Plaintiffs v Defendant

Supreme Court of Victoria|2011-12-21|Before: EMERTON J

ADMINISTRATIVE LAW - Whether an agreement by an irrigation authority to transfer its property in and management and control of certain drains to a local council is void - Function of irrigation authority to provide drainage to irrigated land under the Water Act 1989 (Vic) - The decommissioning of drains - Whether an irrigation authority has impermissibly abandoned its drainage function - Whether drains are 'major works' -Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council (2006) 203 FLR 394 considered - Morrison v Shire of Morwell [1948] VicLawRp 18; [1948] VLR 73 considered - (Vic) , , , - , , - Declarations refused - Proceeding dismissed.

1 This proceeding concerns the obligation of an irrigation Authority to provide drainage to irrigated land under the Water Act 1989 (Vic) (the 'Act'). The plaintiffs, Messrs Rocky and Richard D'Agostino, own land with associated water rights on the outskirts of Shepparton. They seek declarations that an agreement entered into between the defendant, Goulburn Murray Rural Water Corporation ('GMW'), and the Greater Shepparton City Council (the 'Council') on 14 August 2008 (the 'Transfer Agreement') by which GMW purported to transfer to the Council property in and management and control of certain drains is void, that GMW remains the owner of a particular drain (known as 'drain 1/3/2') and that GMW must, pursuant to provisions of the Act, supply the plaintiffs with 'appropriate drainage'.

2 For the reasons that follow, the Court will not make the declarations sought by the plaintiffs. GMW is authorised by the Act to enter into agreements with public statutory bodies such as the Council to carry out its drainage functions, and the Transfer Agreement is not ultra vires for the reasons advanced by the plaintiffs.

3 It is common ground that GMW is an Authority and a water corporation for the purposes of the Act.[1] GMW manages water related services in a region of 68 000 square kilometres, bordered by the Great Dividing Range in the south and the River Murray in the north, and stretching from Corryong in the east down river to Nyah in the west. It also operates salinity mitigation works on the Murray downstream of Nyah, manages Mildura Weir, delivers bulk water to supply points outside its region and is the Victorian Constructing Authority for the Murray-Darling Basin Authority. It has functions under the Act to manage an irrigation district (Part 11), a water district (Part 8) and a waterway management district (Part 10).

4 The plaintiffs are the registered proprietors of land made up of two adjoining lots[2] on the Midland Highway, Shepparton East. The plaintiffs' land falls within the Shepparton Irrigation Area. One of the lots, known as 'Lot 2', is used for mixed purposes. Part of it is used for agricultural purposes (an orchard and cropping), and part of it is used for commercial purposes (an engineering business). The plaintiffs hold associated water shares under the Act and Lot 2 is a 'serviced property' for the purposes of Part 11 of the Act. As a result, GMW must provide the service of delivering water to Lot 2 for the purposes of irrigation and for stock and domestic use at the volumes and for the periods that are determined by GMW in accordance with Part 11 of the Act.

5 Lot 1 previously also enjoyed irrigation rights. However, on 30 July 1999, the plaintiffs entered into an agreement with GMW (the '1999 agreement') whereby they gave up their right to water to irrigate Lot 1 and received a small amount of compensation for the loss of the right. Despite the loss of the right to water for the purpose of irrigating Lot 1, by the 1999 agreement, GMW undertook:

... that as a result of this agreement no reduction in the right to drain to Goulburn-Murray Water drainage will result;

6 The interpretation of this part of the 1999 agreement has been the subject of a separate proceeding and appeal in this Court.[3] The plaintiffs contend that the undertaking given by GMW is relevant to its power to enter into the Transfer Agreement and to the validity of the Transfer Agreement.

7 The Transfer Agreement forms part of a project to decommission the rural drainage network in the area in which the plaintiffs' land is situated to allow for future implementation of an urban drainage scheme.

8 Mr Leigh Jondahl, Legal Counsel for GMW, gave evidence[4] that in the years prior to entry into the Transfer Agreement in 2008, GMW identified significant flooding risks on some of the drains that it managed in the Shepparton Irrigation Area, namely drains 3/2, 1/3/2 and 1/1/3/2,[5] around a low lying area of Carroll Road and the intersection of Doyles Road and the Midland Highway. GMW formed the view that these risks were due to an increase in commercial and industrial development in the area over the previous 20 years and the pressure that development put on GMW's rural drainage network. GMW was concerned that there was an increased risk of flooding that might cause damage to commercial and industrial lots in the area. As a result, it entered into discussions with the Council to cooperate on a joint project to decommission the rural drainage network to allow for the future implementation of an urban drainage scheme. According to Mr Jondahl, this project involved two stages:

(a) the relocation of the Shepparton 3/2 drain; and

(b) the transfer of the abandoned section of rural drains to Council, with the potential for the Council to replace them with a suitable urban scheme. As part of the transfer of the drains, responsibility for the catchment area serviced by those sections of the Shepparton 3/2 drain was also transferred to the Council.

9 Despite the increasing urbanisation of the area in which the plaintiffs' land is situated, they continue to draw irrigation water from GMW's East Goulburn Irrigation Channel for their farming enterprise and to pay rates and water charges levied by GMW on Lot 2.[6] According to the plaintiffs, Lots 1 and 2 drain into the 1/3/2 and 1/1/3/2 drains at eight points and the plaintiffs continue to receive rates notices from GMW for drainage from Lots 1 and 2 into those drains.[7]

10 Mr Rocky D'Agostino gave evidence[8] that the plaintiffs were informed by letter from the Council dated 16 May 2011 that the Council was proposing to construct a new drainage system under a special charge system, and that it proposed that land owners would collectively contribute in the range of $2.7 million to $3.2 million to the cost of the drainage works. The plaintiffs estimate the cost of this to them in respect of Lot 1 to be in the range of $115 000 to $139 000; in respect of Lot 2, in the range of $259 000 to $314 000; and in respect of the channel easement, in the range of $6800 to $8200.

11 The plaintiffs are therefore concerned that, if the Council has become the owner of drains 1/3/2 and 1/1/3/2 as a result of the Transfer Agreement, they will be prevented from draining into those drains and be forced into the proposed new urban drainage scheme, at great expense to them.

12 The parties to the Transfer Agreement are GMW and the Council. The plaintiffs are not parties to the Transfer Agreement, but claim to have standing to challenge its validity on the basis that it interferes with their right to drain from Lots 1 and 2. The plaintiffs' standing to seek the declarations in the Further Amended Statement of Claim is not challenged by GMW.

13 The purpose of the Transfer Agreement is described in Recital B to be the transfer from GMW to the Council of the 'Drains' (as defined) together with their 'Management and Control' (as defined) in accordance with the terms and conditions in the Transfer Agreement. The Drains comprise a part of the 3/2 drain and its branch, the smaller 1/3/2 drain, and its branch, the even smaller 1/1/3/2 drain.

14 More specifically, Recital C expresses the intent of the Transfer Agreement to be for the Council to assume management of the Drains in the 'Area to be Serviced' (as defined, which includes the plaintiffs' land), and to provide the drainage service to the Rural Area (as defined, which does not include the plaintiffs' land) at the existing Level of Service.

15 The Level of Service is defined to mean, at the minimum, the equivalent of GMW's then existing drainage level of service for the Drains. 'Management and Control' is defined as the care, control, operation, maintenance and replacement of the Drains.

16 Recitals D and E record that when the Drains are no longer required, it is the Council's intention to decommission them and that GMW will provide financial assistance to the Council to aid with the decommissioning of the Drains.

17 By clause 3, GMW transfers to the Council from the transfer date the property in and the Management and Control of the Drains.

18 Clause 4.1 of the Transfer Agreement imposes obligations on the Council as follows:

4.1 The Council agrees that from the Transfer Date:

4.1.1 it will be the owner of the Drains as far as it is legally able;

4.1.2 it will be responsible for the Management and Control of the Drains;

4.1.3 that it will provide a drainage service to all the lands in the Area to be Serviced;

4.1.4 that it will receive drainage from the Rural Area;

4.1.5 that it will provide the Rural Area with a drainage service equivalent to the existing Drains' Level of Service;

4.1.6 that it will at all times maintain the Level of Service in respect to lands with an Associated Water Share; and

4.1.7 it will not carry out any works to the Drains which may lessen the Level of Service in respect to the Rural Area without the prior consent of GMW.

19 By cl 4.3, the Council acknowledges that the lands with an associated water share within the Area to be Serviced used for agricultural purposes will not be immediately excised by GMW from its Shepparton irrigation district.

20 Clause 5 imposes obligations on GMW. Among other things, by cl 5.1, GMW grants approval for the Council to discharge drainage water collected in the Drains from the Area to be Serviced[9] to the outfall in GMW's 'Shepparton Drain 2', subject to certain restrictions on future Council approvals. Clause 5.2 provides for a payment to be made by GMW towards the later decommissioning and abandonment of the Drains, and cl 5.3 provides that GMW will, as soon as possible after the transfer date, excise from its Shepparton irrigation district all lands contained within the Area to be Serviced that no longer have an associated water share.

21 So far as drainage from the plaintiffs' land is concerned, the Transfer Agreement therefore provides that:

• The Council is to become the owner of the drains used by the plaintiffs (drains 1/1/3/2 and 1/3/2) and to be responsible for their management and control, which includes their maintenance and replacement;

• The Council is to provide a drainage service to the plaintiffs' land;

• Because Lot 2 has an associated water share, the Council is to maintain, at the minimum, the equivalent of GMW's drainage level of service as at the date of the Transfer Agreement.

22 Further, GMW's undertaking that it will excise from its Shepparton irrigation district all lands contained within the Area to be Serviced that no longer have an associated water share does not apply to Lot 2.

23 As a result, pursuant to the Transfer Agreement, from the transfer date the Council became obliged to provide drainage to Lot 2 and to maintain at the minimum, the equivalent of GMW's then existing drainage level of service. However, it was not obliged to provide drainage to Lot 1, which did not have an associated water share.

24 So far as I understand the submissions of the plaintiffs, they do not allege that the provision of drainage has not occurred. They assert that GMW, rather than the Council, is obliged to provide drainage to their land and challenge the validity of the Transfer Agreement insofar as it purports to transfer GMW's responsibility for the provision of drainage and the ownership of drains to the Council, and to allow for the decommissioning of drains.

25 The plaintiffs submit that the Transfer Agreement is not effective to transfer the property, management and control of the Drains to the Council because it is void as ultra vires GMW. They say this for two reasons:

(a) First, the Act does not authorise GMW to enter into an agreement under which it abandons its obligations to provide drainage and transfers property in its drains to a third party;

(b) Secondly, the drains in question comprise 'major works' which, pursuant to s 139(1) of the Act, cannot be decommissioned without the consent of the Minister and other than in accordance with the requirements of ss 139A-E of the Act.

26 The plaintiffs complain, in substance, that the Transfer Agreement provides for the drainage infrastructure that is currently in place to be decommissioned, and for new infrastructure to be built which will be owned and managed by the Council as the Council sees fit, subject perhaps to minimum service levels that are provided in the Transfer Agreement. They contend, therefore, that the Transfer Agreement results in all the power and decision-making as to how the drainage system is going to be developed and managed in the future resting with the Council. This, it says, constitutes an impermissible abandonment by GMW of its statutory function to provide appropriate drainage to their land.

27 As to the second point, I understand it to be contended that, to the extent that the Transfer Agreement purports to allow the Council to decommission the Drains without reference to the requirements of ss 139 to 139E, it is invalid. Those provisions provide for Ministerial approval of any decommissioning, following a process of public consultation and possible consideration by an independent panel.

28 GMW makes a number of cascading submissions in response to the contention that it has impermissibly abandoned its statutory function of providing drainage. Its principal submission is that, by the Transfer Agreement, it has not abandoned or divested itself of its drainage function or power because it has, by the Transfer Agreement, contracted for the Council to perform the drainage function. The Transfer Agreement is not incompatible with the exercise of those functions or powers. The language in the relevant section of the Act, s 221, does not require the drain to be owned by the Authority, just as it does not require the Authority to operate, manage or control the drainage systems itself. Council's obligation to manage and control the drains does not give it unfettered powers, because, under the Transfer Agreement, it must continue to provide the existing Level of Service which is, at a minimum, the equivalent to GMW's existing[10] drainage level of service for the Drains.

29 In the alternative, GMW submits that if it has divested itself of the drainage function, it was not unlawful for it to do so, as the drainage function is a discretionary and subordinate function to the provision of the service of delivery of water for irrigation.

30 The final tier of GMW's argument is that, even if it has divested itself of its drainage function, and even if entry into the Transfer Agreement was not authorised by the Act as a consequence, the Transfer Agreement remains nonetheless valid and enforceable on the principles described by the High Court of Australia in Project Blue Sky Inc v Australian Broadcasting Authority.[11]

31 As to the argument that the Drains cannot be decommissioned other than in accordance with s 139 because the Drains are 'major works' for the purposes of the Act, GMW submits that the plaintiffs have not provided any evidence that the Drains are major works. It says that the Drains are not major works and that they have not, in any event, been decommissioned.

Has GMW impermissibly abandoned its drainage function?

32 The powers, functions and duties of an Authority with an irrigation district are set out in the Act in Part 7 (General Powers) and Part 11 (Irrigation).[12]

33 As part of the conferral of general powers by Part 7 of the Act, s 123 provides that an Authority may do all things that are necessary or convenient to be done for or in connection with, or as incidental to, the performance of its functions, including any function delegated to it.

34 Section 126 of the Act provides that an Authority's power to enter into contracts includes the power to agree or contract with another Authority, government department or other public statutory body with respect to:

(a) the exercise by the Authority and the other party of their respective functions; or

(b) the carrying out or providing by either party for the other party of any works or services; or

(c) the use or joint use by the Authority and the other party of their respective facilities or the services of their respective staff.

35 'Public statutory body' is defined to include a council. By its terms, therefore, s 126 authorises GMW to enter into a contract with the Council which provides for the exercise by GMW and the Council of their respective functions and/or for the Council to carry out or provide works or services for GMW.

36 I turn to Part 11 of the Act, which relates to irrigation.[13] Part 11 applies to an Authority that has an irrigation district. The functions, powers and duties of an Authority with an irrigation district are set out in Division 2 of Part 11 which comprises ss 221 and 222 of the Act.

37 Section 222(1) provides:

An Authority, subject to the provisions of this Part -

(a) must provide the service of delivering water to the owner or occupier (where the occupier is not the owner) of each serviced property in its irrigation district -

(i) for the purpose of irrigation; and

(ii) for stock and domestic use -

at the volumes and for the periods that are determined by the Authority in accordance with [Part 11].

38 Lot 2 is a serviced property. Accordingly, GMW must provide the service of delivering water to the plaintiffs as the owners of Lot 2 for the purposes of irrigation and for stock and domestic use at the volumes and for the periods that GMW has determined.[14]

39 Section 221 describes more generally the functions of an Authority under Part 11. Section 221 confers on an Authority the following functions in relation to its irrigation district:

(a) to provide, manage and operate systems for the delivery of water to lands and appropriate drainage and protection of those lands;

(b) to identify community needs relating to irrigation, drainage and salinity mitigation, and plan for the future needs of the community relating to irrigation, drainage and salinity migration;

(c) to develop and implement programs for improved irrigation practices, improve drainage practices and improve salinity mitigation practices; and

(d) to investigate any matter related to its functions, powers and duties in relation to irrigation, drainage and salinity mitigation.

40 The plaintiffs submit that s 221(a) imposes an obligation to provide and manage systems for the delivery of water and, as a necessary component of that, to provide appropriate drainage and protection of the lands. They submit that the obligation to provide, manage and operate systems for the delivery of water is a composite obligation that includes an obligation to provide drainage. This is because the legislature did not refer to drainage in a separate sub-paragraph, but included it in a paragraph imposing composite obligations based around the delivery of water. As a result, so the plaintiffs contend, the compulsory consequences of s 222(1)(a) extend to the provision of drainage for the water supplied for irrigation.

41 The plaintiffs further submit that s 126 of the Act does not go so far as to permit GMW to enter into a contract which would have as its effect the abandonment of control and supervision of its functions. They contend that, by the Transfer Agreement, there is an abdication of responsibility by GMW, because the ultimate management and control, and the actual performance of the drainage function, has been transferred to the Council.

42 The plaintiffs rely on Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council,[15] to support the proposition that, even where there is a provision such as s 126 enabling functions to be 'contracted out', there is a limit to what a statutory corporation can do in divesting itself of its responsibilities.

43 In Darkinjung, Barrett J in the Supreme Court of New South Wales considered the validity of transfers of funds by the Darkinjung Local Aboriginal Land Council (DLALC) to a company, Darkinjung Pty Ltd (DPL) as the trustee of a trust established at the instigation of DLALC. The purpose of the trust was to 'improve, protect and foster the best interests of Aboriginal persons' within the DLALC area. It was argued that, having regard to the status of DLALC as a corporation created and governed under the Aboriginal Land Rights Act 1983 (NSW), it had no power, authority or capacity to transfer funds to DPL and that, even if it was possible to identify a particular object, function or power of DLALC as sufficient, in terms, to enable it to transfer the funds, each transfer was inconsistent with the scheme in the Aboriginal Land Rights Act and had to be taken not to have been authorised.

44 His Honour carefully analysed the provisions in the Aboriginal Land Rights Act, particularly those that established the objects and functions of a local Aboriginal land council and gave it a power of delegation. The power of delegation was a limited one. Furthermore, the scheme of the Aboriginal Land Rights Act was that unless a particular matter was placed by the Act within the province of a particular officer or delegated in accordance with the delegation provision, a matter could only be dealt with by the local Aboriginal land council itself at a meeting. This reflected the central role played by such meetings in the affairs of a local Aboriginal land council.[16]

45 Having regard to the statute as a whole, his Honour concluded that a local Aboriginal land council was authorised to perform its functions provided that in so doing it acted within its objects and, conversely, had the authority to pursue the attainment of its objects provided that in so doing, it did not perform functions beyond the functions conferred on it. The authority of a local Aboriginal land council was therefore to perform its functions in pursuit of its objects or to pursue its objects by performing its functions.[17]

46 Justice Barrett considered the agreement between DPL and DLALC in this context, and observed that at the time DPL received the funds from DLALC, it was not suggested that DPL would apply the funds in particular ways or deal with them only as DLALC requested or directed. In the hands of DPL as trustee, the funds received from DLALC might, at DPL's discretion, have been applied in a variety of different ways. Moreover, DLALC, in transferring the funds to DPL, did not apply any part of those funds in or towards the performance of any of its functions. It made those funds available to DPL so that DPL might, according to DPL's own decisions, deploy the funds in furtherance of the purposes for which DPL was permitted to act. Accordingly, DLALC relinquished both ownership of the funds and the power to control their application. In so doing, DLALC could not be said to be exercising any of its functions.

47 Justice Barrett emphasised that the pursuit of its objects by the performance of its functions was not merely a right, power or capacity of DLALC. It was also a duty and responsibility of DLALC which was to be discharged by DLALC itself, subject only to the limited power to delegate conferred by the statute. His Honour concluded that any arrangement which caused land council property to be vested in another person for application in accordance with future decisions of that person entailed an impermissible abdication of statutory responsibility, an impermissible shifting of statutory decision-making, an impermissible side-stepping of statutory controls and therefore a subversion of statutory intention.[18] The transfers of funds were therefore an impermissible abandonment by DLALC of its statutory duties and responsibilities with respect to a large part of its property. The transfers put that property beyond the control and decision-making regimes to which Parliament intended that it should be subject.

48 Similarly, in Morrison v Shire of Morwell,[19] O'Bryan J in this court considered an agreement whereby the Morwell Town Hall was leased to a cinema proprietor. The agreement to lease the town hall had been entered into with the cinema proprietor by a 'town hall committee' rather than by the council itself. It was contended that the statutory power of the municipality to make such a contract could not be delegated but had to be exercised directly by the municipality considering for itself whether the particular contract should be made, and by an appropriate resolution duly passed that the contract should be made by the municipality. Alternatively, it was submitted that if the statutory power could be delegated, it could not be delegated in such a way as to denude the municipality of the statutory powers and duties of management and control which the Local Government Act 1928 (Vic) had given and imposed upon it in respect of the town hall.

49 Having considered the relevant sections of the Local Government Act, O'Bryan J concluded that the duty to manage and control the town hall was imposed upon the council. It also had a duty to obtain the best possible return from the use of the town hall consistent with its use in accordance with the Local Government Act and to properly administer all money so received for its use. Although the council was given wide powers of leasing and licensing, the use to which the town hall was to be put and the question of whether it was to be leased or a licence granted were matters for the council to consider. A duty of management was cast upon the council. For the purpose of carrying out that duty, the council could employ agents, but if it did so, it had to retain control of the exercise of its statutory duties and powers.[20]

50 His Honour concluded that the leasing arrangement was ultra vires the local council.[21]

51 By analogy, the plaintiffs submit that the responsibility for the provision of drainage imposed on GMW by s 221(a) of the Act means that GMW must retain control of the provision of drainage in the proper exercise of its statutory duties and powers. They submit that the effect of the Transfer Agreement is to abdicate the responsibility imposed upon GMW by the Act because it purports to transfer to another body, the Council, the ultimate management and control as well as the actual performance of the function. The Transfer Agreement sets certain minimum levels of service provision for drainage, but other than that, it is the Council's responsibility to provide drainage.

52 Although there is a well established principle of law that if a person or public body is entrusted by the legislature with certain powers and duties expressly or impliedly for public purposes, those persons or bodies cannot divest themselves of those powers or duties,[22] what Darkinjung and Shire of Morwell confirm is the unsurprising proposition that as the powers and duties of a public body or person are derived from the enabling statute, it is necessary to have close regard to the terms of the statute to determine what the person or body has the power to do, what it is required to do, what it can delegate or 'contract out' and so on. The enabling statute may allow the power or duty to be exercised or performed by another. It is a question of construing the Act.

53 The Act sets out the powers, duties and functions of an irrigation Authority and specifies, expressly or impliedly, whether another person or body can exercise those powers or perform those duties and functions and, if so, who may do so and subject to what, if any, conditions or restrictions.

54 Pursuant to s 123 of the Act, GMW has power to do all things that are necessary or convenient to be done for or in connection with the performance of its functions. This power is not limited by any other provision of the Act that confers a power.[23] Section 126 then expressly permits or authorises GMW to enter into a contract or agreement with specified parties in relation to the exercise of the Authority's functions or in relation to the carrying out or provision of works or services for the Authority.

55 The general power to enter into contracts or agreements that is conferred on an Authority by s 123 of the Act may be constrained by reference to the duties, powers and functions of the Authority. However, s 126 makes clear that the power of an Authority to enter into contracts extends to contracts or agreements of the kinds specified, namely contracts or agreements with another Authority, a government department or other public statutory body in respect of the matters described in paragraphs (a), (b) and (c).

56 Paragraphs (a) and (b) are relevant for present purposes. Paragraph (a) provides that a contract or agreement may be made 'with respect to the exercise by the Authority and the other party of their respective functions'. Although this provision is poorly formulated, I consider its meaning to be that the Authority may agree to perform the functions of the other party, and may agree that the other party perform its (the Authority's) functions. The alternative constructions, that the Authority and the other party simply perform their own functions or jointly perform the functions of each or one or other of them, would have little utility. In my view, paragraph (a) provides for an agreement to be made whereby one of the parties agrees to perform the functions of the other. Paragraph (b) then also provides for the carrying out or provision by one party of works or services for the other. By its terms, its permits an Authority to contract with a public statutory body such as the Council to provide services, such as drainage, for the Authority.

57 If I am correct in this analysis, s 126 puts beyond doubt an Authority's power to enter into contracts for the exercise of its functions by another public statutory body -such as the Council - and for another public statutory body - such as the Council - to carry out or provide works or services for it. In nominating 'public' bodies as the types of bodies with which an Authority may contract for these purposes, the legislature has complied with the spirit of Part VII of the Constitution Act 1975 (Vic), which, broadly speaking, requires water services[24] to be and to continue to be delivered by public authorities.

58 In my view, s 126 of the Act is directed to providing the flexibility in service delivery required by the very circumstances giving rise to this proceeding. Given changes in land use in the area surrounding the plaintiffs' land, the body that provides urban drainage - the Council - is able to sensibly 'pick up' the irrigation Authority's residual drainage functions as part of the expansion of its urban drainage network. Section 126 effectively recognises that in the area of water delivery and management, responsibilities of different bodies may overlap and arrangements can be entered into between those bodies for the more efficient delivery of services.

59 In contracting with the Council for the Council to provide its drainage function, GMW is not abandoning that function so much as ensuring that the function of providing 'appropriate drainage' to the plaintiffs' land is carried out.

60 This conclusion is supported by consideration of the scheme in Part 11 of the Act for the provision of the service of delivering water for irrigation purposes. The Act distinguishes between 'functions', 'powers' and 'duties'. The distinction between a 'function' and a 'duty' is reflected in Division 2 of Part 11 of the Act which, by s 221, confers functions on an irrigation Authority and, by s 222, imposes a duty on an irrigation Authority to provide the service of delivering water for specified purposes, principally for irrigation.

61 Section 221(a) provides that it is a function of an irrigation Authority to provide, manage and operate systems for, among other things, appropriate drainage of lands to which water is delivered. The provision, management and operation of systems for appropriate drainage is linked in s 221(a) to the provision, management and operation of systems for the delivery of water to lands under Part 11 of the Act. 'Appropriate drainage' is therefore referrable to the delivery of water for irrigation and is most likely limited to the management of irrigation run-off. Sections 221(b) - (d) also confer functions on an Authority in relation to drainage, again in the context of irrigation. Those drainage functions include the identification of community needs and planning for future needs relating to drainage; the development and implementation of programs for improved drainage practices; the investigation of matters related to its functions duties and powers in relation to, among other things, drainage. Salinity mitigation and land protection generally feature in the same suite of functions.

62 The drainage functions referred to in s 221 are thus of a general and fairly non-specific nature.

63 By contrast, s 222(1)(a), which relates to the service of delivering water, is expressed in specific and mandatory terms. Although ss 221(a) and 222(1) both refer to the delivery of water, s 222 imposes on the Authority a service delivery obligation to owners (or occupiers) of particular land (serviced properties), whereas s 221 confers on an irrigation Authority the more general functions of providing, operating and managing the 'systems' that support or ensure the delivery of water and the drainage and protection of the lands to which the water is delivered. The former is a duty to specified land holders, whereas the latter is a general function.

64 GMW submitted that it was not obliged to provide any drainage at all to the plaintiffs' land because the exercise of the function of providing, managing and operating systems for the drainage of irrigation lands is discretionary. It is unnecessary for present purposes to decide whether the drainage function of an irrigation Authority is purely discretionary or not. However, s 124(5) of the Act provides that an Authority is not obliged to perform any function conferred by the Act unless the Act expressly provides otherwise. Section 222(1), which stipulates that an Authority must provide the service of delivering water does not in my view provide 'otherwise' for the purposes of s 124(5) of the Act, as it imposes a different obligation: the service of delivering water rather than the provision and operation of the means for such service delivery.

65 In my view, the central obligation of an irrigation Authority is the provision of the service of delivering water. Its drainage function is subsidiary and incidental to that obligation.

66 There are sign-posts in other parts of the Act and elsewhere that support the conclusion that the provision of drainage by an irrigation Authority is subsidiary to the service of water delivery and is not something that an irrigation Authority is bound to provide through its own efforts. Section 10 of the Act permits an Authority 'or any other person' to construct or operate works for 'the drainage of any land'. Further, Part VII of the Constitution Act, which seeks to ensure that the delivery of water services remains the responsibility of public authorities, defines a water service as a service relating to water supply, sewerage, irrigation, water collection or storage, and sewage treatment, but makes no mention of drainage.

67 It may be the case that the service of delivering water is something that an irrigation Authority cannot contract with a public statutory body to provide, because it must perform that duty itself. That is not in issue in this proceeding. The provision, management and operation of systems for drainage of irrigated lands is, in my view, a function that can be provided or carried out by another Authority, a government department or a public statutory body by agreement with the Authority under s 126 of the Act.

68 Accordingly, by the Transfer Agreement, GMW has done precisely what s 126 contemplates that it might do, that is, contract with a council for the council to perform one of its functions. In so doing, it has not abandoned that function. It has organised, consistently with the provisions and scheme of the Act, for another public body to carry out that part of its drainage function that relates to the Area to be Serviced and the Rural Area in the Transfer Agreement. While I accept the plaintiffs' submission that an irrigation Authority cannot simply divest itself of the responsibility for the performance of its statutory functions, and that it remains accountable to the Minister for the performance (or non-performance) of those functions,[25] the Authority may decide how a function is to be carried out (or, if the performance of the function is discretionary, whether to carry it out at all).

69 In this case, the Transfer Agreement contemplates that the Council will provide drainage to Lot 2 to existing standards until the rural drainage is replaced by the urban drainage scheme that services the larger area. GMW has therefore made arrangements for the provision of drainage to Lot 2 by a body that provides, and is well capable of continuing to provide, a drainage service with a much higher capacity than the rural service currently available in the Area to be Serviced.[26] The arrangement in question is capable of satisfying any requirement to provide 'appropriate drainage', and it is unnecessary in the circumstances for GMW to supervise or control the provision of that service, or to retain ownership of the Drains.[27] The Transfer Agreement is not incompatible with GMW's exercise of its statutory functions[28] or irreconcilable with its observation of the requirements imposed upon it by the Act.[29] To the contrary, it is a means of carrying out the drainage function.[30]

70 In my view, therefore, the entry into the Transfer Agreement was a valid exercise of the power under s 126 of the Act to contract for the performance of an Authority's functions by a public statutory body. Alternatively, it is a contract for the carrying out by the Council of GMW's works and services in the Area to be Serviced with respect to the provision of drainage.

71 GMW has, by the Transfer Agreement, organised for drainage to be provided for irrigation run-off from Lot 2. Lot 1 will also have the benefit of the urban drainage scheme that is proposed, but its entitlement to drainage at the 'Level of Service' is not assured by the Transfer Agreement, as it is not land with an associated water share. Because Lot 1 is not serviced land, GMW is not required by the Act to provide the service of delivering water to it and correspondingly, the drainage function under the Act does not apply to it.

72 There remains, however, the question as to whether the 1999 Agreement and GMW's undertaking that as a result of the 1999 agreement 'no reduction in the right to drain to Goulburn-Murray Water drainage [from Lot 1] will result', made it unlawful for GMW to contract with the Council for the provision of drainage in the Area to be Serviced. The effect of the Transfer Agreement is that the plaintiffs' ability to drain from Lot 1 to 'Goulburn-Murray Water drainage' may be taken away. Drains 1/1/3/2 and 1/3/2 may cease to be operated or maintained. Even if this does not occur, the drainage provided by the Council via drains 1/1/3/2 and 1/3/2 may not qualify as 'Goulburn-Murray Water drainage'.

73 In D'Agostino v Goulburn Murray Rural Water Authority,[31] Habersberger J considered the nature of the 'right' in question. His Honour concluded that GMW had agreed that there would be no reduction in the plaintiffs' right to drain to GMW's drain 1/3/2, as a result of the 1999 agreement, that is as a result of the plaintiffs giving up their right to have Lot 1 irrigated.[32] On appeal, the Court of Appeal upheld his Honour's decision and confirmed that 'the natural meaning of the clause is that no reduction in the right to drain (whatever that means) will result from the agreement, i.e. from the appellants' relinquishment of their irrigation rights.'[33]

74 Accordingly, the 1999 agreement does not prevent GMW from reducing the right to drain to 'Goulburn-Murray Water drainage' as a result of other factors or for other reasons. Even if an agreement in respect of drainage from a single (non-serviced) property could prevent GMW from exercising its powers as an Authority under the Act to provide drainage to serviced properties in the manner for which the Act provided, the 1999 agreement is not breached by GMW or the Council ceasing to maintain and operate the relevant drains by reason of the implementation of the proposal that underlies the Transfer Agreement.

75 It is unnecessary to consider the third tier of GMW's argument concerning the lawfulness of the Transfer Agreement.

76 The Transfer Agreement is not void by reason of GMW abandoning or divesting itself of its statutory functions or by reason of the existence of the 1999 agreement.

77 Section 139 applies to the abandonment or decommissioning of 'major works' and imposes a procedure to be followed if major works are to be abandoned or decommissioned. Major works are not defined in the Act. However, pursuant to sub-s (2), the Minister may issue guidelines as to what are 'major works' for the purposes of s 139. The Court was informed that searches conducted by the parties have not turned up any Ministerial guidelines. It is reasonable to assume that none have been issued.

78 Section 139 provides that an Authority may not abandon or decommission any of its major works without the approval of the Minister. Sections 139A to 139E apply to the decision-making process by the Minister and include requirements for the Authority to submit a proposal to the Minister for approval, notification of the proposal by way of publication, the invitation of submissions on the proposal and the possible appointment of an independent panel to consider the abandonment or decommissioning.

79 It is the plaintiffs' submission that the Transfer Agreement, as an agreement to decommission the Drains[34] simply by agreement between GMW and the Council, is invalid because it fails to recognise and observe the requirements of the Act in respect of the decommissioning of 'major works'.

80 There are several difficulties with this argument. The main difficulty is that the plaintiffs have done no more than assert that the Drains are 'major works' for the purposes of the Act. They have not provided any basis for this assertion.

81 I consider it to be unlikely that the Drains are 'major works' for the purposes of ss 139 to 139E of the Act. Apart from ss 139(1) and (2), the provisions in question were inserted in the Act by the Water (Governance) Act 2006 (Vic). In the Second Reading Speech for the Water (Governance) Bill 2006 (Vic),[35] the Minister for Water referred to amendments 'to provide consultative processes for the decommissioning of dams'[36] and to the fact that water authorities were not then required by legislation to seek any input from the community on a proposal to decommission a 'major dam'. Given the impact that a proposal to decommission a dam could have, the Bill established 'a mandatory consultative process for the decommissioning of major dams that is transparent and equitable.'[37]

82 The new provisions (ss 139A to 139E) imposing a process of consultation in respect of the decommissioning of 'major works' were therefore inserted by the legislature with dam or 'major dam' decommissioning in mind. As the expression 'major works' should be given the same meaning in s 139(1) as in ss 139A to 139E, the requirement for Ministerial approval in s 139(1) would be limited to works of these kinds described by the Minister for Water in the Second Reading Speech.

83 Of course, the legislature has not limited ss 139 to 139E to major dams, but has expressed these provisions to apply to major 'works'. The definition of 'works' in the Act is a broad one that includes reservoirs, dams, bores, channels, sewers, drains, pipes, conduits, fire plugs, machinery, equipment and apparatus, whether on, above or under land.[38] However, the approval and consultation requirements in ss 139 to 139E do not apply to all of these works. The term 'major works' must have been intended to connote works that are of such a scale and importance that their decommissioning or abandonment could have a significant effect on the community. A large dam would be a good example.

84 I am not satisfied that the Drains referred to in the Transfer Agreement are sufficiently large or important to qualify as major works. They service irrigators in a semi-rural (or, conversely, semi-industrial) part of Shepparton. Drain 1/3/2 and drain 1/1/3/2, according to aerial photographs tendered in evidence, are relatively small constructions servicing what appears to be a small area of land and a small number of properties (none of which, seen from above, appear to be rural properties other than Lot 2). If the Drains qualified as 'major works' for the purposes of ss 139 - 139E, then much of the water infrastructure in Victoria would fall into the same category. It cannot have been the intention of the legislature to impose such onerous requirements in respect every day 'decommissionings'.

85 It was a matter for the plaintiffs to establish to the Court's satisfaction that the Drains were 'major works' so as to enliven ss 139 to 139E of the Act, and they have not done so.

86 Moreover, no submission was addressed to whether, if the Drains were 'major works' for the purposes of the Act, the Transfer Agreement precluded compliance with s 139 to 139E in the event that the Drains were decommissioned. Although the Transfer Agreement recites that GMW warrants that the Drains do not constitute 'major works' for the purposes of s 139 of the Act, and although it contemplates that the Council will decommission the Drains once it has provided an urban drainage system in the Area to be Serviced and suitable and satisfactory drainage to the Rural Area, the clauses in the Transfer Agreement providing for the decommissioning or abandonment of the Drains do not necessarily preclude compliance with ss 139 to 139E of the Act.

87 Accordingly, I do not accept that the Transfer Agreement is void because it provides for the decommissioning or abandonment of the Drains contrary to the requirements of ss 139 to 139E of the Act.

88 The plaintiffs have failed to establish that the Transfer Agreement is void. As a result, the Court is unable to make a declaration to that effect or to declare, as a consequence, that GMW remains the owner of the 1/3/2 drain.

89 The final declaration sought, that GMW must supply pursuant to ss 221(a) and 222(1)(a) the plaintiffs as the owners of Lot 2 with 'appropriate drainage' begs the very question before the Court. GMW contends that it has performed this function through its agreement with the Council because the Council is bound by the Transfer Agreement to provide drainage to Lot 2. I have found this arrangement to be lawful. The Court will not make the final declaration that is sought by the plaintiffs.

[1] The Goulburn Murray Rural Water Authority was the successor in the Goulburn Murray area to the Rural Water Corporation and, before it, to the Rural Water Commission of Victoria and the State Rivers and Rural Water Commission. Under amendments to the Act effected by the Water (Governance) Act 2006 (Vic), Goulburn Murray Rural Water Corporation was constituted. It is deemed to be a continuation of the Goulburn Murray Rural Water Authority and the rights, liabilities and assets of the latter are deemed to be those of GMW.

[2] Lots 1 and 2 on Plan of Subdivision number 337807W, Certificate of Title Volume 06258, Folio 531 ('Lot 1' and 'Lot 2', collectively referred to as the 'plaintiffs' land').

[3] D'Agostino v Goulburn Murray Rural Water Authority [2005] VSCA 220; D'Agostino v Goulburn Murray Rural Water Authority [2003] VSC 497.

[4] Witness Statement of Mr Leigh Jondahl dated 26 July 2011, adopted at trial on 4 August 2011, Exhibit D2.

[5] Drain 1/1/3/2 is an offshoot of the larger drain 1/3/2. Drain 1/3/2 is, in turn, an offshoot of the larger drain 3/2 which is, in turn, an offshoot of the even larger 'Shepparton Drain 2'.

[6] Witness statement of Mr Rocky D'Agostino dated 14 July 2011 and adopted at trial on 4 August 2011, Exhibit P3. Counsel for GMW objected to the admission of the relevant paragraph [9], along with paragraphs [3], [4] and [6]. I consider that they should be admitted into evidence simply because they provide useful background to the plaintiffs' complaint about the Transfer Agreement.

[7] Mr Jondahl deposed that these charges were billed in error, and that payments made by the plaintiffs since 14 August 2008 will be refunded to them.

[8] Witness statement of Mr Rocky D'Agostino dated 14 July 2011 and adopted at trial on 4 August 2011, Exhibit P3. The relevant paragraph was admitted as relevant to standing.

[9] In its state of development as at the transfer date.

[12] Section 124(4) provides that the powers of an Authority that has an irrigation district include the powers set out in Part 11.

[13] The plaintiffs also made reference to the functions of Authorities under Part 10 of the Act, which relates to waterway management districts. However, the Court was informed that GMW does not have a waterway management district in the relevant area, and the powers under Part 10 of the Act are therefore not relevant.

[14] Section 222(2) provides that a service provided by an irrigation Authority under sub-s (1) may be provided on any terms and conditions that are set out in a determination of the Authority. A 'delivery determination' relating to the volumes at which and the periods for which water is to be delivered must be made pursuant to s 223 of the Act. A 'conditions determination' may be made under s 227 relating to the terms and conditions upon which the Authority provides the service under s 222(1).

[19] [1948] VicLawRp 18; [1948] VLR 73 ('Shire of Morwell').

[21] Counsel for the plaintiffs also referred the Court to the decision in Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corp Ltd (No 1) (2000) 24 WAR 1; [2000] WASC 293 (Owen J), which concerned the powers of a strata company incorporated under the Strata Titles Act 1985 (WA). That decision in turn referred to the decision of Re Honey Pool of Western Australia (No 2) (1988) 14 ACLR 621. Both of these cases dealt with the powers of corporations "created by an enabling statute" but in neither case were the relevant companies public statutory corporations. I consider these cases to be of less assistance to the Court than the two to which I have already made reference.

[22] Birkdale District Electric Supply Company v Corporation of Southport [1926] AC 355, 364.

[24] A 'water service' is defined to be a service relating to water supply, sewerage, irrigation, water collection and storage or sewerage treatment that a public authority has responsibility for under water legislation.

[25] The Authority remains subject to the direction of the Minister under s 125 of the Act.

[26] There was evidence that GMW's drainage policy allows drainage at 1.2 litres per second per hectare, whereas the Council's drainage policy allows drainage at 64 litres per second per hectare.

[27] The transfer of ownership of the Drains is a little perplexing. As the Drains are all 'open' drains essentially comprising an unlined trench or channel, it is not clear what ownership entails. Under the Transfer Agreement, GMW appears to retain its interest in the land upon which the Drains are situated, although no specific evidence or submissions were addressed to the Court on this question.

[28] Birkdale District Electric Supply Company v Corporation of Southport [1926] AC 355, 364.

[29] Paterson v Provost of St Andrews & Bain (1881) 6 App Cas 833.

[30] I observe also that as a water corporation, GMW is obliged by s 94 of the Act in performing its functions, exercising its powers and carrying out its duties has the objective that it must act as efficiently as possible consistent with commercial practice.

[34] I note that it was Mr Jondahl's evidence that the larger of the Drains, drain 3/2, is to be relocated rather than decommissioned and that only the smaller 1/3/2 and 1/1/3/2 drains are likely to be decommissioned.

[35] Victoria, Parliamentary Debates, Legislative Assembly, 10 August 2006, 2803-7 (J Thwaites).

Constitution Act 1975(Vic)

Water (Governance) Act 2006(Vic)

Land Rights Act 1983

Constitution Act 1975(Vic)

Water (Governance) Act 2006(Vic)

Land Rights Act 1983

At a glance

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Judgment (134 paragraphs)

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Legislation Cited (8)

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