Murrumbidgee Horticulture Council Inc v Minister for Land and Water Conservation - [2003] NSWLEC 213

No judgment structure available for this case.

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Reported Decision: (2003) 127 LGERA 450

Land and Environment Court

of New South Wales

CITATION: Murrumbidgee Horticulture Council Inc v Minister for Land and Water Conservation [2003] NSWLEC 213

PARTIES:
APPLICANT
Murrumbidgee Horticulture Council Inc
RESPONDENT
Minister for Land and Water Conservation

FILE NUMBER(S): 40326 of 2003

CORAM: Pain J

KEY ISSUES:
Construction and Interpretation :- Minister's plan made under s 50 of the Water Management Act 2000 - proper construction of cl 49 of the Water Sharing Plan for the Murrumbidgee Regulated River Water Source 2003 Order - cl 53(8) of the Plan prohibits high security access licence holders from dealing in water allocations after the first two months in any water year - whether the time limit on dealings for high security access licence holders in cl 53(8) of the Plan is in breach of the priorities set down by s 58(1) of the Act - whether cl 53(8) of the Plan fails to comply with s 20(4)(a) of the Act because of non-compliance with cl 10 of the Access Licence Dealing Principles Order 2002 and/or Target 16a of the State Water Management Outcomes Plan - whether cl 20(4)(a) and s 71L of the Act apply to a Minister's plan - proper construction of s 71L - whether cl 7(1) and (2) and 9(2) of the Access Licence Dealing Principles Order 2002 justify cl 53(8) of the plan
Judicial Review :- whether cl 53(8) of the Plan is invalid - whether the Minister failed to take into account relevant considerations - whether the Minister took into account irrelevant considerations - whether the requirement was manifestly unreasonable
Water Rights :- no unfettered right to dealings in water conferred by the Act

LEGISLATION CITED: Access Licence Dealing Principles Order 2002 cl 7, cl 9, cl 10, cl 18
Murray-Darling Basin Act 1992 s 6
State Water Management Outcomes Plan target 1a, target 16a
Water Management Act 2000 s 5, s 6, s 16, s 20, s 50, s 56, s 57, s 58, s 59, s 60, s 71G, s 71K, s 71L, s 85, s 95(1), s 336(1), s 343(1)(d)
Water Sharing Plan for the Murrumbidgee Regulated River Water Source 2003 Order cl 4, cl 32, cl 33, cl 34, cl 39, cl 49, cl 52, cl 53, Sch 2

CASES CITED: Brown v Heffer (1967) 116 CLR 344;
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 335

DATES OF HEARING: 10/06/2003, 12/06/2003 (written submissions), 13/06/2003 (written submissions), 20/06/2003 (written submissions, 23/06/2003 (written submissions)

DATE OF JUDGMENT:
09/26/2003

LEGAL REPRESENTATIVES:

APPLICANT
Mr J Basten QC
with Mr C Dwyer (barrister)
SOLICITORS
Jenni Mattila & Co
RESPONDENT
Mr MJ Leeming (barrister)
SOLICITORS
Crown Solicitor's Office

JUDGMENT:

40326 of 2003

Pain J

26 September 2003

MURRUMBIDGEE HORTICULTURE COUNCIL INC

Applicant

v

MINISTER FOR LAND AND WATER CONSERVATION

Respondent

Judgment

Introduction

1. The Minister for Land and Water Conservation made a water sharing plan for the Murrumbidgee River on 27 December 2002 (the Plan). The Plan is made under the Water Management Act 2000 (the Act). The Murrumbidgee Horticulture Council Inc alleges that the Plan breaches the Act and should therefore be declared invalid. Section 336(1) of the Act provides that "any person may bring proceedings in the Land and Environment Court for an order to remedy or restrain a breach of this Act …" . The Council represents approximately 1000 "high security" water users (irrigators with permanent plantings) along the Murrumbidgee River. Since the proceedings were commenced the Minister for Natural Resources has become responsible for the Act. The commencement date of the Plan has also changed from 1 July 2003 to the end of 2003.

Grounds

1. Clause 49 of the Plan is invalid because it is inconsistent with s 58 of the Act and therefore beyond the power conferred on the Minister by s 50 of the Act.

Particulars

(1) Whereas s 58(1)(a) provides that the licences identified in pars (a), (b) and (c) of s 57 have priority over all other access licences, clause 49 provides that, in certain circumstances, the access licences identified in pars (a), (c) and (d) of s 57 have priority over other access licences; and

(2)

Priority is granted to those licences in circumstances where the licencees have placed orders for water, but not otherwise.

2. Subclause 53(8) is invalid and beyond power because it imposes a constraint which is -

(a)

inconsistent with the provisions of s 71G of the Water Management Act;

(b)

inconsistent with and contrary to, the principles and objectives set out in clause 10 of the Access Licence Dealing Principles Order 2002, made pursuant to s 71L of the Act and hence contravenes s 20(4)(a) of the Act.

3. Subclause 53(8) is invalid because in making it the Minister -

(a)

failed to take account of relevant considerations;

…

(b)

took into account irrelevant considerations;

…

(c)

imposed a requirement which was manifestly unreasonable in all the circumstances in that it:

…

Legislative framework
3. The Murray-Darling Basin Agreement between the Commonwealth, New South Wales and other state governments, is adopted by s 6 of the Murray-Darling Basin Act 1992. A Ministerial Council is established under the Agreement consisting of New South Wales, other state governments and the Commonwealth government. A "water cap" is defined in Sch E to the Agreement as the total volume of water permitted to be diverted within the Murray-Darling Basin in line with the Ministerial Council's decision to limit diversions of water to the 1993 - 1994 levels of development. The Murray-Darling Basin Commission established by the Agreement adjusts each state's "water cap" so as to maintain the integrity of the overall "water cap" for the Murray-Darling Basin. New South Wales has obligations under the Agreement to meet its "water cap".

4. It is necessary to set out in some detail the terms of the Act and related instruments in order to understand the complex statutory regime which applies to the Plan in this case.

5. Regulated rivers are declared by the Minister by order published in the Government Gazette. The Murrumbidgee River was so declared in the Gazette dated 27 December 2002. The Murrumbidgee Regulated River Water Source is within a water management area and constitutes a water source for the purposes of the Act: see cl 4(4) of the Plan (it is also within the Murray-Darling Basin Agreement area). Management plans made under the Act can include water sharing provisions for water users in relation to a water management area or water source.

6. Management plans must be consistent with other specified instruments including the State Water Management Outcomes Plan (SWMOP) (s 16(1)(a) of the Act) and government policy, including government policy in relation to the environmental objectives for water quality and river flow (s 16(1)(e)). There are also core provisions for water sharing which a management plan must deal with (s 20(1)(a) - (e)). The bulk access regime for water users in a management plan must be consistent with limits set on the availability of water determined by a management plan and establish rules by which access licences are granted and managed (s 20(2)(a) - (b)). Section 20(1)(d) requires that the water sharing provisions of a management plan for a water management area or water source must deal with the establishment of access licence dealing rules for the area or water source. The Act provides for the Minister to make plans which have the same effect as a management plan (s 50). A Minister's plan must in general terms deal with any matters that a management plan is required to deal with (s 50(2)).

7. Access licence holders are entitled to specified shares in the available water within a water management area or from water sources (share component) and to take water at specified times, rates, circumstances and specified locations (the extraction component): s 56(1). Section 57 sets out ten access licence categories, including regulated river (high security) access licences (high security access licences) and regulated river (general security) access licences (general security access licences). The Council's members are high security access licence holders. Section 58 specifies the priorities to be observed between these categories.

8. The Minister has power to make a determination as to the availability of water for the various categories of access licence (s 59). The rules of distribution which apply to an available water determination include the priorities in s 58 (s60(1)(a)). The assignment of water allocations from one access licence to another (dealing) can be done only with the Minister's consent (s 71G(2)). An application for assignment is to be dealt with in accordance with water management principles, access licence dealing principles and access licence dealing rules established by any relevant management plan (s 71K(1)).

9. Access licence dealing principles can be made by the Minister by order published in the Gazette (s 71L). The Access Licence Dealing Principles Order 2002 (the Principles Order) was published in the Gazette on 27 December 2002, the same date as the Plan. The access licence dealing rules contained in a management plan must comply with the access licence dealing principles (s 20(4)(a)).

10. The Principles Order contains general principles and principles for specific types of access licence dealings. Clause 18 concerns dealings under s 71G of the Act. Certain dealings are prohibited but none of the prohibitions in cl 18(2) applies to impose time limits on high security access licence holder dealings.

11. The Minister must keep an account for each access licence showing the water allocations under the licence and any water allocations taken or transferred under the licence (s 85(a), (b)).

Key provisions of the Act

(1) A management plan must be consistent with:

(a)

the State Water Management Outcomes Plan, and

…

(e) government policy, including government policy in relation to the environmental objectives for water quality and river flow.

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

(a)

…

(b)

the identification of requirements for water within the area, or from the water source, to satisfy basic landholder rights,

…

(d)

the establishment of access licence dealing rules for the area or water source,

(e)

the establishment of a bulk access regime for the extraction of water under access licences, having regard to the rules referred to in paragraphs (a) and (d) and the requirements referred to in paragraphs (b) and (c).

14. Section 20(2) provides:

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

(a) must recognise and be consistent with any limits to the availability of water that are set (whether by the relevant management plan or otherwise) in relation to the water sources to which the regime relates, and

(b) must establish rules according to which access licences are to be granted and managed and available water determinations to be made, and

(c) must recognise the effect of climatic variability on the availability of water, and

(d) may establish rules with respect to the priorities according to which water allocations are to be adjusted as a consequence of any reduction in the availability of water, and

(e) may contain provisions with respect to the conditions that must (as mandatory conditions) be imposed on access licences under section 66 (1), including conditions providing for the variation, from time to time, of the share and extraction components of access licences, and

(f) must be consistent with the water management principles.

The rules referred to in subsection (2) (d) must comply with the priorities established under section 58.

The access licence dealing rules established under subsection (1) (d):

(a) must comply with the access licence dealing principles, and

(b) subject to those principles, may regulate or prohibit any dealing under Division 4 of Part 2 of Chapter 3.

(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.

(3) Shares in available water may be assigned generally or to specified categories of access licence.

…

(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.

(1) Water allocations may be assigned from one access licence to another in accordance with this section.

(2) The holders of two or more access licences may apply to the Minister for consent to the assignment of water allocations between the water allocation accounts for their respective access licences.

(3) Such an application may only be made with respect to water allocations currently credited to the access licence from which water allocations are to be assigned.

…

Other relevant instruments

Access Licence Dealing Principles Order 2002 (the Principles Order)
20. Section 71L of the Act provides that the Minister may establish access licence dealing rules. The Principles Order is stated to commence on 20 December 2002, although published in the Government Gazette on 27 December 2002, the same date on which the Plan was also gazetted. The relevant provisions are set out later in this judgment.
State Water Management Outcomes Plan (SWMOP)
21. The SWMOP is provided for by s 6 of the Act which allows the Governor to make a SWMOP and was gazetted before the Plan was made. Section 6(2) and (3) of the Act provides:

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

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

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

(ii) the results of any relevant monitoring programs,

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

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

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

(a) government obligations arising under any inter-governmental agreement to which the government is a party, such as the Murray-Darling Basin Agreement referred to in the

, and

(b) government obligations arising in connection with any international agreement to which the government of the Commonwealth is a party, and

(c) government policy, including government policy in relation to the environmental objectives for water quality and river flow.

…

(6) A State Water Management Outcomes Plan has effect for the period of 5 years commencing on the date on which it is published in the Gazette.

Water Sharing Plan for the Murrumbidgee Regulated River Water Source 2003 Order (the Plan)

22. The Plan made pursuant to s 50 of the Act by the Minister was gazetted on 27 December 2002. Key provisions are set out in the following paragraphs.

(1)

This Part is made in accordance with section 20(1)(e) of the Act and with the Minister's access licence dealing principles gazetted on 27 December 2002 under section 71L of the Act.

Note. The Minister's access licence dealing principles are contained in Appendix 5

(2) Applications for access licence dealings may be granted subject to the Minister's access licence dealing principles gazetted from time to time under section 71L of the Act and the rules in this Part.

Note.

There are a number of mechanisms within the Act, called access licence dealings, to change either the ownership of all or part of an access licence, or the location within a water source at which all or part of the share and extraction components of access licences can be exercised. These dealings are governed by the principles in section 5 of the Act, Minister's access licence dealing principles, and the rules in this Part.

24. I note that cl 52(1) refers to s 20(1)(e) of the Act but that the correct reference should be s 20(1)(d).

(1)

This clause relates to dealings under sections 71D, 71F and 71J of the Act and to dealings in respect of water allocation assignments within this water source under section 71G of the Act.

…

(8) A dealing is prohibited if the application for assignment of water allocations from a regulated river (high security) access licence water allocation account is received after 1 September in any water year.

Ground 1
26. After hearing oral submissions the parties advised that they now agreed on the appropriate interpretation of cl 49 and, if I agreed with that interpretation, there was no longer any issue between them in relation to cl 49. Consequently Ground 1 was no longer pressed. For completeness, I will address my understanding of how cl 49 is intended to operate.

Where extraction components of an access licence do not specify the rate as a share of supply capacity or a volume per unit of time, then whenever supply capability is insufficient to satisfy all orders for water in any section of this water source at any time then:

(a) water will be supplied to domestic and stock access licences, local water utility access licences and regulated river (high security) access licences that have placed orders for water, and

(b) then any remaining supply capability will be shared between regulated river (general security) access licences that placed an order for water, in proportion to the share components specified on the access licence.

28. The Council was concerned that cl 49 could operate so that if a general security access licence holder placed an order for water before a high security access licence holder, and it is then determined that there is insufficient water supply to satisfy all users, the general security access licence holder's order would take priority over the high security licence holders who had not put in an order before the general security access licence holder for water to be supplied. That is, orders would be fulfilled on a "first in, first served" basis. This would be in contravention of the priority between access licence holders specified in s 58 of the Act.

29. The Minister and Council agreed that the alternative, and preferable, construction is that the decision in relation to priority is made at the time of delivery of the water when orders have been received. At the time water is released priority is given to orders from the class of access licence holders in par (a). This would ensure the priority specified in s 58 of the Act is maintained. I see no reason to disagree with this interpretation of the operation of cl 49. It is unnecessary to consider making the declaration of invalidity of cl 49 of the Plan as sought in Ground 1.

Ground 2
30. Clause 53(8) of the Plan prohibits a dealing in water allocations from a high security access licence water allocation account if the application is received (presumably by the Minister under s 71G) after 1 September in any water year. Water years run from 1 July to 30 June. Any sale of water allocations of high security access licence holders must be entered into within the first two months of the water year.

31. The issues ultimately relied on by the Council in relation to ground 2 varied from those in the pleadings.

(a) cl 10 of the Principles Order
(b) Target 16a of the State Water Management Outcomes Plan.

Issue (1) - time limit on trading is in breach of s 58(1) of the Act
Council's arguments
33. The parts of the Plan dealing with available water determinations is in accordance with the statutory priorities between licence holders conferred by s 58(1) and s 60(1)(a). Accordingly, the Council does not complain about this aspect of the Plan.

34. The Council is arguing that the time limit of two months from the start of the water year on dealings in water allocations is a breach of the priorities between licence holders under s 58(1). This limit on trading is the same as a limit on the use of the water which, if imposed, would clearly be a breach of s 58(1).

A key basis of the WM Act is that individual licence holders should have total responsibility for the water in their accounts after the Minister puts it in. The Act therefore provides that the only way water is debited from an account is via water use or transfer.

Clause 53(8) of the Plan is argued to be in breach of this principle.

36. The Council argues that if the Plan has effect contrary to the express provisions in relation to water allocation it impinges on the priorities in s 58(1). If further water is needed for environmental purposes, that water must be found, at least in the first instance, from licence categories having priority below high security access licences. To seek to limit the impact of the priority system on general security and supplementary water access licence holders is a subversion of the priority scheme and inconsistent with the Act.

37. Further, I note that the Council's case as pleaded states that cl 53(8) is inconsistent with s 71G, although this ground was not emphasised in argument.

Minister's arguments
38. The Minister argued that cl 53(8) cannot be inconsistent with s 71G. There is no unfettered right to assign water allocations to other access licence holders. Section 71G requires the Minister's consent to transfers of water between access licence holders. Until the Minister consents, the assignee has no right to the allocation: Brown v Heffer (1967) 116 CLR 344 at 350. If the Minister does not consent, the transaction is at an end: Brown v Heffer at 351. Clause 53(8) is consistent with s 71G. By cl 53(8) the Minister is indicating that consent will not be given if an application for assignment is received after 1 September.

39. Section 58 does not contain any prohibition on a Minister's plan containing priorities in relation to water which has been ordered. Water can only be used under an access licence if it has been ordered (cl 59(4) of the Plan). Further, there is no unfettered right to deal in water allocations under the Act.

Finding on Issue 1
Inconsistency between s 71G of the Act and cl 53(8) of the Plan
40. Section 56 sets out what an access licence holder is entitled to, namely a share component and an extraction component of water from a specified source. The Council accepted there is no issue under the Plan with the priority for available water determinations made between access licence holders. Nowhere in the Act is there recognition of any unfettered right to deal in the share (or extraction) component of a licence. Section 71G provides that the Minister can consent to the transfer of water from one licence to another. There is clearly no inconsistency between s 71G of the Act and cl 53(8) of the Plan.

Does the priority between licence holders under s 58(1) apply to dealings?
41. The Council argues that the priorities identified in s 58(1) are infringed by cl 53(8) because if water is required for environmental purposes that water must be found from licence categories with lower priority than high security access licences. The Council argued that the Plan does not allow an available water determination to be made in favour of general security access licence holders until 95% of the share component has been made available to high security access licence holders. The Plan also makes provision for a long term extraction limit (cl 32 - cl 34) which provides that supplementary water access licences should have their available water determinations reduced if the limit will be exceeded. Further, Mr Foreman (Acting Executive Officer of the Murrumbidgee River Management Committee and employee of the NSW Department of Sustainable Natural Resources) gave evidence on behalf of the Minister that trading in the full share component able to be extracted by high security access licence holders may lead to use greater than the historical levels of use by high security access licence holders so that, in combination with water use by lower priority access licence holders, the "water cap" may be exceeded. The Council submitted the full entitlement of high security access licence holders includes the ability to deal in, as well as use, their water allocation. Reducing dealings of high security access licence holders to increase the amount of water available to other access licence holders with less priority is not allowed under s 58(1).

42. Are time limits on dealings in water allocations to high security access licence holders in the Plan an infringement of the priorities in s 58(1)? I do not think so, given that there is no unfettered "right" to deal in water allocations specified in the Act. One of the difficulties for the Council's argument overall is the lack of any statutory framework in the Act underpinning a legal right to unfettered dealings in water allocations. The issue is an essential matter underpinning the arguments put by both the Council and the Minister in this case. The Council sought to demonstrate that the historical circumstances and recent government policy making at the national and state level encourages dealings in water allocations. The affidavit evidence of Ms Wilkes, Chief Executive Officer of the Council, and Mr Foreman is that dealing in water has been going on since 1983. It may well be government policy to encourage dealings, but there is no evidence before me of any statutory, or other, right to unfettered dealing in water allocations.

43. Section 71G provides only that an access licence holder may apply to the Minister for consent to a transfer of water to another access licence holder. It is clear from the provisions of s 71G and s 71K that consent is not automatically granted, only that it may be granted. Section 71K states that an application for assignment is to be dealt with in accordance with water management principles, access licence dealing principles and access licence dealing rules established by a management plan. There was no argument before me on how s 71K would apply to s 71G applications, but the Act appears clear that the Minister would have to comply with s 71K when considering an application under s 71G. Some of the instruments referred to in s 71K refer to government policy to encourage dealings, amongst many other policies such as the achievement of environmental protection objectives. Nevertheless, whether the Minister consents to a transfer of water from one access licence holder to another is ultimately a matter for the Minister.

44. The entitlements of access licence holders are set out in s 56 of the Act. Access licence holders are entitled, pursuant to s 56, to specified shares in the available water and to take that water at specified times, rates or circumstances (or a combination of these). Clause 53(8) does not impact on the amount of water allocated to high security access licence holders (share component) or the extraction of that water. Essentially what is affected by cl 53(8) of the Plan is the ability of the high security access licence holders to deal in and earn income from, by having the Minister transfer to other access licence holders, that part of their water allocation which they consider surplus to their requirements. Dealings will only be consented to by the Minister under cl 53(8) of the Plan if they take place in the first two months of the water year.

45. Section 58(1) opens with the words "for the purposes of this Act …" . Section 58(2) refers to the priorities of water allocations between access licences when water has to be diminished (the share component). Given the broad opening words of s 58(1) the priorities therein may well apply across the Act, and beyond water allocation so that the application of s 58(1) is not defined by the context of s 58(2). Nevertheless, as I have already stated, the only relevant references to dealing in the Act, s 71G and s 71K, make clear that the Minister may, not must, consent to a transfer of water (that is, there is no unfettered right to deal). The Council's argument that s 58(1) applies so that water saved by limiting dealings of high security access licence holders cannot be used to benefit other access licence holders has no basis as there is no entitlement of high security access licence holders being infringed to which s 58(1) can apply.
46. As is made clear in the affidavit of Mr Blacker, relied on by the Council, the ability to trade water has enabled him, as an access licence holder, to earn income from not only the use of his water allocation for his own agricultural purposes but also dealings in unused water. Mr Blacker attests to the use to which extra money earned from water dealing can be put in terms of implementing good environmental practices on his farm. While that may well be laudable and a useful way of utilising that income, that evidence does not have any relevance to my decision in this matter given the statutory framework as I understand it.

47. I do not consider cl 53(8) of the Plan breaches s 58(1) of the Act. It is still necessary to consider Issue 2 because there are statutory instruments which are intended to regulate dealings in water which, if infringed, could be another basis on which cl 53(8) of the Plan is invalid.

Issue (2)(a) - cl 10 of the Principles Order
48. The access licence dealing rules in a management plan must comply with the Principles Order (s 20(4)(a)). If those principles are complied with, any dealing under s 71A - s 71L of the Act may be regulated or prohibited by the access licence dealing rules (s 20(4)(b)). Dealings which assign water allocations between access licences arise under s 71G of the Act. Clause 18 of the Principles Order concerns s 71G.

Subject to the other parts of this clause, access licence dealing rules may prohibit or regulate these dealings provided this is done consistent with the principles in Part 2 of this order.

(No other parts of the clause are relevant to the circumstances in this case).

(1)

The objective of access licence dealings is to help to facilitate maximising social and economic benefits to the community of access licences as required under the objects of the Act. Dealings do this by:

(a)

allowing water to move from lower to higher value uses, and

(b)

allowing the establishment of water markets that value the access licences, thereby encouraging investment in water efficient infrastructure, and

(c)

allowing greater flexibility to access licence holders.

(2) Subject to other principles in this order, access licence dealing rules should allow maximum flexibility in dealings to promote the objectives set out in subclause (1).

Council's argument
(i) Clause 10 is a binding principle pursuant to s 20(4) of the Act
51. The Council argues cl 53(8) is inconsistent with the principle set out in cl 10(2) of the Principles Order that "dealing rules should allow maximum flexibility" and is therefore invalid because s 20(4) of the Act has not been complied with. Section 20(4) is mandatory and applies to management plans and a Minister's plan.

(ii)

Meaning of s 71L of the Act

The Minister may, by order published in the Gazette, establish access licence dealing principles:

(a) to regulate or prohibit the kinds of access licence dealing rules that may be established by a management plan, and

(b) subject to any such rules, to regulate or prohibit the kinds of dealings that may be effected under this Division, and

(c) subject to any such rules, to establish conversion factors applicable to the share components of access licences in respect of which dealings are effected under this Division.

Minister's argument

(i)

What must a Minister's plan comply with?

A Minister's plan must

deal with any matters that a management plan is required to deal with …

(ii) Meaning of s 71L of the Act
55. The Minister submitted the argument that cl 10 of the Principles Order has not been complied with in the Minister's Plan fails because s 71L cannot be construed in such a way that the principles apply. Giving the words their ordinary meaning, s 71L(a) applies to Access Licence Dealing Rules established in a management plan only, as opposed to a Minister's plan. Section 71L(b) is worded sufficiently broadly to extend to dealings effected under a Minister's plan such as this one, but it is expressly subject to the rules in the Plan. Therefore cl 53(8) in the Plan cannot be subject to cl 10 of the Principles Order.

(iii) Will failure to comply with cl 10 give rise to invalidity?
56. While mandatory language is used in both s 16(1)(a) and s 20(4)(a) the matters which a plan must be consistent with or comply with in general terms under s 50(2) are not matters which have "a rule-like quality which can be easily identified and applied" (see Project Blue SkyInc v Australian Broadcasting Authority (1998) 194 CLR 335 at [95]). Applying Project Blue Sky whether a Minister's plan must be consistent or compliant with a "target" or an "objective" is a matter where "there will be room for widely differing opinions (at [95]). The matters which the Council states must be complied with are "more aptly described as goals to be achieved rather than rules to be obeyed" ( Project Blue Sky at [96]).

57. Clause 10 of the Principles Order states that access licence dealing rules "should" allow maximum flexibility in dealings to promote the objective set out in subclause (1). The wording in cl 10 is in general terms which suggests that non-compliance does not spell invalidity of cl 53(8), for example, "should allow" "maximum flexibility".

58. The Council argued this argument is not maintainable given that s 20(4) of the Act is mandatory. Project Blue Sky is not authority for an argument that failure to comply with a clear statutory precondition does not give rise to invalidity. Clause 20(4) is not a procedural provision dealing with the manner in which functions should be performed as was the situation in Project Blue Sky . The principles which are mandatory under s 20(4) are specific when compared to goals and objectives and are identifiable. Project Blue Sky does not apply in this circumstance.

(iv) Do clauses 7(1) and (2) and cl 9(2) of the Principles Order justify cl 53(8) of the Plan
59. Clause 10 of the Principles Order provides expressly it is subject to the rest of the principles specified in the Principles Order (cl 10(2)). The Minister argued cl 7(1), cl 7(2) and cl 9(2) justified cl 53(8).

Clause 7(1) and (2)

(1) Dealings should not adversely affect environmental water and water dependent ecosystems as identified in any relevant management plan

(2) Dealings should be consistent with any strategies to maintain or enhance water quality identified in any relevant management plan.

Extractions in Murray-Darling Basin's regulated rivers limited to the level of the long-term average annual extraction below the Murray-Darling Basin Ministerial Council Cap which results from the long-term impact of the environmental water rules

62. Schedule 2 of the Plan indicates the level of contribution to the SWMOP Target 1(a) concerning compliance with the "water cap" is "full". One of the reasons for the imposition of the "water cap" is clearly to preserve water quality. Clause 53(8) is required as part of measures to enhance the environment of the Murrumbidgee River as one of the Murray-Darling Basin's regulated rivers.

Clause 9(2)
65. Clause 9(2) of the Principles Order provides:

Dealings should have no more than minimal effect on the ability of a person to take water using an existing approved water supply work and any associated access licences. This should be addressed by constraints on dealings established in access licence dealing rules in relevant management plans.

66. It was argued by the Minister that cl 9(2) would justify cl 53(8) based on the likely effect on the ability of a licence holder to take water using a water supply work. The evidence of Mr Foreman was that general security and other access licence holders might have their water access limited if the high security access licence holders deal in any unused water. If the high security access licence holders exercised their full dealing rights in water excess to their requirements this could affect general security licence holders "to more than a minimal effect". This was in the overall context of Mr Foreman's evidence that the dealings in water, as well as use, by high security access licence holders resulting in the use of their full water entitlement, together with water use by lower priority access licence holders, may well lead to exceedance of the "water cap".

67. The Minister argues that "water supply work" is broadly defined in the dictionary of the Act to include every work which is used to take water, including any pump, bore, tank, dam, pipe, channel, levee and weir. The Minister argued it was difficult to see how a licence holder could take water without using a water supply work and the channels and pipes installed by Mr Blacker referred to in his affidavit dated 23 April 2003 par 5 are such works. Section 343(1)(d) of the Act contains a prohibition on using a water supply work to take water otherwise than in accordance with a water supply work approval. Accordingly, licence holders who use water will all have water supply work approvals granted by the Minister under s 95(1). There is no need for cl 53(8) to refer in terms to water supply works in order to be an authorised restraint on dealings within the meaning of cl 9(2).

Finding on Issue 2(a) - clause 10 of the Principles Order

(i) What must a Minister's plan comply with?
(ii) Meaning of s 71L of the Act
69. Arguments (i) and (ii) are interrelated and are answered together. The first question to consider is whether s 20(4)(a) of the Act applies to a Minister's plan. Section 50(2) states that a Minister's plan must in general terms deal with any matters that a management plan is required to deal with. Section 20(4) is in mandatory terms. It is not immediately clear what the intended meaning of s 50(2) is in relation to Minister's plans when other sections of the Act are considered. Given the very clear wording of s 20(4) there appears to be no other meaning than that the Plan must comply with that section. The access licence dealing rules established in a Minister's plan must therefore comply with the Principles Order. There is an obligation to comply with, given the mandatory wording in s 20(4), as well as to consider the Principles Order. Section 50(2) does state deal with in general terms suggesting that a Minister's Plan can be more general than a management plan in how it deals with a particular instrument. The terms of the instrument will determine how general the Minister can be.
70. The Principles Order is intended to regulate the kinds of access licence dealing rules in a management plan (s 71L(a)). The Minister argued that s 71L(a) applies to access licence dealing rules in a management plan not a Minister's plan made under s 50. Furthermore, s 71L(b) means the rules in a plan take precedence over the Principles Order. On this view a Minister's plan can determine rules which are not subject to the Principles Order. If correct, cl 10 of the Principles Order does not apply to the Minister's Plan.
71. Section 71L(a) is clear that if access licence dealing principles are made by the Minister, these may regulate or prohibit access licence dealing rules in a management plan. Section 71L(a) and (b) are closely linked and need to be considered together to determine if the Minister's Plan must also comply with these.
72. In relation to s 71L(b) I consider the Council's argument is to be preferred so that s 71L(a) and (b) apply to the Minister's Plan. Section 71L(b) is difficult to construe. It opens "subject to any such rules …". This could be interpreted as suggesting the Principles Order is subject to access licence dealing rules in a management plan or Minister's plan. In my opinion s 71L(b) should be interpreted so that the Principles Order should be given priority over the access licence dealing rules in any plan. This interpretation of s 71L(a) and (b) is confirmed by s 20(4)(a) and (b) in the Act which makes the power to regulate dealings in a management plan subject to the access licence dealing principles.
73. A Minister's plan must comply with cl 10 of the Principles Order. Precisely how it does this in general terms will depend on the terms of the Principles Order but the Order must be complied with.
(iv) Do cl 7(1), 7(2) and 9(2), of the Principles Order justify cl 53(8) of the Plan?
74. I will deal with argument (iv) propounded by the Minister first as, depending on my finding here, I will not need to deal with argument (iii) raised by the Minister, namely whether failure to comply with cl 10 gives rise to invalidity. Do cl 7(1), 7(2) and 9(2) of the principles Order, to which cl 10 is subject, justify cl 53(8) of the Minister's Plan? If the interpretation of cl 7(1), cl 7(2) and cl 9(2) proposed by the Minister is adopted his ability to restrict dealings is broad.

75. The competing arguments in relation to cl 7(1) and cl 7(2) of the Principles Order are based on different interpretations of what environmental protection measures are covered by cl 7(1) and (2). The Council argues that as there is no evidence that the water "saved" by the limit on dealings under cl 53(8) will be applied directly towards environmental flows, cl 7(1) and 7(2) can have no operation. That is clear from the affidavit evidence of Mr Foreman relied on by the Minister, who stated that excessive water use, meaning greater than historical water use, by high security access licence holders, could lead to reductions in water for supplementary and general security licence holders. These licence holders will be the first affected if there is a need to limit water access in the event the "water cap" exceeds the diversion limit based on 1993/94 levels of development. The evidence relied on by the Minister is that the aim of the Plan, including cl 53(8), as set out in Target 1(a) of the SWMOP (referred to in Sch 2 of the Plan) is to ensure that the "water cap" in the Murray-Darling Basin is met. One of the objectives of the "water cap" is to preserve water quality and loss of wetland area (affidavit of Mr Foreman sworn 2 June 2003 at par 15 - 18) so that the Plan is in conformity with cl 7(1) and (2).

76. I further note that the SWMOP, Target 1a, that the "water cap" for the Murray-Darling Basin must be met, ensures compliance with s 6(3) of the Act. That section requires the SWMOP to be consistent with government obligations under the Murray-Darling Basin Agreement referred to in the Murray-Darling Basin Act 1992 (s 6(3)(a)) and government policy in relation to the environmental objectives for water quality and river flow (s 6(3)(c)).

Without restrictions on high security trading, the possibility exists that high security water use would greatly exceed the volume it did under the 1993/94 conditions.

78. The Minister's reliance on the need to maintain the "water cap" also appears to be supported by the wording in cl 7(1). Clause 7(1) states dealings should not adversely affect environmental water and water dependent ecosystems identified in a management plan. The Minister's argument, relying on the need to maintain the "water cap", is supported by the evidence of Mr Foreman that the purpose of the "water cap" is in large part to reduce water extraction in the Murray-Darling Basin so that water quality is improved and loss of wetlands is reduced. As I outlined above at par 77 the achievement of the "water cap" is partly through limiting extraction to 1993/94 levels for high security access licence holders. Part of the strategy in the Plan for limiting dealings of high security access licence holders (cl 53(8)) means that water allocations for other access licence holders may benefit, in that the need to reduce their allocations is less likely if the high security access licence holders' dealings are reduced. Nevertheless the overall aim of achieving the "water cap" to which the Plan is directed is to reduce water extraction in the Murray-Darling Basin in order to achieve better water quality, increase environmental flows and habitat protection. I consider this strategy as implemented by cl 53(8) of the Plan satisfies cl 7(1) and (2).

79. This finding on cl 7(1) and(2) does give the Minister broad powers to limit dealings for environmental purposes. Given the general wording used in cl 7(1) and (2) which reflects the drafting in the Principles Order more generally, I consider that broad interpretation is appropriate. I accept that cl 53(8) of the Plan does not infringe cl 10 of the Principles Order because it is justifiable based on cl 7(1) and (2).

80. In relation to cl 9(2) of the Principles Order, I accept the Council's interpretation of that clause in relation to the meaning of "ability" being capability of the system. I do not consider the Minister can rely on cl 9(2) to justify cl 53(8).

(iii) Will failure to comply with cl 10 give rise to invalidity?
81. It is not necessary that I answer this question given my finding on the previous question. Having heard argument, I will express my preliminary view that the Principles Order must be complied with according to s 20(4) of the Act in relation to access licence dealing rules established in the Plan. While principles are by their nature more general than rules and this is confirmed by the wording of cl 10, the Act renders these binding on the Minister's Plan so that cl 10 must be complied with in general terms. Failure to comply with cl 10 would give rise to invalidity if cl 10 had not been complied with, but as I have found cl 53(8) of the Plan is supported by cl 7(1) and 7(2) of the Principles Order, cl 10 has not been breached.

82. The Council has not been successful on Issue 2(a).

Issue 2(b) - State Water Management Outcomes Plan

Council's submissions

Target 16 Improved and extended water markets through:
Target 16a All share components of access licences tradeable.
…

This target is relevant to management plans under Part 3 of the Water Management Act 2000 dealing with: Division 2 - Water sharing

Market competition improves water valuations and encourages the development of appropriate water uses over wasteful or poor-value uses. An effective water market will:

redistribute water access rights amongst licence-holders,

encourage higher productive value for the water used,

allow water users to adjust to any reductions in historical water availability,

reduce the net economic impact of any reductions in licensed access rights,

reduce waste and limit the amount of water locked up in unused or inappropriate applications,

allow new investors to acquire water without jeopardising a sustainable environment,

provide a mechanism that allows for the redistribution of economic opportunity eg. enable aboriginal people to gain a greater share of the benefits of water economy, and

provide a mechanism to encourage water to move away from unsuitable and unproductive land.

…

A paper on a "National approach to water trading" was released in January 2001 that builds on the outcomes of the COAG Strategic Water Reform Framework. The paper promotes a set of principles for water trading which include:

distinctive and clearly specified tradeable rights which must be volumetric and constitute a clear and defined share of the extractable resource,

explicit extraction limits,

removal of unnecessary market distortions such as inappropriate conversion factors,

separation of water access rights from land,

market information,

appropriate transfer and dealing protocols, and

appropriate third party and environmental protection.

New South Wales must address all these factors to ensure that an effective water market can operate in all water sources as agreed extraction limits are reached and the highest productive value of water is realised. Action has already commenced to improve water market opportunities including:

…

· unnecessary market distortions or disincentives are being removed. For example, in the past a deduction was sometimes made against the licensed volume or account water when it was traded ("transfer reduction factor"). In some cases this was to overcome the increased transmission losses in delivering the supply to its new location. In other cases the deductions were applied in order to achieve a "clawback" of environmental water. This latter practice is no longer acceptable as environmental water is now being addressed in the water sharing plans.

84. The principles set out in Target 16 mirror those in cl 10 of the Principles Order. In other words, it is inconsistent with the SWMOP to seek to provide for environmental water by a constraint imposed on tradeable rights in the water market. As that is both the identified purpose and the clear effect of cl 53(8), that provision is inconsistent with the SWMOP and hence contravenes s 16(1)(a) of the Act and is invalid.

Minister's submissions
85. The SWMOP also does not have a "rule-like" quality so that failure to comply with Target 16 does not give rise to invalidity: Project Blue Sky at [95]. Target 16a under the SWMOP provides but one of seven mechanisms designed to lead to "improved and extended water markets". Further, Target 16a is not expressed in absolute terms in any event.

The outcomes and targets identified in this SWMOP do not attempt to be exhaustive. Instead the focus is on those outcomes which affect the highest priorities and/or good indicators of overall improvement. Similarly the targets selected are those which are likely to achieve the greatest gains towards the outcomes in the short term.

This is not descriptive of a rule, the breach of which spells invalidity.

Finding on SWMOP
87. The requirement for a Minister's plan is that it must in general terms deal with any matter a management plan is required to deal with. The Act requires that a management plan "must be consistent with" the SWMOP (s 16(1)(a)). Section 50(2) requires that a Minister's plan must in general terms deal with any matters a management plan is required to deal with. Section 16(1)(a) is in mandatory terms similar to, although not identical to, s 20(4) referred to in par 69. The Minister's submissions did not differentiate between s 16(1) and s 20(4)(a) when reliance was placed on s 50(2). This suggests the Minister did not consider the different wording in s 16 "be consistent with" and s 20(4) "must comply with" imposed different obligations on the Minister pursuant to s 50(2). I consider the Minister's Plan must also be consistent with s 16(1)(a). This means in general terms consistency with the whole of the SWMOP. The Plan itself expressly states that it is consistent with the targets in the SWMOP, as identified in Sch 2 to the Plan (cl 7(1) and (2) of the Plan). Schedule 2 identifies the SWMOP targets which the Plan contributes to achieving. Even if Target 16a was not complied with it could not be said the Plan was in general terms not consistent with the whole of the SWMOP given other targets in the Plan dealing with environmental objectives including implementation of the "water cap" under Target 1a are met by the Plan. I note that Target 16a is referred to in Sch 2 of the Plan and the level of contribution to the target is stated to be "high", meaning while not meeting the target in full there is a good level of achievement.

88. If I had found a breach of the SWMOP, the generality of the language used in the SWMOP in referring to "target" rather than a "rule" makes a finding of inconsistency with the whole of the SWMOP difficult to prove. The drafting of the SWMOP does not suggest that the targets have a binding rule-like quality such that a breach would give rise to invalidity.

89. The Council has not been successful on Issue 2(b). Consequently the Council has not succeeded on Ground 2.

Ground 3
90. None of the three grounds in Ground 3 was strongly pressed by the Council.

(a) failure to take into account relevant considerations
91. The particulars relied on by the Council to support its contention that cl 53(8) is invalid because the Minister failed to take into account relevant considerations are:
(1) the requirements of clause 10 of the Access Licence Dealing Principles Order 2002 made pursuant to s 71L of the Water Management Act

(2) the objectives set out in Part 2 of the State Water Management Outcomes Plan, and

(3) the Water Management Principles set out in s 5 of the Act, and in particular that identified in par 5(2)(g) (the social and economic benefits to the community should be maximised).

92. The Council argued non compliance with these various instruments renders cl 53(8) invalid because the Minister was bound to comply with these matters. No further evidence or submissions were offered by the Council in support of this ground. Given my finding on Ground 2 this argument cannot succeed.

(b) taking into account irrelevant considerations

The benefit which would accrue to general security access licence holders from the constraint imposed on high security access licence holders.

94. There was very little argument, and no evidence presented by the Council, in support of this ground apart from that presented in relation to Ground 2. As I have not found any inconsistency between cl 53(8) of the Plan and s 58(1) of the Act this ground must fail.

(c) manifestly unreasonable
95. The particulars specified in relation to manifest unreasonableness were:

(i) imposed an obligation on high security access licence holders which was not imposed on any other category of licence holder;

(i) rendered dealings by high security access licence holders subject to an arbitrary requirement that the contractual arrangement be entered into at a time when the water requirements of the licensee for the coming year are not known and are a matter of speculation;

(ii) imposes a requirement which would substantially nullify dealings in high security access licence water allocations;

(iii) would have the effect of providing additional water, which would otherwise form part of the trading entitlement of high security access licence holders, for use by general security access licence holders, and

(iv) imposes an arbitrary and irrational restraint on dealings by high security access licence holders in the Murrumbidgee River water source.

96. The Council made only brief written submissions in support of this ground and no additional evidence was produced. There is insufficient evidence to discharge the onus on the Council to prove this ground on the balance of probabilities. It also follows from my finding on Ground 2 that a finding of invalidity on the basis of manifest unreasonableness is highly unlikely.

97. The Council has been unsuccessful in its claims in relation to Grounds 2 and 3.

Order

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Citations

Murrumbidgee Horticulture Council Inc v Minister for Land and Water Conservation [2003] NSWLEC 213

Cases Citing This Decision

0

Cases Cited

5

Statutory Material Cited

5

Redman v Permanent Trustee Co of New South Wales Ltd [1916] HCA 47

Brown v Heffer [1967] HCA 40

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28

CITATION:	Murrumbidgee Horticulture Council Inc v Minister for Land and Water Conservation [2003] NSWLEC 213
PARTIES:	APPLICANT Murrumbidgee Horticulture Council Inc RESPONDENT Minister for Land and Water Conservation
FILE NUMBER(S):	40326 of 2003
CORAM:	Pain J
KEY ISSUES:	Construction and Interpretation :- Minister's plan made under s 50 of the Water Management Act 2000 - proper construction of cl 49 of the Water Sharing Plan for the Murrumbidgee Regulated River Water Source 2003 Order - cl 53(8) of the Plan prohibits high security access licence holders from dealing in water allocations after the first two months in any water year - whether the time limit on dealings for high security access licence holders in cl 53(8) of the Plan is in breach of the priorities set down by s 58(1) of the Act - whether cl 53(8) of the Plan fails to comply with s 20(4)(a) of the Act because of non-compliance with cl 10 of the Access Licence Dealing Principles Order 2002 and/or Target 16a of the State Water Management Outcomes Plan - whether cl 20(4)(a) and s 71L of the Act apply to a Minister's plan - proper construction of s 71L - whether cl 7(1) and (2) and 9(2) of the Access Licence Dealing Principles Order 2002 justify cl 53(8) of the plan Judicial Review :- whether cl 53(8) of the Plan is invalid - whether the Minister failed to take into account relevant considerations - whether the Minister took into account irrelevant considerations - whether the requirement was manifestly unreasonable Water Rights :- no unfettered right to dealings in water conferred by the Act
LEGISLATION CITED:	Access Licence Dealing Principles Order 2002 cl 7, cl 9, cl 10, cl 18 Murray-Darling Basin Act 1992 s 6 State Water Management Outcomes Plan target 1a, target 16a Water Management Act 2000 s 5, s 6, s 16, s 20, s 50, s 56, s 57, s 58, s 59, s 60, s 71G, s 71K, s 71L, s 85, s 95(1), s 336(1), s 343(1)(d) Water Sharing Plan for the Murrumbidgee Regulated River Water Source 2003 Order cl 4, cl 32, cl 33, cl 34, cl 39, cl 49, cl 52, cl 53, Sch 2
CASES CITED:	Brown v Heffer (1967) 116 CLR 344; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 335
DATES OF HEARING:	10/06/2003, 12/06/2003 (written submissions), 13/06/2003 (written submissions), 20/06/2003 (written submissions, 23/06/2003 (written submissions)
DATE OF JUDGMENT:	09/26/2003
LEGAL REPRESENTATIVES:	APPLICANT Mr J Basten QC with Mr C Dwyer (barrister) SOLICITORS Jenni Mattila & Co RESPONDENT Mr MJ Leeming (barrister) SOLICITORS Crown Solicitor's Office