Arnold v Minister Administering the Water Management Act 2000

Arnold v Minister Administering the Water Management Act 2000 [2010] HCA 3

Summary
Majority: French CJ, Gummow, Hayne, Crennan, Kiefel
and Bell JJ
Dissent: Heydon J
Decision: Appeal dismissed

Commonwealth provided a State with a financial grant which required the State to pass legislation cancelling licenses for access to bore water held by the appellant. Appellants argued that both the Cth legislation and the funding agreement were invalid because they abridged the appellants’ right to “reasonable use of the waters of rivers” under s 100 of the Constitution. The Court found that there was no invalidity because bore water did not meet the definition of “waters of rivers” under the Constitution.

Facts

The appellants held bore licences in the Lower Murray in New South Wales under the Water Act 1912 (NSW) that were superseded with aquifer access licences under the Water Management Act 2000 (NSW). The appellants’ entitlements were less under the new aquifer access licences.

Under the Water Act the appellants’ bore licences were subject to change from the time they were granted. The Water Management Act provided for the Minister to determine water management policies and allowed the Minister to convert previous water licences to new licences under new terms as provided for under the Act.

In 2004 the Commonwealth and the each of the States and Territories (except Western Australia) entered the Intergovernmental Agreement on a National Water Initiative which providing for the creation of a National Water Commission. The agreement included objectives relating to water management in the Murray-Darling Basin. As a result of this and corresponding agreements, the NSW Government accepted Commonwealth funding ($55 million) to reduce the allocations of groundwater licences in the Lower Murray region using the powers of the Water Management Act. The Commonwealth funding was intended to help assist the NSW Government in offsetting the impact to licence holders. Commonwealth funding was administered through the National Water Commission under the National Water Commission Act 2004 (Cth).

The appellants challenged the removal and replacement of their licences on the basis that:

• The replacement of their water licences by the Government of NSW as the result of funding by the Commonwealth, was an acquisition of property not on just terms in breach of s 51(xxxi) of the Constitution.

51 Legislative powers of the Parliament

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
(xxxi) the acquisition of property on just terms from any State or person
for any purpose in respect of which the Parliament has power to make laws;

• The funding by the Commonwealth is a “regulation of trade or commerce” which is in breach of s 100 of the Constitution.

100 Nor abridge right to use water

The Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.

Note: Arnold was heard immediately after ICM Agriculture Pty Ltd v The Commonwealth [2009] HCA 51. ICM revolved around an analogous factual situation to those in by Arnold. In ICM the High Court (6:1) ruled that the cancellation of bore licences and issuing of aquifer access licences with a reduced quota (under the same federal funding scheme), did not constitute an acquisition of property within the meaning of s 51 (xxxi).

Decision

Majority

s 51(xxxi)

The majority summarily dismissed the appellants claims that there had been an acquisition of property that fell within the confines of s 51(xxxi), referring directly and without further comment to the reasoning in ICM: at [3] per French CJ; at [48] per Gummow and Crennan JJ; at [72] per Hayne, Kiefel and Bell JJ.

s 100

The majority granted special leave but dismissed the appeal. The majority chose not to reassess the law in Morgan v Commonwealth [1947] HCA 6, namely that s 99 and s 100 of the Constitution applies only to laws being made under s 51(i). There was no need however for the Court to be pulled into an assessment of Morgan, given that the matter could be decided narrowly under the interpretation of ‘waters of rivers’ as per s 100. The majority determined that the Commonwealth law pertained to underground water only, rather than ‘waters of rivers’ and was therefore not within the scope of s 100: at [29] per French CJ; at [55] per Gummow and Crennan JJ; at [75] per Hayne, Kiefel and Bell JJ.

Dissent

Justice Heydon, as he had in ICM, found that the substitution of bore licences for aquifer access licences was invalid. In ICM Heydon J found that the bore licences were proprietary in nature and attracted the protections of s 51(xxxi); and as such the National Water Commission Act 2004 (Cth) was invalid as it allowed the acquisition of property by NSW on other than just terms. Justice Heydon referred solely to his reasons in ICM in his judgment in favour of the appellants: at [81]. His Honour found no reason to explore the merits of the appeal concerning s 100 because doing so would ‘not result in substantive orders more favourable than [restoring the original bore licences]’: at [83]

Commentary

The Court has shown no interest in expanding upon their 2009 decision in ICM concerning s 51(xxxi). Given the Courts ruling in ICM it seems unlikely that Arnold would have been allowed special leave if the appellants sought to rely solely on s 51(xxxi). As Arnold was intended to be read in conjunction with ICM I will endeavour to post a summary shortly as it contains some interesting law.
It is unclear to me whether the French Court would be inclined to re-examine Morgan given another, better suited opportunity. From my reading the French Court is not eager to do so, but that said, not necessarily opposed to it either.

Arnold contains several important policy and political consequences. To my mind, if the appeal were to have been allowed, it would diminish the ability of the Commonwealth Government to take steps, through the provision of funds to the States and Territories, to attempt to alleviate the pressures on water resources. I make no comment as to the desirability of such a policy. Rather I only acknowledge that water resource management, especially in the Murray-Darling is a contemporary political and environmental issue.