Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000
[2014] NSWSC 46
•03 February 2014
Supreme Court
New South Wales
Medium Neutral Citation: Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000 [2014] NSWSC 46 Hearing dates: 26, 27 February 2013 Decision date: 03 February 2014 Jurisdiction: Common Law Before: Slattery J Decision: No relief granted to the plaintiffs.
Catchwords: STATUTORY INTERPRETATION - the plaintiffs hold water access licences under Water Management Act 2000 - the plaintiffs allege that their water entitlements under licences were incorrectly calculated pursuant to a formula in a Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 - whether properties to which licences relate "amalgamated" - whether correction of the calculation is possible if the volume of each entitlement is listed in a schedule to Water Management (General) Regulation 2004 - whether list of entitlements in that schedule is a rebuttable presumption subject to correct application of calculation formula prescribed by Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003, clause 25C. Legislation Cited: Crown Proceedings Act 1988 (NSW)
Real Property Act, ss 14A, 45D, 49, and 81J
Water Act 1912 (NSW)
Water Management (General) Amendment Regulation 2006 (NSW)
Water Management (General) Regulation 2004 (NSW), Schedule 4A
Water Management Act 2000 (NSW), Schedule 10
Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 (NSW) cl 25C, cl 25D, Schdedule 4Cases Cited: Brayson Mavis Pty Limited (in liquidation) v Federal Commissioner of Taxation (Cth) (1985) 156 CLR 651
Commissioner of Stamp Duties (NSW) v Permanent Trustee Co Ltd (1987) 9 NSWLR 719
Cranbrook School v Woollahra municipal Council (2006) 66 NSWLR 379
Deputy Commissioner of Taxation (SA) v Ellis & Clark Limited (1934) 52 CLR 85
Green and Anor v Minister for Climate Change, Environment and Water [2008] NSWLEC 48
Macquarie Bank Ltd v Fociri Pty Limited (1992) 27 NSWLR 203
Nature Conservation Council (NSW) Inc v Minister Administering the Water Management Act 2000 (2005) 137 LGERA 320
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Tubbo Pty limited v Minister Administering the Water Management Act 2000 [2008] NSWCA 356Category: Principal judgment Parties: Plaintiffs:
Hutchins Pastoral Co Pty Ltd (First Plaintiff)
Danwillach Pty Ltd (Second Plaintiff)
Delta Creek Pty Ltd (Third Plaintiff)
Defendants:
The Minister administering the Water Management Act 2000 (First Defendant)
State of New South Wales (Second Defendant)Representation: Counsel:
Plaintiff: Mr M. Zammit
Defendants: Mr N. Hutley, SC; Mr J. Hutton
Solicitors:
Plaintiff: Leigh Adams, Leigh Adams Lawyers
Defendants: I.V. Knight, Crown Solicitor
File Number(s): 2009/298126 Publication restriction: No
Judgment
These proceedings determine whether the first defendant, the Minister administering the Water Management Act 2000 ("the 2000 Act"), correctly calculated the plaintiffs' rights to sources of groundwater in the Lower Murrumbidgee River water management area for their water access licences issued under the 2000 Act.
The plaintiffs commenced these proceedings by Statement of Claim in November 2009 seeking: declarations, as to the correct calculation of their water access rights under the 2000 Act; orders, correcting the Minister's previous calculations of their rights; and consequential orders, rectifying and reissuing records of their rights kept by the Minister. The plaintiffs also seek compensation for loss resulting from the Minister propounding what they claim is an incorrect calculation of their water access rights under the 2000 Act.
The Minister contests that the plaintiffs are entitled to any of the relief they seek. The Minister contends that the plaintiffs' water entitlements have been calculated correctly under the 2000 Act.
On 4 April 2012 this Court ordered by consent that the question of the correctness of the Minister's calculation of the plaintiffs' rights be decided separately from, and prior to, their claims for compensation. These reasons consider that separate question.
That question was argued on 26 and 27 February 2013, following which the parties were given leave to file supplementary submissions on 1 March 2013.
Mr M. Zammit of counsel appeared for the plaintiffs in the proceedings. Mr N. Hutley SC and Mr J. Hutton of counsel appeared for the Minister. The Court has been much assisted by the careful arguments by counsel on both sides of this case, which involves the operation of a complex legislative scheme.
These reasons find that the Minister has correctly calculated the plaintiffs' entitlements under the 2000 Act. Subject to any further submissions from the parties as to costs or other matters, that result means that the plaintiffs' compensation claim and other consequential relief do not arise for determination and the proceedings are now concluded. The Court directs at the conclusion of these reasons that the parties bring in short minutes of order to give effect to the Court's reasons and to deal with any other remaining issues, including costs.
The Parties
The plaintiffs are the three companies, Hutchins Pastoral Co Pty Ltd ("Hutchins"), Danwillach Pty Ltd ("Danwillach") and Delta Creek Pty Ltd ("Delta"). Mr Stewart Ronald Hutchins and his wife Mrs Jennifer Hutchins are the controlling shareholders and the directors of each of the plaintiffs, which co-ordinate their respective irrigation operations.
The first defendant is the "Minister administering the Water Management Act 2000". Responsibility for the administration of the 2000 Act currently lies with two Ministers: the Minister for Primary Industries together with the Minister of Finance and Services. But nothing turns on this allocation of responsibility in these proceedings. For convenience therefore those two Ministers will be referred to in these reasons simply as "the Minister". Some of the earlier applicable legislation required and refers to administration of water licenses by the Water Administration Ministerial Corporation: cf the Water Administration Act 1986. But the parties accepted that for present purposes the Minister is the responsible defendant.
The second defendant is the State of New South Wales. The State may be sued for the actions of the Minister pursuant to the Crown Proceedings Act 1988, and it is joined on that basis. But the plaintiffs do not seek any relief against the State different from that sought against the Minister.
The Plaintiffs' 2000 Act Water Access Licences - Identifying the Issue
Each plaintiff owns a separate parcel of land, which it uses for irrigation. Each parcel overlies the Lower Murrumbidgee Groundwater Sources, a geological system of shallow and deep aquifers in south-western New South Wales, near the city of Narrandera.
The plaintiffs hold, as tenants in common, a single aquifer water access licence ("WAL") issued under the 2000 Act and a single supplementary water access licence ("SWAL") issued under the 2000 Act, which licences enable them to access the aquifer water available from the bores sunk on the three properties. The 2000 Act replaced the licensing scheme of the Water Act 1912 ("the 1912 Act"), under which the plaintiffs held water entitlements for these same three properties.
Although the 2000 Act was passed in that year, it did not actually commence with respect to water access licences in the Lower Murrumbidgee water management area until an "appointed day", which was eventually fixed at 1 October 2006. Up until 1 October 2006 the 1912 Act continued to govern the extraction of water on the plaintiffs' properties.
The plaintiffs' WAL and SWAL issued under the 2000 Act, in the form of a Certificate of Title each specifies on its face: how much water the plaintiffs are entitled to take pursuant to the WAL or the SWAL (called the "share component"); and at what times, at what rates, and the source and the zone from which the plaintiffs may take that water under the WAL and SWAL (called the "extraction component"): 2000 Act, s 56 (1).
The 2000 Act authorises the expression of a WAL or a SWAL share component in the form of "a specified number of units": 2000 Act, s 56(2)(d). And the plaintiffs' WAL and SWAL do just that. The WAL Certificate of Title shows it is for 1925 units. The SWAL Certificate of Title shows it is for 250 units. Thus together in their WAL and SWAL the plaintiffs hold a total share component of 2175 units being their "shares in the available water" within the Lower Murrumbidgee water management area as defined in the 2000 Act, s 56(1). In short this is their entitlement to a particular aliquot share of all the available water in Lower Murrumbidgee water management area in a particular period. The source from which the Certificate of Title authorises the plaintiffs to extract this water, the relevant extraction component, is the Lower Murrumbidgee Deep Groundwater source, which is an aquifer in the region which exists down to local bedrock and with a thickness of 100 to 300 metres.
The Minister contends that the share components of the plaintiffs' WAL and SWAL were determined according to the rules and methodology provided in the legislative scheme for water management in the Lower Murrumbidgee. That scheme is explained in detail below in these reasons. The scheme includes: the 2000 Act; the Water Management (General) Regulation 2004 ("the 2004 Regulation"); and the Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 ("the 2003 Plan"). Moreover, in the alternative the Minister contends that the plaintiffs' share components are now specifically listed in and therefore specially mandated by the 2004 Regulation, Schedule 4A.
The plaintiffs say that their share component of 2175 units was incorrectly calculated by the methodology which was mandated by a combination of the operation of the 2000 Act, Schedule 10, the 2004 Regulation, reg 29B and the 2003 Plan, clauses 25C and 25D. The plaintiffs contend that were the calculation to have been correctly performed in accordance with the methodology, their share component would actually be 3407, not 2175. Currently a share component unit represents a mega litre ("ML") of water. So the issue between the parties represents a contest about the plaintiffs' right to extract approximately 1000 ML (actually 1232ML, being 3407ML - 2175 ML) of water per annum under the WAL and SWAL.
How does this difference arise in the application of the methodology? Put shortly for present purposes - and again the detail appears later in these reasons - the difference arises from the application of the conversion formula for adjusting the quantum of the entitlements of each plaintiff to one of the three licences issued under the 1912 Act in respect of the property of which that plaintiff is the registered proprietor, into the single WAL issued under the 2000 Act issued to all three plaintiffs together as tenants in common in respect of all three properties. The adjustment in the conversion formula involved the reduction in the plaintiffs (and all other users) rights, in order to allow for environmental sustainability, an important objective of the 2000 Act. As part of giving effect to this reduction a critical variable in the conversion formula is the licensee's history of extraction (of water) prior to conversion. The licensee's history of extraction (sometimes abbreviated to HOE in the legislation) is the average of the licence holder's water usage under the 1912 Act taken over a number of years. The formula rewards water users with a higher history of extraction with a resulting higher share component under the 2000 Act. This formula has been criticised as penalising prudent water users, and rewarding profligate users with higher value licences under the 2000 Act. But that is not the issue here. The parties agree on the formula that must be applied.
But the parties differ as to how the conversion formula should be applied. The two competing approaches in issue are: (1) the plaintiffs' approach using each plaintiff's history of extraction in respect of each individual property before the date of conversion (also the date of application of the formula); or (2) the Minister's approach, using the three plaintiffs' notionally combined history of extraction before the date of conversion. The difference in the two approaches is important, because the mandated calculation of the average history of extraction (under the 2003 Plan, cl 25C(6)) excludes years in which no or low extraction has occurred. Far fewer of these no or low extraction years can be excluded if the notionally combined history is used, as in the Minister's approach (2). This has the effect of reducing the plaintiff's average history of extraction (because of the resultant inclusion of more figures from low/no extraction years) compared with the plaintiffs' approach (1), which thereby also reduces the quantum of the plaintiffs' resultant share component under the 2000 Act.
How the conversion formula should be applied is a question of the construction of the legislative scheme. As these reasons show I have found Mr Hutley SC's and Mr Hutton's submissions on behalf of the Minister as to the operation of the scheme to be compelling and I have preferred them to those of Mr Zammit.
These reasons now give the historical background to the issue of the plaintiffs' 2000 Act water access licence (or WAL) and their supplementary water access licence (or SWAL), commencing with the licences issued to them under the 1912 Act.
History of the Plaintiffs' Licences
The plaintiffs did not always own their water licences as tenants in common. That position only arose as a result of the enactment and commencement of the 2000 Act. Separate licences were first issued and granted to each of the plaintiffs under the 1912 Act, ss 115 and 116.
Under the 1912 Act, s 115 each of the plaintiffs had a separate water licence "for a limited period" and subject to "such limitations and conditions" as the Minister may think fit. The separate water allocations under the 1912 Act were as follows: (1) for the licence on the Hutchins property 1615ML; (2) for the licence on the Danwillach property: 1900ML; and (3) for the licence on the Delta property: 1384ML. Those licences were issued between 1998 and 1999. And, as authorised by the licences, one bore was constructed on each of the properties. But bore construction on the Danwillach and Delta properties was delayed. A bore was sunk on the Hutchins property in 1997/1998, and on the Danwillach and Delta properties in 2000/2001.
Important aspects of the legislative scheme debated in these proceedings pivot around a new condition (called throughout these reasons the "linking condition") introduced into each of the three licences issued under the 1912 Act on 19 April 2001 and notified to the plaintiffs on 23 April 2001. That linking condition was in identical terms in each licence and was as follows:
"The volume of groundwater extracted from the works authorised by this licence and by Licence Nos [the two other plaintiffs' licences] shall not exceed 4,899 megalitres in any 12 month period commencing 1st July."
The circumstances of the introduction of this condition are in dispute. The defendants say that Mr Hutchins applied on behalf of the plaintiffs to have the condition introduced. The plaintiffs disagree: they say the Minister imposed the condition. This dispute is not ultimately material to the issues to be decided, because there is no doubt the condition existed in each licence. But the parties' perspectives on the issue are briefly set out here as they emerge from the history in any event.
The 1999 Application. In 1999 there was a single bore drilled on the Hutchins' property but no bore on the Delta or Danwillach properties. The plaintiffs wanted to maximize their water entitlements for the properties. Mr Hutchins proposed sinking bores on the Delta and Danwillach properties, so he wrote to the Department of Land and Water Conservation ("the Department") seeking approval to combine the pumping from those two future bores.
The Department denied the request. It informed Mr Hutchins that as the Properties were on three separate titles and were owned by different entities they "cannot be treated [for the purposes of the 1912 Act] as a combined unit". The Department suggested to Mr Hutchins that he may either: "amalgamate the three properties into a single unit" and use one bore only; or construct a separate bore on each property.
The first of these options would have resulted in a reduction of the plaintiffs overall entitlement because at the time the "per hectare" entitlements were higher for smaller properties. Mr Hutchins decided to keep the properties separate. Sometime in late 1999 and early 2000 he sunk bore on the Delta property and another bore on the Danwillach property.
March-April 2001. Two years later in 2001 Mr Huchins was still seeking greater flexibility in relation to the use of the water entitlements for all three bores. To achieve that he approached the Department, he says, to arrange what he thought were to be temporary transfers in relation to the licences.
The internal correspondence between the Department's employees in March 2001 confirms that they: (1) considered Mr Hutchins previous efforts to achieve flexibility in the use the water entitlements on the Properties; (2) concluded that this could now be achieved through the introduction of a linking condition; and so, (3) requested Mr Hutchins to provide evidence to the Department that the three properties were "being operated by one entity".
Mr Hutchins responded with such evidence. On 2 April 2001 Mr Hutchins' accountant sent to the Department a letter confirming that the Hutchins Family Trust operated the properties "as one enterprise". The accountant's letter continued:
"It is our understanding that if the properties are operated as one the water entitlements on each property can be combined and water from the three production bores used on any part of the above properties approved for irrigation.
In this case, can you please confirm to our client that this is permissible in their situation."
The Department did not approve temporary transfers. Instead on 19 April 2001 two new conditions were introduced into the plaintiffs' licences, which were re-issued: (1) the linking condition, providing an aggregated extraction limit for all three licences of 4,899 ML per year; and (2) a condition requiring that the extracted water could be used on any of the properties. The limit imposed by the linking condition, 4,899ML, was simply the sum of the three individual limits (1615ML- Hutchins + 1384ML- Delta + 1900ML- Danwillach) of the three licences.
The new condition allowing for the water extracted under each of the licences to be used on any of the properties provided:
"Location of land on which water may be used:
LOTS
PARISH
COUNTY
[DP numbers of all the plaintiffs' three properties]
Goolgumbla
Urana
But before 2001, reflecting the intent of the 1912 Act, s 117 each of the licences already included a condition in relation to the land covered by the licence. And this condition was not removed in the reissued licences:
"The allocation has been determined for the total area of land described on the face of the licence. In the event of part of the land being disposed of, the allocation will be subject to review."
The front page of each of the licences referred only to the property, on which the bore to which that licence applied, was located.
On 23 April 2001 the Department wrote to Mr Hutchins attaching copies of the licence certificate for each of the plaintiffs' three newly issued licences together with a statement of their conditions including these new conditions. The Department's 23 April covering letter for each licence also pointed out "the Department has also combined the irrigation entitlement of all three licences to 4,899 megalitres". The plaintiffs did not question the Department's decision to introduce these changes. They appeared responsive to what the plaintiffs had requested. The expert evidence makes clear that the plaintiffs took advantage of the linking condition after it was introduced by drawing volumes of water from individual bores that were in excess of the nominal limits for those bores and which therefore are to be explained here by the existence of the linking condition.
The linking condition: (1) allowed the Hutchins interests to achieve a higher water extraction limit than they would have obtained if they had first converted the three properties into a single title, and then applied for a single licence under the 1912 Act for the whole area of that single title; and (2) allowed them to share the aggregated extraction limit between the three bores in any way they wanted, including extracting it all from one bore, without the need to apply for temporary transfers between bores.
The effect of the 2001 changes in conditions may be shortly stated. Although the plaintiffs' three licences remained separate, the plaintiffs could extract the whole amount of 4,899 ML from a bore on any one of the Properties, and then the whole or any part of that water could be used on the other two Properties.
Because of that linking condition, when the 2003 Plan came into force on 1 October 2006, as will be explained in more detail below, the Minister considered the licences to be "linked Part 5 licences" within the meaning of the 2000 Act, Schedule 10, cl 17. And as a result, pursuant to the 2000 Act, Schedule 10, cl 3 and cl 17, the Minister replaced the three licences with a single water licence, or WAL, and a single supplementary water access licence, a SWAL.
The plaintiffs do not question the validity of the replacement of their three separate 1912 Act licences by a single WAL and SWAL by the operation of the 2000 Act, Schedule 10. Their concern is with the recalculation of the share components of their WAL and SWAL.
Legislation Governing Water Access in the Lower Murrumbidgee
The present dispute about calculating the share component of the plaintiffs' 2000 Act WAL and SWAL requires close consideration of elements of the previous and current legislative schemes governing access to artesian water in the Lower Murrumbidgee region. These schemes must now be described in more detail.
Artesian Well licences under the 1912 Act, Part 5
Before 1 October 2006 the 1912 Act governed the grant of water licences for the Lower Murrumbidgee water sources and in particular for artesian wells in that area. An "artesian well" under the 1912 Act, s 105, includes an artesian well "from which water does not flow naturally but has to be raised by pumping or other artificial means". The 2000 Act dealt with licences granted in respect of artesian wells under the 1912 Act, Part 5 by special statutory provisions, discussed below.
The language describing the rights attaching to water licences changed from the 1912 Act to the 2000 Act. Under the 1912 Act, Part 5 the restriction on the volume of water that the licensee of a bore may extract is known as a "water allocation": 1912 Act, s 105. Generally, rights to extract water under the 1912 Act, Part 5 are referred to as water "entitlements". When the 2000 Act was introduced this language changes and "water access licences", referred to in these reasons as WALs and supplementary water licences, or SWALs, are introduced for the first time.
The 1912 Act Part 5 - Artesian Wells, Division 2 creates a detailed regime for the sinking of bores and the extracting water from artesian wells. The 1912 Act Part 5, Division 3 regulates the application for, and granting of licences for such bores. The 1912 Act, s 112 (included in Division 3) prohibits sinking of bores without a licence. Applications for a licence for any new bore are made to the Minister who will advertise the application in respect of an artesian well: s 113. Then, with or without public inquiry under s 114, the Minster may issue a licence under s 115. And that licence may then be granted to a licensee under s 116. The issue of a licence under s 115 is "subject to such limitations and conditions as it may deem fit and proper".
Section 116 governs the grant and renewal of Part 5 licences in the following terms:
"(1) The Ministerial Corporation may, if, in its opinion such a course is necessary, grant a licence for a limited period, and any licence so granted shall (subject to the provisions of this Part with regard to the renewal of licences, and subject to such limitations and conditions as the Ministerial Corporation may think fit to make) be renewed by the Ministerial Corporation from time to time on the application of the person holding the licence and on payment of the prescribed fee.
(2) The Ministerial Corporation may limit the period of any renewal. The licence shall lapse if the sinking of the bore or the enlarging, deepening, or altering of the bore licensed be not commenced and completed within such times or extended times as may be notified by the Ministerial Corporation to the licensee. [emphasis added]"
Limitations placed on a water access licence foreshadowed by s 116 may restrict the volume of water which its holder is entitled to extract, 1912 Act, s 105 provides:
"'Water allocation', in relation to a licence, means the volume of water to which the licensee of the bore is restricted by means of a condition of the licence referred to in section 115 or 116 or by means of a notice referred to in section 117A(3)(a)."
The 1912 Act also provides for s 115 or s 116 "limitations and conditions" to be imposed on a licence at any time after its issue and grant: s 116C (1). But the Minister must provide procedural fairness to the licensee before imposing such limitations or conditions: s 116C (2).
Part 5 licences are anchored to bores and the land on which the bore is sunk. This appears in the 1912 Act, s 117, which provides as follows:-
"117 Benefit of licence
A licence shall be deemed to be held by and shall operate for the benefit of the lawful occupier for the time being of the land whereon the bore is sunk or is proposed to be sunk."
Depending on changing needs, the licensee might by a written request to the Minister adjust the use of his or her water allocation under Part 5 license between different years. If the Minister varies the allocation the licensee may use in the current year part of the allocation for the following year, or use in the following year the unused allocation for the current year: 1912 Act, s 117G. This provision authorised a practice of licensees "borrowing" allocations between years that added a degree of flexibility to the operation of the licensing scheme.
Even greater flexibility was added to the 1912 Act licensing regime by the use of linking conditions such as those introduced in April 2001 into the plaintiffs' 1912 Act licences. Linking conditions were not specifically authorised by any provision of the 1912 Act but appear to have been a practical and creative utilisation of the 1912 Act, s 116C that developed in response to licensees' demand to borrow geographically among properties operated by the same commercial interests.
It was against this relevant background that the 2000 Act was enacted.
The 2000 Act - Commencement and Operation
The 2000 Act commenced in relation to the Lower Murrumbidgee Groundwater Sources, beneath the plaintiffs' properties on 1 October 2006. This commencement was effected by a 17 September 2006 proclamation declaring under the 2000 Act, s 55A, that Part 2 of Chapter 3 - Access Licences of that Act applied to three identified water sources, referred to in water management plans made under the 2000 Act. One of these water sources was the Lower Murrumbidgee Groundwater Sources.
The 2000 Act declared in section 3 a range of ecological and social objectives that had not appeared in the 1912 Act. These objectives recognise the limited nature of these water resources and inform the process of construction of the 2000 Act required in this case. The 2000 Act, s 3 provides:
"3 Objects
The objects of this Act are to provide for the sustainable and integrated management of the water sources of the State for the benefit of both 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, their associated ecosystems, ecological processes and biological diversity and their water quality, 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:
(i) benefits to the environment, and
(ii) benefits to urban communities, agriculture, fisheries, industry and recreation, and
(iii) benefits to culture and heritage, and
(iv) benefits to the Aboriginal people in relation to their spiritual, social, customary and economic use of land and water,
(d) to recognise the role of the community, as a partner with government, in resolving issues relating to the management of water sources,
(e) to provide for the orderly, efficient and equitable sharing of water from water sources,
(f) to integrate the management of water sources with the management of other aspects of the environment, including the land, its soil, its native vegetation and its native fauna,
(g) to encourage the sharing of responsibility for the sustainable and efficient use of water between the Government and water users,
(h) to encourage best practice in the management and use of water."
Chapter 2 of the 2000 Act provides a regime of Water Management Planning, commencing with the provision of "water management principles", to give effect to the objectives of the Act. These "water management principles", guide water sharing, water use, drainage management, flood plain management, controlled activities, aquifer interference activities, and also operate generally: the 2000 Act, s 5.
The 2000 Act, Chapter 2, Part 2 divides the State's water resources into "water management area[s]", declared by the Minister to facilitate locally based water resource management: s 11. The Murrumbidgee, Lachlan and Murray Water Management Areas, of which the Lower Murrumbidgee Groundwater Sources are a part, are such water management areas.
The Minister may establish a "management committee" to carry out a specific water management task in a water management area: s 12. The Minister constitutes such a committee by appointing persons to represent the interests of various groups, who it may be anticipated will have competing objectives for the use of the available water resources within the particular water management area: s 13.
The management committee consists of persons appointed by the Minister to represent the interests of environmental protection groups, water user groups, local councils, catchment management authorities, Aboriginal persons, Departmental staff, representatives of the Minister, and persons appointed to represent such other interests as the Minister considers require representation, and an independent chair person.
A principal function of a management committee so appointed is the preparation of a draft "management plan" for the whole or any part of the water management area or of the particular water sources within that area: s 14. The 2000 Act, Chapter 2, Part 3 - Management Plans, Division 1 provides a regime for the preparation and standard contents of management plans drafted under the 2000 Act. Part 3, Division 2 - Water Sharing, provides for certain "core provision" of water management plans to the extent that such plans deal with water sharing in a water management area. These provisions include "identification of the requirements for water for extraction under access licences": s 20(1)(c). The 2003 Plan, relevant in this case, makes just such provision. The water sharing provisions of a water management plan must also deal with the rates, times and circumstances under which water may be taken from any water source or the quantity of water that may be taken from any water source and water sharing measures for the protection and enhancement of the quality of water or for the restoration or rehabilitation of water sources, or their dependent ecosystems: s 21 (a) and (d).
But the 2000 Act permits the Minister to shortcut the water management plan making process to a degree, by publishing in the Gazette a "Minster's plan": s 50. The water sharing plan the subject of these proceedings, the the 2003 Plan was made under s 50. The procedures for making a Minister's plan under s 50 (in Chapter 2, Part 4) are to a degree complementary to the procedures for making a management plan set out in Part 3, Division 8. A Minister's plan under Chapter 2, Part 4 may only be made with respect to an area or a water source not already covered by the subject matter of the management plan then in force: s 50(1).
The 2000 Act, Chapter 3 - Water Management Implementation, Part 2 deals with water access licences. The central provision within Part 2, s 56 creates the concept of an "access licence" and defines the components to which its holder is entitled. Section 56 provides as follows:
"56 Access licences
(1) An access licence entitles its holder:
(a) to specified shares in the available water within a specified water management area or from a specified water source (the
"share component" ), and
(b) to take water:
(i) at specified times, at specified rates or in specified circumstances, or in any combination of these, and
(ii) in specified areas or from specified locations,
(the "extraction component" ).
(2) Without limiting subsection (1) (a), the share component of an access licence may be expressed:
(a) as a specified maximum volume over a specified period, or
(b) as a specified proportion of the available water, or
(c) as a specified proportion of the storage capacity of a specified dam or other storage work and a specified proportion of the inflow to that dam or work, or
(d) as a specified number of units.
(3) Shares in available water may be assigned generally or to specified categories of access licence.
(4) In the case of a local water utility licence, its share component is to be expressed as a specified volume per year.
(4A) Without limiting subsection (1) (b), the extraction component of an access licence may authorise the taking of water from a water source specified in the share component of the licence and from another water source not so specified if those water sources are vertically abutting (either wholly or partly) water sources.
(4B) In the circumstances referred to in subsection (4A), the water source specified in the share component of the access licence is to be the water source that is the main source for the extraction of water by the holder of the licence.
(5) For the purposes of this Act, an access licence may also be referred to as a "water access licence" or a "WAL" .
Note: An access licence:
(a) does not confer a right on any person to use water for any particular purpose (that right is conferred by a water use approval), and
(b) does not confer a right on any person to construct or use a water supply work (that right is conferred by a water supply work approval). [emphasis added]"
Section 56 contains important concepts for the present discourse about water access licences. The licence entitles the holder to "specified shares" in the "available water". The "available water" is the result of determinations the Minister makes under s 59. The Minister's "available water determination" determines (usually annually) the "availability of water" for the various different categories (or sub-categories) of access licences (defined in s 57) in relation to specified water management areas or water sources: s 59(1)(a). Thus s 56 entitles a WAL licence holder to this specified "share component" of the s 59 declared available water.
The possible categories of access licences are listed in the 2000 Act, s 57. These include "aquifer access licences" of which the WAL the plaintiffs' held is an example: s 57(e). It also includes "supplementary water access licences" such as the plaintiffs' SWAL: s 57(h). Section 57 provides:
"57 Categories of licence
(1) There are the following categories of access licences:
(a) regulated river (high security) access licences,
(b) regulated river (general security) access licences,
(c) regulated river (conveyance) access licences,
(d) unregulated river access licences,
(e) aquifer access licences,
(f) estuarine water access licences,
(g) coastal water access licences,
(h) supplementary water access licences,
(i) major utility access licences,
(j) local water utility access licences,
(k) domestic and stock access licences,
(l) such other categories of access licence as may be prescribed by the regulations.
(2) Subcategories of any category of access licence may be prescribed by the regulations."
The 2000 Act sets up a hierarchy among the various s 57 licence categories, which priority reflects a common sense view that the needs of local utilities (for local water supply authorities) and major utility access licences (power generators and major water supply authorities) together with domestic and stock access licences have priority over all other access licences: s 58(1)(d). Priorities are mostly otherwise to be provided for in the regulations: s 58(1)(c). Section 58(1) and (2) provide in full:
"(1) For the purposes of this Act, the following priorities are to be observed in relation to access licences:
(a) local water utility access licences, major utility access licences and domestic and stock access licences have priority over all other access licences,
(b) regulated river (high security) access licences have priority over all other access licences (other than those referred to in paragraph (a)),
(c) access licences (other than those referred to in paragraphs (a), (b) and (d)) have priority between themselves as prescribed by the regulations,
(d) supplementary water access licences have priority below all other licences.
(2) If one access licence (the "higher priority licence" ) has priority over another access licence (the "lower priority licence" ), then if the water allocations under them have to be diminished, the water allocations of the higher priority licence are to be diminished at a lesser rate than the water allocations of the lower priority licence."
These priority rules account for the role of supplementary water access licences under the 2000 Act, such as the plaintiffs' SWAL for 250 units. But supplementary water access licences hold the lowest priority out of all the licences: s 58(1)(d). Licensees cannot always access water under supplementary licences. The Minister determines whether a SWAL will entitle a licence holder to any water. Except where a severe water shortage is Gazetted, the s 58 rules of priority apply to the Minister's available water determinations under s 59(1)(a). And the Minister's s 59(1)(a) available water determination may turn out to be insufficient to give a SWAL access to any water during the period of that determination.
The 1912 Act did not include the concept of "supplementary water access licences". The concept first introduced in the 2000 Act. One role of SWALs is to assist in making up for the reduction in licensees' 1912 Act entitlements that came with the introduction of the 2000 Act.
The conversion of former 1912 Act entitlements into WAL share components
On 1 October 2006, when the 2000Act became applicable to water sources in the Lower Murrumbidgee, many 1912 Act water licences were already in place in that region, including the plaintiffs' licences. And so some legislative scheme was necessary to facilitate the conversion of the 1912 Act licences, and their "water allocations", into the 2000 Act access licences, with particular "share components".
The scheme of converting legislative entitlements is authorised through two principal sources found within the 2000 Act. The first is a general source of power found the transitional provisions of the 2000 Act. Section 403 of the 2000 Act gives effect to the Savings and Transitional Provisions in Schedules 9, 10 and 11. Schedule 10 applies a set of general rules for the conversion of entitlements from the 1912 Act for each category of WAL, where (as here) the WAL arises from a section 55A proclamation applying Chapter 3, Part 2 of the Act to a particular water management area or water source. The conversion methodology in Schedule 10 is general and is not specific to any area of the State. The parties agree that the Schedule 10 methodology applies here. But they disagree as to which parts of Schedule 10 are applicable. Schedules 9 and 11 are discussed below.
The second source of power for the conversion scheme is the regulation making power conferred in s 400 of the 2000 Act. Section 400 empowers the Governor, in familiar terms to make regulations "not inconsistent with [the 2000] Act" to do what is "necessary or convenient" for "giving effect to" the 2000 Act. Under s 400 the Governor made the 2004 Regulation. That regulation in turn activated the specific sharing arrangements settled under the 2003 Plan applicable to the Lower Murrumbidgee Groundwater Sources.
So analysis of the conversion scheme involves consideration of methodology of general application and then further methodology and rules specific to the Lower Murrumbidgee Groundwater Sources. These reasons first turn to the general rules in Schedule 10.
The General Methodology and Rules - Schedule 10. The 2000 Act, Schedule 10 clauses 1, 2 and 3 relevantly provide for the application and commencement of Schedule 10 and for its replacement of certain former entitlements. It relevantly provides:
"1 Application of Schedule
This Schedule applies:
(a) to each category or subcategory of access licence that relates to a part of the State or water source to which Part 2 of Chapter 3 applies by operation of a proclamation under section 55A, and
...
2 Definitions
In this Schedule and Schedule 11:
"appointed day" means:
(a) in relation to a category or subcategory of access licence to which Part 2 of Chapter 3 applies or an entitlement from which such an access licence arises, the day appointed under section 55A in relation to that category or subcategory of access licence, or
(b) in relation to a type or kind of approval to which Part 3 of Chapter 3 applies or an entitlement from which such an approval arises, the day appointed under section 88A in relation to that type or kind of approval.
Note: Clause 9 provides that, in certain circumstances, the operation of those Parts is deferred in relation to particular entitlements.
"entitlement" means:
(a) a licence, permit, authority, irrigation corporation licence or group licence referred to in Part 2 of the 1912 Act, or
(b) a right to take and use water referred to in section 38B of the 1912 Act, or
(c) a licence referred to in Part 5 of the 1912 Act, or
(d) an approval referred to in Part 8 of the 1912 Act, or
(e) a water management licence under Part 9 of the 1912 Act, or
(f) a permit under Part 3A of the 1948 Act, or
(g) an irrigation corporation licence under the 1994 Act, or
(h) any power under section 12 of the Water Administration Act 1986 or section 8 of the 1912 Act that, immediately before the appointed day, was exercisable by any person pursuant to an agreement between that person and the Ministerial Corporation, or
(i) any right to take water from an unlicensed water bore (being a water bore constructed as referred to in section 112 (1) (b) of the 1912 Act) that was in force immediately before the appointed day, or
(j) any arrangement that, immediately before the commencement of this Schedule, was in force between the Inverell Shire Council and the Ministerial Corporation, or
(k) any other right, interest, privilege, permission or authority that is declared by the regulations to be an entitlement for the purposes of this clause.
...
"the 1912 Act" means the Water Act 1912 .
...
3 Access licences and approvals arising from former entitlements
(1) Subject to this Schedule, an entitlement that, immediately before the appointed day, was in force under the 1912 Act, the 1948 Act or the 1994 Act is taken to have been replaced:
(a) to the extent to which it entitles any person or body to take a specified quantity of water, by an access licence held by that person or body (subject to such of the conditions of the entitlement as are applicable to an access licence):
(i) for the quantity of water so specified, or
(ii) if the relevant management plan, and regulations made for the purposes of this paragraph, indicate that a different quantity of water calculated in accordance with a specified methodology may be taken under an access licence issued in relation to the water management area or water source to which the management plan applies-for a different quantity of water calculated in accordance with that methodology, and [emphasis added]"
The plaintiffs 1912 Act, Part 5 licences were defined Schedule 10 "entitlements": Schedule 10, cl 2. Under Schedule 10, cl 2 the "appointed day" was 1 October 2006, being the day of the s 55A proclamation, when the Lower Murrumbidgee Groundwater Sources came under the operation of the 2000 Act.
Schedule 10, cl 3(1)(a)(ii) contemplates that a new "relevant management plan" and new "regulations" would be put in place before access licences were created upon the local commencement of the 2000 Act. They were indeed put in place by 1 October 2006 to facilitate the conversion of the 1912 Act licences into WALs: the Minister had made the 2003 Plan under s 50; and the Governor had made the 2004 Regulation under s 400. These instruments are described below.
Schedule 10 also made provision for supplementary water access licences to arise under the regulations. Schedule 10 cl 8 provides as follows:
"8 Supplementary water access licences
On the appointed day, and if the regulations so provide, supplementary water access licences, additional to those arising under this Part, are taken to have arisen in accordance with the regulations."
A central contest between the plaintiffs and the Minister concerns the application of Schedule 10, clause 17 - Multiple Bore Licences to the plaintiffs' 1912 Act Part 5 licences. Schedule 10 cl 17 only applies to pre-existing groups of bore licences that are capable of becoming an "aquifer access licence" (a licence category created in s 57(10(e)). As Schedule 10, cl 17 provides, it "applies to a group of licences under Part 5 of the 1912 Act" that immediately before the "appointed day" were "linked by a condition specifying a maximum quantity of water that may be taken under all of the licences", which clause 17 calls "linked Part 5 licences". Clause 17 provides as follows:
"17 Multiple bore licences
(1) This clause applies to any group of licences under Part 5 of the 1912 Act that, immediately before the appointed day, were linked by a condition specifying a maximum quantity of water that may be taken under all of the licences, referred to in this clause as
"linked Part 5 licences" .
(2) On the appointed day, any linked Part 5 licences are taken to have been replaced:
(a) to the extent to which they entitled any person or body to take a specified quantity of water, by a single aquifer access licence held by all the persons or bodies who held the licences for the quantity of water specified by the linking condition, and
(b) to the extent to which they entitled any person or body to use a specified water supply work, by one water supply work approval held by all the persons or bodies who held the licences in respect of works to which the linking condition related, and
(c) by one water use approval entitling all the persons or bodies who held the licences to use water on the land to which the linking condition related.
(3) An access licence or approval referred to in subclause (2) is subject to such of the conditions of the linked Part 5 licences as are applicable to an access licence or approval of that kind.
(4) In any group of linked Part 5 licences, the Part 5 licence last granted is taken to be the entitlement from which the replacement access licence and approvals arise for the purposes of clause 21."
The Minister submits clause 17 applies to the plaintiffs' three 1912 Act Part 5 licences, which are "linked Part 5 licences" within clause 17 because they each contain linking conditions. The plaintiffs submit that clause 17 does not apply and that clause 3 is the relevant governing provision for the conversion of the plaintiff's 1912 Act Part 5 licences. For the reasons elaborated below in my view Clause 17 does apply to the plaintiffs' 1912 Act licences, in part because clause 3 is to be read "subject to this Schedule" including of course clause 17.
The discussion now turns to the sources of methodology and rules for the conversion scheme that are specific to the Lower Murrumbidgee Groundwater Sources. Both the 2003 Plan and the 2004 Regulation contain the specific methodology and rules.
Specific Methodology and Rules - the 2003 Plan. As indicated earlier the Minister made the 2003 Plan under the 2000 Act, s 50. The 2003 Plan did not take effect until 1 October 2006 when the Lower Murrumbidgee Groundwater Sources came under the operation of the 2000 Act: the 2003 Plan, cl 3.
Under the 2003 Plan as originally made, the groundwater entitlements of all licence holders were to be reduced consistently across the board to approximately 52 per cent of their pre-existing entitlements. But this policy was revised and the 2003 Plan was amended to incorporate new methodology for reducing water entitlements variably according to a formula. The formula applied to holders of the 1912 Act entitlements from of the Deep Groundwater Source, or aquifer, of greater than 100ML, such as the plaintiffs. Holders of the 1912 Act entitlements from of the Deep Groundwater Source, or aquifer, of 100ML or less were to receive the same share component under their WAL as they had under their 1912 Act entitlements.
The formula for variable reduction was included in the 2003 Plan, cl 25C which deals with conversion of the 1912 Act water entitlements into WALs share components under the 2000 Act. Clause 25C provided as follows:
"Share components of aquifer access licences
25C Share components of aquifer access licences
(1) For those Water Act 1912 entitlements in the Shallow Groundwater Source that are to become aquifer access licences in this groundwater source at the commencement of this Plan, the share component is to be equal to the Water Act 1912 entitlement.
(2) It is estimated that at the time of commencement of this Plan, the share components of aquifer access licences authorised to extract water from the Shallow Groundwater Source will total 3,332 unit shares.
(3) For those Water Act 1912 entitlements in the Deep Groundwater Source equal to or less than 100 ML that are to become aquifer access licences in this groundwater source at the commencement of this Plan, the share component is to be equal to the Water Act 1912 entitlement.
(4) For each entitlement in the Deep Groundwater Source referred to in Column 1 of Schedule 5 applying to the licences listed in Column 2 of Schedule 5 that are to become aquifer access licences in this groundwater source at the commencement of this Plan, the share component is to be equal to the share component in Column 3 of Schedule 5.
(5) For those Water Act 1912 entitlements in the Deep Groundwater Source greater than 100 ML and not listed in Column 1 of Schedule 5 and that are to become aquifer access licences in this groundwater source at the commencement of this Plan, the share component will be established in accordance with the following formula:
SCAAL = AV+HV
Where:
(a) SCAAL is the share component of the aquifer access licence,
(b) AV is the volume required to provide asset value protection and to protect entitlements greater than 100 ML from being reduced below 100 ML and is calculated from the following formulae:
AV = (WAE x 0.157) or 100 whichever is greater
Where WAE is the Water Act 1912 entitlement,
(c) HV is the history of extraction component and is calculated from the following formulae:
HV = (HOER/ΣHOER) x (R- PEW- LWU-SD- ΣSL- ΣEXC- ΣAV)
Where:
(i) HOER = 0 where HOE ≤ AV,
(ii) HOER = HOE − AV where HOE > AV
Note. Where HOER = 0 the history of extraction component (HV) will also be 0.
(iii) HOE is as defined in subclause (6),
(iv) R is the amount of recharge established in clause 16 (1) (b),
(v) PEW is the volume of recharge reserved as planned environmental water in clause 18 (1) (c),
(vi) LWU is the total of local water utility access licence share components in this groundwater source at the commencement of this Plan,
(vii) SD is the total volume of domestic and stock access licences in the Deep Groundwater Source at the commencement of this Plan,
(viii) ΣSL is the total volume of all Water Act 1912 entitlements that are less than or equal to 100 ML as defined in subclause (3),
(ix) ΣEXC is the sum of share components specified in Column 3 of Schedule 5, and
(x) ΣAV is the total of the asset value protection component volumes calculated under subclause (5) (b).
(6) For the purposes of subclause (5) and clause 25D HOE is equal to the greater of:
(a) the average extraction over the seven water years from 1995/96 to 2001/02 not exceeding the Water Act 1912 entitlement in 2001/02 and excluding zero and low extraction years prior to activation, or
(b) the average extraction over the five water years from 1997/98 to 2001/02 not exceeding the Water Act 1912 entitlement in 2001/02 and excluding zero and low extraction years prior to activation, or
(c) the average extraction over the six water years from 1997/98 to 2002/03 not exceeding the Water Act 1912 entitlement in 2001/02 and excluding zero and low extraction years prior to activation.
Note: The rules for determining HOE are contained in Appendix 4.
(7) For the purposes of subclause (6) zero and low extraction years are years where extraction was less than 20% of the maximum volume of water extracted in any one year between 1995/96 and 2001/02.
(8) For the purposes of subclause (6) activation is defined as the first year between 1995/96 and 2001/02 in which a licence holder extracted 20% or more of the maximum volume of water extracted in any one year between 1995/96 and 2001/02.
(9) It is estimated that at the time of commencement of this Plan the share components of aquifer access licences established under subclauses (2), (3), (4) and (5) for the Deep Groundwater Source will total approximately 267,500 unit shares."
The parties accept that, as at 1 October 2006 the plaintiffs' existing licences were "Water Act 1912 entitlements in the Deep Groundwater Source greater than 100 ML and not listed in Column 1 of Schedule 5" and that therefore the formula in the 2003 Plan, cl 25C(5) applies to them. Column 1 of Schedule 5 of the final 2003 Plan only listed four groups of licences, which was nothing like the comprehensive list of licences contained in the 2004 Regulation - see below. The explanation for this is that Schedule 5 swept up a small number of 1912 Act licences that had been omitted by mistake from the 2004 Regulation.
Clause 25C (5) operates with respect to 1912 Act entitlements "that are to become aquifer access licences...at the commencement of this Plan". These words are satisfied because the 2004 Regulation, r 29B, see below, states that the water access licences granted under the 1912 Act "have been replaced" by the 2000 Act access licences, also at the time of commencement of the 2003 Plan.
But the 2003 Plan differs from the 2004 Regulation in that the former sets out a formula for calculating the share component resulting from the change from 1912 Act entitlement to 2000 Act share component, whereas the latter states (in its Schedule 4A - see below) the share component outcome from the application of the formula. It was perhaps always on the cards that two pieces of delegated legislation, one that specified a formula and the other which specified the result of that formula's application would produce tension, because of different ways the formula might arguably be applied. This very same tension but in a different Plan arose for Jagot J 's decision in Green and Anor v Minister for Climate Change, Environment and Water [2008] NSWLEC 48 (Green), where her Honour upheld the effect of the statement of the outcome of the formula in the applicable regulation.
The 2003 Plan, cl 25C(5) formula determines the new reduced water entitlements ("share components") for the 2000 Act WALs by reference to several components. But the component leading to the present dispute is the average amount of water in fact extracted by the licence holder historically over a fixed period, before 1 October 2006 called the "history of extraction" or "HOE", determined for each licence according to the 2003 Plan, cl 25C(6)-(8) set out above.
The 2003 Plan, Schedule 4 sets out some general rules in relation to the calculation of the conversion. The parties referred the Court to Rules 1 and 10 which are as follows:
"Rule 1
The history of extraction for each entitlement is calculated separately, irrespective of ownership.
...
Rule 10
Where properties have been amalgamated, all extraction years prior to amalgamation will be combined and together with extraction occurring after amalgamation will be used to calculate HOE."
The words "to amalgamate" and "amalgamation" used in Rule 10 are not defined anywhere in the 2003 Plan. But the 2003 Plan, cl 6(5) states that "Appendices to this Plan do not form part of this Plan." The defendants submitted that, despite that, the rules in Schedule 4 may nevertheless be used as an aid for construction of the other provisions of the 2003 Plan.
When calculating the history of extractions (HOE) the 2003 Plan, cl 25C(6) excludes the "zero and low extraction years prior to activation". "Activation" is defined in the 2003 Plan, cl 25C(8) as the "first year between 1995/96 and 2001/02 in which a licence holder extracted 20% or more of the maximum volume of water extracted in any one year between 1995/96 and 2001/02" and appears to be a measure that a reasonable level of usage of the licence has commenced. The 2003 Plan, cl 25C formula will provides better results (in the form of higher WAL share components), for those licence holders with a higher history of extractions prior to activation. And because such history is calculated as an average over a period, the more "zero and low extraction years prior to activation" that are excluded from the calculation, the better the result is likely to be for the licensee.
The parties accept that the time of "activation" under cl 25(8) is different for each of the plaintiffs three 1912 Act licences. The Hutchins property licence achieved "activation" within cl 25C(8) first, in 1998/99. The Danwillach property licence did not achieve "activation" until 2001/02. And Delta property licence was in fact never activated. But they disagree as to the correct manner of application of the 2003 Plan, cl 25C(6) formula to the plaintiffs' licences.
The competing arithmetical approaches to applying the formula to plaintiffs' licences presented at the hearing by each party may be summarised as follows: (1) applying the 2003 Plan, cl 25C(6) formula separately to each one of the plaintiffs' 1912 Act licences, taking into account its individual activation date, and then adding the resultant separate averages to obtain a combined HOE of the three licences (the separate licence calculation - the plaintiffs' approach); or (2) first combining the historical water extraction figures for each of the three 1912 Act licences and then, using the year of activation of the earliest activated licence, and applying the 2003 Plan, cl 25C(6) formula only once to produce a single average figure (the combined licence calculation - the defendants' approach). The ultimate resulting share component of the new licence is higher when the first method, the separate licence calculation, is applied. This is because due to the late (2000/2001) activation dates of the Delta and Danwillach licences, a higher number of "zero and low extraction years prior to activation" would be excluded if each of the licences is first considered separately. Not surprisingly therefore, the plaintiffs favour the former approach, and the defendants the latter.
It is accepted in the expert evidence of Mrs Doughty that if the combined approach is adopted when applying the formula, and therefore using the 1998/1999 year as the activation date for the calculation, results in a share of sustainable yield for the plaintiffs WAL of 1925ML and for the plaintiffs SWAL of 250ML. As will be seen below these are the exact figures for the plaintiffs' WAL and SWAL set out in Schedule 4A to the 2004 Regulation. Mr Ryan says the calculation cannot be done. But I accept Mrs Doughty's evidence it is possible and I infer that is how the Minister applied the cl 25C(5) formula when Schedule 4A to the 2004 Regulation was prepared. Importantly this means there is one worked example of the cl 25C(5) formula that produces a result consistent with Schedule 4A for the plaintiffs.
The parties accept that the rationale for creating supplementary licences in the 2000 Act was to make up for some of the shortfall between the quantum of the 1912 Act licence water entitlement and the reduced share components of the new 2000 Act during the better seasons, when the Minister determines that sufficient water resources are available in the Lower Murrumbidgee region to allow extraction of water under SWALs.
The defendants submit that the 1912 Act licences (listed in the 2004 Regulation, Schedule 4A table Column 1), whose water entitlements were reduced as part of their conversion into the 2000 Act aquifer WALs, were deemed replaced not only by "an aquifer access licence with a share component of the volume specified in Column 2 [of the 2004 Regulation, Schedule 4A]", but also by "a supplementary water access licence with a share component of the volume specified in Column 3 [of the 2004 Regulation, Schedule 4A]": the 2004 Regulation, r 29B(2)(a) and (b). For the reasons already given, in my view the SWAL share components volumes specified in the 2004 Regulation Schedule 4A table Column 3 are deemed to be, and to have been, calculated in accordance with the methodologies in the 2003 Plan, cl 25D: 2004 Regulation, r 29B(3)(c). In these circumstances, the same considerations as govern the correctness of the WAL share component will govern the validity of the SWAL share component.
Some Observations on the Expert Evidence
Each of the parties in these proceedings adduced expert evidence. Mrs Doughty prepared a report for the defendants, and Mr Ryan prepared a report for the plaintiffs.
The expert gave opinion in relation to two questions: (1) whether for the purpose of the 2003 Plan, cl 25C conversion formula plaintiffs 1912 Act licences should be treated separately or amalgamated; and (2) assuming that they should be treated separately what are the correct share components of their WAL and their SWAL.
After addressing each of those questions in separate reports, Mrs Doughty and Mr Ryan have helpfully summarised the differences between their approaches in a joint report. In the end they disagreed on two issues only: (1) how the history of extractions of the plaintiffs' licences should be calculated under the 2003 Plan, cl 25C(6)-(8) in the circumstances where each of those three licences had a different activation date; and (2) whether when calculating HOE under the 2003 Plan, cl 25C(6)-(8) separately for each of the plaintiffs 1912 Act licences it is appropriate to take into account any "carry-over" or "borrowing" of water entitlements in relation to those licences after the 2001 linking condition was introduced.
Calculation of Plaintiffs' History of Extractions
This first matter on which Mrs Doughty and Mr Ryan disagree is the calculation of HOE under the 2003 Plan, cl 25C(6)-(8) in light of different activation dates of the plaintiffs' licences. Mr Ryan says that the 2003 Plan, cl 25C(6)-(8) does not provide any guidance as to how its formula should be applied to multiple linked licences with different activation dates. He further says because of that, the only way in which the formula may be applied to the plaintiffs' licences is by treating them separately and taking into account each of their activation dates. Mrs Doughty disagrees. She says that for the purposes of the 2003 Plan, cl 25C(6)-(8) the relevant activation date is the year of activation of the earliest licence activation. She does not rely on any particular provisions of the scheme. But she says that this approach follows from treating the three licences as amalgamated.
This issue between the experts is the exact matter that the parties require the Court to resolve in these proceedings. Mrs Doughty's solution of this issue is consistent with the position taken by the defendants and the operation of the 2003 Plan, Appendix 4, Rule 10. And Mr Ryan's approach is consistent with the plaintiffs' position. But they both agreed in oral evidence that the resolution of this issue depends on the interpretation of the provisions of the legislative scheme. And this is a matter for the Court.
"Carry-over" or "borrowing" after the introduction of the linking condition
The resolution of the second issue between the experts is relevant only if the plaintiffs succeed on their submission that the formula in the 2003 Plan, cl 25C(6)-(8) for calculating HOE should first be applied to each of their 1912 Act licences separately and the results should then be added.
Applying that methodology, Mr Ryan calculated the plaintiffs' WAL share component as 2,829ML and their SWAL as 473ML. And Mrs Doughty calculated WAL's share component as 2,720 and SWAL's as 447ML. In the joint report Mr Ryan revised his calculations slightly to: 2,913ML for WAL and 494ML for SWAL.
The difference between the results reached by the experts relates to one element of the calculation of the history of extractions in year 2001/2002. Mr Ryan and Mrs Doughty disagree whether in that year a "borrowing" occurred in relation to the Hutchins' licence. Mr Ryan says that in that year water was "borrowed". Mrs Doughty says no "borrowing" occurred.
The "borrowing" to which the experts refer was regulated under 1912 Act, s 117G. But in light of the Court's earlier conclusions it is not necessary for the Court to decide this issue.
Conclusions and Orders
In the result I decline to grant the plaintiffs the relief they seek and the plaintiffs fail on the separate question.
Therefore the Court makes the following orders and directions:
1. I direct the parties to bring in short minutes of order to give effect to these reasons.
2. I will list the proceedings for any further argument, including as to costs, at 9.30am one morning this month by arrangement with my Associate on a date convenient to the parties.
**********
Decision last updated: 10 February 2014
1
1
7