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Wylie Group Pty Ltd v Minister for Environment & Conservation [2004] SAERDC 69 (2 September 2004)

Last Updated: 7 September 2004

ENVIRONMENT, RESOURCES AND DEVELOPMENT COURT OF SOUTH AUSTRALIA

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated.

WYLIE GROUP PTY LTD v MINISTER FOR ENVIRONMENT & CONSERVATION

Judgment of Her Honour Judge Cole

2 September 2004

ENERGY AND RESOURCES - WATER RESOURCES

Appellant applied to the respondent Minister for a licence to take water to irrigate lucerne seed and proposed olive plantation - licence granted to take water for pivot irrigation in relation to lucerne seed only - appellant appealed allocation that was granted - whether appellant legally committed to olive project before the commencement of the prescribed period - whether significant financial or other resources had been committed - finding that appellant had demonstrated both a legal commitment and a significant financial commitment to project - Memorandum issued by court - subsequent order of court made by agreement between the parties.

Water Resources Act 1997 s.36, referred to.

WYLIE GROUP PTY LTD v MINISTER FOR ENVIRONMENT & CONSERVATION
[2004] SAERDC 69

(ERDC No. 161 of 2003)

THE COURT DELIVERED THE FOLLOWING JUDGMENT:

1 Wylie Group Pty Ltd ("the appellant") applied to the Minister for Environment and Conservation ("the respondent") for a licence to take water in the Tintinara Coonalpyn Management Area to irrigate lucerne seed and a proposed olive plantation on the land at Section 21, Hundred of Makin ("the land"). A water licence was granted, ultimately, on 21 March 2003, but the allocation did not include the water required to irrigate the proposed olive plantation. The appellant claims that it qualified for allocation under s.36(2)(b) of the Water Resources Act 1997, in that it could show a legal commitment to the plantation, and the commitment of significant financial or other resources. The respondent disputes this.

The History of Water Restriction

2 In the further amended statement of agreed facts in this matter, the parties say:-

"5. On 13 January 1999, pursuant to s.16 of the Water Resources Act 1997, the Respondent imposed a Notice of Restriction on water use in the Tintinara-Coonalpyn Management Area which includes the subject land. The Notice of Restriction prohibited the taking of water for irrigation purposes without written authorisation from the Respondent to do so."

3 It seems, from the documents tendered, that a further Notice of Restriction came into effect on 13 January 2000 and continued until 13 January 2002.
4 The further amended statement of agreed facts says:-

"17. On 2 November 2000, the Tintinara Coonalpyn Management Area was prescribed pursuant to s.8 of the Water Resources Act 1997."

5 The relevant effect of the prescribing of the Tintinara Coonalpyn Management Area was that, pursuant to s.9 of the Water Resources Act 1997, water could not thereafter be taken for irrigation in that Area without a licence. It appears that the Notice of Restriction may have continued in operation for about 14 months after the resource was prescribed.

Water Resources Act 1997, section 36

6 The Water Resources Act 1997 provides, relevantly, in s.36:-

"(1) On declaration of a watercourse, lake or well as a prescribed watercourse, lake or well or declaration of a part of the State as a surface water prescribed are, an existing user of water from the water resource concerned –

(a) may, subject to a restriction or prohibition under section 16, continue to use water without a licence until the end of the prescribed period or, if he or she applies for a licence within six months after the publication in the Gazette of the regulation declaring the resource to be a prescribed resource, until the application is granted or refused;

(b) is, subject to subsection (3), entitled to have endorsed on the licence without the payment of a purchase price a water (taking) allocation determined by the Minister under subsection (2) after consultation with the existing user.

(2) The water allocation will be the quantity of water that will, in the opinion of the Minister, meet the future requirements of the existing user –

...

(b) for water for a development, project or other undertaking to which he or she was legally committed or in respect of which he or she had committed significant financial or other resources before the commencement of the prescribed period;

...

(6) An existing user may appeal to the Court against a determination or decision of the Minister under subsection (2).

...

(8) If the quantity of water available for allocation exceeds the entitlements of existing users, the Minister may allocate the excess in accordance with this Act and the relevant water allocation plan.

(9) An entitlement referred to in subsection (1)(b) may be transferred to another person with the approval of the Minister.

(10) In this section -

‘the establishment period’ in relation to the declaration of a water resource means the period prescribed for the purposes of this definition by the regulation declaring the resource to be a prescribed resource being a period that ends at the commencement of the prescribed period;

‘existing user’ means, subject to subsection (11), a person -

(a) who took water from the resource at any time during the establishment period; or

(b) who did not take any water during that period but who needs water for a development, project or undertaking to which he or she was legally committed or in respect of which he or she had, in the opinion of the Minister, committed significant financial or other resources before the commencement of the prescribed period;

‘the prescribed period’ in relation to a water resource commences on the date of publication in the Gazette, a newspaper circulating generally throughout the State or a local newspaper (whichever occurs first) of the notice inviting submissions in relation to the proposed regulation declaring the resource to be a prescribed resource and ends on the date specified for that purpose in the regulation."

7 The appellant claims an entitlement under s.36(1)(b) and s.36(2)(b).

The Basis of the Appellant’s Claim

8 The "establishment period" for the Tintinara Coonalpyn Management Area was from 30 June 1995 to 11 May 2000. It was not disputed that the appellant had taken water in this period and was thus an "existing user" for the purposes of s.36 of the Act.
9 The "prescribed period" was from 11 May 2000 to 31 October 2002. It commenced on the day of the first publication of the notice inviting submissions on the proposed prescription of the resource.
10 The appellant applied for a licence on or about 10 April 2001, which was within six months of the Gazettal of the regulation prescribing the resource. The application sought 1106ML for the irrigation of 208 hectares of lucerne seed and 2744ML for the irrigation of 500 hectares of olives on the land.
11 Ultimately, after much correspondence, the appellant was granted a licence to take 1599ML for pivot irrigation, a portion of which (3432KL) will expire on 30 June 2006. From Mr Wylie’s affidavit, it is evident that the process which led to this outcome included the amendment of the appellant’s application so that the quantity applied for was reduced to that granted. However, by letter dated 21 March 2003 from Mr Schmidt, of the relevant State Government department, to Mr Wylie, it is clear that a decision had been made in relation to the allocation of water claimed on the basis of s.36(2)(b). The amendment of the application was a response to that decision. It is that decision which has been appealed from under s.36(6), rather than the determination of the licence application.
12 The facts of the matter were not substantially in dispute. The dispute is whether, on the basis of those facts, the appellant:
• was legally committed to a development, project, or other undertaking before the commencement of the prescribed period (ie 11 May 2000)

• had committed significant financial or other resources to a development, project or other undertaking before 11 May 2000.
13 Affidavits of Mr Wylie, Managing Director of the appellant, and Mr Gemmell, a Director of the appellant, were tendered in the appellant’s case, and Mr Wylie and Mr Gemmell gave evidence. Their account of the appellant’s decisions and actions in relation to its proposals for the land and its licence application were not contradicted by any other evidence. I have extracted the following relevant facts in summary:-

1. In early 1998, the appellant sent Mr Gemmell on a national study tour conducted by Olives Australia. The purpose of the tour was for Mr Gemmell to learn about the olive industry so that he could advise the appellant in relation to the possibility that it would go into the business of cultivating olive orchards.

2. In November 1998, Mr Wylie and Mr Gemmell inspected the land to assess its suitability for the cultivation of an olive orchard. The appellant (then called Kangaringa Nominees Pty Ltd) entered into an option agreement to purchase the land on 19 November 1998. The owners of the land were irrigating 80 hectares of lucerne with a central pivot irrigator. The balance of the land was used for cropping and sheep.

3. A project was devised by the applicant involving the division of the land by community title so that investors could purchase community lots with the appellant providing management services. The olive trees would be grown on the community lots. There were to be 19 community lots, each with an area greater than 40 hectares. About 700 hectares of the 807 hectare property would be planted with olive trees, it was proposed. Mr Gemmell, in his affidavit, says:-

"9.1 on or about November 1998, I retained Kevin Burgess & Associates Pty Ltd, surveyors, to assist us with the community title proposal, the development application and the general planning of the project;

9.2 in or about December 1998, I retained Mr Tony Thomson of Primary Industries & Resources SA ("PIRSA") to advise the Wylie Group in relation to the irrigation plan for the project. Now produced and shown to me and marked with the letters "IBG 1" is a true copy of the report provided to me by Mr Thomson dated 6 January 1999;

9.3 in or about December 1998, I sought advice from PricewaterhouseCoopers in relation to the proposed olive project. Now produced and shown to me and marked with the letters ‘IBG 2’ is a true copy of a letter I sent to PricewaterhouseCoopers requesting advice and a copy of PricewaterhouseCoopers’ response dated 8 February 1999;

9.4 in or around December 1999, I also sought advice on the project from Deloittes PBS. Now produced and shown to me and marked with the letters ‘IBG 3’ is a true copy of a letter from Deloittes to me in relation to that advice.

9.5 in or around December 1998, I also sought various advice from Corsers Solicitors and O’Loughlins Barristers & Solicitors, which legal advice is subject to legal professional privilege; ..."

4. Mr Wylie wrote to the relevant State Government department on 14 December 1998. The project was outlined in the letter, and an "Irrigation Development and Management Program" was provided. In the letter, Mr Wylie wrote:-

"The purpose of this letter is to advise Water Resources of our irrigation plans for ‘Conway Park’ and obtain your confirmation for the additional water required to complete the project. Your confirmation that irrigation water will be available is integral to the project proceeding"

5. In December 1998, Mr Gemmell lodged a development application with the Development Assessment Commission and the Tatiara District Council, for the division of the land by community title, and the change of use of the land to an olive plantation. In his affidavit, Mr Gemmell says that the advice and reports of the consultants referred to in paragraph 9 of his affidavit were used to prepare the development application.

6. On 9 March 1999, the Tatiara District Council granted development approval, subject to 11 conditions, to the change of use of the land to an "olive grove". On the same day, development approval for the division of the land by community title was granted.

7. In paragraphs 18 and 19 of his affidavit, Mr Wylie says:-

"18. In March 1999, the Wylie Group became concerned about the uncertainty of its request for water which was required to develop the olive project. The Wylie Group felt that it was necessary to secure the water licences and provide potential investors with security in relation to the water available for the olive development. The Wylie Group was also concerned that if it did not use the interim water allocation of 128 hectares of olives and the pre-existing allocation of 80 hectares of lucerne that had been granted pursuant to the letter marked ‘GWW 7’, it would lose its existing user status. It was not economically viable to plant out only 208 hectares of olives without any guarantee that water would be available to develop the remainder of the olive project. It would not have been cost effective to only plant 208 hectares of olives due to economies of scale.

19. As an interim measure, pending Department approval of the 720 hectare olive development, on 23 March 1999 the Wylie Group applied to the Department to vary its interim allocation from 128 hectares of olives to 128 hectares of lucerne seed. The Wylie Group’s intention at this point was to convert the lucerne to olives at a future date if circumstances permitted. Now produced and shown to me and marked with the letters ‘GWW 9’ is a true copy of the application for variation."

8. The appellant exercised its option to purchase the land on 25 March 1999.

9. On 30 March 1999, third party appeals in relation to the approval of the use of the land and its division by community title were filed in this Court.

10. On 30 April 1995, settlement on the contract for the purchase of the land by the appellant took place.

11. In June 1999, the appellant obtained permits from the Department of Environment Heritage and Aboriginal Affairs for well construction in respect of a 54 hectare and 74 hectare pivot to irrigate lucerne seeds on the land.

12. By letter dated 25 June 1999, the two new pivots were approved, bringing the total area of lucerne seed which could be irrigated to 208 hectares.

13. In his affidavit, Mr Wylie said:-

"28. In July and August 1999, the Wylie Group commenced preparation for the 3 centre pivot irrigators, the pre-existing 80 hectare pivot and the subsequently approved 54 and 74 hectare pivots.

29. In or about this time, the Wylie Group became concerned that the prescription process in relation to the Tintinara Coonalpyn Prescribed Wells Area was being further delayed and could take years to complete. This delay in prescription, the possibility of not receiving a full water allocation for hydrogeological reasons, as well as potentially lengthy and costly legal action in relation to the development of the 19 block olive project, caused the Wylie Group to change the structure from a 19 block olive development to a single olive block development of up to 634 hectares of olives and no less than 86 hectares of lucerne seed. The Wylie Group’s intention to irrigate and its requirement for 3,851 ml of water was not affected by this change. It was the Wylie Group’s understanding at the time that one hectare of olives required the same amount of irrigation as one hectare of lucerne. The Wylie Group’s intention was to change the structure of the investment project by establishing a single entity which would own the olive development and investors would purchase shares or units in the company.

30. On 25 August 1999, I, on behalf of the Wylie Group, submitted a further development application to the Tatiara District Council to vary the land use of the subject property. The Wylie Group applied to vary the development application to a single block development, incorporating up to 634 hectares of olives, a buffer zone of 500 metres wide adjacent to the Ngarkat Conservation Park and 86 hectares of lucerne seed. Now produced and shown to me and marked with the letters ‘GWW 16’ is a true copy of the application for variation."

14. The application was not, in fact, an application for variation but was a new development application which was approved on 15 September 1999. No third party appeals were instituted. By consent, the approvals in relation to the community title proposal were cancelled by this Court.

15. In October 1999, Mr Wylie placed an order with Briarwood Nursery for the propagation of 1,500 olive trees. These were later planted at another property owned by the appellant, in September 2003, when it was clear that the olive project for the land would not proceed.

16. In October and November 1999, fencing was constructed within the land at a cost of $4,240. Mr Wylie said in evidence that the fence was to create a buffer between the proposed olive grove and adjacent land.

17. On 5 January 2000, the appellant purchased 1,000 olive trees from Mr Koutris, for $5,000. These were onsold to Weerona Park Pastoral Company for $8,500 on 31 August 2000.

18. In 2000, Mr Wylie, on behalf of the appellant, engaged KD & HM Gericke Pty Ltd "to construct a central roadway on the subject property to enable access to the lucerne crops and the proposed olive crops". The invoice, dated 15 March 2000, records the price as $16,140. Mr Wylie gave evidence that the road was constructed in February 2000.

14 The lucerne was planted and irrigated.

The Application of s.36

15 Before seeking to apply s.36 of the Act, it is useful to identify its role in the administrative scheme created by the Act. The provisions of s.36 provide for entitlements to water as a means of easing the transition from the operation of common law rights to water (altered in some respects by legislation) to the strict regulation which arises from the prescription of the water resource under the Act. The effect of prescription is ameliorated in respect of a category of existing users and potential users who fulfil specified criteria.
16 An appeal against the Minister’s decision under s.36 is an appeal de novo, not a strict appeal. The Court stands in the Minister’s shoes, and considers the matter afresh. In doing so, the Court generally, and certainly in this matter, has a great deal more information than the Minister had when the decision applied for was made. In this matter, the Minister’s powers were exercised by his delegate, Mr Schmidt.
17 There was considerable argument at the hearing of this matter concerning the point in time from which the decision should be made. The respondent’s counsel, Ms Daniell, went so far as to argue that because the plans to establish an olive grove on the land had, by the time of the hearing, been abandoned by the appellant, the appeal should fail. I reject that approach. The decision in relation to an application under s.36(2)(b) is a decision concerning an entitlement which crystallised on the day that the water resource was declared to be a prescribed watercourse, which, in this matter, was 2 November 2000. The events qualifying an applicant for that entitlement must have occurred prior to the commencement of the "prescribed period", which in this matter was 11 May 2000. The quantity of water to which the appellant is entitled is to be determined as at the day of prescription. The proper approach is to ask what future requirements could reasonably have been anticipated on that day, relating to the development, project or other undertaking upon which the applicant relies.

Development Project or Other Undertaking

18 The respondent did not seriously dispute the fact of the existence of a "project" within the meaning of that term pursuant to s.36(2). The argument related to the identification of the characteristics of the project, and what could be attributed to that project by way of legal commitment, or the commitment of significant financial resources.
19 The appellant argued that there existed a single project for the establishment of an olive grove on the land which began in late 1998. Some of the characteristics of that project - such as the arrangements for its financing, its precise size and on-site arrangements - changed from time to time as the project evolved, but, it was argued, it remained fundamentally the same project. It was the appellant’s case that, as a consequence, all costs incurred during the evolution of that project could be counted as part of the financial resources committed to the project.
20 The respondent’s approach was to confine the project to those elements of it with which the appellant was intending to proceed by 11 May 2000. Any costs attributable to those elements of the project which were not being pursued by 11 May 2000, such as community titling, should not, the respondent argued, be counted as part of the financial commitment to the project.
21 Section 36(2) addresses itself to the future requirements of a project to which legal commitment or significant financial commitment can be demonstrated. The proper approach, in identifying the characteristics of the proposal, is to look at what the project was on the day of prescription – in this case, 2 November 2000. Costs incurred in taking the steps on the path to the formation of that project will be part of the financial commitment for the purposes of s.36. Costs incurred in formulating aspects of the project which are abandoned before the relevant day will not.
22 The real difference between the appellant and the respondent in this matter relates to the expenditure on those aspects of the project concerning the proposal that it be divided into community titles to be sold to individual investors. Mr Wylie’s evidence was that this aspect of the project was abandoned in August 1999, and a decision was made at that time to manage the land as a single landholding, with alternatives for the financing of the project being explored. I find that the division of the land by community title was not part of the project on the relevant day, and that, therefore, expenses relating to that undertaking do not count as financial commitment to the project for the purposes of s.36(2).
23 The project, then, to which legal commitment or significant financial commitment must be attributable in order for the appellant to succeed, is the project for which development approval was granted by the Tatiara District Council on 15 September 1999. It proposed a 635 hectare olive orchard, with a 500 metre wide olive free buffer strip on the northern boundary of the land and an access road running, very roughly, down the centre of the land from the road on the southern boundary to the buffer strip.

Legal Commitment

24 It was argued on behalf of the appellant that, by 11 May 2000, there existed a legal commitment to proceed with the development approval granted on 15 September 1999. There is no general obligation in law to use a development approval, but, if a development is lawfully commenced by substantial work on the site of the development, it must be substantially completed within 3 years of the operative date of the development approval, or else the development approval will lapse (see reg.48 Development Regulations 1993). If the development approval lapses, the result is a partially built development which is not authorised.
25 The appellant argued that the construction of the private road on the land, in February 2000, constituted substantial work on the site and was thus the commencement of the approved development. The construction of the road comes within the definition of "development" in s.4 of the Development Act 1993. It required approval. The development approval dated 15 September 1999 is the only development approval authorising it. Ms Daniell argued, in effect, that a development authorisation can never give rise to a legal commitment in the relevant sense, but that a relevant authority would have to commence enforcement action in relation to the partially constructed development before there could be any question of legal commitment. I disagree. I find that a legal commitment in the sense intended by s.36(2) arose upon the substantial commencement, by means of the construction of the road, of the development the subject of the development authorisation dated 15 September 1999.
26 The development authorised by the development approval has not been completed. The land has been sold by the appellants. The development approval may well have lapsed on 14 September 2002, in accordance with reg.48 of the Development Regulations 1993. There was no evidence of the intention of the purchaser of the land with respect to its future use. However, these are all circumstances arising after the relevant day, which, for the purpose of assessing legal commitment, was 11 May 2000. On that day, a legal commitment existed. Subsequent events do not alter that, though they may alter the fact of the commitment at subsequent times.

Substantial Financial Commitment

27 The appellant relied on the following expenditure, which, it submitted, cumulatively represented a substantial financial commitment. The appellant’s claim, and the respondent’s attitude to it, are conveniently set out in this table, which is taken from the further amended agreed statement of facts.

WYLIE GROUP PTY LTD v MINISTER FOR ENVIRONMENT AND CONSERVATION

AGREED SCHEDULE

Item	Agreed as financial commitment to lucerne	Agreed as financial commitment to olives	Disputed Commitment
Freehold Fee Development Application costs Irrigation plan (PIRSA consultant) Legal fees in defending development approval Purchase price of land Application for bore permits x 3 Drill bore for 74ha pivot I Gemmell consultancy fees Drill bore for 54 ha pivot Prepare ground for pivots, purchase of seed/fertiliser Application to vary development approval Irrigation pivots Olive trees Internal fencing Ariad water meters 1000 olive trees Service road constructed by D Gericke Relocation of 80ha pivot Tatiara Council rates Insurance Labour Interest Vehicle and Tractor expenses	97.50 12620.00 13370.00 19645.60 333806.00 2120.00 3190.00 12570.00 26426.75 28607.11 27385.99	84.00	1500.00 4588.00 950.00 16966.00 605185.59 75000.00 3150.00 2120.00 5000.00 16140.00 1795.51 873.00 41882.75 52603.13 6846.50
TOTAL	479838.95	84.00	834600.48

28 Many of the figures are disputed because of the different approach by the parties to identifying the characteristics of the project. It follows from my finding on that matter, above, that those costs attributable purely to the proposal to divide the land by community title will not be counted as part of the financial commitment to the project.
29 It was argued on behalf of the respondent that, in order to be characterised as part of a financial commitment, an expense had to be a sunk cost – in other words, the money or resource devoted to the project had to be devoured by it. For example, it was argued that the purchase price of the land purchased for the project could not be counted as part of the financial commitment because, in the event of the failure of the project, it could be sold or devoted to another use. No accounting or economic evidence was called to support this approach. I reject it. It seems to me that when, as here, land is purchased specifically for a project, within the time frame for the realistic commercial undertaking of the project, then that land has been "committed" to that project in the relevant sense. The appellant used the land for the growing of lucerne whilst the olive orchard aspect of the project was waiting for an allocation of water. I do not think that this derogates from the fact that the land was purchased for the olive orchard project. I find that the use of water originally granted in respect of the first stage of the olive orchard for the irrigation of lucerne was a holding measure designed to further the project in commercial terms, and did not represent an abandonment of any part of the olive orchard project (which included some lucerne, in any event).
30 In order to assess whether the financial commitment to the project was significant, it is necessary to arrive at a figure for that commitment. I take the table reproduced above as a starting point. I exclude the amount of $4588 for development application costs relating to the community title applications. I exclude the amount of $16,966 for legal fees for the defence of those development approvals. Mr Gemmel’s $75,000 fee is itemised in exhibit "IBG 21" to his affidavit, though unfortunately dollar amounts are not attributed to each item. Taking a very broad axe approach, based upon his evidence, I exclude the amount of $50,000 from Mr Gemmel’s fee on the basis that it is attributable to the community titling proposal, leaving $25,000. The other amounts in the "disputed commitment" column will be counted. I have reservations about the labour and vehicle and tractor expenses, but, as these were not seriously challenged, I have no factual basis upon which to reassess them. The resultant total amount of the financial commitment to the project is $736,963.34.
31 The Minister’s delegate, Mr Schmidt, in making the decision appealed from, compared the financial contribution made by the appellant to the project (though he does not seem to have quantified this precisely) with the total cost to the appellant of the project had it proceeded to full establishment. It was agreed that the total cost would have been $6,139,500. It was argued on behalf of the appellant at the hearing that, even if the whole of the disputed costs were counted as financial commitment to the project, it was not "significant" within the meaning of s.36(2) because it was not a sufficiently large percentage of the total project cost. Again, the advice of an economist on this topic would have been useful, both to Mr Schmidt and to the Court. It seems to me that this argument is over simplistic. The proportion of total project cost which the financial commitment represents is only one of the relevant indicators as to whether it can be characterised as significant. Others include the time frame over which the costs are committed, the circumstances in which that commitment is made, the size of the applicant in financial terms and the value of the water applied for. The question is to be answered having regard to the commercial context of the project.
32 In considering the matter, Mr Schmidt took into account a project involving the establishment of an olive orchard being undertaken by another landowner in the district. That landowner was well advanced with the financing side of its proposal, including the obtaining of a tax ruling and the issuing of a prospectus. Mr Schmidt believed that the fact that the appellant had not spent the considerable funds to advance its project to a comparable extent should weigh against it. Mr Schmidt placed too much weight on the comparison between the amount spent by the appellant on its project and the amount spent by the proponent of the other project. He used the comparable project as a kind of benchmark, when there was no warrant to do so. There was no particular reason to expect the appellant to issue a prospectus and obtain a tax ruling prior to 11 May 2000 and, given the existence of a Notice of Restriction at that time, there were good reasons why the appellant might not choose to do those things. It does not demonstrate a lack of commitment to the project. Conceivably, a method of financing the project might have been chosen which would require neither of those things.
33 Mr Schmidt expressed a further reservation about the appellant’s commitment to the project arising from his impression that very little had been done physically to further the project on the land. The extent of the works done upon the land is a relevant fact. In all of the circumstances, the appellant did all that it could reasonably do on the land given the level of uncertainty in relation to the availability of water.
34 Having regard to all of these factors, I find that the financial commitment of $736,963.34 to the project prior to 11 May 2000 was a significant financial commitment within the meaning of s.36(2) of the Act.

Matters Subsequent to 2 November 2000

35 Mr Wylie said, in his statement:-

"As the land was purchased specifically for an olive investment and did not fit in with the Wylie Group’s own farming business strategy, the Directors decided to place the land on the market. On 5 May 2003, the Wylie Group sold the land for $1.32 million, with $880,150 relating to the purchase of building, plant and equipment."

36 There was a suggestion, on behalf of the respondent, that the fact that a profit was ultimately made on the sale of the land somehow detracted from the extent to which that land could be said to be committed to the project. I reject this argument. The fate of the land after 2 November 2000 is not relevant to the determination of the application.
37 Both parties led evidence concerning the availability of water for allocation to the appellant. This is not a matter which is relevant to a decision in relation to an application under s.36(2). Rather than factor into such a decision the provisions of the Water Allocation Plan, the Act, in s.36(3), has provided the Minister with the ability to reduce allocations in the event that allocations to existing users exceed the capacity of the resource.

Conclusion

38 The appellant has demonstrated that it had, by 11 May 2000, made both a legal commitment and a significant financial commitment to a project to establish an olive orchard and some lucerne on the land. That project was still on foot, in the same form, on 2 November 2000, when the water resource was prescribed. It is apparent from the evidence that the quantity of water sought for the purpose of the irrigation of the olive orchard by the application of 10 April 2001 was within the guidelines for the irrigation of olives issued by the Primary Industries and Resources SA. The quantity sought was a reasonable estimate of what would be required to meet the future needs of the project. It should have been approved and endorsed upon the appellant’s licence.

_____________________________________________________________

39 Following delivery of a Memorandum in terms of the above, the parties negotiated a form of order which was acceptable to both, given the determination.
40 Accordingly it is ordered:

1. The appeal is allowed;

2. The Minister’s decision that the appellant is not entitled to a water allocation pursuant to s.36(2)(b) of the Water Resources Act 1997 is reversed;

3. The Minister shall, within 21 days of the date of this order, endorse Licence No 25086, being the water licence of Matthew Tolmachoff and Michael Tolmachoff, with an additional water allocation, such additional water allocation to comprise:

(a) a base allocation of 2,055ML;

(b) an additional allocation (comprising a delivery component) of 1,105ML to 30 June 2008;

(c) from 1 July 2008 such additional allocation (delivery component) calculated in accordance with the delivery component calculation figures in the relevant Water Allocation Plan as the Minister considers will meet the licence holder’s future requirements and if the Minister considers that an additional allocation (delivery component) is necessary to meet the licence holder’s future requirements but there are no such figures in the relevant Water Allocation Plan, then the additional allocation (delivery component) shall be 1,105 ML.

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3	It seems, from the documents tendered, that a further Notice of Restriction came into effect on 13 January 2000 and continued until 13 January 2002.
4	The further amended statement of agreed facts says:-

8	The "establishment period" for the Tintinara Coonalpyn Management Area was from 30 June 1995 to 11 May 2000. It was not disputed that the appellant had taken water in this period and was thus an "existing user" for the purposes of s.36 of the Act.
9	The "prescribed period" was from 11 May 2000 to 31 October 2002. It commenced on the day of the first publication of the notice inviting submissions on the proposed prescription of the resource.
10	The appellant applied for a licence on or about 10 April 2001, which was within six months of the Gazettal of the regulation prescribing the resource. The application sought 1106ML for the irrigation of 208 hectares of lucerne seed and 2744ML for the irrigation of 500 hectares of olives on the land.
11	Ultimately, after much correspondence, the appellant was granted a licence to take 1599ML for pivot irrigation, a portion of which (3432KL) will expire on 30 June 2006. From Mr Wylie’s affidavit, it is evident that the process which led to this outcome included the amendment of the appellant’s application so that the quantity applied for was reduced to that granted. However, by letter dated 21 March 2003 from Mr Schmidt, of the relevant State Government department, to Mr Wylie, it is clear that a decision had been made in relation to the allocation of water claimed on the basis of s.36(2)(b). The amendment of the application was a response to that decision. It is that decision which has been appealed from under s.36(6), rather than the determination of the licence application.
12	The facts of the matter were not substantially in dispute. The dispute is whether, on the basis of those facts, the appellant:
•	was legally committed to a development, project, or other undertaking before the commencement of the prescribed period (ie 11 May 2000)

15	Before seeking to apply s.36 of the Act, it is useful to identify its role in the administrative scheme created by the Act. The provisions of s.36 provide for entitlements to water as a means of easing the transition from the operation of common law rights to water (altered in some respects by legislation) to the strict regulation which arises from the prescription of the water resource under the Act. The effect of prescription is ameliorated in respect of a category of existing users and potential users who fulfil specified criteria.
16	An appeal against the Minister’s decision under s.36 is an appeal de novo, not a strict appeal. The Court stands in the Minister’s shoes, and considers the matter afresh. In doing so, the Court generally, and certainly in this matter, has a great deal more information than the Minister had when the decision applied for was made. In this matter, the Minister’s powers were exercised by his delegate, Mr Schmidt.
17	There was considerable argument at the hearing of this matter concerning the point in time from which the decision should be made. The respondent’s counsel, Ms Daniell, went so far as to argue that because the plans to establish an olive grove on the land had, by the time of the hearing, been abandoned by the appellant, the appeal should fail. I reject that approach. The decision in relation to an application under s.36(2)(b) is a decision concerning an entitlement which crystallised on the day that the water resource was declared to be a prescribed watercourse, which, in this matter, was 2 November 2000. The events qualifying an applicant for that entitlement must have occurred prior to the commencement of the "prescribed period", which in this matter was 11 May 2000. The quantity of water to which the appellant is entitled is to be determined as at the day of prescription. The proper approach is to ask what future requirements could reasonably have been anticipated on that day, relating to the development, project or other undertaking upon which the applicant relies.

18	The respondent did not seriously dispute the fact of the existence of a "project" within the meaning of that term pursuant to s.36(2). The argument related to the identification of the characteristics of the project, and what could be attributed to that project by way of legal commitment, or the commitment of significant financial resources.
19	The appellant argued that there existed a single project for the establishment of an olive grove on the land which began in late 1998. Some of the characteristics of that project - such as the arrangements for its financing, its precise size and on-site arrangements - changed from time to time as the project evolved, but, it was argued, it remained fundamentally the same project. It was the appellant’s case that, as a consequence, all costs incurred during the evolution of that project could be counted as part of the financial resources committed to the project.
20	The respondent’s approach was to confine the project to those elements of it with which the appellant was intending to proceed by 11 May 2000. Any costs attributable to those elements of the project which were not being pursued by 11 May 2000, such as community titling, should not, the respondent argued, be counted as part of the financial commitment to the project.
21	Section 36(2) addresses itself to the future requirements of a project to which legal commitment or significant financial commitment can be demonstrated. The proper approach, in identifying the characteristics of the proposal, is to look at what the project was on the day of prescription – in this case, 2 November 2000. Costs incurred in taking the steps on the path to the formation of that project will be part of the financial commitment for the purposes of s.36. Costs incurred in formulating aspects of the project which are abandoned before the relevant day will not.
22	The real difference between the appellant and the respondent in this matter relates to the expenditure on those aspects of the project concerning the proposal that it be divided into community titles to be sold to individual investors. Mr Wylie’s evidence was that this aspect of the project was abandoned in August 1999, and a decision was made at that time to manage the land as a single landholding, with alternatives for the financing of the project being explored. I find that the division of the land by community title was not part of the project on the relevant day, and that, therefore, expenses relating to that undertaking do not count as financial commitment to the project for the purposes of s.36(2).
23	The project, then, to which legal commitment or significant financial commitment must be attributable in order for the appellant to succeed, is the project for which development approval was granted by the Tatiara District Council on 15 September 1999. It proposed a 635 hectare olive orchard, with a 500 metre wide olive free buffer strip on the northern boundary of the land and an access road running, very roughly, down the centre of the land from the road on the southern boundary to the buffer strip.

24	It was argued on behalf of the appellant that, by 11 May 2000, there existed a legal commitment to proceed with the development approval granted on 15 September 1999. There is no general obligation in law to use a development approval, but, if a development is lawfully commenced by substantial work on the site of the development, it must be substantially completed within 3 years of the operative date of the development approval, or else the development approval will lapse (see reg.48 Development Regulations 1993). If the development approval lapses, the result is a partially built development which is not authorised.
25	The appellant argued that the construction of the private road on the land, in February 2000, constituted substantial work on the site and was thus the commencement of the approved development. The construction of the road comes within the definition of "development" in s.4 of the Development Act 1993. It required approval. The development approval dated 15 September 1999 is the only development approval authorising it. Ms Daniell argued, in effect, that a development authorisation can never give rise to a legal commitment in the relevant sense, but that a relevant authority would have to commence enforcement action in relation to the partially constructed development before there could be any question of legal commitment. I disagree. I find that a legal commitment in the sense intended by s.36(2) arose upon the substantial commencement, by means of the construction of the road, of the development the subject of the development authorisation dated 15 September 1999.
26	The development authorised by the development approval has not been completed. The land has been sold by the appellants. The development approval may well have lapsed on 14 September 2002, in accordance with reg.48 of the Development Regulations 1993. There was no evidence of the intention of the purchaser of the land with respect to its future use. However, these are all circumstances arising after the relevant day, which, for the purpose of assessing legal commitment, was 11 May 2000. On that day, a legal commitment existed. Subsequent events do not alter that, though they may alter the fact of the commitment at subsequent times.

28	Many of the figures are disputed because of the different approach by the parties to identifying the characteristics of the project. It follows from my finding on that matter, above, that those costs attributable purely to the proposal to divide the land by community title will not be counted as part of the financial commitment to the project.
29	It was argued on behalf of the respondent that, in order to be characterised as part of a financial commitment, an expense had to be a sunk cost – in other words, the money or resource devoted to the project had to be devoured by it. For example, it was argued that the purchase price of the land purchased for the project could not be counted as part of the financial commitment because, in the event of the failure of the project, it could be sold or devoted to another use. No accounting or economic evidence was called to support this approach. I reject it. It seems to me that when, as here, land is purchased specifically for a project, within the time frame for the realistic commercial undertaking of the project, then that land has been "committed" to that project in the relevant sense. The appellant used the land for the growing of lucerne whilst the olive orchard aspect of the project was waiting for an allocation of water. I do not think that this derogates from the fact that the land was purchased for the olive orchard project. I find that the use of water originally granted in respect of the first stage of the olive orchard for the irrigation of lucerne was a holding measure designed to further the project in commercial terms, and did not represent an abandonment of any part of the olive orchard project (which included some lucerne, in any event).
30	In order to assess whether the financial commitment to the project was significant, it is necessary to arrive at a figure for that commitment. I take the table reproduced above as a starting point. I exclude the amount of $4588 for development application costs relating to the community title applications. I exclude the amount of $16,966 for legal fees for the defence of those development approvals. Mr Gemmel’s $75,000 fee is itemised in exhibit "IBG 21" to his affidavit, though unfortunately dollar amounts are not attributed to each item. Taking a very broad axe approach, based upon his evidence, I exclude the amount of $50,000 from Mr Gemmel’s fee on the basis that it is attributable to the community titling proposal, leaving $25,000. The other amounts in the "disputed commitment" column will be counted. I have reservations about the labour and vehicle and tractor expenses, but, as these were not seriously challenged, I have no factual basis upon which to reassess them. The resultant total amount of the financial commitment to the project is $736,963.34.
31	The Minister’s delegate, Mr Schmidt, in making the decision appealed from, compared the financial contribution made by the appellant to the project (though he does not seem to have quantified this precisely) with the total cost to the appellant of the project had it proceeded to full establishment. It was agreed that the total cost would have been $6,139,500. It was argued on behalf of the appellant at the hearing that, even if the whole of the disputed costs were counted as financial commitment to the project, it was not "significant" within the meaning of s.36(2) because it was not a sufficiently large percentage of the total project cost. Again, the advice of an economist on this topic would have been useful, both to Mr Schmidt and to the Court. It seems to me that this argument is over simplistic. The proportion of total project cost which the financial commitment represents is only one of the relevant indicators as to whether it can be characterised as significant. Others include the time frame over which the costs are committed, the circumstances in which that commitment is made, the size of the applicant in financial terms and the value of the water applied for. The question is to be answered having regard to the commercial context of the project.
32	In considering the matter, Mr Schmidt took into account a project involving the establishment of an olive orchard being undertaken by another landowner in the district. That landowner was well advanced with the financing side of its proposal, including the obtaining of a tax ruling and the issuing of a prospectus. Mr Schmidt believed that the fact that the appellant had not spent the considerable funds to advance its project to a comparable extent should weigh against it. Mr Schmidt placed too much weight on the comparison between the amount spent by the appellant on its project and the amount spent by the proponent of the other project. He used the comparable project as a kind of benchmark, when there was no warrant to do so. There was no particular reason to expect the appellant to issue a prospectus and obtain a tax ruling prior to 11 May 2000 and, given the existence of a Notice of Restriction at that time, there were good reasons why the appellant might not choose to do those things. It does not demonstrate a lack of commitment to the project. Conceivably, a method of financing the project might have been chosen which would require neither of those things.
33	Mr Schmidt expressed a further reservation about the appellant’s commitment to the project arising from his impression that very little had been done physically to further the project on the land. The extent of the works done upon the land is a relevant fact. In all of the circumstances, the appellant did all that it could reasonably do on the land given the level of uncertainty in relation to the availability of water.
34	Having regard to all of these factors, I find that the financial commitment of $736,963.34 to the project prior to 11 May 2000 was a significant financial commitment within the meaning of s.36(2) of the Act.

39	Following delivery of a Memorandum in terms of the above, the parties negotiated a form of order which was acceptable to both, given the determination.
40	Accordingly it is ordered: