ICM Agriculture Pty Ltd & Ors v The Commonwealth of Australia & Ors

[2009] HCATrans 199

[2009] HCATrans 199

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S24 of 2009

B e t w e e n -

ICM AGRICULTURE PTY LTD ABN 32 006 077 765

First Plaintiff

ICM AUSTRALIA PTY LTD ABN 49 005 120 703

Second Plaintiff

HILLSTON CITRUS PTY LIMITED ABN 45 100 483 243

Third Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

First Defendant

NATIONAL WATER COMMISSION

Second Defendant

THE STATE OF NEW SOUTH WALES

Third Defendant

THE MINISTER ADMINISTERING THE WATER MANAGEMENT ACT 2000 (NSW)

Fourth Defendant

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

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON MONDAY, 24 AUGUST 2009, AT 2.17 PM

Copyright in the High Court of Australia

__________________

MR R.J. ELLICOTT, QC:   If the Court pleases, I appear with MR M.G. McHUGH and MR W.A.D. EDWARDS for the plaintiffs. (instructed by Martine Anderson Legal Counsel for ICM Australia Pty Ltd)

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

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

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

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

MR W. SOFRONOFF, QC, Solicitor‑General of the State of Queensland:   May it please the Court, I appear with my learned friend, MR G.J.D. del VILLAR, for the Attorney‑General for the State of Queensland intervening.  (instructed by Crown Law (Qld))

MR M.G. HINTON, QC, Solicitor‑General for the State of South Australia:   If the Court pleases, I appear with my learned friend, MR S.T. O’FLAHERTY, for the Attorney‑General for the State of South Australia, intervening in support of the defendants.  (instructed by Crown for the State of South Australia)

FRENCH CJ:   Yes, Mr Ellicott.

MR ELLICOTT:   Your Honours, it is amazing how a simple element like water can attract so many lawyers and so much paper.  But I suppose in a sense one has to start by thinking of those English settlers who went across the mountains in the 18th century on to fertile plains and thinking that perhaps they were in some sort of paradise where water would abound and life would be very good because the soil was really good soil.  There were alluvial flats and open plains and black soil.

But they found that the simple thing called water after a while was not as abundant as they had found it, except in some circumstances, in the case of some of the artesian basin, the water did not ooze out of the ground as it had in England and the streams did not run all the time.  When they went to rivers like the Macquarie and the Lachlan and the Castlereagh they found that in time of flood they were raging streams but in times of dry the rivers dried up and became pools, and those pools of water caused a great deal of angst to those English people. 

For a time they used to dam up the rivers and keep it to themselves and that introduced lawyers and those lawyers, no doubt, took proceedings in courts and that caused a great deal of problems and it led ultimately, as the history would tell, to the politicians intervening and deciding that it was time that this simple substance called water should be regulated. 

As your Honours know, at the same time as rivers were drying up or flowing or droughts were occurring or times of plenty were occurring people were sinking bores, and amazingly some of those bores seem to have gone to tremendous depth.  Some of them went down to 4,000 feet and one wonders how they got there in those days, but no doubt they used steam engines and the like.  But whatever they did it was all in search of water and water was a hallmark of this country as soon as it was populated by Europeans.  The scarcity of it left an indelible mark and still does on this country, and it has left an indelible mark on the law, and the water law.

Now, those who came with them, came here, would have brought their English law, and the English law was clear enough, so far as water was concerned, although again it caused lots of problems in the law courts.  But the rights of riparian owners were fairly well established, that is to say, that you were entitled, if a stream ran by your land, to take water, but you had to act reasonably in the interests of those downstream.

So far as groundwater was concerned, the English law seemed to have worked itself through to a point where people who, on the basis that they owned everything from the centre of the earth to the heavens beyond, they worked out a solution to that and that was, so far as water that percolated through the soil below your land was concerned, you did not own it but you had the right to pull it up by one means or another and thereby to take it into your ownership and possession.

FRENCH CJ:   Without reference to its effects on your neighbour’s access?

MR ELLICOTT:   I beg your Honour’s ‑ ‑ ‑

FRENCH CJ:   Without reference to its effect.

MR ELLICOTT:   Without reference to your neighbour, and to take it to the extent to which you could.  Now, no doubt when people found artesian wells, put down artesian wells and saw in some places, like some of us might have been used to in our youth, in places like Moree, for instance, it just came up out of the ground and they must have thought it was there in plenty.  No doubt that stayed for a long time and affected the content of the law.  But by the 1890s, following in Victoria a royal commission, I think, by Alfred Deakin who saw something of a problem, by the 1890s the politicians had decided to intervene and the intervention came with the Water Rights Act 1896 and the Artesian Wells Act 1897.

So far as the Water Rights Act was concerned, it only related to surface water and it vested the use, control and flow of water in the Crown.  When the Artesian Wells Act came in 1897, it was there really to assist people through government money to put down artesian bores and enable people to have the benefit of those bores.  If your Honours have a copy of the Act, your Honours will find that it does not do anything but provide for the notification of proposals for the construction of artesian wells and for inquiries to take place and for a system of petition to enable those matters to be brought before the government. 

Now, the Water Rights Act itself, apart from vesting, did take some steps towards licensing and section 5 of the – and I will not take your Honours to it in detail at this stage – but the vesting was subject to the rights of the holders of licences under the Act and:

The right of the occupier of any work to which this Act extends, to use the work for the purposes of water conservation . . . or to take, use, or dispose of the water contained therein, conserved, or obtained thereby, shall be subject to the provisions of this Act.

It was a right, of course, that was recognised as attaching to the land.  The Artesian Wells Act was – just as a matter of history, your Honours, I think have been directed to it in more recent days and no doubt may have even had the time to read it, but in 1906 a licensing system was introduced.  That was in an Act which was dealing with other matters as well, but in section 22 of the Water and Drainage and Artesian Wells Act 1906 there was a ‑ ‑ ‑

FRENCH CJ:   It is amending Act, is it not?  Water and Drainage and Artesian Wells (Amending) Act?

MR ELLICOTT:   Yes, your Honour.  That amending Act, included from section 22, Part III a provision:

(1)      No artesian well shall be commenced or be enlarged, deepened, or be altered to increase the flow of water therefrom, unless –

(a)     in pursuance of a license under this Act –

et cetera. Now, that in essence formed the framework of what was later to become the relevant provisions that we are concerned with in these proceedings, namely section 12 of the Water Act 1912. It provided for the applications for licences under section 24 and in section 28:

A license 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 well is sunk or is proposed to be sunk.

In 1902 there had been an amendment to the Water Rights Act by the Water Rights Act 1902. Well, it was more than that. It was a repeal, your Honours, I am sorry. In section 4 of that it continued the vesting and no doubt it represented the experience of the administrators with the Water Rights Act 1896 and they introduced more stringent provisions in relation to licensing. That Act also contained – section 17:

A license shall be deemed to be held by and shall operate and enure for the benefit of the lawful occupier for the time being of the land whereon the work is constructed -

Of course, these sections that dealt with water were all concerned initially, not so much with the water, but obviously the means of extracting the water. The licence that was given was either a bore licence or to construct machinery and equipment along a river. It was from the extraction of the water that the rights flowed. Section 18 of the Water Rights Act 1902 provided:

Subject to the provisions of this Act ‑ ‑ ‑

FRENCH CJ:   This is not in the legislative materials that we have been given, I do not think, is it, Mr Ellicott?

MR ELLICOTT:   I thought it had found its way to your Honours in that material that came later last week.  It is important in this respect that these provisions are in a sense the precursors of the sections in the Water Act and they give some of the history.  The sections change a bit, but essentially what they do is give the lawful occupier the right to take and use the water and sometimes on the land ‑ ‑ ‑

BELL J:   Are those rights to take and use usufructuary rights as distinct from proprietary rights?

MR ELLICOTT:   It has been treated as a proprietary right, not a profit à prendre.  A profit à prendre usually comes – or not usually, does relate to taking something that belongs to somebody in the land, the minerals et cetera.  In relation to water, water percolating beneath the land does not belong to anybody.  It just percolates, just like water going down a river.  It is said not to belong to anybody. 

This is in the general situation.  I do not know what the situation is if the river runs through your land but that is a different issue.  But so far as the question your Honour put to me, as I understand it, that is the reason why it is treated not as a profit à prendre but as an interest in land, a proprietary interest, that is, the right to take out of your land something which you can then put to use as you see fit. 

No doubt under the common law you could take it and sell it.  There is not always a provision in these sections about where you will use it but the basic understanding of the water legislation, I think one finds, is that the water that is taken is to be used on the land and that is the reason that you have it.  If you wanted to say sell some mineral water you would have to get a different sort of licence, but so far as the water that you use on crops or for stock, et cetera, is concerned that comes into your possession as it comes out of the pump or up the windmill pipe and then it is yours, you appropriate it to your own use.  

So although you did not own it as it percolated, it was yours when you took it and it was a very valuable and it was a very strong right in the sense that you did not have to be overly troubled about your neighbour and that was fought out in a number of cases in the 19th century in England and I will refer to one or two of those shortly. Section 18 said this:

the person holding a license . . . shall have absolutely, during his lawful occupation of the work, so far only as the said work is constructed or maintained on the land occupied by him, the quiet enjoyment and the sole and exclusive use of the work as against all other persons whomsoever, including the Crown, and shall be entitled to take, use, and dispose of any water contained therein or conserved thereby.

Now, that obviously went a bit further than section 12, certainly in words - it may mean the same thing – and that related of course to river water or surface water. The Artesian Wells Act – the amending Act of 1906 expressed it in different terms.  Your Honours, the Water Act 1912 - and I think we sent copies of this to your Honours – there is no second reading speech for this and as far as we could find I do not think my friends have come up with any. Basically because it is a – I should not say there is no – there was a second reading speech but it did not say anything very intelligible about this Act because it was a consolidation and it consolidated the Water Act 1902 and the Artesian Wells Act in the form it took under the 1906 legislation.

In sections 105 through to I think it is 129 in Part V of the Act your Honours will find the beginnings of the 1912 Act in the form in which your Honours will be considering it:

“Artesian well” includes an artesian well from which the water does not flow naturally, but has to be raised by pumping or other artificial means –

That is an inclusive definition that no doubt - if it oozes from the ground, I guess you may not think it needs a well, but I think the oozing stopped after a while and they are only wells, but what this was enabling, of course, was whereas the Act of 1897 had introduced provisions that enabled the public, in effect, to come and petition for the government to put down an artesian well, the Act of 1906 enabled private people to be licensed to put down bores, and they of course had to bear the expense, and this remained the situation in 1912.

Now, under section 112 wells had to be licensed. Because artesian wells seemed to have a public aspect to them they were always the subject, it seems, of public inquiry and then a licence in the light of that enquiry might be granted. The period of the licence under section 116 was for 28 years and section 117 provided:

A license 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 well is sunk or is proposed to be sunk.

Now, those sections altered in time, as your Honours will find when we come to the current form of the Water Act.

FRENCH CJ:   Mr. Ellicott, we have, as you probably are aware, two bundles of legislated materials from the State of New South Wales, and it includes up to section 120 of the Water Act 1912. I am just wondering if you could perhaps indicate if there is some point in a separate copy being made available when you are doing so. It is just so that we can all work off the one set of materials. It would be helpful, I think.

MR ELLICOTT:   I see.

FRENCH CJ:   It does not matter if you are reciting the sections, but it is just that we are being handed up separate copies ‑ ‑ ‑

MR ELLICOTT:   Is your Honour telling me your Honours do not have beyond 121?

FRENCH CJ:   We do not have 121.  We have to 120 in the bundle, and yours is complete.  I was making a more general point, that is to say we do not want to duplicate paper.

MR ELLICOTT:   We put in the whole of the Act, that is, the Water Act 1912 in the form in which it was passed and that goes up to 129. Your Honours, in the special case book, volume 1, page 87, paragraph 26 - your Honours will find a series of paragraphs. Now, your Honours may tell me that your Honours have read these and I have no need to read them, but ‑ ‑ ‑

FRENCH CJ:   Well, we have.

MR ELLICOTT:   Your Honours will see – I will just refresh perhaps a recollection not needing refreshing but important things happened in 1930. In other words, thenceforth a bore could not be sunk unless with a licence. In 1955 all bores had to be licensed whether they had been put down after 1930 or before. An important section, 117A, was introduced in 1966 – I will come to that section but it is of some importance because it enabled an area called a “restricted subsurface water area” to be declared and it brought into action section 117A as we will come to it.

On 1 January 1987 there was a ministerial corporations constituted and parts of the Water Act went into that Administration Act and it is important to have that in mind in dealing with the legislation.  There are various matters which need to be considered in the light of what happened in relation to bore licences.  In March 1984 the department adopted a policy of imposing on all licences a condition limiting the volume of water that could be extracted in a particular year.  Up to that time, the bore licences were unlimited, and that started a new practice.  The other matter that I would just refer your Honours to is 34: 

on 30 August 1985 . . . the Lachlan River Basin . . . was declared to be a “prescribed area” for the purposes of 117B - 

That enabled the charges to be levied.  Now, so that your Honours know where I might be going, your Honours, it is our submission – and really the case is not a complex case, it is fairly simple but it has some difficult issues to determine.  But the question arises, what are the Parliaments doing in relation to the control and regulation of water?

FRENCH CJ:   Just before you get to that, you mentioned the 1966 legislation which amended the Water Act by bringing in section 117A which gave the right to confer the power to declare a restricted subsurface water area.

MR ELLICOTT:   Yes, your Honour.

FRENCH CJ:   I think there is another significant section there, is there not, 4B – that the right to the use – which was introduced by that amending Act:

The right to the use and flow and to the control of all sub‑surface water shall vest in the Commission for the benefit of the Crown and –

so forth.

MR ELLICOTT:   Yes, your Honour that is when the equivalent of the section that was introduced in 1896 in relation to surface water came into the groundwater area.  Thank you, your Honour.  Your Honours, I was pointing out where I might be heading.  Our case basically is quite simple.  It says this.  Under the common law there was a right in the landowner to take and use water percolating beneath the land of that person.

GUMMOW J:   Well, that depends on what the word “right” means.  It may have been some sort of privilege, which is I think what Justice Crennan was inviting attention to.  Was to usufructuary right?  What was it?

MR ELLICOTT:   It was a proprietary right.

GUMMOW J:   Well, that is the question.

MR ELLICOTT:   It was an interest in the land.

GUMMOW J:   That is a question, too.

MR ELLICOTT:   It is the right to take out of your land something that was not recognised as yours.  It was not in your ownership under the notion that everything from the centre of the earth to the heavens was yours because it was percolating.  It was moving, but it was not in a defined stream or a channel.  That is how the law looked at it and in that sense it was a right that attached to your ownership to take the water and use it.  It was an interest in the land.

Now, I am not saying that it is a profit à prendre.  I think there are decisions against that.  I think Mr Stoneham wrote a book once - and your Honour might remember it - and he went into great detail and that is one of the points that he made about it, but emphasising that it was an interest in land.  Now, as we are dealing with property that, one might conclude, is property.  If an interest in land is not property well what is property?

CRENNAN J:   Well, it might be a right to take something that is common property.

MR ELLICOTT:   It is a right to take it into your ownership, to appropriate it.

CRENNAN J:   Once it is in the bucket.  But I was just mentioning beforehand the right to access and take.  There is a question as to whether that is a proprietary right, strictly speaking.

MR ELLICOTT:   Well, your Honours will not learn much about what you are asking me about.  But can I take your Honours to Tyler v Bennett 5 AD & E 376. 

GUMMOW J:   This is the case on costs, is it not, the question of costs?

MR ELLICOTT:   It is.  In the headnote:

A right to take water from a well by reason of the occupation of a dwelling-house, and for the more convenient occupation thereof, is an interest in land.  Therefore, where nominal damages had been recovered in an action for disturbing such a right (on an issue traversing that the plaintiff was entitled to the use of the well in manner, &c), and the Judge at Nisi Prius certified that the damages were under 40s., it was held that the plaintiff was entitled to his full costs –

It was a case about costs.  Chilton and E.V. Williams showed cause and they argued for some time.  We do not know how long.  It was all on the same day apparently.  Then when they finished, Sir William Follett and Evans, to the contrary, “were stopped by the Court”.  The court seemed to think it was very obvious and they penned a one‑sentence judgment:

There is no doubt that a right to take water is an interest in land; and the case is therefore within the exception.

Now, the law does not – or the exposition that I can assist your Honours with about taking a long time is assisted by going to Mayor of Bradford v Pickles [1895] AC 587 and Lord Halsbury at 591 at the foot of the page:

The facts that are material to the decision of this question seem to me to lie in a very narrow compass.  The acts done, or sought to be done, by the defendant were all done upon his own land, and the interference, whatever it is, with the flow of water is an interference with water, which is underground and not shewn to be water flowing in any defined stream, but is percolating water, which, but for such interference, would undoubtedly reach the plaintiffs’ works, and in that sense does deprive them of the water which they would otherwise get.  But although it does deprive them of water which they would otherwise get, it is necessary for the plaintiffs to establish that they have a right to the flow of water, and that the defendant has no right to do what he is doing . . . 

Apart from the consideration of the particular Act of Parliament . . . the question whether the plaintiffs have a right to the flow of such water appears to me to be covered by authority.  In the case of Chasemore v. Richards, it became necessary for this House to decide whether an owner of land had a right to sink a well upon his own premises, and thereby abstract the subterranean water percolating through his own soil, which would otherwise, by the natural force of gravity, have found its way into springs which fed the River Wandle, the flow of which the plaintiff in that action had enjoyed for upwards of sixty years.

The very question was then determined by this House, and it was held that the landowner had a right to do what he had done whatever his object or purpose might be, and although the purpose  might be wholly unconnected with the enjoyment of his own estate.

It therefore appears to me that, treating this question apart from the particular Act of Parliament, and, indeed, apart from the 49th section of the Act of Parliament upon which the whole question turns, it would be absolutely hopeless to contend that this case is not governed by the authority of Chasemore v. Richards.

The rest of the their Lordships agreed.  In Perth v Halle 13 CLR 393 ‑ ‑ ‑

GUMMOW J:   I think we had better look at, at some stage, at Chasemore v Richards 7 HLC 349, 11 ER 140, Mr Ellicott.

MR ELLICOTT:   Yes, I have it here, your Honour.  Now, this was a case which came before this Court and it came because the Perth Municipal Council had, in effect, dug drains alongside the plaintiff’s property and had caused the water to disappear and it had the effect of undermining the plaintiff’s property.

The point that was taken in the Court was that the council was in breach and could not rely on the common law right because they were not the owners of the land.  At page 403 Sir Edmund Barton said:

Many authorities were cited, but the appellants chiefly relied on the cases of Chasemore v Richards; Popplewell v Hodkinson, and New River Co v Johnson.  Their contention went to the length of maintaining that, even apart from any statutory protection, they were entitled to withdraw the percolating water subjacent to the properties adjoining the street under which the drain was built.  This contention was based on the further one that percolating underground water is not the subject of any proprietary right, and therefore that an owner cannot maintain any action against a stranger, who, even as a trespasser on adjoining land, withdraws the water to the damage of the owner’s property.  I do not think that the authorities support this proposition, though they do not expressly negative it.  They deal with questions between neighbouring owners, and any such negation was unnecessary for the purpose in hand.  The case of Acton v Blundell, was between two owners, of whom one, the defendant, by sinking coal‑pits in his own land, drew away the water which had previously collected underground in the well of the plaintiff, and so laid his well dry.  The Exchequer Chamber held for the defendant, and Tindal CJ, delivering the judgment of the Court, rested the case on “that principle, which gives to the owner of the soil all that lies beneath his surface.”  He laid down “that the land immediately below is his property, whether it is solid rock, or porous ground, or venous earth, or part soil, part water; that the person who owns the surface may dig therein, and apply all that is there found to his own purposes at his free will and pleasure; and that if, in the exercise of such right, he intercepts or drains off the water collected from underground springs in his neighbour’s well, this inconvenience to his neighbour falls within the description of damnum absque injuriâ, which cannot become the ground of an action.”  The learned Chief Justice had just pointed out that the Court was deciding the case upon principle, that “no direct authority can be cited from our books,” and that under such circumstances, if the conclusion of the Court proved to be supported by the Roman law, no small evidence of its soundness was afforded.  He then quoted . . . 

Acton v Blundell, therefore, does not carry the immunity beyond the case where the defendant, in withdrawing subterranean water from the plaintiff’s land, is exercising a strictly proprietary right to the full use of his own.

I come to the case of Chasemore v Richards, where the owner of land, on which he had a mill, supplied with water for over sixty years by a stream chiefly fed by percolating water, was held by the House of Lords to ‑ ‑ ‑

FRENCH CJ:   Mr Ellicott, I am sorry.  Mr Ellicott, we can read this for ourselves.  Is there some particular punch point you wish to take us to?

MR ELLICOTT:   Well, I thought Justice Gummow had some interest in Chasemore v Richards and I ‑ ‑ ‑

FRENCH CJ:   It is just that reading the passages at length is not necessarily ‑ ‑ ‑

MR ELLICOTT:   If your Honour pleases.  Well, he refers to Acton v Blundell and Popplewell v Hodkinson and at the foot of 406:

That was abundant authority on which to base a decision in favour of such owners, and it is not likely . . . I am of opinion, therefore, that the mere stranger fares no better under this decision than under any other, and that in the absence of authority to sustain the extreme proposition on which the appellants rely, such a person would be liable if he entered on a property or a street, and by excavation or otherwise, drained the percolating underground water so as to cause the settlement and injury of houses belonging to the owner of the adjoining land.

Your Honours, that decision, in our submission, is supportive of what we were seeking to get from Mayor of Bradford v Pickles and from Tyler v Bennett, that is an interest in land and of a proprietary nature.  So, your Honours, it is our submission that the common law right – and this is what we seek to get out of it.  I do not want to overstate it or understate it.  If it happens to be a usufructuary right or if it is drawing from a common pool, so be it, but the fact is or the law is, according to the common law, that that right to take it into your ownership and appropriate it and use it on your land and maybe sell it outside your land is an interest in the land and it flows and runs with the land.  If you sell your land, the next person, the next owner or the tenant have the right as lawful occupiers, as the section uses but the cases do not.

GUMMOW J:   But the Chief Justice invited your attention to section 4B introduced 1966 in New South Wales. That seems to suggest whatever the nature of the common law position, the right to use and control is vested in the Commission on behalf of the Crown, in New South Wales at any rate. Upon that a licensing system is then maintained.

MR ELLICOTT:   Yes.  They do not vest the ownership and therefore, none of the ownership rights, of course, if you talk about the bundle of rights of ownership, they do not invest any fee simple or anything of that description.  There is not absolute ownership, but they use words “use”, “control”, “flow”, which are very appropriate.

GUMMOW J:   That is right.  They use them because they are the constituents of what the cases then translate into some notion of usufructuary or proprietary right.

MR ELLICOTT:   Yes.

GUMMOW J:   But I think the draftsman in 4B is going back to the basics.

MR ELLICOTT:   Your Honour, I am not following the distinction, for the purposes of this case, between a usufructuary right and a proprietary right.  I would submit that 4B is simply the Crown saying, well, in future we are going to take control of this and for the purposes of – and we are controlling the use, we are controlling the flow and no longer can individuals do so unless they have, to be practical about it, a bore licence.  That bore licence entitles them to certain things.  Now, in order to understand what happened, one has to go to the Act itself because it is the Act that we are asking your Honours to interpret.

GUMMOW J:   We are talking only at the moment about bore water, are we not?

MR ELLICOTT:   Yes, your Honour.

GUMMOW J:   Not riparian?

MR ELLICOTT:   Not riparian water, no.

HAYNE J:   And just before you come to the Act, after the 1906 Act what right, in New South Wales, did a landholder or owner have to take into possession sub‑surface water without a licence?

MR ELLICOTT:   If you were not sinking an artesian well you had the common law right.

HAYNE J:   And what bore or digging would not fall within the extended definition of “artesian well”, which went beyond its natural meaning of wells which flow to include, did it not, wells that required lifting?

MR ELLICOTT:   Well, it did not include what is referred to as “sub‑artesian water”.  In other words if you were sinking a bore in Victoria, which as I understand it is not in the Great Artesian Basin, then you would not have needed a licence in 1906.  You would not have needed one until 1966 if you dug a bore in sub‑artesian areas and in 1930 you had to get a licence to dig a bore in sub‑artesian areas ‑ ‑ ‑

HAYNE J:   My question was whether from 1906, read with the Artesian Wells Act 1897, was it not then necessary in New South Wales to have a licence to dig for water, whether artesian or sub‑artesian?

MR ELLICOTT:   It was not necessary to have it for sub‑artesian from 1906.  I drew attention to the definition as being an inclusive definition.  An artesian well is a well that relies on the artesian water and not the water that you will find, say, down on the Lachlan that we are concerned about.  It is not in the Artesian Basin, as I understand it and, therefore, it is water that you have to draw up by boring which comes to the surface by mechanical means.  It does not just spout out when you put the bore down like oil or artesian water will; not under pressure.

HAYNE J:   What struck me was section 105 of the 1912 Act extends artesian wells to wells “from which the water does not flow naturally, but has to be raised” et cetera, and the Commissioner’s memorandum is that but for an irrelevant difference 105 is simply a consolidation of the law as it then stood.

MR ELLICOTT:   Yes.  It says “includes an artesian well”, not a well, your Honour.  That is my point.  It is not an artesian well if it is not within the artesian basin.  That is a well‑defined area.  So the strict answer to your Honour’s question is that right up till 1930 you could put down a bore in an area which was outside the – I will call it the artesian area - and you could take and use that water freely under your common law right. 

After 1930, if you had put your bore down before 1930, you could continue to exercise it under your common law right.  When that was extended to all bores, then everybody – I think that was in 1955 – when it was extended to all bores, then everybody had to get a licence whether you had put it down before 1930 or not.  Of course, it is quite possible that by 1955 that bore would have been of little use, so it did not matter very much.

In any event, what we say about it is that the right to take and use, notwithstanding the vesting by the 1955 Act, notwithstanding it, what the Crown is doing is really imposing a control over that area, and by “that area” I mean the practise of boring and taking and using water.  They are simply saying, well, we are vesting that in the Crown and we will say in future, in terms of the way in which we regulate it, what shall be done in relation to it because what lay behind all this legislation was not a desire on the part of the Crown to interfere with the common law right as such, but to regulate it in the public interest and, indeed, in the private interest so that the scarcity that lay behind the problem could be dealt with in a sensible and realistic way by government which had the wherewithal to understand the subterranean areas and had the capacity therefore to know, as far as up‑to‑date science would allow them, whether those subterranean aquifers that held the water were in danger of drying up or whether they were likely to be polluted or whether there was a problem with salinity.  All those things were matters that the private owner would not necessarily know nor have the financial capacity to know.

It was an area where government needed to get involved.  But the dominating cause was the scarcity of water and what the legislation does not do, in our submission, is create some statutory right that has no connection whatsoever with what was happening before the legislature intervened.  It is not a case of anything other than regulating what in substance was always a common law right, the right to take and use, and the right to take and use under the Act itself is an interest in land. 

On the old authorities it is an interest in land and when the sections – and I will take your Honours to them now – when those sections provided that the lawful occupier had the right to take and use then they were granted an interest in land.  When that was taken away then the result was that they lost an interest in land.  It returned so that that was extinguished and the benefit was taken by the State in the process that your Honours will be familiar with and we will come to that later.

Section 116D, if I may take your Honours to the Water Act 1912 now in its form, the relevant date – your Honours, a slight issue - I am not criticising the Solicitor‑General, he has been very good. It is our job to get it before your Honours, but we are preparing the Water Act as at the date of the funding agreement, which was in November 2005.

FRENCH CJ:  Is that what we see, in effect, under tab 29 of the legislative materials? I think it takes us through to 30 June 2004, but it has section 116D in it?

MR ELLICOTT:   I do not think there would be any material difference, but you would want to be exact about it.  So if we could, your Honours, go to tab 29.  At section 105, above it you will notice Part 5 says “Artesian wells”.  It is not just artesian wells that it deals with.  “Artesian well” includes – and it is the old definition that was in the Artesian Wells Act:

Bore means any bore or well or any excavation or other work connected or proposed to be connected with sources of sub-surface water and used or proposed to be used or capable of being used to obtain supplies of such water whether the water flows naturally at all times or has to be raised either wholly or at times by pumping or other artificial means . . . 

Sub‑surface water means water under the surface of the ground whatever may be the geological structure in which it is standing or moving.

Sub‑surface water basin means land overlying, as nearly as may be determined by known facts, a distinct body of sub‑surface water.

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 –

Now, if I can take your Honours to 112:

The sinking of a bore shall not be commenced, nor shall a bore be enlarged –

which is basically what was in the earlier Act –

If any person contravenes the provisions –

then there is an offence.  Then apply for a licence.  This is subsection (2):

On application being so made, and if in the opinion of the Ministerial Corporation the bore is or will be an artesian bore or the circumstances so warrant, the Ministerial Corporation shall cause to be advertised –

So it is only if it will be or is an artesian bore that that is done.  Then there is an inquiry.  Section 115:

In any case where an application has not been advertised pursuant to section 113(2) the Ministerial Corporation shall, as soon as practicable after it has investigated and considered the application and on payment of the prescribed fee, issue a licence –

Now, the word “shall” is important, in our submission.  It means what it says.  It is not another cloak for “may”; it shall.  It is used again, I think, in 116:

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 . . . 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.

Now, again the word “shall”.  When these Acts came in the historical background to them would suggest that the government, particularly in relation to artesian wells, was encouraging people to put down artesian wells.

FRENCH CJ:   That obligation is contingent upon the ministerial corporation deciding first not to advertise and it is under 113(2), is it not?

MR ELLICOTT:   Yes, but it decides it because it is not – it is not or it will not be an artesian well.  In other words, it was preserving what had happened as far back as 1906 that if ‑ ‑ ‑

HAYNE J:   I notice the expression is “artesian bore” which seems to be an injection of yet a new concept.  That is at 113(2), “artesian bore” as distinct from “artesian well”.

MR ELLICOTT:   Yes.  Section 116C:

(1)Limitations and conditions referred to in section 115 (1) or (2) or 116 (1) may be imposed on a licence at the time of, or from time to time after, the issue or grant of the licence.

(2)Before imposing a limitation –

notice is to be given, provision is made for that. Section 116D:

A licence authorises its holder:

(a)to sink, enlarge, deepen or alter the bore in respect of which it is issued, and

(b)to take and use any water obtained by means of the bore,

subject to the limitations and conditions of the licence and subject to the provisions of this Part.

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.

Now, that compares with section 28 of the 1906 Act.

FRENCH CJ:   You accept therefore that the licence holder’s right to take and use water derives entirely from the statute.

MR ELLICOTT:   Well, there is one view, your Honour.  Your Honour, in Thorpes Limited 92 CLR 317 – and I will get the case, and your Honour may be familiar with it – Justice Fullagar wrote a judgment and the passage I have in mind is at 331.

This case raised a question in relation to riparian owners as to whether or not the riparian owner had any rights left.  There was a case called Hanson in which the Court had held, in effect, well, that is not so.  A third of the way down 331, having quoted the passage from Justice Stephen in the old New South Wales case, said:

This passage is open to several comments.  For one thing, this intention to cure the disease by killing the patient is in itself a very curious intention to attribute to the legislature.  I should have thought, with all respect to Stephen J and Cohen J, that the real object of the Water Rights Act 1896, as revealed by the latter part of s 1, was to enable the Crown, in a country in which water is a comparatively scarce and important commodity, to exercise full dominion over the water of rivers and lakes and to undertake generally the conservation and distribution of water. For the attainment of that object it was not necessary to destroy anybody’s rights –

and my friends quote this, I thought it was in our favour –

but it was necessary to give to the Crown, or to some statutory authority, overriding rights to which private rights must, if need arise, give way.

The effect given to the statute in Hanson’s Case means that a riparian proprietor has no remedy as of right if a river is damned by an upper owner so that no water reaches him, or if it is polluted and poisoned by the refuse of a factory.  There is much to be said for the view that it would be contrary to elementary rules of construction to give to it any such effect in the absence of clear and unmistakeable language. The view which I am disposed to take is that the Act does not directly affect any private rights, but gives to the Crown new rights – not riparian rights – which are superior to, and may be exercised in derogation of, private riparian rights, but that, until those new and superior rights are exercised, private rights can and do co‑exist with them.

Now, he goes on to say –

However, the question of the correctness of Hanson’s Case was not fully argued –

Justice Dixon was not prepared to necessarily agree with his – he did not disagree with his pupil, but he and Justice Kitto did concur in that judgment and therefore, if I may say so, with great respect, quite a strong court. Using the notion of the artesian bore that spurts up in the air, what it suggests is that this – in answer to your Honour the Chief Justice’s question – that, in effect, the common law right is still there and if it is released, then it is actually operating and, therefore, when you come to section 116D and 117, that if you have got a licence, what you are exercising is your common law right and if it is taken away, you do not have it or you do not have anything. If it is taken away, it is subsumed into the control of the Crown.

CRENNAN J:   Well, I suppose the competing view  the Hanson view – is that the Water Acts essentially codify the old riparian rights, not simply regulate, but actually codify them.

MR ELLICOTT:   Your Honour, too there is the question of whether if I had a bore and my neighbour is carrying on some activity which pollutes, or if I have a neighbour who puts a bore down and is, in my view, excessively drawing water out of that bore, whether I have any rights at all.  The notion would be that you still have your common law right to take some proceeding, by way of injunction, to stop that unreasonable use of his penetration perhaps of the same aquifer, so that it does not endanger your use of it.

CRENNAN J:   One of the themes, I think, in the debates relevant to the 1896 Act and also relevant to the Irrigation Act 1886 in Victoria, one of the themes in the debates was the mischief that could arise if full bore riparian law operated in Australia, having regard to droughts and having regard to the scarcity of the natural resource.  So there is a suggestion in the debates that the common law system will not work in the Australian context, giving force – some force – to the proposition that the Water Acts codified riparian rights, rather than just coming in on top of them and regulating them and leaving them intact.

MR ELLICOTT:   Your Honours, the notion that Justice Fullagar was expressing there does seem to be that the common law right springs up.  So that when section 116 says, in effect:

authorises its holder:

. . . 

(b)      to take and use any water obtained by means of the bore,

subject to the limitations -

et cetera, then to that extent it is the common law right operating.  It is not essential to our argument that your Honours adopt what Justice Fullagar says because we are saying that when you get into this labyrinth of cases that now exist in relation to the application of the words “acquisition of property” that a very important distinction is made, namely, that if the right does have some base in statute, nevertheless if it is a right akin to a common law right, then that is a good reason for saying, first of all that it is property and secondly it may be a very good reason for saying that something is acquired when that right is extinguished or however it is dealt with.

It is usually in cases of extinction that this issue arises as it does in this case so we are not depending on Justice Fullagar, but to give an honest answer to your Honour I thought I should refer to that, because it does have that notion of – this is a misuse of the words, I am sure – of a spring in use.  It comes up and ‑ ‑ ‑

GUMMOW J:   Now, it is worth noting I think that what was said by Justice Fullagar in Thorpes seems not to have been followed in New South Wales in the Equity Division.  There is a decision of Justice Cohen’s called Van Son v The Forestry Commission (1995) 86 LGERA 108 where there was most elaborate argument about Hanson and Thorpes and Justice Cohen took the view, “Well, the legislature in New South Wales seems to have acted on the face of Hanson for a long time and I should continue to do so”.   So I think Hanson remains the case law in New South Wales.

MR ELLICOTT:   I would not suggest otherwise, your Honour, but it may have been more – I am sorry I have not read that, your Honour, but it may have been the prudent thing to do as a single judge and Justice Fullagar did not take it any further. Now, I was taking your Honours through this Act. Another section which looms large in the minds of the defendants and those who support them, that is all the others, section 117A:

The Ministerial Corporation may, by order published in the Gazette, declare any sub-surface water basin, or any part thereof, to be a restricted sub-surface water area.

Now, this occurred in this case – I will find that for your Honours – this occurred on 2 November 1994.  Your Honours will find the reference to it in special case book 1, page 98, paragraph 63, the Lachlan groundwater zone:

was declared a “restricted sub-surface water area” –

on that date, 2 November 1994.  So that having been done, this applied relevantly to the existing area but whatever strength there is in the argument, either for or against, would still be there whether it had or not.  It says:

In respect of any restricted sub-surface water area:

(a)      the Ministerial Corporation may by order in writing direct the licensee of any bore, whether sunk or commenced to be sunk before or after the proclamation . . . 

(i)to restrict or control the rate of flow or pumping or the manner of extraction of water from the bore, or the quantity of water which may be allowed to flow or be pumped there from in any stated period of time or its usage -

Now, these provisions, if I may say this at this stage, in our submission, are directed to protecting the aquifer.  Bores that go down into a particular part which is distinct, that part into which they go is in technical terms and no doubt in legislation called an aquifer.  Now, I think there is a definition in the - aquifer.

Your Honours, at page 73 of the special case book “aquifer” is defined as meaning:

a geological structure or formation permeated or capable of being permeated with groundwater

and it is regarded as a distinct structure.

FRENCH CJ:   I think there is some exposition of it in the New South Wales materials in response to the questions put by the Court.  Do you accept that?

MR ELLICOTT:   Yes, your Honour.  I overlooked that, your Honour.  What this provision is concerned about, I would call it the health of the aquifer, that is to say, that it is not being polluted, that it is not being overused, that measurement control is undertaken.  I think I can say this, you can go to places where there are bores and you will find that the Government has put down a test bore and the test bore, in effect, may be near the aquifers.  The purpose of it is to keep an eye on the level of the aquifer.

FRENCH CJ:   It might tolerate depletion for a time or you might go to a point ‑ ‑ ‑

MR ELLICOTT:   So it could be depleted for a time.

FRENCH CJ:   Or you might say that you want to get below the recharge rate so that it replenishes.

MR ELLICOTT:   Yes, or it may be getting to a stage where the bore is running out and the bore might damage the aquifer if it is allowed to overrun.  In other words, this is pure regulation in order not to stop people from having access to groundwater, but simply to ensure that with all the environmental issues having been already determined in relation to the quantum that you can take, to ensure that the health of the aquifer is maintained both as to pollution, to volume and allowing the rate at which you take from the aquifer.  Now, I am talking about not so much the water running in, but I am talking about the rate at which you try to extract water can have a deleterious effect on the aquifer, which is not talking about water rushing in ‑ ‑ ‑

KIEFEL J:   Mr Ellicott, excuse me, it remains the case, does it not, that the Crown’s power of control is complete?  It could direct the licensee of a bore not to pump at all?

MR ELLICOTT:   It could, but ‑ ‑ ‑

KIEFEL J:   If I may ask you then, if that is the case, how do you describe the content of the proprietary right that you are referring to?

MR ELLICOTT:   It does not affect the proprietary right.  You are entitled to take and use subject to limitations and conditions, but those limitations and conditions are not designed to take away from you your proprietary right.  It is still there.  You still have the right to take and use and tomorrow ‑ ‑ ‑

KIEFEL J:   But the point is you may not be able to exercise it at all if you are subject to a direction not to.

MR ELLICOTT:   Yes, but tomorrow the heavens might open, and they do open.  We have not seen it for seven years, but they will open one day.  I am being a bit facetious, your Honour, but I say it simply because that is what this is directed at.  It is not directed at destroying whatever rights you have got.  You have still got your licence.  There are many people on the rivers of New South Wales who have what they believe to be very valuable river water licences or surface licences and they can not use them, indeed, in relation to my clients.

KIEFEL J:   On what you say, the value in the licence lies in the expectation that the licence holder has rather than what inheres in the licence itself.

MR ELLICOTT:   Yes, well, the Commonwealth Government is paying for river licences $1,250 a megalitre and that is not because they are shelling out money that is extravagant, in this case, they are paying what is on rivers in New South Wales probably close to the going rate.  It might be a bit higher, but they pay that for licences that can not be used because of this very reason, in the case of surface water, because the Wyangala Dam has only got seven per cent of water in it and because the Government, in its great wisdom, not in its – it is not offensive to those who irrigate – in its great wisdom says we have to provide water to the towns and the stock and the domestics and you cannot have any water.

In relation to this bore provision, it is really of the same nature.  It is just saying, you must desist, because, in our judgment – and we really are in a position no better than you, I suppose they are saying in brackets – you should stop for the time being.  Or they might say you should not use that aquifer for a year, give it a rest, because you are actually handling a fairly delicate part of the geology beneath your land.  It is not difficult to run a bore into trouble and therefore constant inspection and understanding is necessary.  But that is what this section is directed at, to take such measures or precautions as may be specified in the order for the protection of the quality and prevention of pollution or contamination.

In the opinion of the Minister, this all may be caused by abandoned, defective or improperly constructed bores through the interconnection of strata or the introduction of unsuitable surface water.  Now, those words give one an idea of why they are doing it.  It is not directed and would never be directed – in fact, these provisions do not, in our respectful submission, lead in this direction.  They are not intended this way.

FRENCH CJ:   That all goes to the proposition, does it, that the statutory rights conferred by the licence, albeit subject to all these controls and restrictions, are sufficiently stable, if I can use that term, that their conversion into another form of licence would constitute, or could constitute, an acquisition for the purposes of section 51(xxxi)?

MR ELLICOTT:   Yes, your Honour.  Indeed, of course, the first part of it, property, just property, and that it has a ‑ ‑ ‑

FRENCH CJ:   I am assuming given the anomalous rights that are included that ‑ ‑ ‑

MR ELLICOTT:   Yes, your Honour.

CRENNAN J: Section 117A leads to or is linked with 117E.

MR ELLICOTT:   Yes, I was going to take your Honours to that.  It is different in a way.

CRENNAN J:   Subsection (1)(a) of that gives an indication that one of the reasons why restrictions or suspensions occur is satisfaction of the:

Ministerial Corporation . . . that the whole or any part of a sub‑surface water basin . . . is unlikely to have more water available than is sufficient to meet:

(a)      the requirements of the licensees of bores –

raising the idea of the fact that the natural resource has to be shared.  Then in subsection (2), order can be made to:

reduce a licensee’s water allocation during the period for which the order is in force.

MR ELLICOTT:   Yes, and it works both ways.

CRENNAN J:   Which is I think what Justice Kiefel was putting to you, that it is not as though it is just a question of it would be a good idea not to use the bores, there can be orders in place which reduce the water allocation to be taken and used.

MR ELLICOTT:   Yes, I am sorry, I have used the words “it would be a good idea”.  I was not trying to escape the notion that the Minister has made a direction or an order; it was certainly a direction or an order.  In a sense you can say that these are provisions which, given the knowledge, a prudent bore licence holder would put into force himself or herself.  In other words, this is how you manage the bore in your own interests as well as in the public interests.

They are not provisions which are designed to take away your right.  You still have your licence which entitles you to take subject to limitations.  The purpose of looking at the limitations is to see whether they are designed to take it away from you.  They are not designed to take it away from you.  They are designed under the word “control”, if one likes, simply to deal with the exigencies that relate to bores.  One of them is they make them restricted, they call them restricted areas, as one can see, to ensure that you do not overuse your bore, you are wary of pollution, that if it is getting towards the end you do not use it because it may pollute somebody else.

The other section, which has its counterpart, if you go over to 117F, it works both ways:

If the Ministerial Corporation is satisfied that the whole or any part . . . is likely to have more water available –

That is a very important section in the context; and sections like G which say you can borrow and carry it over.  It is all designed to sustain the right ‑ ‑ ‑

FRENCH CJ:   Just before we leave 117E, you had the restricted sub‑surface water area declaration, which is what happened with the lower Lachlan groundwater system.  Then on top of that – this 113A and 117E seem to do – the circumstance in which “the Ministerial Corporation is satisfied that the whole or any part” of an area is “a water shortage zone”.  Now, that attracts another array of controls, including prohibition on use which comes in under 117E.  That happened to this area in 1998, I think, did it not?

MR ELLICOTT:   Yes.  Both things have happened and it is no wonder what happened in present conditions, but that leaves everything else intact.  By “everything else” I mean the rights under the licence.  Section 117B, which we passed by, relates to prescribed areas.  The Lachlan River Basin was prescribed as an area on 30 August 1985.  If I may just give your Honours the references.  It is in volume 1 of the special case book at page 89, paragraph 34:

(2)The Ministerial Corporation may, by order published in the Gazette, declare that as from . . . 

any sub‑surface water basin, or any part thereof, shall be a prescribed area . . . 

(4)The licensee of any bore within a prescribed area shall, subject to and in accordance with this section and even if the licence is suspected, pay a charge for the right to take and use water from the bore in addition to a fee payable for the licence.

(5)The charge payable under subsection (4) shall:

(a)subject to subsection (7), be fixed . . . 

(b)be paid:

(i)in respect of each whole –

et cetera, and it provides, as one might expect, different charges for different bores and provides for interest.  In that provision that I just referred to, I need to take your Honours to paragraph 34 at page 89 of volume 1.  It says this that:

From June 1996 the Ministerial Corporation, acting in accordance with determinations . . . imposed (and continues to impose) charges under s 117B(4) of the Water Act for the right to take water from a bore comprising a fixed charge per megalitre (calculated by reference to the entitlement) and a charge per megalitre for water actually used ‑

That gives some idea that the Government thinks that your entitlement is worth a charge even if they cannot give you the water.

But if you use it you also have to pay a charge.  It fits into, we say, the scope and content of the argument as we are putting it and aids the ultimate decision that this is an interest in land and that its origin is very well and truly embedded in the common law.  Section 117H deals with cancellation and suspension of licences.  Now, the importance of this – apart from the fact it is a serious provision – in the argument it is important because you will not find that in this case or there is no evidence of it in any other case where a licensee has had his licence or her licence extinguished under any of the provisions that we are considering or under any conditions attached to a licence.

As happened in Newcrest’s Case where the Conservation Act came in and had the effect of freezing the first thousand metres of land from mining activity, so here what has come in is the joint action of the State and the Commonwealth under the National Water Commission Act using measures under the Water Management Act that we will come to, has impacted on this licence in the way in which your Honours will find.  So it is important that there is a cancellation provision here.  It does not cover this case, but it is there for cancellation and, as you would expect, it is limited to cancellation for breach of any limitation or condition of the licence or any requirement imposed by or under this part.  Needless to say my clients have not done anything that they should not have done under those two provisions and nobody has cancelled their licence and it would be a very infrequent occasion for that to happen. 

Section 117J came in in 1997.  In relation to – can I just break off here on this – surface water that became transferable as a result of the amendments in 1986 which enabled surface water to be transferred with the result that these licences, which if your Honours compare the provisions, are not greatly different to one another.  That is to say there are controls over surface water licences which are not exactly the same, but they are designed to ensure that the rivers are not overdrawn and all the rest of it.  In other words that there are allocations, in fact, there are mainly allocations of nil in recent years.

These transfer provisions become important because they stress the proprietary nature of the right, but it is making a change in the sense that – and it is the same with water allocations in relation to surface water – that you can sell your allocation, in other words, you are not selling your land but you are selling your allocation.  You can sell an allocation on a temporary basis.  You can sell 1,000 of your 2,000 megalitres for 2010 or you can sell the lot.  You can sell half of it permanently ‑ ‑ ‑

CRENNAN J:   That is really separating, though, entitlement from the land.

MR ELLICOTT:   It is.

CRENNAN J:   Commodifying the entitlement.

MR ELLICOTT:   It is.  It is probably a part of what is called the national water reform, that is designed to free the licence from the land because there are people who think that is a good idea.  They are called economists.  The result is that people who have no interest in the land can acquire the water and they can acquire under 117J provided it is a sub-surface water basin, and the particular area we are concerned with has been so declared and I will find that, but it is under ministerial control.  They can sell temporarily or permanently and they can sell a part as well as the whole.  Now, under this provision, subsection (3) says:

Any such transfer:

(a)      may be a temporary transfer . . . 

(b)      may be a permanent transfer –

and then it adds this:

in which case the transferor’s rights to take and use the water concerned are cancelled on completion of the transfer.

So the draftsman and Parliament have taken that into account.  This links up in a sense with 117K.  At first sight it seemed a bit elusive to me but it will be clarion clear to your Honours.  It works:

This section applies to land in respect of which a transfer of water allocation under section 117J has been approved but has yet to take effect.

Then subsection (2) is the important provision for present purposes:

Despite section 117, the sale of land to which this section applies –

Now, 117 your Honours will recall is the section which grants the right to the lawful occupier.

A license shall be deemed to be held by and shall operate for the benefit of the lawful occupier -

So it says despite that, the sale of land to which this section applies:

(a)does not operate to pass the benefit of the water allocation being transferred to the purchaser of the land, and

(b)does not prevent the transfer taking effect.

So that if you have, prior to the sale, transferred part of your water, well that is it. 

FRENCH CJ:   This is not a transfer of the licence, this is a transfer of the water allocation for the licence.  So supposing, for example, you had an adjoining landowner with a bore which had water allocation X, then that landowner would be buying water allocation Y from his neighbour and he would then have water allocation X plus Y which he could apply to his bore.

MR ELLICOTT:   Yes, that is right.  That is how 117 operates, but what this is talking about is 117K, as I understand it, your Honour, is that if you sell your land in the ordinary course because the licence attaches to the lawful occupier, if you sell the land, the licence goes with it.  In other words, it runs with the land.  It is essentially a proprietary interest running with the land.  What this section 117K is saying, if you have already transferred your water allocation, then that shall operate and shall not go with the land. It severs it.

CRENNAN J:   Creating a separate market in the water allocation.

MR ELLICOTT: Yes, it has gone off to somebody else, not to the purchaser. This section, in effect, is important because it really goes to the heart of what section 117 is saying. It is saying it is an interest in land, it runs with the land. It is like common law, it runs with the owner, because you cannot shift the percolating water under the common law obviously. It all makes sense. Your Honour, there is a definition that I should refer to. “Water allocation” is defined – I read it earlier:

in relation to a licence, means the volume of water which the licensee of the bore is restricted by means of a condition –

Now, that condition, as imposed, has said, well, you can only take 1,000 megalitres, or whatever it may be, per annum.  Now, in the special case, in the definitions, the word “entitlement” and “allocation” are dealt with; “allocation” on page 72:

is the volume of water that the holder of a bore licence, a surface water licence or an access licence is permitted to extract from time to time, which volume may be less than the entitlement –

That definition “water allocation” in the Act is really the same as “entitlement”.  I just wanted to point that out.  It may cause – because of the difference, that we chose when we were preparing the special case – confusion in the mind.  In reading the Act “water allocation” means the same as “entitlement”.  “Allocation”, on the other hand, is simply that which you are permitted to extract from time to time which may be less.  In other words, under section 117E and 117A there may be a restriction, for instance under 117A (3) (i), or under 117E (2), there may be a reduction in the water allocation.  For the purposes of your Honour’s the Chief Justice’s special case, the words “allocation” and “entitlement” need to be considered separately.

FRENCH CJ:   The water allocation, so‑called, must always attach to a licence.  It is transferred to a person who either is the holder of a licence or who under section 117J (10) is issued with a licence, I think.  That is the transferee, is that correct?

MR ELLICOTT:   Yes.

FRENCH CJ:   So that the underlying analysis of what happens when a water allocation is transferred - take the simple case from one licensee to another - is that the rights, so far as they relate to the right to take a particular volume of water associated with one licence – the transferor’s licence are effectively extinguished, either permanently or temporarily, and new rights – that is the right to take a corresponding volume of water – is attached to the transferee’s licence, and if he does not have one, he gets one.

MR ELLICOTT:   Yes, and the Minister has to consent, and the Minister is going to say to itself, well has that transferee got an aquifer that can ‑ ‑ ‑

FRENCH CJ:   It might be out of the same aquifer.

MR ELLICOTT:   If it is not the same aquifer, it may be somebody down on the Murrumbidgee.  Are they going to be able to appropriately take that amount of water out of that aquifer?

FRENCH CJ:   What it looks like really, is a variation in the rights or extinguishment in the rights attaching to one licence and a corresponding creation or variation of rights attaching to another licence.

MR ELLICOTT:   Yes, that is right, subject to ministerial control, again protecting the aquifer of the transferee.  In terms of surface water it is slightly different because if you transfer within the same river then it does not matter whether the water is taken by the transferor or the transferee.  It is there, it is in the river.  With aquifers, obviously, they have their own special issues and volumes.

Your Honours, I just wanted to take your Honours to tab 22 of volume 1 of the State legislation.  Volume 1 at tab 22 it is the Water Administration Act 1986. Section 4 is the objects section and “The objects of this Act are” and it being the Administration Act:

(a)to ensure that the water and related resources of the State are allocated and used in ways which are consistent with environmental requirements and provide the maximum long‑term benefit for the State and for Australia; and

(b)to provide water and related resources to meet the needs of water users in a commercial manner consistent with the overall water management policies of the Government.

In other words, the water rights of the State, indeed, of every State I should imagine, are exercised to ensure that water can be used in a commercial manner because there are large numbers of towns and people and electors and so on who depend on water and they depend on it for a living.  There is a massive irrigation industry in New South Wales and therefore the commercial aspect of this has to be borne in mind as an object which the Parliament had in mind.

It does not intend to take away rights in the sense that Parliament might sometimes take over a particular area of activity and resolve issues between parties, copyright or the like or circuit layouts or the like, but because everybody potentially who lives in the rural areas has an interest in water and the economy and employment, then it is natural that the Act should be administered in that way.

GUMMOW J:   Mr Ellicott, we need to focus, I suppose, on the particular statutory amendment or instruments made under statute which effect the acquisition, which actually strike at what you say are your anterior rights.

MR ELLICOTT:   Yes.

GUMMOW J:   Are you coming to that after you have finished what you are now doing, I imagine.

MR ELLICOTT:   Yes, I can do that, yes.  There is a section of the argument that deals with executive power.

GUMMOW J:   No, I am talking about in the New South Wales system.  What is it under the New South Wales legislation or executive instruments of New South Wales which struck at your anterior rights which you say in New South Wales were proprietary, before one gets to the federal dimension, as it were?

MR ELLICOTT:   If your Honour pleases.  Your Honour, I will deal with that first thing in the morning.  There is just one subject matter that is very important and I have got five minutes to do it in, because your Honours will have read a great deal already.  If your Honours go to volume 1 at page 110.  If I can just point out, that deals with the position of the plaintiff, your Honours, just to get some idea of the business that they carry on. 

There are two properties, one is “Cowl Cowl” which is a large aggregation of properties.  I think it is an aggregation.  As I understand it, it would be in effect something like 67 square miles.  It is 17,000‑odd hectares or 42,000 or 43,000 acres.  It is a very large area of land.  It is located near Hillston in New South Wales, so it is right towards the turn in the Lachlan at the west and it is soil that is responsive, because it is near the river, to irrigation.  There are a number of activities undertaken there and I am addressing this, your Honours would appreciate, to issues that might arise if your Honours go deeply into the question of just terms here, but just to indicate what is at stake. 

They have other activities which are interconnected, in a sense, with the irrigation.  There is farming cereal crops, farming legumes.  There is hay production, but there is also livestock production which is interconnected, of course, with things like hay production or the growing of oats or whatever it may be. There is a vineyard and there are storage and marketing facilities. 

There was a licence in existence and if your Honours go to paragraph 106, you will see that from February 1975 to 1983 the licence was actually unlimited with some exceptions.  Then from August 1983 to

2002 there was a different type of licence.  It was called a conjunctive licence and it is explained here, but what it meant was this.  It recognised that there was an interrelation between surface water and bore water and if in a given year the river water was not wholly available, then you could take up the difference from the bore.  Now, some licences said that.  Their licence said you can only take up to, it said, 22,396. 

So there was a licence which, in effect, was 13,000 megalitres, but in a depleted river water year you could take the balance up to 22,396.  That sort of licence did not fit in with the water reform, as you can imagine, because they wanted to free up both sorts of licences, so they abandoned that and they gave a licence for 18,638 and it is in that state that the licence entitlement was at the time the funding agreement was entered into.

There are statements there to the effect that there was an announced allocation and if you go over the page that was in those three years which were years of drought, but the announced allocations were still quite substantial.  They were done, no doubt, with the drought in mind.  I cannot say that they were done under section 117F, I think.

CRENNAN J:   I think that is E, perhaps, restrictions?

MR ELLICOTT:   Yes, the shortage section.  I think they were done with a view to moving from the Water Act into the Water Management Act and I will explain that tomorrow, but I think your Honours will understand that during a period the State was moving between the Water Act system and the Water Management Act system.  Those allocations seem to have been made under that.  Is that a convenient time, your Honour?

FRENCH CJ:   Yes, thank you, Mr. Ellicott.  We will adjourn until 10.15 tomorrow morning.

AT 4:18 PM THE MATTER WAS ADJOURNED
UNTIL TUESDAY, 25 AUGUST 2009