of trading or commercial operations, or
some material or sensible benefit of a commercial or trading
character. To give preference to one State over another State
discrimination or differentiation is necessary. Without
discrimination between States or parts of respective States, it is
difficult to see how one could be given preference over another.
But I agree that it does not follow that every discrimination
between States is a preference of one over the other. The
expressions are not identical in meaning. More nearly, if not
exactly, the same in meaning, is the expression 'discrimination
against". If sec. 99 had been expressed to forbid the Commonwealth
by a law or regulation of trade, commerce, or revenue to
discriminate against a State or a part of a State, I do not think
its effect would have been substantially varied.
As the DAA is vested with a discretion in the
DSAPs and based on that discretion enterprises may decide to take
the exit payments instead of the DSAP the law implementing DSAPs
may be said to give scope for contravening the prohibition against
preference in section 99 of the Constitution.
As for the types of discrimination or preference
that may offend the provisions of sections 51(ii) and 99 the
following may be relevant to the issues that may arise in respect
of any disparity in payments between and within States under the
DSAP and DEP schemes to be formulated by the Minister:
-
- In R v Barger the High Court found a tax based on
compliance with certain labour conditions which could differ from
State to State was a discrimination within the meaning of section
51(ii) and a preference within the meaning of section 99. (16)
-
- In Cameron v DFC the High Court found a discrimination
in the Income Tax Regulations which provided a method of
calculating the value of livestock, State by State in consequence
of which the fair average values of sheep, horses and pigs varied
as much as 50 per cent between some States. (17)
-
- In Commissioner of Taxation v Clyne the provisions of
the zonal rebate scheme in section 79A of the Income Tax
Assessment Act 1936 were challenged as being outside the
constitutional powers under section 51(ii) of the Constitution.
(18)In the event the High Court did not find it necessary to decide
whether or not section 79A was constitutional. However certain
observations of Dixon CJ, which had the support of the majority of
the High Court, may be regarded as expressing the view that the
zone allowance provisions do conflict with the Constitution.
-
- In Conroy v Carter the High Court was equally divided
on the question of discrimination found a discrimination in section
6(1)(b) of the Poultry Industry Levy Collection Act 1965
on a procedural matter relating to the collection of the levy.(19)
The effect of this section was to disadvantage a person liable to
pay the levy if the Commonwealth had an arrangement with a State
Egg Board which enabled the Board to retain funds equivalent to the
levy from funds payable to that person. This disadvantage would not
arise if the Commonwealth had no such arrangement with a State or
where the State was not prepared to make such deductions.
The certain exception to the rule against
discrimination is when the Commonwealth acts under the grants power
in section 96 of the Constitution. Thus the Commonwealth can tax
all states equally and then reimburse under section 96 one or other
State without offending section 51(ii). This was the view of the
High Court and confirmed by the Privy Council in W. R. Moran
Pty Ltd v DFCT(NSW).(20)
[T]here is nothing in s. 51 to prevent the
Commonwealth Parliament from passing measures in concert with any
State or States with a view to a fair distribution of the burden of
the tax proposed, provided that always that the Act imposing taxes
does not itself discriminate in any way between States or parts of
States, and that the Act granting pecuniary assistance to a
particular State is in its purpose and substance
unobjectionable.
In Moran five Commonwealth Acts imposed
certain taxes on wheat and flour and a sixth Commonwealth Act
provided for the appropriation of the proceeds of the taxes in
payments to the States including an additional payment to Tasmania.
An Act of the State of Tasmania provided for the distribution of
such additional payment amongst payers of tax on flour consumed in
that State. The object of the scheme was to ensure to wheat growers
in all the States a payable price, as it was called, for wheat and
to raise the necessary sum by imposing a tax on flour sold in
Australia for home consumption.
Again the Commonwealth by using section 96 can
prefer one State or part of a State and not offend section 99. Thus
in Grasstree Poultry Enterprises P/L v Bycroft a federal
poultry levy was imposed in all States; the States were reimbursed
under section 96 discriminately and the Commonwealth agreed with
Queensland's plan to allocate 97 per cent to North Queensland. This
scheme was upheld by the High Court.(21)
The legislative scheme for the deregulation of
the dairy industry has not followed the expedient of using the
grants power under section 96 of the Constitution to make grants to
the States for distribution to individual farms on a basis agreed
with the Commonwealth. In consequence the Minister in formulating
the DSAP and DEP schemes may find it necessary to comply with the
requirements of section 99 of not showing a preference to one State
or any part thereof.
Does the Bill
authorise the Acquisition of Property on Terms that are not just
Contrary to Section 51(xxxi) of the Constitution?
The measures in the Dairy Industry Adjustment
Bill 2000 provide for the deregulation of the dairy industry when
the current arrangements for payments under the DMS scheme under
the Dairy Produce Act cease to operate after 1 July 2000.
As indicated earlier in this Current Issues Brief the DSAP and DEP
schemes replace not only the payments under the DMS scheme but also
payments received by various sectors of the dairy industry under
State legislation. The loss of payments under State legislation
whilst being attributable to the scheme for the deregulation of the
dairy industry is not a direct consequence of Commonwealth
legislation.
Section 51(xxxi) provides:
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.
In Newcrest Mining (WA) Limited v. The
Commonwealth(22), McHugh J cited with approval the definition
of property for the purposes of section 51(xxxi) given by Dixon J
in Bank of NSW v The Commonwealth(23) when he stated:
The constitutional term "property" has been
liberally construed. It encompasses traditional estates and
recognised interests in land and chattels and extends to include
choses in action, intangible property rights and "innominate and
anomalous interests".
In terms of this definition the right to receive
payments for the production of milk under State legislation would
be property for the purposes of section 51(xxxi) of the
Constitution. But the question arises whether the Commonwealth was
'acquiring' those rights in exchange for payments to be made under
the DSAP and DEP schemes proposed by measures in the Bill.
The meaning of 'acquisition' for the purposes of
section 51(xxxi) given by Mason J (as he then was) in the
Tasmanian Dam Case was cited with approval by McHugh J in
Newcrest.(24) He stated
In the Tasmanian Dam Case, Mason J
pointed out that s 51(xxxi) does not apply merely because
Commonwealth 'legislation adversely affects or terminates a
pre-existing right that an owner enjoys in relation to his
property; there must be an acquisition whereby the Commonwealth or
another acquires an interest in property, however slight or
insubstantial it be'.(25):
In Newcrest the right to mine was
adversely affected by proclamations made under the National
Parks and Wildlife Conservation Act 1975 (Cwth).
In Georgiadis v Australian and Overseas
Telecommunications Corporation (Georgiadis), Mason
CJ, Deane and Gaudron JJ said:
[A]cquisition in s 51(xxxi) extends to the
extinguishment of a vested cause of action, at least where the
extinguishment results in a direct benefit or financial gain
(which, of course, includes liability being brought to an end
without payment or other satisfaction) and the cause of action is
one that arises under the general law. The position may be
different in a case involving the extinguishment or modification of
a right that has no existence apart from statute. That is
because, prima facie at least and in the absence of a recognised
legal relationship giving rise to some like right, a right which
has no existence apart from statute is one that, of its nature, is
susceptible of modification or extinguishment. There is no
acquisition of property involved in the modification or
extinguishment of a right which has no basis in the general law and
which, of its nature, is susceptible to that course. A law
which effected the modification or extinguishment of a right of
that kind would not have the character of a law with respect to the
acquisition of property within s. 51(xxxi) of the Constitution.
[Emphasis added]. (26)
It may be taken that these dicta apply to
statutory rights created by Commonwealth or State legislation. As
the right to receive DMS payments as well as payments under State
legislation is a statutory right the termination of these payments
by statute may not give rise to an acquisition of property.
Further, the loss of payments for market milk
under State legislation cannot be directly attributed to measures
in the Commonwealth Bills now before Parliament for the
deregulation of the dairy industry. Hence, the passage of these
Bills would not create a law of the Commonwealth which would breach
the provisions of section 51(xxxi) of the Constitution.
Endnotes
-
- (1935) 54 CLR 657 at p. 683.
- Explanatory Memorandum to the Dairy Industry Adjustment Bill
2000; paragraphs 5 and 6, pp. 2 and 3.
- ibid., paragraph 18, pp. 4 and 5.
- ibid., paragraph 29, p. 6.
- ibid., paragraph 46, p. 9.
- ibid., paragraph 54, p. 10.
- Seaman's Union of Australia v Utah Development Co
(1978) 144 CLR 120, 135 and 142.
- Explanatory Memorandum to the Dairy Industry Adjustment Bill
2000; paragraphs 25 and 26, pp. 5 and 6.
- ibid., paragraph 32, p. 6.
- (1968-1969) 118 CLR 90, at p. 103.
- Explanatory Memorandum to the Dairy Industry Adjustment Bill
2000; paragraph 37, p. 7.
- ibid., paragraph 39, pp. 7 and 8.
- (1945) 71 CLR 237 at pp. 266, 269, 271-2
- (1954) 92 CLR 565, pp. 597-8.
- (1935) 54 CLR 657 at p. 683.
- (1908) 6 CLR 41.
- (1923) 32 CLR 68.
- (1957-58) 100 CLR 246.
- (1968) 118 CLR 90.
- (1940) 63 CLR 338 at p. 349.
- (1969) 119 CLR 390.
- (1997) 190 CLR 513 at p. 573.
- (1948) 76 CLR 1 at p. 349.
- (1983) 158 CLR 1 at p. 145.
- (1997) 190 CLR 513 at p. 573.
- (1994) 179 CLR 297.