Ashdon Valley Pty Ltd v Hicks
[2013] VSC 597
•1 November 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW & APPEALS LIST
No. S CI 2012 05857
| ASHDON VALLEY PTY LTD (ACN 060 372 054) | Appellant |
| v | |
| NIGEL ANTHONY HICKS VIVIEN LORRAINE HICKS | Respondents |
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JUDGE: | EMERTON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 July 2013 | |
DATE OF JUDGMENT: | 1 November 2013 | |
CASE MAY BE CITED AS: | Ashdon Valley Pty Ltd v Hicks & Anor | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 597 | |
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APPEAL – Appeal from Magistrates’ Court on questions of law – Sale of land providing for the transfer of water entitlements – whether magistrate misconstrued the Water Act 1989 (Vic) – whether the magistrate failed to consider the issue of causation raised by the appellant – whether the reasons for decision were adequate – reasons for decision do not disclose the magistrate’s path of reasoning – Appeal allowed – Magistrates’ Court Act 1989 (Vic) s 109 – Water Act 1989 (Vic) ss 33E, 33F, 33G, 33S, 33U, 33W, 64J, 64S.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr M Black | Zaitman Lawyers |
| For the Respondents | Mr M Elvin (solicitor for the Respondents) | Camerons Legal |
HER HONOUR:
Introduction
The appellant, Ashdon Valley Pty Ltd (‘Ashdon’), has appealed under s 109 of the Magistrates’ Court Act 1989 (Vic) against the order of the Magistrates’ Court made on 17 September 2012 dismissing its claim and upholding the respondents’ counterclaim against it.[1]
[1]In fact, Ashdon’s claim for unpaid rates and charges was upheld, but the amount to which it was entitled was set off against the respondents’ successful counter-claim for $84,685.87. The respondents were awarded $20,989.59 plus $648.30 in costs.
The dispute between the parties relates to water entitlements attached to land located at 151 Agnes Road, Wyuna. In May 2009, Ashdon sold four lots to the respondents, who proposed to use the land for dairy farming. A company associated with the respondents, Sweeping Plains Pty Ltd, purchased Lot 1 and the respondents, Mr and Mrs Hicks, purchased Lots 2, 3 and 4. Lot 1 was purchased outright, but Lots 2, 3 and 4 were the subject of a terms contract which provided that the purchase of those lots would occur in 2014.[2] The respondents took possession of all four lots in June 2009, although they did not become the registered proprietors of Lots 2, 3 or 4.
[2]Affidavit of Rachelle Shtoltsenberg sworn 24 October 2012, Exhibit RS7. Two contracts were entered into in relation to the four lots: a contract in respect of Lot 1 and a contract in relation to Lots 2, 3 and 4.
The land in question is irrigation land serviced by Goulburn-Murray Water (‘GMW’). The sale of Lots 2, 3 and 4 pursuant to a terms contract raised issues about the transfer of rights and entitlements to water and its availability to the respondents for so long as they were not the registered proprietors of the land. Several clauses in the contract of sale for Lots 2, 3 and 4 (hereinafter referred to simply as the ‘contract of sale’) deal with the question of water and the transfer of water entitlements. In the Magistrates’ Court, Ashdon alleged that the respondents had failed to pay water rates and charges as required by the contract of sale and the respondents alleged that they had not been provided with access to irrigation water for Lots 2, 3 and 4 as required by the contract.
The dispute in the Magistrates’ Court took the form of a claim by Ashdon for an amount representing water rates and charges invoiced to Ashdon by GMW for the period 1 July 2010 to 30 June 2012 and a counterclaim by the respondents for damages in the form of business losses arising from Ashdon’s alleged breach of the contract of sale by failing, neglecting or otherwise refusing to transfer water entitlements or, alternatively, provide the respondents with the use of water entitlements. The respondents also alleged that Ashdon had engaged in misleading or deceptive conduct in contravention of s 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth).
The learned magistrate held that Special Condition 4 of the contract of sale obliged the respondents to pay all water charges imposed by GMW from 1 June 2009 and that they had failed to do this. The magistrate rejected the argument that the respondents could defer this obligation until Ashdon had transferred water entitlements to them, holding that the obligations of the parties were concurrent and that the failure to transfer water entitlements did not impede the respondents from paying the rates and charges, even though the failure to transfer water entitlements rendered the payments pointless. Ashdon succeeded as to $63,695.23, which was the amount of the outstanding water rates and charges less a small amount that had been claimed for legal costs, which were held to be too remote.
However, the magistrate also upheld the respondents’ claim for business losses, on the basis that Ashdon had breached its obligations to the respondents to provide them with the use of irrigation water.
It is the decision to uphold the respondents’ claim for business losses that is the subject of this appeal. Ashdon submits that the magistrate erred in holding that it breached its obligations under the contract of sale, in determining that the breach caused the business losses claimed by the respondents and in failing to take account of Ashdon’s preparedness to facilitate the delivery of water to the respondents by various means and, therefore, in failing to find that the respondents themselves caused the losses that they alleged.
For the reasons that follow, I have concluded that the learned magistrate erred in failing to consider a part of Ashdon’s defence to the counterclaim and that Ashdon’s second and third grounds of appeal are made out. The appeal will be allowed.
Relevant background
Regulatory regime
Both the statutory regime for access to irrigation water and the policies and practices of the authority supplying irrigation water in the relevant area, GMW, are relevant to understanding what could and could not be done under the contract of sale in relation to the transfer of water entitlements to the respondents and making water available to Lots 2, 3 and 4.
The Water Act 1989 (Vic) contains a framework enabling irrigators to obtain rights to access and use water. In areas that have been declared under the Water Act, including the area in which the subject land is located, water rights have been ‘unbundled’ into water shares, delivery shares (or extraction shares) and water use licences.
Section 33E of the Water Act provides that a person must not take water from a waterway in a declared water system unless the person is authorised to do so under a water share. The Minister may issue a water share in respect of a declared water system.[3] On issuing a water share, the Minister must determine the share of water available from the water system under the water share, which must be expressed as a maximum volume of water over a period defined by the Minister, and the class of reliability of the share.[4]
[3]Section 33F(1).
[4]Section 33G(a) and (b). Water shares have different classifications according to their reliability; most shares are classified as high reliability or low reliability.
A water share authorises the taking of water under a water allocation for the share.[5] Each water share authorises the holder of the share to take an amount of water each season, as determined by the Minister. This seasonally adjusted amount is also known as the water allocation. Once the Minister has made a seasonal water allocation determination, the appropriate amount of water is credited to the water shareholder’s allocation account.[6]
[5]Section 33F(2).
[6]Kate Stoeckel et al, Australian Water Law (Law Book Co, 2012) 109–10.
The owner of a water share may transfer ownership of that share to a person.[7] Furthermore, the holder of a water share may assign the whole or a part of the water allocation available to that person under that share to, relevantly, a person who is the owner or occupier of land specified in a water-use licence.[8] However, a person must not transfer ownership of a water share or give a water allocation assignment unless the Minister has approved the transfer or assignment.[9]
[7]Section 33S.
[8]Section 33U(1)(b).
[9]Section 33W(1).
Water-use licences are required under the Water Act to use water held under a water share on a particular piece of land for the purposes of irrigation.[10] The Water Act empowers the Minister to grant a licence that authorises the use of water[11] for the purposes of irrigation on the land that is owned by that person.[12] A water-use licence is therefore granted to the owner of the land in respect to the use of water on the land. In the case of a transfer of ownership of the whole of the land specified in the water-use licence, the person to whom ownership is transferred is deemed to be the holder of the licence.[13]
[10]Section 64J of the Water Act provides that a person must not use water from a declared water system for irrigation on land unless the person does so under a water use licence that authorises the use of water for that purpose on that land.
[11]Authorised to be taken under Part 3A of the Water Act.
[12]That is specified in the licence or for any other purposes that are specified in the licence.
[13]Section 64S(1). In the case of a transfer of ownership of part only of the land specified in a water-use licence, the licence is to be taken to be cancelled on the day on which transfer of the ownership of the land takes place; s 64S(2).
The Minister may impose conditions on a water-use licence that are consistent with water use objectives that apply to the part of the State to which the conditions apply and may include such matters as maximum volumes of water per hectare that may be applied to land over any 12 month period, requirements to minimise impacts of the use of water on other persons or on the environment, conditions concerning the way that water is used and re-used and as to drainage from land.[14]
[14]Section 64Z(3).
Delivery shares are not a construct of the Water Act. However, they are widely recognised and described in the text ‘Australian Water Law’ as follows:
Delivery shares are an unbundled entitlement held by irrigators in an irrigation district to have water delivered to their land and to have a share of the available water flow in a delivery system. The delivery share sets out an irrigator’s right to receive a defined volume of water over a defined period. It is linked to the relevant land and stays with the particular property even if the water share is traded away from that land.[15]
[15]Kate Stoeckel et al, Australian Water Law (Law Book Co, 2012) 110.
To the extent that the Water Act speaks of the power to issue delivery shares, it does so in Part 11, which concerns irrigation. Section 222 provides that an Authority, such as GMW, must provide the service of delivering water to the owner or occupier of serviced properties in an irrigation district for the purposes of irrigation at the volumes and for the periods that are determined by the Authority in accordance with Part 11.[16] Section 223 provides that an Authority, when commencing a service of delivering water for irrigation to a serviced property, must determine the volumes at which and the periods for which the water is to be delivered for irrigation. The provisions of Division 1 of Part 11 generally provide for variation of delivery determinations, and the transfer of volumes or periods between parcels of land in an irrigation district.
[16]Section 22(1)(a)(i).
In the Magistrates’ Court, Ashdon led evidence from a Ms Cassia Saunders, the manager of land transactions for GMW. Ms Saunders described both a water-use licence and a delivery share. She explained that a delivery share is linked to a parcel of land to permit the delivery of water to the land from irrigation infrastructure.
Ms Saunders gave evidence that when a land owner is issued with a water-use licence, GMW will create an ‘allocation bank account’ enabling the transfer or delivery of water. The existence of a water share will also result in the establishment of an allocation bank account (referred to as an ‘ABA’) associated with the share, which can then be linked to land to enable water to be delivered to a service point. If the owner of the share is not the owner of land, an allocation bank account can be created in the share owner’s name, but the land-owner’s consent has to be obtained to have the allocation bank account associated to the relevant land.
Contract of sale
The contract of sale is a terms agreement which provides that from 1 June 2009, the respondents were entitled to possession of Lots 2, 3 and 4 and were liable for payment of all water and council rates and charges in respect of the Lots. The contract of sale does not contemplate that the respondents will become the registered proprietors of Lots 2, 3 or 4 until final payment of the balance of the purchase price, which might occur up to five years from the date on which they took possession.
Special Condition 2 deals with water. It is necessary to pay close attention to its terms.
Special Condition 2(a) provides, under the heading ‘Sale Agreement’:
The Vendor sells and the Purchaser buys 3 megalitres of high reliability water shares. The Vendor advises that a Delivery Share allocation of:
(i)Lot 2 – 0.72ml/day will be attached to the land;
(ii)Lot 3 – 2.00ml/day will be attached to the land;
(iii)Lot 4 – 1.43ml/day will be attached to the land.
Special Condition 2(b) provides, under the heading ‘Allocation of Price’:
(i)The Parties agree that the price allocated to the Water Entitlements is:
ALot 2 – $2,000/megalitre for high reliability water;
BLot 3 – $2,000/megalitre for high reliability water;
CLot 4 - $2,000/megalitre for high reliability water.
(ii)The price payable for the Water Entitlements and Water Licences is included in the purchase price listed in the Particulars of Sale.
Special Condition 2(c) is headed ‘Water Allocation’ and provides in part as follows:
(i)The vendor agrees to transfer to the purchaser the water allocations for the water irrigation period relating to the Water Entitlements including:
AAny allocation made for the said prescribed irrigation period prior to the Day of Sale;
BAny allocations made after the Day of Sale, up until registration of the Water Transfer at Water Registry;
Special Condition 2(d) concerns the parties’ obligations regarding water. It provides:
(i)The Vendor agrees that he shall provide to the Purchaser prior to the exchange of Contracts, the following documents signed and completed by the vendor:
AApplication to transfer a High Reliability Water Share;
BAny other documents required by the relevant authority to give effect to this agreement.
(ii)Upon exchange, the Purchaser shall return to the Vendor the applications described in sub-clause (i) hereof duly completed and signed so as to enable the Applications to be made to the relevant Authority.
(iii)The Vendor agrees to:
AMake application to the relevant water authority for the transfer of the High reliability Water Share;
BPay all application fees for the applications referred to in sub-clause (A) hereof;
CDo all things reasonably necessary to obtain such consent prior to settlement;
DSubject to clause (d), not deal with or trade Water Entitlements or water allocations in any way between the Day of Sale and the settlement date, other than in accordance with this Contract of Sale; and
Eprovide at settlement:
ITransfer of Water Share for High Reliability Water;
IIApplication to Trade Water Allocation;
IIIA Discharge or Withdrawal of any mortgage or other encumbrances over the Water Entitlement;
(iv)The Purchaser:
AAgrees to pay all registration costs for the Transfer of the Water Shares and Application to Trade Water Allocations.
BAuthorises the vendor or the vendor’s solicitors to complete any documentation referred to herein with all details to enable the Application to be made.
Special Condition 2(e) provides, under the heading ‘Conditional Contract’:
(i)The Purchaser acknowledges that it is unreasonable for the Vendor to apply to the Minister or delegated Authority to transfer the Water Entitlement/Share to the Purchaser until no earlier than four (4) weeks prior to the completion of the Contract of Sale;
(ii)the Vendor will within four (4) weeks from the settlement date make application to the Minister or delegated Authority to transfer the Water Entitlement/Share to the Purchaser;
(iii)in the event that the Vendor is unable to obtain the approval set out herein, then the Purchaser must:
Aproceed to settle the purchase of the land in accordance with the terms of this Contract; and
Bagree to extend the settlement date in respect of the Water Entitlement/Share until the Minister’s approval has been obtained by the vendor.
It will be observed that Special Condition 2 refers to the following:
(a)the sale of three megalitres of high reliability water shares;
(b)a ‘delivery share allocation’ of specified volumes per day that is attached to each of the Lots;
(c)a price allocated to ‘the Water Entitlements’ in respect of each of the Lots which is described in terms of a dollar figure per megalitre for high reliability water;
(d)the fact that the purchase price in the particulars of sale is deemed to include the price payable for ‘the Water Entitlements’ and ‘Water Licences’;
(e)water allocations relating to the ‘Water Entitlements’ are to be transferred during a defined period up until the registration of the ‘Water Transfer’ at the ‘Water Registry’;
(f)the Vendor agrees to make application for a transfer of the high reliability water shares and do a variety of things, including ‘all things reasonably necessary to obtain such consent prior to settlement’, being (presumably) the approval of the Minister to transfer the high reliability water shares, and to provide at settlement a transfer of the high reliability water shares and an application to trade water allocations;
(g)the vendor must make application to the Minister (or delegated Authority) within four weeks of settlement to transfer the ‘Water Entitlement/Share’.
The contract of sale contains references to a number of terms which appear in the Water Act and to a number of terms which do not. However, the regime in the Water Act will shed light on the meaning of the terms used in the contract of sale, in that the Water Act allows for the transfer of certain rights and entitlements but not others.
The decision below
The magistrate had before him a claim for unpaid rates and charges and a counterclaim for business losses said to arise from a failure to transfer water entitlements as required by the contract of sale. Argument on the claim turned on the construction of the contract of sale and whether the obligation imposed on the respondents to pay water rates and charges existed independently of their ability to access the irrigation water for which the rates and charges were levied. The counterclaim raised the question whether the contract of sale required Ashdon to transfer to the respondents water-use licence(s) and delivery share as well as high reliability water shares and, if so, by when.[17] In relation to this aspect of the dispute, Ashdon argued that no such obligation arose until ownership of the Lots passed to the respondents at the completion of the terms contract in 2014. On this basis, it submitted that the ‘settlement date’ in Special Condition 2(e) was not 1 June 2009, when the respondents took possession of the land, but when the purchase price was finally paid at the conclusion of the period specified in the terms contract.
[17]Ashdon’s defence to counterclaim pleaded that the final settlement date of the contract of sale was 1 April 2014 [paragraph 7], that the proper construction of Special Condition 2(d)(iii)(E) required the provision of the permanent transfer of the high reliability water shares on that date and not before [paragraph 11], that the proper construction of Special Condition 2(e)(i) was that it would be unreasonable for Ashdon to make application for the transfer of the high reliability water shares and the delivery share until four weeks prior to that date [paragraph 12], and that the proper construction of Special Condition 2(e)(ii) was that Ashdon would within four weeks of that date make application for the permanent transfer of the high reliability water shares and the delivery share [paragraph 13].
The magistrate found that the respondents acquired Lots 2, 3 and 4 for use as a dairy farm, that irrigated water was vital for the successful conduct of a dairy farm, and that this was known to Ashdon. His Honour concluded that the parties intended that the respondents would have access to irrigated water as soon as practicable after the settlement date, which, on the proper construction of the contract, was the date upon which the respondents took possession of lots 2, 3 and 4, namely 1 June 2009.
The magistrate found that as at 1 June 2009, Ashdon possessed a water share, a water-use licence and a delivery share encompassing Lots 2, 3 and 4 and that it had permission to take a share of the allocated water in GMW’s system and to use that water on its land for irrigation purposes. Those entitlements were to be transferred or made available to the respondents shortly after the settlement date of 1 June 2009.
However, the magistrate found that Ashdon did not:
(a)prior to the exchange of contracts provide a signed and completed application to transfer its high reliability water share (as required by Special Condition 2(d)(i)(A) of the contract of sale);
(b)at settlement provide the transfer of the high reliability water share (as required by Special Condition 2(d)(iii)(E)(1) of the contract of sale);
(c)at settlement provide an application to trade water allocations (as required by Special Condition 2(d)(iii)(E)(11) of the contract of sale); and
(d)within four weeks of the settlement date make application to the Minister or delegated authority to transfer the ‘Water Entitlement/Share’ to the respondents (as required by Special Condition 2(e)(ii) of the contract of sale).
In respect of the requirements in Special Condition 2(e)(ii) to relating to the transfer of the ‘Water Entitlement/Share’, the magistrate held that this meant a high reliability water share. His Honour said:
I interpret the expression ‘Water Entitlement/Share’ to mean water share. I do not accept Ashdon’s contention that it means two different things [high reliability water shares and delivery share].
This finding was made in the course of rejecting the argument made by Ashdon that Special Condition 2(e) referred to the completion of the terms contract, not the settlement date. The magistrate held that the contract of sale required Ashdon to apply to transfer the high reliability water share or shares within four weeks of the settlement date of 1 July 2009.
In response to the question, ‘What did Ashdon agree to do under the contract of sale?’, the learned magistrate said as follows:
First, Ashdon sold part of its water share to Hicks. I find the reference to three megalitres of high reliability water shares ambiguous because there is no mention of the period. Second, Ashdon agreed to transfer its water allocation to the Hicks. The water allocation is fundamental. It is the quantity of water which will be delivered to the blocks. Transferring its allocation is a vague expression. It can mean various things, but ultimately it results in the Hicks having access to a certain amount of water to use on the blocks for irrigation. The ‘transfer’ can be done in various ways. As Ms Saunders’ evidence shows, Ashdon could have used the mechanisms created by Goulburn-Murray to cause the delivery of water to the blocks shortly after 1 June. It did not. Its failure to do so constitutes a breach of the contract, which has caused loss and damage to the Hicks.
As to the loss and damage suffered by the respondents, the magistrate referred to the report tendered by the respondents prepared by an agricultural scientist, Mr Cameron Smith, in which Mr Smith examined the respondents’ losses for the period 1 July 2009 to 31 December 2010 due to the lack of availability of irrigation water to Lots 2, 3 and 4. The magistrate accepted Mr Smith’s evidence about the respondents’ losses, which were based on the additional production of milk solids that would have resulted from the availability of additional feed due to irrigation.[18]
[18]Mr Smith concluded that with an expected increase in milk solids production worth $215,655.10 and additional costs incurred of $130,969.28 to achieve the additional production, the quantum of loss in respect of loss of milk production was $84,685.82.
Although there was a challenge to some of the assumptions made by Mr Smith, the magistrate found that the evidence sufficiently established the validity of those assumptions to furnish a ‘fair climate’ for Mr Smith’s opinions.
Grounds of appeal
Ashdon’s notice of appeal contains three matters which are mis-described as ‘questions of law’ but which are in fact grounds of appeal, and a number of matters described as grounds of appeal which are apparently particulars of the grounds that are mis-described as questions of law.
In substance, the grounds of appeal are as follows:
(1)The learned magistrate erred in law by finding that there was a means by which Ashdon could transfer a ‘Water Entitlement/Share’ to the respondents in respect of Lots 2, 3 and 4.
This is said to involve misinterpreting the licensing, allocation and transfer systems governing the supply of irrigation water to the land and affecting the transaction in question by holding that there was a ‘Water Entitlement/Share’ apart from the ‘High Reliability Water Share’ that was able to be transferred to the respondents by Ashdon.
(2)The learned magistrate erred in finding that Ashdon failed to cause the delivery of water to Lots 2, 3 and 4 shortly after 1 June 2009 and in failing to give any, or any adequate, reasons for that decision.
This error is alleged to involve a failure to take into account:
(a)Ashdon’s preparedness to facilitate the delivery of water to the respondents by proposing various options to the respondents;
(b)the respondents’ failure to inform Ashdon which option it elected to take up;
(c)the respondents’ insistence on a transfer of the water-use licences in relation to Lots 2, 3 and 4 when these licences could not be transferred to any person other than the registered proprietor of the land; and
(d)the respondents’ refusal to accept any other method of delivery of water to the lots in the absence of a transfer of the water-use licences.
(3)The learned magistrate erred in law in failing to take into account the respondents’ causation of their own loss and to give any, or any adequate, reasons for this decision.
This error is alleged to arise from the magistrate’s failure to take account of the same matters as the matters referred to in respect of ground (2) and his failure to refer to those matters in his decision.
Ground 1: Misinterpretation of water licensing, allocation and transfer regime
Ashdon contends that the magistrate erred in law by finding that there was a means by which Ashdon could transfer a ‘Water Entitlement/Share’ or delivery share to the respondents in respect of Lots 2, 3 and 4 because the water licensing, allocation and transfer systems in question did not provide a method by which a water-use licence or delivery share could be transferred into the names of any person other than the registered proprietor of the land and did not provide that a high reliability water share could be transferred to any person.
In my view, this misunderstands the magistrate’s reasons for decision. The magistrate did not hold that there was a ‘Water Entitlement/Share’ apart from a high reliability water share that could be transferred by Ashdon to the respondents. To the contrary, he expressly rejected the argument that ‘Water Entitlement/Share’ meant both a water share and a delivery share.
In the critical passage of his reasons for decision set out in paragraph 35 above, the magistrate distinguished between the transfer of high reliability waters shares and the transfer of what he called ‘water allocations’. In respect of the former, there was no requirement for the transferee to be the registered proprietor of land. Subject to the approval of the Minister or delegated authority, any person could acquire a water share. The magistrate held that the contract of sale required Ashdon to deal with the high reliability water shares in specified ways so as to secure their transfer to the respondents on or around 1 June 2009. Ashdon had failed to satisfy its contractual obligations in this respect. It did not, within four weeks from the settlement date, make application to the Minister or delegated authority to transfer the high reliability water shares to the respondents in accordance with Special Condition 2(e)(ii). In respect of the transfer of ‘water allocations’, the magistrate found that Ashdon could have used the mechanisms created by GMW to cause the delivery of water to Lots 2, 3 and 4 shortly after 1 June 2009. Again, it failed to satisfy this contractual obligation.
The reasons therefore make clear that the magistrate was well aware that securing the delivery of water to Lots 2, 3 and 4 involved different mechanisms from securing the transfer of the high reliability water shares to the respondents.
The reference to an ‘allocation’ in the magistrate’s finding that ‘Ashdon agreed to transfer its water allocation to the Hicks’ is ambiguous and unhelpful. Special Condition 2(c) deals expressly with the transfer of water allocations, but only in the period up to the ‘registration of the Water Transfer and the Water Registry’. In effect, Special Condition 2(c) is an adjustment clause. The magistrate made it clear, however, that he was not referring to the allocation of water in this limited sense: he observed that transferring allocation could mean various things, but it ultimately resulted in the respondents having access to a certain amount of water to use on the blocks for irrigation. Used in this broad sense, it would appear to involve access to or use of the delivery share attached to the land in question.
Ashdon might have argued that it was under no obligation to secure the delivery of water to Lots 2, 3 and 4 pursuant to the contract of sale. However, it did not. In its defence to counterclaim, it pleaded that the applicants were entitled between 1 June 2009 and 1 March 2014 to have temporary access to the delivery share to give them access to water through any one of a number of means, not including the permanent transfer of the delivery share. On appeal, it did not cavil with the magistrate’s finding that it was a breach of the contract of sale to fail to cause the delivery of water to Lots 2, 3 and 4 shortly after 1 June. Ashdon’s grounds of appeal are directed to other matters: ground 1 asserts that the error lay in the magistrate’s finding that there was a means by which Ashdon could ‘transfer’ the delivery share to the respondents; grounds 2 and 3 allege a failure to consider causation in the light of the steps actually taken by Ashdon to facilitate the delivery of water to the Lots .
In written and oral submissions to the Court, counsel for Ashdon submitted that insofar as Ashdon had an obligation to transfer the high reliability water shares to the respondents within four weeks of settlement, the 3 megalitres of water per annum attached to each share would not be sufficient to irrigate the land in question, which would require 1 megalitre per hectare. Accordingly, so it was submitted, Ashdon’s failure to transfer the high reliability water shares did not cause the respondents’ losses.
Apart from the fact that this was not raised as a ground of appeal, it was not a matter that was agitated in the Magistrates’ Court and the magistrate made no specific findings as to the relationship between Ashdon’s failure to take the necessary steps to transfer the high reliability water shares and the respondent’s inability to water their land. Although there was evidence that the transfer of the high reliability water shares to the respondents would have permitted them to set up an allocation bank account with GMW, which in turn could have facilitated the purchase of additional water and its distribution across the property, it is not possible to reach any conclusions about the consequences of Ashdon’s failure to transfer the high reliability water shares per se. The magistrate made no finding in this regard, but held that it was Ashdon’s failure to use the mechanisms created by GMW to cause the delivery of water to the blocks shortly after 1 June 2009 which caused loss and damage to the respondents.
The magistrate was required to construe a poorly drafted contract of sale in the context of a complex regime for the ownership, transfer and use of water rights and entitlements. His Honour interpreted the contract of sale in a manner that was, in my view, consistent with the water licensing, allocation and transfer systems governing the supply of irrigation water to the land and the transaction in question. His Honour did not hold that there was a ‘Water Entitlement/Share’ apart from the high reliability water shares that could be transferred by Ashdon to the respondents at settlement. To the contrary, his Honour recognised that the statutory regime did not permit the transfer of certain types of entitlements to persons who were not the legal owners of land[19] and had regard to the other available means of securing the delivery of water to Lots 2, 3 and 4.
[19]The magistrate recognised that only a landowner can hold a water-use licence. His Honour’s reasons record that a delivery share allocation has been described as ‘an entitlement to have water delivered via infrastructure to the farmer’s property’ and set out in some detail the evidence given by Ms Cassia Saunders concerning water use licences and delivery shares. The reasons record the fact that once a landowner possesses a water-use licence and delivery share, the landowner can order water through its allocation bank account. When issued with a water-use licence, GMW issues the licensee with an allocation bank account, in respect of which water can be ordered from a nominated special point. A landowner without a water share can apply to have an account set up or GMW will issue one as part of the water-use licence. With the landowner’s consent, a non-landowner can apply for an account in its name to be associated with the landowner’s name. An account need not be tied to any particular land. Although only a landowner can hold the delivery share, an occupier can obtain water by completing an authority to order and use water and the landowner can authorise an agent to order water from the owner’s allocation bank account.
Ground 1 is not made out.
Grounds 2 and 3: causation of the respondents’ losses
Although Ground 2 is expressed as a challenge to a finding made by the learned magistrate (that Ashdon caused loss and damage to the respondents by failing to cause the delivery of water to Lots 2, 3 and 4 shortly after 1 June 2009), Grounds 2 and 3 allege, in substance, that the magistrate failed to address the question of causation of loss in the light of the available evidence. Ashdon contends that the magistrate failed to have regard to the respondents’ causation of their own loss based on their misconceived insistence on the transfer of the water-use licences and delivery share in the face of Ashdon’s suggestions to them that water could only be supplied to Lots 2, 3 and 4 by other means.
These grounds also allege that as the magistrate did not advert to the evidence of the parties on this issue, the reasons were inadequate.
In its defence to counterclaim, Ashdon pleaded that the respondents were entitled between 1 June 2009 and 1 March 2014 to have temporary access to the delivery share to give them access to water through any of the following methods:
(a) an association of a water share to a water-use licence;
(b) a limited term transfer of a water share;
(c) a permanent transfer of a water share;
(d) a water allocation transfer; and
(e) provision of an Authority to Order and Use Water.
The magistrate held that Ashdon was contractually obliged to use methods or mechanisms such as these to secure the delivery of water to Lots 2, 3 and 4 shortly after 1 June 2009. Some of these methods involved the co-operation of the respondents. However, I observe that this pleading seems to acknowledge that the transfer of the high reliability water share(s) would have given the respondents the means to temporarily access the delivery share. The contract of sale required steps to be taken to secure the transfer of the high reliability water shares shortly after 1 June 2009. This was not an ‘option’ that the respondents were required to consider and request. It should have followed as part of the performance of Ashdon’s obligations under the contract
Nonetheless, Ashdon pleaded that it was not responsible for the respondents’ losses because it had, in good faith, through email and telephone correspondence, informed the respondents of the methods that were available for the delivery of water and had suggested that the respondents choose one option in order to obtain temporary access to the delivery share. It pleaded that the respondents did not attend to choosing one of the options and that any loss and damage suffered by the respondents was caused solely by their own delay in making such a decision in order to access the delivery share.
In argument, the Court was taken to a number of passages in the transcript of the Magistrates’ Court proceeding in which Mr Neville Ismaili of Ashdon, and Mr Hicks gave evidence about communications between them regarding the transfer of water entitlements and how access to water might be secured.
Mr Ismaili gave evidence in the Magistrates’ Court that from October 2009 until October 2010 he ‘constantly’ raised with Mr Hicks how the respondents wanted to access the water for Lots 2, 3 and 4. He told the court that the most basic way was for Ashdon to give the respondents authority to operate on Ashdon’s water-use licence. There were a number of ways in which that could be done, such as a limited term transfer by which Ashdon lent the three megalitres of high reliability water to Lots 2, 3 or 4 or by the respondents having access Ashdon’s allocation bank account. Mr Ismaili gave evidence that he never received an answer from Mr Hicks as to how Mr Hicks wanted access to be provided. He also said that in October 2009 he did not receive any requests from the respondents to facilitate the supply of water to Lots 2, 3 and 4.
For his part, Mr Hicks gave evidence that options for the delivery of water were ‘probably’ first suggested to him in August-October 2010, that is, more than a year after settlement. He gave evidence that he asked in August 2009 to have temporary access to some water, but the respondents were given no options to access water in the first few months of their coming into possession of the property.
Mr Ismaili’s evidence that from October 2009 he ‘constantly’ raised with Mr Hicks how the respondents wanted to access water for Lots 2, 3 and 4 is not supported by the documentary evidence tendered in the Magistrates’ Court. The only mention in the months following settlement on 1 June 2009 of what was to occur in respect of the delivery of water to Lots 2, 3 and 4 was in an email from Mr Hicks to Mr Ismaili on 27 October 2009 in which Mr Hicks, after asking Mr Ismaili to forward by ‘snail mail’ an original water bill, said:
We will also need another form for the subdivision of water on the remaining titles and to include the 3 meg to sort this out.
The first record of Ashdon proposing options to the respondents to access water for Lots 2, 3 and 4 is in an email dated 16 August 2010 from Mr Ismaili to the respondents. It forms part of an email chain commencing on 13 August 2010 in which Mr Ismaili demanded the payment of water rates. Mr Hicks responded that he had attempted to contact GMW about the rates but, because the water attached to the property had not been transferred into the respondents’ names, he could not discuss the account with GMW. Mr Hicks stated that the water issues needed to be dealt with ‘as a matter of urgency’, as the respondents had been restricted in their ability to utilise temporary water that they had purchased and had been delayed in purchasing temporary water by the need to set up a temporary ABA number on the Sweeping Plains block (Lot 1 – which was acquired outright). This could not be attached to the land until Ashdon lodged the relevant documents and the respondents had lost their ‘carry over’ water because it was not attached to the land. Mr Hicks wrote:
The non-lodgement of the relevant documents has also further delayed our ability to finalise negotiations with MVIRP in regard to the rationalisation issues that have been happening since around Nov 09 and should have been completed in time to reduce this year’s account. It is also a requirement of my dairy licence that I have a licensed supply of water for the dairy at this point I don’t and when my next QA audit occurs my ability to continue to supply milk is at risk. At this point I cannot do anything in regard to this account until the relevant documents have been completed by you with GMW.
Mr Ismaili replied that ‘[t]he application was submitted to GMW on or about June 20th’. He continued:
As you own block 1, you could [have] had an ABA associated to land. So carryover would of [have] been retained. I agree that you would not be able to utilise the water on all the property, but I’m sure that if you were planning to do this, that you would [have] contacted me, and the appropriate form would [have] been filled out to give you permission to utilise the water on any part of the farm. This form/permission will still need to be filled out, even once the water share is transferred. I believe once the water share is transferred, it will be associated with your block.
In my view, Mr Ismaili’s response is not consistent with options having been canvassed with the respondents at an earlier point in time.
A further chain of email correspondence commenced on 21 October 2010 in which the respondents advised Mr Ismaili that there was still no notification from GMW that any of the required documentation had been lodged to enable the transfer and subdivision of water as per the contract of sale. The respondents stated that they would not be denied ‘the ability to utilise the water and utilise the land by irrigation covered by the remaining three licences that need dealing with’. Mr Ismaili responded by stating that the respondents would still need to fill out the relevant paperwork in order to irrigate the other blocks and suggesting that they get the relevant paperwork out to him to sign. Mr Hicks replied, ‘You are the only person who can deal with the GMW to transfer and subdivide the relevant licences et cetera as per the sale contract to be done within four weeks of signing in May 2009’.
On 27 October 2010, Mr Ismaili emailed Mr Hicks to advise that he had received the transfer of water share documentation and could drop it off the following week. He requested a payment of $4,000. Mr Hicks replied that no further moneys would be paid to Ashdon and GMW in respect of delivery shares, licences and/or water rights until all documents relevant to water entitlement/share had been lodged. Mr Hicks warned that Ashdon would be held responsible for any existing or future loss or damage incurred due to denial of access to all water licences/entitlements as per the sale agreement.
On 29 October 2010, Mr Ismaili wrote as follows:
The two megs transfer is ready to go. Just waiting confirmation from yourself re the payment of $4k. I will remind you that you had the paperwork for about three-four months before you passed them on to me.
In order to irrigate on the remaining properties you need to link your ABA to the Water use science (sic) on the other three titles. To do this you need to write a letter to GMW stating that you want to link your ABA to the property. The WUL No is 003503. I have mentioned this to you previously. Send me a copy of this letter and I will give you authorisation to GMW to allow this. Obviously you have not needed to irrigate last season and this season to date, thus you have not bothered to arrange anything. So stop stalling and pay the water account. Also stop stalling on the insurance certificate on the property.
Although this arguably qualifies as informing the respondents of one of the methods to access the delivery share referred to in the defence to counterclaim, it can scarcely be said to have occurred ‘shortly after’ 1 June 2009.
In late November and early December 2010, Ashdon communicated further with the respondents about the transfer of water rights, but this appears to be in respect of Lot 1.[20]
[20]On 23 November 2010, Ashdon issued a solicitor’s letter addressed to Mr Hicks requesting payment of water rates. Among other things, the letter stated that the water share transfer documentation had been completed and would be provided to the respondents on receipt of the $4,000 which was withheld from the purchase of Lot 1 moneys and was due to be paid for the two megalitres of water provided once the transfer was complete. On 7 December 2010, Ashdon’s lawyers wrote to the respondents confirming that Ashdon had forwarded all required water share transfer documentation to them and advised that the documentation had to be lodged no later than 14 December 2010.
This evidence provides a tenuous basis for the allegation that the respondents were responsible for the losses that they incurred as a result of not having access to irrigation water for Lots 2, 3 and 4.
Nonetheless, the allegation that respondents caused their own loss is clearly set out in Ashdon’s defence to the respondents’ counterclaim. The magistrate heard evidence about communications between Mr Ismaili and Mr Hicks about the provision of water to Lots 2, 3 and 4. Whether or not the respondents were themselves to blame for not having access to water was an issue in the trial. However, the magistrate made no findings on this question and made no reference to the issue of causation in his reasons. Having found that the contract of sale required Ashdon to use the mechanisms created by GMW to cause delivery of water to the Lots ‘shortly after 1 June’, his Honour concluded, quite simply, that Ashdon had breached the contract of sale and the breach had caused loss and damage to the respondents as identified by Mr Smith in his expert report.
In my view, the magistrate failed to consider a substantive element of Ashdon’s defence to the counterclaim. This oversight or omission amounted to an error of law. The way in which his Honour’s findings about causation are expressed leaves little scope to infer that the magistrate considered but rejected Ashdon’s submissions as to causation. Moreover, insofar as the magistrate could be said to have found that the respondents did not cause or contribute to the loss that they suffered and that their business losses were entirely attributable to Ashdon’s breaches, he gave no explanation for this finding. It is well-established that judicial reasons for decision must sufficiently explain the basis for any findings that are made in reaching that decision. The reasons must disclose ‘the route that led to the answer’, ‘how or why the conclusion was reached’ and the process or path of reasoning.[21] If the magistrate considered but rejected Ashton’s submissions and evidence as to causation, the reasons for decision do not explain why.
[21]ACN 005 565 926 Pty Ltd v Snibson [2012] VSCA 31, [78], referring to Transport Accident Commission v Kamel [2011] VSCA 110 and Church v Echuca Regional Health (2008) VR 566, [90].
Grounds 2 and 3 are made out.
Conclusion
In the normal course, an error of the kind identified would warrant setting aside the orders made below and remitting the proceeding to the Magistrates’ Court to be heard and determined according to law.
I have set out and considered the evidence that was before the learned magistrate about Ashdon’s efforts to secure the delivery of water to Lots 2, 3 and 4 ‘shortly after 1 June’ in order to form a view as to whether it would be futile to set aside the magistrate’s orders and remit the proceeding, or part of it, to be heard and determined again. As a matter of discretion, I would not remit the proceeding if Ashdon’s causation defence was bound to fail on the available evidence.
The question is finely balanced. So far as I can tell, the only evidence of communications about the delivery of water to Lots 2, 3 and 4 post-settlement in 2009 was Mr Ismaili’s oral evidence that from October 2009 until October 2010 he ‘constantly’ raised with Mr Hicks how the respondents wanted to access the water for Lots 2, 3 and 4. Mr Hick’s evidence was entirely to the contrary. There is no documentary support for there having been communications in relation to the delivery of water to Lots 2, 3 and 4 post-settlement in 2009 and the documentary evidence strongly suggests that such communications occurred much later. The respondents correctly point out that the end of October 2010 is at the end of the period over which the business losses were assessed. In other words, the losses had been incurred by the time any options for the delivery of water were proposed to the respondents.
However, the evidence is ambiguous and vague in some respects. What was discussed or agreed in relation to the delivery of water to Lots 2, 3 and 4 is sometimes difficult to separate from the parties’ dealings in relation to the transfer of entitlements for Lot 1, and they did not always use technical terms in their technical sense. It is also the case that there was evidence that the respondents were insistent that water-use licences be transferred to them, despite the impossibility of doing so.
For these reasons, I cannot be satisfied from the transcript and the tendered documents that the causation defence has no substance.
It follows that I am not persuaded that it would be futile to remit the proceeding, or the relevant part of it, to the Magistrates’ Court to be heard and determined again.
The orders of the Magistrates’ Court will be set aside and the proceeding remitted to the Magistrates’ Court to be heard and determined according to law.
I will hear from the parties on the form of the remitter and orders that need to be made to reflect these reasons, and as to costs.
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