As a significant landowner and Crown land manager, the State of Victoria issues and manages many leases of Crown land (Crown Lease), granted under the (Land Act). Given the sensitivity of granting exclusive possession rights over public land, the Land Act establishes a number of considerations and processes which must be adhered to before a Crown Lease can be granted. But what happens when these requirements are not fulfilled before a Crown Lease is granted?
In September 2022, the Honourable Justice Cavanough of the Supreme Court of Victoria addressed this. The decision has important implications for the validity of Crown Leases made without strict adherence to the Land Act procedural requirements.
In May 2018 and June 2019, the Department of Environment, Land, Water and Planning (DELWP) agreed to grant two Crown Leases to MAPA Pearls Pty Ltd (MAPA). The Crown Leases related to coastal waters and sea-bed. The subject areas had been fished commercially by the plaintiffs and others for a substantial period of time under fishing licences, but historically, the tenants had not had rights of exclusive possession.
Prior to the relevant Minister's granting of the Crown Leases, MAPA had given assurances to the Department that the holders of existing fishing licenses and quota units would not be excluded from the leased area. Subsequently, due to an administrative oversight, the Crown Leases were granted even though a procedural requirement had not been fulfilled, under which MAPA was obliged to publish a notice in the Victoria Government Gazette of the intention to enter into the Crown Leases, at least 14 days beforehand. All parties accepted that MAPA had not complied with s 137 of the Land Act.
Despite MAPA’s assurances, once the leases were granted and registered under the (TL Act), it sought to exercise its newly-granted proprietary rights to exclude those who had previously fished in the leased area under fishing licences. Several of these aggrieved individuals and entities then challenged the validity of the decision to grant MAPA the Crown Leases..
MAPA argued that the Minister's decision to grant the Crown Leases had been validly made, and regardless, once the Crown Leases were registered under the TL Act, the Crown Leases gained indefeasibility protection, and therefore, MAPA's exclusive possession rights under the Crown Leases could not be challenged.
Cavanough J found that, despite the State's acceptance of responsibility for failing to publish the s 137 notice (a common practice at time, even though the Land Act required the tenant to publish the notice, i.e. MAPA), MAPA's obligation to meet the Land Act publication requirements could not be shifted to another party. Further, it would be unconscionable for MAPA to rely on the Crown Leases in the circumstances, as the procedural irregularities prevented the plaintiffs from having their objections heard before the Crown Leases were granted, abrogating the plaintiffs' fishing rights through conferral of exclusive possession over the leased area on MAPA. His Honour agreed with the plaintiffs that MAPA could not avoid its notice obligations under the Land Act by ‘passing the buck’ to the State. The Land Act imposes a statutory precondition to the granting of Crown Leases. A failure to comply with this condition will invalidate those Crown Leases, because it results in a denial of procedural fairness to affected third parties, who may wish to make representations to the Minister about the proposed leases' impacts on them.
Cavanough J also rejected the claim that the indefeasibility provisions within the TL Act could salvage the registered Crown Leases. This finding was based on the plaintiffs' ‘in personam’ claim against the defendants to have the Crown Leases struck from the Titles Register – a result of what Cavanaugh J characterised as equitable (or constructive) fraud on the part of MAPA, which is an express exception to indefeasibility under ss 42(1) and 44 of the TL Act. MAPA had:
- induced the State to grant the Crown Leases through making false representations that it would not seek to exclude existing fishing licence holders from the leased area; and
- then compounded this through not affording procedural fairness to adversely affected third parties, due to failing to publish the requisite notice in the Victoria Government Gazette before the Crown Leases were granted, denying aggrieved parties a chance to be heard,
and had therefore perpetrated a constructive fraud within the meaning of the TL Act.
Final orders are yet to be made, but may include a declaration that the Crown Leases were granted ultra vires and should be removed from the Titles Register.
Lessons for the Public Sector
The Supreme Court decision makes clear that a Minister representing the Crown must ensure strict compliance with the statutory preconditions for exercising tenure-granting powers under the Land Act. Compliance with a procedural requirement that is intended to provide advance notice to third parties where their existing proprietary or contractual rights may be adversely affected is particularly crucial, so that those third parties are afforded an opportunity to make representations to the Minister before the final decision is made.
Where the State seeks to grant a Crown Lease, any prior procedural steps that are necessary under the authorising Act should be meticulously complied with, so that the validity of the grant is not imperilled. Failure to do so can result in expensive legal challenges, findings of constructive fraud and invalidity. Best practice would involve reviewing all elements of the decision against checklists addressing each Land Act requirement, prior to official signing of the Crown Lease. State parties may even choose to publish these notices themselves going forward as a matter of course, rather than relying on the counterparty to do so, to achieve comfort that the statutory requirements have been fulfilled- though to be clear, publication of notices under s 137 of the Land Act is the tenant's statutory responsibility.
Contact our team
Our team specialises in Crown land management and statutory interpretation advice; drafting Crown Leases; handling Crown land tenure negotiations; and related legal advice, and is available to discuss any queries or concerns that you may have relating to the granting of Crown Leases and other similar transactions. We can assist public sector entities to manage their portfolios of statutory leases, review processes, procedures and templates and assist with investigations, disputes or challenges.
Reviewed 13 October 2022