Arnold v Minister Administering the Water Management Act 2000 - [2014] NSWCA 386

Court of Appeal

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Arnold v Minister Administering the Water Management Act 2000 [2014] NSWCA 386
Hearing dates: 21, 22 July 2014
Decision date: 13 November 2014
Before: Meagher JA at [1];
Barrett JA at [2];
Tobias AJA at [3]
Decision:
Appeal dismissed with costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:
JUDICIAL REVIEW - whether Minister failed to comply with a mandatory requirement - whether decision manifestly unreasonable - misleading information provided to Minister - consequences of failure to adopt a particular method of establishing socio-economic impact of a decision - Water Management Act 2000 (NSW), s 50
LAND & ENVIRONMENT - where water sharing plan reduces water extraction entitlements - whether water sharing plan valid - where plan based on flawed groundwater management model - whether Minister obliged to consider recharge and sustainable yield - whether sound and reliable numerical groundwater model required to determine recharge and sustainable yield - whether adoption of flawed groundwater model manifestly unreasonable or irrational - whether misleading information invalidates Minister's decision - whether obligation to consider socio-economic impacts of proposals considered for inclusion in plan requires formal socio-economic study - Water Management Act 2000 (NSW), ss 3, 5, 9, 18, 50
Legislation Cited: Water Act 1912 (NSW)
Water Act 2007 (Cth)
Water Management Act 2000 (NSW), ss 3, 5, 6, 9, 12, 15(1)(a), 16(1), 18, 20, 21, 43A, 44, 50, 57(1)(h)
Cases Cited: Arnold v Minister Administering the Water Management Act 2000 (No 6) [2013] NSWLEC 73
Attorney General for the State of New South Wales v Quin [1990] HCA 21; (1990) 170 CLR 1
Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321
Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Johnson v Williams [2000] FCA 3; (2000) 58 ALD 1
McHugh Holdings Pty Ltd v Director General Communities New South Wales [2009] NSWSC 1359
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24
Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332
Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611
Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323
Oates v Attorney-General (Cth) [2001] FCA 84; (2001) 181 ALR 559
Phosphate Resources Ltd v Minister for the Environment, Heritage and the Arts (No 2) [2008] FCA 1521; (2008) 251 ALR 80
Vasiljkovic v O'Connor [2010] FCA 1246; (2010) 276 ALR 326
Zentai v O'Connor (No 3) [2010] FCA 691; (2010) 270 ALR 293
Category: Principal judgment
Parties: Alan Arnold and 107 others (Appellants) Minister Administering the Water Management Act 2000 (First Respondent)
State of New South Wales (Second Respondent)
Representation: Counsel:
FC Corsaro SC / PE King (Appellants)
SB Lloyd SC/ JJ Hutton (Respondents)
Solicitors:
Taylor & Whitty Pty Ltd (Appellants)
Crown Solicitor's Office (Respondents)

File Number(s): 2013/184593
Decision under appeal

Citation:

[2013] NSWLEC 73

Date of Decision:

2013-05-31 00:00:00

Before:

Biscoe J

File Number(s):

2007/40049

HEADNOTE

[This headnote is not to be read as part of the judgment]

Under the Water Management Act 2000 (NSW) (the Act), the respondent Minister is empowered to make water management plans, including plans relating to water sharing. The Minister made a number of water sharing management plans for major groundwater systems in the State which, in some cases, greatly reduced entitlements to extract groundwater under licences issued under the Water Act 1912 (NSW). Those entitlements were reduced to the level of the estimated sustainable yield of each system. Although a sustainable yield is determined by reference to a groundwater system's long-term average annual recharge, that determination also involves matters of policy.

In 2001, the Lower Murray Groundwater Source (the Source) was declared a groundwater management area (GWMA 016) under s 11 of the Act. Also in 2001, the Department of Land and Water Conservation (the Department) engaged an organisation named Ecoseal to prepare a numeric groundwater management model for GWMA 016 (the Ecoseal model). After the Ecoseal model was adjusted to take account of certain flaws identified by departmental staff, the maximum sustainable yield for GWMA 016 was estimated to be 83.7 GL/year. In 2002, a firm of hydrogeological consultants called Aquaterra identified further flaws in the Ecoseal model, relating to the derivation of the estimated sustainable yield. Although it praised Ecoseal's report as being of a high standard, Aquaterra considered that the sustainable yield values stated in the report and modified by departmental staff were not sufficiently robust to be permanently adopted at that time, given the potential problems that needed to be remedied.

The Minister subsequently established the Murray Groundwater Management Committee (MGMC) as an advisory committee pursuant to s 388 of the Act. In 2001 the MGMC discussed whether it should commission a formal socio-economic study in relation to the proposed plan for the Source and whether it was possible to conduct a farm-by-farm analysis of its impact. In 2002 the MGMC established a sub-committee to pursue this further but was unable to arrive at a consensus as to the methodology for such a study. Consequently, no such study was conducted, although the MGMC did consider the ways that the effects of the proposed reduction in entitlements could be minimised or distributed more fairly between licence holders.

In 2006, the Minister made a Water Sharing Plan (the Plan) for the Source, to take effect on 1 November 2006 and cease on 30 June 2017. The effect of the Plan was that over time existing entitlements to extract groundwater were to be reduced by 68 per cent in order to achieve a long-term extraction limit equal to the estimated sustainable yield. Notwithstanding the flaws in the Ecoseal model identified by Aquaterra, the Plan's extraction limit of 83.7 GL/year was derived from the sustainable yield estimated in the Ecoseal model.

The fact that no socio-economic study was carried out was brought to the Minister's attention in July 2006 after the public exhibition of the draft Plan. The MGMC recommended that such a study to investigate the impact of entitlement reduction on the viability of affected farms be carried out during the first five years of the Plan.

In or about October 2006, an executive officer of the Department named Mr Jacobs who was involved in the development of the draft Plan made a submission to the Minister concurred in by a number of other senior officers of the Department. Among other things, the submission stated that the Plan did not provide for variation of the sustainable yield or environmental water provisions during the duration of the Plan for a number of reasons, including that "[t]he Lower Murray Groundwater Source has the best hydrological model available presenting a high confidence in groundwater recharge as set in the Plan".

The Plan recognised certain limitations on the adoption of the extraction limit of 83.7 GL/year. Those limitations included, first, that the Plan recognised that climactic variability would cause the natural recharge to the Source to vary, and secondly, that the Plan stated that during the term of the Plan the Ecoseal model would be refined, which might in turn affect the estimated recharge figure on which the sustainable yield and extraction limit were premised. Further, the extraction limit at the commencement of the Plan exceeded the longer term extraction limit of 83.7 GL/year by a considerable degree. The Plan provided for supplementary water access licences which would gradually be reduced until 30 June 2016. It was only at that point that the extraction limit of 83.7 GL/year would become operative.

About 113 farmers affected by the reductions in their entitlements instituted proceedings in the Land and Environment Court, seeking judicial review of the decision to make the Plan. Biscoe J dismissed the application. That decision is the subject of this appeal.

The issues for determination on appeal were:

(i) Whether the Minister failed to comply with a mandatory requirement under the Act to consider sustainable yield and recharge, which in turn required a sound and reliable numerical groundwater model in order to calculate the correct recharge and sustainable yield;

(ii) Whether the Minister's decision to make the Plan was manifestly unreasonable because the extraction limit of 83.7 GL/year was based on the Ecoseal model which was so flawed that it was irrational to adopt it;

(iii) Whether the Minister's decision was invalid because he received misleading information as to the quality of the Ecoseal report in the form of Mr Jacobs' submission; and

(iv) Whether the Minister failed to consider the socio-economic impacts of proposals considered for inclusion in the draft Plan by neglecting to undertake a formal socio-economic study or a farm-by-farm analysis of the proposed Plan.

The Court held (per Tobias AJA, Meagher JA and Barrett JA agreeing), dismissing the appeal:

In relation to (i)

1. The provisions of the Act relied on by the appellant did not, explicitly or implicitly, create a mandatory requirement that before the making of a management or water sharing plan which provides for a sustainable yield or recharge, the Minister is bound to consider a sound numerical hydrogeological model.

2. The objects and water management principles identified in ss 3 and 5 of the Act are stated in far too general terms to give rise to a mandatory obligation of that kind. Even if one accepts that such modelling is desirable, it is impossible to elevate the desirability of such modelling to the status of a mandatory requirement in the sense that such modelling is the only manner in which the relevant objects and management principles can be achieved.

3. Such a mandatory requirement cannot be implied from a consideration of the subject matter, scope and purpose of the Act as a whole.

In relation to (ii)

1. The decision of the Minister was not irrational or manifestly unreasonable. There was constructively before the Minister material of sufficient probative value as to enable him to make the Plan, notwithstanding the flaws in the Ecoseal model.

2. The authors of the Aquaterra report regarded the Ecoseal model as having some probative value and that it was capable of use, at least as an interim measure, in determining an appropriate extraction limit.

3. The Plan itself had a number of measures built into it to mitigate any inaccuracy in the estimate of the sustainable yield or recharge. It can be inferred that these measures were a consequence of the Minister recognising and acknowledging the limitations of the model.

4. Although the evidence of two experts conflicted, it was clearly open to the primary judge to prefer the evidence of the expert who said that the Ecoseal model was of "low reliability" but still of value, to the evidence of the expert who claimed that the model was entirely unreliable.

In relation to (iii)

1. Misleading advice to a Minister, of itself, does not necessarily lead to invalidity of a decision which, presumably, takes into account that advice. Whether misleading advice introduces legal error into a Minister's decision depends upon the significance of the error or omission in the advice tendered.

2. Misleading advice does not lead to invalidity unless the matter the subject of the advice is a matter which the statute mandates must be taken into account by the relevant decision maker. Here, the soundness of the Ecoseal model was not such a matter.

3. Even if the soundness of the model was a mandatory consideration, it cannot be said with any degree of confidence that the Minister was unaware of, and therefore failed to take into account, the undoubted fact that the Ecoseal model was flawed. The Aquaterra report identified the flaws in the model but also expressed the view that the extraction limit referred to in the model was nevertheless roughly of the correct order.

Oates v Attorney-General (Cth) [2001] FCA 84; (2001) 181 ALR 559; Zentai v O'Connor (No 3) [2010] FCA 691; (2010) 270 ALR 293; Phosphate Resources Ltd v Minister for the Environment, Heritage and the Arts (No 2) [2008] FCA 1521; (2008) 251 ALR 80; Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24, considered

In relation to (iv)

1. Although the MGMC was not a management committee established under s 12 of the Act which could be ordered by the Minister to prepare a draft management plan pursuant to s 15(1)(a), ss 18(1) and 5(2)(g) obliged the Minister to have due regard to the socio-economic impacts of the proposal considered for inclusion in the Plan.

2. The MGMC considered and accepted the Murray Catchment Management Authority's proposed methods of devolution of structural adjustment funds to affected licence holders and access to supplementary water, each of which were matters relevant to the socio-economic impact of the proposals in the draft Plan. The Plan contained measures designed to mitigate the impact of the reduction proposals.

3. Section 18(1) did not oblige the Minister to have 'due regard' to socio-economic impacts of proposals considered for inclusion in a draft plan as that draft plan was formulated. The Minister is not required to prepare a draft plan. The Minister is also not obliged to place any draft plan on public exhibition.

4. The evidence established that the Minister or his delegates had considered an extensive list of matters with respect to the socio-economic impact of the proposals considered for inclusion in the Plan.

5. The failure to conduct a socio-economic study on a farm-by-farm basis was not a failure to comply with the obligation to consider the socio-economic impacts of proposals considered for inclusion in the Plan. Such a study was one way by which the impacts of the proposals could be measured, but it was not the only way. The Minister was only required to have 'due regard' to the socio-economic impacts; he was not required to eliminate them.

Judgment

MEAGHER JA: I agree for the reasons given by Tobias AJA that the appeal should be dismissed with costs.

BARRETT JA: For the reasons stated by Tobias AJA, this appeal should be dismissed with costs.

TOBIAS AJA: The management of the State's groundwater resources is governed by the provisions of the Water Management Act 2000 (NSW) (the Act). It empowers the Minister to make water management plans including plans relating, relevantly in the present case, to water sharing for the purpose of implementing the objects and principles of water management and sharing set out in ss 3 and 5 of the Act. To this end, the Minister made a number of water sharing management plans for the major groundwater systems in the State which, in some cases, greatly reduced entitlements to extract groundwater under licences issued under the Water Act 1912 (NSW) to the level of the estimated sustainable yield of each system.

In this context and relevant to the issues in the appeal, the estimated sustainable yield of a groundwater system is determined by reference to the long-term average annual recharge of the system. The latter is capable of determination by groundwater numerical modelling using known or assumed physical parameters. The sustainable yield is then that proportion of the long-term annual recharge of the system which may be extracted without causing unacceptable impacts on the environment or other groundwater users. Unlike the determination of the relevant recharge of the system, the assessment of the sustainable yield involves matters of policy. Depending on the environmental circumstances, the sustainable yield may be 100 per cent of the recharge or a lesser percentage.

Pursuant to s 50(1) of the Act, by order published in the Government Gazette of 20 October 2006, the Minister made a Water Sharing Plan (the Plan) for the Lower Murray Groundwater Source (the Source) to take effect on 1 November 2006 and to cease on 30 June 2017. The effect of the Plan was that total long-term groundwater extraction entitlements from the Source were reduced by 68 per cent in order to achieve a long-term extraction limit that was equal to the estimated sustainable yield. About 113 farmers affected by the reductions in their entitlements instituted proceedings in the Land and Environment Court (the proceedings) challenging, relevantly, the validity of the Plan. The proceedings did not involve a review of the merits of the reduction in entitlements but were judicial review proceedings which confined the issues to the lawfulness of the Plan.

The matter was heard by Biscoe J who on 31 May 2013 ordered that the proceedings be dismissed and that the applicants (being the appellants in this Court) pay the respondent's costs: Arnold v Minister Administering the Water Management Act 2000 (No 6) [2013] NSWLEC 73. The appellants now appeal to this Court from those orders.

The primary judge's reasons set out in considerable detail a deal of material which is not in issue and which need not be incorporated into these reasons. Relevantly, at [18] - [66] of his reasons his Honour recorded the background to the Act and the Plan. At [67] - [85] he summarised the relevant provisions of the Act, to some of which I will need to further refer. At [86] - [104] he summarised the relevant provisions of the Plan and at [105] - [118] his Honour recorded the relevant principles applicable to judicial review. Finally, at [119] - [139] his Honour dealt with the issue of the admissibility of expert evidence insofar as it was capable of bearing upon the issues which he was called upon to decide. The parties agreed on the appeal that there was no challenge to any of the contents of the paragraphs referred to. However, for the purpose of understanding the issues argued on the appeal, which were narrowed from those argued before the primary judge, it is necessary to selectively set out some of the more significant matters relevant to the resolution those issues.

Summary of Relevant Matters

The provisions of the Act relied upon by the appellants

The chapeau to s 3 of the Act states that the objects of the Act are to provide for the sustainable and integrated management of the water sources of the State for the benefit of present and future generations and, in particular:

"(a) to apply the principles of ecologically sustainable development, and

(b) to protect, enhance and restore water sources ..., and

(c) to recognise and foster the significant social and economic benefits to the State that result from the sustainable and efficient use of water, including:

...

(ii) benefits to urban communities, agriculture ... and

...

(e) to provide for the orderly, efficient and equitable sharing of water from water sources,

...

(g) to encourage the sharing of responsibility for the sustainable and efficient use of water between the Government and water users ..."

Chapter 2 of the Act is headed "Water management planning". Part 1 of Division 1 is headed "Water management principles". Section 5 then relevantly provides as follows:

"Water management principles

(1) The principles set out in this section are the water management principles of this Act.

(2) Generally:

...

(d) the cumulative impacts of water management licences and approvals and other activities on water sources and their dependent ecosystems, should be considered and minimised, and

...

(g) the social and economic benefits to the community should be maximised, and

(h) the principles of adaptive management should be applied, which should be responsive to monitoring and improvements in understanding of ecological water requirements.

(3) In relation to water sharing:

(a) sharing of water from a water source must protect the water source and its dependent ecosystems, and

(b) sharing of water from a water source must protect basic landholder rights, and

(c) sharing or extraction of water under any other right must not prejudice the principles set out in paragraphs (a) and (b)."

The expression "basic landholder rights" is defined in the Dictionary to the Act to mean domestic and stock rights, harvestable rights or native title rights.

Division 2 of Part 1 is headed "State Water Management Outcomes Plan and water source classification". Section 6(1) empowers the Governor, by order published in the Gazette, to establish a State Water Management Outcomes Plan for the development, conservation, management and control of the State's water resources in furtherance of the objects of the Act. Sub-sections (2) and (3) relevantly provide as follows:

"(2) The objects of a State Water Management Outcomes Plan are as follows:

(a) to set the over-arching policy context, targets and strategic outcomes for the management of the State's water sources, having regard to:

(i) relevant environmental, social and economic considerations, and

(ii) the results of any relevant monitoring programs,

(b) to promote the water management principles established by this Act,

(c) to give effect to any government policy statement in relation to salinity strategies.

(3) The State Water Management Outcomes Plan must be consistent with:

(a) government obligations arising under any inter-governmental agreement to which the government is a party ..."

I interpose that s 16(1) of the Act provides that a management plan, which includes a plan made by the Minister pursuant to s 50, must be consistent with an Outcomes Plan. On or about 20 December 2002 the Minister adopted such a plan (the Outcomes Plan). Part 2 of Ch 2 of the Outcomes Plan was headed "Five year water management targets". Division 1 was headed "Limits on extractions". Under a column entitled "Five year target", Target 1(e) was in the following terms:

"The long term average annual extractions for groundwater limited (or being phased down) to an ecologically sustainable level (the Sustainable Yield) as determined by detailed assessment of each groundwater source and consultation with the relevant management committee. In the absence of such an assessment, the following to apply: 100 percent of average annual recharge for a groundwater source where there is no significant ecosystem dependency..."

In the present case, there was no such ecosystem dependency. The appellants placed significant reliance on the terms of Target 1(e) to which I shall return.

Returning to the relevant provisions of the Act, s 9 provides as follows:

"Act to be administered in accordance with water management principles and State Water Management Outcomes Plan

(1) It is the duty of all persons exercising functions under this Act:

(a) to take all reasonable steps to do so in accordance with, and so as to promote, the water management principles of this Act, and

(b) as between the principles for water sharing set out in section 5(3), to give priority to those principles in the order in which they are set out in that subsection.

(2) It is the duty of all persons involved in the administration of this Act to exercise their functions under this Act in a manner that gives effect to the State Water Management Outcomes Plan."

I interpolate that the appellants submitted that the effect of s 9(2) was that the Minister was legally obliged to make the Plan in a manner that gave effect to Target 1(e) of the Outcomes Plan.

Part 3 of Chapter 2 the Act is headed "Management plans". By definition a "management plan" includes a Minister's plan made under s 50. Section 12 of the Act empowers the Minister to establish a management committee which, pursuant to s 15(1)(a), could be ordered by the Minister to prepare a draft management plan. Although a management committee was involved in the process leading up to the making of the Plan, it was not one established pursuant to s 12 but was established by the Minister pursuant to s 388 as an advisory committee for the purposes of the Act.

Section 18 of the Act sets out matters for consideration in the preparation of a draft management plan by a s 12 management committee. It relevantly provides as follows:

"(1) In formulating a draft management plan, the management committee must have due regard to the socio-economic impacts of the proposals considered for inclusion in the draft plan."

Although there was no management committee established for the purposes of Pt 3 of the Act and as it was therefore common ground that the Minister was not required to formulate a draft management plan or even to publicly exhibit it (although in the present case he did), it was nevertheless accepted by the Minister that s 18(1) imposed upon him a duty to have due regard to the socio-economic impacts of the proposals considered for inclusion in the Plan. The primary judge held that the Minister did have due regard to those impacts but this was challenged on the appeal on two bases, one of which was not advanced before the primary judge. I shall return to these issues below.

Section 20 of the Act is headed "Core provisions". It relevantly provides as follows:

"(1) The water sharing provisions of a management plan for a water management area or water source must deal with the following matters:

...

(c) the identification of requirements for water for extraction under access licences,

...

(e) the establishment of a bulk access regime for the extraction of water under access licences ...

(2) The bulk access regime referred to in subsection (1)(e):

...

(f) must be consistent with the water management principles [relevantly set out in s 5(2) and (3)]."

Section 21 then empowers the Minister, in making a management plan, to "also deal with" a number of additional matters. A similar division between "core provisions" which must be dealt with by a management plan and "additional provisions" with which the management plan may deal is also to be found within subsequent divisions of Pt 3 dealing with various topics not presently relevant. The Plan itself identifies the clauses which have been included pursuant to nominated sections of Pt 3 of the Act as either being matters which must be dealt with or as matters which may be dealt with.

Finally, s 50 which is headed "Minister's plan", relevantly provides as follows:

"(2) A Minister's plan must in general terms deal with any matters that a management plan is required to deal with, and may also deal with any other matters that a management plan is authorised to deal with, other than matters that are already dealt with by a management plan.

(2A) Part 3 (except sections 15 and 36-41) applies to a Minister's plan. ..."

Thus it will be seen that s 50(2) reflects the distinction in Pt 3 of the Act between "core provisions" which must be dealt with in a management plan and "additional provisions" which may be dealt with. Furthermore, the effect of s 50(2A) is that, relevantly, s 16(1)(a) and s 18(1) apply to the Minister's making of the Plan.

The Ecoseal model and the Plan

In 2001 the Source was declared a groundwater management area (GWMA 016) under s 11 of the Act. GWMA 016 had an area of some 17,900 sq km in south-western New South Wales. Its two deep aquifers comprise the Calivil Formation and the Renmark Group which extend to a depth of some 350 metres. It also includes a relatively insignificant part (deeper than 12 metres) of the overlying Shepparton Formation. The waters of this shallow regional aquifer were covered by a separate water sharing plan made in 2012 so that the Plan was concerned only with the two deep aquifers.

As part of its deliberations, the Murray Groundwater Management Committee (MGMC) (being the advisory committee referred to at [13] above) considered a broad range of matters including the recharge factor for GWMA 016, the level of sustainable yield, the amount of water that should be reserved for the environment, methodologies for reducing entitlements and measures that could be implemented to minimise the impact of entitlement reductions. As noted by the primary judge at [28] of his reasons, the MGMC wished to depart from Government policy in place at that time, which was that the reduction in the amount of water to be available for extraction under water sharing plans would be shared proportionately amongst all licence holders "across-the-board" (that is, entitlements would be reduced by a uniform percentage for all licence holders). In a letter to the Minister in August 2001, the MGMC noted that the Department of Land and Water Conservation (the Department) estimated that the sustainable yield for GWMA 016 was considerably less than licensed entitlements and so proposed an alternative methodology for reducing allocations that considered infrastructure capacity along with existing licensed entitlements. However, this methodology was not adopted at that time.

In 2001 the Department engaged an organisation known as Ecoseal to prepare a numeric groundwater management model for GWMA 016 (the Ecoseal model). Ecoseal produced a substantial two volume report of which the first was entitled "Model Development and Calibration" and the second "Model Scenarios". As his Honour noted at [30], the Ecoseal model estimated the sustainable yield for the deep Calivil/Renmark aquifers as 66 GL/year. Although I will need to deal with it in a little more detail, later that year a Department hydrogeologist, Mr Mike Williams, and a consultant hydrogeologist, Professor Prathapar, because of flaws in the Ecoseal model, adjusted it for the MGMC and estimated that the maximum sustainable yield for GWMA 016 was 83.7 GL/year (which they rounded to 84 GL/year). This was the basis of the Plan's long-term extraction limit component of 83.7 GL/year.

Later, in 2002 the firm of hydrogeological consultants known as Aquaterra identified further flaws in the Ecoseal model. Those flaws assumed particular relevance as they underpinned the appellants' submission that the Plan was invalid as it was manifestly unreasonable or irrational for the Minister to adopt a maximum sustainable yield of 83.7 GL/year as per the adjusted Ecoseal model given the "fundamental flaws" in that model which required it to be recalibrated as identified by Aquaterra. Before the primary judge expert evidence was called from two hydrogeologists, a Mr Wade on behalf of the appellants and a Ms Hamilton of the Department on behalf of the Minister. That evidence confirmed that there were flaws in the Ecoseal model. The admissibility of their evidence was one of the issues which his Honour was required to determine.

Notwithstanding the flaws in the Ecoseal model, the Minister adopted the maximum sustainable yield determined by Mr Williams and Professor Prathapar of 83.7 GL/year. Accordingly, cl 16 of the Plan which was entitled "Recharge" and formed part of Part 3 entitled "Basis for water sharing" provided as follows:

"(1) The overall basis for water sharing in this Plan is the average annual recharge to the Groundwater Source which is 83,700 megalitres per year [83.7 GL/year] ... plus the requirements for basic landholder rights at the commencement of this plan."

Part 9 of the Plan was entitled "Limits to the availability of water". Division 1 was headed "Long-term average extraction limits". Clause 32 provided as follows:

"Extraction Limit

(1) This Division is made in accordance with s 20(2)(a) of the Act.

(2) The extraction limit for this groundwater source is initially 83,700 ML/year, plus total water made available to supplementary water access licences under clause 34, plus the total requirements for basic landholder rights at the commencement of this plan." (Emphasis added)

As I have noted, the extraction limit of 83.7 GL/year was derived from the Ecoseal model as adjusted by Mr Williams and Professor Prathapar. Neither of those hydrogeologists identified the flaws in the model which were later identified by Aquaterra. Nevertheless, as the primary judge noted at [92] of his reasons, the Plan recognised certain limitations on the adoption of the extraction limit of 83.7 GL/year of which his Honour referred to two. The first was that cl 15(1) provided that the Plan recognised that due to climactic variability the level of natural recharge to the Source will vary. The second was a note to that clause which stated that during the term of the Plan, the Groundwater Management Model for GWMA 016 (which was the Ecoseal model) will be "recalibrated and refined" and that "[t]he Natural Resources Commission will consider any resulting changes to the estimated recharge figure when undertaking their review of the plan (outlined under cl 58)."

Clause 58 of the Plan headed "Monitoring", provided that the monitoring of the performance indicators specified in cl 13 was to be undertaken by the Minister and in a note to that clause it was stated that in accordance with s 43A of the Act, the Natural Resources Commission must undertake a review of the Plan prior to any decision to extend its term or to make a new plan. Further, the note provided that in its review the Commission was to consider, relevantly:

"the outcomes of the recalibration and refinement of the groundwater management model and the impact that any variation in irrigation losses may have on the estimated recharge of this groundwater system."

The note also stated that in accordance with s 44 of the Act the Plan will be audited at intervals of no more than five years for the purpose of ascertaining whether its provisions were being given effect to.

Accordingly, it could legitimately be said that the extraction limit or sustainable yield of 83.7 GL/year was not "writ in stone" for the duration of the Plan. Further, as noted by the primary judge at [102] of his reasons, because of cl 32(2) of the Plan (which I have recorded at [23] above), the extraction limit at the commencement of the Plan exceeded the longer term extraction limit of 83.7 GL/year by a considerable degree due to the provision in the Plan for the issue of supplementary water access licences, a category of licence identified in s 57(1)(h) of the Act. Essentially, that position would be maintained from the commencement of the Plan on 1 November 2006 until 30 June 2011, from which point the supplementary water access licences would reduce by 20 per cent per annum so that by 30 June 2016, being one year before the Plan expired, the supplementary water access licences would be reduced to nil. It was only at that point that the extraction limit of 83.7 GL/year would become operative.

As his Honour remarked, the effect of the foregoing was that over the duration of Plan, the amount of water that was to be allocated would gradually be brought into line with the limit referred to in cl 16, namely, 83.7 GL/year. In that way, the Plan sought to limit the impact on groundwater users while gradually reducing water use to a level that was regarded as being environmentally sustainable. It will be appreciated that what I might call the transitional effect of the Plan which resulted in a gradual decrease in water allocations from 30 June 2011 to 30 June 2016 when the recharge level of 83.7 GL/year would be reached, would have the effect of mitigating to at least some extent the socio-economic impacts of the Plan's proposals.

The judicial review grounds of challenge before the primary judge

At [11] of his reasons, the primary judge identified the grounds of judicial review which were advanced by the appellants together with what he referred to as a "host of sub-grounds" many of which were ultimately conflated or not pressed. Those grounds were:

"(1) The Minister failed to have regard to mandatory relevant matters.

(2) The Minister had regard to a prohibited or mandatory irrelevant matter.

(3) Irrationality in reasoning and fact finding or manifest unreasonableness.

(4) The Plan failed to deal with mandated matters."

At [12] his Honour remarked that the appellants' judicial review case fell into three parts, of which only the first two are presently relevant: first, a science case which attacked the Plan's extraction limit of 83.7 GL/year primarily on the basis that it was derived from a hydrogeological numerical model that was said to be so flawed that the Minister's adoption of that figure was irrational; and secondly, a socio-economic case in that the Minister failed to have regard to mandatory socio-economic considerations because there was no formal socio-economic study or no regard to socio-economic considerations on a farm-by-farm basis.

When dealing with what he referred to as the "science issue" which related to the Plan's extraction limit of 83.7 GL/year, the primary judge (at [140]) distilled the appellants' case into the following three grounds:

"Ground 1. In making the Plan, there was a mandatory requirement under the 2000 Act that the Minister consider sustainable yield and recharge and this required the Minister to consider a sound and reliable numerical groundwater model to calculate the true and correct recharge and, thus, sustainable yield. The Ecoseal groundwater model, on which the Plan was based, was not sound and reliable because some of its parameters were unrealistic. In addition the Minister did not consider another mandatory requirement, protection of the water source.

Ground 2. In making the Plan, the Minister had regard to a prohibited irrelevant consideration, namely, the 2005 ASGE Agreement's targeted reduction in water entitlements.

Ground 3. The Minister's decision to make the Plan was manifestly unreasonable because the Plan's extraction limit of [83.7 GL/year] was based on the Ecoseal model which was so flawed that it was irrational to adopt it, and because zones 1 and 2 were hydrogeologically separate from the rest of GWMA 016."

Ground 1, except the last sentence, and Ground 3 were pressed on the appeal. I did not understand the appellants to press Ground 2 in this Court.

However, I pause to note that the reference to the 2005 ASGE was to the Achieving Sustainable Groundwater Entitlements Agreement (ASGE Agreement) between the Commonwealth and the State which provided for joint funding of $110 million to assist communities located in the groundwater systems catchment by funding local projects that improve infrastructure in order to strengthen the local economy. The Agreement also provided for the State to develop a package of up-front ex gratia structural adjustment payments (totalling $100 million) to licence holders to assist them in managing the impact of their reduced water entitlements. Of course the foregoing applied to all the groundwater systems referred to in Schedule 1 of the ASGE Agreement and not only to the Source. Nevertheless, it was relevant to the appellants' assertion that the Minister did not pay due regard to the socio-economic impacts of the proposals included in the Plan.

Importantly, at [141] the primary judge noted that it was common ground, and he accepted as did the parties' expert witnesses, that the Ecoseal model contained erroneous and unreal calibrations in two respects that were identified by Aquaterra in its 2002 review of the model, namely, the storage coefficient and hydraulic conductivity and transmissibility.

It is therefore convenient at this point to refer, first, to the memorandum of Mr Williams and Professor Prathapar of 21 December 2001 and then to the Aquaterra report of 15 May 2002 after which I shall refer to some of the evidence of the experts.

The memorandum of Mr Williams and Professor Prathapar

As already noted, the memorandum dealt with the topic of the estimated sustainable yield of the Source. In essence, on the basis of the Ecoseal model, the authors stated that the estimated sustainable yield for GWMA 016 should be 59 GL/year. However, as a consequence of certain issues relating to two parts of the management area referred to as zones 1 and 2, the authors increased the estimated sustainable yield from 59 GL/year to 83.7 GL/year recommending that an estimated sustainable yield of 84 GL/year be adopted as the relevant maximum value when developing the Plan. However, the Ecoseal model had other flaws which the authors of the memorandum did not, apparently, then recognise. These flaws were identified in the Aquaterra report of 15 May 2002 which presented to the Department a final draft review of the Ecoseal model and sustainable yield estimate.

The Aquaterra report

The Aquaterra report praised the Ecoseal report as being of a high standard, well structured with a high quality of presentation. It was said to have provided good evidence by way of detailed analysis of the model water balances, and predicted water level variations, to justify conclusions regarding sustainable extractions. However, although the model calibration process conformed to best practice in terms of meeting appropriate calibration targets and water balance/numerical error criteria, nevertheless there were two main problems with regard to aquifer parameters for the Calivil and Renmark aquifers, namely, the transmissivity pattern had not been justified in hydrogeological terms and the values for the confined storage coefficient parameter were not physically realistic in that they were too high.

In relation to the estimation of sustainable yield, the Aquaterra authors considered that these parameter issues were probably the most significant problem with the model in its current configuration. However, if the two defects were to be properly addressed in the right way and the model recalibrated, it was possible that there would be little real change in sustainable abstraction estimates although it was also possible that this could result in significant changes thereto. As the adoption of very high storage parameters for large areas of the confined aquifers was not consistent with best practice, it was necessary to adjust those parameters to more physically realistic values and then to recalibrate the model.

With respect to the estimated sustainable yield values as stated in the Ecoseal report and as modified by departmental staff, Aquaterra considered that those values were not sufficiently robust to be permanently adopted at that time (2002), given the potential problems that needed to be remedied. Accordingly, although the model study was generally in conformity with best practice, there were significant inadequacies and consequentially substantial risks associated with the use of estimated sustainable yield values proposed to set groundwater entitlements for the Shepparton and Calivil/Renmark aquifers. However, the authors then noted:

"a cogent argument could be mounted that the [estimated sustainable yield] values proposed by Ecoseal could be adopted as interim measures in an adaptive management process while the model is upgraded as recommended in this report."

Thus the authors continued:

"Notwithstanding the comments made in this report about the unrealistically high storage parameter, the [estimated sustainable yield] values determined for this study are considered by this review to be of roughly the correct order." (Emphasis added.)

In their summary, the authors observed that, with a few notable exceptions, the model study had been undertaken in a very thorough and comprehensive manner and that the methodologies applied were considered to provide a sound basis for quantifying groundwater resources and making groundwater management decisions. Nevertheless the estimated sustainable yield values were based on unrealistically high aquifer storage parameters so that it would be risky, without further model refinement, to adopt the estimates to determine long-term groundwater entitlements (my emphasis).

The foregoing summary of the relevant parts of the Aquaterra report is consistent with the primary judge's summary of its main conclusions at [152] of his reasons. It must also be noted, as his Honour did at [153], that no further modelling or model refinement was performed.

The Jacobs submission to the Minister

In or about October 2006 a submission to the Minister by Mr Digby Jacobs, an executive officer of the Department who was involved in the development and implementation of the Plan and apparently responsible for the processing of the Plan, and concurred in by a number of other senior officers including the Director-General of the Department, recommended that the Minister make the Plan subject to the concurrence of the Minister for the Environment. The submission stated that the Plan "includes a structural adjustment and entitlement reduction process that reduces the entitlement by 68 per cent overall within a framework of weighted entitlement change and ASGE payments to licences [sic]", the latter being a reference to the ex gratia payments referred to at [31] above. The package, so it was stated, had been agreed by the Australian Government. The author further noted that a draft plan had been placed on display for public comment which resulted in approximately 40 submissions being received which were considered by the MGMC at its final meeting and the recommended changes had been incorporated into the submitted Plan. The submission also stated that the decisions regarding the appropriate sustainable yield and environmental provisions in the plan included officers from the Department of Environment and Conservation as members of the MGMC. The submission then stated the following:

"The Plan does not provide for variation of the sustainable yield or environmental water provisions during the duration of this plan for the following [relevant] reasons:

● The Lower Murray Groundwater Source has the best hydrological model available presenting a high confidence in groundwater recharge as set in the Plan."

At [154] of his reasons the primary judge accepted that the reference to the "best hydrological model available" may be rationalised on the basis that the Ecoseal model was at that time the only model but that the reference to "high confidence" was difficult to rationalise as it was inconsistent with the evidence of the expert witnesses as well as the Aquaterra report.

Mr Jacobs gave evidence and was cross-examined with respect to his submission to the Minister. He acknowledged that he had read the Aquaterra report and that it would also have been read by the principal hydrogeologist, Mr Williams, who was located in Sydney at the time (but not called in the Minister's case) as well as other hydrogeologists within the Department. He acknowledged that the departmental hydrogeologists were the custodians of the model. It was put to Mr Jacobs that there were two main problems with the model. The first concerned the issue of transmissivity in the central and western parts of layer 2 (the Calivil aquifer). The second was that the values attributed to the confined storage coefficient parameters were not physically realistic in that they are too high, both in areas of layer 2 and in some parts of layer 3 (the Renmark aquifer). Mr Jacobs agreed that the confined storage coefficient parameters were "incredibly important" to the model and its accuracy.

He was also aware that the Aquaterra report was telling him that there were problems relevant to the derivation of a reasonably precise sustainable yield and that it was possible that associated model upgrades could involve changes in several parameters which might result in a more physically realistic model. When it was put to him that both of the problems already referred to were vitally critical parameters for the Ecoseal model to work, he responded "[y]es and that was provided [for] advice to our hydrogeologists", specifically Mr Williams. He acknowledged that the statement in the Aquaterra report that it would be risky to adopt the estimates in the model without further refinement concerned him although the report provided him with additional information and opinion.

The following exchange then relevantly occurred:

"Q. You wouldn't have gone on to describe the Ecoseal model, would you, to the Minister as the best available knowing that?

A. This was one point in time when we were looking for further information from our own hydrogeologists.

Q. Yes, at 2002 you would not have described the Ecoseal model as the best model available, would you?

A. As at that time you would've - this would have cast doubt.

Q. And you agree, don't you, that having regard to the fact that these comments were received in 2002 there was ample time between 2002 and 2006 to recalibrate the model and put in realistic parameters, correct?

A. There would have been enough time should this have been accepted, yes.

Q. Now, was the Ecoseal model ever modified to have regard to the Aquaterra comments?

A. I can't comment on that. I don't know.

Q. Who could comment and tell his Honour and assist his Honour about that?

A. The hydrogeologists of the department.

Q. And who would they be again?

A. Well actually as a matter of fact Mike Williams has retired but Mike Williams and his group at the time.

Q. Right because am I hearing this correctly, that you referred Aquaterra to someone else to action?

A. To our hydrogeologist, yes. They were party to this review as well.

Q. In other words, they were aware of the comments, is that what you're saying?

A. Yes."

A little later the following further exchange took place:

"Q. And you were aware, weren't you, from the Aquaterra criticisms that the model was not calibrated, checked against reality by matching its output with observations of the real world, correct?

A. That was the Aquaterra opinion, yes.

Q. Did you take any steps to correct this document?

A. I sought advice from the hydrogeologists of the New South Wales office."

No doubt for tactical reasons Mr Jacobs was not asked by counsel for either party as to what advice he had received from the departmental hydrogeologists. Needless to say no documentation was tendered which may have thrown light on what that advice might have been, whether supporting or criticising the Ecoseal model.

It is difficult to make anything of this cross-examination. It was not suggested that Mr Jacobs intentionally misled the Minister when he stated in his submission that the model was "the best hydrological model available" or that it presented "a high confidence in groundwater recharge as set in the Plan". At its highest, the cross-examination merely confirms the obvious, namely, that Mr Jacobs could not rationally have had high confidence in the accuracy of the model in terms of the recharge figure adopted in cl 16 of the Plan subject, of course, to whatever advice, if any, he received from the departmental hydrogeologists.

In any event, as noted at [31] above, on 4 November 2005 the Commonwealth and the State of New South Wales had entered into the AGSE Agreement, an agreement for the provision of funding from the Australian Government Water Fund to achieve sustainable groundwater entitlements. Clause 5 of the agreement provided that the State agreed to "implement, from 1 July 2006, Water Sharing Plans (as provided for in [the Act]) that reduce[d] (over a 10 year period) the water entitlements of water licence holders" in, inter alia, the Lower Murray (my emphasis).

The schedule to the ASGE Agreement provided for the State to undertake a number of activities to the Commonwealth's satisfaction including the development of a proposed methodology for reducing water entitlements and the groundwater systems that took into account a licence holder's historical extraction of water from the relevant system and achieved after 10 years an overall reduction in water entitlements in respect of each of the systems. With respect to the Lower Murray the reduction required was 167,000 ML (or 68 per cent). The adoption of the estimated sustainable yield of 83.7 GL/year was intended to achieve that reduction.

It would thus appear that at the very latest, by the time the ASGE Agreement was entered into the Minister had adopted, at least for the purpose of the ASGE Agreement, an estimated sustainable yield of 83.7 GL/year. Although when dealing with Ground 5 of the their notice of appeal, which challenged the primary judge's findings as to whether the respondent had taken sufficient account of socio-economic benefits to the community in making the Plan, the appellants submitted that the State (and, therefore, the Minister) had already committed itself to the reduction referred to in the schedule to the ASGE Agreement and, therefore, to an estimated sustainable yield of 83.7 GL/year, and that this amounted to a form of pre-judgment without consideration of the social and economic benefits to the community and thus a failure to comply with a mandatory requirement under the Act, that allegation was not a specific ground of appeal and there were no written submissions with respect to it. What it does, if anything, is indicate that the Minister considered, before he received Mr Jacobs' submission of October 2006 recommending the making of the Plan, that an estimated sustainable yield of 83.7 GL/year should be adopted. In other words, it is arguable that notwithstanding what would appear to be an overly optimistic assertion by Mr Jacobs in his submission, it had no influence upon the Minister's decision to include an estimated sustainable yield of 83.7 GL/year in the Plan.

The expert evidence

The primary judge at [139] concluded that, if Mr Wade's evidence was admissible, it was only admissible in relation to the irrationality or manifest unreasonableness ground of judicial review. Although not mentioned at [139], this conclusion must have applied to Ms Hamilton's evidence as well. As he noted at [144] of his reasons, the main issue dividing the experts concerned the reliability of the Ecoseal model and whether it was rational to use it. His Honour dealt with that evidence at [155] - [174]. On 8 March 2013 Mr Wade and Ms Hamilton issued a joint report. There was no issue between them or between the parties that the Ecoseal model contained erroneous and unreal calibrations in several respects. As noted above, a number of flaws in the model had been identified by Aquaterra in its 2002 review; in particular, physically unrealistic parameters concerning the storage coefficient and hydraulic conductivity and transmissivity.

The respondent submitted that the real contest between the experts was whether the Ecoseal model was of no probative value and thus so flawed that no reasonable decision maker in the position of the Minister could rely on the adjusted modelled output that derived the initial extraction limit of 83.7 GL/year referred to in cl 32(2) of the Plan (my emphasis). Mr Wade accepted that the flaws that he identified in the first of his reports were no different to those which had been identified in the Aquaterra report. Both experts agreed that as the different aquifer properties were interdependent, it was not possible to know their combined effect on model fluxes without recalibrating the model. Further, because those fluxes were dependent on the physical parameters to reasonably simulate reality, the model failed to conform to the Murray Darling Basin Commission Groundwater Flow Modelling Guidelines (MDBC Guidelines) because calibration was achieved without constraining aquifer and aquitard properties by acceptable methods.

However, both experts adopted Aquaterra's comment that apart from the identified problems, the modelling work was assessed as generally conforming to best practice. They also agreed with those parts of the report to which I have referred at [36] - [38] above. On the issue as to the reliability of the model as a basis for, or for use in the process of, evaluating the long-term average extraction limit, they both agreed that if there are known problems with the input parameters, then there are associated problems with the reliability of the output which could have been improved by recalibrating the model.

It is at this point that the experts parted company. Mr Wade expressed the opinion that for the reasons he set out the model was completely unreliable. He agreed with the author of a paper he identified as being referred to in the MDBC Guidelines that stated that:

"[a]lthough the difficulty in performing a thorough and rigorous modelling study is appreciated, it should be realised that the decisions made based on erroneous model application are arbitrary and have no scientific basis".

Mr Wade was of the view that considering the "fundamental flaws" with the model, it should have been recalibrated before it was used in any way to evaluate fluxes which were then used to evaluate extraction limits.

The experts then responded to the question of whether it was unreasonable and irrational to use the model to establish the long-term average extraction limit in all the circumstances, particularly having regard to the economic impacts on the GWMA 016 for this purpose ultimately brought about. In their joint answer they noted that the problems with the model resulted in one with less reliable outputs than would have been achieved if the input parameters had been better constrained. They noted that both Mr Williams and Aquaterra had recommended that the model be recalibrated to provide a more reliable estimate of fluxes. However, they acknowledged the note in the Plan that provided that it would be recalibrated and refined during its term.

Importantly, the experts also noted that the Plan provided that the extraction limit for the Source was initially 83.7 GL/year plus total water made available to supplementary water access licences plus the total requirements for basic landholder rights at the commencement of the Plan. The latter was estimated at 1.525 GL/year. At the commencement of the Plan the estimated sum of supplementary water access licences was 48.4 GL/year, a total of 133.625 GL/year. It was further noted that the volume of water made available to supplementary water access licences for the first four years of the Plan was 1 ML/share which reduced by 0.2 ML/share each year from year five so that at the commencement of year 9 it would be zero. Correspondingly, the long term average extraction limit also reduced over the life of the Plan from 133.705 GL in year 1 of the Plan to 83.7 GL in year 10. The Plan provided that the long-term average extraction limit was approximately 142 per cent of the estimated sustainable yield based on the modified modelled fluxes, a reference to the modifications carried out by Professor Prathapar and Mr Williams. It was noted that the long-term average sustainable limit was not set at the modelled flux outputs, but it was informed by them.

Reference was also made by the experts to the relevant rules in the Plan for the management of local impacts which included the provision of flexibility for licence holders to access more than their individual share component in any one year by way of accounting rules which permitted aquifer access licence holders to carry over unused allocations up to 200 per cent of their share component into the following year.

In the foregoing circumstances Ms Hamilton stated that it was neither unreasonable nor irrational to utilise the Ecoseal model to inform the assessment of the long-term average extraction limit set in the Plan. Whilst that limit provided an overriding limit to extraction, the rules of the Plan were an integral part of the management strategy to ensure the resource was managed within acceptable levels of impacts.

Mr Wade on the other hand repeated his view that as the magnitude of the error in the model flux output was unknown and could not be known without recalibrating the model incorporating the recommended constraints and improvements, what was known was that there were fundamental problems with the model input which were common errors in model application, such that model output was unreliable. As the flaws of the model were not addressed, there were significant potential economic impacts associated with using the model in any way to constrain groundwater extraction. Therefore, it was unreasonable and irrational to use the model without first recalibrating to address the known issues.

As the appellants' submissions noted, Mr Wade gave evidence that he had compared the flux calculations from application of the Ecoseal model and those conducted in 2008 by what was referred to as the CSIRO model (in which the aquifer parameters were said to be constrained to a reasonable range) in order to determine whether the estimate of recharge (or flux) and thus sustainable yield were equivalent under both approaches.

The primary judge dealt with the evidence of Mr Wade in his first report (dated 24 February 2012) with respect to the 2008 CSIRO model at [156] - [158] of his reasons. That model was of an area approximately twice the size of GWMA 016. According to Mr Wade's first report, the total inflows/recharge for the Calivil/Renmark aquifers based on the CSIRO model were 296 GL/year compared with 86 GL/year under the Ecoseal model.

In his first report Mr Wade did not draw any conclusion as to the sustainable yield of GWMA 016 based on the inflows/recharge estimates used in the 2008 CSIRO model. However, after discussing that subject in 2010 with an author of that 2008 report, Mr Wade made his own estimate of sustainable yield. That author presented an estimated long-term average "sustainable diversion limit" (SDL) (a term introduced by the Water Act 2007 (Cth)) for GWMA 016 of 102 GL/year. That estimate included a precautionary discount for uncertainty in the CSIRO model. Mr Wade considered the validity of that discount to be questionable and disregarded it when making his estimate of the sustainable yield for the Calivil/Renmark aquifers. This estimate was equal to the undiscounted SDL quantity of 128 GL/year derived from the CSIRO model, and was approximately 50 per cent greater than the figure of 83.7 GL/year adopted in cl 16 of the Plan.

Mr Wade's estimate of sustainable yield was the subject of further consideration by the experts who later produced a short joint report dated 11 April 2013 (the date upon which they gave evidence) in which it was recognised by Mr Wade that, contrary to his earlier understanding, the CSIRO model SDL figure of 128 GL/year was for the shallow Shepparton aquifer as well as the deep confined Calivil/Renmark aquifers in GWMA 016. Only a relatively insignificant part of that shallow aquifer was included in GWMA 016 but that part was not the subject of the Plan. When that model was adjusted to eliminate that shallow water source, the SDL for the two confirmed aquifers was estimated at 91.9 GL/year.

At [197] of his reasons, the primary judge summarised his findings upon the basis that the "science" in the materials available to the Minister was considered without regard to the expert evidence of Mr Wade and Ms Hamilton:

"(a) Ecoseal produced a flawed model which showed a sustainable extraction limit of 66 GL/year;

(b) Professor Prathapar and Mr Williams adjusted this for flaws in relation to zones 1 and 2 to estimate an extraction limit of 83.7 GL/year (rounded to 84);

(c) Aquaterra, whilst identifying further flaws in Ecoseal that made it risky to adopt Ecoseal's estimates, did not propose an alternative extraction limit and considered that the Ecoseal values were of roughly the correct order and that a cogent argument could be mounted that those values be adopted as interim measures in an adaptive management process perhaps of two years while the model is upgraded;

(d) the Plan adopted a long-term extraction limit of 83.7 GL/year (plus an estimated 1.525 GL/year for 'basic landholder rights' as defined, at the commencement of the Plan); and

(e) the Plan required the Ecoseal model to be recalibrated and refined during its term."

His Honour then took account of that expert evidence and considered (at [198]) that it supported the following additional propositions:

"(a) Mr Wade and Ms Hamilton agreed with the flaws in the Ecoseal model identified by Williams/Prathapar and Aquaterra;

(b) Mr Wade considered the Aquaterra model to be useless and irrational whereas Ms Hamilton considered it to be of low reliability;

(c) the CSIRO model indicated that the sustainable diversion limit (which, as I have said, is sufficiently similar, for present purposes, to sustainable yield) was 102 GL/year for both the deep and shallow aquifers;

(c) [sic] in his first report Mr Wade appeared to accept this but thought it was too conservative and increased it to 128 GL/year;

(d) the CSIRO report considered that the average groundwater pumping of approximately 108 GL/year post 2000 'including shallow pumping' was unsustainable;

(e) the CSIRO 102 and 128 GL/year figures when broken down to apply to the deep aquifers, with which this case is concerned, result in figures that are respectively less, or not significantly more, than the 83.7 GL/year in the Plan;

(f) Ms Hamilton opined that in light of the CSIRO report the Plan's extraction limit of 83.7 GL/year was not manifestly unreasonable or irrational;

(g) Mr Wade took the opposite view but was unable to say whether the CSIRO's approximate 30 per cent of its own estimated inflows as the extraction limit was reasonable without considering the material that led CSIRO to that conclusion (although his initial reaction to the question was that it was not); and

(h) Mr Wade (like the applicants) was in error in assuming that Ecoseal adopted an extraction limit which was 100 per cent of sustainable yield."

I turn now to the grounds of appeal, the relevant findings of the primary judge and my consideration of the submissions made with respect thereto.

Appeal Grounds 1 and 2

These grounds were dealt with together in the appellants' written submissions. They are in the following terms:

"Appeal Ground 1

1. The Applicants' case below, which his Honour wrongly rejected (at [175] - [186] of the Reasons), was that:

(a) 'management' of water use was a mandatory obligation under the Water Management Act 2000 ('the WMA') having, as a critical object, the identification of 'sustainable yield' and 'recharge';

(b) 'sustainable yield' was a mandatory requirement under the WMA for water management purposes, and there was an implied mandatory obligation under the WMA for sound numerical modelling in this regard; and

(c) the identification of 'recharge', and therefore 'sustainable yield' which was referrable to 'recharge' in relation to a water resource managed in accordance with the WMA, was implicitly mandated to require scientific evaluation by sound numerical modelling.

2 The primary judge should have accepted the Applicants' case on these issues.

Appeal Ground 2

3 The Applicants' case below, was that the proper consideration of the requirements of sections 5(d), 5(3), 5(4)(b), 15, 18(1), 20(1)(c), 20(2), 20(2)(f) and 50 of the WMA, the Respondent's authority in making the Plan was dependent on the Respondent identifying the cumulative impacts of the water management licences and approvals on the aquifer resource, and that could not be identified, without irrationality in fact finding, absent a reliable hydro-geological model. His Honour rejected that as a mandatory consideration of the WMA. His Honour incorrectly construed the requirements of the WMA in that regard.

4 His Honour should have determined that those provisions of the WMA meant that the Respondent had to identify the cumulative impacts of the water management licences and approvals on the aquifer resource, and that could not be identified, without irrationality in fact finding, without a reliable hydrogeological model."

At paragraph 3 of the appellants' written submissions on the appeal, they stated that their case relied on establishing the following:

a) That a sound, numerical groundwater model was a mandatory requirement of the Act and that the Minister determined the extraction limit without that requirement so that he therefore failed to have regard to a mandatory consideration of the Act in that regard; or

b) The Minister's finding of the Source's sustainable yield and extraction limit by reference to a fundamentally flawed hydrogeological model was irrational, and the Plan, based on that model, was therefore manifestly unreasonable in the Wednesbury sense (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223).

Appeal Grounds 1 and 2 address the proposition in (a) above whereas Appeal Ground 3 addresses that referred to in (b).

The primary judge's reasons for rejecting proposition (a)

Under the heading "Ground 1: Mandatory Relevant Considerations" the primary judge (at [175]) acknowledged that it was the appellants' case that in making the Plan it was impliedly mandatory under the Act for the Minister to take into account sustainable yield and recharge by using a sound and reliable numerical groundwater model to identify the true and correct recharge and thus the sustainable yield. That requirement was said to arise by implication having regard to the objects of the Act referred to in s 3(c), (e) and (g), the water sharing principles in s 5(2)(d) and (h), the duty in s 9(2) and the requirements of the Outcomes Plan referred to in s 6(3).

At [180] the primary judge accepted that, having regard to s 9(1) and s 5(2)(g) of the Act, there was a statutory implication that it was mandatory for the Minister to have regard to the water management principles when making a plan. He considered that, as a matter of fact, the evidence and the terms of the Plan itself established that the Minister did consider sustainable yield and recharge and that the Minister was not bound to achieve any end to which the water management principles were directed (emphasis in original). This was apparent to his Honour from the language of "take all reasonable steps" in s 9(1)(a) and the word "Generally" at the commencement of s 5(2).

At [181] his Honour rejected the appellants' submission that any obligation of the Minister rose to the level of a duty to establish "a sound and reliable" groundwater model or to identify a "true and correct recharge". The injection of such standards would have the effect, his Honour said, of introducing unpleaded objective jurisdictional facts that the Court would have to then determine on the evidence before it. At no point did the appellants, either in their pleadings at trial or on the appeal, suggest that any requirement of the Act that before a plan could be validly made by the Minister he must have before him a "sound, numerical groundwater model" was a jurisdictional fact. In their written reply submissions, the appellants asserted that they could raise that issue on the appeal but they did not direct any substantive submissions to the point.

The primary judge continued:

"[The Act] does not mandate any particular method of analysis of recharge or sustainable yield. It does not dictate that the method of analysis must include a numeric groundwater model, let alone one that is 'sound and reliable' and achieves a 'true and correct' recharge. Although it is not a mandatory statutory obligation to carry out modelling, there was a model in this case."

Accordingly, his Honour rejected the proposition that the Act could be construed as containing a mandatory requirement that before a valid plan could be made by the Minister pursuant to s 50, he was required to have regard to a sound, numerical groundwater model.

The appellants' submissions

Given that the appellants eschewed that the requirement of a sound, numerical groundwater model was a jurisdictional fact, this aspect of the appellants' case was that the Minister failed to take into account a mandatory relevant consideration, namely the content of a sound, numerical groundwater model. This assumes that such a model was a consideration that the Minister was bound to take into account in making the Plan: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 39-40 (Mason J). To adopt what was there stated by Mason J, in the absence of the Act expressly stating the considerations to be take into account, one must determine from its subject matter, scope and purpose whether it was implied that such a model was to be taken into consideration.

The appellants' submissions accepted, at least impliedly, that none of the provisions of the Act upon which it relied expressly required the Minister to take into consideration, before making a plan, that there had been prepared and made available to him a sound, numerical groundwater model. They relied, for the necessary implication, on the statement in the chapeau of s 3 that the objects of the Act were to provide for the "sustained and integrated management of the water sources of the State"; references in ss 3(c) and (g) to the "sustainable and efficient use of water" and the object in s 3(h) "to encourage best practice in the management and use of water". Reliance was also placed upon the reference in s 5(2)(h) to "the principles of adaptive management".

The appellants further submitted by reference to the evidence of the experts that the recharge of the resource is determined by applying scientific methodology to real world parameters so that if the scientific calculations underlying a recharge determination are incorrect, the sustainable yield will be nullified by the underlying error with the consequence that the recharge can only be determined with the assistance of a "sound and reliable groundwater model". It was further submitted that the primary judge incorrectly rejected sustainable yield as a mandatory requirement of the Act, reference being made to s 5(2)(d) dealing with cumulative impacts of water management licenses and the object of the Act referred to in s 3(e) to provide "for the orderly, efficient and equitable sharing of water from water sources". Reference was also made to s 9(2) which imposed a duty on all persons involved in the administration of the Act (which included the Minister) to exercise their functions in a manner that gave effect to the Outcomes Plan and to s 6(3)(a) which provided that an Outcomes Plan must be consistent with government obligations arising under any inter-governmental agreement of which the State government is a party. One such agreement in force at the time the Outcomes Plan was made was a Council of Australian Governments communiqué issued in 1994 (1994 COAG communiqué) which outlined a framework for reform of the water industry, and in which it was agreed that environmental requirements were to be determined on the "best scientific information available".

Finally, it was submitted that "management" of water use in the Act was a mandatory obligation having, as a critical object, the identification of sustainable yield and recharge. I note that those expressions do not appear in the relevant Part of the Act. This notwithstanding, it was submitted that the identification of recharge and, therefore, sustainable yield in relation to a water resource that is managed in accordance with the Act could only be achieved by scientific evaluation by way of sound numerical modelling with the consequence that such modelling was a mandatory requirement in the determination of the extraction limit adopted by the Plan.

The respondent's submissions

Given that the appellants disclaimed reliance on any jurisdictional fact, the respondent submitted that, in essence, in order to establish Appeal Grounds 1 and 2, the appellants were required to derive from the terms of the Act by implication first, a requirement for the Minister to estimate a sustainable yield for the water source the subject of a plan; secondly, that that estimate had to be based on a numerical groundwater model; and thirdly, that that model had to be "sound", whatever that might mean. Given the evidence in the case, both documentary and expert, it could only mean a model that was free from any fundamental flaws.

The respondent further submitted that the Act does not refer to sustainable yield, groundwater modelling or numerical groundwater modelling. Although there are references in s 3, the objects provision, to "ecologically sustainable development" and "sustainable and efficient use of water" and although one of the "water management principles" is "adaptive management", whether taken severally or cumulatively, these provisions were said to fall short of providing a basis for an implied requirement that all plans made under s 50 may only be based on an estimate of sustainable yield derived from a sound numerical groundwater model.

In Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 at [73] McHugh, Gummow and Hayne JJ observed:

"It is, of course, essential to begin by considering the statutory scheme as a whole. ... On analysis, however, the asserted duty to make findings may be simply another way of expressing the well-known duty to take account of all relevant considerations. The considerations that are, or are not, relevant to the Tribunal's task are to be identified primarily, perhaps even entirely, by reference to the Act rather than the particular facts of the case that the Tribunal is called on to consider."

Their Honours then referred to the well known passage in the judgment of Brennan J in Attorney General for the State of New South Wales v Quin [1990] HCA 21; (1990) 170 CLR 1 at 35-36 where his Honour emphasised the distinction between a review of administrative action on the one hand and the merits of administrative action on the other.

The respondent submitted that the relevance of the foregoing statements of authority is that those matters which a decision maker is bound to take into account are to be determined either by the express words of the statute or by implication from the subject matter, scope and purpose thereof. Relevantly, they are to be determined by reference to the statute itself and not, as the appellants appear to submit, to external non-statutory sources upon which the appellants rely, such as the evidence of Mr Wade that the recharge is determined by applying scientific methodology to real world parameters so that if the calculations underlying that determination are incorrect, the sustainable yield will be nullified by the underlying error.

As the respondent submitted, the primary judge recognised this limitation at [182] of his reasons. It therefore submitted that the opinions of experts, whether contained in documentary or oral form, are simply irrelevant to the question of whether the Act contained preconditions for the making of a valid plan of the type alleged or otherwise required the taking account of a particular consideration identified by implication from the subject matter, scope and purpose of the Act. In this context it is pertinent to note, as the respondent pointed out, that at [139] of his reasons the primary judge concluded that if Mr Wade's evidence was admissible at all, it was only admissible in relation to the irrationality or manifest unreasonable grounds, a finding which the appellants do not challenge. It accordingly follows that it is not open to the appellants to rely, as they have sought to do, upon the evidence of Mr Wade in its submissions on Appeal Grounds 1 and 2.

The respondent further submitted that the appellants' reliance on the words "detailed assessment" in Target 1e of the Outcomes Plan could not be construed as a statutory requirement that the average annual recharge could only be determined by hydrogeological numerical modelling known to be sound. It was further contended that the appellants' reliance upon the 1994 COAG communiqué and the reference therein to the use of "the best scientific evidence available" could not make sound numerical groundwater modelling a necessary precondition to the valid exercise of the Minister's plan making power under the Act. These submissions are clearly correct as the reliance on non-statutory sources external to the Act to imply, as a matter of construction, a mandatory consideration which the Minister is required by the Act to consider, is contrary to authority.

The appellants' submissions should be rejected

In my view the respondent's submissions should be accepted. It is impossible to tease out of the provisions of the Act upon which the appellants specifically rely a mandatory requirement that before the making of a management or water sharing plan under the Act which provides for a sustainable yield or recharge, the Minister is bound to consider a sound numerical hydrogeological model; nor, in my view, can such a mandatory requirement be implied from a consideration of the subject matter, scope and purpose of the Act as a whole. Although the statutory provisions relied upon by the appellants set out objects in s 3 and water management principles in s 5, they are stated in far too general terms to enable one to divine from them a mandatory obligation of the nature of that contended for. Even if one accepts that such modelling is desirable, in my view it is impossible to elevate the desirability of such modelling to the status of a mandatory requirement in the sense that such modelling is the only manner in which the relevant objects and management principles can be achieved. I would therefore reject Appeal Ground 1.

The appellants also challenged the primary judge's statement concerning Mr Jacobs evidence in the last sentence of [194] (set out at [94] above). They submitted that there was no evidence that the Department's internal hydrologists had advised Mr Jacobs that it would not be unreasonable to adopt the figure of 83.7 GL/year. As noted at [45] above, although Mr Jacobs in his evidence stated that he sought advice from hydrogeologists in the New South Wales office of his department, there was no evidence from him or any document tendered that was a direct statement from the Department's internal hydrogeologist that he had advised that it would not be unreasonable to adopt the figure in question. The matter was simply left up in the air.

Although it was submitted by the respondent that it would be a reasonable inference from Mr Jacobs' evidence and from his memorandum to the Minister referred to at [40] - [45] above that he had received advice from the departmental hydrogeologists that the Plan could be made upon the basis of an average annual recharge of 83.7 GL/year based on amendments to the Ecoseal model, it is difficult to draw any such inference notwithstanding that the submission was signed off by the Executive Director Water Management, Mr David Harriss and Manager of Groundwater Adjustment, Mr Gary Coady. However, as the primary judge noted, his conclusion was not dependent upon the evidence of Mr Jacobs; nor, in my view, is it necessary to draw the inference sought by the respondent.

Three important points arise from the foregoing. First, the 68 per cent reduction over the 10 years of the Plan was based, according to the evidence, on the adoption of the extraction limit of 83.7 GL/year. Secondly, that 68 per cent was incorporated into the ASGE Agreement which contemplated the making of water sharing plans which, in the case of the subject groundwater system, would at the end of 10 years reduce existing entitlements by the percentage referred to. It also involved the making of up-front ex gratia payments to licence holders to enable them to better manage the transition to reduced and sustainable water entitlements. Thirdly, the Plan adopted a term of 10 years rather than the 25 years referred to in the last dot point at [110] above. This may have been a reflection of the recognised necessity to recalibrate and refine the Ecoseal model as proposed in the Plan when a longer term plan could be put in place after the contemplated review by the Natural Resources Commission: see [106] above. However, it must be acknowledged that the 10 year timeframe was also part of the ASGE Agreement so making the Plan for 10 years rather than 25 may not have been solely as an acknowledgement of the problems in the model upon which the Plan was based.

A great deal of time was taken up before the primary judge as well as before this Court on the issue raised by the 2008 CSIRO model. It was relied upon by Mr Wade and, therefore, by the appellants to illustrate that a more realistic recharge or sustainable yield for the Source was about three times that adopted in the Plan (although at [167] his Honour referred to Mr Wade in his oral evidence reducing the yield to 50 per cent higher than that under the Ecoseal model, a figure Mr Wade later abandoned as the primary judge noted at [170]). As noted at [108] above, the primary judge rejected (at [195]) Mr Wade's evidence as to the CSIRO model as not being available to the Minister at the time he made the Plan and there is no ground of appeal with respect to that finding.

Nevertheless the issue was addressed at length by both parties and was dealt with by the primary judge at [156] to [173] and particularly at [170]. The issue was pressed by the appellants in oral argument on the appeal, it being submitted that the CSIRO model was relevant as it involved "in one sense" comparing "apples with apples". However, it then transpired that it was possible that the CSIRO model had available to it information that would not have been available in 2002 when the recalibration of the Ecoseal model was recommended by Aquaterra. Accordingly, senior counsel for the appellants accepted that one was not in truth comparing apples with apples.

Senior counsel further acknowledged that "[o]ne can't reject the proposition that the groundwater model in the CSIRO 2008 exercise had additional attributes" and that the CSIRO model was a "much more sophisticated version of the groundwater modelling model" than that of Ecoseal. In those circumstances in my view his Honour was more than justified in rejecting as irrelevant or inadmissible the CSIRO 2008 model, as would I, given senior counsel's very proper concessions.

When one combines all of the above factors, and in the light of the evidence of Ms Hamilton which the primary judge accepted, in my view the appellants' case rose no higher than strong disagreement with the adoption by the Minister of the ultimate extraction limit of 83.7 GL/year. There was therefore no illogicality or irrationality in the Minister's adoption of that figure for use in the Plan notwithstanding that in part it was based on the Ecoseal model which he recognised as requiring recalibration and refinement by so providing in the Plan itself. Furthermore, there were policy considerations such as the ASGE Agreement which required the Minister to put a plan in place when he did. But that of itself would not justify the finding for which the appellants contend.

In my view there was constructively before the Minister material of sufficient probative value as to enable him to make the Plan, notwithstanding the flaws in the Ecoseal model, in circumstances which were neither illogical nor irrational. To adopt the words of the plurality in Li at [76], the Minister's decision to make the Plan did not lack an evident and intelligible justification when its provisions are considered as a whole. For the foregoing reasons, Appeal Ground 3 should be rejected.

Appeal Ground 4

Appeal Ground 4 is in the following terms:

"At [154] of the Reasons, the primary judge wrongly rejected the Applicants' contention that the Respondent received misleading advice as to the quality of the Ecoseal report, on which the 'recharge' and 'sustainable yield' provisions of the Plan were based. His Honour did so on the basis that the allegation was irrelevant, unless it amounted to an allegation of fraud (which was not pleaded."

The primary judge's reasons

This ground of appeal is founded on Mr Jacobs' submission to the Minister for approval of the Plan in October 2006. Its terms are summarised at [40] above. His Honour accepted (at [154]) that although the reference to "best hydrological model available" may be rationalised on the basis that the Ecoseal model was at that time the only model, the reference to "high confidence" was difficult to justify and was inconsistent with the opinion of Ms Hamilton.

His Honour then recorded the submission of the appellants that as Mr Jacobs knew that the Ecoseal model was not the best model available, and knew that it was erroneous to proceed on the basis of "high confidence" in the recharge set in the draft Plan, the Minister must be taken also to have known of those facts. His Honour disposed of the issue by holding that even if the advice of Mr Jacobs was misleading, that was irrelevant to the validity of the Plan unless it amounted to fraud which was neither pleaded nor alleged. His Honour relied in this regard on the decisions in Oates v Attorney-General(Cth) [2001] FCA 84; (2001) 181 ALR 559 at [132] - [136] (Lindgren J); Vasiljkovic v O'Connor [2010] FCA 1246; (2010) 276 ALR 326 at [95] (Edmonds J); McHugh Holdings Pty Ltd v Director General Communities New South Wales [2009] NSWSC 1359 at [66] (Hoeben J).

The appellants' submissions

The appellants submitted that his Honour erred in holding that misleading advice to a decision maker was irrelevant to validity unless it amounted to fraud. Reliance was placed upon what was said in Peko-Wallsend at 31 where Gibbs CJ stated first, that the Minister was bound to consider material correspondence notwithstanding that it had been addressed to a predecessor in office and, secondly, that material in the possession of the Department must be treated as being in the possession of the Minister. Accordingly, if the Minister had not considered that material there was a failure to take that material into account.

The appellants contend, correctly, that Mason J at 36 similarly inferred that the material correspondence had not been taken into account. Further reference was made to a passage in the judgment of Mason J at 37 and to passages in the judgments of Brennan J at 65-66 and Deane J at 70. Their Honours' comments can be summarised in the proposition that a decision of the Minister will be invalid upon the ground of a failure to take into account a material consideration if the Minister is ignorant of salient facts which are not brought to his attention by his departmental officers. In other words, the Minister cannot hide behind his own ignorance of relevant facts known to his Department which he was bound to take into account.

It was submitted that by analogy with Peko-Wallsend, the Minister in the present case was not able to evade responsibility for flaws in the Plan making process. Particularly the Plan does not escape invalidity because the Minister was misled or because only those advising the Minister were aware that the extraction limits in the Plan, and the severe water entitlement reductions that would result, had no sound scientific basis.

The appellants further submitted that the obiter statement of Lindgren J in Oates (at [133]) to the effect that the inadequacy of a departmental memorandum made to the relevant Minister did not vitiate his decision unless it amounted to fraud, had no application to the present case. The appellants relied upon a decision of the Full Court of the Federal Court in Johnson v Williams [2000] FCA 3; (2000) 58 ALD 1 referred to at [134] of Oates where it was conceded that if the Attorney-General had been misled then his decision was liable to be set aside. Lindgren J considered that that concession deprived the case of authority on the question of whether any inadvertent misleading of the Attorney-General by the omission to mention a relevant matter would have rendered the Attorney-General's decision liable to be quashed.

The respondent's submissions

The respondent submitted that the version of this ground of appeal now advanced is different to that which was advanced below. It contended that the ground as presently framed asserts that the Plan is invalid because the Minister received a briefing note that contained factual errors (without any accompanying allegation that Mr Jacobs knew that the note was erroneous). It was submitted that this version of the relevant ground of invalidity was not pleaded or argued below as some form of misrepresentation and should not be permitted to be raised on appeal. Nevertheless if the Court allowed the ground to be advanced, it was submitted that the relevant principle was correctly stated by his Honour to the effect that advice to a decision maker that is wrong or misleading on a question of fact is generally irrelevant to validity unless it amounts to fraud. It was submitted that there was no reason to doubt the principle in Oates which was consistent with the general administrative law principle that a mistake of fact is not a ground of review and that administrative findings of fact are not open to challenge merely on the basis that they are wrong: see Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at 55-56.

The respondent further submitted that the attempt by the appellants to outflank Oates by calling in aid the High Court's decision in Peko-Wallsend was without merit. In that case the Minister had failed to take into account a mandatory relevant consideration, being submissions made to the Minister. The High Court found that such submissions were a mandatory relevant consideration in the sense that, on the proper construction of the relevant statute, they were required to be taken into account. None of the judges in Peko-Wallsend considered whether misleading advice in relation to a non-mandatory consideration could render a decision legally flawed.

The critical point in Peko-Wallsend, so it was contended, was that on the proper construction of the statute the Minister was bound to consider the submissions. In the present case there is no equivalent statutory obligation, express or implied, to consider the soundness of any numerical groundwater model used to determine the long-term annual extraction limit in the Plan made under s 50 of the Act. The Minister was not bound to make use of such a model and so was not bound to give proper consideration to the soundness of any model he happened to use.

Finally, the respondent acknowledged that, at a factual level, the statement by Mr Jacobs that the Minister could have "high confidence" in the recharge figure was "difficult to rationalise", as the primary judge found (at [154]). However, that did not mean that it was positively misleading or erroneous. It was an opinion as to a technical matter of fact given by a lay person. Accepting that the Ecoseal model outputs were of "low reliability", Mr Jacobs' opinion that the Minister could have "high confidence" in the recharge figure drew some support from the opinions of hydrological experts who supported the figure albeit with some reservations on the part of Aquaterra once adjustments had been made.

The appellants' submissions should be rejected

In my opinion, Oates is some authority for the proposition that misleading advice to a Minister, of itself, does not necessarily lead to invalidity of a decision which, presumably, takes into account that advice. Oates and McHughHoldings were referred to by McKerracher J in Zentai v O'Connor (No 3) [2010] FCA 691; (2010) 270 ALR 293 at [357] where his Honour recorded the submission of the Commonwealth that there can be no reviewable error simply because a decision maker makes a wrong finding of fact and factual error, if any be found in the material before the Minister in that case did not render his decision invalid. At [362] McKerracher J held that for there to be jurisdictional error, erroneous information must have been supplied deliberately and in effect, in bad faith. These authorities are consistent with the manner in which the issue was approached by the primary judge.

As the respondent contended, on the appeal the appellants took a somewhat different tack to their approach below in submitting that the Minister must have taken account of Mr Jacobs' statements as to having "high confidence" in the Ecoseal model which thereby led him into error in that he must have failed to take into account a relevant consideration, namely, that the model was fundamentally flawed. I note that it was not submitted by the appellants that the taking into account of Mr Jacobs' statement involved taking into account an irrelevant consideration.

In Phosphate Resources Ltd v Minister for the Environment, Heritage and the Arts (No 2) [2008] FCA 1521; (2008) 251 ALR 80 Buchanan J, after citing various passages from the judgments of Gibbs CJ and Brennan J in Peko-Wallsend, remarked at [95] that although a Minister is entitled to rely upon the advice and analysis of officers of his Department, when he does so and that advice is materially inadequate or misleading, any such failing may introduce legal error into the Minister's decision. Whether it does so will depend upon the significance of the error or omission in the advice tendered.

Relevantly to the present case, at [103] Buchanan J remarked as follows:

"However, the decision taken by the Minister was required to be an informed decision. Furthermore, the Act required that it be informed in certain specified ways and that particular matters and documents be taken into account. Any advice to the Minister about the matters he was required to take into account had to be accurate. Any summary of those matters had to be relevantly accurate and complete."

The important point for present purposes illustrated by the above passage is that it is authority for the proposition that where the relevant statute requires the Minister to take into account particular matters or documents, any advice to the Minister about such matters and documents must be accurate and complete. Accordingly, misleading advice does not lead to invalidity unless the matter the subject of the advice is a matter which the statute mandates must be taken into account by the relevant decision maker. In the present case, the soundness of the Ecoseal model was not such a matter.

It can probably be inferred that the Minister took into account the contents of Mr Jacobs' submission including the statement that he could have "high confidence" in the relevant model. The real issue, as I have observed, is whether the Minister failed to take into account a relevant mandatory consideration, namely, that the model was in fact flawed and, therefore, not one in which he could have "high confidence". As I have noted above, the soundness of the model was not a matter the Minister was bound to consider.

But even if it was a relevant matter which the Minister was required to take into consideration, nevertheless in my view it cannot be said with any degree of confidence that the Minister was unaware of, and therefore failed to take into account, the undoubted fact that the Ecoseal model was flawed. He had before him, constructively, the Aquaterra report which identified the flaws in the model but also expressed the view that, notwithstanding those flaws, the extraction limit referred to in the model was roughly of the correct order. In other words, the Minister took into account the flaws in the model with the consequence that Peko-Wallsend has no relevance to the present issue. Furthermore, in view of the constructive knowledge of the Minister, he could not have been relevantly misled by Mr Jacobs' rather exaggerated comment. This is particularly so as he must be taken to have had knowledge that the Plan that he was about to make expressly contemplated the necessity to recalibrate and refine the Ecoseal model during its term.

Accordingly, in my view, Appeal Ground 4 should be rejected.

Appeal Ground 5

Appeal Ground 5 is in the following terms:

"8 The primary judge wrongly considered that the Respondent had taken all reasonable steps to maximise the 'social and economic benefits to the community', which were mandatory requirements of the WMA. His Honour should not have made that finding in circumstances where, on the evidence before the primary judge:

(a) the Respondent established the Murray Groundwater Management Committee ('MGMC') as an 'advisory committee under the [WMA]' and that the MGMC's Chairman had the task to 'recommend a water sharing plan for the Lower Murray groundwater system ... to meet the statutory requirements of the [WMA]';

(b) the Respondent identified the 'committee's role in this process' as being to:

(i) 'determine the key social, environment, heritage, cultural and economic features that the water sharing plan must address'; and

(ii) 'consider how any existing or proposed quantity management and sharing rules [would] support the agreed objectives and outcomes'.

(c) the Respondent further went on to state that '[w]here there [we]re gaps, the committee should consider other options, their socio-economic impacts and the other cost implications of implementation';

(d) the MGMC formed a Sub-committee, or Working Group, to determine the socio-economic impact of the draft water plan to be proposed by comparing the effects of that plan versus a status quo or 'no plan' position. Even though the MGMC appointed the Sub-committee to investigate the socio-economic impacts on the basis of a 'no plan' position as occurred in the Lower Macquarie for GWMA 016 this never happened; and

(e) the matter remained with the Respondent and the Plan was made without resolution of that issue.

9 On the whole of the evidence before the primary judge, his Honour should have found that the Respondent failed to satisfy the mandatory requirements of the WMA, in respect of the 'social and economic benefits to the community' in making the Plan."

The primary judge's reasons

At [204] the primary judge stated the appellants' socio-economic case as follows:

"(a) The Minister was bound to have due regard to socio-economic impacts of the proposed Plan: ss 18(1) and 50(2A) of the 2000 Act. This required that socio-economic impacts be assessed in a formal study or at a farm-by-farm level. Supporting this construction is s 5(2)(g) which required the Minister to maximise 'the social and economic benefits to the community' and s 20(1)(c) which required the water sharing provisions of the Plan to deal with 'the identification of requirements for water [for] extraction under access licences';

(b) No formal socio-economic study or on a farm-by-farm basis was conducted and the Minister thereby failed to properly consider the socio-economic impacts of the Plan."

At [206] his Honour noted that the respondent accepted that by reason of ss 18(1) and 5(2)(g) of the Act, the Minister was bound to have due regard to the socio-economic impacts of the proposal considered for inclusion in the Plan. However it should be noted that whereas s 5(2)(g) refers to the maximisation of social and economic benefits to the community (my emphasis), s 18(1) refers to the socio-economic impacts of the proposals considered for inclusion in the draft Plan (again my emphasis). As will become apparent, it is the failure of the Minister to consider the latter rather than the former of which complaint is made.

In any event the primary judge rejected (at [207]) the appellants' submission that the Minister was under a duty to maximise the social and economic benefits to the community in making the Plan. A duty framed in such terms, his Honour remarked, overlooked the fact that s 9(1) required the Minister to "take all reasonable steps" when making a water management plan to do so in accordance with the water management principles as a whole.

His Honour then turned (at [208]) to the discussion by the MGMC in 2001 with respect to commissioning a formal socio-economic study or whether it should compare a "no plan" scenario relative to what would happen under the proposed Plan and whether it was possible to conduct a farm-by-farm analysis of its impact. In 2002 the MGMC established a sub-committee to pursue this further but was unable to arrive at a consensus as to the methodology for such a study with the consequence that no such study was conducted. However, the MGMC did consider the ways that the effects of the proposed reduction in entitlements could be minimised or distributed more fairly between licence holders.

At [209] his Honour noted that the fact that no socio-economic study was carried out on a farm-by-farm basis or otherwise, was brought to the Minister's attention in July 2006 after the public exhibition of the draft Plan and the MGMC's consideration of public submissions. The MGMC recommended that such a study to investigate the impact of entitlement reduction on the viability of affected farms be carried out during the first five years of the Plan.

At [210] his Honour concluded that the statutory obligation on the Minister to have due regard to the socio-economic impacts of a proposed plan (as required by s 18(1)) did not include a mandatory requirement to conduct a formal socio-economic study or to consider individual impacts on a farm-by-farm basis.

After referring to a number of authorities not presently relevant, at [215] the primary judge noted that the concept of socio-economic impacts in the Act itself was very broad. Reference was made to s 3(c) of the Act, which lists (inclusively) a number of socio-economic benefits to the State that result from the sustainable and efficient use of water. At [216] his Honour referred to the "overarching way" in which the Minister had due regard to socio-economic impacts by recognising that entitlements had to be reduced to ensure the sustainable long-term use of the resource. His Honour found that the MGMC and the Minister considered a wide range of socio-economic factors of which the primary judge then set out some five which included the ASGE program which would provide substantial ex gratia payments to eligible licence holders to alleviate impacts of entitlement reductions as well as the provision of supplementary water access licences to alleviate the impact on those who had actively used their water entitlements in the past.

His Honour concluded at [217] that the evidence before the Court was replete with examples of consideration of socio-economic impacts by the Minister and others involved in developing the Plan of which the respondent had provided examples in a 30-page list forming part of their submissions and which was made available to this Court on the hearing of the appeal. His Honour's finding at [217] was not challenged or the subject of a ground of appeal.

The appellants' submissions

In their written submissions the appellants contended that, contrary to the primary judge's construction of s 9(1) at [207] of his reasons, the Minister will not have discharged his duty if the steps taken by him were unreasonable. In this context it was submitted that the steps taken by the Minister to maximise the social and economic benefits of the community were unreasonable although that submission was not particularised. In any event, the existence of such a duty was inconsistent with the primary judge's holding that the Minister's obligation, which requires an evaluation, was "to take all reasonable steps" to promote "generally" the relevant water management principles as a whole.

It was nevertheless submitted that the evidence before the primary judge established that the respondent totally ignored the social and economic impacts of the proposals on the community.

It is convenient to address this argument at this point. Pursuant to s 18(1) of the Act, a management committee was required to have "due regard" to the socio-economic impacts of the proposals considered for inclusion in the draft Plan. There was no specified duty equivalent to s 18 that required the Minister or a committee to have due regard to the social and economic benefits of those proposals on the community: albeit that it was a water management principle under s 5(2)(g) of the Act that social and economic benefits to the community should be maximised, and an object of the Act that the significant social and economic benefits to the State that result from the sustainable and efficient use of water should be recognised and fostered.

The submission that the Minister totally ignored the socio-economic impacts of the proposals on the community was based upon the MGMC's minutes of its final meeting in June 2006 when it noted that there was a need to have an understanding of the socio-economic impact of the Plan and resolved that in order to refine the Year 5 review of the Plan, it was recommended that a socio-economic impact study be taken at an appropriate scale to determine the effects to groundwater-dependent enterprises due to the implementation of the Plan. It commented that the Murray Catchment Management Authority's model had attempted to address socio-economic impacts by strategically allocating supplementary water and financial assistance. That was a reference to the Authority's model which was accepted by the MGMC.

In a letter dated 24 July 2006 from Mr Philip Eberbach, the Chair of the MGMC, to the Minister, Mr Eberbach noted with respect to the draft Plan that the proposed methods of devolution of structural adjustment funds to affected licence holders and access to supplementary water, were developed by the Authority after consultation with the community. The letter went on to note that the MGMC had met to discuss public submissions made in response to the public viewing of the draft Plan and, where appropriate, after consideration of the submissions, to amend the Plan. The MGMC said that several points which arose from those submissions would require attention over the duration of the Plan including the lack of socio-economic consideration of the impact of the Plan on individual licence holders in the region. The recommendation of the MGMC was that during the first five years of the Plan the State should conduct a comprehensive socio-economic study to investigate the impact of entitlement reduction on the viability of affected farms and the region.

The appellants' written submission was in essence that in light of these matters the Minister had totally ignored the social and economic impacts of the proposals on the community because prior to the making of the Plan he had not carried out a socio-economic study as recommended by Mr Eberbach. The immediate difficulty with that proposition is that the MGMC had considered and accepted the Authority's proposed methods of devolution of structural adjustment funds to affected licence holders and access to supplementary water, each of which were matters relevant to the socio-economic impact of the proposals in the draft Plan.

It was submitted that the evidence established the Minister and his staffers received many representations from licence holders in the Plan area but they did not take any of them into account or modify the reduction proposals in any way as established by the evidence referred to. I have already referred to part of that evidence at [150] - [151] above. The only other evidence relied upon in the written submissions was the ASGE Agreement to which I have referred at [31], and [47] - [48] above. It was submitted that that evidence established that the reduction targets were implemented to achieve a state-wide groundwater reduction target which was not authorised by either the Act or the Outcomes Plan. Whether this be so or not appears to be beside the point. It does not establish the proposition that the Minister and his staffers did not take any of the representations into account irrespective of whether they modified the reduction proposals. As it happened, the Plan contained measures designed to mitigate the impact of the reduction proposals as already canvassed above.

In their written submissions the appellants ultimately contended that in the present case the mandatory duty which the Minister breached was that set out in s 9(1) of the Act in that he had not taken all reasonable steps to promote the water management principles in s 5 including that social and economic benefits to the community should be maximised. Again, reference is made to the MGMC recommendation for the need of a socio-economic study, it being submitted it was the MGMC's belief that such a study was required if the Minister was "to take all reasonable steps" to implement the water management principles where social and economic benefits to the community were concerned.

In oral argument the appellants' case on this issue was put quite differently. Rather than being based on an alleged breach of s 9(1) it was contended that the Minister had breached s 18(1) in that in formulating a draft management plan he was bound to have due regard to the social and economic impacts of the proposals considered for inclusion therein. Although the effect of s 50(2A) is to apply s 18(1) to the Minister's Plan, the appellants submitted that there was a timing issue involved as the literal construction of s 18(1) required "due regard" to be had to the socio-economic impacts of the proposals considered for inclusion in a draft plan before that draft plan was in fact prepared. It was in the formulation of the draft plan that the due regard was to be had. The difficulty with this proposition is that the Minister, unlike a s 12 management committee if directed by the Minister to do so, is not required to prepare a draft plan although in the present case he did so. Moreover, although not obliged as is a management committee to place its draft plan on public exhibition, the Minister did so through the MGMC and received and considered submissions from the public thereon.

The appellants' submissions on this issue were, with respect, difficult to follow for ultimately it was contended that even if the Minister had regard to the socio-economic impacts of the proposals by inserting mitigating provisions into the Plan, this was too late as "due regard" was to be had to such impacts before the Plan was prepared. With respect, this makes no sense of the application of s 18(1) to a Minister's plan as distinct from a management committee's draft plan. In my view s 18(1) should be construed as imposing upon the Minister an obligation to have due regard to the socio-economic impacts of the proposals considered for inclusion in his Plan, due to the operation of s 50(2A) of the Act. However, it does not require that "due regard" be given or undertaken in any particular manner.

It was further contended that because the ASGE Agreement referred to at [154] above envisaged a pre-determined, particular outcome with respect to the Source said to be based on the Ecoseal recharge figure, the Minister had failed to comply with the mandatory requirement of s 18(1) to have due regard to the socio-economic impact of the proposals considered for inclusion in the Plan. In other words the Minister had, as a matter of timing, determined a critical integer of the Plan before he had complied with s 18(1).

Finally, it was submitted that it was for the Minister, in effect personally, to pay due regard to those socio-economic impacts, not the MGMC, and that he had not done so. That submission was contrary to the primary judge's unchallenged finding at [216] as to the various ways in which the Minister had considered such factors.

The respondent's submissions

In his written submissions the respondent noted that he had conceded below that by reason of ss 18(1) and 5(2)(g) of the Act, the Minister was bound to have due regard to the socio-economic impacts of the proposals considered for inclusion in the Plan. It was submitted that the respondent had adduced extensive evidence of the various ways in which the Minister had fulfilled that obligation. A 30-page list of matters was tendered to his Honour and referred to by him at [217] of his reasons. It was not contended by the appellants that the matters referred to in that list were not relevant to the socio-economic impacts of the proposals. Rather, their contention was, by their written submissions, that s 9(1) and, by their oral submissions, that s 18(1) could only be satisfied by the completion of the socio-economic study recommended by the MGMC. It is noteworthy that in Mr Jacobs' submission to the Minister of October 2006 he advised that the draft Plan had been amended to reflect recommendations arising from the report of the MGMC on the public exhibition of the Plan as well as the ASGE program: see [110] above. The submission further stated that the public comments were considered by the MGMC at its final meeting and the recommended changes incorporated into the plan submitted for the Minister's approval.

The respondent submitted that the Minister's duty was to have due regard to socio-economic impacts and the primary judge properly found that this duty did not extend to the commissioning of a formal study. In particular, s 20(1)(c) upon which the appellants initially relied could not give rise to a duty to conduct a socio-economic study. The fact that the MGMC had considered commissioning such a study but did not proceed to do so could not be determinative of whether the Minister had fulfilled his statutory duty. The findings of the primary judge as to the steps taken by the MGMC and/or the Minister and his staffers in relation to the issue of socio-economic impacts was more than sufficient to satisfy the obligation imposed upon the Minister by s 18(1).

The appellants' submissions should be rejected

In my view the respondent's submissions should be accepted and those of the appellants rejected. As I have noted, the respondent provided a 30 page list of matters which it asserted the Minister or his delegates had considered with respect to the socio-economic impact of the proposals considered for inclusion in the Plan. Furthermore, there was no challenge (nor could there be) to the primary judge's finding of fact at [217] to the effect that there was a plethora of examples justifying the conclusion that the Minister gave due regard to the socio-economic impacts of the proposals.

Essentially, the appellants' case originally rested on the failure of the Minister, prior to making the Plan, to conduct a socio-economic study on a farm-by-farm basis. Obviously, that would be one way by which the socio-economic impacts of the proposals could be measured. But it was not the only way. The Minister was only required to have "due regard" to the socio-economic impacts: he was not required to eliminate them although, in fact, he significantly mitigated them.

In my view the submission based on the terms of the ASGE Agreement is without merit. The issue posed by s 18(1) is whether before he makes the Plan the Minister has had due regard to the proposals considered for inclusion therein. One of those proposals was the average annual recharge figure of 83.7 GL/year. Even if that integer used in the ASGE agreement was also used to determine the overall percentage reduction of existing entitlements under the Plan, that would not prevent the Minister complying with s 18(1) before he made the Plan. There was no finding by the primary judge on this point, because it was not argued before him.

Finally, the suggestion that the Minister was not entitled to rely on the steps taken by the MGMC with respect to the socio-economic impacts of the proposals considered for inclusion in the Plan is equally without merit. The MGMC was appointed by the Minister under the Act to advise him on such issues and that is what it did.

In my view the appellants' contentions that there was a breach of s 18(1), or for that matter s 9(1), by the Minister cannot be sustained. I would therefore reject Appeal Ground 5.

Conclusion

In my view, none of the appellants' grounds of appeal succeed. Each of the challenges to the primary judge's upholding of the validity of the Plan should be rejected. I therefore propose that the appeal be dismissed with costs.

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Amendments

14 November 2014 - Inclusion of title of senior counsel

Amended paragraphs: Coversheet - Representation - Counsel

Decision last updated: 14 November 2014

Medium Neutral Citation:	Arnold v Minister Administering the Water Management Act 2000 [2014] NSWCA 386
Hearing dates:	21, 22 July 2014
Decision date:	13 November 2014
Before:	Meagher JA at [1]; Barrett JA at [2]; Tobias AJA at [3]
Decision:	Appeal dismissed with costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords:	JUDICIAL REVIEW - whether Minister failed to comply with a mandatory requirement - whether decision manifestly unreasonable - misleading information provided to Minister - consequences of failure to adopt a particular method of establishing socio-economic impact of a decision - Water Management Act 2000 (NSW), s 50 LAND & ENVIRONMENT - where water sharing plan reduces water extraction entitlements - whether water sharing plan valid - where plan based on flawed groundwater management model - whether Minister obliged to consider recharge and sustainable yield - whether sound and reliable numerical groundwater model required to determine recharge and sustainable yield - whether adoption of flawed groundwater model manifestly unreasonable or irrational - whether misleading information invalidates Minister's decision - whether obligation to consider socio-economic impacts of proposals considered for inclusion in plan requires formal socio-economic study - Water Management Act 2000 (NSW), ss 3, 5, 9, 18, 50
Legislation Cited:	Water Act 1912 (NSW) Water Act 2007 (Cth) Water Management Act 2000 (NSW), ss 3, 5, 6, 9, 12, 15(1)(a), 16(1), 18, 20, 21, 43A, 44, 50, 57(1)(h)
Cases Cited:	Arnold v Minister Administering the Water Management Act 2000 (No 6) [2013] NSWLEC 73 Attorney General for the State of New South Wales v Quin [1990] HCA 21; (1990) 170 CLR 1 Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 Johnson v Williams [2000] FCA 3; (2000) 58 ALD 1 McHugh Holdings Pty Ltd v Director General Communities New South Wales [2009] NSWSC 1359 Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332 Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611 Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 Oates v Attorney-General (Cth) [2001] FCA 84; (2001) 181 ALR 559 Phosphate Resources Ltd v Minister for the Environment, Heritage and the Arts (No 2) [2008] FCA 1521; (2008) 251 ALR 80 Vasiljkovic v O'Connor [2010] FCA 1246; (2010) 276 ALR 326 Zentai v O'Connor (No 3) [2010] FCA 691; (2010) 270 ALR 293
Category:	Principal judgment
Parties:	Alan Arnold and 107 others (Appellants) Minister Administering the Water Management Act 2000 (First Respondent) State of New South Wales (Second Respondent)
Representation:	Counsel: FC Corsaro SC / PE King (Appellants) SB Lloyd SC/ JJ Hutton (Respondents) Solicitors: Taylor & Whitty Pty Ltd (Appellants) Crown Solicitor's Office (Respondents)
File Number(s):	2013/184593
Decision under appeal	Citation: [2013] NSWLEC 73 Date of Decision: 2013-05-31 00:00:00 Before: Biscoe J File Number(s): 2007/40049