Schieb v Burnheim

Case •

[2020] NSWSC 1254

•

14 September 2020

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Schieb v Burnheim [2020] NSWSC 1254
Hearing dates: 17, 18 and 20 August 2020 and then written submissions 26 August, 3 and 9 September 2020
Decision date: 14 September 2020
Jurisdiction: Equity - Real Property List
Before: Kunc J
Decision:

Cross-claimants entitled to damages in the principal sum of $131,821.04

Catchwords:

CONSUMER LAW — Misleading or deceptive conduct — Representations as to future matters — Damage not suffered at time of entry into original agreement but when future matter fails to come to pass

CONTRACTS — Breach of contract — Consequences of breach — Right to damages — Construction of obligation to “do all things necessary and sign all appropriate documentation to” bring about specified result — Promise to achieve that result and not limited to best or reasonable endeavours

Legislation Cited:

Conveyancing Act 1919 (NSW)

Valuation of Land Act 1916 (NSW)

Cases Cited:

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295

ICM Agriculture v Commonwealth of Australia (2006) 240 CLR 140; [2009] HCA 51

Gange v Sullivan (1966) 116 CLR 418; [1966] HCA 55

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305

Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3

Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35

Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514; [1992] HCA 55

Winnote Pty Ltd (in liq) v Page t/as Freehill Hollingdale & Page (2006) 68 NSWLR 531; [2006] NSWCA 287

Zhang v ROC Services (NSW) Pty Ltd; National Transport Insurance by its manager NTI Ltd v Zhang (2016) 93 NSWLR 561; [2016] NSWCA 370

Category:Principal judgment
Parties:

Donald Hugh Schieb (First Plaintiff and First Cross Defendant)
Ainslie Schieb (Second Plaintiff and Second Cross Defendant)

Peter Burnheim (First Defendant and First Cross Claimant)
Leah Burnheim (Second Defendant and Second Cross Claimant)
Representation:

Counsel:
D Roberts (Plaintiffs and Cross Defendants)
G Campbell (Defendants and Cross Claimants)

Solicitors:
Stacks Law Firm (Plaintiffs and Cross Defendants)
APJ Law (Defendants and Cross Claimants)
File Number(s): 2018/168957
Publication restriction: No

Judgment

Summary

  1. Water is essential to rural Australia. Drought and flood are the stuff of national life and legend. These proceedings concern access to water for a property in country New South Wales. The principal claim between the parties was settled, save as to costs. This judgment resolves a cross-claim. The parties agreed that argument about the costs of the principal claim should abide determination of the cross-claim.

  2. The Great Artesian Basin lies far below the properties of the Coonamble Shire. Bores drilled hundreds of metres into the ground release water from that vast aquifer to irrigate crops and provide water for stock. One such bore is formally known as the “New Wingadee No. 4 Bore Scheme”. Locals call it the “Wiona Bore”. In this judgment I shall call it the “Scheme” or the “Bore” interchangeably as the context requires.

  3. Several properties are entitled to draw water from the Bore for free in return for contributing to its capital costs from time to time. The owners of those properties are members of the Scheme under a contract to which each member is a party and which sets out their rights and responsibilities in relation to the Bore (the “Bore Agreement”). New members can be admitted to the Scheme by vote of the members and provided that not more than two members dissent. The cross-defendants, Donald “Don” Schieb and his wife Ainslie Schieb (the “Schiebs”), have together been a member of the Scheme since its establishment in 2001.

  4. At an auction in March 2011, the cross-claimants, Peter Burnheim and his wife Leah Burnheim (the “Burnheims”), jointly purchased a property called “Mikimba” with the Schiebs. While Mikimba had dams to hold surface water and had the Castlereagh River on its western boundary, it did not have established bore water on the property. The parties agreed to subdivide Mikimba so that each couple became the registered proprietor of approximately half of the property, with the Burnheims to acquire the eastern portion and the Schiebs the western portion. After much disputation and the commencement by the Schiebs of the principal claim in these proceedings, that subdivision has since occurred in April 2020.

  5. In September 2014 (and again in April 2017) the members of the Scheme refused the Burnheims’ application to become a member. However, the Scheme members have agreed to sell (and are selling) water from the Bore to the Burnheims under licence at a price for a 10 year period, but terminable on 12 months’ notice (without a breach of the agreement) or a month’s notice (in the event of a breach, such as non-payment or unauthorised extensions to the water supply).

  6. These proceedings concern whether the Schiebs have breached a promise to ensure that the Burnheims would become a member of the Scheme so that the Burnheims’ eastern half of Mikimba would be able to draw water from the Bore for free, subject to any capital cost contributions as required under the Bore Agreement. The Burnheims’ claims are made in contract and, in the alternative, under the Australian Consumer Law (“ACL”).

  7. Having purchased Mikimba, the parties entered into a Deed of Partition (the “Deed of Partition”) to record their agreement to subdivide the property. The claim in contract requires the Court to construe the Schiebs’ obligations under clause 12.3 of the Deed of Partition “to do all things necessary and sign all appropriate documentation to enable Burnheim (sic) water rights to the Wingadee No 4 Water Scheme”.

  8. The Burnheims contended that clause 12.3 is an unconditional promise to bring about their membership of the Scheme. In the alternative, they submitted that even if it was in the nature of a best endeavours clause to bring about that membership, the Schiebs had not even done that. The Schiebs denied the Burnheims’ constructions of the Deed of Partition and said, in any event, that they had complied with their obligations under clause 12.3 by procuring the current licence arrangements for the Scheme to sell bore water to the Burnheims.

  9. The Burnheims’ claim in contract succeeds for two reasons. First, a promise to “do all things necessary… to” is a promise to achieve the specified result. Second, the expression “water rights” (my emphasis) in the context of clause 12.3 means a permanent legal entitlement to use water without charge from the Bore that comes only with membership of the Scheme, as opposed to a licence to draw water at a price and for a term with no enforceable legal right of renewal.

  10. The Burnheims’ case under the ACL requires the Court to accept that shortly before the parties made their offer to purchase Mikimba after it had been passed in at an auction in March 2011, Mr Schieb said to Mr Burnheim words to the effect of “Don’t worry about water, because I can get you onto the Wingadee No. 4 Bore Scheme, and in the meantime, you can have access to water on Nullabar” (“Nullabar” being the Schiebs’ property adjoining Mikimba).

  11. The Burnheims submitted that this was a representation that Mr Schieb would arrange for the Burnheims to become a member of the Scheme. They contended that in reliance on that representation they had bought Mikimba together with the Schiebs to obtain, in turn, their subdivided half. The Burnheims submitted the words were a representation as to a future matter made without reasonable grounds and so constituted misleading or deceptive conduct under s 18 of the ACL.

  12. The Schiebs denied the representation had ever been made. They also submitted that the claim under the ACL was statute barred. The summons in these proceedings was filed on 30 May 2018, and the cross-claim on 9 August 2018. According to the Schiebs, any cause of action under the ACL had arisen when the Burnheims bought Mikimba in 2011. These proceedings had been commenced and the cross-claim had been filed more than 6 years later. Any action by the Burnheims was therefore statute barred by reason of s 236 of the ACL.

  13. The Burnheims’ claim under the ACL also succeeds. The Court accepts that the alleged representation was made by Mr Schieb. This is because it is inherently probable and because the Court has found Mr Schieb’s recollection of events the subject of these proceedings to be unreliable and prefers the evidence of Mr Burnheim. The Schiebs have failed to rebut the statutory presumption under s 4(2) of the ACL as to lack of reasonable grounds for making the representation.

  14. Nor is the claim statute barred under s 236 of the ACL. The Burnheims’ cause of action under the ACL did not arise until damage was suffered. The alleged representation concerned a future event that was a type of contingency. The Burnheims did not suffer damage until that future event did not happen when their application to join the Scheme was refused at the meeting of the Scheme members held in September 2014.

  15. Neither party submitted that the measure of damages differed depending upon the cause of action. The Burnheims are entitled to damages in the sum of $131,821.04, comprising:

  1. $110,000 for the loss of value of the Burnheims’ eastern half of Mikimba due to the lack of a permanent legal entitlement to water from the Bore;

  2. $17,747.38 for the Burnheims’ payment towards water infrastructure purchased and installed (the majority of which is located on the Schiebs’ half of Mikimba) for the purpose of exploiting the water rights granted by the Scheme, but which were ultimately not provided;

  3. $7,678 for the Burnheims’ payment of water from November 2014 to date, pursuant to the licence arrangement with the Scheme; and

  4. Reduced by $3,604.34, which the Court accepts to be the anticipated membership payment the Burnheims would have been required to pay to the Scheme as an upfront contribution towards capital costs, had their membership application been successful.

  1. Mr G Campbell of Counsel appeared for the Burnheims. Mr D Roberts of Counsel appeared for the Schiebs. Without intending any disrespect, in what follows I shall refer to the parties by their given names. Furthermore, I note without discourtesy to Mrs Schieb and Mrs Burnheim that there was no issue that, to the extent it is legally relevant, they were bound by the acts of their respective husbands. Their primary role was as joint registered proprietors of the relevant properties and as signatories to the Deed of Partition. While Mrs Schieb and Mrs Burnheim filed brief affidavits, neither was cross-examined. They were not the instigators of the critical events which have caused the present dispute.

Procedural history

  1. These proceedings were first commenced in the Real Property List by summons filed on 30 May 2018. The Schiebs sought an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) that Mikimba be sold, trustees be appointed as trustees of the land on statutory trust for sale, and the net proceeds of that sale be divided equally between the Schiebs and Burnheims.

  2. On 9 August 2018 the Burnheims filed a statement of cross-claim seeking damages for:

  1. Breach of contract, being:

  1. breach of a verbal contract entered into between the parties at the auction for Mikimba, such contract being collateral to the sale contract for Mikimba and which included as a term that Don would secure water rights for the Burnheims’ eastern half of the property (the “Collateral Contract”); and

  2. breach of clause 12.3 of the Deed of Partition, which obliged the Schiebs “to do all things necessary and sign all appropriate documentation to enable Burnheim (sic) water rights to the Wingadee No 4 Water Scheme”;

or, in the alternative

  1. Misleading or deceptive conduct pursuant to s 18 of the ACL by virtue of an oral representation made by Don to Peter at the auction for Mikimba that if they purchased the property together, Don would arrange for the Burnheims to become a member of the Scheme for the purpose of securing water rights for the Burnheims’ eastern half of Mikimba, being a representation as to a future matter made without reasonable grounds.

  1. On 7 June 2019, Justice Darke made orders which, inter alia, noted that the parties had resolved the principal proceedings (save as to costs), undertaking to do all acts and things necessary to complete the plan of subdivision of Mikimba and transfer the eastern portion (identified as “Lot 101”) to the Burnheims and the western portion (identified as “Lot 102”) to the Schiebs. The plan of subdivision was finally registered on 27 April 2020.

  2. Accordingly, the only issue for determination at the hearing set down before me on 17 and 18 August 2020 was the Burnheims’ cross-claim. On the first day of hearing, Mr Campbell on behalf of the Burnheims said that they did not press the Collateral Contract argument (see paragraph [18(1)] above), such that the Burnheims’ cross-claim would proceed first as a claim for breach of clause 12.3 of the Deed of Partition only and then, in the alternative, a claim for misleading conduct under the ACL.

  3. Counsel for both parties availed themselves of the opportunity to have the hearing listed for a third day on 20 August 2020, for the purpose of closing submissions. On this occasion, Mr Roberts sought leave to amend the Schiebs’ defence to the cross-claim to include that the Burnheims’ claim under the ACL was statute barred. Leave was granted and a further amended defence to the cross-claim was filed on 27 August 2020, pleading that the proceedings were statute barred pursuant to s 236 of the ACL. With the consent of the parties, leave was granted for a further amended defence to the cross-claim to be filed on 2 September 2020, which further refined the limitation defence. The parties agreed that the statutory limitation argument would be dealt with by written submissions only.

  4. Finally, as I have recorded in paragraph [1] above, the parties agreed that because any order for costs (including in relation to the principal proceedings) could be affected by the outcome of the cross-claim, costs would be dealt with after judgment in the cross-claim was delivered. Following publication of these reasons, the parties will be given an opportunity to make submissions as to costs, including in relation to the principal proceedings.

The facts

  1. With very limited exceptions, the facts were not in dispute. Nevertheless, due to the nature of the claims, damages sought and the contentious matters that were raised, it has been necessary to set out the facts in some detail.

  2. However, it is neither practicable nor necessary to set out in detail every competing argument raised by the parties. Attention has been given to those matters which the Court considers dispositive. Where any reference is made to findings on contentious matters, it is cross-referenced to that part of the judgment where reasons for the findings are given. To the extent any other facts set out below were not agreed by the parties, I am satisfied they could not be sensibly disputed.

The parties

  1. Both the Schiebs and Burnheims own rural properties in the Coonamble Shire. The parties have known each other for approximately 45 years, with Don also having been the Burnheims’ stock and station agent for about 10 years in the 1980s.

  2. The Schiebs have owned and operated the grazing property “Nullabar” since 1978. Don works both as a farmer as well as a stock and station agent in the Coonamble Shire, associated with the businesses Elders and Wesfarmers. Additionally, he is a real estate agent with Ray White Rural in Coonamble. Don is also one of the original members of the Bore (see paragraph [29] below).

  3. Peter has lived in the Coonamble Shire his whole life, with the exception of eight years when at boarding school. Since finishing school in 1974, Peter has worked on the land in the Coonamble area in some capacity, initially as a station hand and from 1979 as an owner when he – together with his wife, Leah – purchased the property “Bindaree” on the Wingadee Road. The Burnheims also own a block of land called “PJ’s”, which lies a further 20km down the Wingadee Road.

The Wiona Bore

  1. The Scheme relates to a capped and piped artesian bore located on the property “Wiona” in the Coonamble Shire. The Scheme was created by the Bore Agreement, which is a deed entered into on 8 January 2011.

  2. The original Scheme members set out in the First Schedule to the Bore Agreement were -

  1. Gregory William Colwell;

  2. Clyde Agriculture Limited (ACN 000 347 259);

  3. Donald Hugh Schieb (being the first plaintiff in these proceedings);

  4. John Charles Colwell and Jill Lennox Colwell;

  5. John Francis Rackham and Wendy Kaye Rackham;

  6. John Lyons Williams; and

  7. Josef Steiner and Elfride Steiner.

  1. The Bore Agreement refers to the subject bore as the “New Wingadee Partnership No. 4 Bore”. A bore known as the “Wingadee No. 4 Bore” ceased operating in or around 1998. However, both parties gave evidence that the subject bore has multiple names and is more commonly referred to by the Scheme members as the “Wiona Bore”, referring to the property on which it is located.

  2. The Bore Agreement alone regulates the parties who may use the Bore, the land or properties that benefit from the Bore’s water as well as the administration and operation of the Scheme. The Bore Agreement includes:

“…WHEREAS:

A.   The parties in the first column of the First Schedule are or will be the owners of a bore to be located on the property “Wiona”, Coonamble and share the water system located on this property such land or property being more particularly described in the Second Column of the First Schedule and set out opposite the name of GREGORY WILLIAM COLWELL in the first column of the First Schedule.

B   The parties have agreed to enter into this deed so as to set out more fully the rights, obligations and covenants with each other with respect to the capital costs of the erection of the bore and to the maintenance of the bore and the taking of water from the bore by pipes.

…

E.   The parties agree to share the capital costs of sinking the bore. The capital of the syndicate is represented by the costs contributed by the parties for the sinking of the bore and is owned by the parties in equal shares.

Now pursuant to these premises the parties hereby covenant and agree jointly and severally with each other as follows:

…

2.   Each party shall pay to the Secretary within the time laid down by the relevant resolution such sums of money as may from time to time be agreed upon at a duly constituted meeting of the parties...

…

4.   Gregory William Colwell does hereby grant, demise and assure unto all parties to this agreement full and free right and liberty from time to time and at all times to take and draw water which shall from time to time flow from the bore for the purpose of watering the lands of the parties.

…

6.   This deed shall be deemed to extend to and include the parties hereto and each of their respective personal representatives, assigns and successors in title and the persons deriving title under him or them and shall have effect as if such successors or other persons were parties hereto.

…

9.   The parties further covenant jointly and severally with each other that if they or any of them shall sell or otherwise dispose of the lands respectively owned by them in the Schedules hereto then each of them will prior to the completion of any such sale or disposal procure the execution of a deed in the same terms as this deed from the party to whom they shall sell or otherwise dispose of such lands.

…

14.   The parties hereto shall not be entitled to extend the water supply beyond the land referred to in the First Schedule hereto except at a General Meeting of all of the parties, when no more than two of the parties to (sic) dissent to the proposed change.

15.   The parties to this Agreement hereby agree that if any further party wishes to contribute towards the capital cost and maintenance of the bore and enter into an Agreement with the other parties then the parties shall have a General Meeting of all parties to this Agreement whereby any decision may only be acceptable when no more than two of the parties dissent.

16.   In the event of another party being allowed to enter into this Agreement and take water from the bore all of the parties shall meet and determine the amount that will be required to be paid by the incoming party. …”

  1. A further deed was entered into on the same date, pursuant to which the original members set out in paragraph [29] above agreed to allow James William Goldsmith and Leonie Maree Goldsmith to together become an additional member of the Scheme on terms which included:

“1.   In consideration of the party set out in the Second Schedule paying to the parties as set out in the First Schedule the sum of Twenty thousand dollars ($20,000.00) the party set out in the Second Schedule shall have the same rights and responsibilities as set out in the Bore Agreement as if they were an original member.

2.   The party whose name is set out in the Second Schedule may share the water system the subject of the Bore Agreement and shall be entitled to the supply of water to the land as set out in column two of Schedule Two.

3.   All parties confirm their obligations under both this Deed and the Water Agreement [a reference to the Bore Agreement] and shall adhere to the terms of both Agreements.”

  1. Following execution of the Bore Agreement, the Scheme members sank a bore for artesian water on Wiona at a cost of $130,000 shared between the 8 members. In the ongoing operation of the Bore, water is moved by pipe to the Scheme members’ land (as approved by the Scheme). The Scheme members share the cost of piping to their respective properties. However, the installation of tanks and troughs (being the infrastructure which ensures adequate water from the Bore can be stored on each property and is available for use) is the responsibility of each Scheme member.

  2. It was accepted by the parties that the Goldsmiths (see paragraph [32] above) are the only new member to have joined the Scheme pursuant to clauses 15 and 16 of the Bore Agreement since the Scheme’s creation in 2001.

  3. Pursuant to clause 9 of the Bore Agreement, since 2005 a number of parties have become Scheme members by way of deed of assignment, following the sale or disposal by original Scheme members of land benefitted by the Scheme.

  4. A copy of the most recent Bore Licence Certificate issued by the NSW Department of Primary Industries, Office of Water (as it was then known) regarding the Bore was in evidence. The certificate (licence number XXBLXXXXX X) was issued on 1 July 2008 and, valid in perpetuity, listed 8 separate licence holders. However, the Court accepts the evidence from Don in cross-examination that this certificate does not reflect the current membership. Accordingly, the Court accepts that there were 9 members of the Scheme as at the time of the hearing.

  5. Before leaving the findings of fact in relation to the Bore, it is convenient to set out two additional findings regarding the management and day-to-day administration of the Scheme. The Bore Agreement is silent on these issues.

  6. First, Don gave evidence in cross-examination that the Scheme is supposed to have an annual meeting (T147:4-5), however accepted that the first Scheme meeting since 2001 was on 16 September 2014 (T135:49-136:3, T137:28-31). The Court is satisfied that the only other Scheme meetings have occurred in September 2015 (albeit without a proper quorum) and on 28 April 2017 (T146:49-147:4).

  7. Second, for the reasons set out in paragraphs [126] to [130] below, the Court finds that Don was the manager of the Scheme from in or around May 2005 up until 28 April 2017, when he formally resigned from that position. Even accepting Don’s evidence that the role had fallen to him by default and that the duties were of a limited nature, I am satisfied, and certainly on the balance of probabilities, that if there was a manager of the Scheme responsible for its administration and operations during this period, it was Don.

The properties “Yallakool” and “Mikimba”

  1. In or around January 2011, Peter received an auction brochure in relation to the prospective auction of two properties from a deceased estate. The two properties - “Yallakool” and “Mikimba” – were both to be auctioned on 25 March 2011 at the Coonamble Golf Club.

  2. Yallakool is located approximately 47 kilometres north of Coonamble. It is a farming property of approximately 1800 hectares, extending from the Wingadee Road frontage on its eastern boundary through to the Castlereagh River on its western boundary. The Schiebs’ property Nullabar extends along the southern side of Yallakool – that is, the two properties share a common boundary. At the time of the auction, there was a private bore on Yallakool (the “Yallakool Bore”), which lay on the eastern side of the property with existing infrastructure (pipes and troughs) to distribute the bore water to the rest of the property.

  3. Mikimba is another farming property of approximately 689 hectares lying a little to the south of Yallakool, around 37 kilometres north of Coonamble. The property similarly runs from the Wingadee Road on its eastern boundary and has frontage to the Castlereagh River along the western boundary. The Schiebs’ property Nullabar abuts the north-western boundary of Mikimba. At the time of the auction, improvements on the property included a flat bottom silo and a small set of steel cattle yards on the eastern side of the property. Two stock water dams were also located on the eastern side, with another dam adjacent to the Castlereagh River on the western boundary. A crown land permissive occupancy of 191 acres, which was formerly an old stock route, was also located on the western portion of Mikimba.

  4. In or around early March 2011, the Schiebs and Burnheims discussed jointly purchasing the property Yallakool. The Court is satisfied that Don and Peter inspected Yallakool and Mikimba prior to the auction, both alone and together in the company of a real estate agent. However, the Court accepts that until they were unsuccessful in their attempt to purchase Yallakool at the auction (see paragraphs [47] and following below), neither party had any interest in bidding for Mikimba.

  5. Consistent with their interest in Yallakool, the parties negotiated a Deed of Agreement relating to their prospective bidding for the property (the “Yallakool Property Agreement”). Under the terms of the Yallakool Property Agreement, Don and Peter would subdivide the property between them. The Yallakool Bore and supporting infrastructure (see paragraph [41] above) would have fallen on the eastern portion of Yallakool, which the Burnheims were to acquire after the partition.

  6. Rather than having to apply to the Scheme to extend access from the (Wiona) Bore (as required under the Bore Agreement), it was the Schiebs’ intention to leverage the existing infrastructure on the property to distribute the Yallakool Bore’s water to the western portion they were to acquire post-partition. At the insistence of Don, a clause on water access rights was therefore inserted into the Yallakool Property Agreement:

“15. Burnheim and Schieb also agree that if successful at the auction then they will enter into a water agreement.”

  1. A final version of the Yallakool Property Agreement was not settled until the morning of the auction, at which time it was executed by both parties.

Auction day, 25 March 2011

  1. The auction for Yallakool and Mikimba was held on 25 March 2011 at the Coonamble Golf Club. Both the Schiebs and Burnheims attended in person.

  2. Mikimba went to auction first and was passed in.

  3. Don and Peter were then unsuccessful in their purchase of Yallakool, as the property sold at auction for a higher price than they were prepared to pay.

  4. Following the close of bidding on Yallakool, the auctioneer sought to gauge interest from attendees in making further offers on Mikimba. The parties do not dispute that Don said words to Peter to the effect of “Are you interested?” and that Don and Peter then moved away from the bidding area to a separate area near the Golf Club’s bar to discuss the potential joint purchase of Mikimba. Although Ainslie and Leah observed their husbands participating in this discussion, they were not a part of it and did not hear what Don and Peter said.

  5. What fell from both Don and Peter during this discussion is the contentious matter upon which the Burnheims’ case under the ACL turns. For the reasons set out in paragraphs [134] to [143] below, the Court finds that the version of events deposed to by Peter is to be accepted, with words to the following effect being said -

“Don:   “Why don’t we purchase Mikimba?”

Peter:   “Yes, I’m interested. I’d be happy to have the eastern half, and you have the western half?”

Don:   “I agree. Don’t worry about water, because I can get you onto the Wingadee No. 4 Bore Scheme, and in the meantime, you can have access to water on Nullabar.” ”

  1. Under this prospective arrangement, Mikimba was to be divided north-south, the eastern half having frontage on the Wingadee Road and the western half having a frontage on the Castlereagh River. There was no dispute that at the time of the conversation referred to in the preceding paragraph, the parties were aware that:

  1. the eastern portion had no existing water access, beyond surface water collected in the two dams lying on that half of the property; and

  2. the western portion had access to water from the Bore by extending existing infrastructure on the Schiebs’ property Nullabar (see paragraph [72] and following below).

  1. There is no dispute that it was this contrast in the parties’ access to water on their proposed respective halves of Mikimba that necessitated Don’s assurance of “Don’t worry about water” to Peter. For the reasons set out in paragraph [134] and following below, the Court is satisfied, on the balance of probabilities and as a matter of actual persuasion, that Don’s further assurance of “I can get you onto the Wingadee No. 4 Bore Scheme” meant that he would arrange for the Burnheims to become a member of the Scheme, and so obtain permanent water rights. Peter asserts (and the Court accepts) that he would not have purchased Mikimba without such an assurance.

  2. Following their discussions, Don and Peter made an offer of $700 per acre for Mikimba, which was rejected by the vendor. Don and Peter then agreed to make an offer to purchase Mikimba for $1,250,000, with each contributing $625,000 (plus fees). This offer was accepted.

Further discussions at the Global Village Café, Coonamble

  1. Following their successful bid for Mikimba, the parties left the Golf Club and went to the Global Village Café in Coonamble. There was a dispute in the evidence as to whether they were joined by their respective bank managers, but nothing turns on this. The Court accepts that the parties used this time to celebrate their purchase and further discuss the particulars of the sale.

  2. There was a further discussion between Don and Peter regarding the proposed subdivision of Mikimba and the Burnheims’ access to water on their eastern half of the property. It was common ground that words to the following effect were said -

“Don:   “Peter, do you want to use water from my depot tank for spraying?”

Peter:   “Yes, I’d appreciate that.” ”

  1. In his affidavit evidence, Don submitted the rationale for this exchange was that because the existing dam water on Mikimba was not suitable for crop spraying (weed control), he offered Peter to take water stored on the Schiebs’ property Nullabar. I am satisfied that offer was made as an interim measure until the parties took steps to install new infrastructure (as to which see paragraphs [72] to [76] below) in anticipation of the Burnheims becoming a Scheme member and receiving water from the Bore in their own right.

The Deed of Partition

  1. After the events and discussions on 25 March 2011, the parties turned their attention to the proposed subdivision of Mikimba.

  2. The Schiebs’ solicitor, Michael McHugh, prepared a first draft of the Deed of Partition in relation to Mikimba. Mr McHugh emailed this draft to the Burnheims’ solicitor (and daughter), Sara Clark at 8.03pm on 18 April 2011. Mr McHugh observed in the covering email -

“We need to work on the common obligations pending registration of the plan of subdivision.

We also need to make arrangements about your parents’ mortgage to Suncorp. No doubt Suncorp will want a mortgage of the whole of the land.”

  1. At 9.27am on 19 April 2011, Ms Clark acknowledged receipt of the first draft and requested Mr McHugh provide a copy of the Mortgage Deed referred to in clause 6 of the draft Deed of Partition, and noted –

“I will make other changes to the Deed in accordance with the draft plan and will let you see it.”

  1. Ms Clark subsequently provided Mr McHugh at 11.55am that same day with a copy of an amended Deed of Partition, mortgage deed and proposed plan of subdivision, and stated in the covering email -

“…I have emailed these documents through to the Mortgagee for their approval. Hopefully by this afternoon we will have a response from them.

We also need to arrange for the transfer to be stamped and signed…”

  1. At 4.25pm on 19 April 2011, Ms Clark sent Mr McHugh a further draft of the Deed of Partition for approval. In the covering email, Ms Clark confirmed in relation to the Deed of Partition that -

“The bank appears satisfied with the contents therein and can prepared (sic) the mortgage documentation.

I have altered the costs clause and also added in our firms (sic) details for the registration of the documentation.”

  1. At 5.22pm later that afternoon, Ms Clark sent Mr McHugh another further draft of the Deed of Partition. In the covering email, she explained -

“Further to my previous email to you, Peter has instructed that he would like something in the Deed in relation to the water.

I have added a further clause for you to peruse.”

  1. The “further clause” inserted by Ms Clark was a new clause 12:

“12.    WATER ACCESS

12.1   The Parties acknowledge that there is no water on the property.

12.2   Schieb will do all things necessary and sign all appropriate documentation to enable Burnheim water rights to the Wingadee No 4 Water Scheme including but not limited to the availability of a tank and trough on Burnheim’s portion of the land.”

  1. At some point between 5.22pm on 19 April 2011 and 21 April 2011 when the Deed of Partition was executed (see paragraph [67] below), clause 12 was amended so that the final version of the Deed of Partition contained:

“12.    WATER ACCESS

12.1   The Parties acknowledge that the water on the property consists of 3 dams and a river.

12.2   The Parties further acknowledge that 2 dams are on Burnheim and 1 dam and the river are on Schieb.

12.3   In addition to the above, Schieb will do all things necessary and sign all appropriate documentation to enable Burnheim water rights to the Wingadee No 4 Water Scheme including but not limited to the availability of a tank and trough on Burnheim’s portion of the land.”

  1. It was Don’s affidavit evidence that the first occasion he saw clause 12 in its final terms was on 21 April 2011 when Ainslie and he executed the Deed of Partition (see the next paragraph). However, Don conceded during cross-examination that he had discussed the Deed of Partition, including the addition of clause 12, with Mr McHugh on the telephone on or around 20 April 2011 (T134:28-34, 42-48, T135:35-47).

  2. By 21 April 2011, the parties had executed the Deed of Partition. There was evidence that the Burnheims may have signed the Deed before this date (T41:19-22), with the Schiebs attending the Global Village Café in Coonamble on 21 April 2011 to execute the Deed in the presence of Ms Clark. The Deed of Partition as executed bears the date 25 March 2011 (being the date of the auction), however it is not disputed that the Schiebs did not sign the document until 21 April 2011.

  3. The operative terms of the Deed of Partition, as executed, included:

“2.    PARTITION

2.1   The property will be partitioned in accordance with the subdivision contained in the Plan.

2.2   Burnheim will take the land shaded blue and Schieb will take the land shaded green on the Plan.

2.3   Burnheim will allow a right of access to Schieb as highlighted in purple as per Clause 11.

3.    APPOINTMENT OF SURVEYOR

3.1   The parties appoint Wayne Rowe of Langford Rowe Surveyors, Dubbo (or such other Surveyor agreed upon by the parties) to:

3.1.1   Enter the Property to make a survey and fix in place pegs to indicate the partition along the bold line on the Plan.

3.1.2   Prepare a plan of survey to enable transfers to be prepared and registered to carry this Deed into effect.

4.    SOLICITOR

4.1   The parties appoint The Law Company and Rachel Stubbs & Associates to act as their agent toe (sic) give all necessary instructions to the surveyor for the purpose of carrying out the survey and preparing a plan of survey.

4.2   Upon completion of the survey, Rachel Stubbs & Associates will prepare transfers to give effect to the partition. For this purpose The Law Company will be the Solicitors for Schieb and Rachel Stubbs & Associates will be the Solicitors for Burnheim. Each party will sign such documents and do such things as may be necessary to give effect to the said transfers and obtain registration of the plan of subdivision in the Land Titles Office.

4.3   Rachel Stubbs & Associates will lodge transfers for registration together with the plan of subdivision, any Section 88B required to create the right of way revered (sic) to in Clause 10 and any title deeds that are necessary to give effect to registration of the plan of subdivision and will do whatever is necessary to ensure registration of the transfers.

5.    CO-OWNERSHIP PENDING REGISTRATION OF PLAN

5.1   The parties acknowledge that pending the registration of the Plan and the partition of the Property, the Property will be owned by the parties as tenants in common in equal shares ('the co-owners").

5.2   The co-owners acknowledge that each co-owner is entitled to the exclusive use and occupation of the area(s) described against their name as set out in item 3 (the 'exclusive areas'). Any mortgagee, lessee or other person authorised by the co-owner for the time being of an exclusive area will be entitled to the exclusive use and occupation of that area subject to compliance with the provisions of this deed.

5.3   The co-owners acknowledge that any existing utilities which exclusively service an exclusive area:

(i)   may remain at all times in their present position; and

(ii)   will be maintained at the cost and expense of the co-owner which has the benefit of them.

5.4   Each co-owner hereby grants to the other co-owner the right at all times to enter the other co-owner's exclusive area for the purpose of maintaining, replacing, renewing, repairing, and servicing any utilities which pass through the other co-owner's exclusive area, provided that as little inconvenience as practicable is caused to the other co-owner in carrying out any works.

5.6 (sic) If a co-owner wishes to relocate a utility service which services his exclusive area and passes through the other co-owner's exclusive area, the co-owner may relocate that service provided that the cost of the relocation is borne by that co-owner. All works necessary to effect the relocation are to be carried out with as little inconvenience as practicable to the other co-owner.

5.7   Each co-owner will have an equal say in all matters in connection with the property.

5.8   The co-owners will jointly maintain the common property and will not permit any obstruction of the use of the common property.

5.9   Insurance: the co-owners will effect public liability insurance for not less than $20,000,000 in respect of the property.

5.10   Each co-owner at his own cost will maintain, and fully comply with and observe all statutes, ordinances, by-laws and regulations and fully comply with the requirements of all relevant authorities relating to the use and occupation of their respective exclusive areas. Each co-owner will be responsible for, and indemnifies the other against, any action, suit, claim, loss or demand arising from the co-owner's failure to comply with this clause and any other loss or liability arising from any act, neglect or omission of that co-owner or of that co-owner's invitees, servants, agents, contractors or tenants.

5.11   Each co-owner will pay as and when required all common general costs in respect of the property (including council rates, crown rates, land tax, public liability insurance and the any other outlay in relation to the Property) in equal shares. In the event that one co-owner fails to pay any common general cost on the due date and the other co­ owner elects to pay the cost in full, the defaulting co-owner will pay to the other co­owner, in addition to the amount which he should have paid, interest on that amount at the rate of 10% per annum calculated on daily balances from the date on which the cost was paid by the other co-owner until the date of actual payment by the defaulting co-owner.

6.    MORTGAGING OF PROPERTY

Each co-owner may at any time mortgage, charge or otherwise encumber his respective interest in the property, provided that prior to mortgaging, charging or encumbering, each mortgagee, chargee or encumbrancee and co-owner first executes a deed in the form set out in annexure 'B' ('mortgage deed'). No breach by a co­owner of this clause will affect the validity of any mortgage, charge or encumbrance.

7.    COSTS

In relation to the purchase of the land through Rachel Stubbs & Associates from Christine Antoinette Sherwood and Cindy Ann Sherwood, as Executors of the Estate of the Late Laurence Hope Mathes, the parties will equally bear the costs of $1,200 plus GST being the professional costs associated with the purchase.

In relation to any 3rd party costs, the parties will equally share the costs including but not limited to any search fees, surveying fees, registration fees and council lodgement fees. These fees will be provided to the parties prior to being incurred.

All other costs associated with advice by their respective solicitors or any mortgage costs will be borne by each party.

8.    SUBJECT TO SUBDIVISION

This Deed of Partition is conditional upon a plan of subdivision of the Property being registered in the Land Titles Office and the parties will use their best endeavours to have the plan registered as quickly as possible.

9.    STAMP DUTY

Any Stamp Duty payable in connection with this Deed and registration of transfers will be paid equally by the parties.

10.    ROAD PERMITS

Any road permits attaching to the Property shall be transferred to the parties within whose land such road permit is situated on completion of the registration of the plan of subdivision and the issue of separate titles.

11.    RIGHT OF CARRIAGEWAY

11.1   In preparing the plan of subdivision the surveyor will prepare a right of carriageway in favour of Schieb over the southern boundary of Lot 70 and Part Lot 81 to the eastern boundary of Lot 70 and across the eastern fence line to the gate coloured purple on the Plan.

11.2 The easement shall be created by registration of a Section 88B Instrument under the Conveyancing Act prepared by The Law Company.

12.    WATER ACCESS

12.1   The Parties acknowledge that the water on the property consists of 3 dams and a river.

12.2   The Parties further acknowledge that 2 dams are on Burnheim and 1 dam and the river are on Schieb.

12.3   In addition to the above, Schieb will do all things necessary and sign all appropriate documentation to enable Burnheim water rights to the Wingadee No 4 Water Scheme including but not limited to the availability of a tank and trough on Burnheim’s portion of the land.

13.    COMPLETION

All parties will do all things reasonable (sic) necessary to complete this matter as soon as practicable.

14.    POWER OF ATTORNEY

Each party hereby irrevocably appoints the other party the Attorney of the other party immediately on or at any time after any breach or default by one party to exercise in the name of the other party all rights, powers and remedies of the other party expressed or implied in this Deed to do anything that the other party has failed to do to give effect to this Deed or to expedite settlement of this Deed or otherwise AND to do all things required to be done by the defaulting party and to execute all documents and to do all things necessary to give effect to this Deed. …”

  1. In accordance with Schedule 2 of the Deed of Partition (and the attached diagram referred to therein), the proposed plan of subdivision divided Mikimba into -

  1. An eastern portion of approximately 346.04 hectares (“Lot 101”) with frontage on the Wingadee Road, to be acquired by the Burnheims. This portion contained the flat bottomed silo, cattle yards and two dams.

  2. A western portion of approximately 343 hectares (“Lot 102”) with frontage on the Castlereagh River, to be acquired by the Schiebs. This portion also contained the dam adjacent to the river and the benefit of a permissive occupancy licence over 191 acres of Crown land.

  1. For convenience, I will hereafter refer to the eastern and western portions of Mikimba as “Lot 101” and “Lot 102” respectively.

  2. On 2 May 2011 the Schiebs’ solicitor, Mr McHugh, retained Langford & Rowe Surveyors to complete a plan of subdivision of Mikimba for registration in accordance with the parties’ obligations under the Deed of Partition.

Installing infrastructure on Mikimba

  1. On 6 May 2011, the purchase of Mikimba was completed. After the parties took possession, Don provided the Burnheims with water on Lot 101 from his own resources on Nullabar for the purpose of spraying and watering stock.

  2. In June 2011 the parties arranged for the installation of a new water tank to connect the Bore water stored in the Schiebs’ depot tank on Nullabar to Lot 101. Fencing materials were also purchased in order to place a fence along the north/south boundary line in accordance with the agreed subdivision. Don was invoiced a total of $12,735.54 for these materials, of which Peter paid $6,367.77 representing his half share.

  3. The new tank was placed on Nullabar, just inside the north-western boundary with Mikimba. The tank was physically located on Nullabar, as opposed to Mikimba, because the Scheme members had not yet formally approved the Burnheims having access to water from the Bore. Nor had the Scheme members approved the extension of Don’s Bore water supply on Nullabar to his Lot 102. It appears that what they perceived to be Don’s presumption in doing this later became a source of tension between Don and the other Scheme members.

  4. In or around August 2011, the parties engaged a contractor to erect the boundary fence along the north/south division. This work totalled $9,431 which was again borne equally by the parties, each paying $4,715.65.

  5. In or around September 2011, further infrastructure was purchased and installed to provide access to water on Mikimba from the Bore at a cost of $13,327.92, again borne equally by the parties.

Steps taken to “enable Burnheim water rights” between 21 April 2011 and 16 September 2014

  1. The Court accepts that sometime in 2011 after the purchase of Mikimba, Don approached four members of the Scheme to discuss approval for the Burnheims to take water directed from the Bore to benefit their Lot 101. The Court further accepts that, at this time, Don did not ask the members to approve the water supply he had extended to Mikimba (including the water given to the Burnheims from his own depot tank on Nullabar) as he “did not consider there was a need to do so”. There was no evidence before the Court as to either what was said in those discussions or what came of them.

  2. For the reasons set out in paragraph [102] and following, the Court rejects Don’s evidence that it wasn’t until in or around 2013 that he learnt, for the first time, pursuant to the Deed of Partition there was a requirement under clause 12.3 that he “do something further concerning water”. However, the Court accepts that it wasn’t until this time that Don began to take active steps towards procuring the Burnheims’ membership of the Scheme, largely as a result from repeated enquiries from Peter as to the status of the membership application.

  3. In or about September 2013, Don had a discussion with a fellow Scheme member, John Rackman, in relation to the Burnheims’ proposed membership application. Mr Rackman was Chair of the Scheme at the time. Mr Rackman said that there would need to be a meeting of the members to consider the Burnheims’ application.

  4. It was accepted by the parties that this meeting did not occur until 16 September 2014 (the “September 2014 Meeting”). The delay was due to an inability on the part of Don to find a suitable time to achieve a quorum of members.

  5. In anticipation of the upcoming meeting, on 9 September 2014 Peter wrote a letter to the Scheme setting out his case in support of his request that his wife and he be approved as a member of the Scheme. Peter provided Don with this letter and requested it be tabled at the September 2014 Meeting. The letter included:

“…It is understood that an in principal agreement for 529 hectares on the western end of Mikimba has may (sic) been granted.

We request that the other portion, of approximately 344 hectare (sic), also be granted. In our calculation, it is less than 2% of the land watered by the scheme and we would submit that it would have negligible effect on the water pressure and usage. Currently there is one trough coming off a tank in adjoining property for which we paid for our share of extending the line. This was not ratified properly at the time and for any wrong that I was not aware of do I apologise…”

  1. The reference in the first paragraph to the “in principle” agreement is to the extension of the Schiebs’ Bore water supply line on Nullabar to their Lot 102. The reference to the “adjoining property” in the second paragraph is again to Nullabar and the new infrastructure installed by the parties (see paragraphs [72] to [76] above).

  2. Also in advance of the September 2014 Meeting, Don told the other Scheme members of the effect of a number of resolutions to be proposed to the meeting (T111:24-36). Relevant to the issues in the current proceedings, these included resolutions to -

  1. approve the extension of his (Don’s) water supply line from the Bore to benefit his Lot 102;

  2. allow the Burnheims to become a member of the Bore for the purpose of watering their Lot 101; and

  3. as an alternative to membership, to allow the Scheme’s sale of water to the Burnheims under a licence arrangement.

  1. The September 2014 Meeting took place at Don’s offices at Ray White Rural in Coonamble. The motion seeking the Burnheims to become a member of the Scheme was lost 5 votes to 3. However, the alternative motion was considered and unanimously approved, resulting in a resolution by the Scheme members to supply water to the Burnheims for 12 months on certain terms.

  2. The minutes of the September 2014 Meeting included:

“RESOLUTION 3:   To allow Peter and Leah Burnheim to become a member of the Bore Scheme to water an area of 344.42 ha (863 acres)

In favour:   Don, Mark & Denis

Against:   John Rackman, Neale, Jenny, John Burton & Harald

Lost

RESOLUTION 4:   If Resolution 3 is lost, then to allow the sale of water to Peter and Leah Burnheim on the following conditions:-

(a)    Price: $1.00 plus GST per acre per annum payable in advance.

An initial fee of $2,500.00 plus $1.00 per acre per annum plus GST.

(b)    Term: 12 months

Approved. Coming from 1 July 2014.

(c)    The supply is personal to Peter and Leah Burnheim and is not transferrable to any other person:

Approved.

(d)    The supply would be to only one tank and one trough on the country that Peter and Leah Burnheim purchased from the late Laurence Hope Mathes:

Lost.

However, the members passed the following:-

Peter and Leah Burnheim may water the whole 863 acres that was bought from Laurence Hope Mathes.

(e)    If the Members of the Bore wish to terminate the sale of water to Peter and Leah Burnheim, they must give them 12 months notice unless Peter or Leah Burnheim breaches the terms of this agreement in which case one months notice is all that is required to be given.

12 months notice the price is increased by CPI.

(f)    Liability.

There was to be limited liability. The members were not to be responsible for any failure in the supply of water.

(g)    Use of line by Peter and Leah Burnheim.

Don Schieb and Wingadee Station do not require any payment of any money for the use of the line to transport the water to Peter and Leah Burnheim. Wilfred Steiner will work an amount that he will require Peter and Leah Burnheim to pay to obtain water from their line.

  1. Before leaving the findings of fact regarding the September 2014 Meeting, I pause to make four brief observations. First, Don’s own application to have the Bore water extended to benefit his Lot 102 was unanimously approved. Second, it was Don’s initiative to put forward the licence arrangement as an alternative option to full membership. Third, Don conceded that he was indifferent as to whether the Burnheims’ application to become members was approved (T150:21-27) and at times appeared to suggest that his “preferred option” was that they be given water under the licence arrangement (T139:8-17, T149:35-150:3). Finally, Don could not remember whether Peter’s letter of 9 September 2014 (see paragraph [81] above) had been tabled at the September 2014 Meeting, let alone given to him at all (T153:16-28). The state of the evidence does not permit the Court to make a finding one way or the other.

  2. The outcome of the September 2014 Meeting was communicated to the Burnheims by the Scheme’s lawyers, Waterford Ryan Solicitors, on 13 October 2014. Peter responded on 10 November 2014 seeking clarification on a number of the terms under the arrangement, but indicating they were “likely to take up this offer”.

  3. On or about 2 September 2015, a further meeting of the Scheme members was held (however with no quorum). At this meeting, the members approved the Burnheims’ access arrangements to water from the Bore for a period of 10 years, upon payment of the same amounts as resolved at the September 2014 Meeting.

  4. On 30 March 2017, Peter wrote another letter to the Scheme members. This letter re-stated his desire for he and his wife to become a member of the Scheme for the purpose of obtaining Bore water on their Lot 101.

  5. In anticipation of a further Scheme meeting, in or about April 2017 Don prepared a memorandum to the members setting out the steps he had taken to have the members consent to the Burnheims’ access to water from the Bore. It was Don’s evidence that this document was prepared in or around April 2014 prior to the September 2014 Meeting and although Mr Campbell’s challenge to this was resisted (T128:16-47), I am satisfied that this is not the case. It is more likely to have been written in or around April 2017 because:

  1. reference is made to the outcome of the September 2014 Meeting:

“I spoke to a number of the Bore owners who basically agreed to allow Burnheim permission to water a trough on his portion of Mikimba. John Rackham insisted it go to a meeting… The meeting was held and decision on a term arrangement was agreed…”

  1. reference is made to Don’s decision to resign from the Bore, which did not formally occur until the meeting on 28 April 2017 (the “April 2017 Meeting”); and

  2. the meeting items proposed by Don on the last page of the memorandum (“Committee to be elected | Payment of electricity account to John Rackham | Change of ownership of properties | Application of Burnheim”) correspond with the minutes of April 2017 Meeting also in evidence, not the September 2014 Meeting.

  1. Nothing turns on the apparent error in date. Further, and in any event, it is convenient to set out parts of that document and the actions Don said he had taken vis-à-vis obtaining the Scheme members’ consent to the Burnheims application. The memorandum continued:

“I spoke to a number of the Bore owners who basically agreed to allow Burnheim permission to water a trough on his portion of Mikimba. John Rackham insisted it go to a meeting which I did not oppose as I wanted to extend my area by 345 hec. The reason I had asked a number of the joint holders directly was for a period of approx. 7 months I had tried to arrange a meeting without success to discuss the proposal. Mr Rackham has been approached by myself since December [2013] to organise a meeting.

I apologise for any misunderstanding which has arisen from Burnheims application. As a neighbour I have no opposition to assisting in this application.”

  1. The April 2017 Meeting was subsequently held at the Coonamble Bowling Club. The Burnheims’ application to become a member of the Scheme was again considered. On this occasion, the two letters written by Peter (see paragraphs [81] and [89] above) were read. The Scheme members rejected the Burnheims’ membership application, but again resolved 5 votes to 1 to offer Bore water to the Burnheims under a licence arrangement for a period of 10 years, upon payment of an annual charge.

  2. The minutes of the April 2017 Meeting included:

“CORRESPONDENCE:

Peter & Leah Burnheim Letter

At this point Don Schieb left the meeting

Letter tabled from Peter & Leah Burnheim dated 30 March 2017 requesting bore members to revisit their decision made at the Bore meeting held 16 September 2014.

After both letters from the Burnhiems (10.3.17 (sic) & 9.9.14) were read to the meeting it was resolved that their request to become members be denied, and the offer to have water supplied at a cost of $2500 up front once off fee + $863 (2017/18 fee) to be paid annually in advance and future annual payments to be $1 /acre plus CPI. This offer is to stand for 1 month from the date the letter is forwarded to Burnheims and if the offer is rejected the water supply will be turned off. This agreement is not transferrable to another party should Burnheims sell the portions of land concerned.

CARRIED 5/1 (it is noted that Don Schieb refrained from voting with a conflict of interest)

In addition to the above resolution if the members decide to discontinue supply of water, without a breach of the agreement, 12 months notice is to be given and the fee per acre is only to increase annually by the CPI. Breaches, such as non payment and unauthorised extensions to the water will terminate the agreement and 1 month notice will be given to discontinue the water supply. …”

  1. This offer was communicated to the Burnheims on 1 May 2017, following which an invoice was issued requiring back payment of $2,500 for Bore water used up to the September 2014 Meeting (when the Scheme first approved the offer) and payment of $863 for the 2017 water rates.

  2. While nothing turns on it, I note in passing that it is not apparent what “conflict of interest” Don had. Nor was he able to explain this when asked what it might be during the course of giving his evidence (T157:32-39).

  3. The Burnheims continue to take water from the Bore under the terms of the licence arrangement.

Submissions on credit

  1. The case at bar involves Don and Peter’s conflicting versions of the one key discussion upon which the Burnheims’ case under the ACL turns.

Submissions on Don’s credibility

  1. During closing submissions on the final day of hearing, Mr Campbell contended on behalf of the Burnheims that Don was an unreliable witness whose evidence on the parties’ discussion at the auction should not be given any weight. The Burnheims emphasised the inconsistencies between Don’s oral testimony and that of his prior affidavit evidence, contending this was illustrative of Don having “changed his tune” under cross-examination.

  1. Mr Campbell advanced the following examples:

  1. The inconsistency between Don’s affidavit evidence that there was no discussion between he and Peter regarding water access on Yallakool prior to the auction and his later testimony during cross-examination conceding that such a discussion had occurred;

  2. Don’s resistance to the proposition that he was the manager of the Scheme;

  3. The implausibility of Don’s evidence that he was not the only signatory on the Scheme’s bank account, despite his inability to recall the other signatory and in the face of documentary evidence suggesting he was in fact the only signatory (a letter from the Scheme’s lawyers, Waterford Ryan Solicitors, dated 3 March 2017); and

  4. The inconsistency between Don’s affidavit evidence that there was no discussion with the Burnheims regarding water access on Mikimba prior to execution of the Deed of Partition on 21 April 2011 and his later testimony during cross-examination that such a discussion had occurred immediately after the auction (with Don accepting he had actually discussed supporting the Burnheims’ application to the Scheme (T132:35-41, T133:22-23)).

  1. Mr Campbell submitted that the preceding matters meant that the Court should prefer Peter’s version of events regarding the parties’ discussion prior to their joint offer to purchase Mikimba.

Submissions on Peter’s credibility

  1. Mr Roberts did not directly put Peter’s credit in issue. However, he argued that in cross-examination Peter had “gratuitously added to and embellished” his affidavit evidence setting out his (Peter’s) recollection of the events on the auction day in March 2011 and what was allegedly said by Don. The inference to be drawn from that submission was that it was Peter who was the unreliable witness and whose evidence should not be preferred over Don’s.

Findings as to credit

  1. The Court rejects Mr Robert’s submission on Peter’s credibility. Peter gave his evidence in a confident, straightforward manner. The Court accepts Peter as a reliable, truthful witness.

  2. In contrast, the impression I formed of Don was that he was an unsatisfactory witness whose recollection I could not accept as reliable. Don presented at times as uncooperative and stubbornly adhered to his version of certain events, even where such testimony could not be sensibly maintained. Don’s evidence was at times not only inconsistent with what contemporaneous documentary record there was, but also with previous evidence he himself had given, as well as with what, on all accounts, could only be viewed as the inherently likely version of events.

  3. There are five reasons for the Court’s conclusion that Don’s recollection could not be regarded as reliable unless inherently likely or supported by contemporaneous documentary evidence.

  4. First, there were a number of occasions where Don failed to accept propositions put to him which objectively were obvious, self-evident and clearly appropriate.

  5. One example is Don’s evidence on whether he was a “manager” of the Scheme (which the Court finds he was; see paragraphs [126] and following below). Don was resolute in his evidence that he was not the manager of the Scheme and had never been appointed as manager (T104:3). Although Don on occasions accepted that responsibility for the running of the Scheme had fallen to him by default (T104:43-45), he continued to resist the characterisation that he had, in effect, assumed the role of manager (even if those duties were of a limited nature). Concessions on this topic were frequently qualified or later sought to be withdrawn. This exchange in cross-examination is typical (T104:5 – 105:21):

“[MR CAMPBELL] Q. But you were effectively the manager, weren’t you?

A. Basically I was there, no-one else wanted to take it on and I just look on basically just looking after the – the only thing I really did was look after the bank account.

…

[HIS HONOUR] Q. So what Mr Campbell is asking you, and I just want to be clear about this, is in so far as anyone was in the position of attending to administrative matters in relation to the running of the scheme, that was you in 2011. Is that a -

A. Indirectly, yes.

Q. What do you mean by indirectly?

A. Well, no-one else wanted to take it on, and I was basically forced to just do what I had to do and it mainly just revolved around the banks, the bank statements -

…

Q. So if anyone would be described as being responsible for the running of the scheme, it had fallen to you by default. Is that a fair way of putting it?

A. That’s correct.

…

[MR CAMPBELL] Q. Now, you say here in this note on page 405, “I resigned from the operation of the bore as it was handed to me by Jock Colwell, as I was the only one showing any interest in its operation.” So you operated the bore scheme from the time Jock Colwell left the bore scheme, didn’t you?

A. There was nothing to operate.

Q. As far as the bore scheme did operate, you were the one that did the operating, weren’t you?

A. I did not operate, no. The bore scheme was on its own.

…

Q. But you were the one that did the organising of the meetings, didn’t you?

A. I had no choice. No-one else wanted to do it.”

  1. Don resisted the proposition that he had responsibility for the management of the Scheme even in the face of his own contemporaneous documentary evidence. In a memorandum to the Scheme members prepared in April 2017 (see paragraph [90] above), Don wrote (emphases added):

“I resigned from the operation of the bore as it was handed to me by Jock Colwell as I was the only one showing any interest in its operation. …

I advised John it was in his own interests to organise the collection of power accounts to manage the bore operations and advised him I was resigning from the management position. I arranged for him to have access at the Commonwealth bank and to be manager of its operations.”

  1. Don resisted the proposition that he was the sole signatory to the Scheme’s bank account, maintaining there were two signatories but was unable to recall who was the other signatory (T104:19-28, T105:1-3). This was against the evidence of a letter from Waterford Ryan Solicitors (the lawyers for the Scheme) dated 3 March 2017 which said, inter alia (emphasis added):

“3. Our client does not hold a copy of the water licence (Mr Schieb should as he has run the Wiona Bore for some years and is the only signatory on the bank account).

  1. A further example of Don’s resistance to accept obvious propositions was his opposition to Mr Campbell’s suggestion that the Bore may have been referred to as the “Wingadee No 4 Bore” during the relevant period. Don was insistent that he would never have referred to the “Wingadee No 4 Bore” as the bore of that name closed down in 1998, was replaced by the “New Wingadee No 4 Bore” and that members of the Scheme referred to it as the “Wiona Bore” only (see T131:23-30). However, Don had accepted that the Department of Water (T93:14-17) and “solicitors” (T93:22-25, T94:10-12) may refer to it as the “Wingadee No 4 Bore” or “New Wingadee Number 4 Bore Scheme”, and gave evidence that the title of the Scheme’s bank account in or around 2011 was in fact “The Wingadee Number 4 Bore Scheme” (T104:15-17). Minutes of the Scheme’s meetings also referred to the Bore as the “Wingadee No. 4/10 Bore”.

  2. Propositions that could not be sensibly disputed and that should have been accepted simply and quickly were resisted without cause, as the following exchange during cross-examination demonstrates (T130:25-39):

“[MR CAMPBELL] Q. The western side had a 191 acre permissive occupancy access didn’t it?

A. Correct.

Q. Which is an additional 191 acres of land on which to graze livestock isn’t it?

A. Yes, at a cost.

…

Q. But it’s an additional feature of lot 102 isn’t it, that it has this access?

A. It costs money to do it.

Q. But it’s an additional feature of lot 102 isn’t it that it has this access to the permissive occupancy?

A. Yes if you’d like to say so.”

  1. Second, the Court’s impression of Don as a witness was informed by his unsatisfactory explanation of the Yallakool Property Agreement. It was not in dispute that Don and Peter had initially discussed their intentions to purchase the property Yallakool, and had signed the Yallakool Property Agreement on the morning of the auction (see paragraphs [44] to [46] above). The Yallakool Property Agreement related to the prospective bidding concerning Yallakool and, if successful, how the parties would subdivide the land.

  2. Don’s affidavit evidence was that there had been no discussion between Peter and himself about the terms of the Yallakool Property Agreement prior to 25 March 2011, and that “Mr Burnheim presented the agreement to me at the auction to sign prior to the bidding on “Yallakool””. During cross-examination it became readily apparent that this statement in Don’s affidavit was incorrect, however Don was reluctant to accept this and the inherently probable sequence of events.

  3. In cross-examination, Don said that the first iteration of the Yallakool Property Agreement had been given to him prior to the auction on 25 March 2011 (T120:6-7, 20-22), that this version did not include anything about water on Yallakool (T120:3-4, 24-26) and that he, Don, had subsequently requested something to be inserted into the Agreement about water (T120:32-37). Clause 15 of the Yallakool Property Agreement was then inserted, prior to the parties signing the document on 25 March 2011:

“15. Burnheim and Schieb also agree that if successful at the auction then they will enter into a water agreement.”

  1. Although Don accepted that the parties had discussed water on Yallakool “just prior to signing” the Yallakool Property Agreement on 25 March 2011 (T121:4-6), he continued to resist the obvious, as appears from this exchange during cross-examination (T121:18-123:27):

“[MR CAMPBELL] Q. But you had seen the earlier version of this document without clause 15, the water agreement, some days prior to the auction, hadn’t you?

A. I couldn’t say how long beforehand, no.

Q. But some time before, enough time -

A. I couldn’t even comment on that.

…

Q. You say in this paragraph [of your affidavit], “There was no discussion about the terms of the Yallakool [Property Agreement] prior to 25 March 2011. Mr Burnheim presented the [Yallakool Property Agreement] to me at the auction to sign prior to bidding on Yallakool.” That’s incorrect, isn’t it?

A. I – no, I – this is the morning of the 25th, yes.

…

[HIS HONOUR] Q. And obviously you and Mr Burnheim had some discussions about the terms on which you would [buy Yallakool], didn’t you?

A. That’s correct.

Q. How long before the auction had you been talking about it with Mr Burnheim?

A. Probably the previous week.

Q. So at least a week?

A. Yeah.

Q. Do you accept that at some point before 25 March, the day of the auction, you were given a copy of the Yallakool [Property Agreement] that did not include [clause] 15?

A. That’s correct.

…

Q. And you tell me, as I understand your evidence, sir, that you requested something to be put in about a water agreement.

A. That is correct.

…

Q. So what you signed on the morning of the auction was version number 2, which included your request to change about the water agreement. Correct?

A. That’s correct.

Q. And so just to be clear, because Mr Campbell has drawn this to your attention, on page 146 paragraph 11(f) [of your affidavit], where you say, ‘There was no discussion about the terms of the Yallakool [Property Agreement] prior to 25 March 2011,” that’s not right, is it? You must have talked about it prior to 25 March.

A. Well, it would have – yeah. It would, that would have been discussed that, the, the previous day or the day before, yes.

Q. Yes, so what’s in that first sentence isn’t right.

A. Yes.”

  1. In attempting to convey that there had been no discussion between the parties in relation to the prospective purchase of Yallakool, Don was attempting to colour Peter’s version of events – in which Peter said Don and he had discussed water access rights on Mikimba prior to putting in their offer to purchase Mikimba – as unlikely.

  2. Third, Don made a number of unsatisfactory attempts to distinguish the need for water on Yallakool as opposed to Mikimba. As is set out in paragraph [45] above, at Don’s own insistence a clause pertaining to water access rights was inserted into the Yallakool Property Agreement. Don gave evidence that the request for a “water agreement” was because had the purchase of Yallakool been successful and the agreed subdivision effected, the existing Yallakool Bore (and supporting infrastructure) on the property would have been on the Burnheims’ portion of the land, to which Don wanted access (T123:45-124:7).

  3. Having conceded that he had insisted on a “water agreement” clause in the Yallakool Property Agreement, Don strenuously maintained that a similar agreement was not required in relation to Mikimba and as such had not been discussed between Peter and himself.

  4. Don gave evidence that no water agreement was necessary for Mikimba because at the time of the auction on 25 March 2011, “everything was full of water” on Mikimba (T125:16). Don submitted that water was not an important consideration for the purchase of Mikimba as the region was “having a wet season” and that all dams on Mikimba were “full” and that the Castlereagh River traversing the property was “running” (T124:40-44). Don also referred to a presumptive purchase of Mikimba where the property “had flood over it and the vendor had written off a lot of money… because of the damage to the crops” due to all the water (T125:17-19).

  5. Don’s position in the preceding paragraph cannot be sensibly maintained when considered in light of this evidence:

  1. Don is a licensed real estate agent and has worked since 1961 as a “stock and station agent”, and since August 1974 in the Coonamble Shire specifically. He accepted that he was an experienced Coonamble rural property real estate agent (T91:39-41) and agreed that the availability of water was an important consideration for property purchases in the Coonamble area (T115:12-14).

  2. Don was aware that there was no existing bore on Mikimba and that at times in the past, Mikimba has been completely dry (T124:30-34).

  3. In his memorandum to the Scheme prepared in or around April 2017 (see paragraph [90] above), Don himself acknowledged that “the future of water on Mikimba will always be a concern”;

  4. Don gave evidence that he had requested water access rights in relation to Yallakool as a “condition for the future” and that he “suppose[d] the same applies to Mikimba” (T125:14-15). Don further accepted that Coonamble was a drought-prone area (T124:46-47).

  5. In response to Mr Campbell’s observation that the Schiebs’ Lot 102 had access to the Castlereagh River and a dam, Don contradicted his earlier evidence (see paragraph [118] above) and responded “Yes, the Castlereagh River is dry most times” (T130:17-18).

  1. Fourth, Don also gave conflicting evidence on when the first discussion occurred between Peter and himself regarding the Bore. Don’s case was that no discussion regarding water access from the Bore for the Burnheims’ Lot 101 had occurred at any time prior to executing the Deed of Partition on 21 April 2011. In his affidavit evidence, Don deposed that at no time prior to 21 April 2011 did the parties “have any discussion whatsoever… concerning the new bore and the syndicate that operated it”. This stance was initially reiterated by Don during cross-examination (T131:47-132:4).

  2. However, later in cross-examination Don then said that the first time any discussion occurred between Peter and himself about water access for Lot 101 was when the parties were negotiating the Deed of Partition at the Global Village Café in Coonamble on 25 March 2016, immediately following their purchase of Mikimba (T132:35-45, T133:15, 31-32; see also paragraphs [55] to [57] above). Although initially certain that this discussion at the Global Village Café did not include any reference to the Bore or Scheme so that the above statement in his affidavit remained correct (T133:17-23, 34-40, T134:3-7), Don eventually agreed his affidavit was wrong (T134:9-16).

  3. Finally, and following from the preceding point, Don gave inconsistent evidence on his attitude towards the need for a water agreement in relation to Mikimba. As set out in the two preceding paragraphs, Don’s affidavit evidence was that no discussion about water had occurred prior to 21 April 2011 and that neither his wife Ainslie nor he “recall having any explanation of clause 12.3 to the deed as it was drafted” when they signed the Deed of Partition on 21 April 2011. This is not only inconsistent with the evidence I have previously referred to regarding the importance of water access on Mikimba (see paragraph [119] above), but also with Don’s own evidence that he had the benefit of discussions with his solicitor at the time of the negotiations to the Deed of Partition, including specifically in relation to clause 12 (T134:24-135:47). While I accept it is Don’s evidence that he only understood the nature of his obligations under clause 12.3 as requiring him to provide assistance to the Burnheims to gain access to water from the Bore (as opposed to obtaining membership of the Scheme), this does not cure the inconsistency in Don’s evidence regarding his attitude towards a water agreement in respect of Mikimba.

  4. The cumulative effect of the matters set out in the preceding paragraphs and my observations of Don giving his evidence in the virtual witness box has led me to the conclusion that, while not dishonest, he is an unreliable witness, whose recollection of events cannot be accepted. Where there is a conflict in the evidence, the Court will not accept Don’s evidence unless it accords with the probabilities, is against interest or is supported by contemporaneous documents.

Contentious matters

  1. I will now set out my conclusions on the factual matters in dispute. By reference to the uncontested facts and what was inherently likely, informed by the Court’s findings on Don’s reliability as a witness, the Court is satisfied, on the balance of probabilities, of what follows and finds accordingly.

  2. The Burnheims case under the ACL came to turn on the Court’s resolution of one key contentious matter, being the Burnheims’ assertion that Don had made an unconditional promise to bring about their membership of the Scheme so as to ensure “water rights” for Lot 101. This necessarily involves consideration of:

  1. Was Don “manager” of the Scheme and, if yes, what was the effect of having this role?

  2. What was the parties’ awareness and understanding of water access on Mikimba at the time of the auction in March 2011?

  3. What was said between Don and Peter prior to their decision to make a joint offer to purchase Mikimba?

Was Don “manager” of the Scheme?

  1. The Court finds that Don was the manager of the Scheme from in or around May 2005 up until 28 April 2017, when he formally resigned from that management position. In accepting Don’s evidence that the role had fallen to him by default and that the duties were of a limited nature, the Court is nevertheless satisfied as a matter of actual persuasion that Don was the manager of the Scheme during the relevant period.

  2. The evidence before the Court which supports this finding has been set out in paragraphs [106] to [108] above, however it is appropriate here to record:

  1. Don conceded that insofar as anyone would be described as being responsible for the running of the Scheme and attending to administrative matters, it was him (T104:30-45). Further, he had taken up this role since in or around 2005 when the initial member who held the position left the Scheme (T105:6-10), meaning that by the time of the auction in 2011 Don had held this role for around 6 years;

  2. Even though a meeting had not taken place since the Bore’s creation in 2001, Don conceded he was responsible for organising meetings of the Scheme members (T105:16-25); and

  3. Don gave evidence that in respect of his decision to extend his water supply from the Bore to benefit his Lot 102 before formally seeking approval from the Scheme members pursuant to clause 14 of the Bore Agreement, he assumed there would be no objection to the application and that he had “just applied… sort of… as a formality” (T137:44-138:12).

  1. In applying these authorities to the case at bar, Mr Campbell argued that the damage the subject of these proceedings, being primarily the difference in value of the Burnheims’ purchase of their half of Mikimba with and without water rights in the Scheme, was contingent on whether or not they obtained “water rights” to the Scheme. The success or failure of the Burnheims’ membership application was not determined before the vote of the Scheme members at the September 2014 Meeting, and (contrary to one of Mr Roberts’ submissions) the outcome of the vote could not have been known before this time. Accordingly, it was the Burnheims’ submission that the damage was contingent as at 25 March 2011 and remained contingent until the September 2014 Meeting, when it crystallised. Mr Campbell rejected the submission put forward by Mr Roberts that the Scheme’s vote on the Burnheims’ membership application was a foregone conclusion (in that it was always going to fail). Mr Campbell contended that there was no evidence that as at 25 March 2011 Don knew that the vote would fail, or even that the vote was certain to fail.

  2. Finally, Mr Campbell contended some of the authorities relied on by the Schiebs should be viewed with caution, as they were more specifically negligent advice cases or had involved alternative claims for breach of contract and misleading or deceptive conduct.

Submissions on behalf of the Schiebs

  1. The Schiebs’ primary case on the ACL claim was that the Water Representation had never been made, with the words attributed to Don never having been said. For this reason, it was never part of their case that Don had reasonable grounds to make the Water Representation. As set out in paragraphs [134] to [143] above, the Court is satisfied that the representation was made.

  2. In any event, Mr Roberts contended that the Burnheims’ claim under the ACL also failed because even if the Water Representation had been made, the Burnheims’ cause of action was statute barred by reason of s 236 of the ACL.

  3. The Schiebs agreed that the cause of action for misleading conduct accrues when loss or damage is suffered as a result of that conduct. It was therefore accepted that the sole issue for determination was when the damage claimed by the Burnheims occurred. However, if it was also accepted that the alleged Water Representation arose in a discussion between Don and Peter on 25 March 2011, then it was submitted that the damage was suffered at the time the parties entered into a commitment on 25 March 2011 to purchase Mikimba together. That is, time started running on 25 March 2011 and the statutory limitation period of 6 years expired in March 2017, more than a year before the proceedings were commenced on 30 May 2018 and cross-claim filed on 9 August 2018.

  4. Mr Roberts accepted that the ascertainment of the State’s loss or damage by the High Court in Wardley could not be determined until the eventuality of extrinsic circumstances, namely the Bank calling upon the State to meet the indemnity. However, Mr Roberts disputed the alleged similarity between the current proceedings and Wardley, seeking instead to distinguish the two cases on the basis that the Burnheims’ cause of action was not similarly contingent. Two submissions were made in support of this distinction.

  5. First, Mr Roberts contended that if the alleged Water Representation was accepted and Don was found to have made an unconditional promise to obtain their membership to the Scheme, then the Burnheims had a right to enforce that promise pursuant to either of ss 232 (injunction) or 236 (damages) of the ACL on and from 25 March 2011.

  6. Second, particular emphasis was placed on evidence which, it was submitted, unequivocally demonstrated the Burnheims’ patent awareness that Mikimba did not have access to water at all, let alone in perpetuity at the time it was purchased. Accordingly, against the Burnheims’ submission that the damage was contingent and did not “crystallise” until the outcome of the September 2014 Meeting, Mr Roberts argued that the September 2014 Meeting “merely confirmed the position or the state of the land as regards water” as it was on 25 March 2011, namely:

  1. the Burnheims’ were not members of the Scheme; and

  2. Mikimba did not have artesian water access, in perpetuity.

  1. Mr Roberts referred to a number of authorities where the damage suffered was found to be ascertainable at the time of the conduct. In particular, Mr Roberts submitted the factual matrix in the current proceedings was comparable to Winnote Pty Ltd (in liq) v Page t/as Freehill Hollingdale & Page (2006) 68 NSWLR 531; [2006] NSWCA 287 (“Winnote”).

  2. In Winnote, the appellant client had suffered damage as a result of negligent advice provided by its firm of solicitors, because at the time the advice was obtained, the client acquired an ordinary lease of a property upon which it proposed to conduct a mining business. A mining licence was subsequently granted to another party and the client’s interest became, or was revealed to be, worthless. The Court of Appeal held by majority (Mason P and Tobias JA) that the client’s loss was not contingent but known at the time of the firm’s advice, when it obtained a bundle of rights inferior to those which it would otherwise have received absent the firm’s conduct.

  3. Just as the appellant in Winnote was found to have purchased “damaged goods”, the Burnheims became bound to pay the purchase price of Mikimba for an elevated price because they thought, at the time, they were purchasing the land “with water rights”. The loss or damage propounded by the Burnheims (which the Schiebs denied) was immediately ascertainable, with Mr Roberts concluding in his written submissions that (emphasis in original):

“In the result, on 25 March 2011, the dye (sic) was cast. Mr Burnheim had purchased damaged goods and he had purchased a lemon. Accordingly, the cause of action accrued to Mr Burnheim, if there was one, on 25 March 2011.”

  1. Against the possibility the Court did find in fact that the Water Representation had been made and that the Burnheims’ claim was not statute barred, Mr Roberts submitted on behalf of the Schiebs that the Court should not be satisfied that Peter relied on those words in the way he had alleged for two reasons:

  1. The words “I can get you onto the Wingadee No. 4 Bore Scheme” do not assert “membership”, and no cogent evidence had been elicited in the proceedings which would infer the words allegedly said were used to indicate membership of the Scheme or a proprietary interest in the Bore; and

  2. The evidence similarly did not disclose that Peter told Don he would not purchase the land unless he was included as a member of the Bore, or that Peter had told Don he would not proceed with the contract for sale of Mikimba unless he had water rights in perpetuity.

  1. Finally, Mr Roberts contended in his written submissions that the Water Representation should be treated merely as an opinion on behalf of Don, not a statement made for the purposes of inducing Peter to enter into a joint purchase of Mikimba. To further counter any suggestion of inducement, emphasis was placed on Don’s unchallenged evidence that he could have purchased Mikimba outright and that the Burnheims had in fact required financial assistance (with their banker present at the auction) and that amendments had been made to the Deed of Partition to allow Mikimba to be mortgaged. In such circumstances, it was submitted it was clear Don had not induced Peter to join in the purchase of Mikimba.

Consideration and conclusions on the ACL case

  1. Those matters which objectively support the Court’s finding that the Water Representation was in fact said to Mr Burnheim have already been set out in paragraphs [134] to [143] above.

  2. Moreover, the Court is not persuaded by Don’s evidence given in cross-examination that the length of the conversation between he and Peter at the Golf Club bar (which Don tried to minimise) meant the Water Representation could not have been made. The inference to be drawn from this contention was that a brief conversation supported the Schiebs’ case that water access was not discussed at all prior to the parties’ purchase of Mikimba. I reject this proposition. It does not matter whether the conversation was 2 minutes or 10 minutes (as contended by Don and Peter respectively). On either view, I am satisfied the conversation at the Golf Club bar was long enough for the parties to discuss the salient particulars of the purchase, including the purchase price to be offered, how the property would be divided between them and, as a necessary corollary of this, water arrangements.

  3. Turning to the limitation defence, the Court accepts Mr Campbell’s submissions (see paragraphs [189] to [194] above). Damage (including loss of value in Lot 101 or expenditure made in the expectation of membership of the Scheme) was contingent in the sense that it would only be suffered when the future matter – becoming a member of the Scheme – did not come to pass. Although obviously not the same type of contingency as a potential liability under a guarantee, it is a type of contingency that brings it within the limitation analysis of Wardley and Murphy.

  4. The issue can be tested quite simply. If the Burnheims had been asked the day after they had bought Mikimba whether they had suffered any loss arising from Mikimba not being part of the Scheme, the answer would have been along the lines of “No, not yet. It all depends on whether Don gets us membership of the Scheme”. Furthermore, there is no evidence to support the Schiebs’ submission that it was always a foregone conclusion that the Burnheims would not have been admitted to the Scheme and the submission is rejected accordingly.

  5. The limitation defence therefore fails. Don contravened s 18 of the ACL by making the Water Representation, being a representation as to a future matter without reasonable grounds by reason of s 4(2) of the ACL. The damage to the Burnheims caused by Don’s contravention was suffered in September 2014 when the members of the Scheme rejected the Burnheims’ application for membership. The Burnheims’ cross-claim relying on the ACL was filed well within the statutory limitation period, which would have expired in September 2020. Pursuant to s 236 of the ACL, the Burnheims are entitled to be compensated for the loss they have suffered because of Don’s contravention. I will consider the question of quantum in the next section of these reasons.

  6. I will next deal with the other arguments raised by Mr Roberts. There are five points to be made.

  7. First, the fact that the Burnheims may have had a present right to enforce the Water Representation by injunction under s 232 of the ACL from the date they bought Mikimba says nothing about when damage was suffered. If anything, it reinforces the conclusion that damage was not in fact suffered unless and until the Water Representation was not fulfilled. The Schiebs’ reference to an action for damages under s 236 of the ACL begs the question because it requires the person to have suffered loss or damage because of the contravening conduct.

  8. Second, I do not accept the “lemon” argument, being that the Schiebs had bought damaged goods and that the September 2014 Meeting merely confirmed that status quo that had been known to the Burnheims. The difficulty with this argument is that it assumes the Burnheims bought the land at a higher price because they were buying it “with water rights”.

  9. This assumption is wrong in two respects. First, there is no suggestion that the price the parties paid factored in water rights insofar as the transaction between them and the vendor is concerned (or as between themselves). Second, it is undisputed that Peter knew Mikimba did not have access to bore water at the time of the purchase. What the Burnheims were buying was not the land “with water rights”, but rather with Don’s assurance that he would in the future procure them to have those rights (understood as membership of the Scheme). To the extent the metaphor is helpful (if at all), the Burnheims’ share of Mikimba only became a lemon of the kind hypothesised by Mr Roberts when Don could not make good on the Water Representation. So understood, there is no relevant factual similarity between this case and Winnote.

  10. Third, for the reasons set out in paragraphs [135] to [143] above, the Court rejects the submission that the Water Representation was not a representation that membership of Scheme would be arranged by Don for the Burnheims.

  11. Fourth, as I have already recorded, the Court accepts Peter as a reliable witness and accepts his evidence that he relied on the Water Representation in purchasing Mikimba. Given the importance of access to water and the fact that both men understood that Lot 101 otherwise only had surface water, that reliance is also inherently likely. The fact that Peter may not have expressed that reliance to Don at the time of the purchase, while relevant, is in itself not sufficient to detract from the conclusion which the Court has reached on the question of reliance.

  12. Fifth, the Court does not accept that the Water Representation can be properly characterised as a statement of opinion. In the context in which it was made, it was plainly a representation that Don would in fact arrange for the Burnheims to become a member of the Scheme (see paragraph [216] above).

Quantification of damage

  1. Neither party suggested that, if the Burnheims were entitled to damages, there should be any difference in the quantification of those damages in contract or under the ACL. As the matter was argued, there was only one area of dispute as to quantum, which was whether the Burnheims had adequately proven the loss they claimed as the difference between the value of Lot 101 with and without an entitlement to draw water from the Bore as part of the Scheme. For the reasons which follow, the Court finds for the Burnheims on that question.

  2. Both parties retained experts to value Mikimba for the purpose of determining the loss of value of what, with the registration of the subdivision, has become Lot 101, arising as a result of Don’s failure to arrange their membership of the Scheme and so secure water rights. Jeffrey Heal and Bruce Sharrock were retained by the Burnheims and the Schiebs respectively. The experts were cross-examined concurrently.

  3. Pursuant to orders of the Court, Mr Heal and Mr Sharrock held a joint valuers’ conference and their agreed property values as at January 2019, insofar as they concerned Mikimba as a whole as well as Lot 101 and Lot 102 individually, were confirmed on 3 April 2019 as:

Property Details

Agreed Property Value

Total Property Area: 689 ha with access to the Scheme

$1,475,000

Total Property Area: 689 ha without access to the Scheme

$1,325,000

(An amount of $150,000 is allowed for no water)

Proposed Lot 101

Property area: 344.5 ha with access to the Scheme

$759,000

(As a separate Lot with water & fronting onto main roadway)

Proposed Lot 101

Property area: 344.5 ha without access to the Scheme

$649,000

(As a separate Lot allowing $110,000 for no water; and fronting onto main roadway)

Proposed Lot 102

Property area: 344.5 ha with access to the Scheme

$680,000

($716,000 with water less 5% ($36,000) due to an unformed road access for 1030 metres to Lot 102)

Proposed Lot 102

Property area: 344.5 ha without access to the Scheme

$570,000

(As a separate Lot allowing $110,000 for no water; and with an unformed road access)

  1. In considering those figures (the “Joint Valuers’ Summary”), four points should be made.

  2. First, both Mr Heal and Mr Sharrock adopted a summation approach as the most appropriate method of valuation. This involved a market analysis of recent sales activity for comparable properties in the Coonamble Shire.

  3. Second, for the purposes of the Joint Valuers’ Summary, Mr Heal and Mr Sharrock also agreed that in order to value Mikimba on the basis of the property having water access, it was necessary to deduct an allowance for the cost of drilling a bore on the property, together with the cost of associated infrastructure. An explanation of this methodology was provided by Mr Heal in his independent valuation report of September 2018:

“In relation to the valuation on the basis of the property has a whole and the Burnheim section of the property without access to the Wingadee No 4 Bore Trust we have valued the property on the basis of the property having adequate stock and domestic water as outlined by the above market evidence (all of which have access to either artesian or sub artesian bores) and then deducted an allowance for the cost of drilling a bore together with associated pumping and storage facilities. The reason for this approach is that there is no readily available market evidence of properties without access to a water supply. … It is therefore considered reasonable that a potential prudent purchaser would factor into the purchase price an allowance for the cost of establishing a reliable water supply with (sic) in this case would be the drilling of a bore sinking of an artesian bore.

To arrive at an allowance for the cost of drilling a bore we have made enquiries with drillers that operate in the district. We note that a precise estimate could not be obtained due to the unknown final depth of the bore and the expected soil types. Our enquiries have indicated that there are 2 aquifers in the vicinity of the subject property one at approximately 300 metres and one at 600 metres. Our enquiries indicate the cost of drilling to 300 metres (sub artesian) would range from $120,000 to $165,000 ex GST and the cost of drilling to 600 metres (artesian) would range from $240,000 to $330,000. This cost is exclusive of storage facilities or lift pump should it be required. A further allowance of $10,000 has been made for storage facilities. As the bore would be required to service a maximum on only 689.1 hectares it is considered a bore drilled to 300 meters is all that would be required. For the purpose of this assessment we have adopted an allowance of $150,000 exclusive of GST, this allowance has been made ono (sic) the assumption that a bore would be pressurised. We advise a formal onsite quote should be obtained to verify both depth and costs. Should such a quote vary from that which has been stated above the matter should be referred to the reporting valuer for comment/review.”

  1. With respect to valuing Lot 101 and Lot 102 individually, Mr Heal and Mr Sharrock agreed that each lot would be affected by a diminution in value of $110,000 “without water”, with each lot (treated as a standalone property) discounted by $40,000. This was in recognition that it would be an “overcapitalisation” for someone to expend $150,000 sinking a bore on either of the smaller, subdivided portions, with the discount reflecting what they considered to be the market determination of loss of value (T54:47-55:21, T58:27-33).

  2. In response to questions in cross-examination from Mr Roberts as to the valuation methodology, Mr Heal again confirmed that he and Mr Sharrock had made inquiries from drillers who had drilled artesian bores in the Coonamble Shire, but that no driller had actually attended Mikimba on site prior to giving quotes (TT47:7-11).

  3. Third, Mr Heal and Mr Sharrock accepted that the parties’ purchase of Mikimba in March 2011 for $1.25 million was market price, if not slightly above the market price on the assumption that parties often pay a premium where they are adjoining owners (as was the case) (T48:49-49:4, T49:18-23).

  4. Finally, during cross-examination Mr Heal and Mr Sharrock confirmed they had understood their instructions to provide a valuation “with access” as being access to water rights in perpetuity (T53:48-54:1). As such, they had not undertaken a valuation exercise of “access” as a member of the Scheme as opposed to “access” under a licence arrangement (similar to the arrangement which currently gives the Burnheims access to water from the Bore). However, in giving this evidence, I did not understood them to be suggesting there was any material difference between access to water “in perpetuity” and as members of the Scheme. The real point of distinction was with a contractual right to draw water of the kind currently available to the Burnheims. Both valuers said they had never before heard of such an arrangement to draw bore water (T55:50-51:23).

Submissions on behalf of the Burnheims

  1. On behalf of the Burnheims, Mr Campbell submitted that the quantum of damages calculated under either the contract claim or the ACL claim is $131,821.04, comprising:

  1. $110,000 for the loss of value of the Burnheims’ Lot 101 due to the lack of permanent legal entitlement to water from the Bore;

  2. $17,747.38 for the Burnheims’ payment towards water infrastructure purchased and installed (the majority of which is located on the Schiebs’ half of Mikimba) for the purpose of exploiting the water rights granted by the Scheme, but which were ultimately not provided;

  3. $7,678 for the Burnheims’ payment of water from November 2014 to date, pursuant to the licence arrangement with the Scheme; and

  4. reduced by $3,604.34, which he submitted (and the Court accepts) to be the expected membership payment the Burnheims would have been required to pay to the Scheme as an upfront contribution towards capital costs, had their membership application been successful.

Submissions on behalf of the Schiebs

  1. Although no objections were initially raised to the tender of the Joint Valuers’ Summary on the first day of hearing, in written submissions provided in advance of closing submissions Mr Roberts sought to contend that certain aspects of Mr Heal and Mr Sharrock’s evidence should be “rejected” by reference to the principles set out in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 (“Makita”).

  2. Mr Roberts submitted that the opinion given by Mr Heal and Mr Sharrock concerning the diminution of the value of the whole of Mikimba “without water” as it existed prior to the subdivision (being a reduction of $150,000) should be “rejected” as:

  1. The figure of $150,000 had been assumed as the costs of putting a bore on Mikimba, however neither Mr Heal nor Mr Sharrock had expertise in drilling or sinking bores and there was no market evidence to support this. Further, neither Mr Heal nor Mr Sharrock had sought formal quotations but rather based their estimate on “enquiries” made from water drillers;

  2. Mr Heal and Mr Sharrock disclosed they had investigated the market to find out whether there were any sales of properties in the Coonamble Shire that did not have any access to the Scheme or other bore, but such data was unavailable; and

  3. Mr Heal and Mr Sharrock conceded that they had only undertaken a valuation of the property benefitted with water rights in perpetuity as opposed to “without water”; that is, they had not undertaken a valuation on the basis of something less than water rights in perpetuity, such as by way of contract. However, both Mr Heal and Mr Sharrock opined that the value of land would be less if water rights were less than in perpetuity.

  1. With respect to the diminution of the individual subdivided lots, for the reasons set out in the preceding paragraph Mr Roberts again challenged the reliability of the estimates.

  2. When I asked Mr Roberts whether his submissions were in fact a late attempt to exclude the evidence, Mr Roberts confirmed that he accepted the evidence was “in” and that his submissions were confined to the weight the Court should give that evidence. However, Mr Roberts contended that because the principles set out in Makita had not been met, that part of the experts’ joint evidence should be rejected in its entirety, notwithstanding it was the only evidence before the Court on this aspect of the damages. I understood Mr Roberts’ reliance on Makita to be a submission that the valuers had not exposed their reasoning and that their reliance on the information they had obtained from the drillers was flawed because of the lack of precision (including the absence of an inspection of Mikimba) in that information.

  3. Mr Campbell submitted that the experts had clearly exposed their reasoning, in particular by the passage reproduced in paragraph [224] above and adopted by Mr Sharrock, and that the valuers’ approach adequately allowed for the generic nature of the quotations obtained from the drillers.

Consideration and conclusion as to quantification of damages

  1. The Court rejects Mr Roberts’ submission. As has often been said, valuation is an art and not a science. As Mr Campbell submitted, the valuers’ process of reasoning was clearly set out in their respective reports, which then formed the basis of the opinions they came to in the Joint Valuers’ Summary. Their approach, in the absence of “comparable sales”, of taking into account the value of drilling a bore is self-evidently logical and their reliance on the information they obtained from the local drillers, albeit generic to the area, not unreasonable.

  2. Furthermore, there was no suggestion that the Schiebs could not have sought to adduce their own more specific evidence of the cost of drilling a bore on Lot 101 had they wished to do so. Instead, they acquiesced in their own expert’s adoption of the information that Mr Heal (for the Burnheims) had obtained from the drillers.

  3. No one suggested there was any difference between the relevant property values in January 2019 and as at the date of hearing. The Court is therefore satisfied that the Joint Valuers’ Summary provides a reliable basis for the Court to find (as it does) that Lot 101 is worth $110,000 less than it would be if the Burnheims were able to irrigate it as members of the Scheme.

Conclusion

  1. There will be judgment on the cross-claim for the Burnheims in the principal sum of $131,821.04. Subject to any special application, the costs of the cross-claim should follow the event. The parties will be given an opportunity to bring in short minutes and to make submissions in relation to the costs of the (settled) principal claim.

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Decision last updated: 14 September 2020

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