Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10 (9 February 2005)

CITATION: Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10

FILE NUMBER(S):

40329/04

HEARING DATE(S): 3/11/04, 4/11/04, 5/11/04, 6/11/04

JUDGMENT DATE: 09/02/2005

PARTIES:

Murrumbidgee Groundwater Preservation Association Inc

Minister for Natural Resources

JUDGMENT OF: Spigelman CJ Beazley JA Tobias JA

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT FILE NUMBER(S): 40583/03

LOWER COURT JUDICIAL OFFICER: McClellan J

COUNSEL:

J Basten QC / L Byrne (Appellant)

N Hutley / M Allars (Respondent)

SOLICITORS:

Jenny Mattila & Co (Appellant)

Crown Solicitor (Respondent)

CATCHWORDS:

ADMINISTRATIVE LAW - Minister's water management plan - Whether invalid for extraneous purpose

ADMINISTRATIVE LAW - Minister's water management plan - Contemplates right not supported by statute - Right could be created by series of interconnected executive acts - Whether invalid

ADMINISTRATIVE LAW - Minister's water management plan - Whether invalid for irrationality

CONSTRUCTION AND INTERPRETATION - Minister's water management plan - Whether formula mathematically impossible

CONSTRUCTION AND INTERPRETATION - Minister's water management plan - Difficulty arising from commencement date of Plan - Whether invalid - Whether amendments to Act save provisions

WATER RIGHTS - Minister's Sharing Plan - Whether invalid

WORDS AND PHRASES: Requirements

LEGISLATION CITED:

Administrative Decisions (Judicial Review) Act 1977 (Cth)

Fisheries Act (1952) (Cth)

Water Act 1912

Water Management Act 2000

Water Management (General) Regulation 2004

Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003

DECISION:

Appeal dismissed with costs

JUDGMENT:

- 4 -

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40329/04

SPIGELMAN CJ

BEAZLEY JA

TOBIAS JA

Wednesday 9 February 2005

MURRUMBIDGEE GROUNDWATER PRESERVATION ASSOCIATION INC v MINISTER FOR NATURAL RESOURCES

The Respondent Minister made the Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 (“the Plan”), pursuant to the Water Management Act 2000 (NSW) (“the Act”). The Appellant, an association of primary producers, challenged the validity of the Plan in the Land and Environment Court. McClellan J, Chief Judge of that Court, rejected each ground of challenge and dismissed the application. The Appellant appeals to this Court.

1. Extraneous Purpose

The Appellants submitted that the power to make the Plan has been exercised for an extraneous purpose, namely to avoid the statutory scheme for the promulgation of a plan by a management committee. This occurred pursuant to a deliberate policy to either avoid the statutory procedures which such a committee was required to follow or because the Minister wished to reserve the power to make such plans to himself.

HELD

Nothing in the legislative scheme suggests that a Ministerial plan is in any way a secondary or subordinate form of making a plan.

Furthermore, there was no evidence about the Minister’s motive for pursuing the course he did and no proper basis for an inference that that motive was improper. The findings of fact in this regard by McClellan J were not challenged.

This ground of appeal is rejected.

2. Supplementary Water Licences

The Plan makes provision for the grant of supplementary water access licences for those licence holders who have historically used a significant proportion of their entitlement under existing licences issued under the predecessor legislation, the Water Act 1912. The right to draw water under these additional licences will progressively diminish. This system is intended to ameliorate the consequences for intensive uses of the reduction in their rights to draw water under the Plan.

The Appellant submitted that the Plan purports to actually create an entitlement to supplementary water access licences without statutory authority.

HELD

The clause relied on speaks in the future tense. There is no immediate right or duty arising under the Plan. Any challenge to validity is premature.

Alternatively, it is permissible for a Minister to indicate in a Minister’s plan how the Minister intends to exercise the statutory power.

In the further alternative, in 2004 the Act was amended in a form which came into effect after the judgment of McClellan J. Entitlements under the Water Act 1912 are converted into access licences which can be assigned to a particular category of access licence by force of a water management plan. The Plan is effective to assign the entitlement to the specified categories of access licence, including to a supplementary water access licence. Furthermore, the Act now provides for a power to grant supplementary licences in the relevant area by regulation. All that is required is a series of interconnected executive acts in the control of the very Minister who promulgated the Plan.

3. Is the Formula Impossible?

The Appellant submitted that the formula in the Plan which provides, inter alia, for the reservation of water for environmental purposes contains a mathematical impossibility.

HELD

On the proper construction of the Plan there is no mathematical impossibility.

4. Commencement of the Plan

The Appellant submitted that the difficulty arising from the commencement date of the Plan was one of the factors which could lead to a conclusion of invalidity.

HELD

On its proper construction the reference to time periods in the Plan are references to a period commencing from the date of the proclamation of that part of the Plan making provision for access licences.

Alternatively, the Amendment Act of 2004 expressly provides for the dates from which time relevantly is to be computed, so that the time of commencement is adapted to ensure the effective operation of each plan. The Appellant’s submission that the Amendment Act referred only to an existing valid plan rejected.

There is no element of uncertainty in the operation of the Plan.

5. The Requirements Issue

The Act relevantly provides that the water sharing provisions of a management plan must deal with the identification of requirements for water for extraction under access licences. The Appellant submitted that the word “requirements” should be understood in the sense of “needs”, as distinct from “entitlements”.

HELD

On the construction of the word in its context, the submission is rejected.

6. Irrationality

There was limited interconnectivity within the aquifers constituting the water source. Groundwater does not flow, other than in geological time, so that extraction at one point will not necessarily detract from the water available at another point. The Appellant submitted that the across-the-board pro rata cut in pre-existing entitlements was perverse and did not serve the objective of limiting extraction to sustainable usage. In such a context the imposition of uniform reductions was illogical to the point of irrationality and involved a considerable level of unfairness. The Plan was not saved by the fact that, under the scheme for transfer of licences, persons who had lost some level of their previous entitlements could purchase licences to restore prior usage.

HELD

Nothing in the nature, scope and purpose of the Act prevents the Minister from implementing a scheme which operates to the detriment of some persons, and to the advantage of others, in a manner not determined by availability of water but by broader considerations of what the Minister regards as equitable. Reasons were advanced for adopting such an approach in the present case. A universally applicable formula may well receive more widespread acceptance than a more complicated approach, allowing for local differences. The Plan implements a proportionate reduction of all existing entitlements alleviated in the short term by a supplementary water licence system. In the longer term the transfer system will provide a mechanism for bringing licence extraction in particular areas closer to the annual recharge in those areas. Such element of unfairness as some may believe to arise in the case of the Plan is not of a degree which renders the mechanism irrational with the effect that the Plan operates beyond the legally permissible limits of the statutory power. (Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) HCA 30; (2003) 77 ALJR 1165; Minister for Immigration and Multicultural and Indigenous Affairs v SGLB (2004) HCA 32; (2004) 74 ALJR 992; Williams v Melbourne Corporation [1933] HCA 56; (1933) 49 CLR 142; Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd [1993] FCA 45; (1993) 40 FCR 381; Bienke v Minister for Primary Industries and Energy (1994) 125 ALR 151; Bienke v Minister for Primary Industries and Energy (1995) 63 FCR 567 referred to.)

Conclusion

Appeal dismissed with costs.

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40329/04

SPIGELMAN CJ

BEAZLEY JA

TOBIAS JA

WEDNESDAY 9 FEBRUARY 2005

MURRUMBIDGEE GROUNDWATER PRESERVATION ASSOCIATION INC v MINISTER FOR NATURAL RESOURCES

Judgment

1 SPIGELMAN CJ: Pursuant to the Water Management Act 2000 (NSW) (“the Act”), the Respondent Minister made the Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 (“the Plan”). The Appellant, an association of primary producers, challenged the validity of the Plan in the Land and Environment Court. McClellan J, Chief Judge of that Court, rejected each ground of challenge and dismissed the application. The Appellant raises five grounds of appeal in this Court. I will set out background facts and the principal statutory provisions. It is convenient to outline a number of sections and relevant facts in the context of the particular ground of appeal as they arise.

Background Facts

2 Over the course of the last decade or so, the government of New South Wales has been engaged in a process of reforming the regulation of both groundwater and surface water in the State, within the framework of a nationwide process of water management reform agreed by the Council of Australian Governments. The Plan in issue in these proceedings is one product of that process.

3 The Plan covers an area of some 33,000 square kilometres lying mainly between the towns of Narrandera, Booligal, Balranald and Jerilderie. There are three groundwater sources within this area: the Shepparton Formation, the Calivil Formation and Renmark Group. The latter two are treated together in the Plan. The Shepparton Formation is the shallower geological unit and is located from the surface down to a depth of 75 metres. It consists of sand and clay. The Calivil Formation consists of coarse sand and fine gravel, along with clay, and underlies the Shepparton Formation to a depth of up to 150 metres below the surface. The Renmark Group extends from the bottom of the Calivil Formation to the bedrock about 300 metres below the surface and is composed of black carbonaceous clay, sand and wood.

4 During the 1980s groundwater management in NSW encouraged the extraction of deep groundwater for rural production purposes in large measure, it appears, in response to the problem of increased salinity. The government department responsible for water regulation encouraged farmers to take water from groundwater sources in the hope of reducing the water table, and hence the salt content of the water, at or near the surface. Rules for access to water were based on this policy, often, it appears, with no regard to the impact of extraction and in the absence of information as to sustainable yields of the source aquifers. During this period groundwater user rights and obligations were poorly defined. Nevertheless, substantial access rights were granted. As a result levels of extraction from the aquifers increased significantly during the 1990s. Entitlements to extract groundwater had increased over the period but not all were used and, it was believed, not all entitlements could or would be used.

5 In 1999, the State government published a policy framework document for groundwater. In 1998, the Respondent Minister established the Murrumbidgee Groundwater Management Committee, with a view to creating a water management plan for groundwater sources by means of community consultation. As will presently appear, the Minister did not, in the event, invoke the statutory mechanism for drafting a plan by such a committee, but proceeded by the alternative statutory route of a Minister’s Plan.

6 By 1998 the Lower Murrumbidgee Groundwater Management Area had been identified as a high-risk groundwater system as part of a state-wide programme for aquifer risk assessment. The risks identified included over-allocation of extraction entitlements, local drawdown and interference between bores and invasion of aquifers by saline groundwater. In 1997 an embargo was imposed on new bore licences from the deep aquifers and entitlements to groundwater extraction were thereby capped at 532,000 ML per year (see Blue AB 1 173). According to the evidence, which his Honour accepted, entitlements stood at 520,000 ML per year in 2002–2003 but actual usage during that year was only 380,000 ML. There were approximately 210 licence holders who used water for irrigation, for industrial uses and to supply water to towns in the Lower Murrumbidgee Groundwater Management Area (“the Area”).

7 The Plan was promulgated by the Minister for Land and Water Conservation on 26 February 2003 pursuant to s50 of the Act. The main issue addressed by the Plan is the sustainable management of groundwater usage. The Plan identifies limits on extraction from the groundwater sources. Each source is replenished in a process called “recharge” for which an average annual amount has been computed. The overall object of the Plan is to reduce actual use over ten years down to the average annual recharge, less a specific quantity reserved for the environment as specified in cl 18 of the Plan, set out below.

8 A policy implemented by the Plan was the reduction of groundwater users’ entitlements on a pro-rata basis to serve objectives identified in the Plan. The general effect of the Plan is that, by the tenth year of its operation, each user will be subject to the same proportional reduction of entitlement, when measured against the total of the maximum historical extraction from the Area.

9 The Plan contains two mechanisms for ameliorating the impact of the reduction in entitlements: first, the creation of a market in access licences, with associated access licence dealing rules; and secondly, the issue for a number of years of supplementary water access licences to those users who had, in the past, taken up a high percentage of their entitlements to extract water. Each of these mechanisms will be considered in more detail below.

10 After year nine, when supplementary licences for those with historically high usage are phased out, all users will be entitled to about 52 percent of their original theoretical entitlements.

11 As indicated, a significant proportion of entitlements under the pre-existing access licences was not in fact used. However, the degree to which individual licence holders had made use of their entitlements varied considerably from case to case. The effect of the new regime is to create winners and losers in the sense that the level of entitlement at year 10 of the Plan may be either well below or well above current actual usage. Substantial investments that have been made by existing licence holders, who constitute the membership of the Appellant Association, may be rendered nugatory by restrictions below current or anticipated usage, whereas other licence holders will have a surplus compared to past usage for their own use or for purposes of trading in licences. This is alleged to be iniquitous and, it is submitted, irrational.

12 The issue of interconnectivity of the aquifers arises in the appeal. Unlike a river, groundwater does not flow in other than geological time, so that extraction at one point will not necessarily detract from the available water at another point. Furthermore, unlike a lake, it appears that, other than in reasonably close proximity, extraction of water at one point does not reduce the availability of water at other points of the aquifer. The expert evidence about the degree of interconnectivity will need to be further considered below.

13 By reason of the limits upon, or absence of, interconnectivity, the Appellant contends that across-the-board proportionate cuts in entitlements are perverse in that the approach does not serve the objective of limiting extraction to sustainable usage.

Structure of the Act

14 The objects of the Act, as set out in s3, are “to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations”. Particular objects relied on by the Appellants include s3(d) “to recognise the role of the community, as a partner with government, in resolving issues relating to the management of water sources” and s3(e) “to provide for the orderly, efficient and equitable sharing of water from water sources”. The water management principles embodied in the Act are set out in s5.

15 Of particular relevance, in addition to the general principles, are those relating to water sharing:

“5(2) Generally:

(a) water sources, floodplains and dependent ecosystems (including groundwater and wetlands) should be protected and restored and, where possible, land should not be degraded, and

(b) habitats, animals and plants that benefit from water or are potentially affected by managed activities should be protected and (in the case of habitats) restored, and

(c) the water quality of all water sources should be protected and, wherever possible, enhanced, and

(d) the cumulative impacts of water management licences and approvals and other activities on water sources and their dependent ecosystems, should be considered and minimised, and

(e) geographical and other features of indigenous significance should be protected, and

(f) geographical and other features of major cultural, heritage or spiritual significance should be protected, and

(g) the social and economic benefits to the community should be maximised, and

(h) the principles of adaptive management should be applied, which should be responsive to monitoring and improvements in understanding of ecological water requirements.

(3) In relation to water sharing:

(a) sharing of water from a water source must protect the water source and its dependent ecosystems, and

(b) sharing of water from a water source must protect basic landholder rights, and

(c) sharing or extraction of water under any other right must not prejudice the principles set out in paragraphs (a) and (b).”

16 By s9 the water management principles are relevant to the exercise of the power to make a plan under s50:

“9(1) It is the duty of all persons exercising functions under this Act:

(a) to take all reasonable steps to do so in accordance with, and so as to promote, the water management principles of this Act, and

(b) as between the principles for water sharing set out in section 5 (3), to give priority to those principles in the order in which they are set out in that subsection.

(2) It is the duty of all persons involved in the administration of this Act to exercise their functions under this Act in a manner that gives effect to the State Water Management Outcomes Plan.”

17 This appeal is concerned with access licences. That term is defined in the Dictionary to the Act to mean “an access licence referred to in section 56”. That section explains that an access licence confers dual entitlements:

“56(1) An access licence entitles its holder:

(a) to specified shares in the available water within a specified water management area or from a specified water source (the share component), and

(b) to take water:

(i) at specified times, at specified rates or in specified circumstances, or in any combination of these, and

(ii) in specified areas or from specified locations,

(the extraction component).

(2) Without limiting subsection (1) (a), the share component of an access licence may be expressed:

(a) as a specified maximum volume over a specified period, or

(b) as a specified proportion of the available water, or

(c) as a specified proportion of the storage capacity of a specified dam or other storage work and a specified proportion of the inflow to that dam or work, or

(d) as a specified number of units.”

18 The “share component” to which an access licence holder is entitled is a share of “available water”. By s59 of the Act the Minister may make an “available water determination” which may, in a year in which insufficient water is available in the relevant water source, result in the licence holder being able to use less than their actual entitlement on an access licence. As s56(2) makes clear, a share component in an access licence may be expressed as either a specified maximum volume or as a specified proportion of available water.

19 The different categories of access licence are listed in s57, and include, relevantly, supplementary water access licences (initially (f), now (h)), and aquifer access licences (initially (h), now (e)). At the relevant time, s61 provided that “[s]ubject to any embargo, any person may apply to the Minister for an access licence”. The Minister may determine an application for an access licence by granting or refusing to grant the licence, although s63(2) restricts approval to circumstances where the Minister is satisfied both that the grant is permitted by relevant management plan provisions, and that adequate arrangements are in force to ensure minimal harm to any water source by reason of the water to be taken.

20 Chapter 2, Pt 2 of the Act provides for management committees, which may be established by the Minister to carry out a specific task in relation to water management in a particular area (s12). The tasks for which a committee is appointed include the preparation of a draft management plan for the water management area (s14(2)(a)). Chapter 2, Pt 3 covers the process of preparation, and content, of management plans. At the time of the preparation of the Plan, s15(4) (now repealed) provided that Pt 3 applied to a management plan prepared by the Minister in the same way as it applied to a management plan prepared by a management committee.

21 Minister’s plans are regulated by Pt 4 of Ch 2, and may be made for any water management area for which a management plan is not already in force (s50). I will set out the section below.

22 The procedure for making management plans are outlined in Div 8 of Pt 3 of Ch 2, including public exhibition and concurrence requirements before the Minister can make a management plan. Sections 36–41 no longer apply to Minister’s plans (though the Minister may adopt any of these provisions in a particular case: s50(2A)). However at the time of the making of the Plan for the Area, the sections retained their application. Section 41(3) provided that a management plan commences on the date on which it is published in the Gazette or on such later date as may be specified in the plan. Section 42(2), which has since been substituted, provided at the relevant time: “A management plan may also be amended by the Minister, by notice published in the Gazette, but only in such circumstances, in relation to such matters and to such extent as the plan so provides.” Section 43 originally provided for a management plan to have effect for 10 years from the date on which it was made: the amended section is more complex and, subject to s43A, enables the Minister to extend a plan dealing with water sharing for further 10 year periods.

23 The matters with which a management plan must deal are prescribed. Section 16(1) requires that a plan be consistent with the State Water Management Outcomes Plan, various specific statutory policies, as well as “government policy, including government policy in relation to the environmental objectives for water quality and flow.” There is provision in s17(1)(c) for management plans to contain mandatory conditions, namely conditions to which all access licences and approvals within the area are to be subject.

24 Division 2 of Pt 3 covers water sharing, particularly s20 and s21:

“20(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

(c) must recognise the effect of climatic variability on the availability of water, 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

(e) may contain provisions with respect to the conditions that must (as mandatory conditions) be imposed on access licences under section 66 (1), including conditions providing for the variation, from time to time, of the share and extraction components of access licences, 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.

(4) The access licence dealing rules established under subsection (1) (d):

(a) must comply with the access licence dealing principles, and

(b) subject to those principles, may regulate or prohibit any dealing under Division 4 of Part 2 of Chapter 3.

21 The water sharing planning provisions of a management plan for a water management plan for a water management area or water source may also deal with the following matters:

(a) the rates, times and circumstances under which water may be taken from any water source in the area, or the quantity of water that may be taken from any water source in the area or delivered through the area,

(b) the kinds of water supply works that may be constructed and used in the area,

(c) the operation of water accounts for the area or water source, such as the carrying over of credits from one accounting period to the next, and the maximum credit that may be allowed to accumulate in any account,

(d) water sharing measures for the protection and enhancement of the quality of water in the water sources in the area or for the restoration or rehabilitation of water sources of their dependent ecosystems,

(e) measures to give effect to the water management principles and the objects of this Act,

(f) such other matters as are prescribed by the regulations.”

25 Limits to the availability of water, of the kind referred to in s20(2), may be set by the Minister making an available water determination under s59. Section 21 covers discretionary additional provisions that may be included in a management plan.

26 At the time of the proceedings before McClellan J, “environmental water” referred to in s20(1)(a) was identified in s8:

“8(1) The following classes of environmental water are recognised for the purposes of this Act:

(a) water that is committed for fundamental ecosystem health at all times, and may not be taken or used for other purposes (environmental health water),

(b) water that is committed for specified environmental purposes at specified times or in specified circumstances, but may, at other times and in other circumstances, be taken and used for other purposes (supplementary environmental water),

(c) water that, pursuant to an access licence, is committed for specified environmental purposes, either generally or at specified times or in specified circumstances (adaptive environmental water),

(2) Rules for the identification, establishment and maintenance of each class of environmental water (environmental water rules) are to be established for all of the water sources in the State, by means of a management plan, as soon as practicable after the commencement of this Act.”

27 Chapter 3 of the Act is entitled “Water Management Implementation”. Part 2 of the Chapter deals with access licences. It applies, by s55A, only to each part of the State or water source, and each category or subcategory of access licence relating to that part of the State or water source, to which Ch 3 Pt 2 is declared applicable by proclamation. No such proclamation has yet been made in relation to the Lower Murrumbidgee Groundwater Management Area. Thus, although the hitherto uncommenced provisions of Ch 3 Pt 2 commenced on 1 July 2004, the Part has not relevantly commenced for the purposes of the Area the subject of the present appeal.

28 Schedule 9 of the Act contains savings and transitional provisions. Clause 1 in the Schedule allows for transitional regulations to operate in a retrospective manner, despite any other provision of Sch 9, provided there is no prejudice to the pre-existing rights of any person or retrospective liability imposed. The transfer of entitlements under the Water Act 1912 to access licences under the new Act would, it was originally contemplated, be regulated by cl 9. However, not only did this clause never commence, but the transitional effects outlined in it could never have taken place in the Local Murrumbidgee Groundwater Management Area because the appointed day (as defined in cl 2) never arrived. There was no proclamation under s55A of the Act. Accordingly, the Water Act 1912 continues to have effect in the Area. Clause 9 of Sch 9 has been repealed and conversion of former entitlements into access licences and approvals is now regulated by Sch 10 inserted by the Water Management Amendment Act 2004.

29 The Water Management Amendment Act 2004 made significant additions to Sch 9, adding Pt 4 to that schedule. Relevantly, cl 63 extends the duration of management plans, including the Plan presently under consideration, whose nominal commencement date occurred before a s55A proclamation declaring it to be a plan for a water source to which Ch 3, Pt 2 applies. By force of cl 63 such plans commence and have effect for 10 years from 1 July next after the date declared in the s55A proclamation. Clause 63(2) makes consequential adjustments to other dates or periods of time found in such a management plan, calculating them by reference to the actual commencement date, rather than the nominal commencement date.

Extraneous Purpose

30 The Appellants challenge the validity of the Plan on the basis that the power to make the Plan has been exercised for an extraneous purpose. Section 50 of the Act relevantly provides:

“50(1) The Minister may, by order published in the Gazette, make a plan (a Minister’s plan):

...

(b) for any water management area or water source, or part of a water management area or water source, for which a management plan is not in force.

...”

31 As noted above, the Act makes detailed provision for the preparation and content of a management plan. Of particular significance for present purposes is the fact that the mechanism for formulating a plan, other than a Minister’s plan, commences with a draft management plan prepared by a management committee established by the Minister under s12 of the Act. The procedures for preparation of a draft plan include a process of notification, public exhibition, and consideration of submissions, prior to the Minister making the management plan pursuant to s41 of the Act.

32 The Appellant contended that the Plan was invalid on the basis that the power to make the Plan had been exercised for an extraneous purpose, namely that the Minister did not wish to be put in a position where he might be pressed to give effect to recommendations of a management committee and he made plans, including the Plan, with the intent to avoid the statutory scheme of what was described as the “transparent and open” processes under Pt 3 of Ch 2.

33 The Appellant relied on the proposition that this scheme, based on preparation of a draft plan by a management committee, gave effect to the object of the Act recorded in s3(d):

“To recognise the role of the community, as a partner with government, in resolving issues relating to the management of water sources.”

Reliance was also placed on s3(g) which identified as an object:

“To encourage the sharing of responsibility for the sustainable and efficient use of water between the government and water users ...”

34 It was submitted that the structure of the Act was such that the provision for a Minister’s plan in s50 should be seen only as a “backup mechanism” although that has not been the practice. The Minister has established only one committee in the whole State pursuant to s12 of the Act. It was submitted that the failure to establish management committees constituted a deliberate policy either to avoid the statutory procedures which those committees were required to follow or because the Minister wished to preserve for himself the power to make all relevant plans. This, it was submitted, made the exercise of the power, to make a Minister’s plan, an exercise for an extraneous purpose. The Plan in dispute was one example of this defect.

35 In my opinion, nothing in the legislative scheme suggests that a Ministerial plan under s50 is in any way a secondary, subordinate form of making a plan or that the power to make such a plan is one only to be exercised as a matter of last resort. The Minister’s power under s12 of the Act to establish a management committee is discretionary. Such public consultation as is desirable or necessary can be attained, as occurred in this case, by other means. For this reason above, this ground of appeal should be rejected.

36 Furthermore, allegations of impropriety of this kind cannot be left to mere inference on the basis of so narrow a foundation as the fact that only one management committee had been established in the State. Whether by way of discovery or subpoena or by way of interrogatories or by way of seeking an interlocutory order from the Court directing the Minister to file an affidavit as to the matters he took into consideration in formulating the Plan or failing or refusing, if that be the case, to appoint a management committee to formulate a management plan, the Appellant could have, but did not, lay a factual foundation for its case. There was no evidence as to the Minister’s motive for pursuing the course he did, either with respect to the Lower Murrumbidgee Groundwater Management Area or more generally. There is no proper basis for an inference that that motive was improper.

37 McClellan J was correct to reject the Appellant’s contentions in this respect. His Honour said:

“[227] ...There is no evidence as to the reason why the Minister did not appoint a committee under s12 of the Act and require it to prepare a Plan. However, the evidence makes plain that there was a Committee in place under the Water Act 1912 which had undertaken consultation and deliberation processes similar to those which would have occurred if a Committee had been established under s12 of the Act. The appointment of a Committee with a requirement to begin the task afresh may have been thought to be unnecessary.

[228] The evidence does not disclose the Minister’s reasons for exercising his power under s50. However, he took that course aware of the concern as to the present environmental difficulties in parts of the Area and conscious of the extent to which the future management of the Area had already been considered by the Department and others.

...

[231] In any event, the process which was adopted in the preparation of the Minister’s Plan reflected the statutory process required to make a s41 plan. The Committee, which had been established prior to the Act in 1998, consisted of various interest groups and met regularly. In March 2001 the Minister reconstituted the Committee under s388 of the Act and requested it to build on the work it had already done, advise on a draft plan, review public submissions and recommend changes to it. The Committee’s work was actively considered following which the draft plan was placed on exhibition and submissions were received and reviewed. The Minister also had available to him the detailed advice of officers of the Department and other Departments in relations to hydrogeology, economic and social impacts and the environmental consequences of the Plan.”

38 The Appellant’s submissions did not challenge these findings of fact by McClellan J. In view of these findings any suggestion that the Minister’s exercise of the power under s50 was in some manner improper must be rejected. I agree with the reasons of McClellan J. As I have said, this ground of appeal should be rejected.

The Water Sharing Plan

39 Pursuant to s50(2) a Minister’s plan must deal with matters with which a management plan is required to deal. The requirements of a management plan include those contained in s20 which I have set out above.

40 The critical provisions of the Plan with respect to the grounds of appeal are:

“16(1) The overall basis for water sharing in this Plan is the average annual recharge to each groundwater source as follows:

(a) 65,000 megalitres per year (hereafter ML/yr) to the Shepparton, and,

(b) 335,000 ML/yr to the Calivil and Renmark.

...

17 Environmental water provisions

This Part is made in accordance with sections 5(3) and 8(1), 8(2) and 20(1)(a) of the Act.

18 Environmental health water

(1) This Plan establishes the following environmental health water rules:

(a) the long-term average storage component of each groundwater source, minus the basic landholder rights extraction, is reserved for the environment,

(b) 55,000 ML/yr of the average annual recharge to the Shepparton will be reserved for the environment, and

(c) 65,000 ML/yr of the average annual recharge to the Calivil and Renmark, minus the access permitted under supplementary water access licences, will be reserved for the environment.”

41 Clauses 21–23 deal with “Basic landholder rights” which include domestic and stock rights and native title rights.

42 Clause 24 then provides:

“24 Bulk access regime

(1) This Part is made in accordance with section 20(1)(e) of the Act.

(2) This Plan establishes a bulk access regime for the extraction of water under access licences in these groundwater sources having regard to:

(a) the environmental water provisions established under Part 4 of this Plan,

(b) the requirements for basic landholder rights identified under Part 5 of this Plan, and

(c) the requirements for water for extraction under access licences identified under Part 7 of this Plan.

(3) The bulk access regime established in subclause (2):

(a) recognises the effect of climatic variability on the availability of water as provided for under Part 3 of this Plan.

(b) establishes rules according to which access licences are granted as provided for in Part 8 of the Plan.

(c) recognises and is consistent with limits to the availability of water as provided for in Part 9, Division 1 of this Plan.

(d) establishes rules according to which available water determinations are to be made as provided for in Part 9 Division 2 of this Plan,

(e) establishes rules according to which access licences are managed as provided for in Part 9 and 10 of this Plan, and

(f) establishes rules with respect to the priorities according to which access licences are to be adjusted as a consequence of any reduction in the availability of water as provided for in Part 9 of this Plan.”

I note that cl 17 and cl 18 are in Pt 4 and cl 24 is in Pt 7 of the Plan.

43 Of central significance is cl 25:

“25 Estimate of water requirements

(1) This Part is made in accordance with section 20(1)(c) of the Act.

(2) At the commencement of this Plan, the requirements identified for water for extraction under access licences within these groundwater sources are estimated to be as follows:

(a) 0 ML/yr in the Shepparton,

(b) 522,233 ML/yr in the Calivil and Renmark,

(3) Subclause (2) includes local water utility access licences of 2,210 ML/yr in these groundwater sources, made up of:

(a) 0 ML/yr in the Shepparton, and

(b) 2,210 ML/yr in the Calivil and Renmark, being for Carrathool, Coleambally and Darlington Point.

Note. Subclauses (2) and (3) represent the total volumes specified on access licences in these groundwater sources. These are not a commitment to supply that water.

(4) Pursuant to section 42(2) of the Act, and at the commencement of year six of this plan the Minister should reduce the total share components of aquifer access licences specified in subclause (2) in the Calivil and Renmark to 125% of the extraction limit determined in clause 27, according to the following:

Amended access licence share (1.25 (recharge – EHW)) - LWU

access = component prior to X Total access licence

share amendment share components prior - LWU

component to amendment

(5) Recharge in subclause (4) is the recharge established in clause 16(1), as amended by clause 16(2).

(6) EHW in subclause (4) is the volume of recharge reserved as environmental health water in the Calivil and Renmark in clause 18(1), as amended by clause 18(2).

(7) LWU in subclause (4) is the total of local water utility access licence share components in the Calivil and Renmark existing prior to any access licence amendments under subclause (4).

(8) Subclause (4) does not apply to the share components of local water utility access licences.

(9) At the time of the commencement of Part 2 of Chapter 3 of the Act, aquifer access licences in the Calivil and Renmark with a history of extraction greater than 80% of the aquifer access licence share component, as amended by subclause (4), will have a second licence, called a supplementary water access licence.

(10) A supplementary water access licence referred to in subclause (9), will have an initial share component equivalent to the history of extraction, minus 80% of the aquifer access licence share component as if amended by subclause (4).

(11) The history of extraction referred to in subclauses (9) and (10) will be the greater of:

(a) the average extraction over the seven water years from 1995/96 to 2001/02, or the average of the years within that period from which extraction was first measured, not exceeding the access licence share component equivalent in 2001/02, or

(b) the average extraction over the five water years from 1997/98 to 2001/02, or the average of the years within that period from which extraction was first measured, not exceeding the access licence share component equivalent in 2001/02.

(12) Share components of all supplementary water access licences will be reduced to 0 ML/yr at 30 June 2012.

(13) This Plan recognises that the total requirements for water for extraction under access licences within these groundwater sources may changed during the term of this Plan as a result of:

(a) the granting, surrender, non-renewal or cancellation of access licences,

(b) the variation of local water utility access licences under section 66 of the Act, or

(c) the volumetric quantification of the share components of existing access licences that are currently non-volumetric.”

Supplementary Water Access Licences

44 Subclauses 25(9)–(12) of the Plan make provision with respect to supplementary water access licences for those licence holders who have historically used a significant proportion of their entitlement under existing licences. The right to draw water under these additional licences will progressively diminish. This system is intended to ameliorate the consequences, for intensive users, of the reduction in their rights to draw water under the overall scheme. It appears to be motivated by considerations of equity.

45 With respect to this ground of appeal the focus is on cl 25(9), which I repeat:

“(9) At the time of the commencement of Part 2 of Chapter 3 of the Act, aquifer access licences in the Calivil and Renmark with a history of extraction greater than 80% of the aquifer access licence share component ... will have a second licence, called a supplementary water licence.”

46 McClellan J said:

“[214] Fundamental to the operation of the Plan is the provision made in clause 25(9) for those who have a history of relatively intense use of their existing entitlements to a supplementary water access licence. Although provided for in the Plan the Act makes no provision for the grant of such a licence. Chapter 3, Part 2, Division 2 of the Act contains the mechanism for the grant and renewal of access licences but does not contemplate supplementary licences. The Minister accepts that this is the case, with the consequence that if another mechanism by which they can be granted is not available, the Plan must fail. It will be incapable of implementation.”

47 I should note that in this Court the Respondent submitted, contrary to what his Honour understood to be conceded before him, that the Act did authorise the grant of supplementary licences by provision in a plan.

48 His Honour went on to conclude:

“[219] It appears that the difficulty identified by the Applicants was not foreseen when the Act was drafted. The acknowledgement by the Minister that the Plan in its present form could not have legal effect without amendment, at least to the transitional provisions, has the consequence that it is not appropriate to consider this aspect of the matter further. The court is aware that amendment of the legislation is proposed by the Minister before 1 July 2004 and presumably, whether as part of those amendments or, as was suggested, by making of regulations, the present difficulty will be addressed. Whether the measures taken are effective to deal with the problem will depend upon the method which is adopted and the precise terms of any amendment.”

49 The Appellant submits that in the context of the findings that he made, his Honour erred in withholding relief. There is much to be said for this proposition on the basis of the principle that the Court should deal with the law as it is, rather than speculate about changes in the law. (See Ramsay v Aberfoyle Manufacturing Co (Australia) Pty Ltd [1935] HCA 75; (1935) 54 CLR 230 at 253; Willow-Wren Canal Carrying Company Limited v British Transport Commission [1956] 1 WLR 213 at 216; Sydney City Council v Ke-Su Investments Pty Ltd (1985) 1 NSWLR 246 esp at 251–252, 257, 258; Meggitt Overseas Limited v Grdovic (1998) 43 NSWLR 527 at 530, 537.)

50 The Appellant did not, in this respect, rely on any particular provision said to be mandatory. Its submissions on this ground concentrated on the significance of the supplementary licence regime in the Plan, and the absence of any power to create an entitlement to licences of this kind which, it was submitted, cl 25(9) purports to do. I do not construe the clause in that way. In my opinion, it constitutes a statement that at a future date, i.e. when Pt 2 Ch 3 commences, certain persons “will have” a supplementary licence. The provision speaks expressly in the future tense. There is no immediate right or duty arising under the Plan. Any challenge to validity is, in my opinion, premature.

51 If there were to be no system for the grant of supplementary licences at the time that any person sought to avail himself or herself of access to water on this basis, the position could be different. Until then, I can discern no legislative purpose to invalidate an exercise of the statutory power by reason of the absence, if that be so, of a formal regime for supplementary licences. (See Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 335 at [91].)

52 On this basis, this ground of appeal should be rejected. The Respondent relied on other arguments in the alternative. As noted above, in this Court the Respondent contended that the Act did authorise the grant of supplementary licences by provision in a plan.

53 As in force at the time the Plan was made, the Act made provision for applications for and the grant of access licences, which provisions extended to each category of such licences, including “supplementary water access licences”. The power to grant or refuse an application was discretionary (s63(1)), subject to the restraint in s63(2) that a licence is not to be granted unless “an access licence of the category ... is permitted by the relevant provisions of a management plan or Minister’s plan”.

54 Section 20(2)(b) requires a bulk access regime to “establish rules according to which access licences are granted”. Clause 26 of the Plan makes detailed provision on this matter. Subclause 26(2) states: “Access licences may be granted in those groundwater sources ...”. In my opinion, that reference encompasses the particular category of access licences called “supplementary water access licences” as well as “aquifer access licences.” This is a “permission” for purposes of s63(2), referred to above.

55 The Respondent appeared reluctant to rely on the power to support cl 25(9) of the Plan apparently on the basis of the reference in the Plan that licence holders “will have a second licence”. This, it appears to have been thought, may have been understood as fettering the discretion under s63(1). Presumably, it was on this basis that the Respondent made the concession to which McClellan J made reference in par [214] and par [219] of his judgment as quoted above, and which has been withdrawn in this Court.

56 The principle against fettering a discretion is only of relevance when an issue arises in judicial proceedings as to whether a particular exercise of a discretionary power has miscarried. It applies most frequently when it is said that a power has been exercised in accordance with a rule of policy without consideration of the merits of the case. I can see no relevant application of the principle in the present case. No question has yet arisen about the exercise of the power in s63(1). This Court is concerned with the power under s50 to make a Minister’s plan.

57 I can see no reason why the Minister cannot express in a plan an intention to exercise another power (i.e. the power in s63(1)) in a particular way. Any such expression of intention must be understood as subject to the possibility that supervening circumstances may lead to a different result. No doubt the expectations created will have effects on the future exercise of the power.

58 The relevant fettering, if any, does not arise between the Plan and s63(1). If cl 25(9) is authorised by s20 of the Act, such tension as exists arises between two sections of the Act (i.e. ss20 and 63(1)). Any such tension must be resolved by statutory construction. In my opinion, the exercise of the power to make a Minister’s plan pursuant to s50 is not invalidated by an indication of how the Minister intends to exercise the power in s63.

59 Indeed, s20(1)(c) authorises the Minister to “identify” the “requirements for water” that may be extracted under access licences. Subclauses 25(9)–(12) of the Plan do precisely that with respect to supplementary water access licences. The use of the terminology “will have” in cl 25(9) does not, in my opinion, constitute an actual grant, enforceable by mandamus. It does no more than indicate the then intended outcome of the process of application and grant under ss61–63 of the Act with respect to the licences to which the subclause applies. That does not invalidate the Plan in the form in which it was at the time of the proceedings before McClellan J.

60 Since the decision of McClellan J, the Act has been amended so that s61 concerns applications for a limited class of access licences, not including supplementary licences. However, other provision is now made.

61 The appeal to this Court is by way of rehearing and must be determined in accordance with the law as it stands at this time. By way of Notice of Contention the Respondent relied on amendments introduced by the 2004 Amendment Act, which came into effect after the judgment by McClellan J. The Appellant contends that Sch 10 of the Act now makes provision for the creation of a category of access licence in the form of a supplementary water access licence, so that the Plan is capable of operating in accordance with its terms. There is now express provision for an entitlement under the Water Act 1912 to be converted into a water access licence and a supplementary water access licence under Pt 2 of Ch 3, when that part of the Act comes into force.

62 Relevantly cl 3(1) of Sch 10 provides:

“3(1) ... an entitlement that ... was in force under the 1912 Act ... is taken to have been replaced:

(a) To the extent to which it entitles any person or body to take a specified quantity of water, by an access licence held by that person or body for the quantity of water so specified (subject to such of the conditions of the entitlement as are applicable to an access licence) ...”

63 Further, cl 7(1) of Sch 10 provides:

“7(1) The Minister, by order in writing, may at any time convert the manner in which the share component of an access licence ... is expressed from a specified quantity of water to any other manner in which the share component of an access licence may be expressed under section 56.”

Clause 8 provides:

“(8) On the appointed day, and if the regulations so provide, supplementary water access licences, additional to those arising under this Part, are taken to have arisen in accordance with the regulations.”

64 The “appointed day” is the day appointed under s55A for the operation of Pt 2 of Ch 3 in relation to that category of access licence.

65 The Water Management (General) Regulation 2004 provides for supplementary water access licences to replace entitlements under the Water Act 1912. At this stage this Regulation refers only to other water sources. No regulation applicable to the Lower Murrumbidgee Groundwater Management Area has been made. The Respondent relied, in the alternative, on either the translation exercise under cl 3 or an order by the Minister under cl 7 or the effect of cl 8 as establishing the mechanism for creation of a supplementary water licence so that full effect can be given to cl 25 of the Plan.

66 The Act has always made provision in s57 for the creation of supplementary water access licences as a particular category of access licence (previously par (f), now in par (h)). There was, however, no separate mechanism for the grant of such licences, nor for the regulation of the incidents of such licences.

67 Section 56 of the Act provides:

“56(1) An access licence entitles its holder:

(a) to specified shares in the available water within a specified water management area or from a specified water source (the share component), and

(b) to take water:

(i) at specified times, at specified rates or in specified circumstances, or in any combination of these, and

(ii) in specified areas or from specified locations,

(the extraction component).

(2) Without limiting subsection (1)(a), the share component of an access licence may be expressed:

(a) as a specified maximum volume over a specified period, or

(b) as a specified proportion of the available water, or

(c) as a specified proportion of the storage capacity of a specified dam or other storage work and a specified proportion of the inflow to that dam or work, or

(d) as a specified number of units.

(3) Shares in available water may be assigned generally or to specified categories of access licence.

(4) In the case of a local water utility licence, its share component is to be expressed as a specified volume per year.”

68 As set out above, s56(2) identifies the way in which the share component of an access licence may be expressed in distinct ways. That is the precise terminology used in cl 7 of Sch 10. That is not the terminology used in s56(3), allowing the shares in available water to be “assigned” to another category of access licence including, relevantly, a supplementary water access licence. I do not see how cl 7 can be employed to convert an access licence established under cl 3 into a supplementary water access licence.

69 However, each of the other alternatives relied on by the Minister do, in my opinion, have the requisite effect.

70 By reason of the operation of cl 3(1) persons with entitlements under the 1912 Act now have those entitlements converted into access licences, which will have effect as and from the date that the proclamation under s55A is made with respect to the Area. Section 56(3) contemplates that an access licence can be “assigned” to different categories. There is no statutory mechanism for such an “assignment”. I do not see any reason why an assignment of the entitlement cannot occur by force of a water management plan, in the absence of any such statutory mechanism.

71 There are two categories of relevant access licences in s57: aquifer access licences in s57(1)(e); and supplementary water access licences in s57(1)(h). An assignment of a share in available water can be split between the two. Clause 25 of the Plan makes provision for the reduction of the aquifer access licence share component in subcl (4) and also makes provision for the allocation, subject to reduction, of a supplementary water access licence under subcl (10). In my opinion, this is effective as an “assignment” between the two specified categories of access licence.

72 Alternatively, in my opinion the combined effect of cl 8 of Sch 10 and the power to provide for a supplementary licence in the relevant area by amendment of the Water Management (General) Regulation 2004 establishes the present validity of the Plan. This is not a case in which any present right or duty may be changed by a future law and, accordingly, the line of authority referred to above, most recently Meggitt Overseas Ltd v Grdovic, has no application.

73 The relevant right in cl 25(9) arises at a future time. Clause 8 of Sch 10 contemplates the existence of a supplementary licence regime arising at the same time. In terms it contemplates an amendment to the regulations which can be made by the same Minister who promulgated the Plan. The fact that such a regulation may be disallowed by Parliament is not a contingency which suggests that any right and therefore, possibly, the validity of the Plan, can be said to require a change of the law. All that is required is a series of interconnected executive acts in the control of the very Minister who promulgated the Plan. I can detect no legislative purpose to invalidate the exercise of the power to make a plan in so well integrated a legislative regime.

Is the Formula Impossible?

74 An important aspect of the legislative scheme and of the Plan is the reservation of water for environmental purposes. Such reservation must, to be effective, be reflected in the mechanism by which the quantity of water capable of being accessed under access licences is computed. The Appellant suggests a range of difficulties arise in implementing these provisions of the Plan. None appeared to touch on validity, other than an allegation of mathematical impossibility in a formula and doubt about the date of commencement.

75 The Appellant contends that an important formula in the Plan provides a computation that is impossible. To a substantial extent McClellan J accepted that contention. His Honour, however, held that by a process of construction, the Plan could be made to work. The Appellant contends that his Honour’s approach to construction was impermissible, with the consequence that a critical calculation required by the Plan was impossible and that, accordingly, the Plan must fail.

76 It is pertinent to note that entitlements under aquifer access licences do not mean that licence holders can use their entitlements each year. That depends on how much water is in fact available for use under an “annual available water determination” made by the Minister.

77 The formula in cl 25(4), set out above, can be explained as follows. The access licence share component prior to amendment is to be multiplied by a figure that is calculated as follows: first, the recharge established in cl 16(1) (as varied by the Minister after 2008) – 335,000 ML/yr for the Calivil and Renmark minus the volume of recharge reserved as environmental health water in the Calivil and Renmark in cl 18(1) – is multiplied by 1.25. From the result of this first multiplication must be deducted the total of local utility access licence share components in the Calivil and Renmark existing prior to any access licence amendments under cl 25(4). His Honour at [78] reproduced as “equals” a symbol that is in fact a subtraction symbol. Reading the top line of the cl 25(4) equation would otherwise be impossible. This is a typographical error which played no part in his Honour’s subsequent analysis.

78 The figure arrived at by the first multiplication and subtraction exercise is then divided by a figure calculated by subtracting the total of local utility access licence share components in the Calivil and Renmark existing prior to any access licence amendments from the total access licence share components prior to amendment. Once the division is complete, the total is multiplied by the access licence share component prior to amendment, as mentioned above. The parties agreed that it was intended that the amended access licence share component be 64 percent of the pre-amendment share component.

79 His Honour dealt with this issue in the following passage of his judgment:

“[203] As I have indicated, before the Plan can work it is necessary to be able to calculate the reduced total share components of access licences in the Calivil and Renmark after year five. Clause 25(4) of the Plan provides the formula by which this calculation is intended to be made.

[204] One element of the equation in cl 25(4) is the volume of recharge reserved as environmental health water in cl 18(1). Clause 18(1) says that environmental health water in the Calivil and Renmark is 65,000 ML/yr minus supplementary water. However, before supplementary water can be calculated, the calculation required by cl 25(4) must be completed (see cl 25(9)). Accordingly, if cl 18(1)(c) is to be read as it is literally written, the calculation in cl 25(4) is impossible and the Plan must fail as a matter of law. So much was accepted by the Minister, who in a supplementary submission said:

‘There is no doubt that the literal construction of clause 18(1)(c) propounded by the application has an absurd result. As is demonstrated by the applicant’s latest round of submissions, if that construction is accepted, the Plan simply does not work. At each level there must be certainty as to the amount of environmental health water but that cannot be achieved until other factors (themselves reliant on the environmental health water) are known. The result of the construction is a circular definition which ends up going nowhere. This cannot have been the intention of the Minister. The clear intention is that the entitlement for each licence will be able to be calculated in advance so as to give economic certainty and stability with regard to the sustainability of the physical resource as far as possible.’

[205] It is submitted that the difficulty created by cl 18(1)(c) is removed if cl 18(1)(c) is construed in the context of cl 18 as a whole. The proposition is that the water in cl 18(1)(a), (b), and (c) should be added together and supplementary water deducted from the total instead of only the water from the Calivil and Renmark.

...

[208] The consequence is that cl 18(1) should be understood as providing for four elements which together allow identification of the volume of water set aside as environmental health water. After identifying each of subsections (a), (b) and (c) of cl 18(1), the amount of supplementary water is to be deducted for so long as that water is to be made available. Supplementary water is to be deducted from the total environmental water not just from the 65,000 ML/yr set aside from the Calivil and Renmark.

[209] If cl 18(1)(c) is construed in this manner, the problem with the calculation in cl 25(4) is removed. The amount which is to be deducted as environmental health water is 65,000 ML/yr without the necessity to bring into account any allowance for supplementary water.

[210] The Minister accepts that a literal construction of cl 18(1)(c) produces absurd results, but submits that a purposive approach to its construction will avoid the problem ...”

80 His Honour went on to refer to the High Court judgment in Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) [1981] HCA 26; (1981) 147 CLR 297 at 320–321 and the judgment in the Court of Criminal Appeal in R v Young [1999] NSWCCA 166; (1999) 46 NSWLR 681 at 687–688. He concluded:

“[213] Notwithstanding that the construction of cl 18(1) contended for by the Minister does, as his counsel submitted ‘some violence to the grammar of cl 18(1)(c)’, I am satisfied that it should be adopted. The purpose of the Plan is made clear by cl 27(1), and by interpreting cl 18(1) in the manner indicated, cl 25 can operate. However, it scarcely need be said that a document intended to provide a statement of the rights of irrigators so that they, and those who deal with them, which will include mortgagees, should be prepared with meticulous care so that it can be clearly understood and applied. Concern about the fairness of the proposed new arrangements is not diminished if the plan which implements them does not make sense without adopting a construction of some of its central provisions at the limits of that which is permissible.”

81 In my opinion, his Honour’s conclusion is correct, but there is a different means of reaching it. The Minister did not make this alternative submission to his Honour.

82 In cl 25(6) environmental health water (“EHW”), for purposes of the application of the formula in cl 25(4), is defined in terms of “the volume of recharge reserved as environmental health water in the Calivil and Renmark in cl 18(1)”. His Honour’s analysis, and the written submissions in this Court, proceeded on the basis that the reference to “volume” in cl 25(6) was a reference to the whole of cl 18(1)(c). That is not, in my opinion, the case. There is only one reference in cl 18(1)(c) which answers the description of “volume”. That is the express reference to “65,000 ML/yr”. In my opinion, the whole scheme works perfectly sensibly so long as the reference “EHW” in the s25(4) formula is understood to be a reference to the volume expressly mentioned in cl 18(1)(c), i.e. 65,000 ML per year. So understood the formula works in accordance with its terms.

83 The Respondent contended that references to “proportion of recharge” where appearing in cl 18(2), should be understood as a reference to the 65,000 ML which is about 20 percent of the 225,000 ML/yr recharge to the Calivil and Renmark. That is, in my opinion, the correct construction of the word “proportion” in cl 18(2), which expressly refers back to cl 18(1) in which the only reference capable of answering the description of “proportion” are the two references to “ – ML/yr” of the average annual recharge.

84 As the Respondent submitted, the word “proportion” has the same meaning in cl 29(2)(d) which provides:

“In making an available water determination under s59 of the Act, the Minister should consider the following rules:

...

(d) total water available under aquifer access licences will be equal to the recharge established in cl 16, minus the proportion of recharge reserved for the local water utility access licences.”

85 The elements of cl 29(d) coincide precisely with the relevant part of the equation in cl 25(4), i.e. “(recharge – EHW)) – LWU”. The coincidence is only precise if the words “volume of recharge” in cl 25(6) and the words “proportion of recharge” in cl 29(d), both refer to “65,000 ML/yr”. This reinforces the conclusion to which I have come.

86 This ground of appeal should be rejected.

Commencement of the Plan

87 The Appellant’s case is that the complex calculations required by the Plan, particularly by cl 25(4), could not be undertaken. Difficulty said to arise from the date of commencement of the Plan is one of the factors leading to that conclusion. The Appellants did not, however, submit that the issue of the commencement date was alone sufficient to render the Plan invalid.

88 The Act provides relevantly:

“41(3) A Management Plan commences on the date on which it is published in the Gazette or on such later date as may be specified in the Plan.”

89 The Plan was published in the Gazette on 26 February 2003 and cl 3 of the Plan said that it took effect on 1 July 2003. The Appellant accepted that cl 3 specified a “later date” for the purpose of s41(3) and submitted the Plan commenced on the date specified, i.e. 1 July 2003.

90 The particular defect which, together with other matters upon which the Appellant relied, was said to result in invalidity, arose from the reference in the formula in cl 25(4) to “year 6 of this Plan”. The Appellant’s submission is that cl 25(4) was based on the assumption that both the Plan, and Ch 3 Pt 2 of the Act which makes provision for access licences, to which the formula applied, would come into effect on the same date. However, that part of the Act was not proclaimed as and from 1 July 2003 and, indeed, has still not been proclaimed in relation to the Lower Murrumbidgee Groundwater Area.

91 This is a contingency which was specifically contemplated by the drafters of the Plan. Clause 7 states:

“7 Effect on licences, authorities and permits under the Water Act 1912

(1) This Plan applies from the date of commencement to those matters that are administered under the Act at that time.

(2) This Plan applies to other matters from the date the relevant provisions of the Act are commenced.

Note. To the extent possible the rules embodied in this Plan will apply to matters administered under the Water Act 1912 in the interim.”

92 In cl 2(1) of the Plan “the Act” is defined to mean the Water Management Act 2000. Such a definition will of course be supplanted by a clear indication to the contrary. Such an indication may be suggested by the heading and Note to cl 7 as set out above, each of which refer expressly to the Water Act 1912. This may well be “the Act” referred to in cl 7(1). However, in my opinion, it is not the case that cl 7(2) refers to the Water Act 1912. That subclause contains the words “the relevant provisions of the Act are commenced”. That reference must be a reference to the Water Management Act 2000.

93 Accordingly, by operation of cl 7(2) the Act commences, relevantly, as at the date that Ch 3 Pt 2, making provision for access licences, comes into force. Therefore, the reference to “year six” in cl 25(4) is a reference to the sixth year from the date of that proclamation.

94 It may be that for this reason McClellan J concluded that “the reference to commencement date in the Plan is of no practical effect” (at [133]).

95 The Respondent also relied on the terms of cl 63 of Sch 9 which was inserted by the Water Management Amendment Act 2004 and which provides:

“63(1) Subject to s43, any management plan for water source whose nominal commencement date occurs before the date on which the water source is declared, by proclamation under s55A, to be a water source to which Part 2 of Chapter 3 applies commences on and has effect for 10 years from 1 July next after the date so declared.

(2) In any management plan whose actual commencement date is later than its nominal commencement date:

(a) any date or period of time that is required to be calculated by reference to the nominal commencement date is instead to be calculated by reference to the actual commencement date, and

(b) any date specified in the plan is taken instead to be the date occurring after the date so specified by the number of days by which the actual commencement date succeeds the nominal commencement date.

(3) In this clause:

Actual commencement date, in relation to a management plan referred to subclause (1), means the date on which the plan commences pursuant to that subclause.

Nominal commencement date, in relation to a management plan, means the date specified in the plan as the date on which the plan is to commence.”

96 If there were any doubt on this issue, the insertion of cl 63 by the 2004 amending Act has cleared it up. The Appellant submits that unlike some other clauses in Sch 9, cl 63 does not expressly refer to a management plan “made before the commencement of this clause”. The language of cl 63, the Appellant submits, is at best neutral in a temporal sense. Furthermore, the Appellant submits that any reference to a “management plan” must be to a plan which has been properly made and is valid. It does not apply to a purported plan. Accordingly, the Appellant submits that cl 63 should be construed as not having application in relation to the Plan presently under consideration.

97 In my opinion, these submissions should be rejected. The purpose of cl 63 is to adapt the time commencement, for the various purposes for which such a date is of significance, in order to ensure the effective operation of each such plan. This purpose is clearly best served if it applies to all existing management plans. Indeed it would only be a necessary amendment with respect to previously proclaimed plans. The definition of “nominal commencement date” in cl 63(3) applies generally to the date specified in any such plan. The language speaks in the present tense with respect to “any management plan”. I can identify no legislative purpose that is served by restricting these references to future plans.

98 Nor, given the ameliorative purpose of ensuring the effective operation of plans, is there any reason to conclude that this section would only apply to

valid plans. In any event, factors which constitute a plan to be invalid would have that effect in accordance with their own terms. If such factors exist, as will be considered with another ground of appeal below, then they have the consequence of invalidity. There is no additional element leading to a conclusion of invalidity which is to be derived from the date of commencement of the Plan upon which the Appellant relies, namely 1 July 2003.

99 In conclusion, the effect of cl 63 in Sch 9 of the Act is such that there is no element of uncertainty in the operation of cl 25(4) arising from any imprecision in the date of commencement of the Plan.

The Requirements Issue

100 Clause 25 of the Plan was made in purported compliance with s20(1)(c) of the Act. The Appellant contends that the Minister misconstrued the section in a manner which affected fundamental structural features of the Plan. This was an error of law that resulted in invalidity. I have set out s20(1)(c) above. The ground of appeal now under consideration turns on the proper construction of the paragraph which states that water sharing provisions of a management plan must deal with “the identification of requirements for water for extraction under access licences”.

101 Clause 25(2) of the Plan identifies “requirements ... for water for extraction under access licences” as 0 ML/yr in the Shepparton and 522,233 ML/yr in the Calivil and Renmark. The Appellant submits that the figures identified in cl 25(2) represent the total amount of all the water which was theoretically available to be lawfully taken under existing licences. This, it was submitted, involved a misconstruction of the word “requirements” in s20(1)(c). That word should be understood in the sense of “needs”, as distinct from “entitlements”. There was a clear distinction between the two with respect to the extraction from the Calivil and Renmark. Actual usage over the years had been considerably less than the total theoretically available under the entitlements. The actual “requirements” understood in terms of need had no necessary relationship with the nominal share components or licences held under the 1912 Act.

102 The Respondent accepted that cl 25(2) was an estimate of the entitlements that would exist as at a future date when the Plan came into force after a proclamation under s55A of the Act made Pt 2 Ch 3 applicable. Thereupon, under cl 9 of Sch 9 of the Act, all entitlements under the 1912 Act would be automatically replaced by access licences under the Act for the quantity of water specified in the original entitlement. Clause 25(8) makes it clear that the licence must be an aquifer access licence.

103 Section 43 of the Act provides that a management plan has effect for ten years. Over such a period the “needs” for water can alter substantially depending on the nature and intensity of use of land. If the word “requirements” were to be given the meaning of “need”, for which the Appellant contends, I do not see how many of the purposes to be served by a management plan could be obtained. Any projection of need depends on the desires and intentions of the water users. Many of the objects of a plan, e.g. ensuring ecologically sustainable development, require such desires and intentions to be modified.

104 This construction is reinforced by the terms of s20(1)(b) which uses the identical formula “identification of requirements” with respect to “basic landholder rights”. That term is defined to mean domestic and stock rights, harvestable rights and native title rights. The Act makes provision for rights of this character in Ch 3 Pt 1: permitting use of water for purposes of domestic consumption and limited forms of stock watering; orders permitting land holders to “harvest” in the sense of capturing and storing a defined percentage of rainwater runoff; and native title rights subject to a maximum amount that can be used in any one year for domestic and traditional purposes. All but the first are the subject of quantification provisions. In all cases an estimate may be made of permissible use, as distinct from desired use. This is particularly the case with harvestable rights where any order made by the Minister under s54 permitting landholders to capture and store rainwater runoff must identify the proportion of the average rainwater runoff that may be so captured (see s54(2)). This has nothing to do with “need”.

105 The other aspect of the immediate context of s20(1)(c) which assists in the construction of the word “requirements” is the bulk access regime for which s20(1)(e) makes provision by noting that any such regime must have regard to “the requirements referred to in pars (b) and (c)”. As quoted above, s20(2) establishes the elements that must be contained in a bulk access regime, including rules for the grant and management of access licences (par (b)) and conditions to be imposed on access licences including conditions for the variation of the “share and extraction components of access licences” (par (e)). These provisions can operate in relation to entitlements under an access licence in a clear manner over a period of years. They cannot operate with the same degree of clarity if they must relate to some idea of “needs” on the part of water users.

106 The Act is dealing with a resource on which numerous claimants had been making, and would for the foreseeable future make, demands which were inconsistent in the sense that not all could be satisfied. The introduction of a concept of “need” which turns on the particular desires of landholders for access to water appears to me to be inconsistent with the fundamental purpose and object of the Act. One person’s idea of “need” is another person’s idea of excessive use. This is particularly so in a context where past use and, in the case of the Lower Murrumbidgee Groundwater Management Area, possible future use was precisely the matter that needed to be controlled and regulated under the new Act.

107 The particular hydrogeology of the groundwater source under consideration is not pertinent because s20(1)(c) is applicable to all kinds of water sources. It appears to me that the introduction of an idea of “need” into a core provision of the legislative scheme for management plans would introduce a level of uncertainty in the operation of the Act of a character that is inconsistent with the achievement of the purpose of ecologically sustainable development of land.

108 Finally, I note that if the word “requirements” in cl 20(1)(c) does not deal with entitlements under access licences, no other section of the Act does so. Subject to controls under the Act and a management plan, access licences are intended to identify maximum permissible use. That maximum is a valuable right not only for users but also for the trading regime which the Act establishes. Indeed, I do not understood how the trading regime in access licences could operate except with respect to precise known entitlements which cannot be based on so uncertain a concept as “need”. Accordingly, amongst the provisions with which the water sharing provisions of a management plan “must deal”, all of which are identified in s20 of the Act, identification of entitlements must be made in a manner which is sufficiently precise to enable the trading in rights to occur. The only provision that states it to be mandatory that a plan identify such matters is s20(1)(c).

109 In my opinion this ground of appeal should be rejected.

Irrationality

110 The final ground of appeal is a challenge to the validity of the Plan on the basis that it was irrational because it treated the groundwater source as a single body of water and provided for pro rata cuts in entitlement across the whole Area.

111 The Appellant’s case on irrationality has its factual foundation in the limited interconnectivity within the aquifers the subject of the Plan. Although it is accepted that each aquifer is a single geological formation, it is submitted that the absence of interconnectivity is such that it is not rational to treat this formation as a single body of water for the purposes of a plan under the Act.

112 At its most extreme, the absence of interconnectivity is suggested by the evidence to have the consequence that it could take up to 100,000 years for a molecule of water to move from the eastern extremity of the Calivil and Renmark aquifer to its western extremity. There is a higher level of localised interconnectivity, although the expert evidence adduced on the part of the Minister before McClellan J did not suggest that interconnectivity, whether by means of lateral flows or vertical flows, was such that it was rational to treat the whole of the aquifer as if it were a single “water source” within the meaning of the Act.

113 Historically the groundwater system had been managed in a series of zones, with high levels of interconnectivity within each zone. A logical link could be established between the annual extraction within such a specific area and the annual recharge in that particular area. There was evidence that drawing the precise boundaries between such zones was a matter of some difficulty. Nevertheless, it was accepted by both experts that there were substantial differences between different areas. For example, at Darlington Point area in the east, licence holders could use a substantial proportion of their entitlements without affecting the sustainability of the water source in that region. Further to the west at Carrathool much stricter limits were required.

114 The position of the Minister was summarised in the evidence of Mr Scott Lawson, a hydrogeologist for the Department of Infrastructure, Planning and Natural Resources, who had been involved in the preparation of the Plan and had represented the Department on the Murrumbidgee Groundwater Management Committee. Mr Lawson accepted the existence of different effects in different regions:

“Recharge may be somewhat site-specific in that it does not occur everywhere at equal rates. Groundwater travels via throughflow to all parts of the groundwater system, with the result that extraction does not have to be precisely proportioned to match local recharge. While it is accepted that aquifer recharge and potential groundwater extraction are not evenly distributed across the plan area, each of the aquifer system components is interconnected. An activity in one area, or at one depth, will result in changed conditions elsewhere in the aquifer system. It was because of this unevenness but interconnectedness, that the groundwater model was developed. [Blue AB vol 2, p 386].”

115 Mr Lawson accepted that it was possible, but difficult, to manage the whole of the groundwater systems by zonal management:

“While it is not impossible to zone the aquifer system, determining the zones will be a matter of personal opinion influenced by a range of criteria and hydrogeological interpretation. This is because, from a technical perspective, the hyrdogeology is a continuum – there are no clear internal boundaries. Zones based on purely physical aquifer considerations are difficult to define on the surface. In any event the LMGMA lacks physical hydrogeological features on which to base zone boundaries for implementing critical aspects of the Plan. ... A trade-off between the aquifer conditions and the definable physical and cultural surface features will necessitate less than ideal zonation. Even if zones were adopted, unless the zones were very small, differences would still occur within those zones such that some groundwater users in unstressed parts of a zone may still request additional zonation so that restrictions may not apply to them ... The impact of pumping should not be the basis for defining long-term management zones, since a change in pumping distribution would necessitate a change of zones. [Blue AB vol 2, p 391].”

116 The expert called on the part of the Appellant had given evidence of an alternative method of management referred to as the “bandwidth method” which was described as follows:

“Two band levels are set, an upper band for non-pumping recovery and a lower limit for irrigation season drawdown. These are absolute limits. If the site specific bore or regional piezometer falls below these bands a cut back in groundwater extraction occurs, either on a particular regional or site-specific mandatory basis.”

117 In this regard it is relevant to recognise that in addition to the overall water availability determination made by the Minister, which limits how much actual water can be drawn in any period under access licences, the Plan makes provision for local extraction limits in cl 36 which relevantly provides:

“36(1) The Minister may declare that, in order to protect water levels within these groundwater sources, local access rules are to apply in a defined area known as a local impact area.

(2) Local extraction restrictions will first apply once draw down or recovery depths exceed trigger levels specified by the Minister or two or more successive years, or unacceptable levels of draw down or recovery specified by the Minister are observed in a single year.

(3) Local extraction restrictions will apply to such an extent and for such time as to reduce the rate of pressure to climb, or in response to unacceptable seasonal drawdown or recovery, to ensure pressure recovery occurs to acceptable levels.

(4) Local extraction restrictions may increase to prevent unacceptable seasonable drawdown and unacceptable recovery levels as specified by the Minister.

...”

118 It was in the context of this clause of the Plan that Mr Lawson commented on the bandwidth approach and said:

“There is no objection in principle to ‘bandwidth’ management which means managing groundwater levels (rather than volumes) within predetermined limits. This is proposed under the Plan as a secondary level of management, called ‘Local Impact Management’, in the knowledge that higher level controls exist to ensure total extraction is within limits of sustainable yield. Groundwater allocation through water level management is an approach that could be used once individual shares in the total resource are defined. While local interference impacts can be minimised by bore spacing, individual allocations and pumping scheduling, the overall impacts must be recognised and dealt with by managing the regional volume abstracted. It is necessary to understand the external impacts of total extraction and manage that total extraction to sustainable yield, as well as manage local extraction to resolve local internal interference impacts. [Blue AB vol 2, pp 391-2].”

119 Mr Lawson also placed considerable emphasis on the role of the precautionary principle in the decision-making process leading up to the gazettal of the Plan. He said:

“... the concept of ecologically sustainable development ... is fundamental to the New South Wales water reforms, and ... requires effective integration of economic and environmental considerations in decision-making processes, including implementation of the precautionary principle that if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation. The absence of complete certainty that the outcomes predicted by modelling will actually occur should not be allowed to stand in the way of taking measures to ensure sustainability. [Blue AB vol 2, pp 383-4].”

120 Plainly an alternative approach to management of the Lower Murrumbidgee Groundwater Management Area could have been adopted. The issue for this Court, however, is whether the Plan actually adopted was irrational in a legal sense, so as to invalidate the Plan.

121 His Honour summarised the Appellant’s case in a way which generally reflected the submissions in this Court:

“[143] The applicants’ argument is reinforced by the fact that it is contemplated that by the process of water transfer (see s 71A), water allocations may be sold by an irrigator in one part of the Area to an irrigator in another part of the Area. Because a transfer requires consent, it will only be allowed if that part of the Area to which the allocation is proposed to be transferred has adequate water and if the extraction will not have adverse environmental consequences. However, it is likely that the transfer may be of a licence allocation which, because of the circumstances in that part of the Area in which it is held, could never be utilised (see cl 39 of the Plan). It is submitted that, if this occurs, the transferor will receive a windfall by obtaining consideration for an asset, being the entitlement which they may never have used and which in the future could not use. The transfer of entitlements provides no environmental benefit, it could never have been utilised, but the holder of the licence receives financial consideration (which may be quite substantial) from the transferee who can utilise the licence.

[144] The effect is that the transferee suffers a financial detriment which is to the benefit of the transferor. In these circumstances, although there may be windfall gains and losses, there is no net benefit for the aquifer or the environment. Because water will not be allowed to be extracted from any site in a volume which cannot be sustained (irrespective of the allocation) and because an upper limit has been imposed on the water which may be extracted in any year (appropriately averaged), all that the Plan will do is redistribute wealth to the advantage of those holding licences which they cannot presently use.

[145] It is submitted that the absurdity of the Plan is emphasised by the fact that many of those who will acquire water will have expended considerable sums in developing their properties, in some cases with the active encouragement of the government, only to now pay money for water rights without which part of their capital investment in infrastructure may be lost.

[146] In summary, the applicants submit that the consequence of the Plan is to give a windfall to some and inflict financial hardship on others. This will occur in circumstances where the total water taken from the aquifers under the Plan will remain at approximately the level taken in the previous year of greatest usage (2002/2003). Accordingly, the plan will not achieve a reduction in water taken from the total volume taken in the past but will inflict significant financial hardship on some people.

[147] The applicants’ argument is not dependent on a resolution of the debate as to the precise performance of the aquifer. Whether or not the aquifer is integrated so that water taken from one location will ultimately result in a reduction of water in another location, or whether the aquifer in one part of the Area is recharged from the Murrumbidgee River, it is contemplated that by the transfer system a greater volume of water per square kilometre may be taken from some areas than from others, although the total water taken is kept below the available water determination. Consequently, the applicants submit that the Plan fails to maximise the social and economic benefits to the community and does not reflect the requirements of the Act. Indeed, it is submitted that because of the economic disadvantage to some, the effect of the Plan will be to inflict negative economic impacts with discordant social and economic outcomes.

[148] The applicants submit that the approach to water management reflected in the Plan fails to recognise that although the aquifer may be one water body, parts of it perform differently and, as is inherent in the contemplated transfer arrangements, may be managed differently. Consequently, it is submitted that it is illogical to impose uniform reductions on an Area which will not thereafter be uniformly managed but will in fact be managed by reference to the quality and performance of the aquifer in particular parts of the Area. These may be thought of as the zones by which the Area has been managed in the past and, it is submitted, by which it should be managed in the future.”

122 As can be seen, particularly from [147], the Appellant’s case did not require a determination of the actual degree of interconnectivity. It is sufficient, it submits, that the limited degree of interconnectivity which is accepted by all experts leads to a level of unfairness that indicates irrationality or illogicality.

123 The central significance of equity considerations was emphasised in the Appellant’s submissions in this Court. I note in particular the following passage from the written submissions:

“3.9 ... Did the Parliament intend the Minister to reduce entitlements arbitrarily, in the sense that no account was to be taken of the state of the water source from which a particular user extracted water? Did the Parliament intend that the Minister could, in order to promote a trading scheme insist that farmers with existing entitlement and adequate available water, have their entitlements arbitrarily reduced, so as to force them to purchase an entitlement from farmers with no use for it? In short, did Parliament intend that the Minister have power, in circumstances where no overall reduction in water usage was required, to impose a financial penalty on current licencees? The formulation of questions in this manner reveals the implausibility of the answers proposed by the Minister.”

124 The Appellant’s case is that the imposition of a single system across the entire aquifer is irrational because it cannot be based on any requirement determined by water availability and, accordingly, that the imposition of uniform reductions was illogical. It submitted that the Plan was not saved by the fact that persons who lost some level of their entitlements under the 1912 Act, in circumstances where there was no reason for doing so based on water availability, had the ability to buy back an entitlement at additional cost.

125 The Respondent, however, relies on the role of the transfer system under the Plan. Part 11 of the Plan outlines access licence dealing rules which apply to all access licences, other than supplementary licences. Licence holders may have entitlements in excess of their requirements, perhaps because they have never used a significant proportion of their theoretical entitlements or because their farming operations are no longer viable or because local impact restrictions under cl 36 reduce their actual ability to draw water in a particular year. Such excess entitlements may be sold to other water users whose entitlements under access licences, even with the addition of supplementary licences in the years when they are available, would give rise to a level of extraction below sustainable recharge in their area. The requirements of such users could be satisfied by the purchase of the entitlements of persons who have excess entitlements. Because the transfers require Ministerial approval, no transfer would be permitted to be made into an area with inadequate supply.

126 His Honour’s conclusion appears in the following passages of his judgment:

“[179] The fundamental complaint in the present case is that the Plan operates to the disadvantage of those who have, because of the location and the attributes of their land, been able to use, or who can expect to be able to use, the greater proportion of the water allocated to them in the past without any identifiable detriment for the groundwater within the Area. Ultimately, the likely consequence of the water transfer arrangements is that water will be taken from those areas in the same total volumes as it is today.

[180] Although the evidence discloses that over a great many years the aquifer may function as a single body of water which would justify a uniform reduction in entitlements, there are obvious anomalies in basing the Plan on these principles. The reason for this is that the water which will in future be allowed to be taken for irrigation will be confined to the volume of the annual average recharge. In other words, only the water that will be replaced by natural processes in any year can be taken. In some areas, the controls will be imposed by the natural features – wells which have been made may simply be dry or the water may be unfit for use for agriculture. In other areas, the control on the volume of water taken will be imposed by the Minister so that the water taken from part of an area will not deplete the long term average storage component of the aquifer and cause damage to the environment. Of course in areas where the recharge is plentiful, high levels of extraction, which may have to be authorised by the acquisition of additional licences, are likely to continue.

[181] I am in no doubt that the Minister could have achieved the intended environmental outcome by either imposing appropriate and different controls on parts of the Area or managing the aquifer by a bandwidth approach. I accept Mr Lawson when he says that there may be some difficulty in defining the boundaries between zones, but those problems have been faced and addressed under the existing management regime and I am not persuaded that they would be insurmountable.

[182] I am also satisfied that by imposing a uniform reduction on all irrigators, irrespective of their capacity to use the water theoretically available under the licence, the Plan will operate unfairly on some irrigators in a manner which could have been avoided. However, an approach which was based entirely on historical usage would also have been unfair to those who were still developing their properties and may have rewarded inefficient irrigators more than efficient users unless detailed rules in relation to the method of irrigation were imposed.

[183] As I have indicated, the fundamental object of the Plan is to confine water taken for irrigation to the capacity of the annual recharge of the aquifers. However, recharge is not uniform across the Area. Accordingly, to impose a regime of uniform reductions has the consequence that the identified objective, of allowing the water taken to be the equivalent of the annual recharge, will not be achieved by the plan. That will only occur by the operation of the market to be created for water allocations and then with the obvious inequities which I have discussed.

[184] Notwithstanding these matters and accepting the identified anomalies I am not persuaded that bearing in mind the confined role for a court in judicial review proceedings the applicants are entitled to relief. It was for the Minister, and not the Court to balance the desired environmental outcome, and the chosen method of achieving it, with the beneficial and adverse social and economic consequences.

[185] As Mason J said in Peko (at 42) when the decision-maker is required to balance disparate matters when making a decision, a court should be cautious when asked to intervene for otherwise it may inadvertently be engaging in merit review. Perhaps, in the present case, if the Minister had not addressed the potential anomalies by providing a regime for supplementary water, a case for intervention could be made out. However, by providing for supplementary water the Minister has acknowledged the harm which may be occasioned to some irrigators and provided a regime designed to ameliorate it. It is not for the court to determine whether the regime adopted is the best which could have been provided. It is plain that the difficulties were considered and that the Minister, balancing the competing interests, is of the opinion that he has appropriately provided for the social, economic and environmental benefits from the available groundwater. The Minister’s decision to provide a management regime which imposed hardship on some in the interests of achieving a satisfactory future regime for the management of the whole of the aquifers cannot be described as irrational.

[186] When deciding to make the Plan the Minister had the ultimate objective of providing for the long term sustainability of the underground water. His decision was required to be informed by, inter alia, the precautionary principle which required a regime to be put in place which was likely to sustain the water source even if, as is the case, full scientific knowledge of the structure and behaviour of the aquifer is not available.

[187] By ensuring the long-term health of the aquifer, the Minister has ensured both an appropriate environmental outcome and sustainable agriculture with the associated social and economic benefits. The mechanism adopted is faithful to the principle in s 5(3)(a) of the Act “that sharing of water from a water source must protect the water source and its dependent ecosystems” which must not be prejudiced by extraction of water (s 5(3)(c)). By providing supplementary water, the Minister has allowed for a lengthy period of adjustment during which those who can sustain an agricultural enterprise may, although at a cost, acquire water rights.

[188] Others who lose part of their present rights to water and who could not justify, for economic or environmental reasons, the acquisition of additional entitlement may receive some moneys from the sale of entitlement, which they will presumably invest in some manner. To the extent that the Plan impacts adversely on those persons, the sale of the entitlement will ameliorate their position.

[189] Having regard to all of these matters, I am not satisfied that the approach which has been taken is so lacking in logical structure or so fails to have regard to the parameters which the Act imposes on the Minister that it could be said that it was not open to the Minister and that the Minister’s discretion in making the Plan has miscarried.

[190] By providing a uniform approach to reducing entitlements, the Minister has ensured that ultimate control over the performance of the aquifers can be managed by available water determinations and close supervision of the transfer applications. The fact that there may be windfall gains or losses which could have been avoided does not mean that the Plan is founded upon judgments which were not open to the Minister. Some may believe it to be preferable, if possible, to manage the water without those consequences, but that was a decision for the Minister and not for the Court.”

127 A challenge to the exercise of a statutory power on the basis of irrationality or unreasonableness requires the Court to be conscious of the permissible scope of judicial review. The legality/merits dichotomy is at the heart of Australian administrative law and the boundary between the two is policed more rigorously in this country than appears to have become the case in recent years in other common law jurisdictions. The most frequently cited statement of principle is that of Brennan J in Attorney-General (NSW) v Quinn (1990) 170 CLR 1 at 35–36:

“The duty and jurisdiction of the Court to review administrative action do not go beyond the declaration and enforcing of the law which determines the limits and governs the exercise of the repository’s power. If, in so doing, the Court avoids administrative injustice or error, so be it; but the Court has no jurisdiction simply to cure administrative injustice or error. The merits of administrative action, to the extent that they can be distinguished from legality, are for the repository of the relevant power and, subject to political control, for the repository alone.”

128 There are circumstances in which the outcome of a decision-making process will of itself indicate legal error. However, the courts must be slow to so find, because of the blurring of the distinction between legality and merits that can often arise when determining such a ground of judicial review.

129 The submissions in the present case did not give rise to any dispute as to the appropriate legal test. Both parties accepted that judicial review on such a basis was permissible. Nothing appeared to turn on the particular formulation of the test in the case law. Perhaps the most appropriate formulation is whether the decision is “illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds”: Minister for Immigration and Multicultural Affairs Ex parte Applicant S20/2002 [2003] HCA 30; (2003) 77 ALJR 1165 at [52] and [37], [173]; see also Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32; (2004) 78 ALJR 992 at [38].

130 With respect to a power to make a plan of the character under consideration in the present case, I find particularly helpful the formulation of Sir Owen Dixon in Williams v Melbourne Corporation [1933] HCA 56; (1933) 49 CLR 142 at 155:

“To determine whether the bylaw is an exercise of a power, it is not always enough to ascertain the subject matter of the power and consider whether the bylaw appears on its face to relate to that subject. The true nature and purpose of the power must be determined and it must often be necessary to examine the operation of the bylaw in the local circumstances to which it is intended to apply. Notwithstanding that ex facie there seemed a sufficient connection between the subject of the power and that of the bylaw, the true character of the bylaw may then appear to be such that it could not reasonably have been adopted as a means of attaining the ends of the power. In such a case the bylaw will be invalid, not because it is inexpedient or misguided, but because it is not a real exercise of the power.”

131 The facts of that case involved a power to regulate traffic. Dixon J formulated the issue at 156 in terms which are able to be adapted to the present case:

“The ultimate question in the present case appears to me to be whether, when applied to the conditions of Melbourne, the bylaw involves such an actual suppression of the use of the streets for the purposes of the necessary transit of an important and ordinary commodity as to go beyond any restraint which could be reasonably adopted for the purpose of preserving the safety, convenience and proper facility of traffic in general.”

132 The line of authority that bears the closest analogy with the legislative scheme presently under consideration is the Federal Court case law on management of fisheries by the relevant Minister under the Fisheries Act 1952 (Cth).

133 In Minister for Primary Industries & Energy v Austral Fisheries Pty Ltd [1993] FCA 45; (1993) 40 FCR 381, the Court found that the provisions of a particular plan were so unreasonable as to be invalid. Lockhart J said at 384:

“Delegated legislation may be declared to be invalid on the ground of unreasonableness if it leads to manifest arbitrariness, injustice or partiality; but the underlying rationale is that legislation of this offending kind cannot be within the scope of what Parliament intended in authorising the subordinate legislative authority to enact law.”

His Honour went on at 384.10 to say that declaring delegated legislation of that kind to be invalid was a step that the Court would only take in “an extreme case”. In that case the plan was based on a statistical fallacy and, accordingly, a declaration of invalidity was appropriate.

134 The other judgment in the case was a joint judgment of Beaumont and Hill JJ. Their Honours applied a test of whether or not the plan was such that “no reasonable person could ever have devised it”, which their Honours described as a “stringent test” at 400.10. Their Honours concluded at 401:

“In substance, the Judge held that the relevant provisions of the Plan were capricious and irrational, such that no reasonable person could ever have devised it. This was an extreme conclusion. But it was justified on the expert evidence ...

“In the absence of evidence or a process of reasoning to propound any rational basis to warrant the adoption of a statistically flawed formula for the calculation of catch history over the five year period, it was, we think, reasonably open to his Honour to conclude that the relevant provisions of the Plan were beyond power and thus void.”

135 A challenge to another plan under the Fisheries Act (1952) (Clth), failed both at first instance (Bienke v Minister for Primary Industries and Energy (1994) 125 ALR 151 (per Gummow J)) and on appeal (Bienke v Minister for Primary Industries and Energy (1996) 63 FCR 567 (per Black CJ, Davies and Sackville JJ)). In that case there was a dispute between experts. The expert for the plaintiff criticised the methodology underlying one aspect of the plan as deeply flawed. There was, however, expert evidence on the part of the Minister justifying the decision.

136 Gummow J emphasised the following considerations at 166:

“... Great caution must be shown in judicial review ... of determinations resting upon factual matters where (i) the determinations in question were made after prolonged public debate and (ii) being legislative in character, the determinations were subject to disallowance by either House of Parliament and (iii) the disputed matters of fact turn upon expert knowledge and opinion, there is dispute between the experts, and there was no cross examination upon that conflict.”

137 The appeal to the Full Court was dismissed and Austral Fisheries was distinguished (see at 579).

138 Before turning to a consideration of the scope, nature and purpose of the power presently under consideration, I should note that in its Notice of Appeal the Appellant also stated, with respect to this ground, that the Minister had failed to give real, genuine and proper consideration to material differences in the circumstances of licence holders in different areas. This is a formulation that was developed in the context of case law under the Administrative Decisions (Judicial Review) Act 1977 (Cth). It is a formulation that may not extend beyond that legislation. (See Bruce v Cole (1998) 45 NSWLR 163 at 185–186.) It has in any event been criticised by the Full Court of the Federal Court (Minister for Immigration and Multicultural Affairs v Anthonypillai [2001] FCA 274; (2001) 106 FCR 426 at 435–442). Although mentioned in the Notice of Appeal there was no submission made to the Court on the basis of this test and I do not further consider it.

139 It is always necessary to commence with the identification of the particular statutory power, understood in its context, and to assess the exercise of that power against the high standard of unreasonableness or of irrationality which the outcome must reach before the Court can legitimately infer that the legal limits to the exercise of the power have not been observed so that, to adopt the formulation from Williams v Melbourne Corporation quoted above, the Plan “could not reasonably have been adopted as a means of attaining the ends of the power” and, therefore, “is not a real exercise of the power”.

140 Section 50 of the Act provided at the relevant time:

“50(1) The Minister may, by order published in the Gazette, make a plan (a Minister’s plan):

(a) for any part of the State that is not within a water management area, or

(b) for any water management area or water source, or part of a water management area or water source, for which a management plan is not in force, or

(c) for any water management area or water source, or part of a water management area or water source, for which a management plan is in force, but only so as to deal with matters not dealt with by the management plan.

(1A) A Minister’s plan may be made for more than one water management area or water source or for parts of more than one water management area or water source.

(2) A Minister’s plan must in general terms deal with any matters that a management plan is required to deal with, and may also deal with any other matters that a management plan is authorised to deal with, other than matters that are already dealt with by a management plan.”

141 It is a feature of this power that it can deal with either a “water management area” or a “water source”. Under s50(1)(b) it may deal with the whole or part of any such area or source. Under s50(1A) a plan may be made for more than one area or source or parts thereof. This provides a considerable degree of flexibility to the Minister who is not confined to dealing solely with the whole of one area, nor with a single water source. The breadth of the Minister’s powers under s50 is such that the making of a plan is not to be constrained by matters such as limits on interconnectivity, but may involve joint planning of separate water sources or of separately identified management areas. After all, interconnectivity may exist above ground by means of transporting water extracted from the ground by man-made or natural channels.

142 Section 21 of the Act sets out matters with which a management plan may deal. Section 21(e) states that a management plan may deal with “measures to give effect to ... the objects of the Act”. One of those objects is found in 3(e):

“3 The objects of this Act are to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations and, in particular:

...

(e) to provide for the orderly, efficient and equitable sharing of water from water sources.” [Emphasis added]

143 Matters of “equity” are introduced in the objects clause and, by force of s21(e), are permissible to be considered by a Minister when determining the content of a plan. This identifies relevant considerations with the determination of which a court is unlikely to intervene.

144 Inevitably, when significant changes are made to an established regulatory regimes, there will be winners and losers. Considerations of equity are quintessentially matters for political decision-making. I am not satisfied that anything in the nature, scope and purpose of the Act prevents the Minister from implementing a scheme which operates to the detriment of some persons and to the advantage of others, in a manner not determined by availability of water but by broader considerations of what the Minister regards as equitable.

145 The Appellant relied on the statement in s20(2)(f) that the bulk access regime must be “consistent with the water management principles” and referred to s5(2)(g) which identified the following “principle”: “the social and economic benefits to the community should be maximised”. However, in my opinion, that “principle” is not directed to issues of comparative fairness.

146 In August 2001, the relevant government department published the “Water Management Act 2000 Groundwater Update”. That statement of government policy indicated a State-wide approach to the reduction of groundwater entitlements based on pro-rata reduction of licensed entitlements, not based on user’s level of use. (See Blue AB 1, p169)

147 The underlying policy was said to be:

“The continuing existence and fundamental health of groundwater systems must take priority over providing access to meet current levels of licensed groundwater extraction. Existing licences will continue, but the total entitlement of each aquifer will be set so that long-term average extractions match the long-term sustainable yield of the aquifer.

Shares of groundwater resources from an aquifer will be based on a pro-rata level of licensed entitlements, not on users’ levels of development or history of use. Most groundwater licence holders are expected to receive a share of the aquifer’s sustainable yield that can support their recent levels of extraction, and in some cases enable further development. Volumetric licence conditions will be adjusted accordingly, to reflect these shares.”

148 The choice made was justified in the following terms:

“Where total licence entitlements for an aquifer exceed a sustainable level, initial volumetric shares will be distributed to existing licence holders in proportion to their current licence entitlement. In those aquifers where licence entitlement is currently at or below sustainable levels, shares will reflect existing licence entitlement and new licences will not be issued beyond the total sustainable extraction for the aquifer.

Community consultations advised that history of use or levels of development should be taken into account when adjusting allocations. However, because these concepts are loosely interpreted and there are no clear and consistent ways agreed to measure them, they cannot provide a fair way to adjust licence entitlements. The risk was that efficient users would be penalised and inefficient users would be rewarded.

The Government is, however, sensitive to the fact that some users currently extract more groundwater than their relative share of the aquifer’s sustainable yield. These users do face real challenges, in particular in the Namoi Valley. To assist users facing this situation, and to help reduce any economic impacts, three measures will be available:

· While licence conditions will be adjusted in the short term, volumetric adjustments to groundwater extractions will be phased-in over periods of up to 10 years.

· ...

· groundwater trading and water accounts will be introduced where they do not already exist. Trading will enable adversely affected licence holders to obtain additional access through trading in licences while water accounts will enable limited ‘banking’ of unused entitlements.”

149 The foregoing is a clear recognition of the differential impact of the proposed system. Reasons are given for the approach adopted. A universally applicable formula may well receive more widespread acceptance than a more complicated approach allowing for local differences, where boundaries will be difficult to determine and discretionary decisions about relevant matters would be inherently contestable and likely to be contested.

150 The Plan implements a proportionate reduction of all existing entitlements, alleviated in the short term by the supplementary water licence system. In the longer term the transfer system will provide a mechanism for bringing licensed extraction in particular areas closer to the annual recharge in those areas. Furthermore, it will do so by ensuring that the water is used for its highest value economic use.

151 The Plan operates unequally by reason of the fact that one group of licence holders may have to pay another group of licence holders a sum of money in order to access additional water. The choice made by the Minister in this regard raises considerations of equity of a character inappropriate for judicial review.

152 No doubt some persons would regard pre-existing water access licences as some sort of accrued right, notwithstanding their statutory origin. It may appear to be unfair for such persons to have to pay additional money to obtain access to water which they could presently achieve under their licences, without adverse effects on water availability in the immediate region, particularly as they have to pay other persons who could not use the water in any event. What is fair or unfair in such a context is a matter on which reasonable minds can differ. In view of the conflicting interests involved, a broad brush approach of general application is not, in my opinion, irrational.

153 Subject to the proposition that I would give weight to the transfer system rather than the supplementary water system as saving the Plan from invalidity, I agree with his Honour’s reasons as set out above. I have come to the same conclusion as McClellan J that such elements of unfairness as some may believe to arise in the case of the Plan are not of a degree which renders the mechanism irrational so that the Plan operates beyond the legally permissible limits of the statutory power.

154 This ground of appeal should also be rejected.

Conclusion

155 In my opinion the appeal should be dismissed with costs.

156 BEAZLEY JA: I agree with Spigelman CJ.

157 TOBIAS JA: I agree with Spigelman CJ.

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LAST UPDATED: 09/02/2005