Hutchins Pastoral Co Pty Ltd and Ors v Minister for Water and Energy

Civil Procedure Act 2005 LEGISLATION CITED : Water Act 1912 Water Management Act 2000

Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 CASES CITED : CGU Insurance Ltd v Watson [2007] NSWCA 301 Greinert v Jarrett [2004] NSWSC 209 Spencer v Minister for Climate Change and the Environment [2010] NSWCA 75

Hutchins Pastoral Co Pty Ltd (1st Plaintiff) Danwillach Pty Ltd (2nd Plaintiff) PARTIES : Delta Creek Pty Ltd (3rd Plaintiff) Minister for Water and Energy (NSW) (1st Defendant) State of New South Wales (2nd Defendant)

COUNSEL : B. O'Donnell (Plaintiffs) C. Spruce (Defendants)

SOLICITORS : Kell Moore Solicitors Pty Ltd (Plaintiffs) Crown Solicitor (Defendants)

• 16 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2009/298126 HUTCHINS PASTORAL CO PTY LTD v MINISTER FOR WATER AND ENERGY AND ANOR

JUDGMENT 1 McCALLUM J: The plaintiffs in these proceedings are three companies ("the Hutchins companies"), each of which owns a separate parcel of land within the State of New South Wales. Their access to the water sources on their land is governed by the Water Management Act 2000 and a management plan made under that Act by the first defendant, the Minister responsible for the administration of the Act. In these proceedings, the Hutchins companies bring two claims related to their water entitlements under that legislative scheme against the Minister and the State of New South Wales. 2 The first claim is an administrative law claim seeking declaratory relief as to the proper construction of the management plan and orders requiring the Minister to recalculate the future water allocation of a water access licence and supplementary water access licence issued under the plan. The second is a compensation claim seeking damages for breach of common law duty of care and statutory duty in respect of the past water allocation that the companies have received since the plan came into force. 3 The application presently before the Court is the defendants' application to have the proceedings stayed on grounds related, broadly, to the existence of two other sets of proceedings in which common or related matters allegedly arise involving the same parties. The two other proceedings are proceedings commenced by the Hutchins companies in the Land and Environment Court and earlier proceedings commenced in this Court. 4 In order to determine the issues raised by the defendants' application, it is necessary to explain the legislative framework within which the water access licence and supplementary licence were issued and the relevant features of the other proceedings between the parties.

Legislative framework 5 Prior to the commencement of the Water Management Act, access to groundwater was governed by the Water Act 1912. Under that Act, all water bores were required to be licensed. Each of the Hutchins companies held a bore licence under that Act. 6 The Water Management Act commenced on 1 January 2001. However, water access rights in the Lower Murrumbidgee continued to be governed by the Water Act until October 2006. The first plaintiff, Hutchins Pastoral Co Pty Ltd, was granted its bore licence in 2002. The other two Hutchins companies were granted their bore licences in March 2003. 7 The objects of the Water Management Act are "to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations": s 3 of the Act. The Act makes provision for the Minister to make management plans for the management and sharing of water. On 26 February 2003, the Minister gazetted the Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 made under s 41 of the Act. That plan governs the area in which the land owned by the Hutchins companies is located. One of the purposes of the Water Sharing Plan is to reduce the allocation of water from the Lower Murrumbidgee groundwater sources to a sustainable level. 8 The plan did not come into force as originally gazetted. Under the original plan, the groundwater entitlements of all licence holders were to be reduced consistently across the board to approximately 52% of pre-existing entitlements. An amendment order made by the Minister in respect of the plan under s 45 of the Act introduced a new methodology for reducing water entitlement. Under the new methodology, water entitlements were to be reduced variably according to a formula contained in s 25C of the plan. The formula produces the calculation of the "share component" of the relevant licence holder. One of the components of the formula is the amount of water in fact extracted by the licence holder historically over a fixed period. That figure is referred to in the formula as the "history of extraction component". Once calculated (based on historical data), it is a constant in the formula used to determine each licence holder's water entitlement from time to time. 9 The formula favoured licence holders who had historically extracted high levels of water. Licence holders who had not previously used their full entitlement under the Water Act had a smaller entitlement under the amended plan than they would have under the plan as originally gazetted. However, the formula for calculating a licence holder's history of extraction component excluded "zero and low extraction years" from the calculation. 10 On 1 October 2006, the plan as amended came into force. The three bore licences then held by the Hutchins companies were "linked" licences within the meaning of schedule 10 of the Water Management Act, that is, they were linked by a condition specifying the maximum quantity of water that could be drawn under all three licences. They were accordingly to be replaced by a single water access licence in accordance with clause 17 of schedule 10. 11 Although the three bore licences were linked, each was held independently by one of the three Hutchins companies and related to a separate bore on a separately owned parcel of land. However, since the Water Management Act contemplated that linked bore licences were to be converted to a single licence under the new regime, the task under s 25C was to calculate a single "share component" for the Hutchins companies. 12 In those circumstances, the Minister appears to have treated the three parcels of land owned by the Hutchins companies as properties that had been "amalgamated" within the meaning of the rules in Appendix 4 of the Water Sharing Plan. Rule 1 of Appendix 4 provides: "The history of extraction for each entitlement is calculated separately, irrespective of ownership." 13 Rule 10 of Appendix 4 provides: "Where properties have been amalgamated, all extraction prior to amalgamation will be combined and together with extraction occurring after amalgamation will be used to calculate [the history of extraction]." 14 The central contention of the Hutchins companies in the administrative law claim in the present proceedings is that the approach of the Minister in that respect entailed error. It produced a disadvantage to the Hutchins companies because two of the companies are alleged to have had significant "zero and low extraction years", which would have been excluded from their individual history of extraction component if the properties had been treated as separate properties for the purpose of the calculation.

Other relevant litigation 15 In order to understand the grounds on which a stay is sought, it is also necessary to explain the history of the other litigation relating to the application of the Water Management Act to the Hutchins companies. The two relevant proceedings are the proceedings in the Land and Environment Court and the earlier proceedings in this Court. The defendants in each case include the defendants to these proceedings. The course of the two other proceedings is set out in the written submissions of counsel for the defendants, from which the following summary is largely drawn. 16 The proceedings in the Land and Environment Court were commenced on 22 December 2006. The original applicants were the Hutchins Companies and two other companies. Other parties also affected by the Water Sharing Plan (being parties involved in the business of primary production) were later joined as applicants in those proceedings. Ultimately, there were over 30 applicants in the proceedings. 17 Points of claim filed in the Land and Environment Court disclose three kinds of claim made in those proceedings. First, it is contended that the Water Sharing Plan and the amendment order are invalid. Those contentions are referred to by the parties as "the invalidity claim". The Hutchins companies contend that they did not initially give instructions to their former lawyers to commence proceedings challenging the validity of the legislation, but that they were subsequently persuaded to remain as applicants in that claim. 18 Alternatively, the points of claim contend that if, the Water Sharing Plan and the amendment order are valid, then the entitlements of the Hutchins companies and one other applicant have been wrongly calculated under the plan as a result of the defendants' misconstruing rule 1 and rule 10 of Appendix 4. Those contentions are referred to by the parties as "the amalgamation claim". The defendants contend (and I think it is common ground) that the amalgamation claim in the Land and Environment Court was in substance the same as the administrative law claim in the present proceedings. The Hutchins companies contend that the amalgamation claim was always their primary focus. 19 Finally, the applicants in the Land and Environment Court seek damages for negligent misrepresentations allegedly made to them before October 2006 by officers of the State of New South Wales in relation to entitlements under the Water Sharing Plan. Those claims were pleaded by the former lawyers and, as explained below, are apparently no longer pressed in any form by the Hutchins companies. 20 The earlier proceedings in this Court were commenced on 13 December 2007. The plaintiffs in those proceedings are the Hutchins companies and their directors, Mr and Mrs Hutchins. As with the proceedings in the Land and Environment Court, the pleadings in those proceedings were drafted by the Hutchins companies' former lawyers. In the pleadings, the Hutchins companies claim damages for a series of statements and representations allegedly made at various times over a lengthy period. They include statements allegedly made to Mr Hutchins before the Hutchins companies purchased their land, statements made after the land was purchased as to works being carried out on the land and statements made between April 2001 and October 2006 as to the loss of water entitlements under the Water Sharing Plan. 21 In their written submissions in support of the present application, the defendants contended that the allegations made in the earlier proceedings relating to loss of water entitlements overlap both with the allegations previously made in the Land and Environment Court proceedings and with the compensation claim made in these proceedings. During the hearing of the present application, however, counsel for the Hutchins companies indicated (as I understood his remarks) that those allegations are no longer maintained. He said: "the claim that there was negligent misrepresentation by government officials as to the nature of the plan and the history of extraction scheme is not something that the Hutchins companies pursue any more…The only things that the Hutchins companies are claiming are the amalgamation claim including compensation and erroneously put it together and a negligent misrepresentation relating to the Native Vegetation Act." 22 Counsel stated that the Native Vegetation Act claim is what the earlier proceedings in this Court are "primarily about". However, he acknowledged that the negligent misrepresentation claim was "still in the Native Vegetation pleadings". It appeared at the hearing before me that the defendants had not previously been made aware of any decision on the part of the Hutchins companies to abandon some of the claims pleaded in the earlier proceedings. Upon hearing that information (and assuming its correctness), counsel for the defendants was constrained to accept that the key issue on the present application is the effect on the present proceedings of a declaration of invalidity in the Land and Environment Court proceedings. 23 In 2008, a date fixed for the hearing of the Land and Environment Court proceedings was vacated and the proceedings were "held in abeyance" pending the outcome of decisions of the Court of Appeal and the High Court in other proceedings concerning the Water Sharing Plan and other management plans made under the Water Management Act. During that period, the solicitors who now act for the plaintiffs wrote to the defendants indicating that the Hutchins companies wished to discontinue the Land and Environment Court proceedings and to pursue the amalgamation claim in separate proceedings. 24 On 24 June 2009, the earlier proceedings in this Court were stayed generally, by consent, pending the finalisation of the Land and Environment Court proceedings. In view of the overlap between the issues raised by the pleadings in the earlier proceedings in this Court and the issues raised in the present proceedings, there would seem to have been a measure of tension between the decision to consent to that stay and the determination to pursue the present claims. 25 It may be that the tension is resolved by the decision to abandon some of the claims presently pleaded in the earlier proceedings, but that should not be left as a matter of speculation. I accept, as submitted on behalf of the defendants, that at the very least the position in relation to the two sets of proceedings should be clarified and the pleadings reconciled with the plaintiffs' instructions. 26 Separately, counsel for the Hutchins companies indicated that the stay of the earlier proceedings has continued by consent because in one respect those proceedings are dependent upon the determination of the amalgamation claim in the present proceedings. The particulars of loss in the earlier proceedings include the contention that, had there been no Native Vegetation Act intervention, there would have been a greater "history of extraction" result for the purpose of the calculation under the Water Management Act (presumably because the Hutchins companies would have cleared more land and so used more water for irrigation). The calculation of any such loss requires knowledge of the correct approach to the amalgamation issue, and in that limited respect is predicated upon the determination of these proceedings. 27 On 6 November 2009, the following orders were made by consent in the Land and Environment Court: "1. For the purposes of these Orders: a. The "Hutchins Applicants" refers to Hutchins Pastoral Corporation Pty Ltd, Danwillach Pty Ltd and Delta Creek Pty Ltd; b. The "Non-Hutchins Applicants" refers to all applicants in these proceedings other than the Hutchins Applicants. 2. The Hutchins Applicants have leave to discontinue these proceedings. 3. The Court notes that if, within 14 days of the Hutchins Applicants discontinuing their participation in these proceedings, the Hutchins Applicants commence proceedings in the Supreme Court or Land and Environment Court and file in any such proceedings either as a Statement of Claim or Points of Claim a document in the same terms as Annexure AMW3 of the affidavit of Andrew McArthur Williams sworn 21 August 2009 and filed in these proceedings, the respondents undertake that, in respect only of the matters pleaded in that document, they will not raise any defence of delay or laches that would not have been available to them if the Hutchins Applicants had not discontinued their participation in these proceedings. 4. The Hutchins notice of motion filed on 24 August 2009 (as subsequently amended) be dismissed. 5. The Hutchins Applicants pay the Respondents costs referrable to the Hutchins Applicants' participation in these proceedings from the date of the commencement of the proceedings to 24 August 2009 as agreed or assessed. 6. The Hutchins Applicants pay the Respondents costs of the motion referred to in paragraph 4 above as agreed or assessed. 7. With respect to any entitlement that the Hutchins Applicants may have to an indemnity from Taylor & Whitty in respect of orders made in paragraph 5 and 6 above: a. By 27 November 2009 the Hutchins Applicants to: i. file and serve any Notice of Motion seeking orders against any third party for the purposes of s 99 of the Civil Procedure Act 2005 (NSW) including any order seeking leave to join that third party. 8. The costs referred to in orders 5 and 6 not to be payable until after the later of 27 November 2009 or, if a Notice of Motion is filed pursuant to order 7(a)(i) above, the determination of that motion." 28 The present proceedings were commenced on 19 November 2009. As at that date, however, the Hutchins companies had not filed a notice of discontinuance in the proceedings in the Land and Environment Court in accordance with the leave granted in order 2 above made on 6 November 2009. Further, although a notice of motion was filed in the Land and Environment Court Proceedings in accordance with order 7 above seeking payment or indemnity from the former lawyers of the costs in orders 5 and 6, that notice of motion (the "wasted costs application") had not been heard as at the date of hearing of the present motion. 29 A notice of discontinuance was not filed by the Hutchins companies in the Land and Environment Court until 30 April 2010, the Friday before the hearing of the present motion. It was served on the solicitor for the defendants in the Land and Environment Court proceedings (who is also their solicitor in these proceedings) at 5.27pm that day. The reason for the delay appears to have been a concern that formal discontinuance of the proceedings might prejudice the wasted costs application. 30 Having apparently learned only whilst on her feet that the notice of discontinuance had finally been filed, counsel for the defendants took the position that, although the proceedings ought to have been discontinued promptly (as apparently contemplated in the orders), the formality of the discontinuance could be regarded as being peripheral to the questions raised by the present application. The defendants accept that the Hutchins companies have not actively participated in the proceedings in the Land and Environment Court since the making of the consent orders. 31 In my view, the proceedings as against the present defendants should have been discontinued promptly after leave was granted. Until that occurred, whether or not the Hutchins companies were actively participating in the proceedings in the Land and Environment Court, the defendants were entitled to regard the present proceedings as an abuse of process and to regard that as a proper basis for the present application. 32 The proceedings having now been discontinued, however, the issue of abuse of process on that basis no longer arises.

Stay pending determination of the invalidity claim 33 The first order sought by the defendants is to have the present proceedings stayed until the determination of the proceedings in the Land and Environment Court. The defendants submitted that the issues raised in the proceedings in that Court are "logically anterior" to the issues raised in these proceedings, since these proceedings assume the validity of the Water Sharing Plan and the amendment order whereas the proceedings in the Land and Environment Court put the validity of the plan (as amended) in contest. 34 The defendants submitted that the resolution of proceedings that assume the validity of the plan ought await the determination by a superior court as to whether the plan is valid. It was noted that the proceedings in the Land and Environment Court were commenced first in time and are significantly further advanced than the present proceedings. It was submitted, further, that the parties should not incur expense preparing litigation that may be rendered futile. In that respect, the defendants relied upon the decision of Austin J in Greinert v Jarrett [2004] NSWSC 209 at [26] (sic). The facts as to the two sets of proceedings under consideration in that case are quite different and I do not think the decision is of any great assistance in determining the present application. 35 Separately, it was submitted that the law should strive against permitting a multiplicity of proceedings in relation to "similar issues". However, for the reasons already explained, much of the multiplicity apprehended (not unreasonably) by the defendants was apparent rather than real. 36 Counsel for the Hutchins companies submitted that to adopt the approach of staying the present proceedings to abide the determination of the validity claim in the Land and Environment Court would violate the presumption of validity in public law. Since that contention had only been raised in written submissions provided on the morning of the hearing, the parties provided further written submissions on that issue (with leave) after the conclusion of the hearing. 37 Counsel for the Hutchins companies relied on the principle stated by Mason ACJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148. In that case, the plaintiffs sought an interlocutory injunction restraining the enforcement of a law challenged as unconstitutional in the proceedings. His Honour said (at 155-6): "In the absence of compelling grounds, it is the duty of the Court to respect, indeed, to defer to, the enactment of the legislature until that enactment is adjudged ultra vires ." 38 Mason ACJ suggested that it might be "undesirable" to commence prosecutions whilst the validity of the relevant sections was under challenge in proceedings in the High Court. His Honour nonetheless plainly considered the principle stated to be a factor militating against the granting of an interlocutory injunction. Counsel in the present case submitted that the principle should apply a fortiori in proceedings in which neither party challenges the validity of the legislation in question. 39 In my view, there is force in that submission. I accept, as submitted on behalf of the defendants, that the presumption is only that, and may be outweighed by other factors. The defendants accepted that it is plainly in the public interest to treat legislation as valid pending final determination of a challenge to its validity, but submitted that other factors do come into play in the present case. They noted that the present claim seeks an award of damages premised on the validity of the legislation, in circumstances where another superior court may declare the relevant legislation void ab initio. 40 In her supplementary submissions, counsel for the defendants relied on the decision of the Court of Appeal in Spencer v Minister for Climate Change and the Environment [2010] NSWCA 75. In that case, the applicant sought an adjournment of the appeal (in which the validity of the relevant legislation was not in dispute) pending the determination of an application for special leave in the High Court in proceedings brought by the same applicant in which the validity of the same legislation would be challenged. 41 McColl JA granted the adjournment. Her Honour said (at [24] to [25]): "24 Both the mooted claim in the draft proposed pleading and the claim in the proceedings in this Court, directly and indirectly clearly involve consideration of the value of the applicant's property as affected by the operation of the State and Commonwealth Acts. 25 If the High Court were to declare the State Acts invalid, then the premise of their validity, which underpinned the proceedings before Rothman J, would be removed. Invalidity may have consequences in relation to steps already taken in implementation of programmes such as the FEAP established under their aegis: cf Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516." 42 I accept that the same reasoning is available in the present case. However, as submitted on behalf of the Hutchins companies, an important difference is the fact that they are no longer parties to the proceedings in which the validity claim is to be determined. It might be said that that is a matter of their choice but I must have regard to their contention that they never gave instructions to commence those proceedings. In any event, the simple fact is that neither party to the present proceedings challenges the validity of the legislation. In those circumstances, I do not think the pursuit of the plaintiffs' claims should be held up by others who do. 43 The defendants invited me to have regard, as I must, to the overriding purpose of the Civil Procedure Act 2005 to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Plainly there is at least some risk, which it is difficult for me to quantify, of futility in the present proceedings. A competing consideration, however, is my obligation to facilitate the object of determining the claims brought forward by the Hutchins companies in accordance with the overriding purpose. 44 In circumstances in which no party to the present litigation impugns the validity of the legislation under consideration, I think it would be inimical to that object to stay the proceedings abiding the resolution of that issue in another court at the suit of strangers to this litigation. I am not persuaded that I should grant a stay on that basis. Stay pending payment of the defendants' costs 45 In the alternative to an order for a stay pending the determination of the proceedings in the Land and Environment Court, the defendants sought an order that the proceedings should be stayed until the defendants have filed a notice of discontinuance and paid the defendants' costs of the proceedings in the Land and Environment Court (order 3 in the amended notice of motion). 46 As already explained, a notice of discontinuance was filed on the Friday before the hearing of the present application. There was an issue as to the acceptance of that notice in the registry of the Land and Environment Court, but in light of the concession made by counsel for the defendants, I do not think that on its own is a basis for granting the relief sought. 47 As to the question of the defendants' costs, the defendants noted that there may be an abuse of process if a plaintiff brings second proceedings against the same defendant "in the same cause" without first having paid the costs of the earlier proceedings. That will ordinarily found a stay of the second proceedings until the costs of the first proceedings have been paid: CGU Insurance Ltd v Watson [2007] NSWCA 301 at [40] per Giles JA, Spigelman CJ and Basten JA agreeing. 48 In the present case, however, it is necessary to consider what was contemplated in the orders made in the Land and Environment Court on 6 November 2009. Order 8 expressly contemplated that the defendants' costs payable under orders 5 and 6 would abide the determination of the wasted costs application. Further, leaving aside the delay in filing the notice of discontinuance, the orders contemplated the commencement of these proceedings in the meantime. 49 In those circumstances, I am not persuaded that the prosecution of the present claims before payment of the costs of the other proceedings is an abuse of process. The application insofar as it is based on that complaint is rejected.

Stay until the stay of the earlier proceedings has been lifted 50 Finally, the defendants sought an order that these proceedings be stayed until the stay of the earlier proceedings commenced in this Court has been lifted (order 2 sought in the amended notice of motion).

51 I note that the defendants' application sought, in the alternative, a temporary stay (order 4). Counsel for the defendants maintained that such an order would be appropriate to enable there to be, at least, a clarification of the apparent overlap between the pleadings in the two sets of proceedings in this Court. The period for which the Court's decision has been reserved in this matter has, de facto, afforded that relief and that is regrettable. I note, however, that the Hutchins companies have had the opportunity in the meantime to address an obvious problem with their pleadings that should have been addressed earlier. 52 The intention to abandon some of the claims pleaded in the earlier proceedings in this Court was disclosed for the first time during the hearing before me. In circumstances in which the existence of the earlier proceedings was part of the basis for the relief now sought, it behoved the Hutchins companies to make their position clear immediately in response to the defendants' motion. The stay of the earlier proceedings prevented (and obviated the need for) the filing of an amended statement of claim in those proceedings. However, it did not preclude the service of a proposed amended pleading making the true position clear so that the present application could proceed on a properly informed basis. The failure to do so, coupled with the delay in filing the notice of discontinuance, no doubt contributed to the defendants' decision to bring the present application. 53 I am persuaded that the present proceedings should be stayed only until the position indicated at the hearing as to the earlier proceedings has been confirmed by service of a proposed amended statement of claim in the earlier proceedings in this Court.

Conclusion 54 The orders are: (1) that the proceedings be stayed until the plaintiffs in proceedings in this Court no. 30088 of 2007 have served a proposed amended statement of claim in accordance with their present instructions as referred to at paragraph 21 of this judgment.

(2) that the defendants' amended notice of motion filed 3 May 2010 otherwise be dismissed. 55 I will hear the parties as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.