Did the primary judge err in dismissing the ss 100 and 99 cases?
62 Section 99 of the Constitution provides:
99 Commonwealth not to give preference
The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.
63 Section 100 provides:
100 Nor abridge right to use water
The Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.
64 Section 51(i) provides that the Commonwealth Parliament has legislative power with respect to "trade and commerce with other countries, and among the States".
65 The appellants, by [3] of their amended statement of claim, relevantly alleged the following constitutional issues with respect to ss 100 and 99:
(1) whether Pts 1 and 2 or alternatively ss 11, 19(2), 22 (items 6, 7 and 8), 23 and 24 thereof and Pts 6 and 8 of the Water Act are laws which by their terms, operation or effect are invalid by reason of being contrary to s 100; and
(2) whether Pts 2, 8, 11 and Sch 4 of the Water Act are laws which by their terms, operation or effect are invalid by reason of being contrary to s 99.
66 So far as the s 100 claim was concerned, at [25] and [26] of the amended statement of claim, the appellants alleged that the Water Act and in particular Pts 2 and 6 abridged their right to the reasonable use of the waters of the Murray River for irrigation. The particulars of that claim were that:
The Water Act confers a right or power upon the Minister and the Authority to reduce consumptive use of the waters for irrigation to zero.
The Water Act empowers the Minister and Authority to maintain zero extraction for irrigation of the Basin water resources or in particular water resource plan areas in the Basin States for an indeterminate period, for three months, 12 months or a period of years.
The Water Act authorises the respondents to take from the appellants all waters of the River Murray for irrigation without any recognition or safeguards of their reasonable use of the river water for irrigation.
The Water Act empowers the Minister and Authority to further reduce or abridge, once the Basin Plan is made, established SDLs to zero, and to reduce and establish SDLs of at least 20 per cent or more of reasonable use or State caps at which level a circumstance of permanent drought is imposed on the farms of the appellants.
The operation of the Water Act is such that unless the reasonable use of water by the appellants is abridged, the water market will not be effective as a market.
The Water Act further abridges and dilutes the appellants' use rights by allocating all water in water resource plan areas to water entitlement holders, whether they are users or not, and whether their licences are overallocated as referred to in s 3(d)(i) of the Water Act, to the great harm and loss of the appellants.
The Water Act empowers the Commonwealth as the Water Holder to trade and profit from water use such that the abridgment of the reasonable use of the waters of the River Murray by the appellants enhances the opportunity for profit by water trading, a stated aim of the Water Holder.
By the creation of the tender process in water entitlements and allocation the Commonwealth has created a separate and artificial market which has devalued the appellants' entitlements to the benefit of the Commonwealth.
The practical operation of the Water Act is to sacrifice, by taking the appellants' reasonable use of waters for conservation or irrigation, instead of resuming and acquiring overallocated entitlements referred to in s 3(d)(i) of the Water Act as provided for in the National Water Initiative, in order to save expense and/or founded upon fixed views about property rights in water and the requirement of the Basin water market.
67 The appellants further alleged, in [27] of the amended statement of claim, that in contravention of s 100 of the Constitution, the Water Act, in particular by Pts 2 and 6, has abridged their right to the reasonable use of the waters of the Murray River for conservation, and a number of similar particulars were provided.
68 By [28] of the amended statement of claim, the appellants further alleged the Water Act has empowered the respondents to limit all use by the States of Victoria, South Australia and New South Wales of the waters of the rivers, being the River Murray for irrigation or conservation or any other consumptive use, except for critical human needs under Pt 2A of the Water Act.
69 In each case the appellants pleaded that the Water Act or its relevant parts or provisions is a "law or regulation of trade or commerce".
70 Similarly, the appellants by [33] of the amended statement of claim, alleged the Water Act is a "law or regulation of trade, commerce or revenue" within the meaning of s 99 and that Pts 2, 8 and 11 and Sch 4 in their terms, operation or effect discriminate in favour of certain parts of each of the Basin States of Queensland, Victoria, South Australia and New South Wales. The discrimination was said to arise by by quarantining these Basin States from burdens or impediments to water administration and trade otherwise imposed by the requirement that water entitlement holders and State administrators act consistently with the Basin Plan as required by all other parts or areas of all other Basin States under the Water Act, and excusing such parts of the States and persons from civil penalties, injunctions and other privations and actions, whereby a State or parts of one Basin State are preferred over another State or parts of other Basin States. Particulars were provided of the areas alleged to be preferred parts or areas.
71 In contending that the primary judge was in error in finding that the ss 100 and 99 cases had no reasonable prospects of success, the appellants submit that it is not necessary that the relevant parts or provisions of the Water Act that they impugn should be made or be capable of being made under s 51(i) of the Constitution if, by their terms, operation or effect they can be characterised as a law or regulation of trade and commerce.
72 Alternatively, the appellants contend that the relevant parts or provisions of the Water Act may be characterised as laws made under s 51(i) in respect of trade and commerce among the States, that is to say, interstate trade and commerce, and so ss 100 and 99 relevantly have application to them.
73 The appellants say the primary judge was in error to find otherwise and the Court should now find that the cases that they wished to put in relation to ss 100 and 99 had reasonable prospects of success having regard to the principles laid down in Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 and applied by the Full Court in State of Western Australia v Ward [2013] FCAFC 54.
74 Sections 99 and 100 are located in Ch IV of the Constitution, which contains provisions relating to finance and trade. On its face, this chapter deals with trade and commerce and revenue laws. It also includes ss 98, 101 and 102.
75 Section 98 provides:
98 Trade and commerce includes navigation and State railways
The power of the Parliament to make laws with respect to trade and commerce extends to navigation and shipping, and to railways the property of any State.
76 Section 101 provides:
101 Inter-State Commission
There shall be an Inter-State Commission, with such powers of adjudication and administration as the Parliament deems necessary for the execution and maintenance, within the Commonwealth, of the provisions of this Constitution relating to trade and commerce, and of all laws made thereunder.
77 Section 102 provides:
102 Parliament may forbid preferences by State
The Parliament may by any law with respect to trade or commerce forbid, as to railways, any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State; due regard being had to the financial responsibilities incurred by any State in connexion with the construction and maintenance of its railways. But no preference or discrimination shall, within the meaning of this section, be taken to be undue and unreasonable, or unjust to any State, unless so adjudged by the Inter-State Commission.
78 Sections 99 and 100 of the Constitution have been the subject of relatively little consideration by the High Court of Australia since federation. The decision in Morgan dealt directly with s 99 and, in the course of doing so, the Court made certain observations about s 100.
79 Section 100 was also considered by members of the High Court in Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1 (Tasmanian Dam Case) and mentioned in Arnold v Minister Administering the Water Management Act 2000 [2010] HCA 3; (2010) 240 CLR 242 (Arnold HC). The New South Wales Court of Appeal also regarded Morgan in relation to s 100 in Arnold v Minister Administering the Water Management Act 2000 [2008] NSWCA 338; (2008) 73 NSWLR 196 (Arnold CA).
80 Morgan concerned orders made under wartime prices regulations, which fixed the price of meat, and wartime rationing regulations, which required the production of coupons for the purchase of meat. The regulations operated only in Victoria. They were challenged on the ground that s 99 prohibited the Commonwealth from making the laws.
81 The plurality (Latham CJ, Dixon, McTiernan and Williams JJ), at 452-3, held that the impugned orders were valid and that s 99 only prohibits the giving of preferences by laws which were, or could have been made, under s 51(i) of the Constitution. Their Honours relevantly stated:
(2) The Constitution, in s. 51 (i), confers an express power upon the Commonwealth Parliament to make laws with respect to trade and commerce with other countries and among the States. This provision confers no power to legislate with respect to intra-State trade. It gives no power to make laws with respect to trade between different parts of the same State. Accordingly it was not necessary to provide against preferences to parts of a State over other parts of the same State, as no law could validly be made under s. 51 (i) with respect to trade between different parts of the same State. Section 99 prohibits preferences to one State or part of a State over another State or part thereof, but does not purport to deal with preferences within a single State. This circumstance shows a connection between s. 99 and s. 51 (i).
(3) There is, however, no such circumstance to show a connection between s. 99 and the other legislative powers referred to in s. 51. There are many powers of the Commonwealth Parliament besides the defence power under which laws may be passed which affect trade and commerce, not only inter-State but also intra-State. Reference may be made to the powers to make laws with respect to (s. 51 (ii)) taxation - laws might be made under this power prohibiting commercial transactions, whether inter-State or intra-State, which were designed to evade taxation or which would interfere with the application of a system of taxation; s. 51 (iii)-bounties on the export of goods; s. 51 (v)- postal, telegraphic, telephonic, and other like services; s. 51 (ix) - quarantine (under this power there can be control of the movement of goods in the interests of health) ; s. 51 (xii) - currency, coinage, and legal tender; s. 51 (xv) - weights and measures ; s. 51 (xvi) - bills of exchange and promissory notes; s. 51 (xvii) - bankruptcy and insolvency; s. 51 (xviii) copyrights, patents of inventions and designs, and trade marks. Under all these powers legislation may be enacted which may have an important effect in relation to trade and commerce. A law with respect to patents may prohibit the sale of patented articles without a licence from the person entitled to the patent. Such a law would be effective as a law with respect to patents in relation both to interState and intra-State sales. It would be quite irrelevant to consider the law in relation to the power contained in s. 51 (i) with respect to trade and commerce, because the law would obviously be a law with respect to patents, and so considered would (unless it infringed some applicable constitutional prohibition) be valid, being completely unaffected by the limitation of the trade and commerce power to foreign and inter-State trade.
82 The plurality, at 454, further observed that the impugned regulations and orders were with respect to defence and should not be held to be laws or regulations of trade and commerce within the meaning of the words used in s 99 of the Constitution, even though they produced effects in relation to trade and commerce, because they could not have been made by virtue of the legislative power conferred by s 51(i).
83 The plurality also took into account ss 98 to 102 and, at 454, said the view they had adopted was "reinforced" by consideration of the context and setting of s 99 in the Constitution. In this regard, their Honours stated:
It is included in Chapter IV. of the Constitution - Finance and Trade - and is one of a group of sections which deal with trade or commerce. The other associated sections consist of provisions all of which either define, or limit in some way, the exercise of the power of the Commonwealth Parliament in relation to trade and commerce - a power which, as already stated, is derived from s. 51 (i) of the Constitution and is therefore limited to inter-State and foreign trade and commerce. The following phrases are used in this group of sections: s. 98 - "laws with respect to trade and commerce"; s. 99 - "any law or regulation of trade, commerce, or revenue"; s. 100 -"any law or regulation of trade or commerce"; s. 101 - "provisions of this Constitution relating to trade and commerce and…all laws made thereunder" ; s. 102 -"any law with respect to trade or commerce." These phrases vary in some particulars but they are all intended to refer to the same subject matter, namely laws which the Parliament can make under the power conferred upon it by s. 51 (i).
84 The plurality, at 455, said of s 100:
This provision raises a question as to the relation between it and the defence power which is not unlike that raised by s. 99. The prohibition contained in the section would, if it were construed as limiting the exercise of the defence power, limit it only in cases where the law of defence was also a law or regulation of trade or commerce and not in other cases. Such a limitation could find no justification in reason in that case and similar considerations apply in the case of s. 99.
85 Finally, the plurality concluded, at 455, that the whole group of sections, including s 99, should be read as applying only to laws which can be made under the power conferred upon the Commonwealth Parliament by s 51(i).
86 In the Tasmanian Dam Case, the Hydro-Electric Commission contended (amongst other things) that the Commonwealth regulations prohibiting it from building a dam on a Tasmanian river were invalid as a result of the operation of s 100. The Commission contended that what was said in Morgan about ss 99 and 100 could be distinguished. The argument put on behalf of the Commission - which is largely put by counsel for the appellants in argument before us - is recorded at (1983) 158 CLR 1 at 35, as follows:
The case should be distinguished for four reasons: 1. It concerned the defence power and not one of the trading law powers in s. 51. 2. The Court was strongly influenced by the possible inhibition of the Commonwealth's power to provide for the defence of the country if s. 99 were construed to qualify par. (vi). 3. A reciprocal relationship was found between ss. 51(i) and 99 which s. 100 does not provide. 4. Paragraph (xx) was in abeyance after the Huddart, Parker Case. The received wisdom was that it was of limited effect and it did not occur to the judges that it might support laws bearing upon similar areas of activity to par. (i). On the positive side, s. 100 reveals a strong desire by the founding fathers to preserve the reasonable use of rivers for the States and their residents for stated purposes. It would be anomalous if the protection were available against the exercise of the trade and commerce power if it were not available against the exercise of another power depending upon trading considerations to deny the use altogether. All persons who derive rights through the exercise of a State's legislative and executive powers are within the field of s. 100.
[Footnotes omitted.]
87 In the Tasmanian Dam Case, Mason, Murphy and Brennan JJ each applied Morgan in separate reasons for decision. Deane J also referred to Morgan but did not find it necessary to determine its correctness. Gibbs CJ, Wilson and Dawson JJ did not consider Morgan in light of their views on the validity of the impugned provisions. Whether the majority in the Tasmanian Dam Case is identified as involving three or four members of the High Court, it is clear that at least three members considered that the Morgan approach to s 99 also underlay s 100, and should be applied.
88 Mason J, at 153, expressly addressed the question whether the Commonwealth legislation infringed s 100. He said the prohibitions in ss 99 and 100 were plainly directed to the Commonwealth, not to the States. His Honour considered it unnecessary to decide whether s 100 guarantees to riparian States and their residents access to the use of the waters for the purposes mentioned, or whether it merely imposes a restriction on the power of the Commonwealth when legislating under ss 51(i) and 98. His Honour pointed out, however, that s 100 does impose a restriction on the exercise of Commonwealth legislative power which prevents it by a law or regulation of the kind described from abridging the rights of a State and its residents.
89 His Honour also said that the words "of trade or commerce" relate back to "law" as well as "regulation". He considered this view was supported by similar expressions in ss 98, 99, 101 and 102, which make it plain that the group of sections is dealing with laws with respect to trade and commerce. In that context, his Honour said that the concept of laws with respect to trade and commerce signifies laws made, or perhaps capable of being made, under ss 51(i) and 98, for that is the relevant power conferred on the Parliament to make laws with respect to trade and commerce. He said the prohibitions are naturally directed to laws which may be made in the exercise of that power, with the addition in the case of s 99 of revenue laws, because the exercise of the taxation power might otherwise result in the giving of a preference to a State or to a part of a State. Mason J considered s 98 to be of special significance for three reasons, the third being that it suggested the primary purpose of s 100 was to safeguard the rights of a State and its residents to the use of waters in rivers used for interstate trade and commerce, including navigation and shipping, namely, the Murray River.
90 Mason J, at 154, considered that what he had said accorded with what was decided in Morgan. He added:
At first glance it may seem somewhat artificial to confine the restriction on legislative power as it was made, or capable of being made, in exercise of one power in a somewhat similar effect in relation to the use of waters of rivers by a State and its residents for conservation or irrigation might be achieved by the Commonwealth in the exercise of other legislative powers. Why, one might ask, would the framers of the Constitution confine the pursuit of the objective - the protection of the State and its residents in relation to the use of the waters - to some Commonwealth laws but not others?
91 His Honour said the answer to this question probably lay in the importance of the Murray River to New South Wales, Victoria and South Australia and the residents of those States and the apprehensions entertained by them as to the impact of the Commonwealth's legislative powers under ss 51(i) and 98.
92 His Honour then added, at 154-155, that in any event the legal answer to the question is that one must give preponderant weight to the significance of the expression "law or regulation of trade and commerce" used in ss 99 and 100 which confines the prohibition to laws made, or capable of being made, under ss 51(i) and 98.
93 In Arnold CA, the appellants had commenced proceedings in the Land and Environment Court in New South Wales challenging the validity of a legislative scheme whereby farmers who held groundwater extraction entitlements under the Water Act 1912 (NSW) which, as and from 1 November 2006, under the Water Management Act 2000 (NSW) were replaced by aquifer access licences and supplementary water licences. The 1912 Act may be referred to as the old legislation and the 2000 Act as the new legislation.
94 The appellants contended that a water sharing plan made in 2006 under this legislative scheme and the legislative scheme itself were invalid. Relief was also sought that the National Water Commission Act 2004 (Cth) and the National Resources Management (Financial Assistance) Act 1992 (Cth) were also unconstitutional.
95 The alleged constitutional invalidity of the Commonwealth legislation was based upon s 51(xxxi) concerning the acquisition of the property on just terms by the Commonwealth, and on s 100.
96 The appellants contended that the invalidity of the Commonwealth conduct alleged was an essential element of its challenge to the decision of the State Minister to make the 2006 Water Sharing Plan under the new legislation.
97 The Court of Appeal, contrary to the conclusion reached by the primary judge in the Land and Environment Court, considered that the Court had jurisdiction to deal with the case before it. See Spigelman CJ (with whom Allsop P and Handley AJA agreed), at [86].
98 As to the s 100 point, the Chief Justice, at [89], explained that the focus of attention in the proceeding, for the proposition that the appellants had no prospect of success, was upon the words "by any law or regulation of trade or commerce". His Honour there said that this was a matter that had been "authoritatively determined by the High Court in Morgan…".
99 His Honour noted, at [90], that the appellants did not contend that the laws in question in the case before the Court were capable of answering that description.
100 His Honour further noted, at [91], as we have above, that in the Tasmanian Dam Case, Mason, Murphy and Brennan JJ accepted the authority of Morgan.
101 As to the proposition that the appellants relied on the fact that there was no majority in favour of affirming Morgan, his Honour said, at [92], that the Court of Appeal was bound by Morgan and the propositions based on s 100 which the appellants contended could not be accepted.
102 In Arnold HC, the High Court declined an invitation to re-open Morgan, which the appellants had submitted should be overruled on the basis that the words "law or regulation of trade or commerce" in s 100 were not confined to laws made under s 51(i). All members of the Court, with the exception of Heydon J, considered that the replacement of bore licences issued under the old legislation, with aquifer access licenses issued under the new legislation, was not an acquisition of property within the meaning of s 51(xxxi) of the Constitution. Similarly, the same members of the Court considered that the rights of the holders of bore licences under the old legislation were not to "the waters of rivers" within the meaning of s 100, which expression spoke only to surface water of a stream flowing in a defined channel.
103 In relation to the invitation to overrule Morgan, French CJ, at [23], noted that the case did not require its correctness to be re-examined, although the artificiality of its consequences, to which Mason J adverted in the Tasmanian Dam Case, remained. The Chief Justice, at [23], also noted that, in the Tasmanian Dam Case, three of the Justices endorsed the limitations in ss 99 and 100 to laws made under s 51(i). He also noted that no reference was made in Morgan or in the Tasmanian Dam Case to the drafting history relating to ss 99 and 100. The Chief Justice said that was not surprising as it was not until Cole v Whitfield (1988) 165 CLR 360 that the High Court accepted that such references could be made to ascertain the contemporary meaning of language used in a provision of the Constitution.
104 Gummow and Crennan JJ similarly did not find it necessary to re-open Morgan. They also noted other issues of construction of s 100 appeared in the course of argument, one being whether the term "residents therein" is confined to individuals and thus, could not include the corporate appellants. Another was whether as between riparian States and their residents, s 100 guarantees access to the use of the waters for the purposes mentioned, or did no more than impose a restriction on the exercise of the power, as noted by Mason J in the Tasmanian Dam Case.
105 Hayne, Kiefel and Bell JJ, at [76], considered that because the waters at issue in the matter were not "the waters of rivers" the further questions argued about the operation of s 100 did not need to be examined further and it was not necessary to decide whether to re-open Morgan.
106 At [75], their Honours suggested that an important purpose (perhaps the purpose) behind the inclusion of s 100 in the Constitution was to mark a particular limit upon the power of the Federal Parliament to regulate navigation.
107 It may reasonably be said, therefore, as the primary judge found, that the approach taken by Morgan to the proper application of s 99 is binding on this Court. If what was said in Morgan, and indeed by Mason J in the Tasmanian Dam Case about the rationale for the decision, is to be departed from then, in our view, this should result from a considered re-opening of Morgan by the High Court, not by this Court.
108 In the circumstances, his Honour cannot be said to have erred in deciding that, on the s 99 case, the respondents had no reasonable prospects of success. He properly considered the principles set out in Spencer v Commonwealth in so deciding. No error is shown.
109 Similarly, in relation to the s 100 case, given the dicta in Morgan and subsequent decisions, referred to above, the appropriate construction of the expression "law or regulation of trade or commerce" for the purpose of s 100, must currently be considered the same as "any law or regulation of trade, commerce …" for the purposes of s 99.
110 Consequently, we do not consider it can be said the primary judge erred in concluding that the s 100 case argued by the appellants, on the basis of Morgan, had no reasonable prospects of success. No error is shown. If a different approach to the construction of s 100 is to be taken, it must be as a result of a considered re-opening of Morgan by the High Court, not by this Court.
111 In those circumstances, the appellants press their alternative argument that the relevant parts of the Water Act that they impugn, can be characterised as a law relating to trade and commerce for the purposes of s 51(i), and so for the purposes of ss 99 and 100.
112 While the appellants appeared to rely on the entirety of the Water Act is pressing this contention, it became clear in the course of argument that the contention focussed on particular parts and provisions of the Water Act only. In particular, they posited that the Basin Plan and SDL provisions should be characterised as falling within the trade and commerce power.
113 The pinnacle of the appellants' counsels' argument was, in essence, that water travelling down the river system has an interstate dimension and should be regarded as an interstate commodity which is regulated by the Water Act.
114 The primary judge, in reasoning analogous to that employed by Deane J in the Tasmanian Dam Case, found that the provisions of the Water Act in issue did not relate to trade and commerce, let alone interstate trade and commerce.
115 The appellants contest this characterisation. First, they posit that the Water Act establishes and regulates a Basin water market. They say the Basin Plan is the machinery by which this occurs. They point to the requirement in s 20(e) of the Water Act that the Basin Plan must establish an efficient water trading regime across the Basin. In particular they note that by s 22, item 12, the Plan must set rules for the transfer and trading of transferable water rights and that the rules must contribute to achieving the Basin water market. They say the Water Act then provides the detail of how the rules may regulate the market (as in s 26).
116 The appellants contend that the Water Act thereby creates a water market which regulates a commodity which flows between different States and which regulates the trade of that commodity between persons in different States. Contrary to a submission made by the respondents, the appellants say there is nothing which is either vague or unspecified about the operation of the Water Act upon interstate trade and commerce in this regard. They contend that the operation of the Water Act is directed against trade and commerce and, more specifically, upon interstate trade and commerce.
117 The appellants develop their submission by saying that the trade of water as a commodity within each of the States has to be similarly regulated in order to achieve the efficient regulation of the interstate trade in that commodity, which the Water Act requires. Thus, the intrastate operation is said to be an incidental necessity to the exercise of the power under s 51(i).
118 The appellants emphasise that it is the operation and effect of the relevant provisions of the water market created by the Water Act that must be focussed on in determining the true nature and character of the impugned provisions. They contend that when that is done appropriately, and at least arguably for the purposes of a summary dismissal application, it can be seen that, while many of the provisions of the Water Act are, as the primary judge found, designed to protect the environment, they are also about interstate trade or commerce.
119 Counsel for the appellants emphasises:
Pt 2.1 of the Water Act, which provides for the imposition of what he calls "water cuts" across the Basin and the establishment of a water market by a Basin Plan, especially by ss 19 to 27, and for prohibitions upon the State authorities and his clients in taking water for conservation and irrigation, otherwise than by the Plan.
Pt 2.2, starting at s 53, which deals with the Water Resource Plan areas. For example, in New South Wales the lower Murray-Darling water sharing plan became, as from 2 July 2014, part of the Commonwealth Plan under Pt 2.2. Before that it was a Transitional Water Resource Plan.
Div 3, starting with s 72, which creates procedures for step-in, that is to say, if a State does not amend its plans and provide them to the Commonwealth for adoption, then the Commonwealth has the power to step-in.
Pt 2.4, starting at s 74 and the provision for risk assessment in the event of overallocation of water which, in effect, provides for the redistribution of overallocation measures.
Pt 4, which establishes water market rules and prohibitions, starting with s 91.
Pt 6, starting at s 104, which establishes the Water Holder.
Pt 7 (although not challenged) deals with water information.
Pt 8, which deals with enforcement, noting various modes of enforcement including civil penalty provisions and injunctive powers.
Pt 11, which deals with transitional matters, particularly Div 1 which deals with traditional water resources plans and interim water resource plans, and Div 2, which deals with the powers of the Water Holder subject to certain restrictions in ss 248 and 249.
120 The appellants emphasise the SDLs in pressing their case. As became quite clear in the course of argument, the case put on behalf of the appellants is essentially that, because of the Basin Plan and the calculation of SDLs, there is potentially less water available from the Murray River for irrigators, and so, for the purposes of the s 100 case, the appellants are no longer able to make reasonable use of the water of the river.
121 In pressing that case, counsel for the appellants relied on a number of propositions:
(1) The appellants are engaged in commercial irrigation using surface water resources, as defined in the Water Act.
(2) That commercial irrigation is an activity in interstate trade and commerce.
(3) The Water Act, in subjecting an indispensable step in the right to the water use of the appellants to an arbitrary power, conferred a right upon the executive to cut or abolish their rights of commercial irrigation and conservation down to what is described in Pt 2A of the Water Act as the level of predictable human needs.
(4) The law providing for such "cuts" is in operation a law of trade or commerce or a law capable of being made under s 51(i).
(5) The provisions relating to "cuts" are not severable from other provisions in Pts 2, 8 and 11 of the Water Act.
(6) Thus, the law in Pts 2.1, 2.2 and 2.3 and the enforcement and transitional provisions in Pts 8 and 11 is a "law or regulation of trade and commerce" within the meaning of ss 99 and 100.
122 There are a number of stumbling blocks, recognised by the primary judge, which, in our view, make the propositions, pressed as a whole, untenable. In particular, the proposition, or assertion, that commercial irrigation is an activity in interstate trade and commerce, is put at a very high level of generality. It very much was put on the basis that water flowing down the river, which is diverted into commercial horticultural farms, provided the interstate character of the law. The argument, put in this way, fails to appropriately engage with the machinery provisions of the Water Act and what they say and do.
123 The second proposition put, again at a high level of generality, was that because the Water Act had the effect, or potential effect, of reducing the quantity of water in the River Murray for irrigation or conservation purposes, it therefore "cut" the appellants' rights of commercial irrigation and conservation, so that the Water Act and its relevant parts was in substance or effect a law about trade and commerce among the States. In so stating, the submission fails to explain how the law thereby becomes one of trade and commerce among the States.
124 As the primary judge found, at [114], the central purpose of the Basin Plan is to establish the Basin SDL and the SDLs for water resource plan areas (s 22(1), item 6 and 7). The SDLs must comply with s 23 which, by subs (1), provides that "A long-term average sustainable diversion limit must reflect an environmentally sustainable level of take".
125 An "environmentally sustainable level of take for a water resource" is defined by s 4 to mean:
environmentally sustainable level of take for a water resource means the level at which water can be taken from that water resource which, if exceeded, would compromise:
(a) key environmental assets of the water resource; or
(b) key ecosystem functions of the water resource; or
(c) the productive base of the water resource; or
(d) key environmental outcomes for the water resource.
126 In this context, the Basin Plan must include a water quality and salinity management plan (s 22(1), item 10) and the Plan must identify the key causes of water quality degradation in the Murray-Darling Basin (s 25(1)(a)) and include water quality and salinity objectives for the Murray-Darling water resources (s 25(1)(b)).
127 The water resource plans for water resource plan areas, in addition to incorporating the SDL for the area, must include requirements, by s 22(3), in relation to:
(c) The sustainable use and management of the water resources of the water resource plan area with that diversion limit; and
…
(e) planning for environmental watering; and
(f) water quality and salinity objectives for the water resource plan area.
128 The purpose of the functions of the Water Holder is as set out in s 105(3) and (4):
To protect or restore the environmental assets of the Basin and other areas outside the Basin where the Commonwealth holds water, so as to give effect to relevant international agreements.
The Water Holder must manage the Commonwealth Environmental Water Holdings in accordance with the environmental watering plan in the Basin and the plan if any, that relates to environmental watering and is specified in regulations in relation to an area outside the Basin, as well as any operating rules that the Minister has made under s 109 and any environment watering schedules to which the Water Holder is party.
129 The power of the Water Holder to dispose of its water holdings is strictly governed by the environmental considerations as set out in s 106.
130 The Minister's power to make rules for the Basin Water market is subject to the objectives as set out in Sch 3, cl 3. The Basin Water market and trading principles are set out in Sch 3, cl 4.
131 The primary judge concluded, in respect of those challenged provisions, at [122] of his reasons, that the provisions establishing the SDLs, imposing the obligation to comply with the SDLs, the enforcement of the SDLs, and the role of the Water Holder are all concerned with the protection of the environment of the Murray-Darling Basin. His Honour considered they implement obligations found in the international agreements referred to in the Water Act which are concerned with environmental protection. Thus his Honour concluded that they were an exercise of the power to legislate in respect of external affairs under s 51(xxix), and the Water Act was not a law with respect to trade and commerce under s 51(i).
132 His Honour considered the same conclusion applied to Pts 2, 6, 8 and 11, which were also challenged separately, as well as to the individual sections challenged - ss 19(2), 22(1) (items 6, 7 and 8), 23 and 24, which all dealt with the establishment of SDLs and were concerned with environmental protection which implemented terms of international agreements on that subject and so were not laws with respect to trade or commerce.
133 By way of further observation, his Honour said that, even if they could be characterised as laws with respect to trade and commerce, they were not and could not have been made under s 51(i) of the Constitution. His Honour said that the challenged provisions were not limited to interstate or overseas trade but dealt with water resource management within and between Basin States without differentiation.
134 In our view, the primary judge's conclusion as to the proper characterisation of the impugned parts and provisions of the Water Act is correct. While, as the respondents accepted before the primary judge and on the appeal, certain provisions of the Water Act within Pt 2 (such as ss 22(1) item 12, 26(1)(j) read with Sch 3, 36(3), 37(3), 60(3) and 61(3)) may be supported in some of their operations by s 51(i), these were not provisions impugned by the appellants. That such provisions may be supported by s 51(i) for their validity does not mean that the remainder of the provisions in Pt 2 or any other parts of the Water Act are similarly to be characterised as laws with respect to trade and commerce with other countries or among the States.
135 We consider, as his Honour found, that Pts 2, 6, 8 and 11 of the Water Act were enacted principally in reliance on the Commonwealth's legislative power with respect to external affairs under s 51(xxix). Each of those parts and indeed the impugned provisions referred to above, are, as his Honour concluded, concerned with the protection of the environment of the Murray-Darling Basin and directed to implementing Australia's international obligations under a variety of treaties.
136 In our view the impugned provisions are not made in reliance on s 51(i), nor could they be. No regulation of trade and commerce among the States is identified, even when focussing on the effect the operation of the Water Act is claimed to have.
137 In particular, it does not follow that because the implementation of the Basin Plan engages the creation of a water market in relation to the allocation or trading of entitlements to draw water from the Murray, the impugned provisions of the Water Act necessarily have the character of a law with respect to trade and commerce among the States. That persons may buy and sell water that flows down the Murray, as a commodity, does not mean those involved in such a market are engaged in interstate trade or commerce.
138 More particularly, we accept the submission made on behalf of the respondents that it is not sufficient to attract s 51(i) that it is possible that the law will have some form of vague and unspecified indirect economic "effect" on trade and commerce in Australia. See Airlines of NSW Pty Ltd v New South Wales [No 2] [1965] HCA 3; (1965) 113 CLR 54 at 113-115 (Kitto J); Attorney-General (WA); ex rel Ansett Transport Industries (Operations) Pty Ltd v Australian National Airlines Commission [1976] HCA 66; (1976) 138 CLR 492 at 499 (Barwick CJ), 502-503 (Gibbs J), 509-511 (Stephen J).
139 In our view, it was open to the primary judge to conclude, as he did, that the impugned parts and provisions of the Water Act are properly characterised as laws with respect to the external affairs-treaty power (in respect of environmental protection) and nothing more. We consider he was correct in so doing.
140 In these circumstances, we do not consider that any error is disclosed by his Honour's determination that the alternative case put by the appellants in respect of ss 100 and 99 had no reasonable prospects of success if they were to proceed to a trial.
141 In these circumstances, it is not necessary for us to consider his Honour's further observations, at [126] of his reasons, that the challenged provisions were not limited to interstate or overseas trade and dealt with water resource management within and between Basin States without differentiation.
142 In these circumstances, the primary judge did not err in finding that the ss 100 and 99 cases had no reasonable prospects of succeeding at trial.