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[2005] VSCA 220
Court of Appeal (Vic)
2005-09-06
CALLAWAY, BUCHANAN and ASHLEY, JJ.A.
Original judgment source is linked above.
Contract - Agreement between landowners and water authority - Landowners agreeing to relinquish irrigation rights - Undertaking by authority that as a result of agreement "no reduction in the right to drain ... will result" - Whether "right" includes permitted practice - Whether any reduction has resulted, or threatens to result, from relinquishment of irrigation rights - Whether evidence of surrounding circumstances admissible to construe agreement.
1 On 19th December 2003 Habersberger, J. dismissed the proceeding brought by the appellants against the respondent. This is an appeal against his Honour's order. In my opinion, the appeal should be dismissed. It is possible to state my reasons briefly provided that they are read in conjunction with the reasons below, which, among other things, describe the negotiations between the parties, the agreement that they made on 30th July 1999 and the expert and other evidence that was said to be relevant to the construction of that agreement.
2 Clause 6 of the agreement provides that the respondent will "[u]ndertake that as a result of this agreement no reduction in the right to drain to Goulburn-Murray Water drainage will result".
3 The first obstacle that the appellants would have to overcome for their appeal to be successful relates to the word "right" in that clause. It was conceded that, immediately before the agreement was made, they had no legal right to discharge water into the respondent's drain in excess of 1.2 litres per second per hectare. In practice they could do so whilst the land use remained unchanged. The word "right" would have to be construed as referring to that practice. I assume in favour of the appellants that the word "right" might be given such a loose meaning in an agreement drafted without professional assistance.
4 The second, and more formidable, obstacle that the appellants would have to overcome, even if "right" were construed to refer to what could happen in practice, relates to the two references to "result" in clause 6. The natural meaning of the clause is that no reduction in the right to drain (whatever that means) will result from the agreement, i.e. from the appellants' relinquishment of their irrigation rights. No reduction in the right to drain (in any sense) has resulted, or threatens to result, from the agreement or from that relinquishment. Mr Watts submitted that the clause
should be read as if it said that the respondent will "[u]ndertake that, as a result of this agreement, there will be no reduction in the right to drain to Goulburn-Murray Water drainage". That departs from the natural meaning and requires the excision of the last two words and the insertion of the words "there will be". Even then, for the appellants to succeed, one would have to construe "as a result of this agreement" as meaning something like "in consideration of this agreement". In my opinion, the clause bears its natural meaning.
5 There is yet a third obstacle that the appellants would have to overcome. Even if clause 6 meant that, in consideration for relinquishing their irrigation rights, the respondent agreed that they would continue to be able to discharge water from the land at the existing rate, it would have to be shown that that entitlement was to continue even if there were further industrial development of the land. (I express the matter that way because I accept counsel's submission that the clause applies to the whole of the land, not just Lot 1, and because there is already some industrial development on Lot 2.) I doubt that the appellants could overcome that obstacle, but the point need not be decided.
6 I also doubt that the evidence of negotiations and other extrinsic material relied on at the trial was admissible. Habersberger, J. was of the same view, because he concluded that clause 6 was unambiguous. Nevertheless his Honour went on to consider the evidence of surrounding circumstances and concluded that it supported his construction. I take comfort from that conclusion. In particular, in my opinion, to emphasize the references to "result" in clause 6 accords with the appellants' concern that, if they relinquished their irrigation rights, their drainage entitlements, legal or practical, would not be prejudiced.
7 In my opinion the appeal should be dismissed for the reasons stated by Callaway, J.A.
8 I have had the advantage of reading in draft the reasons of Callaway J.A. I agree with his Honour that the appeal should be dismissed. I would add the following to what his Honour has said.
9 The centrepiece of the agreement of 30 July 1999 was the relinquishing by the appellants of the right to irrigation water for what was to become Lot 1 of the sub-division. I consider, given that context, that the meaning of clause 6 is clear. The respondent thereby undertook that the appellants' right of drainage from their land was not to be reduced by the circumstance that they were relinquishing the irrigation right which would otherwise attach to the proposed Lot 1. That was the interpretation placed upon clause 6 by the learned trial judge. Rightly so, in my respectful opinion.
10 Such a construction accords with the circumstances which attended the preparation and execution of the document - though strictly the same need not be considered. Thus -
• There seems to be no doubt that, prior to and at the time when the agreement was executed, the appellants were enjoying a "right" of discharging as much water from their land, and at so fast a rate, as the diameter of the pipe which led from their property to the respondent's drainage channel would permit. The evidence showed, as to rate, that discharge was possible at up to 23 litres per second.
• It seems very clear that the appellants wished to ensure that by giving up their right to irrigation water for the proposed Lot 1 they did not lose their "right" to discharge drainage water into the respondent's drainage channel. That is, they perceived, a linkage between the two rights.
• It also seems very clear that the appellants wished to ensure, as a subtext of not losing their "right" to discharge drainage water, that the status quo be retained. Hence their objection to the second draft version of the agreement, which referred to discharge "at the current rural rate".
• For its part, it seems to me, the respondent was content that the status quo as to drainage should not be affected by the appellants relinquishing the right to have irrigation water for the proposed Lot 1.
11 In my opinion the "right" of drainage referred to in clause 6 should be understood to refer to the then-existing situation; and not to a discharge limit of 1.2 litres per second per hectare. Such limit was established as a policy of the respondent. But the appellants did not know that; and it had never been applied to drainage from their land.
12 So to construe "right" in clause 6 is to give the word a variable meaning where used from time to time in the agreement. But the document was drawn by laymen; and in my opinion that is the sense of the clause, considered in context. I add that if regard were had to the circumstances which I mentioned in [10], my opinion would be reinforced.
13 The appellants would have it that by clause 6 the respondent committed itself to receive drainage from their property at whatever rate the discharge pipe would permit - without limit as to time and without regard to the possibility of change of circumstances. It is wholly improbable that such an agreement was reached. Particularly that is so where the status quo was so obviously at odds with the respondent's discharge policy.
14 In the event, circumstances did change. The respondent was called upon to consider a drainage plan formulated in respect of Lot 1 in the context of a proposed commercial development of that lot. It is not in point that the development was in contemplation when the agreement of 30 July 1999 was executed. Asked to consider an actual drainage plan, the respondent resolved to implement its discharge rate policy; requiring, so far as was necessary, that a retardation basin be established to ensure that the discharge rate did not exceed the limit set by such policy. It was not disabled from so acting. Implementation of the policy did involve a reduction in the status quo as to drainage; but one not deriving from the agreement. There was no breach of the agreement, actual or threatened, thereby.
[1] D'Agostino v. Goulburn Murray Rural Water Authority [2003] VSC 497.
D'Agostino
Golburn Murray Rural Water Authority [2005] VSCA 220