ICM Agriculture Pty Ltd v The Commonwealth.

On 9 December 2009 the High Court, by majority, rejected the challenge to a funding agreement between the Chief Executive of the National Water Commission (acting on behalf of the Commonwealth) and New South Wales, under the National Water Commission Act 2004 and relevant New South Wales laws. Under the funding agreement New South Wales agreed to reduce entitlements to groundwater under New South Wales legislation, and the Commonwealth provided financial assistance for payments to affected entitlement holders. The plaintiffs argued that the reduction in water entitlements amounted to an acquisition of property other than on just terms, contrary to s 51(xxxi) of the Commonwealth Constitution. That section provides that the Commonwealth may make laws with respect to 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. A majority of the High Court found that since 1966, under New South Wales legislation, the right to the use, flow and control of groundwater has been vested in the state. The reduction in the plaintiffs' entitlements to groundwater by operation of NSW law therefore conferred no identifiable benefit on New South Wales (or anyone else) that New South Wales did not already have. There was therefore no acquisition of the plaintiffs' property within the meaning of s 51(xxxi) of the Commonwealth Constitution. The High Court held, in brief, that the legislative power of the Commonwealth 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. In essence this means that the Commonwealth cannot by way of section 96 (the grants power) or any other provision provide money for a state requiring the state to resume land on unjust terms.Justice Heydon dissented.