Property rights in WA: an endangered species

This speech was delivered at a Property Rights Conference, held at Murdoch University. Addressing a group of the legal fraternity, I implored them to do the best they could when pushing projects through the system.

Property rights — where are we in a global context?

Every year, with a group of keen observers, I visit a fresh bunch of countries and evaluate policies that work and policies that fail. We have learned a lot from these visits and those host countries feel that they learn a lot too.

Perhaps this annual event makes me more despairing of the way Australia rates so poorly in the various international indexes of measurement, particularly on the World Index of Economic Freedom (where we are now 10^th) and the World Index of Property Rights where we are now 12^th.

So that’s the background of my approach for today’s talk — comparing Australia, particularly Western Australia, to successful models from elsewhere and asking: “Where are we going wrong?”

This international overview has shown me the importance of property rights.  If we desire prosperity over poverty (which is the default condition) and particularly if we wish to encourage investment by our own citizens and new arrivals, we need to be more aware of the central role of property rights and the fact that one of the few legitimate roles of government is the protection of the property rights of its citizens.

I’m talking about genuine property rights, the way they were described by the American Philosopher, Lysander Spooner:

“The right to acquire property is enumerated in many, if not all, of the State constitutions as one of the natural, inherent rights of men — one that is not surrendered to government — but which government has no power to infringe —one which government is bound to respect and secure.” 

Previous speakers have identified this serious discrepancy in our own state constitution, unlike our federal constitution, which explains how our state government gets away with abrogating and derogating our property rights without due compensation. There is another decision that our state government should make.  Do they wish to lose our respect or earn our respect?

Over the past century, Americans and Australians who own property — homeowners, landlords, businesspeople of all kinds, even non-profit organizations such as churches and charities — have found themselves  increasingly entangled in a web of regulatory restrictions  that have limited what they can do with their property.  Imposed in the name of an amorphous ‘public interest’, those restrictions have often been unwarranted and severe, resulting in untold personal and financial losses.  By the last century’s end they had led to the birth of the property rights movement and also to a call for both legislative and judicial redress.  The movement is likely to grow in the 21^st century and today’s conference is part of this accelerating movement.  It is one of the reasons that this conference was convened.  So, you are all part of this ongoing property rights movement.

You are not alone, many learned observers from Ludwig Mises to William Easterly have drawn attention to the depth and scope that free societies must be based on scrupulous respect for private property and the consistent rule of law.

Our individual rights include the political freedom from seizure of your person and the economic seizure of your property. So, having defined property rights, let me give you two very personal stories in what could be termed ‘From Ground Zero’ or ‘From the Battlefields of Commercial Reality’.

The first story

In the 1990’s my part-time farming endeavors, in Esperance, were ending as it became obvious that the small farm, 3km from Esperance, was a better proposition as a subdivision of 47 small holdings, along with a substantial area contributed as public open space. So, over many years a detailed plan was prepared.

My goal for the remaining 403 hectares was to adopt a detailed plan prepared by Whelans (town planning surveyors) in conjunction with Graham Gath (surveyor).  They had carefully identified the various soil types and separated the fragile land from the lake system and from the more robust land classifications.

All this had taken eight years of battling with various branches of the bureaucracy and eventually we managed to obtain approvals from five of the required six bureaucratic entities. The Department of Conservation and Land Management’s (CALM) approval was still not forthcoming and, after a further 18-month delay, we received a negative response.

During a heated phone conversation with the relevant officer, I ended up giving him a lecture on property rights. In most civilized countries, when you own freehold title, you can do what you like with the land as long as you don’t violate the rights of others.

He didn’t seem to understand this so I suggested that if they wanted to make decisions about the land as though it was their own, they should be adult enough to simply purchase it outright.  Then they would own the ‘Property Rights’ and they could develop a whole new generation of endangered species if that’s what they wanted to do. There followed a strange silence at the end of the phone before he said: “Would you really sell it to us?”

Naturally, I didn’t mind who I sold it to, as long as I could get a break from dealing with the bureaucracy. So a sale was quickly concluded. So, that was the end of an era, the first time in 70 years that our family didn’t own property in Esperance.

In my notes I called up two appropriate quotations.  The first from William Butler Yeats that I dedicate to all bureaucrats, in the hope that in an enlightened society their powers may be diminished:

“I have spread my dreams under your feet;

Tread softly because you tread on my dreams.”

And the second quotation, from Adam Smith (1723 -1790):

“A gardener who cultivates his own garden with his own hands,

unites in his own person the three different characters,

of landlord, farmer, and labourer.

His produce, therefore, should pay him the rent of the first,

The profit of the second,

And the wages of the third.”

The true ‘division of labor’!

In summary, my first story had a reasonable outcome, but in no way compensated me for eight years of bureaucratic agony and deferred plans. Those eight years I could have best used by being an energetic productive citizen.

My second story is unfortunately ongoing

This 10 year saga, of Wattleup Road landholding, in detail:

 

Acquisition: Two separate syndicates (QUBE and Primewest) own a combined 26 hectares of urban land Wattleup, conveniently located some 30km south of the Perth CBD and 500m west of the Kwinana Freeway. The land is on the urban front and ideally located to provide affordable with good social and lifestyle amenity.  It is also approximately 1.25km north east of Alcoa’s Tailing Pond area which has been used as a residue disposal area for Alcoa’s Kwinana operations since the 1960’s.

 

In 2006 when these landholdings (let’s call them ‘the Wattleup Rd Site’) were acquired, the Kwinana air quality buffer designed to provide adequate separation between industry and future residential was in place and did not affect the site in any way nor was there any proposal to extend the buffer.

While the Wattleup Rd Site was unaffected by the Kwinana air quality buffer and to be as sure as we could reasonably be, meetings were held by one of the purchasing syndicate with Alcoa employees as part of the Wattleup Rd Site’s pre-acquisition due diligence.  Alcoa:

• advised it required a one kilometer separation buffer from its Tailing Pond and noted their operations would move west and south away from the Wattleup Rd Site over time. That was Alcoa’s assurance.

• indicated there was no health or amenity issues emanating from Alcoa’s Tailing Pond (this is all in the context that the state agreement entered into by Alcoa and the state does not allow any for the creation of any public nuisance. No health or amenity issues. That was Alcoa’s assurance.

• made available to the purchasers a copy of a 2004 dust modelling report prepared for Alcoa which indicated that there was no effect on the Wattleup Rd Site. That was Alcoa’s assurance. 

Rezoning: The site and surrounding land has consistently been designated for residential development in strategic planning documents produced by the State Government’s Western Australian Planning Commission (WAPC).

• The 1993 South West Corridor Structure Plan

• The 1999 Southern Suburbs District Structure Plan

• The Site was rezoned by WAPC to Urban – 2008 (eight years ago).

Buffer Extension: All appeared on track and in accordance with the strategic and statutory planning process that had been in place for decades. But in 2009 Aloca submitted a second dust report to the WAPC.  The Aloca report raised concerns with Department of Health and the Department of Environment and Conservation prompting WAPC in 2010 to endorse a dust buffer line 1km north, north-east and east of the ALCOA residue disposal area and an additional 0.5km extension of the 1km buffer as a non-sensitive land use transition zone. Effectively, the Wattleup Rd Site became quarantined from residential development as a result.

There had been little to no land owner consultation by the authorities and requests for release of the Alcoa technical studies that led to the buffer extension were refused by the WAPC.  Indeed the November 2012 Parliamentary Standing Committee on Environment and Public Affairs concluded that the WAPC had a case to answer in regard to the methodology and secretive manner by which the buffer was extended.

State Administrative Appeal: Following the introduction by the WAPC of the interim buffer in 2010 which only then affected the Wattleup Rd Site, a subdivision application over the Wattleup Rd Site was subsequently refused by the WAPC, triggering the Right of Appeal to SAT.

In 2011, SAT heard the Appeal and delivered the following decision:

1. The second Alcoa report provided insufficient scientific evidence for the WAPC’s proposed 1.5km buffer to be reflected in the town planning framework and found that the Precautionary Principle was applicable in light of a lack of significant scientific evidence. (I will come back to the so-called ‘precautionary principle’ later.)

2. The Tribunal determined that given the circumstances of the case, the precautionary principle warranted refusal of the proposed subdivision of the Site, unless and until adequate air quality monitoring was undertaken and reviewed in relation to the Site demonstrating that the proposed subdivision would be acceptable in relation to the health and amenity impacts of dust by undertaking a minimum 12 month monitoring study of the Wattleup Rd Site to see if the air quality at the Site complies with the applicable National Standards.

3. The determination by SAT left the buffer without certainty and resolution.

Air Monitoring — 2012 to 2013

1. A dust monitoring program and methodology was prepared was commissioned and funded by the syndicates. The Department of Health, Department of Environmental Regulation and the WAPC were engaged in the methodology design to ensure all Australian standards were complied with.

2. Only after the proposed methodology was approved in full by the aforementioned Agencies was the monitoring undertaken at the Site; running for 13 months from 1 July 2012 to 31 July 2013 some 1.3km north of the Alcoa Tailings Pond.

3. The monitoring was conducted during an extremely dry summer. The monitoring results met all known and applicable Australian standards.

Following completion of 13 months of monitoring, a report was finalized and presented to WAPC, DoH and DER. After considerable review, all agencies confirmed that the monitoring results met all applicable Australian Standards.  With the science confirming the Site had no dust issue, the owners returned to SAT in 2013 to progress a subdivision application over the Site.  However, the Precautionary Principle was once again used and it won the day over the science.

Meanwhile, it came to light that WA’s Premier was considering legislation for the proposed 1.5km buffer.  The Premier is also on record saying as recently as earlier this year that the syndicates purchased the Site knowing it was affected by a buffer.  This claim is simply not true.  The land was purchased in 2006 while the 1.5km buffer was only proposed in 2010.  Four years later!

After 10 years of ownership, two SAT appeals in 2011 and 2013, 13 months of air quality monitoring and a judicial review this year in the WA Supreme Court, the extent and nature of the buffer is still without resolution.

Now, let me make some very specific points:

1. The crippling costs of dust monitoring and legal fees, so far, are in excess of $1 million. If this was my only investment I would be bankrupt by now. I’m not bankrupt, only because I have the ability to work hard on other projects. However, I do have a long memory, when I’m ‘done over’ in this fashion.
2. The economic damage being done by our state government to a whole range of landowners and the local council, in this region, appears to be in complete betrayal of the government’s legitimate role to protect the property rights of its citizens.

3. Repeatedly, this obfuscation is hiding behind the Precautionary Principle which appears to take precedence over science and property rights.

The over-use of the Precautionary Principle in WA is a very blunt instrument that threatens to cripple progress. The considerable benefits that flow to the controlling bureaucrats that use it, as a tool, to expand their control explains their enthusiasm for it.

The sheer insanity of the Precautionary Principle, that prevents anything from happening, does not bear discussion but I’ll just explain that Dirk Hartog, William Dampier, Captain Cook and Captain Stirling would never have set sail for Australia if they were dependent on an approvals process based on the Precautionary Principle because it would have shown that there was a remote possibility of their ships sinking. You would not start a business; because of the risk of going broke. You would not get married; because it may end in divorce.

No great nation ever developed on the basis of the Precautionary Principle and when I see it used, to throttle projects, I know that our state is doomed. It has led me to have little respect for the state political system and legal framework through which it operates.

This has led me to write a disrespectful letter to our Premier who was simply wrong in his correspondence to me.

That letter to the Premier had on its subject line ‘Barnett Government trashes Property Rights’, in which I concluded with the statement: “My small dog has a better understanding of property rights, than the Barnett state government.” I’ll leave it to you, as an audience, to decide if my comments are unfair. The complete exchange of correspondence with our Premier is available here.

The Role of the Ombudsman

As a way of correcting the error in the Premier’s letter I raised this matter with our State Ombudsman, having had extensive experience with the Office of the Ombudsman, during my time as President of a Chamber of Commerce, some years ago. However, to my amazement I find now that the role of the Ombudsman (after the Triple C legislation was passed) has been severely curtailed.

It appears that whilst there are areas that are no longer deemed to be corruption because it has now been legalized, the Ombudsman’s office is no longer able to investigate, even though the conduct can clearly be seen to be inappropriate. The Ombudsman’s reply, along these lines, stated as follows:

“You complain that the Premier, or his advisors, have:

• Unreasonably grouped together his consideration of issues relating to land owned by the Wattleup syndicate (managed by Primewest) (Primewest land) and issues relating to land owned by the Wattleup Road Development Co Pty Ltd, and
• Not taken into account the fact that the Primewest land was not buffer allocated when it was purchased.

The role of the Ombudsman is to investigate complaints about certain administrative actions of state government departments and local governments, in accordance with the Parliamentary Commissioner Act 1971 (the Act).

Section 13(2)(a) of the Act provides that the Act does not apply to ‘either House of Parliament, any committee or member of either of those Houses or a joint committee of both Houses of Parliament’. Based on the information available, it appears that your complaint is about the actions of a member of the Legislative Assembly.  Accordingly, I am unable to investigate your complaint.” Why have an Ombudsman?

So, my question is, for those of us without extremely deep pockets, where does one go these days for property rights justice?

Conclusion

 In 2011 I published a paper called Canberra is 200 square kilometres, surrounded by reality! Today in this speaker panel of nine speakers, Gary Peacock (Pastoralists & Graziers Association) and I are the only participants with hands-on activities involving Property Rights.  A Farmer and a Prospector.

The other seven speakers are all legal agents, living off the expansion of complexity and I say that not in an insulting way. Entrepreneurs and people in business, thrive only on a clear set of rules so they can gather momentum and it is very difficult to gain momentum in Western Australia under the existing regulatory complexity.

There is a much bigger issue at stake here, far beyond the outcome of the life of lonely entrepreneurs. The future of our nation is at stake as our attention to legal complexity has contributed to Australia now having the world’s highest manufacturing costs (Switzerland is second) and the world’s most appalling approvals system for resource projects.

From a survey I did, three years ago, I found that 85 per cent of Australia’s exploration budget was being spent overseas. As a direct result of this we see that the two major mining discoveries, this year, have been made by Australian companies.  However, they made their discoveries in Africa. Our complexity has driven investment dollars away.

Closer to home, where our office is in Subiaco, we are witnessing Subiaco experiencing the death rattles and I’m wondering if there are any regrets being shown by the various bureaucracies that stalled so many first-class projects from proceeding there?Subiaco would be very grateful to have that multi-story development on the old Pavilion Markets site instead of seeing eight years of decay.

So my plea, to you good folk, from the legal fraternity, please do not measure your success by the number of delays you can bring about; by the number of projects you successfully torpedo; by the number of entrepreneurs you bring to their knees.

Legal delays kill projects and cripple economies. An example?  Any business person involved in a legal dispute with ASIC gives seven years of their life to prove what may be their innocence. This is costly justice and as they say, the process itself is the punishment. Delays like this are inexcusable with today’s technology and are not tolerated in other industries.

So, please measure your success by the part you play in getting our state and nation moving again. A big challenge but with big rewards for every Australian.

Recommended reading: Property Rights & Competition (An Essay on the Constitution of Capitalism), by Wolfgang Kasper (CIS).