Arnold & Ors v Minister Administering the Water Management Act 2000 & Ors

[2009] HCATrans 203

[2009] HCATrans 203

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S110 of 2009
  No S6 of 2009

B e t w e e n -

ALAN ARNOLD AND ORS

Appellants/Applicants

and

MINISTER ADMINISTERING THE WATER MANAGEMENT ACT 2000

First Respondents

STATE OF NEW SOUTH WALES

Second Respondents

COMMONWEALTH OF AUSTRALIA

Third Respondents

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 27 AUGUST 2009, AT 2.01 PM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   May it please the Court, I appear for the appellants/applicants with my learned friends, MR P.T. TAYLOR, SC and MR P.E. KING (instructed by Taylor & Whitty Solicitors)

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:   If the Court pleases, I appear with my learned friend, MR J.K. KIRK, for the first and second respondents.  (instructed by Crown Solicitor (NSW))

MR S.J. GAGELER, SC, Solicitor‑General of the Commonwealth of Australia:   If the Court pleases, I appear with MR A. ROBERTSON, SC and MR C.L. LENEHAN, for the third respondents.  (instructed by Australian Government Solicitor)

MR R.J. MEADOWS, QC, Solicitor‑General for the State of Western Australia:   May it please the Court, I appear with my learned friend, MR R.M. MITCHELL, SC, on behalf of the Attorney‑General for the State of Western Australia intervening.  (instructed by State Solicitor for Western Australia)

MS P.M. TATE, SC, Solicitor‑General for the State of Victoria:   May it please the Court, I appear with my learned friends, MR K.L. EMERTON, SC and MR G.A. HILL, on behalf of the Attorney‑General for the State of Victoria intervening.  (instructed by Victorian Government Solicitor)

MR G.J.D. DEL VILLAR:   May it please the Court, I appear on behalf of the Attorney‑General for Queensland intervening.  (instructed by Crown Law – Brisbane)

MR M.G. HINTON, QC, Solicitor‑General for the State of South Australia:   May it please the Court, I appear with my learned friend, MS K. DENNIS, on behalf of the Attorney‑General for South Australia intervening.  (instructed by Crown Solicitor (South Australia))

FRENCH CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, the issues raised in this case and the way in which they arise are really quite different from those aspects of the ICM Case in which your Honours have just concluded argument.  However, there are important areas of close similarity, indeed, a degree of considerable overlap in relation to the arguments to be advanced in this case with those that there canvassed in ICM.  With a view to a saving of time and preserving myself from your Honours’ wrath at this end of the week, I will endeavour, to the greatest extent possible, to refer to, quite expressly, and adopt certain parts of some of the arguments that have been put both in writing and in address to your Honours in ICM, and I will signify that as I come to the relevant parts.

Your Honours, this is a case involving the summary termination of proceedings.  This is a case in which there has been no trial.  It is fundamentally different from an argument upon a special case.  The facts, to the extent that one can speak of facts at this stage in proceedings, summarily terminated, are those taken by assumption in our favour on the basis of the pleadings. 

Now, in relation to the pleadings, may I say this.  The case that we advance in this Court does not include all the contentions that were put on my client’s behalf in the New South Wales Court of Appeal.  The contentions put on behalf of my clients in the New South Wales Court of Appeal did not include all the contentions that had been put in opposition to the Commonwealth’s motion for summary dismissal and, I suspect, from my investigations that those arguments at first instance, in turn, did not advance all the contentions that one can see advanced in or implicit in the lengthy pleading.

In order to give point to and explain in relation to the sections 51(xxxi), 96 and 100 matters that I wish to address on the way in which our case is put, the starting point that I have selected is the State action, which is the target, State action which is impugned by our case and thus I start with the amendment to the Water Management (General) Regulations introduced by the Water Management (General) Amendment (Lower Murray) Regulation 2006, which your Honours will find in the appeal book starting at page 156 and going through to page 169.

My clients are those who hold the bore licences under the 1912 Act noted in Schedule 4B, which is set out on appeal book pages 161 to 169. The teeth of the amendment introduced by this regulation is found in the text on page 158, clause 29G. In a manner beloved of government draftsmen, your Honours will find Russian dolls of cross‑references here. I am going to try and work through all the relevant ones. Your Honours will see in 29G(1) a reference to clause 3(1)(a) and clause 8 of Schedule 10 to the Act.

Now, I hope this is convenient to your Honours.  I think your Honours have the relevant form of the Water Management Act 2000 at the date in question in the State, that is, New South Wales bundle of legislation assembled for the ICM argument, volume 2 of that bundle, tab 34. I will be coming to a number of provisions of that Act about which otherwise I, with great respect, adopt the submissions made about it both by my learned friend, the Solicitor‑General for the Commonwealth, as well as my learned friend, the Solicitor‑General for New South Wales.

I use my opponent’s argument in the preceding case as, with great respect, the exposition of the operation of the statute which matters for our case. Schedule 10 of the Water Management Act is one which commences by a reference to its application, clause 1, “by operation of a proclamation under section 55A”.  That refers to a category of access licence that “relates to a part of the State or water source”.  Part 2 of Chapter 3 of the Act is that part of the regime concerning access licences.  Section 55A, to which I think your Honours have been taken from time to time in ICM, which commences “Part 2 – Access Licences” in Chapter 3, says that that Part of the Act:

(a)      each part of the State or each water source, and

(b)      each category or subcategory of access licence . . . 

that is declared by proclamation to be part of the State or water source, and category or subcategory of access licence, to which this Part applies.

In clause 2(a) of Schedule 10 there is a definition of an “appointed day”. That is to be found also in the proclamation under section 55A to which I am about to come. Now, under Schedule 10 there is what might be called and is called conversion. This is the regime which, if there is a proclamation appropriate to the task, may be applied to the licences in respect to the groundwater sources water source affecting my clients.

Clause 3(1)(a) of Schedule 10 of the Water Management Act takes the 1912 Act bore licences in subparagraph (i) sets up the first alternative that the quantity of water to be granted in that to which they have been converted, an access licence under the 2000 Act, for the quantity of water specified in the 1912 licence.  That is the first alternative.  The second alternative requires instruments of the two kinds that are in question in this case to have operated.  It starts off, “if the relevant management plan” and then:

and regulations made for the purpose of this paragraph, indicate that a different quantity of water calculated in accordance with a specified methodology –

To look ahead to the way in which one tracks this through, the management plan is that in which one will find the specified methodology, as we are told in the regulation.  Then that becomes an access licence for a different quantity of water calculated in accordance with that methodology.  Could I then come to the proclamation itself.  That is found in the appeal book at page 154:

on and from 1 November 2006 –

the Governor, on advice, proclaimed that –

(a)      Part 2 of Chapter 3 of that Act applies to each water source to which the Water Sharing Plan for the Lower Murray Groundwater Source 2006 –

that is what I will be referring to throughout this address as “the Plan” applies.  I stress the word “applies” – to which it applies –

and to all categories and subcategories of access licences in relation to any such water source –

They will, of course, apply to those in which purportedly our 1912 licences and all licences had been converted by operation of the regulation.  I then come, because of the reference in the proclamation, to the Plan.  That is found in the appeal book between pages 133 and 152.  The source necessary for the operation of the proclamation, because it turns on a plan applying to it, is defined, you will find, in the appeal book at page 148 in Schedule 2 which, under clause 4 of the Plan, page 134, defines the source as required for its operation.  One sees clause 4 at about line 20 on page 134:

The area in respect of which this Plan is made is that area of land within the Murray Water Management Area known as the Lower Murray Groundwater Source.

That is a name, a title, a designation which your Honours will find in other instruments relevant to this case as well.  If I could take your Honours now to appeal book 136 to note for the purposes of argument some way down the track in relation to acquisition, if that becomes a matter in this Court in this case, that there is the planned environmental water rules of clause 18 established by this plan whereby:

the physical water contained in [what is called] the storage component of this groundwater source, minus the supplementary access permitted under clause 28, as varied by clause 34 –

and then an important phrase –

will be reserved for the environment.

Under subsection (2) your Honours will see that an excess amount is also not to be taken.  The Plan says that:

thereby protecting a proportion of the total water available in the water source for fundamental ecosystem needs, from increases in water extraction over the long‑term.

Could I now take your Honours to an extremely critical part of the Plan.  Unfortunately, I cannot understand and will not be able to explain many of the actual operations of the algorithms that you will find in clause 27 on page 138 of the appeal book but, fortunately, clause 27 explains for a lawyer how it all works.  Clause 27 determines by formula, by the algorithm, the amount of water in megalitres which comprises the entitlement of what are called “share components”.  You will see that after the formula in subclause (5), “the sum of aquifer access licences established will total 83,580 ML”.  That is an important figure for reasons to which I will come shortly.  This in clause 27 applies to a calculation for all licences for more than 20 megalitres.  Your Honours can take it that that applies to, I think, all of those that you will find in the schedule to the regulation. 

Clause 28 does a similar exercise for supplementary licences which is not of any great importance in this case.       Could I ask your Honours to note that the figure of that estimated aggregate of aquifer access licences contained in clause 27 is obviously based upon and because of the figure you find as the recharge amount on page 136 in clause 16(1) of the Plan; 83,700 megalitres as the average annual recharge to groundwater source provides what it is called the overall basis for water sharing in this Plan.

There are limits imposed.  I can do this briefly because I adopt, with great respect, those submissions I have specified earlier in relation to this made in ICM.  There are limits that are imposed on what may be used and one sees that – I will not take your Honours to them – in clauses 33(3), 34(6) and particularly 56(1)(c) of the Plan in terms of the so‑called “available water determination” providing a limit to the permission to take water under these licences.

FRENCH CJ:   So the recharge, there is some environmental allowances that cap?

MR WALKER:   Yes.  The available water determination, about which your Honours were told in detail in the manner I adopt compendiously in ICM, is of course a method of estimating by recent past experience something which is unknowable, namely, the future.  I should draw to attention in relation to that use of the past in a ambulatory way for projections and regulation of access to this water by referring to the definition of “HoE” in the algorithm, that you will find at clause 27, if I could take you back to page 138.  In 27(4) you will see that that important variable:

“HoE” is equal to average of the three highest years of metered extraction in the water years –

That reference to metered extraction, of course, carries out one of the sort of changes in policy about which your Honours were told in the ICM Case with no great materiality for present purposes. Now, the Plan itself, as it announces in clause 2(1), found on page 134, is made under section 50 of the Water Management Act 2000. The statutory status of the Plan as a Minister’s plan bears explicitly considerable similarity to that of management plans. To make that good, could I take your Honours in the Act to section 50. Under subsection (2) you see that it may:

in general terms deal with any matters that a management plan is required to deal with . . . is authorised to deal with, other than matters that are already dealt with by a management plan.

Under subsection (4), “Except” as otherwise specified, nothing material will emerge there, it “has the same effect as a management plan”. As your Honours, I think, have heard, management plans have governing roles in terms of the statutory functions. Under subsection (2A) the application of the specified parts of Part 3 of the Act has the effect, particularly in relation to sections 16 to 18, which are among the applied sections, of adapting and applying to the Minister’s plan under section 50 a deal of the processes applicable to the making of management plans which emanate whether by ministerial request or not from a draft prepared by a committee.

Without going to them, I can draw attention, as I say, to sections 16, 17 and 18 which might be regarded as laying down if not exhaustively, relevant considerations in the making of a management plan. The making of the 2006 Plan by the Minister under section 50 is the discretionary decision which in our administrative law case is impugned as having been vitiated by the Minister taking into account the irrelevant consideration, namely, his mistaken belief that the funding agreement called for this Plan to be made in the terms relevantly concerning reduction of water quantities and compensation for that reduction.

In relation to the mistaken belief, that depends upon matters of fact which, of course, were not explored but are assumed in our favour for summary dismissal, but one can hardly leave the question of wondering about whether there is a matter fit for trial in this case, well, I can hardly forebear from referring to paragraph 82 of the special case in the ICM proceedings.

GUMMOW J:   How do we connect what you have just been submitting, Mr Walker, to the further amended points of claim?

MR WALKER:   I am going to do that, in a moment, if I may, your Honour.

GUMMOW J:   All right.  It seems a rather diffuse document.

MR WALKER:   I am in particular going to go to the paragraphs the Chief Justice referred to as he sought to untangle what the issues were that were before the Court of Appeal.  I wonder, your Honour, if I may go immediately then to appeal book pages 12 and 13, paragraph 13, particulars 4 and 12 of the points of claim.  The “Second Claim” so‑called, says “The 2006 Plan is invalid as a Plan”, et cetera, and then under 4:

In making the Plan the First Respondent took into account an irrelevant consideration namely the dictation or requirement of the Commonwealth Government as to the basis for reductions in water allocation –

et cetera, and then 12:

The plan making function was exercised in accordance with a rule or policy . . . namely the Anderson‑Knowles agreement of October 2003 –

The ASGE agreement is the funding agreement.  That is the part that has survived the winnowing out successively at first instance and in the Court of Appeal of the case.

GUMMOW J:   So one of the particulars at paragraph 13, it is 4 and 12, is it?

MR WALKER:   Yes, it is.

KIEFEL J:    Paragraph 4 reads as an acting under dictation point.

MR WALKER:   Yes.  It seems to be belt and braces, your Honour.  It says that the dictation amounts to taking “into account an irrelevant consideration”, or at least that is how I read the phrase:

took into account an irrelevant consideration namely the dictation or requirement –

I am going to stress for obvious reasons stemming from Magennis’ Case the word “requirement” there, just as the word “agreement” in 12 is evoked by Magennis’ Case.

GUMMOW J:   The primary judge described your clients, who are very numerous, as landowners.

MR WALKER:   Yes.

GUMMOW J:   What is their title?  Does that appear?

MR WALKER:   Your Honour, it is not here at all. The pleading found in the book at page 10 in paragraph 3 says of them two things relevantly. They are, one, “the owners of farming land”, this is about line 30 on page 10 and, two, “the holders of bore water licences under the Water Act 1912”. The landholdings were set out in a schedule which I think has not been ‑ ‑ ‑

GUMMOW J:   There is a little bit of layman’s language on page 10, but that is how it stands, does it?

MR WALKER:   Yes, there is.  Your Honours, may I give a proper answer to Justice Gummow’s question by getting access to – and we will do this and supply it – the schedule which is referred to at about line 45 on page 10.  I cannot promise, however, that that schedule improves on the layman’s language, I am sorry.  In particular, whether they all, say, Torrens title is something that we will look to, that is, as to the facts pleaded otherwise available to the Court.  Now, in the Court of Appeal, if I could take your Honours, please, to page 367 of the appeal book.  

In paragraph 12 the Chief Justice recites – this is not a finding of fact.  This must be treated only as a fact assumed to be true for testing the Commonwealth’s summary dismissal contentions – includes in paragraph 12 the reference to the funding agreement, to which I am about to turn:

provided that water entitlements be adjusted in the way they were adjusted in the 2006 Plan. 

That is obviously not coincidence, see his Honour’s last sentence on that paragraph:

The policy, reflected in the 2006 Plan, was implemented ‑

et cetera.  Page 373, the same link is the subject of observation at the beginning of paragraph 29 which quotes from the National Water Initiative.  His Honour introduces that at the foot of 373:

Express provision is made for what became the 2006 Plan.

I am sorry, that is in the funding agreement, to which I will come.  Page 402, in paragraph 113, in the middle of that paragraph, about line 17:

No doubt the agreements, especially the Funding Agreement, explain how the 2006 Plan came to be adopted.

Then page 407, paragraph 139, third sentence:

The Commonwealth encouraged, indeed may well have determined, a critical aspect of that modification.  It did so by imposing a condition on its financial grant in order to implement a policy which it could not achieve without the co‑operation of the State.

For the purposes of the legal arguments upon which we were unsuccessful both at first instance and on the Court of Appeal, they are to be taken as a combination of that which appears from the enactments and statutory instruments as well as the intergovernmental agreements, and also from facts alleged and assumed for the purposes of the argument.  Could I therefore, with that link thus critical to the basis upon which the summary dismissal was argued, take your Honours to the funding agreement which you will find in the appeal books between pages 81 and 127. 

At this stage in the argument, these are the provisions to which I will draw attention.  First of all, the Commonwealth in clause 1 on page 84 is said to be “represented by and acting through the National Water Commission” as a party to this funding agreement which is said, at about line 18, to be one which “binds the following parties”.  Could I take your Honours to the so‑called context that then starts at about line 30 on page 84 and continues onto page 85 and draw to particular attention the references to the National Water Commission’s CEO under the National Water Commission Act found in proposition B.  The reference to the chief executive officer providing in C:

funding from the Australian Government Water Fund for activities that assist in implementing the Intergovernmental Agreement on a National Water Initiative ‑

In D, that:

The NWI sets out objectives, outcomes and actions for the ongoing process of [I stress] Australia’s national water reform –

Then H, the State’s commitment in G gets from the Commonwealth what is called – it has agreed to support the project:

by its involvement in the Project and by providing Funding to the State, subject to the terms and conditions of this Agreement.

Language redolent of, as I shall in due course submit, section 96.  In J on page 85:

The State agrees to accept the Funding for the purposes, and subject to the terms and conditions, set out in this Agreement.

On page 91 in clause 5.1 one has that State agreement to carry out the project.  The project, which is a defined term – see appeal book 89, line 10 – is actually defined by reference to item 1 of the Schedule which is a very lengthy item.  It is found on pages 109 to 116 of the appeal book.  One sees, for present purposes, that under 1.6 there are water sharing plans, of which the 2006 Plan is one, which the project requires the State to implement.  Under 1.8 there is a requirement by the project for the “State to undertake the following activities” – I stress the next phrase – “to the Commonwealth’s satisfaction”.  I will obviously call that in aid when comparing this joint venture, as Chief Justice Spigelman called it, with what was before this Court in Magennis, “including all actions that are incidental to the achievement of the following”, is that obligation.  In 1.8 there is then set out on page 111 the first of the critical provisions for the allegation by us in our pleading that there was an acquisition of property otherwise than on just terms.  One sees in sub‑item e there is:

overall reductions in water entitlements in respect of each of the Groundwater Systems –

and one sees that letter D applies to the Lower Murray.  Groundwater systems are defined in 1.6a. to include those that are named.  Item D “A reduction of 167,000 ML”, we are told this is what the project comprises, is a 68 per cent reduction of those water entitlements.  It comes to about 250,000 as the 100 per cent.  It leaves about 84,000, to which I drew attention when I referred to the Plan, and the balance figure is, of course, the recharge amount, which explains those figures. 

Can I take your Honours back then to page 91.  The correlative obligation, as we put it, in clause 4.1, “Subject to sufficient appropriations” as to which there was in the summary dismissal case no issue and it appears there is no issue by reason of the matters demonstrated conclusively by the Solicitor‑General for the Commonwealth in ICM yesterday.  The Commonwealth promises – that is not my word, it is those words “the Commonwealth will provide” – obviously enough fits the description that one will see back on page 85 at about line 27, under the heading “OPERATIVE PROVISIONS”:

In consideration of the mutual promises contained in this document –

they agree, and there is no better pair of mutual promises, the primary or principal ones, than those which see 5.1 being met by 4.1 because, as 4.1 says, it is subject to the State’s compliance with this agreement.  One knows that under 5.1 that is an agreement to carry out the project and one knows by definition of the project that means carry out to the satisfaction of the Commonwealth.  Could I then take your Honours on page 92 to clause 6.2, the financial assistance, as we call the funding.  The financial assistance is by this agreement limited, restricted, confined or dedicated only to those purposes.  One sees that they are all purposes that relate to the project called for by the agreement and requiring the relevant budget. 

Now, those are the provisions, that is, 5.1, 4.6, 6.2, plus the very important item 1 of Schedule 1, particularly 1.8e, i, j and l, that we say constitutes the requirement by the Commonwealth for the State to acquire property for less than just terms.  The less than just terms comes from the provisions that your Honours will have seen on page 112 of the appeal book as matters stood at the time of the purported acquisition, as we put it, by the regulation.  As things stood, one sees that under j.C at the top of page 112, the water sharing plan, that which the 2006 Plan was intended to be, had to:

provide for the structural adjustment payments . . . as approved by the Prime Minister and the NSW Premier. 

Then under l.C:

each structural adjustment payment must not exceed two‑thirds of the final value of a licence holder’s water entitlement reduction at the end of the 10 year period. 

So there was at that time historically something even plainer than the backdated valuation which worked the lack of just terms in Magennis.

GUMMOW J:   What is the significance of clause 27 at page 107?

MR WALKER:   That is one, perhaps just one, of a number of clauses.  I was going to come to them later.  May I come to them all now.  The significance of that, together with the others that I will now do exhaustively, is that, at least so far as an objective intention to be contractually bound in a legally enforceable manner can be gathered from the words of the parties to this agreement, there can be no doubt that they have that intention.

GUMMOW J:   It might go beyond contract.  Look at 8.1, page 95.

MR WALKER:   Your Honour, may I say, there are a number of provisions here, that is why I chose the words I did as I did.  There are a number of provisions here which remind one of the raw material from a Masters v Cameron argument and they remind one also of the doubts about promises to negotiate without yardsticks by which to measure performance of the promise to negotiate.  There are certainly terms which you would not need to be a very ingenious counsel to suggest might be agreements to agree or demonstrations of a failure finally to negotiate certain points.

GUMMOW J:   I think 8.1 suggested the opposite, so does 13.1.  They are talking about property.

MR WALKER:   Your Honour, there is a number of them and among them ‑ ‑ ‑

GUMMOW J:   They are talking about creation of property rights as between themselves.

MR WALKER:   It gives permission for people to enter property, for example.  May I just go through them.  They are, in our submission, an overwhelming catalogue of terms that show this was intended to be legally binding, having effect there and then upon legal matters to such an extent that, as the parties themselves actually anticipated by one of the provisions I am about to specify, if there was anything unenforceable about any of it, the parties ask a court to excise it. 

GUMMOW J:   Where do we see that?

MR WALKER:   Your Honour, that particular one is to be found on page 105, 23.3.  Now, if I may just go through in order, I will not need to dwell on these, I think.  I have already drawn to attention the language under the heading “OPERATIVE PROVISIONS” on page 85.  That is the language of legally binding agreement.  On page 91, clause 3.2, that is redolent of enforceable obligations.  Clause 4.1 obviously I have already drawn to attention.  Clause 4.2 similarly, legal obligations to pay and dispensation from that. 

Page 92, 5.5, the survival of the operation of a clause following termination is consistent only with an understanding of enforceability and the law of contract.  Clause 6, 6.1, a requirement possible by the Commonwealth for the re‑destination of certain funds in certain events.  Page 93, 6.7 similarly.  Page 94, 6.7 and 6.9 as to the accrual of interest and a right to receive interest is much more likely to be seen as indicative of an intention to effect legal rights between parties than mere political aspiration.  Page 94, clause 6.11, has the reference to amounts, et cetera:

will, without prejudice to any other rights available to the Commonwealth under this Agreement or at law or in equity –

An invocation by familiar phrase of that which surely is the hallmark of an intention to be bound as formally, as fully as the law will permit to –

be recoverable by the Commonwealth as a debt due –

Language of the creation of contingent rights.  Clause 6.13 is like 5.5.  Page 95, clause 7.1, a promise “subject to sufficient appropriations”, et cetera.  Clause 7.2, an event upon what I will call breach failure, which leads 7.2b to termination.  Page 101, what I referred to in answering Justice Gummow earlier, 16.1.  This is an agreement under which permission to enter premises is given, affecting what would otherwise be trespass.  Page 102, “TERMINATION FOR DEFAULT” in paragraph 18, continuing on the next page, uses the language of obligation by reference to breach.

Page 105, the trouble is taken in clause 22 to negate certain legal relationships but certainly not to say this is not intended to create any binding relations.  The implication by selection in 22 is powerful.  Clause 23, there is an entire agreement clause.  Clause 23.3 I have already drawn to attention, inviting the attentions of the judicial power.  Clause 24 on page 106, waiver.  Clause 25, this could have been, so the parties contemplated, the subject of assignment, although the mind boggles at the notion and maybe that very definitely is more abundant caution. 

Then we come to clause 26, “DISPUTE RESOLUTION”.  You have got to talk, et cetera, and so you may not sue “until the procedure provided by this clause has been utilised”.  Then there is a dispute resolution process.  Then under 27 you have got a choice of law in 27.1.  I am sorry, I am reminded in 26.3, borrowed no doubt from the Commercial Arbitration Acts in a fairly recent manifestation around the country, the clause 26 first tort before suing promised, does not apply to commencing “legal proceedings for urgent interlocutory relief”. 

Under 27 you have got a choice of law clause to which Justice Hayne drew attention during the ICM argument in 27.1.  In 27.2 there is a submission to non‑exclusive jurisdiction.  Again, one wonders exactly why that was necessary, but there one has it.  An indication, as plain as one might imagine, of an intention to be bound in such a way as to give rise to rights which are justiciable in a court of law.  Now, there is a notices provision of a kind that highlight the formality of an intention to great legal relations by dealings under and pursuant to provisions of this agreement in clause 29.1. 

So a very long‑winded answer by way of supplying material I was going to come to later in any event to Justice Gummow’s question.  The significance of those provisions, each of them on their own and all of them together, when reading this funding agreement is that notwithstanding that which may be open‑ended in certain respects, this is plainly intended to the extent that it can be saved by a judge examining it from a severability point of view, this is intended to be binding. 

GUMMOW J:   Now, 27.2, is a bit problematic.  Maybe the only jurisdiction is that of this Court under section 38 of the Judiciary Act.  This would be a suit between the Commonwealth and the State. 

MR WALKER:   Yes.

HAYNE J:   It shows the corporatisation of government that seems to be informing principle beneath this agreement. 

MR WALKER:   Your Honour, it occurred to me that it showed that some lawyers, government or otherwise, may operate in silos and that the constitutionalists are not allowed to communicate with the commercial lawyers and, particularly, vice versa.  There are lots of marks of that in this drafting.  There are also a few rough wells apparent, but for my present purposes, words chosen by the parties as setting the context, it does not matter that there are amusing or even untutored aspects to some of this drafting, it very powerfully displaces any notion of being an intergovernmental agreement.  It is one which sounds in political aspiration and political undertaking only.  Whether they have done so entirely effectively is really not an issue in this case.

FRENCH CJ:   Does this feed into the proposition, just so I understand where we are going, in terms of your points of claim?

MR WALKER:   This is for requirement?

FRENCH CJ:   Yes, the requirement issue.

MR WALKER:   This will be fore requirement, yes.

FRENCH CJ:   So it feeds into the proposition that the irrelevant consideration was a view that there was a requirement on the assumption that it was a legally binding requirement, is that right?

MR WALKER:   Exactly so, and it feeds into our irrelevant consideration, namely, acting on a dictation or requirement.  We put the case somewhat differently from the way in which the somewhat different point arises in ICM. The way we put it is that what Mr Ellicott termed the unconstitutionality as something which it may be taken ought to have prevented the State from co‑operating, we put it differently. We say that the invalidity by reason of unconstitutionality of the funding agreement – and I stress of the funding agreement – means that it cannot be relevant if the Minister’s consideration of it for his State Minister’s consideration for his section 50 making of the 2006 Plan was premised on the funding agreement being valid. That responds, I think, in these proceedings to a matter raised by Justice Gummow today in ICM.

GUMMOW J:   Could you just explain that again, Mr Walker?

MR WALKER:   The invalidity of the funding agreement because of 51(xxxi) ‑ ‑ ‑

FRENCH CJ:   That is to say, the fact that it does not have legally binding effect?

MR WALKER:   Yes. It purports to have legally binding effect. It purports to be a binding document. By reason of its unconstitutionality, it does not. It cannot be relevant, it must be irrelevant, in the State Minister’s section 50 Water Management Act decision, if, as we plead it was – that is, assume for the purpose of the summary dismissal debate – that section 50 decision was premised on the Minister believing, wrongly it turns out, the funding agreement to have been valid. So the funding agreement would clearly have been relevant had it been valid or binding, imposing a requirement. Subject to the constitutional arguments, it would have been relevant. It cannot be relevant if it is taken into account because it is valid, and that is not true, it was not valid, it was invalid.

KIEFEL J:   It is not so much being – this might just be characterisation – it is not so much from what you say that the Minister was influenced by a consideration which was irrelevant as much as the Minister acted upon an assumed basis of law and fact.  That is almost like a no evidence ‑ ‑ ‑

MR WALKER:   Yes, that would suffice.  There is no doubt a variety of ways in which one could say that this is a decision, the making of which required the validity of the funding agreement, and there is a number of different ways in which ‑ ‑ ‑

GUMMOW J:   There must have been administrative law cases with similar situations, not in a constitutional dimension, where, for example, what Justice Kiefel was just putting to you has had a reviewable effect.

MR WALKER:   Yes.  Project Blue Sky has a statutory setting that could give rise to such a thing from time to time.  But this is not directly a Project Blue Sky question.

KIEFEL J:   It is acting on the basis of the existence of facts which do not exist.  That is probably the closest analogy.

MR WALKER:   In AD(JR) terms it would match it perfectly, with respect, yes.  But I am today arguing about summary dismissal on the pleading that we see in the book, so I do not want to move further than I already may have away from the words of that.

GUMMOW J:   We have to know what relief you would seek in the end in the New South Wales court with respect to these instruments of the New South Wales Government system.

MR WALKER:   May I come to that very soon because I have got to try and draw all these instruments together.  I have just been dealing with the funding agreement which, you will recall, is entered into by the National Water Commission as the representative of the Commonwealth.  So can I come now to the National Water Commission Act 2004(Cth) of which, of course, your Honours are well familiar. I will take only a very short time on it. Could I, again adopting what has been put by my learned friends, the Solicitors for the Commonwealth and New South Wales about it, simply add by way of emphasis a reference to the function in paragraph 7(1)(a), function of the Commission that is, to assist in implementing the National Water Initiative and to remind your Honours that under section 6 the Commission itself was established, as your Honours have already seen in ICM, as indeed was expressly required by the National Water Initiative. 

GUMMOW J:   Just stopping at 7(1)(a) for a minute, is assisting with the implementation by, on behalf of the Commonwealth entering into the funding agreement?

MR WALKER:   That is the notion, yes. Now, that is strongly supported by the particular ‑ ‑ ‑

GUMMOW J:   The submission has to be that that is beyond power insofar as the relevant activity under 7(1)(a) would contravene 51(xxxi).

MR WALKER:   Yes, and maybe here is an appropriate point for us to differentiate ourselves most radically from ICM.  We do not seek to invalidate, we do not impugn any statute; not the Commonwealth statute, not the State statute.  In answer to Justice Gummow’s question, we simply say of the Commonwealth statute, for reasons which we think are common ground or were common ground in ICM, I imagine will be common ground here, that the assisting in implementing in section 7 or the administering financial assistance in section 24 of the Commonwealth Act naturally and constitutionally mean, those expressions, mean doing so constitutionally, that is, within the bounds set by the Constitution and, in particular, section 51(xxxi) if we can make that apply.

So we do not say that there is anything wrong with the Commonwealth statute, far from it.  We simply say that properly understood in what we submit is a rudimentary fashion, naturally it neither purports to nor could it ever have authorised action which would place the Commonwealth in breach of section 51(xxxi).

HEYDON J:   The real difference then, between you and Mr Ellicott on this point, is that he construes the statute widely and says it is bad.  You construe it narrowly and say the action done under it was beyond the powers conferred.

MR WALKER:   With only one modification, we would respectfully adopt that characterisation of the difference between us.  The one modification is – I hope it is not a quibble – we certainly would not accept in any adverse way the description narrowly to describe the reading we offer.  We submit it is just ordinary language ‑ ‑ ‑

HEYDON J:   No, I am not suggesting – no, it is just that your construction is different from his construction.

MR WALKER:   Yes, and radically so.

HEYDON J:   And his is wider than your perfectly correct construction.

MR WALKER:   I embrace that, your Honour, yes.  I will not take as a blank cheque for what I am going to say about it, of course.  Your Honours, that is of great significance when one comes to understand how – if we can persuade your Honours of it at all – the case law illustrated by the pair – and I do stress “the pair”, there are others, but it is the pair that matters – of Magennis and Pye.  So, I have now touched on 24(1)(a)(i) about which you have been addressed.  May I add to my references on adoptions, please, the first and second defendant’s note on the Australian Water Fund Account handed up by my learned friend the Solicitor‑General for the Commonwealth and we respectfully adopt it as well for the purposes of our argument in this case. 

So we have the funding agreement, we submit, plainly entered into in a way intended to be binding in the full legal sense of that expression by the Commonwealth through the Commission, pursuant to the Commission’s first‑named function of assisting in the implementation of the initiative and to administer financial assistance awarded by, as it happens, the Prime Minister to particular projects relating to Australia’s – I stress “Australia’s” – water resources from the Australian Water Fund Account.

Adopting, as I have, the submissions about the appropriations, one knows that that was manifested not only in the authority to debit, which one finds in section 42 of the National Water Commission Act, one also has the appropriations to which reference has been made both standing and annual. Section 42, your Honours will recall, says of the special account:

The purposes of the Special Account, in relation to which amounts may be debited from the Account, are:

(a)to provide financial assistance that is:

(i)awarded by the Minister –

et cetera.

HAYNE J:   Before you depart from the Act, your reading of the Act and in particular the provisions about this body assisting, administering and the like, is a reading that permits this body to undertake obligations on behalf of the Commonwealth.

MR WALKER:   Yes.

HAYNE J:   And to fix terms and conditions.

MR WALKER:   Yes.  May I jump straight ahead to a reading of section 96 which is necessary in order for that answer to have any virtue.

HAYNE J:   I understand that, but it is to read this Act which permits the appointment of a commission having no separate corporate existence, I think.  Does it?  I do not think it is a body corporate.  I think it is just something called a commission, which is a group of individuals appointed in a particular fashion.

MR WALKER:   It is a group, yes.

HAYNE J:   So this group of individuals thus appointed, under a statute permitting them having a general function to assist the CEO of this body having a function of administering something awarded by a Minister, it is to be understood as having power to undertake an obligation on behalf of the polity.  I am not saying that is wrong, but ‑ ‑ ‑

MR WALKER:   Can I add another ‑ ‑ ‑

HAYNE J:   My reference to corporatisation of government were not mere fluff.

MR WALKER:   No.  My answer to your Honour’s main question is, yes.  Could I add to the factors that Justice Hayne raised for me to consider in answering that question “yes”?  Section 10, which your Honours may have noticed:

Each Commissioner must act in the best interests of the NWC.

HAYNE J:   No doubt support motherhood as well.

MR WALKER:   They comprise the Commission, but one assumes that this is not a mandate for self‑interest.  This obviously is a reference to the Commission as – and I do not know what word to use next – an entity, if I may use a neutral expression, whose first‑named function is to assist in the implementation of the NWI.  It owes its existence to the political compact which is the National Water Initiative.

FRENCH CJ:   Although there is no reference to it in the Act I think in the second reading speech there was an indication that the Commission was to be made up of representatives of the various States.

MR WALKER:   Yes, is the answer, yes.

FRENCH CJ:   I notice also the Commission under section 37:

The CEO, on behalf of the NWC, may engage consultants ‑ ‑ ‑

MR WALKER:   Yes.  Assess – your Honours should not leave aside – it has a very large assessment function as well.  I am not going to go to any of those other functions.  The first‑named one will do for our purposes.

GUMMOW J:   It seems to be constituted under 8(2) and 8(3) in terms that give a Commonwealth representation and a non‑Commonwealth/State representation.

MR WALKER:   Yes.

HAYNE J:   But thus the statute is to be read as permitting what, an exercise of Chapter II power, is it?  Is that what is underpinning your proposition constitutionally, that the body can exercise Chapter II executive power?

MR WALKER:   I hope this is not a sidestep of Chapter II.  In our submission, this is the mechanism by which – by persona designata perhaps – this is the mechanism by which Parliament has imposed the possibility of terms and condition and it thinks fit that it be done in this fashion.

HAYNE J:   I understand the section 96 argument, I think, to which you are coming ‑ ‑ ‑

MR WALKER:   I think that answers your Honour’s question, is this Chapter II power?  The answer is, no, not really, it happens to be the legislatively mandated way in which through the CEO – I stress, through the CEO, not the Commission, who will no doubt be directed by the Commissioners – the CEO provides – or administers, I should say, financial assistance.

FRENCH CJ:   The agreement is made between the Commonwealth acting through the NWC.

MR WALKER:   I hope your Honours are not going to ask me what is the legal significance of the preposition “through”.  I am not able to do so.

FRENCH CJ:   Yes.

MR WALKER:   But clearly enough, it is either a three‑party agreement, which would be the preferred – sorry, I should not say that – it is either an agreement to which the Commissioners are party as well as the Commonwealth and the State, or there is intended by that simply an historical reference to what might be called an authorisation to execute, which does not make you a party.

FRENCH CJ:   Well, just picking up what Justice Hayne put to you, I suppose one can see a line through section 24 from the CEO through to the ministerial function directly; in other words, not necessarily dependent upon the involvement of the NWC.

MR WALKER:   Not necessarily, except that ‑ ‑ ‑

FRENCH CJ:   In this case, of course, the funding agreement invokes the NWC.

MR WALKER:   Yes, it does. 

GUMMOW J:   Are these people executive officers, under section 67 of the Constitution?  Are they people executing the executive power in respect of a law of the Commonwealth?

MR WALKER:   I think the answer to that is probably ‑ ‑ ‑

GUMMOW J:   This comes back to Justice Hayne’s question about chapter II.

MR WALKER:   Yes.  It is actually quite difficult to find, within the functions, apart from the generality given in the first‑named one, anything that would amount to executing a law, except as it were executing ‑ ‑ ‑

GUMMOW J:   Section 7(1)(a). 

MR WALKER:   That is the one that seems to cover everything that has happened in this case.  The staff are engaged under the Public Service Act, section 35. I think the answer to Justice Gummow’s question, with respect, would need to be yes, they are officers of the Commonwealth. Your Honours, that is where that Act, which I stress we do not impugn, sits in the framework. Its critical importance is that, we will be submitting, we submit that by reason of either section 51(xxxi) and section 96 or section 100 that that is not an Act that can have authorised entry into this agreement which purports to require in binding terms the State to do that which it requires the State to do, namely to reduce these entitlements so swingeingly for what, at the time was stipulated could not be more than two‑thirds their value.

Could I now take you, because of its reference in that statute, to the intergovernmental agreement known as the National Water Initiative.  Your Honours will find that for this case in the appeal book between pages 28 and 66. 

FRENCH CJ:   In one sense at least one strand of your case could stop at the assumed success of the constitutional argument in its impact on the funding agreement and then just get into standard admin law grounds for review.  That is the way it seems to be set up in the points of claim. 

MR WALKER:   That is right.  That if, for the constitutional reasons, the funding agreement is bad in the sense I have described, then it ceases in administrative law terms to have been properly a resort for the making of the 2006 plan. 

FRENCH CJ:   But its validity was assumed below, was it not?

MR WALKER:   Could I come directly to that matter which is ‑ ‑ ‑

FRENCH CJ:   At 403 I think, at line 10.

MR WALKER:   ‑ ‑ ‑ a very large differentiation between our case and the ICM Case.  The Chief Justice, I think, has just referred to what I think is paragraph 119 on appeal book page 403.

MR WALKER:   ‑ ‑ ‑ a very large differentiation between our case and the ICM Case.  The Chief Justice, I think, has just referred to what I think is paragraph 119 on appeal book page 403.  Could I go back to page 396 first, paragraph 94, “This case”.  Now, to remind your Honours, this is the Commonwealth, so State was the spectator.  This is the Commonwealth’s motion which at first instance included a jurisdictional challenge which at first instance succeeded, failed in the Court of Appeal, is not live here.  For that summary dismissal purpose, as the Chief Justice recites:

the assumption that the entitlements to draw water from the Lower Murray Groundwater Source under the Water Act 1912, previously held by the applicants, constituted “property” within the meaning of s 51(xxxi). It was further assumed that the Commonwealth legislation referred to is capable of constituting an “acquisition” of such property within the meaning of s 51(xxxi). Specifically –

and this is important to differentiate us from ICM –

the case proceeded without reference to the proposition that there is no acquisition of property when what is involved is the “adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity”; (see AustralianTape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480 at 510; Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134 AT 161); nor when what is involved is an “extinguishment” rather than an “acquisition”. (See eg Health Insurance Commission vPeverill (1994) 179 CLR 226.) Finally, there was no issue before this Court as to whether the particular formula for reduction in entitlements, together with the compensation payable, constituted “just terms”.

Then at page 403 there is not only the conclusion in paragraph 119, there are the assumptions referred to in paragraph 117 starting on the foot of page 402.  One notes the trace there of a contention advanced below that I do not advance here about an invalid Commonwealth law.  It is what follows the “and/or” that we rely on.

HEYDON J:   To make your argument work, do we not have to look at these assumptions?  Your argument has to be that what happened would have contravened in some sense section 51(xxxi).  You then read the legislation so that it does not confer authority to enter an agreement of that character because you read the legislation as if it is within constitutional power.  So, do we not have to test the assumptions rather than really make them?

MR WALKER:   The first thing to be said is that there is a notice of contention which raises either all of these or nearly all of these.  I do not think it raises just terms, it raises the others which go to acquisition.  But it is to be borne in mind that we are here on an appeal from summary dismissal.  The Commonwealth undertook an argument to spare itself a trial framed on the basis assume property, assume acquisition, assume no just terms, still there is no invalidation which is relevant – and I stress “which is relevant” – of the funding agreement in relation to the regulation reducing the water entitlements. 

Justice Heydon has asked whether we need to examine or test the assumptions.  In our submission, given this is an appeal from summary dismissal, not only do we not need to, we should not.  The Commonwealth made the choices, we certainly did not.  The Commonwealth made the choices that that was how they were to frame the reason why these proceedings should not have a trial.

HEYDON J:   You have a point in limine against the notice of contention.  You say it is just not legitimate?  It is not legitimate to consider those things.

MR WALKER:   Yes.  One should not permit, by way of notice of contention, a party to depart from an explicitly advanced basis for their application for summary dismissal adhered to, at first instance and in the Court of Appeal, to convert, as it were, in this Court, the only Court in the sequence that cannot receive evidence, for example, section 73 Mickelberg, to convert the hearing in this Court into a full fledged, separate issues argument, for example.

Now, I am conscious of the tandem aspect of this case with ICM and the fact that ICM has no such factor.  Our learned friends for the Commonwealth and we have discussed what might be the consequence of that in what I might call case management.  I put this forward gingerly as one way in which the question of whether these assumptions need to be tested might be dealt with and that is on an assumption I trust your Honours will not treat as an impertinence, on an assumption that ICM and this case may be considered, as it were, together by your Honours, at least as to the common factors in them.

If that were to be the case, then it may be that following pronouncement of orders and delivery of reasons in ICM a short and controlled opportunity should be given to the parties in this case to consider whether there is any consequence following from the reasoning in ICM for the different framing of this case, based upon the assumptions contained in paragraph 94, for example, whether the result in ICM means there can be final relief given in our case, or whether it involves returning it to the Supreme Court or the Land and Environment Court.

HAYNE J:   But how would that proposition sit with the proposition previously advanced by you that the course of events in the courts below, having been as it is ‑ ‑ ‑

MR WALKER:   It is an alternative.

HAYNE J:   It is an alternative, is it?

MR WALKER:   It is an alternative because there is a notice of contention before the Court and I may not succeed in the in limine objection I have raised.

HAYNE J:   Is it convenient to explore that in limine point now, or should that wait for later in your argument, Mr Walker?

MR WALKER:   It is convenient for me to conclude anything I want to say on it now.  I think I have said everything I wish to say about it.

HAYNE J:   What is it other than the fact that this is the way it has happened?  What is the unfairness, the injustice, the wrong that would be done to your clients?  I am not saying there is none, I just need to know what it is that would be done to your clients if we permitted argument on these things now.

MR WALKER:   We are ready to argue property, we are ready to argue acquisition, we are ready to argue the roles of the Commonwealth statute and the funding agreement for the purpose of the section 51(xxxi) argument.  We do not have to argue just terms because the Commonwealth does not wish to raise that.  Just terms would have raised, could have raised factual matters.  I hope that comprehensively answers Justice Hayne’s question, what unfairness and I do not think there is one I can point to.

FRENCH CJ:   Yes, well we are content here to argue the points raised on the notice of contention.

MR WALKER:   Can I take you first in the appeal book to page 29 in paragraph 8. The parties, by the way, on the previous page, they are everyone that matters for present purposes, particularly there New South Wales, Victoria and South Australia and ACT if one is talking about the hydrology in question.  Clause 8, we have got an agreement by those Parties “that actions under this Agreement will be implemented in accordance with the timetable” with substantial progress by 2010.  In paragraph 10 there is the agreement to establish the National Water Commission “to assist with the effective implementation of this Agreement”.  That was done. 

It has what is called an accrediting role of implementation plans.  That no doubt is just part of the first‑name function.  It has the objectives set out on pages 30 to 31, paragraph 23.  Can I draw to attention it is:

a nationally‑compatible, market, regulatory and planning based system of managing surface and groundwater resources for rural and urban use that optimises economic –

and I stress “economic” –

social and environmental outcomes by achieving –

et cetera. The State action, page 32, paragraph 27. Your Honours note the language which may or may not have conjured up thoughts of section 100, at least with the States. The States:

agree to modify their existing legislation and administrative regimes where necessary to ensure that their water access entitlement and planning frameworks incorporate the features identified in paragraphs 28 to 57 below.

They start off with 28 by the reference to the consumptive use:

perpetual or open‑ended share of the consumptive pool of a specified water resource, as determined by the relevant water plan –

Then at paragraph 31 on page 33 you have got water access entitlements are to have characteristics which clearly fit them to be regarded as in the nature of property.  Paragraph 39 on page 34, the obligation to:

prepare water plans along the lines of the characteristics and components at Schedule E.

Schedule E is found on pages 62 and 63 of the appeal book and you can see in paragraph 2 on page 62 that:

Where systems are found to be overallocated or overused, the relevant plan should set out a pathway to correct the overallocation or overuse.

Then on page 35 there is the obligation on Commonwealth States and Territories:

to address significant adjustment issues affecting water users, in accordance with paragraph 97.

Which you will find on page 48:  At 97 you have the parties agreeing to address those issues as:

that may arise from reductions in water availability as a result of implementing the reforms proposed in this Agreement.

i)        States and Territories will consult –

et cetera, including –

with industry on possible appropriate responses ‑ ‑ ‑

FRENCH CJ:   What does address mean - think about, deal with, look at? 

MR WALKER:   All of those.

FRENCH CJ:   Conjunctively.

MR WALKER:   This is not the language that travels outside political aspiration.

FRENCH CJ:   Yes.

MR WALKER:   Paragraph 97ii) on page 48 - perhaps the Chief Justice’s comment could equally apply to this next one: 

The Commonwealth Government commits itself to discussing with signatories . . . assistance to affected regions -

I am delighted to tell your Honours that that is an aspiration that was achieved and it ended up with the parsimonious offer. I think while I am here perhaps I should draw to your Honours’ attention, for the purposes of use in section 100 argument, some matters that start on page 28 in the preamble:

1.Water may be viewed as part of Australia’s natural capital, serving a number of important productive, environmental and social objectives . . . 

2.In Australia, water is vested in governments that allow other parties to access and use water for a variety of purposes – whether irrigation, industrial use, mining ‑ ‑ ‑

HEYDON J:   What is the precise point of this current survey? 

MR WALKER:   That the funding agreement is itself a regulation of trade and commerce and the funding agreement is ‑ ‑ ‑

HEYDON J: Section 100 in other words.

MR WALKER:   Yes, section 100. I am doing it so as not to come back to this document. It is for section 100 purposes. So in 2, you have the reference to “balancing sets of economic, environmental and other interests”. At the foot of 2 you have reference to achieving “economically beneficial outcomes in a manner that is environmentally sustainable” and 3 it is a “national issue”. In 4 the reference to the “interconnection” of “surface and groundwater systems”. Your Honours will recall that interconnection and recharge of these aquifers, be they ancient rivers or not, is no respecter of boundaries, particularly a boundary that is, in one case, the southern bank of one of our largest rivers, and that is very important for this particular water source.

BELL J: Before you go to the cases on section 100, the right of which it speaks, being “the right of a State or of the residents therein” of that State, “to the reasonable use of the waters of rivers”, you say that right relevantly is the right of the residents under the bore licence under the Water Act, is that so?

MR WALKER:   I do in this case.  It is a difficult phrase.

BELL J:   Well, it is difficult partly because the use is vested in the State.

MR WALKER:   Yes.  The phrase that is particularly difficult is “right of the residents”.

BELL J:   Yes.

MR WALKER:   This is being enacted as a constitutional tenet at a time when there had already been legislation affecting, and to some degree very greatly affecting, what would previously have been common law rights of landowners – I stress “of land owners”.  There may have been many people in New South Wales who had no rights to use the waters of rivers for irrigation, for example, simply because of how they were placed in relation to ownership or other property.

GUMMOW J:  Well, there is another problem too. It talks about “residents” which is a word that, as we know, appears in section 75 where it is said not to include corporations or artificial persons. Would one carry that constricted meaning over to section 100, given the existence in 1900 of irrigation trusts, for example?

MR WALKER:   I have, by the couple of references your Honours may already have noticed, proceeded on the basis that your Honours may, by reason of that jurisprudence, decline to read “residents” as including corporations of whatever kind.  As it happens, 96 of 112 of my clients are natural persons. 

GUMMOW J:   Maybe you should think about that overnight, I think.

MR WALKER:  Yes. Your Honours, the thing that gives me pause is that unless we challenge that jurisprudence there are, we concede, powerful reasons for your Honours not to give such a greatly disparate reading to that expression in this other use of it in the Constitution. We accept it would not be an appropriate way to construe the Constitution, as it were, to confine those decisions to the provisions they were construing and now to say, but the use of waters for irrigation is a very common activity of trading corporations, as well as other corporations, some of them set up and existing – co‑operatives and the like – existing solely for the purpose of making, maintaining and permitting access to water facilities.

GUMMOW J:   You had better read overnight Justice Isaacs’ dissenting judgment in that 1920s case in section 75.  I think it goes into some of these questions.

MR WALKER:   Yes, and, your Honours, I am sorry, the spectre is raised of, if I am to pursue that, needing to go to the question of whether that jurisprudence should be revisited by this Court.  Now, there is another answer, of course, namely, that this is not a point that the Commonwealth raised in what they said was their killer blow constituted by Morgan’s Case.  Their summary dismissal, they said, assume everything else, Morgan’s Case says, because there is not a 51(i) law that carries out your supposed abridgement, without going into any of the other integers required by section 100 case, you lose. So under section 100 it really was only that aspect of the elements of section 100 that was ever raised. They did not challenge, in other words, our assertion that what they had done, or threatened to do, amounted to the abridgement of the right of residence.

Could I go back to Justice Bell’s question in relation to what I have called the difficult phrase “the right of the residents therein”.  Now, like the right of a State the question arises as to whether the word is being used in its full fledged form to describe a juristic concept which may have, for example, correlative obligations.

There may be a need to differentiate between the nature of the right of a State where a correlative obligation is really not to the point.  It may only be referring to the capacity of a State, by dint of being a State and having formerly been a colony, to control, by legislation, access to, that is use of, the waters of rivers.  So the right of a State might need to be understood differently from the right of residents.

It would be odd to regard the right of the residents of a State as being merely that which was left to them, either from the common law, or by reason of colonial or State legislature from time to time, by their local Parliament. That would be odd because section 100 is, in our submission, scarcely to be supposed to be assuming that the Commonwealth, as full a capacity in relation to subject matter as any State would concerning the use of the waters of rivers.

It may be, therefore, that the right of residents to the reasonable use of the waters of rivers is describing what might be called the original common law position as affected from time to time by the laws of a State, which as I said to Justice Kiefel, can of course operate quite outside any control by section 100, so long as the State does not do what it did in this case, namely co‑operate with, by subjecting itself to, the Commonwealth regulation of the relevant trade and commerce.

So that in this case we do have, however, as Justice Bell raised with me at the outset of the question, the very straightforward proposition that we had rights on any understanding of that expression under the 1912 Water Act licences, and we say they are rights which have been abridged and it is very plain that that is exactly what the 2006 Water Plan intended to do.  It was one of the main points of that as the State action called for by the funding agreement.  See clause 1.8 in item 1 of the funding agreement. 

Your Honours, Morgan’s Case 74 CLR 421, in our submission, ought to be seen as an authority detrimentally affected by an approach to characterisation which ought no longer be regarded as the appropriate one. This of course will not determine that issue. One notes, for example, the way in which the matter was argued at page 438, right in the middle of the page. Mr Phillips said:

It is not possible to find laws made by the Parliament under the other legislative heads which are, at the one and the same time, a valid exercise of the legislative powers under the other heads and laws of trade and commerce.

In our submission, there are traces of that approach in the passage starting at 449 in the majority judgment to which I would now ask your Honours to turn.  This was a case about black market meat, black market both in relation to prices and in relation to the kind of cuts that you were allowed to offer for sale.  It is a case, very significantly, that turned upon the argued application of section 99, the prohibition on defined preferences.  The corresponding expression in section 99 is “by any law or regulation of trade, commerce, or revenue”.  This was said by the reference to the subordinate legislation and statutory instruments noted at the foot of page 449, this was said to be “regulations of trade and commerce”.  The analysis in the reasoning at the foot of page 449 and at the top of page 450 commences with noting that:

The Commonwealth Parliament also has power under s. 51(i) –

that is, apart from the defence power –

to make laws with respect to –

et cetera, and notes the argument that laws confined by the operation of section 99 are –

not limited to laws which are authorized by the power conferred in s. 51(i), but that s. 99 applies to other laws or regulations which are laws or regulations of trade or commerce, whatever the constitutional power may be in pursuance of which or under which they have been enacted by the Commonwealth Parliament.

As your Honours know, that failed as an argument, but it is, with respect, in that paraphrase worth questioning how the result could have come about if those words are taken on their own.

If they are laws or regulations of trade or commerce and there is a constitutional power in pursuance of which they have been enacted, it is, with respect in modern terms, difficult to see why they do not, for that reason, without any possibility of contrary reasoning, satisfy the description in section 99 and a question arises is there an answer to that puzzle given in the reasons that follow.  We submit there is not.

The argument on the other side is then noted in the next paragraph and your Honours will see that there is reference to “words” and “context” as supplying the answer, and that the conclusion should be that:

s. 99 does not apply to laws or regulations which can be supported only –

and I wish to emphasise that word “only” –

under other powers, even though they have (as some of them in fact have) an effect upon or in relation to trade and commerce.

We accept that a law is not necessarily a law under section 51(i) because it has an effect upon, or in relation to trade and commerce of an interstate or international kind.  That will not necessarily be enough.

GUMMOW J:   This is from an era when there was, at least on some parts and some quarters, an acceptance of a single characterisation, a method of looking of matters in the Constitution which is ‑ ‑ ‑

MR WALKER:   Yes, we submit this is an anachronism and its authority should be terminated on that ground. 

GUMMOW J:   When I was referring to Howe’s Case 31 CLR, the reference to section 100 is in the judgment of Justice Higgins at 334 to 335 where he distinguishes 75(v) from section 100.

MR WALKER:   I am obliged to your Honour.  Your Honours, you will see another kind of argument which, in our submission, does not really survive scrutiny today, introduced in the next paragraph, the alternative contention that they:

are not really laws or regulations of trade or commerce, even if those words are given their widest interpretation as including, not only laws made under s. 51 (i), but any other laws with deal with trade and commerce –

another phrase has been introduced –

under whatever power they are made.

We interpolate a law that deals with trade and commerce, rather depending upon what you mean by that phrase, but if you give its ordinary colloquial meaning, is almost impossible, with respect, not to be a law with respect to trade and commerce.  If it deals with it, it is difficult to see why that is not a very important subset central within the ambit of that which is permitted by a law being with respect to trade and commerce. 

Can I take your Honours over then to the foot of page 451 where there are numbered propositions developed in order to support their Honour’s conclusions.  They note that so far as the meaning of the expression in section 99, similar to the expression in 100, is concerned, there is no decision.  Your Honours see that the way in which that is framed is:

There is no decision of the Court upon the question whether the words “law or regulation of trade, commerce, or revenue” in s. 99 include, so far as trade and commerce is concerned, laws made under a power other than the power conferred by s. 51(i)

The question is, is that intended to mean laws which are properly understood, laws or regulation of trade and commerce.  I think the answer to that must be yes.  Then they say “made other than under the power conferred by 51(i)”.  That, in our submission, at the very beginning and as a foundation of the reasoning, shows that the majority are proceeding on this basis, that though it be something that answers the description in section 99, if it is not under 51(i) because it is under another head of power – which contains the fallacy in question – then it cannot be within the description of section 99. 

There are two problems with that proposition.  The first is the fallacy I have noted.  It does not avoid or fail to be justified by 51(i) simply because it may be justified by something else.  That is the first proposition.  Second, even if it did, the premise of this proposition is that it does answer the description required by the words of section 99, that is, it is a law or regulation of trade and commerce, and that answers the question within the terms of section 99.  There is no answer to that question, we submit, in the reason that follows.

GUMMOW J:   If you are right, the regulation by the Commonwealth need not be by statute, need it?

MR WALKER:   That is right.

GUMMOW J:   If that is correct, does that undermine Morgan in its attachment to 51(i)?

MR WALKER:   Yes.  Now, that issue was not argued in Morgan.

GUMMOW J:   That is why I asked you.

MR WALKER:   It did not arise, because it was delegated legislation and statutory instruments.  But, with respect, that is right, figuratively speaking.  There is a further undermining, if I am correct, that regulation need not be by legislation.  Your Honours, is that a convenient time?

FRENCH CJ:   Yes.  We will adjourn until 10 o’clock tomorrow morning.

AT 4:16 PM THE MATTER WAS ADJOURNED
UNTIL, FRIDAY, 28 AUGUST 2009