Arnold v Minister Administering the Water Management Act 2000

Arnold v Minister Administering the Water Management Act 2000 - [2010] HCA 3 - HCA 2010 case summary — Zoe

[36]

On 22 January 2007, the appellants commenced proceedings in the Land and Environment Court of New South Wales challenging, on a variety of grounds, the validity and operation of the statutes, statutory instruments and regulations underpinning the purported replacement of their bore licences. The Minister administering the Water Management Act was named as respondent. The State of New South Wales and the Commonwealth of Australia were later joined as second and third respondent respectively.
By their further amended application filed 16 November 2007 the appellants sought a declaration of the invalidity of the National Water Commission Act or the provisions of that Act so far as it related to water and water resources[11]. They sought a declaration that Pts 2 and 3 of Ch 3 and Sched 10 of the Water Management Act were inoperative with respect to their licences and that the proclamation of 25 October 2006 was also inoperative. In addition, they sought declarations that the Water Management (General) Amendment (Lower Murray) Regulation 2006 and the Water Sharing Plan for the Lower Murray Groundwater Source 2006 Order were void and inoperative. Injunctive relief and damages were also sought.
On 21 December 2007, Lloyd J, on the motion of the Commonwealth, dismissed the proceedings as against the Commonwealth on the basis that the Land and Environment Court had no jurisdiction to entertain them[12]. His Honour went on to hold that the Court "should also dismiss or stay the applicants' application in so far as it concerns the Commonwealth on the basis it discloses no reasonable cause of action as against the Commonwealth or on the basis that it is frivolous or vexatious"[13]. His Honour held s 51(xxxi) was not applicable, absent a law of the Commonwealth with respect to the acquisition of property[14]. As to the alleged contravention of s 100 of the Constitution, he accepted the Commonwealth's submission that the section only affected laws made under s 51(i) of the Constitution[15]. In addition, his Honour held that the appellants lacked standing to seek the relief they sought against the Commonwealth[16].

[62]

Section 100 of the Constitution gives rise to a number of important constructional questions, some of which were agitated before this Court on the referred application for special leave. The section was described by Quick and Garran as being one which takes its place in the Constitution, along with s 99, as "a further limitation of the trade and commerce power."[40] The limitations in ss 99 and 100 were held in Morgan[41] to be confined to laws made under s 51(i)[42] of the Constitution[43]. That confinement of the limitation was endorsed by three of the Justices in The Tasmanian Dam Case[44]. No reference was made in Morgan, nor later in The Tasmanian Dam Case, to the drafting history relating to s 99 or s 100. That is not surprising. It was not until Cole v Whitfield[45] that this Court accepted that such references could be made to ascertain the contemporary meaning of language used in a provision of the Constitution, the subject to which that language was directed, and the nature and objectives of the movement towards federation from which the Constitution emerged[46]. However, the invitation to overrule Morgan should be declined for present purposes. This case does not require that its correctness be re-examined, although the artificiality of its consequences, to which Mason J adverted in The Tasmanian Dam Case[47], remains.
The appellants' invocation of s 100 was directed to the validity of the Funding Agreement. It was upon the premise of its invalidity that they based their submissions that the exercise of ministerial power in making the Water Sharing Plan was vitiated. Having regard to the drafting history and irrespective of the correctness of the Court's decision in Morgan, it is difficult to see how an agreement made between the executive governments of the Commonwealth and the States could, of itself, constitute a "law or regulation of trade or commerce". There is also an interesting question whether the term "right of … the residents" in s 100 is used in a collective sense rather than as a reference to individual rights[48].
Critical and sufficient for the disposition of the application is the question whether the rights of the appellants said to have been abridged by the replacement of their bore licences related to the use of the "waters of rivers" within the meaning of s 100.
The drafting history in my opinion makes clear that the qualification on Commonwealth legislative power imposed by s 100 was directed to the application, to the waters of rivers, of legislative powers with respect to trade and commerce and navigation and shipping. The subject matter of the limitation originally contained in the proposed s 52(VIII), as adopted at the Melbourne session of the Convention in 1898, was rivers which could be used for navigation or shipping. Mr Reid's amendment of s 52(VIII) to include a reference to trade or commerce no doubt reflected in part the view expressed by Inglis Clark that the trade and commerce power would extend to navigation and shipping. Section 98 in the final draft put that proposition beyond doubt. Against this background, and without suggesting that the prohibition is limited to navigable rivers, there is no plausible basis for construing the limitation as applying to underground water in aquifers.
This conclusion reflects the historical context of s 100. As Gleeson CJ said in Singh v The Commonwealth[49]:

[108]

It is unnecessary to consider these matters because the appellants must first show that they had, within the meaning of s 100, the right "to the reasonable use of the waters of rivers for conservation or irrigation". They had no such right.
In the light of s 4B of the 1912 Act and as explained in ICM, the appellants had no common law right to the extraction and use of groundwater for irrigation. They had the right (or, more accurately, the liberty) to do so given by their bore licences. But the bore licences did not permit the use for irrigation of "the waters of rivers" within the meaning of s 100 of the Constitution.
Three reasons support that conclusion respecting the construction of s 100. First, the compromise represented by the formulation of s 100 responded to the conflicting interests of the colonies of New South Wales, Victoria and South Australia with respect to the Murray‑Darling river system. By 1855, South Australia had the benefit of a river trade extending throughout that system; goods were off‑loaded before their transport reached what even then was the non‑navigable mouth of the Murray and were taken to Victor Harbor and Port Adelaide[65]. South Australia had as its primary interest navigation and the maintenance of the river flow for that purpose. Victoria was the first colony to exploit the advantages of irrigation[66], and was interested in the diversion of water from the upper Murray and all tributaries within its territory. New South Wales had the further interest based upon the denial by Imperial legislation in 1855[67] of any claim by Victoria to a mid‑river boundary line along the Murray; New South Wales claimed the exclusive use of the waters of the Murray above the border with South Australia.
Secondly, as explained in ICM, the common law had distinct principles respecting the use of surface water and groundwater; this distinction then was reflected in the legislative regulation of surface water and groundwater by the colonies and then by the States, which proceeded at different paces and in different terms.
Thirdly, the ordinary understanding of the expression "the waters of rivers" in 1900 was that given by Quick and Garran in their commentary on s 100[68], namely:

[111]

The grant of special leave should be expanded and there should be leave to the Commonwealth to file its Notices of Contention, as indicated earlier in these reasons. The appeal should be dismissed. The appellants should pay the costs of the third respondent.
HAYNE, KIEFEL AND BELL JJ. This appeal and application for special leave were heard immediately after the matter of ICM Agriculture Pty Ltd v The Commonwealth[69]. These reasons must be read with our reasons in ICM.
The appellants held bore licences under Pt 5 of the Water Act 1912 (NSW) ("the 1912 Act") which permitted them to extract groundwater in the Lower Murray region. Those licences were cancelled and, in their place, aquifer access licences were issued under the Water Management Act 2000 (NSW) ("the 2000 Act"). The aquifer access licences issued to the appellants permit them to extract less water than could have been extracted under the bore licences. These steps were taken in consequence of an agreement ("the Funding Agreement") made in 2005 between the Commonwealth and the State of New South Wales.
By the Funding Agreement, the Commonwealth agreed to provide money to the State for a "project" known as the "Achieving Sustainable Groundwater Entitlements" project. The project required the State to reduce the groundwater extraction entitlements of the appellants and others in relation not only to the Lower Murray region, but also to other areas of the State. Entitlements to extract groundwater in the Lower Murray region were to be reduced by a total of 68% over 10 years.
Section 50 of the 2000 Act empowered the State Minister, by order published in the New South Wales Government Gazette, to make a plan (among other things) for any water source, or part of a water source, for which a management plan was not then in force. In 2006, by order published in the New South Wales Government Gazette, the Minister for Natural Resources of New South Wales made the "Water Sharing Plan for the Lower Murray Groundwater Source". That plan ("the Water Sharing Plan") provided for the adjustment of water entitlements in respect of the Lower Murray Groundwater Source in accordance with the Funding Agreement.
In 2007, the appellants instituted proceedings in the Land and Environment Court of New South Wales challenging the validity of the Water Sharing Plan, the Funding Agreement, and Commonwealth legislation under which it was alleged that the Funding Agreement had been made: the Natural Resources Management (Financial Assistance) Act 1992 (Cth) ("the Financial Assistance Act") and the National Water Commission Act 2004 (Cth) ("the NWC Act"). The appellants alleged that the steps taken to reduce their water entitlements amounted to an acquisition of property otherwise than on just terms, contrary to s 51(xxxi) of the Constitution. The appellants further alleged that, contrary to s 100 of the Constitution, the Commonwealth had "by any law or regulation of trade or commerce, abridge[d] the right of a State or of the residents therein to the reasonable use of the waters of rivers for ... irrigation". The appellants also alleged that the steps taken under the 2000 Act to make and implement the Water Sharing Plan were legally infirm because one or more of the relevant decision‑makers had taken irrelevant considerations into account.
The Commonwealth sought and obtained summary judgment in the Land and Environment Court[70] dismissing the appellants' claims against the Commonwealth. The Land and Environment Court (Lloyd J) held[71] that it had no jurisdiction to entertain the appellants' claims against the Commonwealth. It further held[72] that, in any event, this Court's decisions in P J Magennis Pty Ltd v The Commonwealth[73] and Pye v Renshaw[74] required the conclusion that it was not arguable that either the Financial Assistance Act or the NWC Act was in any relevant respect a law with respect to the acquisition of property.
Those who are now appellants in this Court sought leave to appeal to the Court of Appeal of the Supreme Court of New South Wales against the orders of the Land and Environment Court dismissing their claims against the Commonwealth. The Court of Appeal (Spigelman CJ, Allsop P and Handley AJA) granted leave to appeal but dismissed the appeal[75].
The Court of Appeal concluded[76] that even if, as the appellants submitted, there was no valid Commonwealth law supporting the making of the Funding Agreement and even if, as the appellants further submitted, the Funding Agreement itself was invalid, nothing in the 2000 Act or the Water Sharing Plan depended on the existence of a valid Commonwealth law or a valid agreement between the Commonwealth and the State. The Court of Appeal rejected[77] the appellants' further argument that the State Minister had taken into account irrelevant considerations in exercising powers under the 2000 Act by taking account of the existence of what the appellants submitted was an invalid Commonwealth law and an invalid ("non‑existent") Funding Agreement.
The Court of Appeal further held[78] that neither the Funding Agreement, nor either of the impugned Commonwealth Acts (the Financial Assistance Act or the NWC Act), was a "law or regulation of trade or commerce" which, contrary to s 100 of the Constitution, abridged "the right of a State or of the residents therein to the reasonable use of the waters of rivers for ... irrigation". The Court of Appeal held[79] that this conclusion was required by this Court's decision in Morgan v The Commonwealth[80], in which it was held that the restraint on Commonwealth legislative power provided by s 100 applied "only to laws which can be made under the power conferred upon the Commonwealth Parliament by s 51(i)". The Court of Appeal recorded[81] that the appellants did not submit that the laws which they sought to impugn were capable of answering that description.
Argument in the Court of Appeal proceeded on the assumptions that the reduction of the appellants' water entitlements constituted an acquisition of property other than on just terms[82], that the appellants had rights to the reasonable use of the waters of rivers for irrigation and that those rights had been abridged[83]. These assumptions were challenged in this Court, and accordingly, the arguments advanced in this Court departed in significant respects from those advanced in the courts below. It is necessary, however, to deal with only three aspects of the appellants' arguments in this Court: (a) the proposition that the cancellation of bore licences and issue of aquifer access licences permitting the extraction of less water was an acquisition of property within the meaning of s 51(xxxi); (b) the proposition that taking groundwater under the bore licences or the aquifer access licences was "use of the waters of rivers" within the meaning of s 100; and (c) the proposition that the steps taken to effect the cancellation of bore licences and issue of aquifer access licences were legally infirm because the State Minister had taken irrelevant considerations into account in making the Water Sharing Plan.
The appellants require a grant of special leave to agitate questions about the application of s 100. They should have that leave. The Commonwealth should be given leave to rely on grounds in its notices of contention which sought to answer the matters put in issue by the appellants' reliance upon s 51(xxxi) and s 100.
These reasons will demonstrate that each of the three propositions identified should be rejected. It follows that the appeal should be dismissed.

[113]

The Water Sharing Plan described the Lower Murray Groundwater Source as including "all water contained in the Calivil, Renmark, and the Lower Shepparton unconsolidated alluvial aquifers deeper than 12 metres below the ground surface" within an area delineated in a schedule to the plan. It noted that the Lower Murray Groundwater Source is recharged primarily from an overlying groundwater source - the Shepparton Groundwater Source - which in turn is recharged "in part, from irrigation losses".
The plan identified a number of objectives. At the risk of some oversimplification, the central purpose of the plan can be understood as being to reduce, and then manage, the extraction of groundwater from the Lower Murray Groundwater Source to a level variously described as "an ecologically sustainable level" or the "estimated sustainable yield".
Water extracted from the Lower Murray Groundwater Source is not encompassed by the expression in s 100: "the waters of rivers". The water at issue in this appeal is not surface water. It is groundwater that percolates through the soil. It does not flow in a defined channel. Together, these are reasons enough to conclude that the water in question does not form part of "the waters of rivers". But the conclusion is reinforced by consideration of the purpose served by s 100. An important purpose (perhaps the purpose) behind the inclusion of s 100 in the Constitution was to mark a particular limit upon the power of the federal Parliament to regulate navigation. As Quick and Garran pointed out[84], the federal Parliament's power to legislate with respect to trade and commerce (explicitly extended by s 98 to "navigation and shipping") "would have prevailed absolutely against any claims by the States to the use of the water" of rivers as "highways of interstate commerce" or for the development of land. As those authors went on to say[85], "the object of [s 100] is to limit the paramountcy of the navigation power so far as it may interfere with 'the reasonable use' of the waters for State purposes" of conservation or irrigation. The federal Parliament's legislative powers with respect to navigation have no immediate intersection with the extraction, for use in irrigation, of groundwater that percolates through the soil and does not flow in a defined channel. They do have an obvious intersection with the use of the waters of rivers for that purpose.
Because the waters at issue in this matter are not "the waters of rivers" the further questions argued about the operation of s 100 need not be examined. In particular, it is not necessary to decide whether the decision in Morgan should be reopened.

[114]

The appellants' argument that the State Minister had taken irrelevant considerations into account in deciding whether to make the Water Sharing Plan was understood by the Court of Appeal as being an argument that the Minister had taken account of the existence of what was alleged to be one or more invalid Commonwealth laws and what was alleged to be an invalid Funding Agreement. The appellants' amended points of claim in the Land and Environment Court had described the allegedly irrelevant considerations taken into account by the Minister in rather different terms. In their pleading the appellants identified the matter that had been taken into account as being "the dictation or requirement of the Commonwealth Government as to the basis for reductions in water allocation rather than a broad approach of general application balanced by considerations of equity amongst water users in the State and having regard to the environment of New South Wales". The appellants did not seek to make any case in this Court or in the Court of Appeal that the State Minister acted under dictation.
Assuming, without deciding, that it was open to the appellants to frame their argument along the lines described by the Court of Appeal, repeated in this Court, the argument should not be accepted. Because there was not, as the appellants submitted, an acquisition of property, neither the Funding Agreement nor either of the two federal statutes whose validity the appellants impugned was invalid for any want of provision of just terms. Having regard to the subject matter, scope and purposes of the 2000 Act as a whole, and s 50 in particular, the existence of the Funding Agreement was not a consideration irrelevant to the exercise of the power given to the State Minister by s 50 of the 2000 Act to make the Water Sharing Plan. On its face the Water Sharing Plan was intended, in the words of s 3 of the 2000 Act, "to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations". Under the Funding Agreement the State was to receive money to effect the Water Sharing Plan. The Funding Agreement was not an irrelevant consideration in exercising the power given by s 50.

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