Phelps and Ors v Minister Administering the Water Management Act 2000 [2025] NSWLEC 4 | Case summary

Land and Environment Court (NSW)|2024-05-27|Before: Robson J

Outline

This judgment is structured as follows. I will first provide an overview of the legislative regime in relation to the regulation and management of water sources in NSW which is not without some nicety. I will then summarise the salient background facts (and evidence) in relation to the nature and operation of hydrologic computer models and the development of the Namoi Source Model, which are mostly uncontroversial and provide context for the parties' detailed submissions. Further facts, some controversial, will be noted in my consideration of the discrete grounds.

The WM Act

The WM Act establishes a regime that regulates access to, and the sharing of, water from various water sources in NSW by imposing a framework for the development of water management plans, including water sharing plans in Pts 3-4 of Ch 2, and the granting of water access licences in Pt 2 of Ch 3.
Section 3 sets out the objects of the WM Act, including to "provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations"; protect the water sources and their associated ecosystems; and "provide for the orderly, efficient and equitable sharing of water from water sources".
Pursuant to s 9, in exercising any functions under the WM Act, the Minister is required to take all reasonable steps to act in accordance with the "water management principles" detailed in s 5, which relevantly provide that the sharing of water from a water source must "protect the water source and its dependent ecosystems, and … protect basic landholder rights…" (s 5(3)(a)-(b) of the WM Act).
Part 2 of Ch 3 provides that extractions of water from a water source are regulated through an access licence which entitles its holder to a specified number of shares in the available water and to take water at specified times, rates, and circumstances. There are various categories of access licences under the WM Act providing for different water needs including, relevantly, supplementary water access licences.
Section 55A provides that Pt 2 "Access licences" applies to "each part of the State or each water source" that is "declared by proclamation to be a part of the State or water source, and category or subcategory of access licence, to which this Part applies".
Section 58 establishes an order of priority among access licences, with supplementary water access licences having the lowest priority subject to variation by an individual water sharing plan.
Section 59(1)(a) provides that the Minister may make an "available water determination" ('AWD'), being a determination as to the availability of water for the various categories (or subcategories) of access licences in relation to specified water sources. Pursuant to s 85(2), the making of an AWD enables water allocations to be credited to water allocation accounts established for each access licence holder.
Section 60(1)(c) mandates that an AWD must be made in accordance with the provisions of any relevant management plan, including any "Minister's plan" (here, the Namoi WSP) made pursuant to s 50.
Part 3 of Ch 2 provides that specific water sources are to be managed through a management plan (which includes a water sharing plan) that sets out rules to regulate the extraction of water from the water source in a way which is consistent with the water management principles including, as noted above, the protection of the water source and its dependent ecosystems. A water management plan details when and how water will be available for extraction and is referred to as "water sharing provisions".
Section 20 "Core provisions" mandates the inclusion in a management plan of certain core provisions and relevantly provides: 20 Core provisions (1) The water sharing provisions of a management plan for a water management area or water source must deal with the following matters - (a) the establishment of environmental water rules for the area or water source, (b) the identification of requirements for water within the area, or from the water source, to satisfy basic landholder rights, (c) the identification of requirements for water for extraction under access licences, (d) the establishment of access licence dealing rules for the area or water source, (e) the establishment of a bulk access regime for the extraction of water under access licences, having regard to the rules referred to in paragraphs (a) and (d) and the requirements referred to in paragraphs (b) and (c). (2) The bulk access regime referred to in subsection (1) (e) - (a) must recognise and be consistent with any limits to the availability of water that are set (whether by the relevant management plan or otherwise) in relation to the water sources to which the regime relates, and (b) must establish rules according to which access licences are to be granted and managed and available water determinations to be made, and … (d) may establish rules with respect to the priorities according to which water allocations are to be adjusted as a consequence of any reduction in the availability of water, and … (f) must be consistent with the water management principles. (3) The rules referred to in subsection (2) (d) must comply with the priorities established under section 58. …

The Namoi WSP

The Namoi WSP is a principal concern in this litigation. The Namoi WSP is a Minister's plan which took effect in 2016 pursuant to s 50 of the WM Act and which applies to the Lower Namoi Water Source. Its objectives (detailed in subcll 9(a) and (b) of the Namoi WSP) are to protect, preserve, maintain or enhance the important river flow dependant environmental features of the water sources. I will note the presently relevant provisions of the Namoi WSP, then provide a brief explicatory narrative.
Part 8 of the Namoi WSP concerns "Limits to the availability of water" and deals with the long-term extraction limit. Clauses 29, 30 and 31 relevantly provide: 29 Volume of the long-term extraction limit (1) This Plan establishes a long-term extraction limit for these water sources being the lesser of: (a) the long-term average annual extraction from these water sources that would occur with the water storages and water use development that existed in 1999/2000, the share components in this water source that existed on 1 July 2004 and the water management rules that were defined in this Plan on 1 July 2004, or (b) the long-term average annual extraction from these water sources that would occur under Cap baseline conditions. … … (3) For the purposes of establishing the long-term extraction limit and auditing compliance with it, the following shall be included: (a) all water extractions by holders of all categories of access licences in accordance with the rules used for accounting of Cap diversions for Schedule E of the Murray-Darling Basin Agreement, (b) domestic and stock rights and native title rights extractions, (c) volumes of water delivered as adaptive environmental water, (d) floodplain harvesting extractions determined to be taken for use in conjunction with extractions from these water sources, and (e) water allocations assigned from access licence water allocation accounts in these water sources to access licence water allocation accounts in any other water source. (4) For the purposes of establishing the long-term extraction limit and auditing compliance with it, the following shall not be included: (a) replenishment flows made in accordance with this Plan, or (b) diversion of water pursuant to the planned environmental water rules in Part 3 of this Plan 30 Assessment of the long-term extraction limit, the current long-term average annual extraction from these water sources and growth in water use by Tamworth City Council (1) Assessment of the long-term extraction limit and the current long-term average annual extraction from these water sources shall be carried out after the end of each water year, using the hydrologic computer model that, at the time, is approved by the Department for assessing long-term water extraction from these water sources. (2) To assess the long-term extraction limit, the model referred to in subclause (1) shall be set to represent as closely as possible the conditions referred to in clauses 29 (1) (a) and 29 (1) (b). (3) To assess the current long-term average annual extraction from these water sources, the model referred to in subclause (1) shall be set to represent as closely as possible all water use development, supply system management and other factors affecting the quantity of long-term average annual extraction from these water sources at the time of assessment. (4) An assessment shall also be carried out each year to determine the growth in extraction by Tamworth City Council. (5) Growth in extraction by Tamworth City Council for the purposes of this clause and clause 31 shall be the greater of: (a) the current long-term average annual extraction from all surface water sources in the Namoi Water Management Area under the local water utility access licences or Water Act 1912 licences held by Tamworth City Council minus the long-term average annual extraction by Tamworth City Council, under Cap baseline conditions, and (b) zero. (6) Assessments under subclause (4) shall be carried out in accordance with procedures established by the Minister, but should be based on the results from a hydrologic computer model where this is possible. 31 Maintaining compliance with the long-term extraction limit (1) The current long-term average annual extraction from these water sources plus 95% of the growth in extraction by Tamworth City Council, determined in accordance with clause 30, may not be permitted to exceed the long-term extraction limit specified in clause 29. …
Essentially, cl 29 establishes a long-term extraction limit ('LTEL') for the Lower Namoi Water Source. This is the baseline against which current water extraction rates are assessed. The LTEL is critical for determining, through an AWD, the total amount of water that can be taken from, relevantly, the Lower Namoi Water Source in any particular year by a supplementary water access licence holder.
Under cl 29(1), the LTEL is determined as the lesser of either (a) the long-term average annual extraction ('LTAAE') from the Lower Namoi Water Source that would occur taking into account the water storages and water use development that existed in 1999/2000, the share components (that is, access licences) in that water source that existed on 1 July 2004 and the water management rules that existed on 1 July 2004 (this scenario is referred to in the evidence and submissions as "WSP Conditions"); or, (b), the LTAAE from, relevantly, the Lower Namoi Water Source that would occur under "Cap baseline conditions" (this scenario is referred to in the evidence and submissions as "Cap baseline conditions").
"Cap baseline conditions" is defined in the Dictionary to the Namoi WSP as those conditions used for assessment of the extraction cap (or "Cap") set by the Murray-Darling Basin Agreement for the Water Source (per Schedule E of the Murray-Darling Basin Agreement) and relates to the level of water resource development that existed in June 1994.
Pursuant to subcll 29(3)(a)-(e), five factors must be included in establishing the LTEL (and auditing compliance with it) under the WSP Conditions or the Cap baseline conditions - first, all water extractions by holders of access licences in accordance with the rules used for accounting of Cap diversions for Schedule E of the Murray-Darling Basin Agreement (cl 29(3)(a)); second, domestic and stock rights and native title rights extractions (cl 29(3)(b)); third, volumes of water delivered as adaptive environmental water (cl 29(3)(c)); fourth, floodplain harvesting extractions determined to be taken for use in conjunction with extractions from these water sources (cl 29(3)(d)); and fifth, water allocations assigned from access licence water allocation accounts in these water sources to access allocation accounts in any other water source (cl 29(3)(e)). These factors are referred to in the parties' submissions as "mandatory parameters" for establishing the LTEL.
Clause 29(4)(a) provides that for the purposes of establishing the LTEL (and auditing compliance with it), replenishment flows made in accordance with the Namoi WSP or diversion of water pursuant to planned environmental water rules should not be factored in.
Pursuant to cl 30(1), after the end of each water year (which runs from 1 July to 30 June), the Department must assess the LTEL (which includes calculating the LTAAE under both WSP Conditions and Cap baseline conditions), and the Current Extraction "using the hydrologic computer model that, at the time, is approved by the Department for assessing long-term water extraction from these water sources". Effectively, the model 'approved' is one approved for assessing the LTEL and the Current Extraction.
Subclauses 30(2) and (3) require the following steps: 1. First, the LTEL is established for a water year by assessing the LTAAE under both WSP Conditions and Cap baseline conditions using the approved hydrologic computer model (cl 30(1)). 2. Second, the Current Extraction from the water source is assessed using the same hydrologic computer model but is updated to "represent as closely as possible all water use development … and other factors affecting the quantity of long-term average annual extraction from these water sources at the time of assessment" (cl 30(3)). The Current Extraction figure is not the total amount of water extracted from the water sources in any particular water year but, rather, it is an annualised average over the long-term which factors in more recent developments (for example, additional on farm storages) that affect the amount of water that could be extracted (on average) over the long-term. 3. Third, an assessment is carried out to determine the growth in extraction by Tamworth City Council (subcll 30(4) and (5)).
Clause 30(6) provides that the assessment under subcl (4) shall be carried out in accordance with procedures established by the Minister and based on results from a hydrologic computer model where possible.
Subclauses 31(2)(a)(i) and (3) provide that if the carrying out of the compliance audit as required under cll 30 and 31 establishes that the Current Extraction plus 95% of the growth in extraction by Tamworth City Council exceeds the LTEL by more than 3% (as has occurred here), the maximum AWD (of 1.0 ML/unit share) must be reduced for supplementary water access licence holders to an amount that is "necessary to return the long-term average annual extractions plus 95% of growth in extraction by Tamworth City Council to" the LTEL.
Clause 38(1) provides that an AWD shall be made for supplementary water access licences in the Lower Namoi Water Source "at the commencement of each water year and shall define the number of megalitres per unit share that can be taken in that year". Clause 38(2) mandates that an AWD (made under cl 38(1)) "shall not exceed 1 megalitre per unit share, or such lower amount that may result from clause [31]."
In summary, to make an AWD for a supplementary water access licence, the Namoi WSP requires - first, the LTEL to be established; second, the Current Extraction of these water sources to be established (with the establishment of the LTEL and Current Extraction to be done by the hydrologic computer model that has been approved by the Department); third, where Current Extraction and a percentage of growth in use by Tamworth City Council does not exceed the LTEL, the AWD is to be 1.0 ML/unit share entitlement; and fourth, where the Current Extraction exceeds the LTEL by 3%, the AWD is to be reduced to return the Current Extraction to the LTEL amount.
Section 85 of the WM Act and cll 40-44 of the Namoi WSP provide that the Minister is to establish a water allocation for each water access licence. Water allocations are credited to the water allocation account in accordance with any AWD. Water allocation accounts are credited and debited either through an AWD or through trading between water allocation account and licence holders.
Following the making of an AWD at the beginning of each water year, each water allocation account for a water access licence is credited with the water allocation for that water year provided in the AWD for the relevant water access licence category and water source. Further, cl 44(5) of the Namoi WSP provides that the water allocation in the water allocation account for supplementary water access licences in the Lower Namoi Water Source cannot be carried over from one water year to the next.

Evidence

The Court received extensive evidence including a detailed Evidence Book. The applicants read the affidavits of John Zorzetto affirmed 21 December 2023 and 4 March 2024, and a collection of correspondence. The respondent read the affidavits of Daniel Connor affirmed 20 February 2024 and Danielle Baker sworn 5 April 2024, and relied upon the expert hydrologic modelling report of Tony Weber dated 9 February 2024. Oral evidence was given by Mr Connor, Ms Baker and Mr Weber.

Use of hydrologic computer models for determination of the LTEL

A hydrologic computer model (approved by the Department pursuant to cl 30(1) of the Namoi WSP) is used to calculate the LTAAE under both the WSP Conditions and the Cap baseline conditions in order to determine the LTEL. In simple terms, a hydrologic computer model although described as "a" model, is effectively a group of different models working within a software platform to create a simulation of the water balances in relation to a water source. The model evaluates a series of data sets relating to climate (rainfall, evaporation, temperature etc), river flows, water uses (that is, incorporating the WSP Conditions or Cap baseline conditions and the mandatory parameters) being the factors in cl 29(3) of the Namoi WSP, and the overall waterway network, and then uses these data sets to compute the way water flows from a point of generation (for example, where rainfall is converted to runoff), down through storages, extractions, weirs and the river system itself to a point where it may leave the river system (for example, a pump that extracts water from the water source into a farm). Such models are described in the evidence as "simplifications of reality".
As noted above, the modelling process used to determine the LTEL effectively involves six steps - first, the hydrologic computer model is set up to reflect the WSP Conditions ('WSP Scenario'); second, the mandatory parameters (pursuant to subcll 29(3)(a)-(e) of the Namoi WSP) are included in the calibration of the model; third, available climate data sets from 1895 up until the end of that water year are input into the model; fourth, the result from the WSP Scenario is then averaged to determine the LTAAE based on the WSP Conditions; fifth, the four steps above are repeated with the model set to reflect Cap baseline conditions to determine the LTAAE; and sixth, the LTAAE based on the WSP Conditions is compared to the LTAAE based on Cap baseline conditions and the lower figure becomes the LTEL for that water year.
In 2005, the eWater Cooperative Research Centre was founded by a number of Australian state and territory governments, including NSW, to develop the "next generation" of Australian water resources management models. As part of a National Hydrologic Modelling Strategy (first adopted by the Council of Australian Governments ('COAG') in 2008), a decision was made to transition from the earlier IQQM Model to the new "eWater Source" platform.
In August 2015, a project plan was developed by the Department to transition all NSW Murray-Darling Basin models to the "eWater Source" hydrology modelling platform ('eWater Source'), including for the Namoi WSP, for reasons including, first, the IQQM Model, initially developed in 1995, was no longer under development, was minimally supported, and was beyond that software asset's life; second, significant investment would be needed to update the IQQM Model to address new requirements such as the need to link different river models; and third, eWater Source was better suited to developing the next generation of river basin water models within NSW.
On 16 November 2021, the Chief Operating Officer of the Department, approved a briefing note titled "Briefing - operational" which approved a strategy for updating the hydrologic models and provided that any updated models would be externally reviewed. Under the heading "Long-term strategy - Workplan for model updates", the briefing note states: "The best available current conditions models for this year's assessment will vary in how well they reflect contemporary conditions. Rather than continuing to update IQQMs, modelling is focusing on the roll out of the Source models to create updated current condition models".
In May 2022, the Department produced a document titled "Guidelines to select scenario models for assessing compliance to long-term average annual extraction limits" ('Model Selection Guidelines') which establishes guidelines to assess the selection of hydrologic models to determine the long-term average annual extraction limits ('LTAAEL').
In June 2022, the Department produced a document titled "LTAAEL compliance assessment for Upper Namoi and Lower Namoi Regulated River Water Source" which describes the methods used to assess if extractions from the Namoi Regulated River Water Source are compliant with the limits in the Namoi WSP and found that the LTAAE are compliant for the 2020/21 water year. The report identified that for the Namoi Regulated River Water Source during the water year 2020/21, for the "Cap scenario model" (or Cap baseline conditions) the LTAAEL was 248.6 GL/year and for the "WSP Scenario model" (or WSP Conditions) the LTAAEL was 225.6 GL/year; and the Current Extraction was 209.5 GL/year. These results were determined using the IQQM Model which resulted in full allocation of supplementary water (being 1.0 ML/unit share) for the supplementary water access licence holders as no reduction was required because the Current Extraction was less than the LTAAEL.
In November 2022, the Department produced a report titled "Floodplain harvesting entitlements for the Namoi Valley river system: Model Scenarios" which identifies that a "new Namoi Valley model has been developed to better represent floodplain harvesting and to determine volumetric floodplain harvesting entitlements as required by the [NSW Floodplain Harvesting Policy]".
On 30 April 2023, the Chief Knowledge Officer of the Department approved a briefing note titled "Brief - Approval of model scenarios selected for LTAAEL compliance" ('Initial Models Briefing Note'), which states under "Analysis": "Namoi model: The candidate model analysis and recommendations (INT22/167070) propose the use of the same IQQM models which have been used for LTAAEL compliance in 2021 as the best available at the time of LTAAEL modelling. … A new SOURCE model for the regulated Namoi River has been completed recently and currently going through independent review processes before it becomes available for general use. An initial review has not identified any major flaws and we are working with the reviewers to fulfil interim recommendations and provide further evidence before finalising the review. At present the new SOURCE model indicates that significant growth in use has occurred, driven predominantly by increased on farm storage capacity, estimated through the Healthy Floodplains program and incorporated into the new model. Once the independent reviews and any required improvements have been completed there is an expectation that the 2021/2022 LTAAEL compliance check will be repeated with the new model and be used to inform opening allocations in the 2023/24 water year. The implementation group has advised that any updated assessment must be made available by no later than 15/05/2023."
Of particular relevance to Ground 8 (concerning apprehended bias), the Department's Chief Knowledge Officer, Mitchell Isaacs, approved a briefing note titled "Approval of model selection for 2021/22 LTEL and LTAAE assessment for upper and lower Namoi regulated river water sources" ('Models Briefing Note') on 5 June 2023, which states under "Analysis": "…We previously recommended the use of a suite of IQQM scenarios based on the previous river system model for this assessment. … As of May 2023, however, an updated assessment… has determined that the new Namoi River system Source model is the best available, despite some concerns expressed by external stakeholders. A formal independent review is underway and additional evidence is being provided in response to reviewer queries, however, the reviewers have not identified any major flaws in the Source model, and have advised that the Source model is the best available for this purpose. The suite of Source modelled scenarios is therefore considered the most appropriate for assessing WSP compliance in the Namoi River system this year. …"
Under "Recommendations", the Models Briefing Note states: "Agree that the Namoi Source Model is the best available hydrologic computer model to meet the requirements of [c]lause 30 of the [Namoi] WSP"; and "Approve the use of Source model scenarios 1c, 2d and 3b (Attachment A) as the approved 'hydrologic computer model' under clause 30(1) of the [Namoi] WSP to assess LTEL and LTAAE for the 2021/22 water year for water sources covered by the [Namoi] WSP".
Attachment A to the Models Briefing Note is a document styled "Assessment of model scenarios for use in assessing LTAAEL for the Water Sharing Plan for the Upper Namoi and Lower Namoi Regulated River Water Sources" ('Model Selection Assessment'), being an internal assessment using the Model Selection Guidelines which recommends that the Namoi Source Model be adopted for each of the "Cap scenario", the "WSP scenario" and the "Current conditions".
Attachment B to the Models Briefing Note is a document styled "Email advice from independent peer reviewers", being an email dated 21 May 2023 from three external independent peer reviewers providing advice to the Department that the Namoi Source Model was the "best available" model for assessing long-term water extractions and noting that the Namoi Source Model was "superior to the Namoi IQQM".
The Models Briefing Note includes a table (extracted below) illustrating the different results of LTAAEL compliance assessments using both "model suites" and stating, "[t]he results in Table 2 show that current levels of extractions determined by the IQQM suite are less than the corresponding LTAAEL by around 7.1%. Contrary to this, Source suite modelling indicates a 3.9% growth."

Table 2: Modelled long-term average annual extractions (GL/year, unless stated otherwise) for LTAAEL and current scenario models

As will be considered later in this judgment, the applicants note that the table demonstrates that if the Namoi Source Model is used, floodplain harvesting accounts for 44.3 GL/year for the LTAAEL and 50.5 GL/year for the Current Extraction; whereas, if the IQQM Model is used, floodplain harvesting is considered "n/a", and consequently, there would be no basis to reduce supplementary water.
On 6 June 2023, a delegate of the Minister, Graham Attenborough ('Delegate'), approved a briefing note titled "2023 assessment of compliance with long term average annual extraction limits (LTAAEL) - Namoi regulated river" ('Compliance Briefing Note'), which recommends the following: "1. Note that Analytics have completed an LTAAEL compliance assessment for the Namoi regulated river. This assessment uses a model which has been approved by the Chief Knowledge Officer as best available for this year's assessment. … 2. Note that the Namoi is non-compliant with the LTAAEL. … 3. Approve a supplementary access AWD of 0.36 ML/share as this is the required compliance action (to return total diversion to the LTAAEL). …"
The Compliance Briefing Note contains attachments including Attachment C titled "Long Term Extraction Limit compliance assessment for Upper Namoi and Lower Namoi Regulated River Water Source", and states under the heading "Scenarios and agreed model version": "…The recently completed model in the 'Source' modelling platform is of a superior calibration as it is based on an extended climatic period and more accurate development data. The model is currently in the late stages of an independent review. So far, the reviews indicate that the new model is the best available model that supersedes and is superior to the existing IQQM model. One major improvement of the new model is the ability to estimate floodplain harvesting take. This is an updated method and is part of the modelled component. In prior compliance assessments, a fixed estimate of floodplain harvesting as reported in the Basin Plan was used instead. At the time of writing, the model only runs to 2020. The same long term period (1895-2020) is used to compare the different scenarios for LTEL compliance (i.e. CAP, WSP and Current Condition model results are assessed over the same consistent period). In future, we will extend the model to run up to 2022. It is not expected that this will have any significant impact on the compliance outcomes."
On 9 June 2023, the Delegate approved a briefing note titled "2023 assessment of compliance with long term average annual extraction limits - surface water" ('Assessment Briefing Note'), which states: "Analysis: Best available models have been used to assess LTAAEL compliance for the Barwon-Darling unregulated river … The Namoi is not compliant and a reduction [in] supplementary access AWD is required. …" … Recommendations … 5. Note that the Namoi is non-compliant and that a supplementary access AWD of 0.36 ML/share is required to return total diversions to the LTAAEL and stakeholders have already been notified… … Key reasons LTAAEL compliance outcomes - Inland surface water LTAAELs … Table 1 Summary of LTAAEL compliance outcomes …Results are based on the new Source model which includes most contemporary representation of on farm infrastructure and floodplain harvesting capability. … …"
On 21 June 2023, the Delegate approved a briefing note titled "Market Sensitive Brief - Available Water Determinations (AWDs) for 1 July 2023 and Public Statements" ('AWD Briefing Note'), which relevantly states: "Topic: Approval of AWDs for 1 July 2023 for the 2023/24 water year. … Recommendations That the Chief Operating Officer, Water: … 2. Notes that the preparation of the AWDs follows a long-standing established process. 3. Approves and signs the bundled AWD orders made under section 59(1)(a) of the Water Management Act 2000 (WM Act) at Attachment B (three separate orders: regulated rivers, unregulated rivers, and groundwater). 4. Approves publication of three (3) water allocation statements at Attachment C (three separate statements - regulated rivers, unregulated rivers, and groundwater). … 8. Notes the one contentious issue, specifically the reduced allocation of 0.36 ML/unit share (usually 1 ML/share) to supplementary water access license holders in the Lower Namoi Water Source as a required growth in use action. … Contentious issues … Regulated river issues As most of the storages are near full resulting good allocation, we expect positive reactions to opening allocations. The exception will be the reduced allocation of 36% to supplementary water access license holders on Lower Namoi regulated river water source. The background to reduced allocation is explained under 'Annual extraction limit' in Page 6. In this water source, this is the first ever such action to stem growth-in-use, so it is expected the reduced allocation will be unpopular. The department foreshadowed this reduction to water users in the water allocation statement of 7 June 2023. … Supporting analysis The preparation of AWDs follows a long-standing established process. This includes hydrologic assessment, publication of water allocation statements, preparation of AWD orders, along with crediting of water accounts by WaterNSW. … The process has been led by hydrologists in the Water Allocations Unit in collaboration with other business units in DPE-Water, as well as river operators in WaterNSW. The water allocation statements, together with the draft ministerial media release and speaking points, have been prepared by the DPE-Water Communications team and reviewed by the Water Allocations Unit. Annual extraction limit … Non-compliant: The Upper and Lower Namoi regulated water source is not compliant (BN23/2969 and BN23/3149). A reduced AWD of 0.36 ML/share is required for the supplementary access license in the Lower Namoi to return total diversions to the LTAAEL (BN23/4018). … Regulated rivers …Although the planned creation of floodplain harvesting licenses in the Lower Namoi in 2023/24 may reduce the exceedance, and allow an allocation increase, it is not expected that full allocation for supplementary access entitlements will be possible this water-year. …"
Attachment B to the AWD Briefing Note is a draft of the (later) approved "Available Water Determination Order for Regulated River Water Sources 2023", which was made by the Delegate on 22 June 2023.
Attachment C to the AWD Briefing Note is a document styled "Opening Water Allocations 2023/24 - NSW Regulated River Water Sources" being, the approved water allocation statement, which relevantly states: "Water availability and allocation update … Opening Allocation 2023/24 …Full allocation is provided to supplementary license holders in all applicable river systems, except for those in the Lower Namoi water source. They receive a reduced allocation of 0.36 ML/unit share due to exceedance of long term extraction limits and the need to reduce usage. … Details for Individual Regulated River Valleys … Upper and Lower Namoi regulated rivers … Supplementary license holders have received a reduced allocation of 0.36 ML/unit share due to the required implementation of growth-in use measures."

Pleaded claims and issues

The amended summons seeks relief from that part of the "decision" to make the 2023 AWD as it relates to the Lower Namoi Water Source and advances the following eight grounds alleging invalidity of the 2023 AWD. 1. Ground 1, because in making the decision, the Delegate took into account an irrelevant consideration, being the unapproved use of the Namoi Source Model. 2. Ground 2, because in making the decision, the Delegate took into account an irrelevant consideration, being "floodplain harvesting", in circumstances where floodplain harvesting and/or water from the floodplain should not have been taken into account under the Namoi WSP. 3. Ground 3 (pleaded in the alternative to Ground 1), because in making the decision, the Delegate relied upon an invalid hydrologic computer model (being the Namoi Source Model) to assess the Current Extraction. 4. Ground 4, because in making the decision, the Delegate relied upon the Namoi Source Model which was not validly approved by the Department at the time of the decision. 5. Ground 5, because in making the decision, the Delegate constructively failed to exercise jurisdiction in circumstances where the necessary state of satisfaction was not reached. 6. Ground 6, because in making the decision, the Delegate failed to apply the proper statutory test contained in cl 31 of the Namoi WSP. 7. Ground 7, because in making the decision, the Delegate was otherwise attended by jurisdictional error because the decision exceeded the power conferred by s 59 of the WM Act and/or failed to comply with the rules under s 60 of the WM Act. 8. Ground 8, because the 2023 AWD was affected by apprehended bias in circumstances where the Delegate's decision relied on the anterior decision of Mitchell Isaacs, the Department's Chief Knowledge Officer, to approve the use of the Namoi Source Model - a hydrologic computer model that was developed by eWater Ltd, of which Mr Isaacs was concurrently a director.

Submissions

Despite the eight pleaded grounds, the applicants essentially assert that the 2023 AWD is invalid and of no effect on three bases: 1. In Grounds 1 and 4, because first, the Namoi Source Model was only approved (if approved at all) for use in the 2021/22 water year, and, as such, it was not approved to assess the Current Extraction for the 2023/24 water year; and second, the power in cl 30(1) of the Namoi WSP was constrained by the phrase "at the time" ('Namoi Source Model Grounds'). 2. In Grounds 2, 3, 5, 6 and 7, because "floodplain harvesting" data was impermissibly incorporated into the Namoi Source Model and used to assess the LTEL and the Current Extraction under the Namoi WSP ('Jurisdictional Error Grounds'). 3. In Ground 8, because the decision to approve the use of the Namoi Source Model was affected by apprehended bias ('Apprehended Bias Ground').

Applicants' position

The applicants submit that cl 30(1) of the Namoi WSP effectively has three requirements. First, that a hydrologic computer model must be approved by the Department for assessing the LTEL from the Lower Namoi Water Source; second, that the hydrologic computer model must be capable of assessing the LTEL and the Current Extraction; and third, that the assessment must be carried out after the end of each water year, being, after 30 June of each year. In the present case, the AWD for the 2023/24 water year was (in fact) carried out before the beginning of the new water year and prior to the end of the 2022/23 water year.
The applicants submit that the Namoi Source Model which even if "approved" by Mr Isaacs on 5 June 2023 in the Models Briefing Note (at [43]-[47] above), was not approved for prospective or general use, being only approved for the narrower purpose of the "2021/22 LTEL and LTAAE assessment". This approval does not extend to, or allow for, the Namoi Source Model to be used for making assessments (such as the 2023 AWD) in the 2023/24 water year. The applicants note that the Models Briefing Note contains no reference to the upcoming water year, being the 2023/24 water year and, notably, states: "Critical date: 25 May 2023, to allow the Implementation team to finalise their advice to the Allocations team on 2021/22 surface water LTAAEL compliance outcomes." (Emphasis added by applicants.)
The applicants further note that under "Recommendations" in the Compliance Briefing Note of 6 June 2023 (at [49] above), it states: "1. Note that Analytics have completed an LTAEEL compliance assessment for the Namoi regulated river. This assessment uses a model which has been approved by the Chief Knowledge Officer as best available for this year's assessment. …" and submit that the reference to "this year's assessment" cannot be a reference to the 2023/24 water year, as under cl 30(1) of the Namoi WSP, such an assessment must be undertaken "after the end of each water year".
The applicants point to the "disjoint" between the language in cl 30(1) which provides that the assessment is to be carried out "after the end of each water year", and cl 38(1), which requires an AWD for supplementary water access licences for the Lower Namoi Water Source to be made "at the commencement of each water year", and submit that in order to construe the provisions so they work harmoniously, the word "commencement" (in cl 38(1)) should not be interpreted as requiring the AWD to be made, or effective on, 1 July of the new water year. As such, the word "commencement" should be given its ordinary meaning, which simply requires an AWD to be made at the beginning of the new water year such that the process resulting in the making of an AWD occurs on and from 1 July of each year.
The applicants submit that their approach acknowledges the statutory purpose of allowing data from the current water year (being the most recently passed water year) to be factored into the AWD for the coming water year. Further, the applicants contend that the making of an AWD cannot be done "prematurely" as the decision will not take into account data from the immediately preceding water year to inform the following water year and that this is supported by the fact that the existing AWD continues to be in force and effect for a water access licence holder until a new AWD is promulgated.
The applicants submit that the construction contended by the respondent (noted at [66] below) would require an assessment conducted, for example, after 30 June 2022 (of the 2021/22 water year) to inform the making of an AWD on and from 1 July 2022, and the result of this assessment (and the resulting AWD) would apply from 1 July 2023 to 30 June 2024, which is an "entire" year after the assessment. As such, the respondent's construction would "mandate" that any assessment of the Current Extraction is significantly out of date by the time it is used to inform water entitlements through the AWD process. Further, the respondent's interpretation (allowing for a delay of a year between the data collection assessment and implementation) undermines the purpose and intended operation of the regime.
The applicants submit that, given the dynamic nature of weather, the Court should accept that their construction is more consistent with the words used in the Namoi WSP and better gives effect to the need for the more immediate assessment to inform water entitlements such as for supplementary water access licences.

Respondent's position

The respondent submits that Ground 1 should be rejected as it proceeds from a misapprehension of the provisions in the Namoi WSP dealing with the time in which an AWD is made and the processes for auditing compliance in cll 30 and 31.
The respondent submits first, that the decision-making documents record that the Namoi Source Model was selected and approved for the assessment of both the LTEL and the Current Extraction; and second, that there is no legal impediment to making the 2023 AWD based on an assessment of both the LTEL and Current Extraction for the 2021/22 water year.
In contrast to the applicants' interpretation, the respondent submits that cl 38(1) of the Namoi WSP requires that an AWD be made for supplementary water access licences in the Lower Namoi Water Source "at the commencement of the water year" which specifies the amount of water "that can be taken in that year". The effect of cl 38(1) is that, for the 2023/24 water year, an AWD for supplementary water access licences must commence on 1 July 2023 (the date upon which the water year commences) and therefore, the compliance assessment required (and the subsequent making of the AWD) must occur before 1 July of any year.
The respondent submits that the statutory context informs the reading above. In particular, that following the making of an AWD at the beginning of each water year, each access licence holder's water allocation account is credited with the water allocation for that water year provided for in the AWD. Further, in circumstances where cl 44(5) of the Namoi WSP provides that the water allocation in the account of a licence holder cannot be carried over from one water year to the next, if an AWD is not made to commence on 1 July of a water year, the amount allocated in a licence holder's account would be zero until an AWD is made. The respondent submits that this reinforces its reading of cl 38(1) because, from a practical point of view, the making of an AWD is a necessary step to enable the crediting of a licence holder's account with the allocated water for extraction at the beginning of a new water year.
The respondent submits that, contrary to the applicants' submission, there is no conflict (or "disjoint") between cl 38(1) and cl 30(1) of the Namoi WSP. Clause 30(1) requires that the assessment of the LTEL and Current Extraction be carried out "after the end of each water year". The reference to "water year" in cl 30(1) is not a reference to the water year for which an AWD is made under cl 38(1). Rather, it is a reference to the water year which immediately precedes the water year for which an AWD is made under cl 38(1). Put another way, when making an AWD under cl 38(1) for the 2023/24 water year, an assessment of the LTEL and the Current Extraction may be carried out after the end of the 2021/22 water year (being during the period 1 July 2022 to 30 June 2023), and such an assessment would not be contrary to cl 30(1).
The respondent submits that the Models Briefing Note, the Compliance Briefing Note, and the Assessment Briefing Note read together, indicate that the assessments of the LTEL and the Current Extraction (as well as the comparative analysis under cl 31 of the Namoi WSP) were completed in June 2023. Further, the Models Briefing Note records the Chief Operating Officer's agreement that the Namoi Source Model is the "best available hydrologic computer model to meet the requirements of cl 30 of the [Namoi] WSP", and approval of "the use of a suite of Source model scenarios as the approved 'hydrologic computer model' under cl 30(1) to assess LTEL and LTAAE for the 2021-22 water year…".
The respondent submits that the use and/or approval of the Namoi Source Model to assess the LTEL and the Current Extraction for the 2021-22 water year is consistent with the regime in cll 30(1) and 38(1). Simply stated, for the purpose of making an AWD for the 2023/24 water year, an assessment of the LTEL and the Current Extraction may be carried out prior to 1 July 2023 and there is nothing in cl 30(1) (or any of the clauses of the Namoi WSP) which requires that assessment to be carried out for the specific water year in which the assessment is done. Further, the scenarios in subcll 29(1)(a) and (b) require the use of historical data sets and conditions. And, cl 30(2) provides that for assessing LTEL, the model must "be set to represent as closely as possible the conditions referred to in clauses 29(1)(a) and 29(1)(b)".
The respondent therefore submits that it was open to the Delegate when making the 2023 AWD to rely upon an assessment of the LTEL and the Current Extraction for the 2021/22 water year, whereby such assessment was completed in June 2023, and the Delegate was not legally precluded from adopting such an approach.
In summary, the respondent submits that Ground 1 has no merit for three reasons. First, the contention that an AWD should be made at the beginning of the new water year being around July or August is contrary to the text of cl 38(1) of the Namoi WSP. Second, the operation of the water allocation accounts for supplementary water access licence holders would not work under the applicants' construction, given that allocations of supplementary water under the Namoi WSP cannot be carried over from one water year to the next, meaning that under the applicants' assertion that a new AWD is made in July or August, licence holders would have a balance of zero in their water accounts at the beginning of each water year at 1 July until a new AWD is made, which would be a capricious or perverse outcome. Third, it is inconsistent with the AWDs that were made for the Namoi Valley between 2020 and 2022, where all assessments were conducted before the commencement of the new water year.

Consideration

The applicants claim there is jurisdictional error in the making of the 2023 AWD because it does not comply with the timing required by the Namoi WSP and because the Namoi Source Model was only approved (if approved at all) for the 2021/22 water year and not the 2023/24 water year. For the following reasons, and accepting the respondent's position noted at [66]-[69] above, I do not accept this position as I do not find that the use of the Namoi Source Model was invalid because it was not approved as required by cl 30(1) of the Namoi WSP.
Clause 38(1) of the Namoi WSP plainly requires that an AWD be made for supplementary water access licences "at the commencement of each water year". It is clear that an AWD determines a licence holder's entitlement to a specific amount of water that can be taken "in that year". I consider that the effect is that for the 2023/24 water year, an AWD for a supplementary water access licence must commence on 1 July 2023 (that is, the date at which the water year commences) and, therefore, the compliance assessment required (and the making of an AWD) must occur before 1 July of each year. This literal reading is reinforced by the statutory context.
It is clear from the WM Act and the Namoi WSP that following the making of an AWD at the beginning of each water year, each access licence water allocation account is credited with the water allocation for that water year provided for in the AWD for the relevant water access licence category and/or the source. As noted earlier, cl 44(5) of the Namoi WSP provides that water allocation in the allocation account for supplementary water access licences in the Lower Namoi Water Source cannot be carried over from one water year to the next. Therefore, I accept the respondent's submission that if an AWD is not made to commence on 1 July of a water year, the allocation account for supplementary water access licences in the Lower Namoi Water Source would be zero until a new AWD is made.
I find that there is no conflict between cl 38(1) and cl 30(1) of the Namoi WSP. Clause 30(1) requires the assessment of the LTEL and the Current Extraction "after the end of each water year". I accept the respondent's position that this is a reference to the last completed water year which precedes the water year for which an AWD is made under cl 38(1). Read sensibly, these provisions deal with the time at which an AWD is made and the process for auditing compliance provided for in cll 30 and 31.
Leaving aside my view that the applicants' construction (at [60] above) is contrary to the text of cl 38(1), I find that the construction proffered by the respondent is assisted by consideration of the operation of the water allocation accounts which, as noted in the previous paragraph, effectively means that the allocations of supplementary water under the Namoi WSP cannot be carried over from one water year to the next which would appear to have the effect that the licence holders would have a balance of zero in their water accounts at the commencement of the new water year until a new AWD is made (sometime in July or August).
Apart from the above, I find that cl 30(1) of the Namoi WSP does not require that the Department assess the LTEL or the Current Extraction using any particular dataset or conditions and, more relevantly, it does not require any such assessment to be carried out for the specific water year in which the assessment is done. Moreover, the determination provided for in subcll 29(1)(a) and (b) requires the hydrologic computer model (per cl 30(2)) to "represent as closely as possible…" certain historical conditions in circumstances where these parameters (as per cl 30(3)) do not limit the Department (or a decision-maker) to a particular year.
In this regard, I accept the respondent's position (and the evidence provides) that the practical realities of the hydrologic computer model and the assessment process require that a number of parameters (such as on farm infrastructure, water storage facilities, pump capacities, crop areas, and areas developed for irrigation) are to be incorporated into the relevant hydrologic computer model. And, for those parameters, simulations must be carried out, or data sourced, for use in the model (as noted at [34] above). As such, I do not accept the applicants' submission that the respondent's interpretation that the delay between assessment and implementation undermines the purpose and intention of the scheme.
With reference to the factual background, it is clear that the assessments of the LTEL and the Current Extraction were completed in June 2023 because the Models Briefing Note records the matters (as noted at [44] above) comprising both the agreement that the Namoi Source Model is the "best available hydrologic computer model" as well as approval for the use of "Source Model scenarios" as the "approved hydrologic computer model" under cl 30(1) of the Namoi WSP to assess "LTEL and LTAAE for the 2021/2022 water year…". I do not consider that this wording restricts the use of the model for subsequent years.
In summary, although the applicants maintain the contention that the Namoi Source Model was not approved to assess Current Extraction, I do not accept that the power in cl 30 of the Namoi WSP was constrained by the words "at the time", where it is clear, and I find, that the Namoi Source Model was an approved model able to be used for the 2023/24 water year and, as further considered later in this judgment, I find that "these water sources" do not exclude floodplain harvesting waters. As such, I find that Grounds 1 and 4 are not made out.

Jurisdictional Error Grounds - Grounds 2, 3, 5, 6 and 7

Applicants' position

The applicants' claim that the Minister (through the Delegate) wrongly took floodplain harvesting into account in making the 2023 AWD - at least in determining the Current Extraction - drives the applicants' claims in each of Ground 2 (taking into account an irrelevant consideration), Ground 3 (relying upon an invalid hydrologic computer model), Ground 5 (constructive failure to exercise jurisdiction), Ground 6 (failure to apply the proper statutory test), and Ground 7 (decision attended by jurisdictional error).
As noted at [48] above, and repeated for convenience, the applicants point to Table 2 in the Models Briefing Note (reproduced at [47] above) which demonstrates that if the Namoi Source Model is used, floodplain harvesting accounts for 44.3 GL/year for the LTAAEL and 50.5 GL/year for the Current Extraction; whereas, if the IQQM Model is used, floodplain harvesting is considered "n/a", and consequently, there would be no basis to reduce supplementary water.
In summary, the applicants contend that the decision of the Minister (through the Delegate) in making the 2023 AWD involved the error of the use of the Namoi Source Model because the model impermissibly included floodplain harvesting in its assessment of water usage. As such, the Delegate was required, but failed, to apply the test in cl 31 of the Namoi WSP.
The applicants firstly submit that s 59 of the WM Act (which contains the power for the Minister to make an AWD in relation to one or more "specified … water sources") cannot apply to a "water source" unless there has been a proclamation pursuant to s 55A to apply Pt 2 of Ch 3 (which contains s 59) of the WM Act to that specified water source. This is because Pt 2 of Ch 3 deals with access licences and must be engaged first. As such, for the reasons noted in the following four paragraphs, the applicants contend that no proclamation has been made applying Pt 2 of Ch 3 to floodplain harvesting (or floodplain waters) and therefore it is an unlicensed water source with the result that where floodplain harvesting has been included in the LTEL (as has occurred in the 2023 AWD), by the use of the Namoi Source Model (which takes into account floodplain harvesting), the making of the 2023 AWD was in error.
The applicants point to the (only) two existing proclamations in evidence being the Proclamation under the Water Management Act 2000 made on 1 July 2004 ('2004 Proclamation') and the Water Management (Application of Act to Certain Water Sources) Proclamation 2022 made on 19 February 2022 ('2022 Proclamation') and submit that, properly considered, neither proclamation applies to floodplain harvesting.
The 2004 Proclamation declares that Pt 2 and Pt 3 of Ch 3 of the WM Act apply to water sources to which the (then relevant) Water Sharing Plan for the Upper Namoi and Lower Namoi Regulated River Water Sources 2003 ('2003 Namoi WSP') applies. The applicants submit that it is clear from the wording in cl 4 of the 2003 Namoi WSP (which clause identifies the water sources to which that plan applies), specifically, the phrase in cl 4(3) "between the banks of all rivers", and the limitation in cl 4(6) that the 2003 Namoi WSP "does not apply … to waters on land adjacent to these water sources", that neither floodplain waters nor floodplain harvesting is a "water source" identified in the 2003 Namoi WSP.
The applicants submit that this contention is further supported by the legislative "note" at the end of cl 4 which states: "[m]anagement of floodplain harvesting is not a component of this water sharing plan…". The applicants submit that, although this note does not form part of the 2003 Namoi WSP (pursuant to s 35(2)(c) of the Interpretation Act 1987 (NSW)), it is part of the context and purpose relevant to interpreting the provisions: One.Tel Limited (in Liq) v John David Rich [2005] NSWSC 226; (2005) 190 FLR 443 at [52]-[53] (Bergin J).
The applicants further submit that the 2022 Proclamation similarly declares that the specified water sources identified in the Namoi WSP are water sources for the purposes of the licensing regime in Pt 2 of Ch 3 of the WM Act. The applicants note that the language of subcll 4(3) and (6) of the Namoi WSP is the same as the 2003 Namoi WSP, and that the interpretation and analysis submitted (at [87] above) for the 2003 Namoi WSP equally applies to the Namoi WSP.
The applicants identify that there is a point of difference between the 2003 Namoi WSP and the Namoi WSP because cl 69 of the Namoi WSP provides that "[t]he Minister may amend this Plan so as to provide for the floodplain harvesting of water by amending the waters or water sources to which this Plan applies". The applicants submit that the fact that the Minister has not made any relevant amendments to the Namoi WSP regarding floodplain harvesting (as would be permitted by cl 69) is further evidence that the words "these water sources" in cl 4 of the Namoi WSP must exclude floodplain harvesting.
The applicants submit that it follows that neither the 2004 Proclamation nor the 2022 Proclamation activated the provisions or powers in Pt 2 of Ch 3 of the WM Act in respect of floodplain waters or floodplain harvesting as a "water source" and, accordingly, s 59 of the WM Act, which authorises the making of an AWD cannot be exercised in relation to an unspecified and undeclared water source and any attempt by the Minister to do so (as has occurred here) would go beyond the power of s 59 of the WM Act.
In circumstances where floodplain harvesting has not been "proclaimed" as a "water source" but is nevertheless allowed to be included in calculations for the LTEL (as has occurred here), the applicants further contend that this would effectively and inappropriately lead to the "regulation" of floodplain harvesting through the supplementary water access licensing regime - a licensing regime which (again) is not prescribed to apply to "floodplain harvesting" as a water source.
The applicants accept that in determining the LTEL, the matters identified in subcll 29(1) and (3) of the Namoi WSP are to be taken into account and the specific matters identified in cl 29(4) are to be excluded, and acknowledge that the language in cl 29(3)(d) (which provides that "[f]or the purposes of establishing the [LTEL] and auditing compliance with it … floodplain harvesting extractions … shall be included") has the effect of regulating "floodplain harvesting" even though, as outlined above, they maintain that it is not a water source that is "proclaimed" to be covered by the licensing regime. However, the applicants contend that while cl 29(3) expressly refers to the inclusion of floodplain harvesting extractions in determining the LTEL, cl 30(3) is drafted to exclude the consideration of floodplain harvesting in determining Current Extraction as floodplain harvesting is not captured by the defined term "these water sources" (pursuant to cl 4(1)).
In summary, the applicants raise four (related) matters in support of their contention that any calculation of Current Extraction should exclude floodplain harvesting. First, cl 30(3) begins with "[t]o assess the [Current Extraction] from these water sources…", which is a textural indicator that the Current Extraction is only obtained from "these water sources" and not expansive (as compared to the operation of cl 29(3)(d) for calculating the LTEL).
Second, when reading cl 30(3), the Court must give meaning to the words "from these water sources": Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 ('Project Blue Sky') at [70]. As the words "these water sources" expressly exclude floodplain harvesting, floodplain harvesting should not be read into any of the terms "all water use development", "supply system management" or "other factors" in cl 30(3).
Third, there is an asymmetry between the matters prescribed by subcll 29(1) and (3), and the matters prescribed by cl 30(3). Clause 29(3) clearly identifies the five items that "shall be included", whereas there is no similar prescription or textual indicator in cl 30(3) such that there is nothing to indicate that the prescribed matters in cl 29(3) should equally apply to cl 30(3).
Fourth, there is policy support for the applicants' approach where policies and announcements of the Department (including the "NSW Floodplain Harvesting Policy") indicate that future licensing of floodplain harvesting (which has not yet occurred) would necessitate amendments to water sharing plans to address floodplain harvesting.
The applicants further submit that, contrary to the respondent's submission that the evidence establishes that the Namoi Source Model is the "best available model" for assessing the LTEL, in circumstances where the applicants maintain that the change from the IQQM Model to the Namoi Source Model was only made for the specific purpose of implementing floodplain harvesting policy and where the task for the independent reviewers was to "endorse" the Namoi Source Model, no appropriate endorsement has occurred.
The applicants further submit that even if s 59 of the WM Act could apply to floodplain harvesting as a water source (despite there being no applicable proclamation), the power in s 59 is subject to the mandatory statutory considerations in s 60 of the WM Act which require the application of the provisions of the Namoi WSP. The applicants maintain (similarly to their submissions in relation to Grounds 1 and 4) that the Namoi WSP does not permit consideration of floodplain harvesting in usage amounts, nor does it allow assessment of LTEL and Current Extraction until after the end of each water year, noting that in the present circumstances, the assessment for the 2023/24 water year was carried out before the beginning of the new water year and prior to the end of the 2022/23 water year.
Apart from the above, and as considered under Grounds 1 and 4, the applicants repeat their submission that the Namoi Source Model was only approved to apply to the 2021/22 water year and not approved to apply to the 2023/24 water year and was therefore adopted contrary to the requirements of cl 30(1) of the Namoi WSP. Consequently, the 2023 AWD, being made without taking into consideration the provisions of any applicable water management plan, was also made contrary to the requirements of s 60 of the WM Act (specifically, s 60(1)(c)).
The applicants further submit that in the circumstances outlined above, the Minister (through the Delegate) failed to apply the statutory test required under cl 31 of the Namoi WSP when making the 2023 AWD (as pleaded in Ground 6). Clause 31 requires the Delegate to have regard to the LTEL, the Current Extraction, and the growth in water extraction by Tamworth City Council and, in simple terms, to reach a state of satisfaction that the Current Extraction (plus Tamworth City Council water) exceeds the LTEL, LTAAEL or the Cap baseline conditions by certain percentages or amounts. As such, by impermissibly taking floodplain harvesting into account in the calculation of the Current Extraction, the Minister did not properly apply the test in cl 31 of the Namoi WSP.
The applicants point at some length to the detailed evidence given by Mr Weber and Mr Connor that the review of the Namoi Source Model undertaken by the Department has not been completed such that the applicants submit that the Namoi Source Model cannot be described as the "best available model".
The applicants further submit that the respondent's contention that the applicants' argument that Grounds 2, 3, 5, 6 and 7 turn on there being a "mandatory prohibition" created in the legislative regime which prevents the Delegate from considering floodplain harvesting for the purposes of making the 2023 AWD (summarised at [104] below) is a "strawman" argument because in judicial review proceedings, the test is not whether there is a mandatory prohibition but rather whether the decision-maker (in this case, the Delegate) has taken into account irrelevant matters or matters outside the legislative scope of power or authority afforded to the decision-maker by the legislation.

Respondent's position

The respondent submits that Grounds 2, 3, 5, 6 and 7 all turn on the single proposition that the legislative regime creates a mandatory prohibition which precluded the Delegate from considering floodplain harvesting for the purpose of making the 2023 AWD. The respondent submits that this proposition should be rejected on eight bases.
First, there is nothing in the text or context of the WM Act that precludes the Delegate from considering floodplain harvesting for the purpose of making the 2023 AWD.
Second, there is also nothing in the Namoi WSP which prohibits consideration of floodplain harvesting. Specifically, cl 29(3)(d) outlines the factors or parameters that must be included when determining the LTEL and expressly includes "[f]loodplain harvesting extractions determined to be taken for use in conjunction with extractions from these water sources". As such, floodplain harvesting extractions are a mandatory parameter when determining the LTAAE under WSP Conditions or Cap baseline conditions in order to establish the LTEL. Notably, cl 29(4) specifies the two factors which the Namoi WSP requires to be excluded when determining the LTEL and those two factors do not refer to floodplain harvesting.
Third, cl 29(3)(d) requires the inclusion of floodplain harvesting extractions "for the purposes of … auditing compliance" with the LTEL. Pursuant to cll 30 and 31 of the Namoi WSP, auditing compliance involves determining the LTEL and the Current Extraction and comparing the two. It follows that auditing compliance necessarily involves the factoring in of floodplain harvesting. The respondent notes that although the applicants accept the principle of statutory construction that the Court must give effect to all the words used (Project Blue Sky at [71]), the applicants give no meaning or content to the words "auditing compliance with" the LTEL in their interpretation of cl 29(3).
Fourth, although the applicants contend that reference to "water sources" in the Namoi WSP is limited to the water between "the banks of all rivers" pursuant to subcll 4(2) and (3), even if this is correct, the respondent contends that cl 29(3)(d) states that "floodplain harvesting extractions" are determined "in conjunction with extractions from these water sources". This means that even if "water sources" do not include floodplain harvesting, floodplain harvesting is separately brought in as a relevant consideration by way of cl 29(3)(d).
Fifth, cl 30 of the Namoi WSP requires (or at least provides for) the inclusion of floodplain harvesting extractions as a parameter when assessing the Current Extraction. The regime in cl 30 does not create a prohibition excluding floodplain harvesting extractions from the assessment of the Current Extraction. Further, the text of cl 30(3) requires that in calculating the Current Extraction, the hydrologic computer model should be set to represent as closely as possible "… factors affecting the quantity of [LTAAE]" from the water sources, whereby floodplain harvesting should be considered an affecting "factor" in the relevant sense. Moreover, floodplain harvesting is an affecting "factor" in calculating the LTAAE as the amount of water obtained from the floodplain will impact the quantity of water required to be extracted from the water sources between the riverbanks. And, floodplain harvesting is clearly a factor which affects the LTAAE by reference to the NSW Floodplain Harvest Policy, which states (page 3): "The unconstrained harvesting of water from floodplains reduces the amount of water reaching or returning to rivers. This decreases the amount of water available to meet downstream river health and wetland and floodplain needs."
Sixth, the inclusion of floodplain harvesting extractions in the LTEL compliance does not mean that floodplain harvesting is therefore regulated by the Namoi WSP (as the applicants submit). While the respondent accepts that there is no relevant proclamation under s 55A of the WM Act which designates that floodplain harvesting within the Lower Namoi Water Source is a "water source", this does not affect the respondent's analysis because a proclamation is not a precondition to the inclusion of floodplain harvesting in the calculation required by the LTEL in cll 29-31 of the Namoi WSP. Further, the absence of a proclamation does not preclude the taking into account of floodplain harvesting when assessing the LTEL and the Current Extraction under a water sharing plan. As such, the applicants conflate the "fact of floodplain harvesting" and the "regulation of floodplain harvesting", whereby the regulation of floodplain harvesting through a floodplain licensing regime has no bearing on whether the fact of floodplain harvesting may be taken into account for the purposes of cl 30 of the Namoi WSP.
Seventh, factors such as rainfall, dams, town water use, and water in private irrigation channels are not part of the definition of "water sources" under the Namoi WSP but are nevertheless taken into account for the purpose of assessing the LTEL and the Current Extraction. And, just as the Namoi WSP provides for non-regulated factors such as rainfall, historical climate, river flow information, and town water to be taken into account for the purpose of assessing the LTEL and Current Extraction, the Namoi WSP also provides for taking into account floodplain harvesting even if it is not a regulated "water source".
Eighth, the respondent submits that the applicants are incorrect to say that the (earlier) IQQM Model did not consider floodplain harvesting. The respondent points to Mr Weber's expert report which makes clear that floodplain harvesting was always considered in the IQQM Model that supported previous AWDs, and that the (new) Namoi Source Model simply represents floodplain harvesting more accurately and to a finer spatial resolution.
The respondent further submits that the assessment processes in subcll 30(2)-(4), including the assessment of the Current Extraction, together with the comparison that is required to be undertaken under subcll 31(1)-(2) are, individually or collectively, "auditing compliance with [the LTEL]" (being the expression used in subcll 29(3) and (4)). As "audit" means (relevantly) "a thorough examination or inspection, particularly in relation to an approved standard measure" (Macquarie Dictionary, 9th ed (2023)), given the terms of cl 29(3)(d), it follows that floodplain harvesting extractions must be taken into account when (relevantly) assessing the Current Extraction. Further, the term "floodplain harvesting" is defined in Sch 1 to the Namoi WSP as "the collection or capture of water flowing across the floodplains". And, as the applicants accept, s 60(1)(c) of the WM Act mandates that in "the making of an [AWD] … the provisions of" the Namoi WSP are to be applied - these include cl 29(3)(d).

Consideration

In my consideration to follow, I remain aware that the term "floodplain harvesting" is defined in Sch 1 to the Namoi WSP as "the collection or capture of water flowing across floodplains" and that it was accepted in evidence that floodplain harvesting is, in general terms, the collection, extraction or impoundment of water flowing across floodplains including rainwater run-off and overbank flow. In addition to the summary earlier in this judgment, the manner in which the regime operates in practice is explained in the affidavit of Mr Connor as follows: "40. Audits and reporting of regulated extractions in the Namoi Catchment are undertaken by the Department annually, following the end of a water year, based on a comparison of long-term average annual extraction under what is known as a 'current conditions' scenario against the LTEL. 41. Assessing compliance with the LTEL requires the Department to calculate the current long-term average annual extraction following the end of a water year, by inputting the historical data from 1895 up until the end of that water year into the river system model, which, as per clause 30(3) of the Namoi WSP, should reflect as closely as possible all water use development, supply system management and other factors affecting the quality of long-term average annual extraction from these water sources at the time of assessment."
While I accept the applicants' contention that neither the 2004 Proclamation nor the 2022 Proclamation discretely designates floodplain harvesting as a "water source" (to which Pt 2 of Ch 3 of the WM Act is to apply), I do not accept the submission that simply because floodplain harvesting has not been proclaimed as a "water source", its inclusion in calculations for the LTEL (and the Current Extraction) is precluded. For the reasons that follow, I find that the absence of such a proclamation does not preclude taking floodplain harvesting into account when assessing the LTEL and the Current Extraction under a water sharing plan and that the conduct of taking into account floodplain harvesting through the supplementary water access licensing regime does not inappropriately or unlawfully amount to the "regulation" of floodplain harvesting.
Accepting that there is no prohibition in the WM Act precluding the Delegate from considering floodplain harvesting for the purposes of the 2023 AWD, one enquiry is whether the Namoi WSP creates any such prohibition. As will be seen, I find that there is no such prohibition.
I find that the only two factors which are required to be excluded from the calculation of the LTEL (and auditing compliance with it) are those detailed in subcll 29(4)(a) and (b) of the Namoi WSP (at [19] above), which do not include floodplain harvesting. Further, cl 29(3)(d) expressly requires floodplain harvesting extraction to be taken into account when determining the LTAAE under the WSP Conditions or Cap baseline conditions (in order to establish the LTEL). Clause 29(3)(d) also requires the inclusion of floodplain harvesting extractions "[f]or the purposes of … auditing compliance" with the LTEL.
An understanding of the broader statutory and regulatory regime provides context and assists the construction I prefer. As noted at [17] above, s 20 of the WM Act provides that water schemes are to be managed through a water sharing plan that regulates the extraction of water and must include "core provisions" including the establishment of a bulk access regime for the extraction of water under access licences, having regard to various rules.
The Namoi WSP, through the clauses noted earlier, effectively sets a limit regarding the availability of water (cl 29), includes long-term coverage commitment (cll 29 and 31) and includes "environmental water rules" for the identification and establishment of long-term coverage commitment (cl 29) and for the maintenance of that long-term coverage commitment (cll 30-31). Further, in addition to s 20 of the WM Act requiring a water management plan to deal with "core provisions", ss 21(e) and 24(g) of the WM Act provide that water management plans may deal with measures to give effect to the water management principles and the objects of the WM Act (noted at [9] above).
Seen in this way, the fact that the Namoi WSP does not seek to regulate floodplain harvesting extractions does not preclude the Minister from taking into account floodplain harvesting in assessing the LTEL and the Current Extraction.
As I accept the respondent's position that the provisions in a water sharing plan operate irrespective of whether the water sharing plan "regulates" floodplain harvesting, it follows that I do not accept the applicants' argument that cl 29(3) of the Namoi WSP "relates only to the LTEL". Although the matter is not without some nicety, I consider that the more practical and harmonious construction of cl 29(3) in the context of the regime provided by cl 29(3) must be that floodplain harvesting is to be considered in both establishing the LTEL and "auditing compliance with it" given, as noted above, and that in establishing the LTEL the only matters that are precluded are those set out in subcll 29(4)(a) and (b).
In reaching my view, I find that the scheme created in cll 29-31 of the Namoi WSP, which concerns "Limits to the availability of water" and specifically provides for "Volume of the long-term extraction limit" (cl 29); "Assessment of the long-term extraction limit, the current long-term average annual extraction from these water sources and growth in water use by Tamworth City Council" (cl 30); and "Maintaining compliance with the long-term extraction limit" (cl 31), clearly encompasses floodplain harvesting as a matter to be considered when assessing Current Extraction. This is at least because cl 30(3) requires the same hydrologic computer model to be used as was used in relation to the LTEL. In my view, cl 31 is, as the respondent submits, inextricably bound up with cl 30(1) because the process under cl 31 requires the use of the Current Extraction to be "determined in accordance with clause 30".
Further, as the hydrologic computer model is to be "set to represent as closely as possible the conditions referred to in clauses 29(1)(a) and 29(1)(b)" of the Namoi WSP, there is little doubt in my view that cl 29(3)(d) must be included in the establishment of the LTEL (and, as noted above, "auditing compliance with it") and, in assessing Current Extraction, the model is to be set to represent "as closely as possible all water use development, supply system management and other factors affecting the quantity of long-term average annual extraction from these water sources at the time of assessment" (emphasis added) (cl 30(3)). As cl 30(3) requires the inclusion of additional data in the same hydrologic computer model used to assess the LTEL, I accept the respondent's submission that this is consistent with the proposition that the Current Extraction is the annualised average over the long-term which factors in more recent developments. Further, cl 30(3) implicitly provides for the inclusion of floodplain harvesting extractions because it requires that in determining the Current Extraction, the "other factors" (affecting the quantity of extraction from these water sources) are to be included in circumstances where floodplain harvesting extractions must be such a factor.
Although the applicants appear to contend that floodplain harvesting is included in the hydrologic computer modelling undertaken for the purpose of cl 30(2) of the Namoi WSP but excluded in the modelling for the purpose of cl 30(3), this does not sit comfortably with the fact that the regime requires the same model to be used for both provisions. As such, I do not accept the contention that floodplain harvesting extractions must be disregarded when considering Current Extraction.
I also do not accept the applicants' submission (at [96] above) that there is an asymmetry between the matters prescribed by subcll 29(1) and (3), and the matters prescribed by cl 30(3) of the Namoi WSP. Read sensibly, the clauses require the comparison of outcomes using a hydrologic computer model that has the same parameters and climate dataset, with the LTEL modelling incorporating water use development using a historical baseline, and the Current Extraction modelling incorporating more recent water use development.
Further, I do not accept the applicants' submission that the reference to "these water sources" in cl 30(1) in some way militates against my construction above. Even if (and I do not so find) "water sources" is confined to water between the banks of rivers, as per subcll 4(2) and (3) of the Namoi WSP, cl 29(3)(d) mandates the taking into account floodplain harvesting extractions "in conjunction with extractions from these water sources".
I repeat my view that it matters not whether the Namoi WSP seeks to "regulate" floodplain harvesting extractions. The Minister (or a delegate) is not precluded from taking into account floodplain harvesting when assessing the LTEL and the Current Extraction. The provisions in the Namoi WSP provide for certain matters to be taken into account and these matters operate regardless of whether or not the Namoi WSP "regulates" floodplain harvesting extractions.
As the respondent submits, there are a number of factors such as rainfall, dams, town water use and water in private irrigation channels which, under the Namoi WSP, are not part of "these water sources" (as described in subcll 4(1) and (3) of the Namoi WSP or absent a relevant proclamation) but which nonetheless may be taken into account for the purposes of assessing the LTEL and the Current Extraction. This is made clear when the following provisions are considered.
First, s 20(1)(e) of the WM Act provides that a water sharing plan must establish "a bulk access regime for the extraction of water under access licences" which takes into account "environmental water rules" referred to in s 20(1)(a).
Second, s 20(2)(a) of the WM Act requires that the bulk access regime for the extraction of water under access licences must "recognise and be consistent with any limits to the availability of water that are set" under access licences.
Third, as recited above, cll 29-31 of the Namoi WSP (made in accordance with s 20(2)(a) of the WM Act) set limits regarding the availability of water, including a long-term average commitment, and include provisions in the nature of "environmental water rules" for the establishment of the "long-term average annual commitment" and maintenance of that long-term average annual commitment (as referred to in subss 8(1A)(b) and (c) of the WM Act relating to what a management plan is required to do in relation to "planned environmental water").
Although not determinative in my findings in my consideration of the applicants' submissions, I have taken into account the expert evidence of Mr Weber that floodplain harvesting extractions had been a part of the IQQM Model that had been used in relation to earlier AWDs in relation to the Namoi WSP.
Mr Weber, having stated that floodplain harvesting occurs from two different sources being, first, water breaking out of the main river channel and flowing over the floodplain; and second, rainwater running off farming land and upstream overland, explained that while the Namoi Source Model explicitly represents those flow components, the IQQM Model represented these "implicitly as a lumped process and as losses to the system".
The fact that the earlier utilised IQQM Model included floodplain harvesting is also confirmed from a number of Departmental documents including the "Namoi River Valley IQQM Cap Implementation Summary Report", (March 2005); the "Floodplain harvesting entitlements for the Namoi Valley river system: Model Scenarios" report, (November 2022); the 2021/22 Compliance Assessment Briefing Note (which relied on the earlier IQQM Model); and the "Building the river system model for the Namoi regulated river system" report, (November 2022).
In passing, and again not determinative in relation to the present grounds, I accept Mr Weber's evidence, which although the subject of some challenge, was that the IQQM Model is an inferior model to the Namoi Source Model.
I also consider that the applicants' construction would not allow an accurate compliance check as there would be no true comparison between the LTEL and the Current Extraction because the applicants' construction requires the use of floodplain harvesting extractions in one but not the other. Effectively, the applicants' approach would be to prevent an administrator of the regime from being able to consider whether there has been growth in water use over the long-term and, if necessary, take steps to reduce the AWD or take such other action to reduce allocations to access licence holders. I therefore find that the applicants' approach would undermine the purpose of the regulatory scheme and the compliance mechanisms pursuant to cll 29-31 of the Namoi WSP.
For completeness, I accept the respondent's further submission and find that cl 69 of the Namoi WSP, which contemplates that the Namoi WSP may be amended by the Minister to provide for the regulation of floodplain harvesting by "amending the waters or water sources" to which the plan applies (for example, to provide for floodplain harvesting extractions) and, in particular cl 69(a), relating to where a water sharing plan has already taken floodplain harvesting extractions into account, implicitly recognises that floodplain harvesting is an extraction that must be considered in the LTEL compliance assessment.
Finally, I do not consider that even if the independent review had not been completed, this was either compelling or determinative. Although the applicants again highlight details of the oral evidence of Mr Connor and Mr Weber, I find that their evidence explained that the independent review included consideration and assessment of the Source Model for its planning and policy uses (Tcpt, 9 April 2024, p 67(43-50)).
For the reasons above, I find that the decision-maker (here, the Delegate) has not taken into account irrelevant matters or matters outside the legislative source of power or authority afforded to the decision-maker by the legislation. Further, the decision-maker did not rely upon an invalid or unapproved hydrologic computer model, did not constructively fail to exercise jurisdiction, and did not fail to apply the proper statutory test. As such, I find the applicants have not made out their claims in Grounds 2, 3, 5, 6 and 7 that the 2023 AWD was invalid because in the making of that AWD, floodplain harvesting data was impermissibly incorporated into the hydrologic computer model used to make the 2023 AWD.

Applicants' position

The applicants contend that the "decision" made by Mr Isaacs on 5 June 2023 to adopt the Namoi Source Model (which the applicants contend was a "step" in the later decision of the Delegate to make the 2023 AWD) was attended to by an apprehension of bias.
The applicants submit that the factor potentially leading Mr Isaacs, as the decision-maker, to decide the matter other than on its legal and factual merits is that on 5 June 2023 when he approved the Models Briefing Note (at [43] above) adopting the Namoi Source Model (which the applicants maintain was a model owned and operated by eWater Ltd) over the existing IQQM Model, Mr Isaacs concurrently held the role of Chief Knowledge Officer of the Department and a director of eWater Ltd. And, thereafter on 22 June 2023, the Delegate relied on Mr Isaacs' decision (to adopt the use of the Namoi Source Model) to make the 2023 AWD.
The applicants submit that a fair-minded lay observer might reasonably apprehend that Mr Isaacs, as a director of eWater Ltd (the developer of the Namoi Source Model), might not bring an impartial mind to the decision as to which hydrologic computer model to adopt for the purpose of determining the 2023 AWD, and that a fair-minded lay observer would consider that Mr Isaacs would be predisposed to being partial to adopting a model which utilised the Namoi Source Model because of his position as a director of eWater Ltd.
The applicants submit that the reasonableness of that apprehension from the perspective of a fair-minded observer is clear from the fact that Mr Isaacs was aware of the potential conflict as this was disclosed in a conflict of interest declaration submitted by Mr Isaacs to the NSW Government's internal "Ethics Portal" on 17 November 2022, in which Mr Isaacs declared a new "COD" (or conflict of duties) in the following terms: "… I receive no renumeration. I have no private interest in the company and there is no conflict of interest. However, there is a [conflict of duties] given [that] the interests of the NSW Gov and eWater do not always align. … The water modelling team is in my division and is a user and customer of eWater products. There is also interjurisdictional negotiation around funding to modelling program[sic] some of which will be directed to eWater. Decision through these roles will have a material impact on eWater."
Mr Isaacs also declared that a management strategy was in place to manage the conflict as follows: "Danielle Baker, Director Water Analytics, and oversight of the modelling team, and is nominated NSW shareholder rep for eWater. Where there's a potential CoD, she is directed to seek further exec support for the CEO NSW Water Sector or WINSW Ed Services rather than me. Danielle leads on any matters of a financial or legal matter that impact eWater. If modelling is being discussed while I'm performing my regular duties, where relevant or necessary I declare the conflict and if there's significant discussion or decision making impacting eWater I would excuse myself from the meeting and ask that the minutes record this."
The applicants submit that as there is a clear causal connection between Mr Isaacs' conflict of interest and his decision to approve the Models Briefing Note, Ms Baker should have taken the role to approve the Models Briefing Note and it follows that materiality is clearly satisfied in this case. The applicants also point to Ms Baker's oral evidence that she had originally approved or recommended the adoption of the IQQM Model and Mr Isaacs overrode that recommendation.
The applicants therefore submit that bias is shown because Mr Isaacs did not exclude himself from consideration of the adoption of the Namoi Source Model and because he countermanded an earlier recommendation of Ms Baker, and that this suggests that the "conflict" was not properly dealt with in accordance with the adopted management strategy.
The applicants submit that the decision to adopt the Namoi Source Model over the IQQM Model is a legal matter impacting on eWater Ltd, and one with potential financial and non-financial ramifications. The applicants point to the Constitution of eWater Ltd which states that one of the objects of the company is to "commercialise or otherwise develop and utilize Centre IP in such a manner as to ensure that the maximum benefit accrues to Australia … through appropriate arrangements that generate revenue streams to further the pursuit of the objectives of the Centre". In this regard, the applicants point to the fact that a standard licence for use of a Source Model for a single user on one computer costs $10,000 while a support and maintenance agreement costs $2,500 per user per year.
The applicants also point to eWater Ltd's "Strategic Plan 2023-28" which states: "eWater Ltd is driven to grow through a need to earn revenue…" and that "Risk management matters" involve the threat of a "Loss of Key State, Federal and International level relationships in water sector agencies" in the event of not being the "preferred supplier to government".
The applicants also submit that Mr Isaacs owes legal and equitable duties and obligations to eWater Ltd due to his position as a director of eWater Ltd, including a duty to exercise his powers in the best interests of eWater Ltd as provided for in s 181(1)(a) of the Corporations Act 2001 (Cth).
The applicants submit that in the above circumstances, particularly where eWater Ltd is pursuing financial, strategic, and reputational goals, and where Mr Issacs is a director of eWater Ltd, a fair-minded observer may reasonably hold the apprehension that Mr Isaacs did not bring an impartial mind to the decision about which hydrologic computer model to adopt.
In response to the respondent's submission that Mr Isaacs himself did not actually make the decision to use the Namoi Source Model on 5 June 2023, but rather that it was a decision that had been made some years earlier in line with a national approach, the applicants submit that the evidence only goes as far as a general direction of government policy, which does not go to the operative decision which is the subject of these judicial review proceedings.
In response to the respondent's submission that the Namoi Source Model had been independently reviewed and recommended for use by Departmental experts, the applicants submit that it is clear on the evidence that the independent reviewers had not endorsed the Namoi Source Model. Furthermore, the independent reviewers had assumed that the Namoi Source Model was to be used for the purposes of floodplain harvesting extractions rather than general use, and that the reviewers were not focussed on whether the Namoi Source Model was "fit for purpose" as required by cl 30 of the Namoi WSP.
The applicants further contend that, in any event, the "independent" reviewers should not be considered to be truly independent in circumstances where one of the reviewers, Mr Weber, describes himself in his curriculum vitae as a "leading proponent of the source modelling framework", and indicated in evidence that he had only once not recommended the use of the Source modelling framework; and another reviewer, Mr Claydon, is the Chair of eWater Ltd.

Respondent's position

The respondent submits that the Court would not be satisfied that there is a conflict arising from Mr Isaacs' role as a director of eWater Ltd, a "non-for-profit" company, and from the fact that the Namoi Source Model had been developed by eWater Ltd.
The respondent identifies that the Models Briefing Note (at [43]-[47] above) records Mr Isaacs' agreement "that the Namoi Source Model is the best available hydrologic computer model to meet the requirements" of cl 30 of the Namoi WSP and in doing so, the respondent contends that Mr Isaacs was simply agreeing to the use of a hydrologic computer model that had been built by Department experts specifically for the Namoi Valley.
The respondent notes that the Models Briefing Note also records Mr Isaacs' approval of "the use of Source model scenarios 1c, 2d and 3b (Attachment A) as the approved 'hydrologic computer model' under clause 30(1) of the [Namoi] WSP to assess LTEL and LTAAE for the 2021/22 water year for water sources covered by the [Namoi] WSP". The respondent contends that this approval was for specific modelling calculations and not an election by Mr Isaacs between the IQQM Model and the Namoi Source Model, but rather a choice between the different outputs using different modelling scenarios and/or outputs for each of the (i) LTAAE under the WSP Conditions; (ii) LTAAE under Cap baseline conditions; and (iii) Current Extraction.
Contrary to the applicants' submission that there was at least a potential conflict between the interests of eWater Ltd and Mr Isaacs' duties as a director and the interests of the Department, the respondent submits that there is no conflict or even potential conflict as eWater Ltd did not stand to gain anything more from Mr Isaacs' agreement/approval (as evidenced in the Models Briefing Note) and that a fair-minded observer would not consider that Mr Isaacs would be predisposed to being partial to adopting a hydrologic computer model which utilised the Namoi Source Model.
In this regard, the respondent identifies that the decision to select the Namoi Source Model as the hydrologic computer modelling software to be used for river system modelling across Australia, including NSW, and for the Namoi Valley specifically, was made prior to Mr Isaacs becoming a director of eWater Ltd (or even the Chief Knowledge Officer of the Department). The respondent also points to the following evidence (mostly given by Ms Baker) which demonstrates that the decision to employ the Namoi Source Model occurred on a much "larger scale" than simply through Mr Isaacs himself: 1. eWater Ltd is a not-for-profit organisation that is owned by Australian state and territory governments, including the NSW Government in circumstances where eWater Ltd was created for the express purpose of developing the "next generation" of Australian water resources management models. 2. In 2008, COAG adopted the National Hydrologic Modelling Strategy ('NHMS') as a response to a national review that the existing Australian hydrology modelling platforms (including the IQQM Model) required significant modernisation and increased functionality to meet future needs. 3. In 2014, the Department began the process of transitioning from the IQQM Model to the Source Model, and Ms Baker gave evidence that in June 2014, the Department received advice which noted that NHMS had been established to "pursue a new generation approach promoting world best practice in water resource management, applied through the Source Model framework". 4. In 2015, a project plan was finalised to "transition all NSW Murray-Darling models to [S]ource, including the Lower Namoi River Source". This project plan recorded a number of limitations in continuing to use the IQQM Model including that significant investment would be needed to update the model. 5. In December 2017, the Department's Principal Water Modeller (Dusmantha Dutta) prepared a business case (known as the "NSW Source Business Case") for the transition of NSW inland River Valleys' hydrologic computer models (including the Namoi), from the IQQM Model to the Source Model. The Principal Water Modeller had found that there were limitations to the IQQM Model architecture and set out a detailed plan for the implementation of Source software for NSW inland River Valleys' hydrologic computer models outlining several advantages of transitioning from the IQQM Model to the Source Model. 6. In July 2018, COAG signed the "NHMS Collaboration Head Agreement", which reiterated the deployment of the Source Model as a national software platform for hydrologic computer modelling and COAG adopted the "Basin Compliance Compact" under which the NSW Government made a public commitment to develop and transition its hydrologic computer models to models using the eWater Source software platform across a number of valleys including in the Namoi. 7. In August 2018, the "National Collaboration Framework - Source Project Agreement" was entered into by various Australian state and territory governments, the Murray-Darling Basin Authority, and eWater Ltd, which sought to promote the implementation and maintenance of "Source" (which was defined as "the suite of hydrological modelling software collaboratively developed by governments through eWater"). As such, the Department's "build" of the Namoi Source Model using the Source software (in line with the national approach and the NSW Government's commitment and recommendations from experts) was underway as early as June 2018, which is four years before Mr Isaacs became a director of eWater Ltd.
The respondent submits that Mr Isaacs' agreement and approval in the Models Briefing Note of the Namoi Source Model did "not change how much NSW pays eWater". The respondent identifies that eWater Ltd is funded by Australian state and territory governments through annual contributions (cl 7 and Sch 7 of the National Collaboration Framework - Source Project Agreement). The respondent repeats that, in the circumstances, the NSW Government's decision to employ the Source Model was a decision that took place on a scale much higher, broader and larger than simply Mr Issacs' concurrent role as a director of both eWater Ltd and the Chief Knowledge Officer of the Department. The respondent submits that it follows that there was neither a conflict of interest nor a potential conflict of interest.
The respondent submits that a fair-minded observer would be aware of the above matters and that multiple reviews were conducted by different experts concluding that the Namoi Source Model is superior to, and more modern than, the IQQM Model, and that several Departmental experts and independent experts had identified that the Namoi Source Model was both superior to prior models and the "best available".
Finally, the respondent submits that the applicants' entire apprehended bias argument fails as a matter of materiality such that even if it was established that Mr Isaacs' decision suffered from apprehended bias, given all the circumstances, there was no realistic prospect that the outcome would have been different even if another officer of the Department had been tasked with approving the Models Briefing Note.

Consideration

The manner in which apprehended bias is considered is well-known and was recently reiterated, albeit in a different factual context, in QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 15; (2023) 409 ALR 65 at [37]-[38] by Kiefel CJ and Gageler J: "[37] …The criterion is whether 'a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide' [Charisteas v Charisteas (2021) 273 CLR 289 at [11]]. The 'double might' [CNY17 v Minister for Immigration and Border Protection (2019) 268 CLR 76 at [18]] serves to emphasise that the criterion is concerned with the 'possibility (real and not remote), not probability' [Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at [7]]. [38] Application of the criterion was identified in Ebner and has been reiterated, logically to entail: (1) identification of the factor which it is said might lead a judge to resolve the question other than on its legal and factual merits; (2) articulation of the logical connection between that factor and the apprehended deviation from deciding that question on its merits; and (3) assessment of the reasonableness of that apprehension from the perspective of a fair-minded lay observer."
In CNY17 v Minister for Immigration and Border Protection (2019) 268 CLR 76; [2019] HCA 50 at [19], Kiefel CJ and Gageler J explained the rationale behind the third step: "The purpose of combining the 'fair-mindedness' of the hypothetical lay observer with the 'reasonableness' of that observer's apprehension is to stress that the appearance or non-appearance of independence and impartiality on the part of the Authority falls to be determined from the perspective of a member of the public who is 'neither complacent nor unduly sensitive or suspicious' [Johnson v Johnson (2000) 201 CLR 488 at [53]]. Together they emphasise that 'the confidence with which the [Authority] and its decisions ought to be regarded and received may be undermined, as much as may confidence in the courts of law, by a suspicion of bias reasonably - and not fancifully - entertained by responsible minds' [R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553]."
In LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] HCA 12; (2024) 418 ALR 152 at [5]-[6], it was made clear that while it is impossible to "divine a rigid classification of errors that constitute jurisdictional errors", where error is constituted by apprehended bias, "the error will be jurisdictional irrespective of any effect that the error might or might not have had on the decision that was made in fact". In such circumstances, the error necessarily satisfies any requirement of materiality.
Further, a fair-minded observer is a hypothetical figure taken to know the nature of the decision, the circumstances which led to the decision and the context in which it was made: Webb v R (1994) 181 CLR 41 at 73 (Deane J); [1994] HCA 30; Hot Holdings Pty Ltd v Creasy (2002) 210 CLR 438; [2002] HCA 51 ('Hot Holdings') at [68]; Polsen v Harrison [2021] NSWCA 23 at [46].
Taking into account the approach noted above, for the reasons that follow, I find that the applicants have not made out their case of apprehended bias.
Although the applicants point to Mr Isaacs' entry on the "conflict of interest declaration" (entered on the Department's "Ethics Portal"), which contains the wording detailed at [143] above and although Ms Baker, the director of Water Analytics in the Water Group which is part of the Department, was cross-examined at some length in relation to this aspect, I do not consider that this evidence assists the applicants' case. I consider the decision or approval of Mr Isaacs must be considered in the larger context particularly the historical development of the Source Model which I consider later in this judgment.
The applicants maintained in final submissions that although the lay observer does not need to be pernicious or conspiratorial to see there might be a possibility that Mr Isaacs would not bring an unbiased mind to his task, and although there is evidence that Mr Isaacs did not originally accept an earlier recommendation made by Ms Baker to adopt the IQQM Model, again, I do not consider this fact persuasive because I accept Ms Baker's evidence that various documents (including complex technical documents and briefing notes) go through "numerous" iterations (and "drafts"). I consider the fact that she endorsed certain iterations before Mr Isaacs may have made comments, and that Mr Issacs did not accept Ms Baker's recommendation not to approve the Namoi Source Model, is neither determinative nor persuasive.
Further, I do not accept the applicants' submission that the material and evidence available to a fair-minded lay observer is indicative (and certainly not decisive) that there is something fundamentally impartial about Mr Isaacs "injecting himself into the process and declining the recommendation of Ms Baker", and thereafter approving the Namoi Source Model over the IQQM Model. I find that a hypothetical fair-minded lay observer would be aware of the nature of Mr Isaacs' decision and the context in which it was made (which is noted above at [158]), as well as the circumstances leading to the decision: Hot Holdings at [68].
As both parties accept, it is not for the Court to consider whether the Namoi Source Model itself, is the best available or the most appropriate choice when considering the applicants' apprehended bias ground. The question is simply whether there arises a reasonable apprehension that Mr Isaacs might not have brought a fair and impartial mind to the decision.
Given the evidence in relation to the background material, the totality of the circumstances that existed at the time when the question of apprehension of bias is to be determined, and that the matter is determined from the perspective of a member of the public who is "neither complacent nor unduly sensitive or suspicious", I consider that the evidence before the Court weighs against the applicants' position.
Moreover, I accept the respondent's submission that the "decision" to use the Namoi Source Model (or more particularly to approve the use thereof) occurred on a "larger scale" and, effectively, well before the circumstances that gave rise to the applicants' primary contentions. In particular, the background facts to which the Court was directed (at [158] above), including, first, the adoption by COAG as early as 2008 of the NHMS, which responded to a national review, finding that the then existing and available hydrologic computer modelling platforms (including the IQQM Model) required significant modernisation; second, the fact that from 2014 to 2017 the Department progressed the transitioning from the IQQM Model to the Source Model and that a specific plan was finalised to effect this transition (at least by 2015); third, the "NHMS Collaboration Head Agreement" signed in July 2018; and fourth, the "National Collaboration Framework - Source Project Agreement" entered in August 2018, in my view, clearly set the path for the Department developing (or "building") what became the Namoi Source Model using the Source Model software.
In reaching my view, I repeat that I have taken into account that the above (primarily historical) facts would be known to a fair-minded lay observer who was "neither complacent nor unduly sensitive", as would the fact that eWater Ltd is a not-for-profit organisation that is effectively owned by Australian state and territory governments and was created expressly for the purpose of developing the "next generation" of Australian water resources management models; and further, that eWater Ltd develops and maintains other software products which are provided to governments, research and industry users. It would also be known, both within the Department and otherwise, to a fair-minded lay observer, that the Namoi Source Model was superior to prior models and, in the circumstances, was the "best available" model. I find that it would also be known that a number of reviewers and experts concluded that the Source software was superior to the older IQQM software.
In addition, I take into account the more contemporaneous material, including the various earlier briefing notes detailing the background and development of the Source-based modelling, and the fact that this background was reflected in other policies including the Department's report styled "Building the river system model for the Namoi regulated river system" report, (November 2022) which stated (at p 21): "The Department, along with other Australian water agencies, uses or is migrating to use the Source software platform which has been adopted as Australia's national hydrological modelling platform. Source was developed by a consortium of Australian research and industry partners to provide a consistent hydrological and water quality modelling and reporting framework to support integrated planning, operations and governance, and urban, catchment to river basin scales. Use of a common platform facilitates collaborative and consistent modelling, analysis and policy development across the Murray Darling Basin, including the accreditation of water resources under the Basic Plan."
For completeness, I also accept the evidence of Ms Baker that the "build" of the Namoi Source Model (based obviously on Source Model software) was underway as at June 2018 and that this would be known to a fair-minded lay observer.
In their submissions in reply, the applicants submitted that much of the earlier documentary material commencing in August 2008 referred to, and relied upon, by the respondent, did not assist the respondent because it related to "policy setting" and did not explain what was later to happen in April, May or June 2023 and further, was "aspirational" in the sense that it considered that floodplain harvesting extractions would be subject to a licensing regime which had not come into effect in June 2023. I do not accept this position.
Both in relation to this ground (in relation to apprehended bias) and Grounds 2, 3, 5, 6 and 7, having considered the evidence, I do not accept the applicants' contentions that simply because there were references in some of the earlier material to a desire for, or likelihood of, the implementation of a discrete floodplain licensing regime, what was effectively undertaken (in the decision leading to the 2023 AWD) was a process of now including floodplain harvesting extractions as a factor which had not been historically accounted for, and was, therefore, an "unauthorised policy shift". As I have noted earlier in my consideration of other grounds, I accept the evidence of Mr Weber that floodplain harvesting extractions had been considered (in the sense of taken into account) in the earlier use of the IQQM Model. Moreover, I find the better view is that floodplain harvesting was appropriate to be considered and that the progressive development (and later adoption) of the Source software took this into account as was anticipated.
Further, I do not accept the applicants' submission that eWater Ltd stood to "tangibly" gain from Mr Isaacs' decision to approve the Source Model. Although the applicants pointed to detailed accounting material in relation to various monetary "contributions" (including purchase orders for the provision of goods and services and that the Department was, effectively, a "user" and "customer" of eWater Ltd), this submission again understates the history of the development of the Source Model, the ownership model of eWater Ltd, and the long-standing government policy to which I have referred above, which was to deploy the Source Model for water modelling across the country. Although the evidence was that the State of NSW, as a co-owner of eWater Ltd, provides an annual amount of funding to eWater Ltd (by reason of their co-ownership as well as for eWater Ltd to deploy and manage the software), I accept the evidence of Ms Baker that the amount of "owners' contributions" is not tied to any decision to utilise the software in particular weather systems.
Simply stated, the evidence does not convince me that eWater Ltd stood to gain anything by Mr Isaacs' agreement and/or approval of employing the Namoi Source Model such that there is little prospect that a fair-minded lay observer, when considering Mr Isaacs' position in the surrounding factual matrix, would likely consider that he be predisposed to being partial to adopting a hydrologic computer modelling framework which utilised the eWater Source platform and which was considered to be clearly superior to the IQQM Model.
For the above reasons, I do not find that a fair-minded lay observer would have a reasonable apprehension that Mr Isaacs was predisposed to being partial to adopting a hydrologic computer model which utilised the Source Model because of his position as a director of eWater Ltd.

Conclusion

The applicants have not made out their claims in their amended summons filed 8 March 2024 and the amended summons should be dismissed.

Costs

The usual costs order in judicial review proceedings is that costs follow the event. While I consider that this is the appropriate order, the parties did not address at the hearing whether the Court, in the exercise of its discretion under r 4.2(1) of the Land and Environment Court Rules 2007 (NSW) or otherwise, should decide not to make an order that the applicants pay the respondent's costs of the proceedings. If the applicants contend for a different order (and agreement is not reached between the parties), they should file written submissions limited to three pages within three weeks of the date of this judgment and the respondent should then file written submissions in response also limited to three pages within a further three weeks with the intention that any question of costs will be decided on the papers unless either party makes an application for an oral hearing.

Orders

The Orders of the Court are: 1. The amended summons filed 8 March 2024 is dismissed. 2. Costs are reserved.

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. Decision last updated: 14 February 2025

Phelps and Ors v Minister Administering the Water Management Act 2000

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