Broughton v Leslie - [2019] NSWSC 827 - NSWSC 2019 case summary — Zoe

NSWNSWSC

Broughton v Leslie

[2019] NSWSC 827

Supreme Court of NSW|2019-06-26|Before: Leeming JA

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2019-06-26

Before

Leeming JA

Source

Original judgment source is linked above.

Judgment (31 paragraphs)

[1]

g (1992) 27 NSWLR 483 Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11; (2019) 365 ALR 345 Taouk v Assure (NSW) Pty Ltd [2017] NSWCA 227 University of Technology v Gerrard [2001] NSWSC 368 Van Son v Forestry Commission of New South Wales (1996) 86 LGERA 108 Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135 Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56 Texts Cited: S Clark and J Renard, 'The Riparian Doctrine and Australian Legislation' (1970) 7 Melbourne University Law Review 475 J Getzler, A History of Water Rights at Common Law (Oxford University Press, 2004) Heydon on Contract (Lawbook Co 2019) J N Pomeroy, A Treatise on the Law of Water Rights (2nd ed West Publishing Co, 1893) P Tan, "An Historical Introduction to Water Reform in NSW - 1975 to 1994" (2002) 19 Environmental and Planning Law Journal 445 Category: Principal judgment Parties: Gregory Paul Broughton (First Plaintiff) Kate Charlotte Broughton (Second Plaintiff) Rosalie Hazel Broughton (Third Plaintiff) Paul Broughton Investments Pty Ltd (Fourth Plaintiff) Rosalie Hazel Broughton, Gregory Paul Broughton and Kate Charlotte Broughton as trustees for the PR and GK Superannuation Fund (Fifth Plaintiff)

[2]

David Peter Leslie and Robert Richard McCutcheon (Representative Defendants for the members of the Trangie-Nevertire Stock and Domestic Scheme) Trangie Nevertire Co-Operative Ltd (Ninth Defendant) Representation: Counsel: D Pritchard SC, R Notley (Plaintiffs) L Gyles SC, A Barnett (Representative Defendants) E Peden (Ninth Defendant)

[5]

Overview of parties and issues

The plaintiffs are Mr Gregory Paul Broughton, his wife Kate, his mother Rosalie and a company of which he is a director, Paul Broughton Investments Pty Ltd. Either in their own right, or as trustees for the PR and GK Superannuation Fund, the plaintiffs are the legal owners of some 13 parcels of land comprising eight named farming properties in the Trangie region of western New South Wales. Much of the evidence in this proceeding speaks not of the individual land owners, or even of the individual parcels of land, but rather of the named farming properties. Indeed, that distinction is central to the two remaining issues in this litigation, which are whether (a) two of the properties, Noondoo and Yurone, are receiving "their" entitlement to water pursuant to the TNSDS, and (b) whether those properties may "resign" from participating in the TNSDS. I shall elaborate upon the way in which the "properties" may be said to participate in the TNSDS presently; one of the complexities of this litigation is that, at least on the view I take, a deal of analysis is required in order to frame the issues with appropriate precision.
The first and fifth defendants, Mr David Peter Leslie and Mr Robert Richard McCutcheon, are the only active defendants. They were appointed representative defendants for the members of the TNSDS, pursuant to orders to that effect made in 2018, when it was realised that the plaintiffs had joined only eight members of the relevant sub-committee of the TNSDS, and needed to bind all members of the unincorporated association. The ninth defendant, Trangie-Nevertire Co-operative Ltd (TNCL), owns some of the infrastructure supplying water to farming properties in the Trangie area. The plaintiffs' claims, and the defendants' cross-claim, against TNCL were compromised shortly before the trial.
As refined in pleadings and submissions, the issues between the parties are quite narrow. A factual issue involving expert evidence as to the capacity of the infrastructure fell away. The plaintiffs' pleaded claims for rectification and estoppel were abandoned shortly before the trial. In consequence, much of the evidence which had been served was not read, and indeed much that was read is no longer relevant to the issues remaining for determination. I shall not attempt to summarise it. Indeed, although the original court book was eight volumes and ultimately only two volumes were tendered, there remain hundreds of pages tendered without objection which were not once mentioned in the parties' oral or written submissions.
The water entitlements of four of the eight properties under the TNSDS have become common ground. Indeed, in a sense the entitlements of six of the eight properties have become common ground, although stated that way (as the plaintiffs repeatedly did) somewhat conceals the reality of the dispute. A clearer way of framing the principal dispute is as to the maximum volume of Stock and Domestic Water to which the plaintiffs, in their capacities as owners of the 8 properties which are "members" of the TNSDS, are entitled each year. Is that annual volume 75.8 or 85.1 megalitres?
The eight properties are known as Myall Plains, Wewona, Noondoo, Jamea, Amaroo, Glenmaree, Westholme and Yurone. All are adjoining, and collectively comprise slightly less than 7,000 hectares to the southwest of Trangie, at the extremity of the Stock and Domestic Water irrigation pipes now known as "Main 8" and "Main 9".

[10]

Principles of contractual construction

It is agreed that both issues are questions of the construction of the 2012 deed. I did not understand any of the principles on which the parties relied to have been controversial.
Both sides cited what was said in Taouk v Assure (NSW) Pty Ltd [2017] NSWCA 227 at [101]-[103] as to the ascertainment of the parties' objectively imputed intention, which requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose of objects to be served, something which was reiterated in Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 at [44].
The plaintiffs gave emphasis to what was said in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11 at [5]; (2019) 365 ALR 345 concerning cases where something has gone wrong with the contract and the ways in which as a matter of construction (as opposed to rectification in equity) the mistake can be fixed. They also noted the reluctance reflected in the "policy of the law" against interference in the affairs of voluntary associations, as noted in Cameron v Hogan (1934) 51 CLR 358; [1934] HCA 24, but relied on the qualification to that principle which applied where there is "some clear positive intention to create legal relations", as Barrett J observed in University of Technology v Gerrard [2001] NSWSC 368 at [14]-[17].
I interpolate that the TNSDS was established by deed which imposed direct liabilities upon those executing it, including the plaintiffs, and authorised dealings with a valuable property right (or, at least, a right akin to a property right) - the right to exploit Stock and Domestic Water pursuant to WAL13360. The difficulties often confronted when attempting to enforce a non-contractual aspect of an unincorporated association do not arise: cf Scandrett v Dowling (1992) 27 NSWLR 483 at 503-504 and Agricultural Societies Council of NSW Ltd v Christie [2016] NSWCA 331; (2016) 340 ALR 560 at [29]-[53].
The defendants said that the deed was ambiguous, and that on any view of the law regard could be had to the surrounding circumstances, citing Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [57]-[59] and [68]-[71]. However, they also said that it was "also to be borne in mind that the parties to a commercial contract have chosen to record their bargain in a document, and ordinarily the most powerful guide to the intention to be imputed to them emerges directly from the critical language of the document executed by them", citing Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135 at [51].
To those principles I would add the need to have regard to the history and genesis of the events leading to the execution of the deed. As Gleeson CJ said in International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; [2008] HCA 3 at [8]: "This is a case in which the Court's general understanding of background and purpose is supplemented by specific information as to the genesis of the transaction. The Agreement has a history; and that history is part of the context in which the contract takes its meaning." [Citation omitted.]
Similarly, in Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56 at [82] it was said that it was necessary to have regard to "the genesis of the transaction, the background, the context, the market in which the parties were operating, as known to both parties".

[12]

The substantive provisions of the deed

Many of the provisions of the deed appear to have been taken verbatim from the 1970 predecessor which established the TNIS, irrespective of their aptness in the 21st century. I shall return to this below.
The defendants placed weight on the definition in the deed for "Stock and Domestic Entitlement", which was defined to mean: "in relation to each Member or to each jointure of Joint Members the right to take and use on the area or areas of land shown opposite his or their names in the Schedule hereto under the heading 'land to which Stock and Domestic Entitlement relates' water from the System for stock and domestic purposes in quantities which shall not in total exceed in any period specified from time to time by the Committee the quantity of stock and domestic water specified in the Schedule or in such other quantities (whether larger or smaller) as the Committee shall specify from time to time."
The "System" was defined to include the pipelines and works, as varied by the Committee, but "does not include any pipeline works or equipment of a Member downstream (going away from the pipeline on which such offtake is situated) from any offtake forming part of the Scheme".
Clause 6, headed "Control of Scheme", relied on the definitions of "Stock and Domestic Entitlement" and "System". It provided as follows: "The Scheme including all easements and other rights used or held in connection therewith will be under the exclusive control of the Association acting itself in general meeting or by the Committee. The System will include the offtakes and metering devices designed to divert and measure water from the System to the land of Members in accordance with their respective Stock and Domestic Entitlement and each such turnout and metering device shall form part of the System and will be supplied and installed by the Association at the expense of the Association. The installation by Members of pumps pipelines and other devices to divert and measure water from the System in respect of Stock and Domestic Entitlements shall be subject to the approval of the Committee and such pumps pipelines and other devices shall not unless otherwise determined by Committee be part of the System."
Clause 7 headed "Management", made reference to a "Committee" which, subject to special resolutions to the contrary, was responsible for most of the activities of the association, and concluded that "all members shall be bound by all and decision of the Committee acting within the scope of the authority conferred in it by these presents".
Clause 8 empowered the Committee to make calls upon members for money for the implementation, maintenance or administration of the scheme or other scheme purposes. Clauses 9-12 addressed the enforceability of those calls and included a covenant by each member to pay amounts the subject of a call. Clauses 13 and 14 dealt with the transfer of a members stock and domestic entitlement which, speaking generally, was to happen in accordance with the requirements of the Committee. Clauses 15-18 dealt with the transmission of the rights and obligations of a deceased member.
The deed includes detailed provisions for notices of general meeting and procedure at general meetings including voting. Clause 48 speaks in terms of resignation of the office of a member of the Committee: a member may resign at any time by notice in writing. That provision is to be contrasted with the absence of any provision for a member of the association to "resign" from the unincorporated association.
Both sides regarded cl 73 as central to the litigation. It provides as follows: "Subject to the powers conferred in the Committee and to the provisos hereinafter in this clause contained any Member shall be entitled to draw his share of water from the System through an offtake and metering device specified by the Committee such share being that quantity of water equivalent to his co-holding in WAL13360 or his Geolyse calculated hectare entitlement as the case may be whichever be the greater PROVIDED THAT the Committee may allow a Member to order and to draw water from the System otherwise than in accordance with that Member's prescribed entitlement hereunder if such ordering and drawing does not in the opinion of the Committee detrimentally interfere with or otherwise prejudice the water requirements of any other Member within the limits of his entitlement hereunder or may withhold water from a Member for such limited time as it may in its absolute discretion consider necessary or desirable for the equitable and efficient administration of the Scheme and having regard always to the Member's entitlement to the capacity of the System and to any other considerations which the Committee may deem to be relevant including the desirability of combining the delivery of water for Stock and Domestic purposes to a number of Members at any other time selected for the purpose of achieving efficiencies in operation PROVIDED FURTHER that the charges to be made for water drawn by Members shall be fixed from time to time by the Committee which may also fix charges to be paid by Members who do not for the time being draw water from the System."
The most important words have been highlighted in the quotation above. As it happens, the words in bold are new, while most of the balance of the clause is identical with cl 73 of the 1970 deed.

[13]

The schedule to the deed

The schedule to which the definition of "Stock and Domestic Entitlement" refers comprises four pages at the end of the deed. Those pages comprise five columns, headed "Name", "Primary offtake location (Voting Right)", "Property/Properties to which Stock and Domestic Entitlement/s relate/s", "Hectare Entitlement" and "WAL13360 Co-Holding (of 56200 share)".
The first column suggests an explanation of the unusual feature of the execution pages. The first seven entries are Jeremy Nihill Weston, David Bryan Freeth, Robert Richard McCutcheon, Robert Richard McCutcheon, Robert Richard McCutcheon, Rebel Ag Pty Ltd and Robert Richard McCutcheon. Against each row is identified the name of a property. In the case of Mr McCutcheon, four properties are identified: "Mullah", "Barooga", "Mullah West" and "Ralbi". I return to this below, when dealing with the execution clauses.
The fourth column is headed "Hectare Entitlement". As will be seen below, there is a corresponding column titled "Acreage Entitlement" in the 1970 Deed. But the updated form is problematic. The column in the 2012 schedule does not identify entitlements of water for each property. Instead, it merely identifies the area of each property.
The fifth column identifies the numerator which, when combined with a denominator of 56200, specifies the fractional entitlement to the water available under WAL13360. There are 27 rows which contain entries in this column. The remaining 47 rows leave this column blank. This corresponds to the fact that, generally speaking, members of the TNSDS included all co-holders of WAL13360, but also included many properties which had no rights under WAL13360.
The entries in the schedule which refer to the plaintiffs' properties are all on page 2. They are as follows: Name Primary offtake location (Voting Right) Property/Properties to which Stock and Domestic Entitlement/s relate/s Hectare Entitlement WAL13360 Co-Holding (of 56200 share) Louise Maree Sayer, Kevin James Sayer, Valerie May Sayer, Larry Edwin Sayer, Therese Maria Patricia Sayer & Raymond Keith Sayer Myall Plains Myall Plains 952 1500 Rosalie Hazel Broughton, Gregory Paul Broughton, Kate Charlotte Broughton & Paul Bede Broughton Weenona [sic] Weenona/Noondoo [sic] 1,196 2200 Rosalie Hazel Broughton Jamea Jamea/Yurone 2,178 3000 Gregory Paul Broughton & Kate Charlotte Broughton Amaroo Amaroo 746 Rosalie Hazel Broughton, Gregory Paul Broughton, Kate Charlotte Broughton & Paul Bede Broughton Glenmaree Glenmaree 749 Douglas James Hertslet Westholm [sic] Westholm [sic] 750

[15]

The execution pages of the deed

The execution pages of the deed take a very unusual form. The first page provides space for execution by Mr Jeremy Nihill Weston, Mr David Bryan Freeth, and then Mr Richard McCutcheon on three occasions. Mr McCutcheon also has a further execution clause on the following page. In the copy of the deed which was tendered, Mr McCutcheon has signed four separate times.
Further, each of Mr Gregory, Ms Kate and Ms Rosalie Broughton has signed the deed on a number of occasions. Indeed, Mr Broughton has signed the deed six times.
Of course, very commonly the same person signs a deed on more than one occasion. That may occur where the person signs as agent for different principals. The same solicitor may be appointed agent for each lender in a syndicate, and may sign an amending deed numerous times, with the effect of binding each of the solicitor's principals. But it is almost invariable practice for the separate capacities in which the person signs to be shown in such cases.
The execution clauses in the deed establishing the TNSDS do not explain why it is that the same people are repeatedly signing the same document. That is to say, the execution clauses do not say that Mr McCutcheon or Mr Broughton or Ms Broughton was signing the document in particular capacities.
However, the recitation of names in the execution pages replicate, precisely and in the same order, the identified names of owners of properties listed in the schedule. That is a powerful indication that each of the owners of particular named properties were executing in their capacity as owners of those properties, and that the requirement of 60 members was a requirement that 60 properties participate in the scheme.
Indeed, in a case where much was in dispute, it was common ground at the Bar table that "membership" of the unincorporated association under the deed operated by reference to named properties. Thus, for example, Mr Broughton gave unchallenged evidence that at general meetings he would regularly receive up to six voting slips, corresponding to the various properties owned by him (or interests associated with him) which were regarded as separate members of the scheme. Hence too the alternative relief sought by the plaintiffs, which, as refined during the trial was that Mr Broughton in his capacity as owner of "Noondoo" and "Yurone" was entitled to resign from the unincorporated association. His intention in so doing was for the other six properties owned by him or by interests associated with him would remain as members of the unincorporated association.
All this is somewhat awkward and counterintuitive to many legally trained minds, which tend to be accustomed to focussing upon the relations between natural and artificial persons. But the underlying goal is clear enough. It is to seek to confer rights and obligations specific to named properties which run with ownership (and, perhaps, occupation) of the land. That is a natural enough thing to seek to do, although it faces formidable problems given the way the legal system has developed.
The 2012 deed is to be construed on that basis. Nowhere does it clearly say that the "members" are the named properties, nor that it confers rights and obligations on the owners of those named properties from time to time. But it is the only explanation for the way it has been executed. Further, as the parties were at pains to point out to me, that the deed operated in that fashion was not in issue.
There will be instances where the personal, as opposed to proprietary, nature of the rights conferred will defeat this approach to the deed, including where statute intrudes. Thus there will be times (including death, mental incapacity, guardianship, bankruptcy and, in the case of companies, liquidation, other forms of external management and deregistration) when a different approach may need to be adopted. There are also other difficulties in the approach taken in the deed. What when one parcel of land comprising part of a named property is sold to a neighbour? What happens to membership when an owner "merges" two named properties to create a single larger property? Or when an owner subdivides a property so as to leave parts to those of the next generation who wish to farm the land? Happily, none of these issues arose in the litigation, and I express no views on them.

[16]

The significance of cl 73

The plaintiffs treated cl 73 as containing "the most important right" conferred by the deed upon a member. The defendants did not squarely refute that contention. It is a little odd, as a matter of drafting, that the most important clause in a deed should be preceded by 72 less important clauses. But there is much that is odd in this deed. I think the plaintiffs are correct. In clause 73 and nowhere else in the body of the deed is provision made to identify the maximum quantity of Stock and Domestic Water to which a member is entitled.
In reaching that conclusion, I have considered cl 6. Clause 6 is directed to the powers of the Committee. Clause 73 is directed to the rights of members. In a sense, such powers as the Committee enjoys are correlative liabilities to which members are subject. Most obviously, the Committee may in certain ways reduce the amount of water actually available to be taken by members.
Further, cl 6 refers to "Stock and Domestic Entitlement" and cl 73 does not. One might have thought, if only from the label "Stock and Domestic Entitlement", that that definition would specify the entitlement of members to Stock and Domestic Water. The words used as labels are seldom arbitrary, but are usually chosen as a distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition: see Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101; [2009] UKHL 38 at [17] and Barangaroo Delivery Authority v Lend Lease (Millers Point) Pty Ltd [2014] NSWCA 279 at [10]-[11].
However, the definition in the 2012 deed creating the TNSDS does not have that result. It will be seen that that definition identifies the "land to which Stock and Domestic Entitlement relates" and by that means requires members only to use Stock and Domestic Water on the properties specified in the Schedule. It will also be seen that the definition concludes with the words: "in quantities which shall not in total exceed in any period specified from time to time by the Committee the quantity of stock and domestic water specified in the Schedule or in such other quantities (whether larger or smaller) as the Committee shall specify from time to time."
But those words cannot mean what they say, for two reasons. 1. The first is that there is no column in the Schedule for "stock and domestic water" so named. It is true that the last column in the schedule specifies an annual quantity of water. But this cannot be the something which is picked up by the definition, because most of the properties listed in the Schedule leave that column blank. That is to say, most of the properties in the Schedule do not specify any quantity of Stock and Domestic Water. 2. The second is that cl 73, which is a substantive provision in the body of the deed, as opposed to a definition, makes express provision for members' maximal entitlement to Stock and Domestic Water. Clause 73 defines each member's "share" by reference to "whichever be the greater" of two quantities of water: that reflected in a co-holding of WAL13360, and that stated in the "Geolyse calculated hectare entitlement".
As will be seen below, the reason for the noncomformity between the expected meaning of the definition of "Stock and Domestic Entitlement", and the operation of cl 73, may have been the inappropriate repetition of words from the 1970 deed. But whether or not that be so, it is cl 73 and not cl 6 which determines members' entitlements to Stock and Domestic Water.
I turn now to the two volumes of water identified in cl 73, the greater of which is the member's entitlement: the "co-holding in WAL13360" and the "Geolyse calculated hectare entitlement". Neither of those volumes of water is free from complexity.

[17]

The co-holding in WAL13360

The schedule to the deed contains a column headed "WAL13360 Co-Holding (of 56200 share)". There is, at least potentially, a question of construction whether those words in cl 73 "his co-holding in WAL13360" mean the amount stated in the schedule, or a quantity reflecting the member's statutory right. Unlike cl 6, cl 73 does not refer to what is specified in the schedule as the WAL13360 co-holding, but what is the WAL13360 co-holding. I shall return to this point below.
As noted above, in evidence were various documents, described as "Title Searches" and resembling the title of land under the Real Property Act 1900 (NSW), of "FOLIO: WAL13360". All said that "CERTIFICATE OF TITLE HAS NOT ISSUED". The document contained the following "Access Licence Details": "Category: Domestic and Stock Share Component: Share - 562 Megalitres per year Water Source - Macquarie and Cudgegong Regulated Rivers Water Source Water Sharing Plan - Macquarie and Cudgegong Regulated Rivers Water Source"
The entitlements conferred by the Water Access Licence as regulated under the Water Sharing Plan include, in cl 35, the statement that: "The water supply system shall be managed so that available water determinations for domestic and stock access licences of 100% of share components can be maintained through a repeat of the worst period of low inflows into this water source ...."
In Park v Murray Irrigation Ltd [2018] NSWCA 166 at [21], Sackville AJA said with the agreement of Bathurst CJ and me: "For the most part the parties, particularly the appellant, approached the appeal as though the construction of the contractual arrangements between Murray and the appellant could be dealt with independently of the statutory and regulatory context. It is true that the appellant's argument requires close consideration of the terms of the WE Contract and the other documents having contractual force between the parties. But they must be construed having regard to the powers and functions conferred on Murray by legislation and the extent to which the exercise of those powers and the discharge of those functions were susceptible to changes in the regulatory environment."
The same lack of regard for the underlying rights attended this litigation, despite my efforts during the trial to direct parties' attention to the source and nature of the rights in contest. Sackville AJA's admonition is equally apt to this litigation.
At common law, a riparian owner is entitled to the reasonable use of water: John Young & Co v Bankier Distillery Co [1893] AC 691; H Jones & Co Pty Ltd v Kingborough Corporation (1950) 82 CLR 282 at 299 and 342; [1950] HCA 11. As Professor Getzler has explained, the earlier history of riparian rights was complex, and indeed the conclusion reached at the end of the nineteenth century relied, somewhat unusually, on principles formulated in the United States of America: see J Getzler, A History of Water Rights at Common Law (Oxford University Press, 2004), pp 271-296. New South Wales law took a very different course.
First, the common law rights were in large measure abolished in colonial times. The right to "the use and flow and to the control of the water in all rivers" was vested in the State Crown, initially by s 1 of the Water Rights Act 1896 (NSW), succeeded by s 1 of the Water Rights Act 1902 (NSW) and s 6 of the Water Act 1912 (NSW). That course was facilitated by the absence of any protection against the acquisition or taking of common law rights without compensation (cf J N Pomeroy, A Treatise on the Law of Water Rights (2nd ed West Publishing Co, 1893), s174 Eminent domain). Hanson v Grassy Gully Gold Mining Co (1900) 21 LR (NSW) 271 confirmed as much, a decision which, although it has been questioned, was treated as binding at first instance by Cohen J, in the course of a valuable historical account in Van Son v Forestry Commission of New South Wales (1996) 86 LGERA 108, which has now been confirmed in ICM Agriculture Pty Ltd v The Commonwealth (2009) 240 CLR 140; [2009] HCA 51 at [54] (and see, less unequivocally, at [116]). Although the contrary view expressed in S Clark and J Renard, 'The Riparian Doctrine and Australian Legislation' (1970) 7 Melbourne University Law Review 475 cannot now be regarded as correct, pages 489-493 remain a useful summary of the legislative background.
However, s 2 of the Water Rights Act 1896 (and s 2 of the Water Rights Act 1902 and s 7 of the Water Act 1912) provided that: "The occupier of land on the bank of a river or lake shall have the right to use the water then being in the river or lake for domestic purposes, and for watering cattle or other stock, or for gardens not exceeding five acres in extent used in connection with a dwelling-house ..."
Here may be seen the statutory genesis of the term "Stock and Domestic" water. There is a question whether the right to use water for domestic purposes or for watering stock is separately conferred by statute, or is a remnant of the riparian landowner's right at common law, but nothing presently turns on that. So far as I can see, the extinction of common law right to the use and flow and control of river water rights at common law is now absolute: see Water Management Act 2000 (NSW), s 393. The vesting of rights of use and flow in the Crown is effected by s 392 of that Act.
In this way, the colonial and later State governments regulated water use. They did so in part by special legislation (including the Irrigation Act 1912 (NSW) and its successors - which was the method in Park v Murray Irrigation Ltd), and in part by licensing. One description of the latter is as follows: "Outside of the irrigation and special schemes, water was allocated through a complicated system of licensing under the Water Act 1912. There were seven different types of licences for surface water": P Tan, "An Historical Introduction to Water Reform in NSW - 1975 to 1994" (2002) 19 Environmental and Planning Law Journal 445 at 447.
The licence known as "WAL13360" was not in evidence. Possibly, no formal document recording its terms (as contemplated by s 367 of the Water Management Act) exists. Plainly enough, there was some entitlement to take water from the Macquarie River prior to 2004. The 1970 deed recites that the executing members: "are the applicants for an authority for a joint water supply scheme under Part II of the Water Act 1912 as amended of the State of New South Wales (such authority being hereinafter referred to as 'the Authority') for stock and domestic purposes and irrigations by pumping water from the Macquarie River in the said State."
I proceed on the basis that there was at least one licence issued under the Water Act 1912 (NSW). Its terms and conditions have not all been identified, but I would infer that it permitted the annual extraction of not more than 562 megalitres of water. It may be that, in the manner described by White J in Martin v Martin [2010] NSWSC 700 at [8] and [20]-[22], that licence was taken to have been replaced by an access licence held by the same persons under the Water Management Act 2000 (NSW) in 2003: see Clause 3 of Schedule 10 of that Act. That legislation expressly permits an access licence to be held by "co-holders". The register required to be kept under s 71 contemplated co-holders being recorded (see s 71A(1)(g)), as do other provisions of the Act (see for example ss 72, 72A, 73 and 74). These provisions appear to proceed on the basis that co-holders can bind themselves contractually as to the use of the share of the water permitted to be taken pursuant to the licence to which each is entitled.
So far as I can see, WAL13360, which is the basic right to take water from the Macquarie River, remained unaltered before and after the commencement of the TNSDS following execution of the deed by 60 members. The rights to water permitted by WAL13360 were, however, the subject of transactions at the time.

[18]

Some members made their WAL13360 co-holding available to the TNSDS

In the case of land which was not a co-holder of WAL13360, participation in the TNSDS required merely executing the deed. However, in respect of co-holders in WAL13360, there was also executed a "TNSDS WAL13360 Proponent Agreement". Despite that description, these were expressed to be, and executed as, deeds.
Thus in July 2012 proponent agreements were executed in respect of Wewona and Jamea. (It may be presumed that other co-holders of WAL13360, including the vendors of Myall Plains and Westholme who later sold to Mr Broughton, likewise executed proponent agreements.) The deeds recited the federal funding, the fact that the "proponent" (ie the owners of Wewona and Jamea, respectively) was a member of the TNIS and had agreed to be disconnected from the existing works of the TNIS, and that the TNSDS had agreed to construct and TNCL had agreed to operate, "a dedicated stock and domestic pipeline supply system in substitution for the previous TNIS supply works". By cl 9(a), each proponent was promised to be paid $20,000 as a contribution to the cost of infrastructure changes caused by the installation of a pressurised piped Stock and Domestic Water supply system. By cl 9(f), each proponent: "agreed to make available to the TNSDS water available from the Proponent's co-holding in WAL13360 for use by the TNSDS through the pipeline but otherwise subject to the Constitution of the TNSDS."
The proponent also granted a licence to access the proponent's lands for the purposes of the TNSDS.
In short, it appears that: 1. the common law rights of riparian landowners to take water, even for stock and domestic purposes, have been extinguished; 2. the right to take and use water vests in the State Crown, and is regulated through (relevantly) licences; 3. WAL13360 appears to have been taken to be a licence granted under the Water Management Act 2000 but was originally granted under the Water Act 1912; 4. the co-holders of WAL13360 are entitled to take their respective share of water from the Macquarie River for stock and domestic purposes; 5. those co-holders have by individual proponent agreements allowed that water to be used by the members of the TNSDS in accordance with the 2012 deed.

[19]

Noondoo and Yurone had no rights under WAL13360

I find that the entitlement to 22 megalitres of the 562 megalitres permitted to be extracted annually from the river was enjoyed by Ms Rosalie Broughton and Paul Broughton Investments Pty Ltd in their capacity as owners of Jamea, and that Mr Greg Broughton, in his capacity as owner of Yurone, did not enjoy or participate in any such entitlement. It is not clear to me that that finding was in fact disputed by the defendants (I have in mind transcript of 26 June 2018, page 172 line 44). However, in light of its criticality to the first issue, I should indicate that it follows from the following considerations: 1. First, the "title search" document for WAL13360 records Ms Rosalie Broughton as the owner of a 3000/56200 share of the licence. It is common ground that that is wrong, as to 800/56200, which is held by Mr Greg and Ms Kate Broughton as owners of Amaroo (they acquired Amaroo from Ms Rosalie Broughton). I understood it not to be disputed that the balance reflects a holding in respect of the 99% ownership of Jamea by Ms Rosalie Broughton, and even if that understanding is wrong, I would so find (understandably, and very properly, the plaintiffs eschewed any notion of indefeasibility from the "title search" documents). The critical point, for the purposes of the "title search" document, is that there is no entry for Mr Greg Broughton in respect of his ownership of Yurone. 2. Secondly, the proponent agreement by which the 30 megalitres of Stock and Domestic Water was made available to the TNSDS was drawn up for execution by, and was in fact executed only by, Ms Rosalie Broughton. 3. Thirdly, it is wholly consistent with Mr Greg Broughton's testimonial evidence in paragraphs 63-74 of his affidavit, as to which he was not challenged. 4. Fourthly, it is perfectly rational that properties which could not directly access the water which was made available through the scheme established by the TNIS would not be co-holders of WAL13360.
Similarly, I find that an entitlement to 22 megalitres of the 562 megalitres permitted to be extracted annually from the river was enjoyed by the natural person plaintiffs in their capacity as trustees of the Broughton Superannuation Fund in respect of their ownership of Wewona, and that Mr Greg Broughton, in his capacity as owner of Noondoo, did not enjoy or participate in any such entitlement, for substantially the same reasons. 1. First, the "title search" document for WAL13360 records the four natural persons as joint owners of a 2200/56200 share of the licence. That reflects the fact that prior to his death, the natural person plaintiffs together with the late Mr Paul Broughton were the owners of Wewona. 2. Secondly, the position is perhaps not quite so definitive as in the case of Jamea, because the ownership of Jamea and Yurone is entirely disjoint (by which I mean there is no common owner), while Mr Greg Broughton is a co-owner (in his capacity as a trustee) of Wewona and legal and beneficial owner of Noondoo. Even so, the finding is consistent with the unchallenged evidence of Mr Greg Broughton, and the fact that Noondoo did not adjoin the channels providing water under the TNIS.
It is possible that I have been over elaborate in the previous two paragraphs, and that it is clear from the conditions attaching to WAL13360 that Noondoo and Yurone could have no rights to Stock and Domestic Water taken under that licence. However, the terms of WAL13360 were not in evidence.

[20]

The Geolyse calculated hectare entitlement

The evidence established that on the date of the deed, 20 April 2012, drafts of a spreadsheet prepared by Geolyse Pty Ltd which referred to the area in hectares of various properties and the Stock and Domestic Water to which each would be entitled were in circulation amongst potential members, including Mr Broughton. The final version of that document (which the parties agree is the document mentioned in cl 73 of the deed) bears the date 14 May 2012. There are slight differences in earlier versions, reflecting the fact that 4 of the 92 properties on earlier drafts of the document are blanks on the final form, having the result that the total area of the properties identified on the document was some 147,000 hectares, as opposed to 150,000 hectares. It would appear that the four properties which did not participate in the scheme led to a marginal increase in the amounts of water specified in relation to the remaining 88 properties on the final form of the table.
The earliest draft schedule in evidence appears to be an annexure to a report dated June 2011. It lists Wewona, Yurone, Noondoo and Jamea on separate rows. It has no column for WAL13360 entitlements.
All versions of the schedule in evidence made provision for Wewona and Noondoo on separate rows, and Jamea and Yurone on separate rows. Later versions of the spreadsheet identified a WAL entitlement of each of those four properties as 11 megalitres per annum. Thus, although Wewona is some 60% larger than Noondoo, the spreadsheet appears to have divided the 22 megalitres of "Wewona" water equally between the two properties.
All versions of the spreadsheet identified a separate allocation of water for each named property. It may readily be seen that the water allocation of each property was the sum of a fixed daily allocation of 3,444 litres for domestic water, and an allocation for stock water which was proportionate to the area of the property. (For the most part, the remainder of the spreadsheet follows the same pattern, although some properties are listed with a fixed daily allocation of 6,888 litres for domestic water, and there is a handful of exceptional cases.)
I understood it to be common ground that regard could be had to the drafts of the Geolyse spreadsheet. That must be so. The precise formulation of the spreadsheet had to await a time when all who were going to execute the deed had done so - and only when that had occurred could the final amounts of water be calculated. Thus the parties were, when executing the deed, binding themselves in respect of a document which was not in existence. However, the fact that the document would take the same general form as the drafts which were in existence at that time was a surrounding circumstance to which regard may be had in construing the deed.
Focussing upon the eight properties owned or controlled by the plaintiffs, the spreadsheet relevantly provides as follows (I have omitted columns for "Map Ref No", "Legal Trading Name", "Scheme Branch", "6 Days Farm Storage (kL)", "Delivery Rate 22 Hours (Non WAL)(L/s)" and "Daily Rate 22 Hours(WAL)(L/s)": Owner Property Area (ha) WAL 13360 RIGHT (ML) Daily Domestic Allocation Daily Stock Allocation Total Daily Allocation (L) Annual Supply on 22 hours Delivery (ML) Sayers L Myall Plains 952 15 3444 10952 14396 15.00 Broughton Wenona [sic] 747 11 3444 8594 12038 11.00 Broughton Noodoo [sic] 449 11 3444 5166 8610 11.00 Broughton Jamea 1,012 11 3444 11643 15087 11.00 Broughton Glenmaree 749 0 3444 8617 12061 4.40 Hertslet JL & MAM Westholm [sic] 750 0 3444 8628 12072 4.41 Broughton Yurone 1,166 11 3444 13414 16858 11.00

[23]

Submissions based on cl 73, the schedule and the Geolyse spreadsheet

The plaintiffs' case has the attraction of simplicity. The plaintiffs said that it was established beyond argument that each of Wewona and Jamea had been entitled to 22 megalitres of Stock and Domestic Water per annum pursuant to WAL13360. The deed permitted properties which had not been co-holders in WAL13360 to participate. Such new members would be entitled pursuant to cl 73 to their "Geolyse calculated hectare entitlement". On the other hand, members who were co-holders in WAL13360 would be entitled, again pursuant to cl 73, to the amount of water which was equivalent to the existing co-holding in WAL13360 or the Geolyse calculate entitlement as the case may be whichever be the greater. Noondoo and Yurone were not co-holders of WAL13360, but they were allocated amounts of water on the Geolyse calculated hectare entitlement, and so they were entitled to those amounts.
True it is that the Geolyse spreadsheet erroneously listed Noondoo and Yurone as entitled to 11 megalitres of stock and domestic water per annum from WAL13360. But the more significant thing was that Noondoo and Yurone were listed separately on the spreadsheet from Wewona and Jamea, and those separate rows contained daily amounts of water.
The defendants pointed to the rows of the schedule to the deed which referred to "Wewona/Noondoo" and "Jamea/Yurone" as a single entry. The hectares next to those properties, 1,196 and 2,178 respectively, reflected the sum of the areas of Wewona and Noondoo, on the one hand, and Jamea and Yurone on the other. They submitted that it must have been plain when regard was had to the schedule that "Wewona/Noondoo" was being treated as one combined property, of 1,196 hectares, with a WAL13360 co-holding of 2200 of the 56200 shares. The same was true of Jamea and Yurone, save for the fact that the schedule contained what all parties accepted was an error in that of the 30 megalitres per annum co-holding attributed to Jamea and Yurone, 8 megalitres per annum should have been attributed to a separate property Amaroo.
The defendants submitted: "The fact that each of the two properties in question are on the same line in the TNSDS Schedule is wholly inconsistent with the Broughtons' case on construction of the document. If the entitlements of Noondoo and Yurone were intended to stand alone, and to be calculated separately from Wewona and Jamea, they could easily have been included on their own line, with their own hectare entitlement figure. That would not have been difficult for the drafter of the document to achieve if that was the intention."
The last element of that submission carries little weight. A submission that there was another way of drafting a problematic clause which would not give rise to the problem is seldom of great assistance in ascertaining the legal meaning of the problematic provision; see Cherry v Steele-Park at [111].
It is true that the schedule to the deed has a row which combines "Wewona/Noondoo" and gives the properties a combined area and concludes with a WAL entitlement of 2200. But I do not see why the number in the schedule - which is far from being error-free - answers the question posed by cl 73, which is the "quantity of water equivalent to [the member's] co-holding in WAL13360". The natural meaning of those words in cl 73 is the entitlement in law - namely, 22 megalitres per year for Wewona and Jamea, and none for Noondoo and Yurone. Those words may be contrasted with the "Geolyse calculated hectare entitlement", which can only ever be a number as calculated by Geolyse. That conclusion is strengthened when it is borne in mind that a member who had a co-holding in WAL13360 who participated in the TNSDS was required to enter into a proponent agreement whereby the member would make available the member's entitlement under WAL13360 to the TNSDS. That conclusion is further strengthened when regard is had to the 1970 deed.
The 1970 deed was textually very similar to the 2012 deed in many respects, but worked in a very different way. It is not necessary to summarise it in any detail (and indeed, only cl 73 was mentioned at any time during the hearing). Aspects of the 1970 deed were considered in Committee of the Trangie Nevertire Irrigation Scheme v Smith [2013] NSWSC 128 but not so as to bear upon the issues in the present litigation.
Much of cl 73 in the 1970 deed is verbatim identical to cl 73 in the 2012 deed. However, the proportionate entitlement of members under cl 73 of the 1970 deed was obtained by determining: "the total quantity of water allocated under the Authority from time to time as the Member's Acreage Entitlement or Stock and Domestic Entitlement at the relevant time bears to the total of all Acreage Entitlements and all Stock and Domestic Entitlements at that time in the Scheme added together …"
The clause made provision that, for that purpose, "Acreage Entitlements counted as one (1) and each Stock and Domestic Entitlement counted as ten (10)". The schedule of the 1970 deed identified Stock and Domestic members, as well as giving a list of "Acreage Entitlements" in the right-most column.
It may be seen that the 1970 deed gave a single answer to the question of how much water a member was entitled to under cl 73, by reference to a formula based on "Acreage Entitlements" and "Stock and Domestic Entitlements". The 1970 schedule was determinative of the water entitlement of each property.
The 2012 deed addressed the same question quite differently. Every member was entitled to at least the volumes of water on the Geolyse spreadsheet. In addition, members who had been members of the TNIS who had made available to the TNSDS their co-holdings under WAL13360 were entitled to that amount of water, if it was greater than the amount on the spreadsheet. The schedule to the 2012 deed is not determinative of the water entitlement of each property.

[24]

The parties' more wide-ranging submissions

The plaintiffs prayed in aid what was said to be the underlying commercial purpose, namely, to make Stock and Domestic Water available to more properties. But that purpose is expressed at too high a level of generality to be useful. It is not the case that every question of construction of the deed is resolved by adopting that approach which yields members being entitled to the larger volume of water. The position is substantially similar to the approach in construing a tax statute: although the purpose is to raise revenue, it does not mean that each section is construed so as to maximise the revenue generated: Carr v Western Australia (2007) 232 CLR 138; [2007] HCA 47 at [6].
The defendants pointed to a series of surrounding circumstances said to favour their construction. They said that Noondoo and Yurone were not TNIS members, were not WAL13360 co-holders, had no pipeline running through them, had no right to participate in the TNSDS, were "satellite properties", entered into no proponent agreements, and had no primary offtake. They submitted that Mr Broughton gained a valuable right by Noondoo and Yurone becoming members, namely, Stock and Domestic Water taken from the Macquarie River could be used on those properties. And they said that there was no contemporaneous document or statement that Noondoo and Yurone would have their own separate entitlement.
The last proposition turns upon what is made of the drafts and final Geolyse documents, which is the ultimate question. The other surrounding circumstances do not, in my view, bear upon the question of construction.
The defendants pointed to various inconsistent stances of Mr Broughton over the years. That included an immediate complaint to Mr McKay, the solicitor who seems to have been primarily involved in drafting the deed and other transactional documents, of the error concerning Amaroo but remaining silent as to Noondoo and Yurone. The oral complaint concerning Amaroo was followed up in writing, but seems not to have extended to the position of Noondoo and Yurone. They pointed to the fact that Mr Broughton had read the schedule carefully before signing the deed, and must have appreciated that Yurone was treated collectively with Jamea, and Noondoo was treated collectively with Wewona. Mr Broughton eventually went so far as to decline to pay fixed fees in respect of Noondoo and Yurone, and, when debt proceedings were brought in the Local Court at Dubbo against him, filing a defence to the effect that those properties were not members of the scheme. I was told that those proceedings were settled; it was not suggested that any judgment had been entered. Rather, it was said at one stage that the defence amounted to an admission against Mr Broughton.
Much of the cross-examination of Mr Broughton, which occupied some two hours, was directed to these points. I do not think anything turns on his answers. For completeness, and in fairness to him and those in dispute with him, although his stance has not been consistent, I would not regard anything he has done to which the cross-examination was directed as other than seeking to act in his own or his family's best interests, and I see nothing wrong with that. I do not accept, as was put to him, that he knowingly said or instructed his solicitor to say something which he knew not to be true.
I do not consider that anything turns on Mr Broughton's conduct, most of which post-dates the execution of the deed. Whether or not Noondoo and Yurone are members which are themselves independently entitled to water under cl 73 is a question of law, and is not affected by statements made by Mr Broughton to the contrary, until and unless some other legal principle (such as estoppel, waiver, abandonment, res judicata or issue estoppel) defeats that contractual entitlement. No such principle was pleaded. No such principle was relied upon by the defendants.
Subject to some other doctrine of law or equity intervening, the fact that either or both parties are mistaken as to their rights under the deed does not affect the quality of those rights. "The general principle of the law is that 'it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made'": Administration of Papua & New Guinea v Daera Guba (1973) 130 CLR 353 at 446; [1973] HCA 59. The account of the rule in Heydon on Contract (Lawbook Co 2019) at [9.1600]-[9.1780] is enlightening. Like much in law, the rule is subject to complexities, some of which are poorly known. But for present purposes, nothing in Mr Broughton's subsequent conduct is relevant to the question of construction, and the defendants did not ultimately dispute the general rule that post-contractual conduct was not relevant.
The defendants submitted that the provisions of the Deed, drafted by a lawyer, should be given precedence over the entries in the Geolyse spreadsheet, which was drafted for another purpose and not by a lawyer. I do not think that submission is apt. The question is the meaning of cl 73, which refers in terms to the Geolyse spreadsheet in order to determine one element of the member's entitlement to Stock and Domestic Water. Those words compel regard to be had to the Geolyse spreadsheet.
Both sides appealed, repeatedly, to what was said to be the underlying merits of their position. Mr Broughton maintained that he was seeking only to obtain his entitlements. The defendants said that Mr Broughton was "gaming" the system. But the parties have chosen to record their bargain in a deed, and such entitlements as the plaintiffs enjoy are determined by construing the deed. They are not determined by an appeal to more abstract and doubtless contestable questions of morality or fairness. The outcome of litigation such as this does not turn on the worthiness or public-spiritedness of any of the parties. The question is as to the legal meaning of the words in the document recording their bargain.

[25]

Conclusion on first issue

The foregoing reasons are lengthy and a little complex. They may be summarised as follows. 1. First, in accordance with the execution pages, the 1970 deed and the parties' common position, the 2012 deed is to be construed on the basis that it speaks of membership not by individuals but by named properties. The incidents of membership - including the obligations to pay charges and be liable for calls, and the entitlement to Stock and Domestic Water - are determined on the basis of individual properties. 2. Secondly, the entitlements to Stock and Domestic Water are conferred by the 2012 deed and are determined as a matter of contractual construction. 3. Thirdly, the 2012 deed is replete with errors. Some are obvious and acknowledged, including the omission of Amaroo's annual entitlement to 8 megalitres of Stock and Domestic Water. Others (such as the definition of "Stock and Domestic Entitlement") appear to have come about by reason of the replication of clauses from the 1970 deed. 4. Fourthly, the Stock and Domestic Water regulated by the 2012 deed was regulated by WAL13360, and so the premise of the deed was that existing co-holders of WAL13360 would make that water available to the TNSDS. A fundamental aspect of the transaction, reflected in cl 73, is that each member of the new unincorporated association who was formerly a co-holder of WAL13360 would be entitled to at least the same amount of Stock and Domestic Water. 5. Fifthly, there were to be many new members of the TNSDS who had not been co-holders in WAL13360. The entitlements to Stock and Domestic Water of those members were to be identified in the Geolyse spreadsheet, which could not be finalised until the precise membership of the TNSDS was determined, but drafts of which were in circulation when the deed was executed. 6. Sixthly, Noondoo and Yurone were not co-holders of WAL13360. They were separately listed on the Geolyse spreadsheet. The spreadsheet identified the areas of Noondoo and Yurone, and calculated daily allocations for domestic and stock purposes (the latter by reference to area), and added them to yield a "Total Daily Allocation" in litres. 7. Seventhly, the ordinary meaning of "his Geolyse calculated hectare entitlement" in cl 73 of the 2012 deed for a member which had not been a co-holder of WAL13360 is the "Total Daily Allocation" in the Geolyse spreadsheet. 8. Eighthly, while it is true that the Geolyse spreadsheet also identifies an annual amount of 11 megalitres for each property, which reflects half of the co-holdings of WAL13360 for Wewona and Jamea, that is both erroneous as a matter of fact, and does not answer the description of a "Geolyse calculated hectare entitlement". While it is true that the schedule to the deed combines Wewona and Noondoo, and Jamea and Yurone, the schedule does not answer the question posed by cl 73.
It follows that, based on the text and ordinary meaning of cl 73, the plaintiffs' construction is the preferable one. That conclusion depends upon (a) Noondoo and Yurone not having any co-holding under WAL13360, and (b) Noondoo and Yurone being entitled to a Geolyse calculated entitlement pursuant to the second limb of cl 73. I acknowledge that that conclusion sits awkwardly with the way in which those properties are treated in the schedule to the deed, and the references to an 11 megalitre annual supply in the Geolyse spreadsheet. But this is not a case where there is a clear mistake which can be corrected as a matter of construction. As Lord Rodger observed in Multi-Link Leisure Developments Ltd v North Lanarkshire Council [2010] UKSC 47; [2011] 1 All ER 475 at [27], there are cases where "no construction is ever going to produce perfect harmony amongst all its elements". This is one such case. Given the infelicities in the drafting of the deed, it would be surprising if the position were otherwise.
Further, acceptance of the defendants' submission would lead to an unlikely consequence. If, by joining the TNSDS, Noondoo and Yurone were only entitled to share in the annual 22 megalitres entitlements of Werona and Jamea, then in a real sense those properties would be treated differently from other properties which are not WAL13360 co-holders, all of which were entitled to a quantity of Stock and Domestic water in their own right.
Still further, I could see mroe force in the defendants' construction if they had contended that Noondoo and Yurone, rather than being separate members in their own right, were only jointly members in conjunction with Wewona and Jamea. That is to say, if Noondoo and Werone were considered one single large property for the purpose of membership (and likewise Jamea and Yurone). That would be a natural reading of the schedule. But that is not the defendants' case (and, if it were, would confront problems of a different nature). The defendants maintain that Noondoo and Yurone are individually subject to the burden of membership, but are not entitled to the benefits enjoyed by all other members which had no co-holding in WAL13360. That is an improbable result.
It follows that the plaintiffs are entitled to relief in respect of Mr Broughton's claimed entitlement to water in respect of his ownership of Noondoo and Yurone. Those properties are entitled to Stock and Domestic Water by virtue of the TNSDS in respect of the amounts of Stock and Domestic Water stated on the Geolyse spreadsheet, namely, a daily entitlement of 8,610 and 16,858 litres respectively, or some 3.143 and 6.153 megalitres annually, such entitlements being separate from the 22 megalitres annually of Stock and Domestic Water to which Wewona and Jamea are entitled.

[27]

Factual background

In around the middle of 2013, Mr Broughton addressed a meeting of the Committee of the Scheme. The minutes record that the charges for the first quarter accounts had been higher than Mr Broughton had been led to expect and that he "now wants to terminate some of his memberships". He requested removal of Myall Plains, Noondoo, Yurone and Amaroo from his hectare allowance. The minutes record that: "After Greg left the Committee discussed the request and decided that any member leaving would cause a precedent that would have to be followed by any other member who wanted to leave. It was decided that any member leaving should not be at the disadvantage of those remaining."
The documents suggest there was some other contemporaneous disappointment with the prices charged for Stock and Domestic Water.
Mr Broughton addressed the first annual meeting of the association on 28 August 2013, apparently at some length. He gave a series of examples which may or may not have been accurate, but which reflected the fact that the cost per megalitre varied greatly depending upon his use, because of the (relatively high) fixed charges. The minutes record him saying: "I am now up for $7,100.00 before I turn a tap on. If I use 5 megalitres it is going to cost me $1,616.00 per megalitre under the new pricing revised today, if I use 10 megalitres $928.00 per megalitre. For me to be on a level playing field with those who hold a small hectare allocation in this new system and who are using my water, I have to use my full 33 megalitres under the new pricing I will be paying $448.00 per megalitre. I am supplying my water for the new system now I am asked to supply the financial support to keep the pipeline."
At the special general meeting held on 31 October 2013, the first resolution was "That a Member may make application to the Committee to terminate his membership of the TNSDS." A secret ballot was conducted and the motion failed.
Passing over some years of seeming ongoing resentment between the plaintiffs and the Committee of the TNSDS, on 31 August 2016 the plaintiffs purported to resign their membership of the association in their capacities as proprietors of Yurone, Westholme, Noondoo, Glenmaree and Wewona. By that stage, the proceedings had been commenced, and the Committee determined not to process the application pending the outcome of the litigation. Both sides' pleadings sought declaratory relief in respect of the purported resignation.
During the course of the hearing in June 2019, senior counsel for the plaintiffs made it clear that the issue relating to resignation was much narrower than had formerly been agitated by Mr Broughton and also narrower than had been pleaded, even in the Further Amended Statement of Claim. First, Mr Broughton now sought only to resign from the association in his capacity as owner of Noondoo and Yurone. Secondly, he sought only to do so in the event that Noondoo and Yurone were not separately entitled to water under the scheme by reason of their hectare entitlement pursuant to the Geolyse spreadsheet.
For its part, the defendants advanced no opposition to Noondoo and Yurone being permitted to resign if (contrary to their contention) Noondoo and Yurone were not entitled to any water. That concession was properly made. It could not be the case that Noondoo and Yurone were obliged to pay fixed fees but could not lawfully obtain any benefit from the rights to water under the scheme.
The contested issue relating to the right to resign arose in circumstances where the defendants contended, and the plaintiffs denied, that Noondoo and Yurone were entitled to water under the scheme, but only because those properties' entitlements were regarded as part of the 22 megalitres per annum reflected by the respective co-holdings of Wewona and Jamea under WAL13360. In that case, the defendants said those properties could not unilaterally resign.

[28]

Submissions

Both sides invited me to apply or distinguish a line of authorities including Finch v Oake [1896] 1 Ch 409, Field v Battye [1939] SASR 235 and Redhead Grange Incorporated v Davidson (2002) 55 NSWLR 14; [2002] NSWSC 90. I understood it to be common ground that (a) the issue was one of contractual construction, and (b) the question was whether a right to "resign" might be inferred, in the absence of any express provision.
The parties gave understandable emphasis to different themes in the decisions. The plaintiffs emphasised that this was not a case like Field v Battye where a person might on the one hand resign from the financial obligations of membership, but retain the benefits. On the other hand, the defendants emphasised that the effect of resignation would be an increase in the burdens imposed upon those who remained.
It is to be borne in mind that these decisions address signally different legal regimes. First, it is one thing to be a member of a company or an incorporated association.
By and large, status as a member of a separate legal entity engages certain statutory provisions, including being contractually bound by the constitution: Corporations Act 2001 (Cth), s 140; Associations Incorporation Act 2009 (NSW), s 26(1) - even if membership is acquired by transfer. That is to say, by dint of statute, a member is in contractual relations with other members, merely by acquiring an outgoing member's share, or by joining the incorporated association, even if the new member has never had any dealings with the other members and does not even know who they are.
Secondly, there is no "office" of membership, at least as that word is conventionally understood, in connection with "resignation". Most companies have boards of directors, and the Associations Incorporation Act 2009 requires associations to have a committee of at least three members to manage its affairs. The bundle of powers, rights and obligations of a director or committee member may naturally be regarded as an office, to which a person may be appointed and from which a person may resign. But the TNSDS, which is an unincorporated association, is nothing more or less than the contractual rights between members.
It is in one sense unhelpful to refer to Mr Broughton's right to resign his membership (or for that matter for Noondoo or Yurone to resign "their" "memberships"). The question is whether Mr Broughton as owner of Noondoo and Yurone can cease to be bound by the obligations in the deed in respect of those properties by his unilateral act.

[30]

Orders

The result is that the plaintiffs have succeeded on what they regarded as the primary issue advanced by them in the litigation. The defendants have succeeded in what they regarded as the primary issue in the litigation. The plaintiffs are entitled to declaratory relief reflecting the separate entitlement of Noondoo and Yurone to Stock and Domestic Water by virtue of their membership of the unincorporated association, in addition to the 22 megalitres per annum to which Wewona and Jamea are entitled. There was nothing in the evidence to suggest that either the named defendants, or the other members of the association who are represented by them, would do otherwise than abide by this Court's decision. Against the possibility that that might prove not to be so, the orders I will in due course make will permit further application to be made, on evidence, for injunctive relief.
The declaratory relief sought in the Further Amended Statement of Claim was unqualified. Relief in those terms does not reflect the reality that, on any view of the matter, such rights as Mr Broughton enjoys in his capacity as owner of Noondoo and Yurone are qualified by the powers conferred by the deed upon the Committee (and, I presume, the powers to which WAL13360 is subject). To take one obvious example, in a dry year, members may not receive the entirety of Stock and Domestic Water to which they would otherwise be entitled. A form of declaration supplied on the third day of the hearing incorporates the qualified entitlement of the plaintiffs, and in due course I propose to make an order in terms of the first order sought, subject to any further submissions that might be made as to its form in light of these reasons.
Otherwise, the balance of the Further Amended Statement of Claim will in due course be dismissed. The defendants had filed a cross-claim, seeking declaratory orders in relation to the application made by Mr Broughton in 2016. That application was refined during the hearing, and given the outcome on the first issue, is not pressed even in its refined form. The declarations in the form sought in the cross-claim are entirely moot. My inclination is to dismiss the cross-claim, but I will hear the parties further on that. I will hear further from the parties in relation to costs, having regard to their partial success, the abandonment of issues prior to the hearing, and the possibility that there has been correspondence of which I am presently unaware.
The only order I shall presently make is as follows: Direct the parties to supply to my Associate within 21 days agreed short minutes of order, or in default of agreement, direct the plaintiffs to supply a short minute of orders for which they contend, and short submissions in support of those orders, within 21 days, with the defendants to supply the orders for which they contend, and short submissions in support, 14 days thereafter, and the plaintiffs to supply any submissions in reply 14 days thereafter. The submissions are to indicate whether the parties seek a further oral hearing on the question of relief, and, if so, their basis for doing so.

Broughton v Leslie

At a glance

Court

Decision date

Before

Source

Judgment (31 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (34)

Cited By (2)