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Caution urged on Water Bill

Solicitor and water specialist EDWIN KENNON wrote this OPINION piece for the Water Talk feature in Country News. The is the unabridged version.

EDWIN KENNON August 5, 2014 3:30am

The Minister for Water, the Honourable Peter Walsh, has read the Water Bill 2014 for the second time in the Legislative Assembly. Now the Bill is about to be debated in that House.

I do not believe that the Bill should be passed in its present form. There are too many changes which take away the rights of individuals and there is a major problem with the fact that water cases have to be heard by the Victorian Civil and Administrative Tribunal (VCAT). This could be solved by providing that flooding cases could be brought at the choice of the litigant to a court or to VCAT, as applied in the 1958 Water Act.

Since 1916 in Victoria, the common law has been abolished with respect of flooding of private land from works of the Water Authority. Where this happens, the Authority will be liable unless it can prove three things, that its conduct was not intentional or negligent or would not have happened in any event.

At common law, the word “negligent” in relation to the conduct of a public statutory Authority in exercising its powers, has a special meaning. It means failure to take reasonable care and skill in the performance of its statutory powers, bearing in mind possible damage to landowners. The authority must exercise its powers to avoid causing unnecessary harm. In other words the damage was not inevitable if there was any practical way in which the power could be exercised without causing the damage. The Water Acts going back to 1916 carried the implication that this damage was foreseeable.

In 1952 Justice Sholl, a Judge of the Supreme Court of Victoria decided (by arbitration) the case of Armstrong v State Rivers and Water Supply Commission. He held the Authority liable for not making the Deakin main drain big enough to prevent the flooding which it caused to Dorothy Armstrong’s land at the Bay of Biscay near Echuca. He held that the Authority was bound to design its drains and siphons to cope with the biggest rainfall event that had ever been recorded in the catchment. He followed the decision of the High Court in Stewart v Commissioner of Railways WA 1936 CRR 520 where culverts under a railway embankment were not big enough and caused a flood, after a rainfall event at York which was unprecedented. These two cases have been followed subsequently by the Supreme Court of Victoria in the leading decision of Crea 1980 and Transpacific in 2010. However, in 1956 the Water Act in Victoria was changed after Armstrong’s case to introduce defences for the Authority. These defences were taken from a case in England in 1930, Manchester Corporation v Farnworth. The common law continually evolves, because it is based on principle. A statute stays the same. It is like a photograph in time. There are no principles in a statute. The law has to be discovered from the plain meaning of the words. In 1916 in Victoria, the amendment to the Water Act did not define “intention” or “negligence”.

In Victoria in 1955-6, the Parliament set up a statute law revision committee to investigate the liability of water authorities for flooding. This followed the decision in Armstrong’s case, after which the State Rivers and Water Supply Commission believed that it would never win another case. It was also wanting to introduce an apportionment provision, since what it especially objected to was the decision of Justice Sholl to award the whole of the damages against State Rivers and Water Supply Commission.

The Committee took evidence from solicitors practising in irrigation districts and other prominent citizens and farmers. Three experienced solicitors in Northern Victoria, Tom Tehan, Charles Newman and Percy Feltham gave evidence. All three were unanimous in saying that the jurisdiction should stay with the courts and not be moved to arbitration or to an administrative decision maker.

Professors Cowen and Derham also gave evidence on Water Law before the Parliamentary Committee, including statutory interpretation of the Water Act and the common law of nuisance.

As a result of the Parliamentary review by the committee, the Water Act amendment in 1956 introduced words taken from the common law of nuisance applicable to public statutory authorities by providing that, “in determining whether a flow of water occurred as a result of negligent conduct on the part of the Authority, account must be taken of all the circumstances including failure to provide reasonable standards of capacity or efficiency or exercise reasonable care or skill having regard to the state of scientific knowledge and knowledge of local conditions at any relevant time, the nature and situation of the works, the service to be provided by the works, the circumstances and costs of the works and the maintenance and operation of the works and works which would have been necessary to construct to avoid the occurrence of the damage”. This is not a definition of “negligent conduct” but sets out some circumstances which are a guide to what it means.

There was one important omission in the amendment referred to above. The words did not say failure to “exercise reasonable care or skill having regard to the rights of landowners”, which was what the common law principle was. I contend that these words were implied because the relevant flow of water from the works of the Authority is “onto land”.

In 1962, the High Court changed the law in Victoria in relation to drainage between private individuals in the case of Gartner v Kidman. Victoria had, since 1902 adopted the civil law rule that water must be able to find its own level. Landowners could not put banks on their land to stop the ordinary flow of water from their neighbours land coming onto their land. From 1963 onwards farmers started putting up banks around their boundaries, but this had undesirable consequences for local and regional drainage. In 1975, Victoria passed the Drainage of Land Act which stated that a landowner could not unreasonably interfere with a flow of water onto his land i.e. unless the flow itself was not reasonable.

In 1989 the new Water Act in Victoria incorporated the provisions of the Drainage of Land Act. Henceforth, the free flow principle applied between individuals and between Councils and individuals. The law is contained in section 16 and 20, whereas the law relating to claims against the Authority for flooding is in section 157.

Since the 1989 Water Act came into force, the cases under section 16 and 157 have been heard in VCAT. It was thought that VCAT would be a more efficient and less costly means of hearing water cases than the court, giving the individual easier access to a venue in which to assert his rights. However this has not been the experience of litigants in VCAT. VCAT has not interpreted the relevant sections of the Water Act with legal skill. It is not a court. It has made continuous legal errors. VCAT is not an expert Tribunal. Mediators who are appointed by VCAT from their Members are not familiar with water cases, only building cases. The processes in VCAT are not efficient. Discovery of documents is not as effective as it is in the courts. The hearing of witnesses, especially expert witnesses and their cross examination, is not handled as well as it is in the courts. The costs are just as high as they are in the courts and can be ordered against the losing Applicant.

If the losing applicant wishes to appeal to the Supreme Court, he first must obtain special leave on the ground that VCAT has made an error of law. He cannot appeal on the basis that the Member of the Tribunal deciding the case has preferred the evidence of one witness to another. This makes it difficult for the Applicant, because the Tribunal tends to prefer the evidence of expert witnesses for the Authority. The Applicant does not feel that the Tribunal is truly independent, since VCAT is part of the Executive arm of the Government and the Water Authority is a government instrumentality.

Like any Administrative Tribunal, VCAT in its Property division, which has the jurisdiction for flooding cases, has developed the habit of citing its own decisions. It cites its decisions in a way which gives them a standing they do not have. Moreover, it tends to ignore the wisdom and understanding of the Courts built up over centuries. It lives in its own little world and has its own procedures and past decisions which perpetuate its own errors.

The combination of a Code, together with interpretation of the words by a Tribunal, does not produce a good legal result. As Humpty Dumpty said ’I can make a word mean anything I want it to mean’. In the Leongatha Water Board case, the Deputy President decided that the word ’onto’ in Section 157 meant ’on top of’. He held that seepage from the works of the Authority was not a flow of water onto land. The Supreme Court decided that the word ’onto’ meant ’toward’ and that the Section did not exclude subterranean flows. The Deputy President also held that the damage referred to under Section 157 was caused by the flow rather than by the water. The Supreme Court also reversed this interpretation.

In his evidence to the Statute Law Revision Committee on 6 April 1955, Charles Newman, well known Solicitor of Numurkah, in giving his opinion that water cases should not be decided by an administrative body referred to the words of Keir and Lawson in their book ’Cases on Constitutional Law’, where they write ’any step which tended to deprive the subject of the protection of the Courts against illegal encroachment on his private rights would be against all the principles of English law. But there is at the present time an unfortunate tendency, due partly, one fears, to bureaucratic impatience of any control to oust the jurisdiction of the ordinary courts, entirely in administrative matters’. The case I am about to refer to, Boroondara v Yarra Valley Water, is a case where the Tribunal deprived the subject of private rights. It is disappointing to see the standard of legal decisions reduced in this area of the law, as it has been by VCAT. Flooding and drainage cases are difficult. The subject should have the right to take them directly to a court. I think of the famous case of Sedleigh-Denfield v O’Callagan which was a drainage case (about adoption of a nuisance) decided by the House of Lords on 24 June 1940, about 10 days after the fall of France, at one of the darkest moments of the Second World War. It is a measure of British civilisation that some of the best of the Law Lords, Viscount Maugham, Lord Atkin, Lord Wright, Lord Romer and Lord Porter were thinking about the law of nuisance in relation to a drain at this perilous time for England’s existence. In Victoria, such cases cannot be brought directly to the courts and the Tribunal is unlikely to remember or be guided by the highest standards that have been set in the past. As Hamlet said ’what a falling off was there, my Lord’. He might have said ’My Lords’ if he was thinking about the judgments of Viscount Maugham, Lord Atkin, Lord Wright, Lord Romer and Lord Porter in this celebrated decision in the House of Lords, which is a high point of English civilisation.

Section 726(8) of the 2014 Water Bill states that causes of action under Sections 716, 718, 719, 722 or 723 must only be commenced in VCAT. Section 876 provides that it is the intention of Section 726(8) to alter or vary Section 85 of the Constitution Act. Section 85(1) provides that the Supreme Court shall have jurisdiction in all cases whatsoever and shall be the superior Court of Victoria with unlimited jurisdiction. Subsection (5) provides that a provision which directly repeals or directly amends any part of this section is not to be taken to repeal, alter or vary this section unless the Act refers to this section and states an intention to repeal, alter or vary this section and requires the member of Parliament to make a statement to the Council or Assembly stating the reasons for repealing, altering or varying the section, during the Member’s second reading speech.

It is clear that Parliament needs to be alerted to the fact that Sections 716, 718, 719, 722 and 723 are taking away jurisdiction of the Supreme Court and therefore rights of the subject and that Parliament needs to be satisfied that this is a sound and sensible thing to do. In my view, it is not. The subject should have a choice of taking his case to the Court or to VCAT.sewage

In 2011 VCAT decided a case about leaking sewage from the works of Yarra Valley Water onto a kindergarten run by the City of Boroondara. The escape of sewage was caused by a clay drop pipe which suddenly shattered causing a blockage. The grass and playground of the kindergarten were seeped in putrid sewage. Luckily the children were not there that day. The Tribunal found the water Authority not liable under a section of the Water Industry Act, exactly the same as section 157. The Tribunal applied the test of negligence at common law (for breach of duty) rather than nuisance. It considered the magnitude of the risk and whether it was likely to recur, along with the expense, difficulty and inconvenience of taking alleviating action. It asked “what would a reasonable man do in response to that risk, having regard to the likelihood of its occurrence and recurrence”. It found the Authority not liable, even though the Authority would have been liable at common law in nuisance where the burden of proof is hard for the Authority to discharge because the courts take the view that it is unreasonable to interfere with private rights. It followed a case in the High Court (Wyong Council v Shirt 1979-80) which had nothing to do with unreasonable interference with enjoyment of rights to land. The case was about a water skier who suffered personal injuries when he fell in a shallow part of the lake controlled by the council.

The courts strain against a conclusion that private rights are intended to be sacrificed for the common good, but, if they are, compensation should be paid whether or not the Authority is negligent. In a case of maintenance, the courts will find that there is a duty to maintain a service which the landowner is paying for. In Crea’s case a very able majority of the Supreme Court (Justices Lush and Crockett), held that the Water Authority had a duty to maintain its drains to the standard to which they were designed.

In a recent flooding case at Kerang, the solicitors for GMW took the defence stemming from the Boroondara case that the risk of the flooding that occurred was unlikely and that a reasonable Authority could not have been expected to avoid it. They also said that their actions were intended to be for the majority benefit. This is not the test that should apply to the Water Authority and is not the test which would apply in New South Wales, United Kingdom or Canada. Why should Victoria depart from these other common law jurisdictions by applying a much lesser standard of liability to the Authority than would apply in those places.

Sometimes, water escapes from one channel and its drainage path is then held up by another one, making the damage worse. In this situation, there are two distinct flows, one out of the first channel and one from the banks of the second one. There are two causes of action and an apportionment of the damages between them, which are separate from the apportionment of damages that would have happened in any event. Section 157(4) now provides for this apportionment to be made.

The Water Bill 2014

The Water Bill has moved the liability of Council from liability for unreasonable interference with a flow of water to liability under the same section that applies to Water Authorities. This is strict liability if the interference is unreasonable. A Council will now be liable for a flow of water caused by its infrastructure onto to private land if the flow was intentional or negligent. Unless the Bill is amended VCAT will follow its decision in Boroondara about the escape of sewage onto the land of a kindergarten. The test of liability will be much reduced from what it should be, as it is now with water Authorities.

New sections have been created to replace section 16 (and 20) and section 157. These amendments further erode private rights and tilt the balance of fairness away from the individual towards the Authority. VCAT is now required to consider principles deriving from section 83 of the Wrongs Act so that the functions required to be exercised by the Authority or Council are to be determined “by reference to the broad range of its activities (and not merely by reference to the matter to which the proceeding relates)”. This will give further arguments to the Authority when all that should be investigated is whether the Authority or the Council could have, in any practical way, have avoided the damage to land.

A new section 721 has been added in relation to infrastructure of a public statutory body (including an Authority) which may interfere with a reasonable flow of water. “In determining whether the infrastructure should be continued, removed or modified, regard must be had to circumstances therein set out”. VCAT has power to order relief by injunction, but this provision may be endeavouring to persuade VCAT not to exercise it. This section would appear to contradict the free flow principle which is that the Authority or Council is liable when its infrastructure unreasonably interferes with the free flow of surface water in a way that could be practically avoided. In Stewart’s case the cost of putting adequate culverts under the railway embankment was not great. In a recent case I had at Werribee the cost of putting an adequate culvert in a drain under a road crossing would not have been great. The culvert reduced the flow in the drain by three-quarters and caused a blockage after a heavy rainfall event. The farm which was flooded had enjoyed the benefit of a drain which had the capacity to carry three to four times irrigation runoff.

The Water Bill is not intended to come into force until 2016. I believe the passing of this Bill now would be too rushed. This is an opportunity to examine the water legislation of Victoria which will not occur for a long time to come.

It is important to understand the role of the Minister in relation to Water Authorities. Water Authorities have tremendous power in their districts. They can adversely affect the rights of farmers if they misuse their powers. The Minister has a role in this respect. The Water Authority, for instance, is not allowed to increase the size of its water districts without approval of the Minister. This is because of the power which the Water Authorities have in their districts.

It is important that the power of the Water Authority to charge rates be carefully scrutinised. Under the 1989 Water Act, VCAT has a limited role of reviewing the power of the Water Authorities to charge rates. In Victoria, the power of the Magistrates courts to hear a defence in relation to cases where the Authority has exceeded its power to charge rates has not been sufficiently clarified. Farmers need to be able to challenge their rates in a court if they are wrongly charged.

The environment now stores its water in storages once reserved for private water entitlements. The rights of the environment and the rights of private water holders can come into conflict. There have been cases where the Authority has sought to reduce the rights of private water holders to take water from storages in order to give priority to the environment. These restrictions can reduce the value of water licences to nothing.

I am concerned about the section in the new Water Bill (section 224) which replaces the former section 32A of the Water Act 1989. I acted for the holders of deep lead groundwater licences at Katunga when the Authority brought in a new management plan under section 32A. The Supreme Court declared the proposed management plan invalid and a new one was introduced, in which the farmers were not only represented in equal numbers with the other members of the committee, but had their own hydro-geologist on the committee.

Under section 29 of the Water Act 1989, the Minister must make sure that the consultative committee represents all relevant interests, consists of persons who have knowledge or experience in the matters to be covered in the management plan and at least one-half of the membership must consist of persons who are owners or occupiers of land in the area concerned.

Under the proposed section 224 of the Water Bill, the Minister must make sure that the committee appointed in connection with the resource management order is comprised of members who have knowledge of, or experience in, the matters to be dealt with and that all relevant interests are fairly represented but there is no requirement that at least half of the membership must consist of landowners. It will be a question under section 224(3) whether licensees whose rights may be reduced to nothing could be fairly represented on a committee if they comprise less than half the members of the committee.

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