Jemena Gas Networks (NSW) Limited v Mine Subsidence Board

8 Section 10 the MSC Act provides for the establishment of the Mine Subsidence Compensation Fund ("the fund"), to which contributions are made by colliery proprietors on the basis prescribed in s 11, and from which payments are made either in respect of damage caused by subsidence, or in the circumstances envisaged in ss12A, 13A, or 13B of the Act. Section 13B is not involved in this matter, but ss 12A and 13A are. 9 Section 12(1) relevantly provides how claims are to be made on the fund for payment of (a) "compensation for any damage to improvements that arises from subsidence", and (b) "an amount to meet the proper and necessary expense incurred or to be incurred as a result of such damage". 10 Section 12A(1) should be set out in full, due to its relevance to the consideration of the separate question:

"12A Claims arising out of actions to prevent or mitigate damage (1) Subject to this section, claims may be made under this Act for payment from the Fund of: (a) compensation for damage incurred as a result of the exercise by the Board of its powers under section 13A, and (b) an amount to meet the proper and necessary expense incurred or proposed by or on behalf of the owner of improvements or household or other effects in preventing or mitigating damage to those improvements or household or other effects that, in the opinion of the Board, the owner could reasonably have anticipated would otherwise have arisen, or could reasonably anticipate would otherwise arise, from a subsidence that has taken place , other than a subsidence due to operations carried on by the owner" (emphasis added).

11 The term "improvement" is relevantly defined in s 4 to include "any building or work erected or constructed on land; any formed road, street, path, walk or drive-way; any pipeline, water, sewer, telephone, gas or other service main, whether above or below the surface of the land". 12 Section 13A provides: "13A Works for prevention or mitigation of damage from subsidence The Board may carry out, or cause to be carried out such works as, in its opinion, would reduce the total prospective liability of the Fund by preventing or mitigating damage that the Board anticipates would, but for those works, be incurred by reason of subsidence , whether or not the damage anticipated is damage to improvements or household or other effects on the land on which the works are to be carried out" (emphasis added). The factual background 13 The hearing on the separate question proceeded on the basis of a comprehensive Statement of Agreed Facts ("SAF" - Exhibit J1) which I will not reproduce in full. It will remain in the court file, and is the primary source for what follows in this section of the judgment. 14 The applicant's claim relates to works which it says are mitigatory and preventative works in respect of subsidence, and were undertaken by it to protect its natural gas pipeline ("the pipeline"), which, en route from Moomba to Sydney, runs underneath Mallaty Creek in proclaimed mine subsidence areas near Campbelltown. 15 The pipeline was constructed pursuant to a licence granted in 1974; it is known as the Central Trunk Pipeline or the 34-inch Sydney to Moomba pipeline; and it is the source of natural gas for the Sydney and Newcastle metropolitan areas. There are three additional pipelines within the same easement, namely, an ethane pipe, another natural gas pipe (the Eastern Gas pipeline), and a low-pressure water pipe. 16 The length of the pipeline subject to the disputed claim on the fund lies within the area of Consolidated Coal Lease 724 dated 4 July 1991, relating to West Cliff Colliery, the lease being held by a subsidiary of BHP Billiton Ltd ("the Miner"). 17 Details of the relevant rights to mine are included in the SAF, and five "longwalls" ("LW"), numbered LW 29 to LW 33, are relevant to this appeal. LWs 29 and 30 are generally "taken together". They are part of a series of LWs that runs parallel in generally a northwest to southeast direction, with LW 36 being the most northerly. LWs 30-35 each have a section which traverses the pipeline easement (Exhibit J1, Annexure B). Mallaty Creek "passes over" the areas of LW 31-36 inclusive. 18 The easement and the pipeline cross Mallaty Creek within the area of LW 32. A December 2004 mining approval covers LW 29/30 and parts of LWs 31, 32 and 33. The Miner at all material times made the applicant aware of its intention to seek approval to extend its operations to the remainder of LWs 31-33, and to LWs 34-36. 19 A timeline of the mining of the LWs was tabulated by the parties in the SAF (at p5, par 26):

Longwall Commencement Completion 29 14 April 2003 14 July 2004 30 29 July 2004 4 June 2005 31 26 July 2005 11 December 2006 32 12 February 2007 17 June 2008 33 30 July 2008 Ongoing

20 On or about 1 September 2006 a subsidence management plan for the remainder of LWs 31-33 was approved, and on or about 14 January 2008 the Miner sought approval of such a plan for LWs 34-36. 21 For completeness, I set out the following from the SAF (pars 28-32): " 28. The Miner engaged expert consultants, Mine Subsidence Engineering Consultants ( MSEC ), to predict subsidence levels from the mining of Longwalls 30 to 38. On or about 17 and 29 December 2003, MSEC predicted the following ground movements at or in the vicinity of the intersection of the Pipeline and Mallaty Creek from mining of Longwalls 30 to 38: Cumulative Maximum Cumulative Cumulative Longwall subsidence Cumulative Valley closure upsidence (mm)1 Subsidence (mm) (mm) (mm)2 30 0 17 6.8 11.2 31 17 120 150.6 65.0 32 349 894 277.0 202.5 33 861 1156 436.1 394.9 34 992 1261 502.6 445.7 35 1024 1297 544.9 457.7 36 1024 1307 562.8 463.8 37 1024 1307 563.1 464.5 38 1024 1307 563.1 464.5

Notes: 1. Cumulative subsidence at the centre of Mallaty Creek. 2. Maximum cumulative subsidence within 300m of Mallaty Creek along the gas pipeline 29. The Miner also engaged expert consultants, Worley, to interpret and model the effects of the subsidence predicted by MSEC on the Pipeline and Other Pipelines. 30. In February 2004 Worley provided a memorandum to the applicant describing the anticipated stress levels on the Pipeline on the basis of the predicted ground movements from the mining of Longwalls 30 to 38 supplied by MSEC ( Worley Memo77 ). The Worley Memo77 is annexed and marked 'A'. 31. The Worley Memo77 advised (as recorded in Table 2 on page 2) that: (a) the anticipated pipeline stress at Mallaty Creek resulting from the predicted cumulative subsidence from extraction from Longwalls 30 and 31 was within acceptable levels (Peak Tresca stresses below 90%) and no mitigation works would be required in relation to those stress levels; (b) the anticipated pipeline stress at Mallaty Creek resulting from the predicted cumulative subsidence from extraction from Longwalls 30 to 32 was above acceptable levels and mitigation works would be required. 32. Prior to July 2005 the applicant had commenced the process of planning works to prevent or mitigate damage to the Pipeline arising from the subsidence predicted by MSEC."

22 The applicant's written submissions (at par 15) seek to bring all the expert contentions together as follows: " A convenient amalgamation of the MSEC advice as to predicted subsidence and the Worley advice as to predicted stress levels on the pipeline as a result of such subsidence is shown in the following table. Longwall Cumulative subsidence at the centre of Mallaty Creek (mm) Peak Tresca stress levels on pipeline Within or exceeds acceptable stress levels 30 0 50.05% Within 31 17 85.36% Within 32 349 115.07% Exceeds 33 861 115.15% Exceeds 34 992 115.15% Exceeds 35 1024 115.17% Exceeds 36 1024 115.18% Exceeds 37 1024 115.18% Exceeds 38 1024 115.18% Exceeds

23 As noted above, extraction from LW 31 commenced in July 2005, but the applicant had earlier commenced the planning of works to prevent or mitigate damage to the pipeline from subsidence predicted by MSEC. 24 On 24 October 2005, subsidence of 31.8mm was recorded at the invert of Mallaty Creek (Survey point J087). That "observed subsidence" did not cause damage to the pipeline, and the applicant did not anticipate that that subsidence would itself cause damage to the pipeline, nor that subsidence resulting from extraction from LWs 30-31 was likely, in the absence of further mining of LWs 32ff, to result in damage to the pipeline. 25 As the SAF records (pars 39-41): "39. Based on the MSEC predicted ground movements (which were consistent with the Observed Subsidence) and the Worley advice, the applicant reasonably anticipated that: (a) further subsidence was likely to occur at Mallaty Creek in the order of 1307mm from the continuation of longwall mining activities in accordance with the Second Revised Longwall Mining Approval and the Proposed Further Longwall Mining Application, in particular extraction from Longwall 32; and (b) the anticipated cumulative subsidence at Mallaty Creek (that is, the Observed Subsidence and the anticipated further subsidence) was of such a magnitude as was likely to cause significant damage to the Pipeline. 40. Between December 2005 and October 2006, the applicant obtained various reports from its consultants and commenced engineering and design works to prevent or mitigate damage to the Pipeline from the anticipated further subsidence. 41. In October 2006, works (Subject Works) commenced on both sides of Mallaty Creek. The Subject Works consisted of excavation of the Pipeline and the Other Pipelines, decoupling of the Pipeline and the Other Pipelines from the soil, and associated filling. The works were completed in January 2007."

26 On 20 December 2006, the cumulative subsidence recorded at survey point J087R (to which J087 had been relocated, without any loss of comparability - SAF 42) was 42.3mm. In or about February 2007, mining commenced in LW 32. In or about April 2007 subsidence as a result of that mining was observed, and the cumulative subsidence (resulting from mining of LWs 30-32) was measured and recorded on 30 April 2007 at 140.4mm. On 28 August 2007, cumulative subsidence was measured and recorded to be 274.7mm, which represented increases of 134.3mm since 30 April 2007 and 242.9mm since 24 October 2005. As both counsel observed, these numbers were consistent with the experts' predictions. 27 The applicant did not invoke s 13A for the subject works, but, one month before it commenced those works, the Board had relied on s 13A to approve $6.2M for similar preventative works to be carried out on the adjacent Eastern Gas pipeline. 28 The applicant made the subject claim on 17 July 2007, and it was rejected on 23 July 2008 (Exhibit J2 and Exhibit J3). Consideration 29 Shorn of the words of no real relevance to the question at hand (respondent submissions par 9), s 12A(1)(b) can be seen as providing for payment by the Board of an amount to meet "the proper and necessary expense incurred … by … the owner of improvements … in preventing or mitigating damage to those improvements … that, in the opinion of the Board, the owner could reasonably have anticipated would otherwise have arisen … from a subsidence that has taken place" (emphasis in submissions). 30 It is common ground that s 12A(1)(b) is engaged only in the event of actual, as compared with anticipated, subsidence at the time the preventative or migratory expenses are incurred. As Mr Craig submits (par 34), that conclusion follows from the use of the words "from a subsidence that has taken place" in that subsection and from the Court of Appeal decision in Wambo. 31 Subsidence of 31.8mm was recorded at Mallaty Creek in October 2005, and was attributed to the mining of LW30 and 31. By that time, the applicant was planning the works which were commenced in December 2005 and became the subject of the claim in July 2007. The mining of LW 32 commenced in February 2007, after subsidence of 42.3mm had been recorded at the Creek in December 2006. 32 The applicant contends (submissions par 36) that "it is no bar to a claim under s12A(1)(b) that the claimant may anticipate further subsidence and that the claimant's expectation of damage is premised on the cumulative effect of the actual subsidence that has taken place and the anticipated further subsidence". The applicant asks the court to regard subsidence as an ongoing process, rather than as a series of particular events. 33 On the other hand, the Board contends (submissions par 4 - emphasis in the submissions) that a claim so based must fail "because the expenses in question were not incurred to prevent or mitigate damage that the applicant anticipated would otherwise have arisen from 'a subsidence' which had taken place at the time the expenses were incurred. Rather, the expenses were incurred to prevent or mitigate damage that the applicant anticipated would otherwise arise from anticipated subsidence which had not yet taken place at the time of the works". The damage which is reasonably anticipated and is the subject of the works must have a causal link as well as a temporal link (ie incur the expenses after) to a "subsidence which has taken place". 34 Both sides of the argument rely on Wambo. The applicant relies in particular really on only one paragraph ([37]) of the judgment of the Court of Appeal, but the respondent wants that paragraph considered (T16, LL37-40) "in the context …[of] His Honour's reasoning" as a whole. 35 I agree with Mr Free's contention that the facts of Wambo and of the present case are "relevantly equivalent". I see no basis upon which to distinguish it. 36 In Wambo the "improvement" was a 1km long conveyor erected on land subject to subsidence. It was common ground that it was reasonable to apprehend that the conveyor would sustain some damage as a result of subsidence predicted to flow from intended expansion of relevant mining beneath the surface of the land. Expert reports had come to notice in August and November 2003, and the owner of the conveyor opted to dismantle and relocate it, commencing in February 2004, at a cost of $597,000, as soon as it learned of the Miner's intentions. It made its s 12A claim in February 2004, prior to the commencement of the mining and, therefore, prior to the occurrence of the predicted subsidence. 37 On a separate question at first instance, Lloyd J found for the owner (see Wambo Coal Pty Ltd v Mine Subsidence Board [2006] NSWLEC 528; (2006) 147 LGERA 457), but, on appeal, the Court of Appeal (per Tobias JA, with whom Hodgson and Santow JJA agreed without comment) accepted the Board's arguments. 38 Tobias JA said that at first instance inadequate weight was given to the fact that subsidence and causally related damage do not occur simultaneously, and that the claim under s 12A(1)(b) should be made after the subsidence, but before the reasonably anticipated damage (at [29]-[30]). Each of s 12(1)(a), s 12A(1)(b), and s 13A is available to the owner at respectively appropriate times - s 13A in anticipation of subsidence and damage occurring, s 12A(1)(b) between subsidence and damage, and s 12(1)(a) after damage (see [33]-[35]). It is certainly not the case that one has to wait until the pipeline or other improvement sustains actual damage. 39 The proper role of s 13A in the statutory scheme was described by the Court of Appeal (at [31]-[32]), on the basis of which counsel for the respondent concluded (submissions par 17) that s 13A "provides a sufficient and exclusive mechanism for dealing with damage which is expected to arise from anticipated subsidence in advance of the subsidence occurring" (his emphasis). 40 Lloyd J had found support for his view in some remarks made by the Minister in his Second Reading Speech introducing ss 12A and 13A into the Act in 1969, but Tobias JA relied on some of the Minister's other remarks during that speech for the contrary conclusion he reached on appeal. The three paragraphs upon which their Honours variously relied are included in the following quotations from the judgment of Tobias JA:

[20] In so concluding, his Honour placed reliance upon the following passage from the Minister's Second Reading Speech supporting the Bill which introduced ss 12A and 13A into the Act in 1969: As the Act stands at present the board can carry out works only after damage to improvements by subsidence has arisen. This power to repair is to be supplemented by power to carry out preventative works, as the costs of prevention are often cheaper than of cure. It is recognised also that emergencies may occur when it might be necessary for the owner to carry out works to prevent or mitigate damage arising from a subsidence. In such cases proposed new section 12(A)(1)(b) will empower a claim to be made for the proper and necessary expense so incurred. … [33] Fifth, the significance of the Board carrying out works pursuant to s 13A to "reduce the total prospective liability of the Fund" and its relationship to or influence upon the proposed construction of s 12A(1)(b), is to be found in the following passage from the Minister's Second Reading speech with respect to the 1969 amendment to the Act which inserted ss 12A and 13A and which preceded the passages recorded in [20] of these reasons: The bill will provide also for the carrying out of works by the board to prevent or mitigate subsidence damage before it [the damage] occurs. Proposed new section 13A will empower the board to carry out such works where the total prospective liability of the fund will thereby be reduced." 41 The key paragraph of the Court of Appeal's judgment in Wambo for the applicant's case in this matter is par [37], in which Tobias JA said: "Common sense would indicate that some subsidence may take place but may not be so extensive as to cause immediate or significant damage to surface improvements located over or near to the area which has subsided. Further subsidence may be anticipated which, without the taking of preventative or mitigating measures, is likely to cause damage or greater damage to those improvements, It is only in that sense that s 12A(1)(b) contemplates damage arising from anticipated subsidence. But some initial subsidence must have taken place before the subsection is engaged." 42 The applicant submitted (par 39): " It is plain that Tobias JA's observation at [37] of his judgment goes well beyond the straightforward proposition that damage may occur some time after a subsidence. If all his Honour had meant to say was that a subsidence that occurs at one time may manifest itself in damage to an improvement at a later time (for example, a house which collapses some time after the ground on which it rests subsides), he could easily have done so. Paragraph 37 is quite clearly concerned with a different proposition, namely an initial subsidence followed by a further subsidence which is productive of damage." 43 However, paragraph [37] must be seen in the context of His Honour's discussion and reasoning throughout pars [28]-[47]. For example, one cannot ignore what His Honour said immediately after it (in [38]):

"The terms of s 12A(1)(b) are therefore directed to the situation where subsidence has taken place but damage has not yet arisen therefrom but could reasonably be anticipated to do so if works to prevent or mitigate such anticipated damage are not yet performed." 44 Nor can [37] be divorced from His Honour's "ordinary meaning" point in [46]: " Finally, and again not without significance, the use of the past tense in the phrase "a subsidence that has taken place" is confirmatory of a construction of s 12A(1)(b) that applies it only to the reimbursement of expense incurred or proposed to be incurred to prevent or mitigate damage which could be reasonably anticipated to arise, but which is yet to do so, from an existing subsidence. The text of the provision is in my opinion unambiguous. Giving the words used their ordinary meaning does not result in any irrationality and that meaning should therefore prevail: Cooper Brookes (Holdings) Pty Ltd [sic] v Federal Commissioner of Taxation (1981)147 CLR 297 at 304-305." 45 Paragraph [37] of His Honour's judgment cannot be said to be the central point of His Honour's reasoning. I agree with Mr Free's assessment of it both in understanding Wambo and in deciding this case (T21, LL25-43). The comments His Honour made are obiter, the ratio of the decision having been spelled out in [30], [36], etc, and His Honour appears to be speculating in [37] about a hypothetical situation where there is "further continuing subsidence from an event which has already occurred". 46 A particular "incident" of subsidence has to be linked to the damage, real or anticipated, both in temporal and causal terms. Causal connection is a factual question to be answered using commonsense (per Mason CJ in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506, at 515-6), and one need not identify a single cause (Henville v Walker (2001) 206 CLR 459). As Mr Free submitted (T22, LL20-24): "The causal link which - or the causal chain which is set-up by the subsection is between the damage which is anticipated and the subsidence which has taken place. So the preventive works are to address the damage which is anticipated - in order to be relevant, the anticipated damage must arise from that which has taken place." 47 Even if the applicant here can be said to have established the necessary temporal connection, it has not proven the necessary causal link. 48 Nothing in Tobias JA's reasoning, which is authority binding on this court, gives any support to Mr Craig's "subsidence is a process, not an event" submission (see T23, L6), which requires a conclusion that there is a single incident of subsidence, commencing with perhaps the subsidence measurement dated 24 October 2005, which can be said to be causally connected to anticipated damage. Mr Craig relied on (1) the words of the statutory definition, (2) several paragraphs of the agreed facts (pars 36-39), and on (3) the experts' regular reference to the "cumulative" effects of subsidence. 49 However, it cannot be said that subsidence as at October 2005 is part of the subsidence expected from planned later mining, and I note that in his oral submissions in chief (T11, LL21-29 - my emphasis) on the meaning of His Honour's par [37], Mr Craig himself was prepared to describe the giving of an expert's advice, when a measurement was taken at a particular point in time, as "an event ... which engages s 12A(1)(b)". The expert advisors are also clearly able to associate particular stages of ongoing mining activity with particular predicted subsidence, even though they report/advise in terms of cumulative subsidence. Each LW is a "distinct extraction with distinct consequences", and the option to cease mining, at any time, is available to the Miner (T22, L13). 50 In any case the applicant commenced its planning of the substantive works as early as July 2005, reasonably anticipating that the threat of damage would crystallise as the mining of LW 32 progressed. Mr Craig needs the October 2005 incident to be seen in the context of, and as a step in, the Miner's pursuit of a "single mine plan", appropriately approved by the relevant authorities, to facilitate an "essentially continuous mining operation", dating from the date of approval, namely December 2004. That approval predated the planning of the subject works, and the applicant says that it means that subsidence later in the cycle is inevitable. 51 However, just as there is no guarantee that the Board will favourably exercise its discretion to assist under s 13A, if asked, there is no guarantee that a Miner will continuously follow its approved plan, nor that its mining operations would proceed to a stage where the pipeline would be relevantly threatened. As noted above, mining can cease for any reason at any time. Approved programmes do not necessarily proceed. As Mr Free submitted (T19, L49-T20, L3): "So if you're going to use that to feed back into the Mine Subsidence Compensation Act and somehow deem subsidence to have occurred merely because it would occur if a miner went ahead and mined all the longwalls they got approval for, it would lead to artificial results." 52 The statutory mining approval process does not govern the administration of the MSC Act. The beneficiary of the approval cannot prepare (from a subsidence point of view), in advance for all of the approved mining. Each stage of the planned mining has its own identifiable consequences in terms of subsidence and potential for damage to the improvement. For the MSC Act to apply there must be actual movement caused by actual prospecting or extraction (see definition in [3] above). It cannot work on notional mining activity and notional movement. In this case there is a level of common ground as to what is at least likely to occur, but it is all predicated on extraction work proceeding as planned. 53 The "absurd result" argument succeeded before Lloyd J, but was rejected unanimously by the Court of Appeal in Wambo. It cannot be re-agitated, and I do not accept Mr Craig's submission (T14, LL25-37) that the Court of Appeal came to the wrong conclusion. 54 As Mr Free acknowledged, the owner of the improvement may adopt a "commonsense approach" (T17, LL28-38), and/or do some "good planning" (T18, L39-T19, L15), but that does not necessarily dictate that the statutory scheme will respond with compensation from the fund. Section 12A(1)(b) makes clear that the scheme will respond favourably to "self-help" only in strictly limited circumstances. 55 I agree with Mr Free's submission that the correct avenue for assistance to the applicant in the present case was that provided by s 13A, upon which the owner of the adjacent gas pipeline had recently relied with success. The applicant's claim would then have been considered against the background of expert advice as to the point in the mining continuum at which consequential subsidence would pose some relevant threat to the valuable improvement. The applicant's complaint that there is no right of appeal (c.f. a prerogative writ type challenge) against an unfavourable s 13A decision does not establish a right to rely on s 12A(1)(b) in the circumstances appropriately covered by s 13A.

56 It should be clear from what I have said that the question before the court should be answered "NO". 57 The exhibits are to remain on the court file, and the matter will be listed for mention before me at 9am on Friday 17 July 2009 so that further consideration can be given to: 1. the costs consequences of the answer to the question, and 2. the further disposition of the appeal itself.

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