Appellants v Respondents

38 The matters referred to in s 20 of the Water Act 1989, being matters to be taken into account in determining whether a flow of water is reasonable or not reasonable, arguably do not by their terms expressly relate to the flow of water through reticulated domestic water pipes. The matters arguably relate to drainage water.

39 If, the act complained of was turning on the spa tap or allowing the spa to overflow, then the matters specified in the paragraphs of s 20 arguably may not be used to judge whether the relevant flow of water was reasonable or not reasonable where the flow was caused by turning or not turning of the spa tap. On the other hand, the paragraphs may have relevance to the flow of water caused by the failure of the drainage point to safely drain the overflow water.

40 Turning to the specific paragraphs of s 20, it arguably is not appropriate to ascertain whether that act of turning on the spa tap or failing to turn it off was authorised within the meaning of para (a) of s 20 of the Water Act 1989.

41 It arguably is not appropriate to ascertain the extent to which any conditions or requirements imposed under the Water Act 1989 in relation to an authorisation were complied with in turning on or failing to turn off the spa tap as referred to in para (b).

42 It arguably is not appropriate to ascertain with respect to the flow of water into or out of the spa whether or not the flow conforms with any guidelines or principles published by the Minister with respect to the drainage of the area as referred to in para (c).

43 It arguably is not appropriate to ascertain whether or not account was taken at the relevant time of the likely impact of the flow on drainage in the area having regard to the information then reasonably available about the cumulative effects on drainage of works and activities in the area in turning on or failing to turn off the spa tap as referred to in para (d).

44 It arguably is not appropriate in respect of turning on or off the spa tap to ascertain the uses to which the lands concerned and any other lands in the vicinity are put as required by para (e).

45 It arguably is irrelevant to have regard to the contours of the lands concerned as required by sub-paragraph (f) in assessing the reasonableness of the flow of water into and out of the spa. The same observations arguably might be made about sub-paras (g), (h) and (i).

46 On the other hand, some of these matters may have relevance to the flow of water caused by the faulty drainage point.

"In taking account of the matters specified in sub-section (1), greater weight must be attached to the matters specified in paragraphs (a), (b), (c) and (d) than to the other specified matters."

48 His Honour Magistrate Smith said in referring to Gillard J's decision in Coles Myer Ltd v City West Water Ltd[11]

"...there is no doubt that His Honour's reasoning and findings in that case must apply to the situation here.

I say this with some reluctance. Quite apart from the unfortunate failure to define what is precisely meant by "land", perusal of the Act and a consideration of its general intentions and purposes persuade me that the particular provisions here under consideration were not intended by the legislature to apply to what might be called domestic or commercial mishaps between adjoining properties such as occasioned by circumstances here under consideration or where water might be ordinarily stored for some domestic or commercial purpose.

I am encouraged in this view by a comparison of s 16)b) and the criteria set out in s 20 "Matters to be taken into account in determining whether the flow is reasonable or not reasonable." The criteria there set out, to my mind, have little or no apparent nexus with or relevance to the situation with which we are here concerned, but rather appear more concerned with agriculture, mining, and irrigation activities. Furthermore, unless "reasonable" is somehow related to the conduct of the contractor or tortfeasor, it is difficult to see how as a matter of logic a flow of water causing damage to, for example, adjacent domestic properties through the agency of an overflowing bathtub could in ay circumstances be described as "reasonable."

As indicated above, none of the matters that are required to be taken account of under para 20 are apposite to the complaint in this case. In those circumstances, in my opinion, the statute provides little or no guidance as to what is meant by "reasonable" when applied to the flow of water caused by turning on a domestic tap to fill a bath. In my view, s 20 provides further support for the argument that s 16 is, as it was originally, directed to drainage water and is not intended to apply to the use of reticulated domestic water. If, contrary to my view, s 16 could apply to the flow of water from a tap into or out of a spa, then there is little practical guidance, if any, in the Act of what is or is not a reasonable flow of water in or out of the spa.

Be that as it may, the Act itself draws no such distinctions, and a perusal of the second reading speech of the Bill provides no assistance whatsoever."

49 The learned Magistrate held that in those circumstances he felt constrained to follow the decision in Coles Myer. In my view the Magistrate made some important points that may well be relevant in deciding whether the Water Act 1989 applies to a domestic bath overflowing.

50 Section 9 of the Drainage of Land Act 1975 contained similar provisions to those in s 20 of the Water Act 1989 in determining whether any waters were caused or permitted to flow onto any lands in a reasonable manner, which were arguably limited to drainage water.[12]

51 An issue therefore remains in my opinion, of the extent, if any, the consolidation of the Drainage of Land Act 1975 into the Water Act 1989 with some amendment was intended to extend the scope of the relevant provisions of the Drainage of Land Act 1975.

52 I should add that no argument was put to me that the flow of water into the spa or out of the spa onto the floor only became drainage water after it left the spa and sought unsuccessfully to enter the drainage point.

53 The issue of whether or not s 16 applies to waters other than drainage water arguably was not articulated before Gillard J in Coles-Myer Ltd v. City West Water Ltd. [13]

54 In my opinion, there is still an unresolved issue as to whether or not sections 16, 17 and 19 apply to water flow other than drainage water. It is unnecessary for me on this appeal, however, to express any view on this issue one way or the other as the appeal was argued solely on the issue of whether the relevant flow of water was from the land of a person onto other land as referred to in paragraph 16(1)(a) of the Water Act 1989.

55 The appellants submitted that s 17 of the Water Act 1989 ("the Act") extinguishes liability based on contract and tort "wherever the facts establishing the injury, damage or loss by water prima facie established the statutory cause of action".

56 For this proposition the appellants relied on the decision of Gillard J in Coles Myer Ltd v. City West Water Limited[14]. They further submit that s 19 of the Act vests exclusive jurisdiction in VCAT to determine claims based on the statutory cause of action; relying on Montana Hotels Pty Ltd v. Fasson Pty Ltd[15].

57 The appellants submit that in order to establish a cause of action pursuant to s 16(1) of the Act, the plaintiff has to prove:

(a) that water flowed from the land of a person onto other land;

58 The proposition in (a) is not quite consistent with the requirements of s 16(1). Section 16(1) requires that "there is a flow of water from the land of a person onto any other land". It is that flow which is required to be not reasonable.

59 "Flow" is defined in Part 1 of the Act: "in relation to water, includes discharge, release, escape, percolation, seepage and passage, and includes both surface and underground flow". It is relevant to note that the definition is not exhaustive but the reference to surface and underground flow seems applicable to drainage water rather than tap water.

60 The appellants submit that the flow of water through the water pipe into the spa bath was from the land of another person into room 609. The appellants submitted that the water that flowed into the spa had come through water pipes and that space occupied by the water pipes was land. They refer, for this proposition, to Gas & Fuel Corporation of Victoria v. City of Williamstown[16] and also to Commissioner of Main Roads v. North Shore Gas Company Limited[17]. They further submit that water flowing through water pipes onto land is the flow of water from the land of another for the purpose of s 16 of the Act. They rely on Turner v. Bayside City Council[18].

61 The respondents submit that the words included in paragraph 16(1)(a) "land of a person onto any other land" was intended to limit the jurisdiction to a proceeding that involved the flow from one person's land to another. The respondents point to the purposes of the Act set out in paragraph 1 (b) of the Act which include "the terrestrial phase of the water cycle". Reference to those purposes suggests that the Act may be directed to the conservation and management of water resources, rather than to domestic plumbing issues.

62 As indicated above, the appellants argue that the water flowing into the spa bath in room 609 flowed through pipes which were on the land of a person other than the proprietor of room 609.

63 On that analysis, the respondents submitted that the flow of water would begin at the reservoir and pass through and over many lands of people before it reached the spa in room 609, and it could be argued just as validly on this basis that Melbourne Water caused the flow of water from the reservoir all the way to the spa in room 609.

64 In my opinion, the relevant flow of water as referred to in s 16 is identified by other words referred to in that section. In particular, that flow must not be reasonable and, importantly, that flow must be caused by a person who, under the section, is liable to pay damages to the other person in respect of injury, damage or loss.

65 In those circumstances it appears to me that the person who caused the flow is the person who turned on the tap to allow water to flow into the spa or failed to turn off the tap to allow the spa to overflow or failed to ensure the drainage point properly functioned. The flow in that sense then becomes the flow of the water out of the tap into the spa or out of the spa onto the floor or the flow away from the blocked drainage point. The issue would then be whether that flow is not reasonable.

66 I have already noted that none of the matters referred to in s 20 which must be taken into account in determining whether a flow is reasonable or not reasonable, would appear to apply to turning on or off a tap to fill a spa, although they may have some relevance to the failure to ensure the drainage point functioned properly.

67 In any event, if such an action as turning on a tap to fill a spa or failing to turn off a tap or failing to ensure the drainage point functioned properly could characterise the flow of water as not reasonable, then the relevant flow of water caught by s 16 is the flow of water from the tap into the spa or the flow of water out of the spa onto the floor of room 609 or the flow caused by the failure of the drainage point to operate properly.

68 Assuming that the relevant sections of the Water Act 1989 do apply to the flows I have identified, the history of the legislation and its purpose in seeking to codify the common law supports my view that the reasonableness of the flow is characterised by actions or things failed to be done on the land from which the water flows onto other land where it causes injury.

69 In the case before the learned Magistrate, the action or failure to act about which the Magistrate would have to form a view in characterising the flow of water as reasonable or unreasonable was either turning on the tap in room 609 or failing to turn off the tap to prevent flooding in room 609 or failing to ensure the drainage point functioned properly. Thus, the relevant "flow of water" which is alleged to be "not reasonable" was not "from the land of a person onto any other land". On the contrary, the flow alleged to be not reasonable commenced within room 609.

70 I find therefore that the relevant flow of the water for the purpose of s 16 did not begin on land outside room 609 where the water pipe may have come from. I find that the relevant flow began in room 609. The learned Magistrate was therefore correct in finding that the Water Act 1989 did not apply to the complaint in respect of the damage to room 609.

71 The learned Magistrate was entitled to embark upon and decide the claim in contract and in tort in respect of the damage to room 609. I have not been asked to decide whether or not the learned Magistrate correctly decided the claims nor do I express any view one way or the other about his decision.

72 I therefore dismiss the appellants' appeal against the decision of the learned Magistrate that the statutory defence did not apply to the damage caused to room 609.

73 It was assumed during the appeal that the causes of action caught by Part 2 and limited to the jurisdiction of Tribunal included the claim in contract. I do not need to decide that issue. It was not argued before me and I have decided in any event that the appeal should be dismissed on the sole ground that was argued.

74 I should mention in passing, however, that I have reservations as to whether or not the combination of sections 16, 17 and 19 apply to a claim in contract. Contractual claims do not require proof of injury, damage or loss: they are maintainable through breach alone. Accordingly, s 17 may not apply to deny civil liability in contract.

75 Further, the purpose of the initial legislation in the Drainage of Land Act 1975 was not directed to committing claims in contract to the Drainage Tribunal and now VCAT. It would seem unreasonable that a contractual obligation could be avoided by the sections which sought to codify tortious claims relating to water flowing from land to other land.

76 In Hocking v. Western Australia Bank[19] Griffith CJ said:

"It is a sound rule to be applied in the construction of all Acts altering the common law, that they are to be taken to alter it only so far as is necessary to give effect to the express provisions of the Act".

77 There are arguable grounds for the view that there is no need to give effect to the express provisions of the Act to extend it to contractual claims. As indicated above, however, there is no need for me to express a view on this point.

78 The learned Magistrate's decision refers to the defendants conceding that the defence that they ran under the Water Act 1989 did not apply to the damage caused to room 609.

79 Paragraph 6 of the questions of law upon which the appeal is brought asks "Did the learned Magistrate err in law in finding that the defendants conceded that the provisions of the Water Act 1989 do not apply to the damage caused to room 609?".

80 On the appeal the respondents made no issue of this supposed concession.

81 The appellants disputed the concession was made. Further, the appellants submitted that, for four reasons, the concession should be ignored. First, that the Magistrate did not base any part of his judgment on the concession. This is in fact correct. Second, that if the concession was made (which is denied), it was made after the conclusion of the evidence. At that stage it is said that all the facts necessary for the defence were already adduced. Third, it is said a fatal objection in law may be taken on appeal even if conceded at first instance. Reference was made to Adams v. Chas. Watson Pty Ltd[20] and Hollis v. Vabu Pty Ltd.[21]

82 Finally, it is said by the appellants that the defendants cannot waive or consent to a court exercising jurisdiction in the matter where a statute prohibits the court exercising that jurisdiction. Reference was made to Commonwealth v. Verwayen[22] and Norwich Corporation v. Norwich Electric Tramways Company Ltd..[23]

83 I accept these submissions, which were not disputed, and have therefore embarked on the appeal despite the observation by the Magistrate referred to above.

84 I now turn to the issue of costs. The proceedings in the Magistrates' Court commenced on 2 February 2006. Prior to the proceedings being instituted in the Magistrates' Court, proceedings had been instituted in VCAT by Body Corporate against Mr Vasarelli alone, presumably making a claim in relation to the water damage caused by the spa overflow.

85 By a letter dated 30 September 2005, Mr Vasarelli's solicitors, Mahons, wrote to LFS Legal identifying Mahons' client as Simon Vasarelli and LFS Legal's client as Body Corporate Strata Plan 4189790 trading as Quest on Bourke.

86 The letter said that Mahons were instructed to offer the sum of $6,500 " 'all in' in full and final settlement of the proceeding and on the basis that your client provides both our abovenamed client and Mr Spagnolo with complete releases in respect of the matter the subject of the proceedings."

87 On the same date, LFS Legal replied to Mahons by letter saying they were instructed to reject the offer. They said further that if it was Mahons' intention to come back with an offer of $8,500, that was also rejected.

88 By a further letter dated 30 September 2005 from Mahons to LFS Legal, Mahons informed LFS Legal:

"Please note your client's offer to accept $13,500 'all in' is rejected.

We are instructed to make a final offer of $10,000 'all in' on the same basis set forth in the first paragraph of our transmission to you earlier today."

89 The offer remained open for acceptance until 4.00 p.m. that day.

"This offer is made so as to avoid incurring further legal costs. In these circumstances, should this offer be rejected or not accepted within the timeframe indicated and the plaintiff obtains no greater on judgment, we will raise this letter on the question of costs at which time we will seek an order that your client pay our client's costs on a solicitor/client basis. Please note we rely on the principles applied in Calderbank v. Calderbank [1975] 3 All ER 333 and Cutts v. Head [1983] EWCA Civ 8; [1984] 1 All ER 597."

91 The second ground of appeal is that the learned Magistrate erred in law in failing to give any weight to the letters dated 30 September 2005 from the defendants' solicitor to the plaintiffs' solicitor as Calderbank letters.

92 The transcript of the learned Magistrate's decision that was tendered in evidence before me merely notes that the Magistrate would hear counsel on the question of costs.

93 Mr Vasarelli, in his affidavit of 24 January 2007, said as follows about the costs issue:

"17. Upon delivering his decision, Magistrate Smith asked for submissions about legal costs. The plaintiff replied [sic] with an order for costs. The defendants' council (sic) argued that order for costs ought to be made in favour of the defendant.

1. 18. The defendants' counsel produced three letters related to offers of settlement made by the defendant prior to the issue of the proceedings. [The exhibited letters].
2. 19. In discussion with the defendants' council (sic), Magistrate Smith said that there was no offer of compromise containing the said offers, he would not have regard to the letters before the action.

20. It is respectfully submitted that the Magistrate failed to exercise his discretion in accordance with the law by refusing to have regard to the letters containing offers of settlement before the issue of legal proceedings. As a matter of law, the Defendants are entitled to rely upon the offer of $10,000 made prior to the commencement of proceedings in support of an order for costs in their favour."

94 David Charles Wilson, solicitor for the respondents, deposed in his affidavit of 15 May 2007 as follows:

"9. That I humbly refer to paragraph 17 of Vasarelli's affidavit. I attended the hearing on 13 December 2006 and am able to say Mr Vasarelli did not attend the hearing on 13 December 2006. Further, the respondents' counsel initially sought an order for costs which counsel for the appellants opposed.

1. 10. That I humbly refer to paragraph 18 of Vasarelli's affidavit. The learned Magistrate inquired of the plaintiffs' counsel as to whether the Magistrates' Court proceeding was on foot at that stage. The learned Magistrate was advised that the Magistrates' Court proceedings only issued on 2 February 2006 and was not on foot at that time.
2. 11. I humbly refer to paragraph 19 of Vasarelli's affidavit. The learned Magistrate did not indicate that there was no offer of compromise. The learned Magistrate indicated that as the letters were written at a time when the Magistrates' Court proceedings were not on foot, the letters were offers and part of a process of negotiation rather than an offer of compromise.
3. 12. That I humbly refer to paragraph 20 of Vasarelli's affidavit. The learned Magistrate did not refuse to have regard to the letters as stated in paragraph 11 of this my affidavit. Further the letters were specifically related to a proceeding issued by the respondents at the Victorian Civil and Administrative Tribunal against the second named appellant."

95 Mr Vasarelli does not say in his affidavit that he attended the hearing at which the costs questions were ventilated. I therefore accept the version of the events given by Mr Wilson in his affidavit. Contrary to the submissions of the appellants, it appears that the Magistrate did have regard to the letters, but noted that they were made before the Magistrates' Court proceedings were on foot and related to VCAT proceedings. It must have also been apparent to the Magistrate that the offer of 30 September 2005 had lapsed before the proceedings were issued on 2 February 2006.

96 In Hazeldene's Chicken Farm Pty Ltd v. Victorian WorkCover Authority[24] Warren CJ, Maxwell P and Harper AJA held that there is "no presumption that the party rejecting a Calderbank offer should pay the offeror's costs on an indemnity basis if the offeree received a less favourable result. The correct approach [is] to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs."[25]

97 The Court went on to say the correct test for determining whether to make such an order is to consider whether "the rejection of the offer was unreasonable in the circumstances".[26]

98 The Court held that considerations one should ordinarily have regard to when determining whether the rejection was unreasonable should include 'at least the following matters:

the stage of the proceeding at which the offer was received;

the time allowed to the offeree to consider the offer;

the offeree's prospects of success, assessed as at the date of the offer;

the clarity with which the terms of the offer were expressed;

whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.'[27]

99 The respondents raised the issue of whether a Calderbank offer could be made prior to proceedings being commenced. In my opinion, there does not appear to be any reason in principle why such an offer could not be made prior to proceedings being commenced but the circumstances of the offer may lead to the conclusion that its rejection was not unreasonable in considering the costs in subsequent proceedings.

100 In Brymount Pty Ltd v Cummins (No 2), Beazley JA of the New South Wales Court of Appeal held that one of the considerations for not exercising his discretion to consider earlier Calderbank offers made at trial was that the offers 'substantially pre-dated proceedings in [the] Court.'[28]

101 In Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) Ipp JA of the New South Wales Court of Appeal opined: "As the offer had so lapsed (prior to the conclusion of the trial), it was not possible for the appellants to accept it thereafter. In particular, it could not have been accepted on the launching of the appeal or thereafter. On that basis alone, it seems to me, the offer could play no part in the exercise of the discretion to order indemnity costs in regard to the appeal.'[29] His Honour also noted[30] the rule that a Calderbank offer made prior to judgment at the trial remains relevant to costs orders on appeal, citing Ettingshausen v Australian Consolidated Press Ltd[31]

102 As indicated above, in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority Warren CJ, Maxwell P and Harper AJA held that in determining the unreasonableness of the rejection of a Calderbank letter the court should contemplate 'the stage of the proceeding at which the offer was received.'[32]

103 The ground of appeal is that the Magistrate failed to give any weight to the letters dated 30 September 2005. It is apparent from the affidavit of Mr Wilson that the Magistrate did consider them and did give them weight. The offer related to other earlier proceedings. The offer had been withdrawn some months before the proceedings were commenced in the Magistrates' Court. The authorities referred to above confirm it was open to the learned Magistrate in his discretion to find that the Calderbank offer in the circumstances did not rebut the usual order as to costs.

105 I therefore dismiss the appellants' appeal with costs.

[1] See Second Reading Speech of The Minister for Water Resources of 26 May 1989, Hansard, 2227.

[4] (1868) HLR [1868] UKHL 1; 3 HL 330

[5] (1981) 45 LGRA 31.

[7] Minister of Public Works 22 November 1975, Hansard, 9045.

[9] See the Drainage of Land (Amendment) Act 1984 (No. 10064 of 1984) that substituted the Planning Appeals Tribunal; the Water Act 1989 (No. 809 of 1989) that substituted the Administrative Appeals Tribunal; and the Tribunals and Licensing Authorities (Miscellaneous Amendments) Act 1998 (No. 52 of 1998); s 311 (Sch 1 , item 105).

[10] [1998] VSC 63.

[11] [1998] VSC 63; (1998) 14 VAR 37.

[12] Each of paragraphs (a) to (h) of section 9 are essentially repeated in some form or other in section 20 of the Water Act 1989.

[13] (1998) VSC 63.

[14] [1998] VSC 63; (1998) 14 VAR 37 at [47] to [54].

[15] [1987] VicRp 11; [1987] VR 147 at 149, affirmed (1986) 69 ALR 258.

[16] [1978] VicRp 64; [1978] VR 677 at 680.25, 681.25.

[17] [1967] HCA 41; (1967) 120 CLR 118 at 131-2.

[18] Unreported, VCAT, DP McNamara, 29 November 1999 at paragraph [14].

[19] (1909) 9 CLR 738 per Griffith CJ at 746.

[20] [1938] HCA 37; (1938) 60 CLR 545 at 547-8.

[21] [2001] HCA 44; (2001) 207 CLR 21 at 31 and 36.

[23] [1906] 2 KB 119 at 125-6.

[24] [2005] VSCA 298; (2005) 13 VR 435.

[28] Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 at [29] per Beazley JA.

[29] Trustee for the Salvation Army (NSW) Property Trust and Anor v Becker and Anor (No 2) [2007] NSWCA 194 at 9 per Ipp JA.

[31] (1995) 38 NSWLR 404/

[32] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [2005] VSCA 298; (2005) 13 VR 435 at [25].