Achieving sustainability in the use of water resources is a significant issue facing legislators. Federal and State Governments in Australia have enacted comprehensive water legislation in an endeavour to ensure that limited water resources are being used sustainably. Legislation may seek to regulate water use and improve functionality of water markets; however, there are inherent jurisdictional difficulties associated with water resources legislation arising from a limited resource being shared by States and the Commonwealth.
The Water Management Act 2000 (NSW) (the Act) provides for the re-allocation within NSW of water resources between users through the means of water allocation plans. Disaffected water users may challenge water allocation plans in the courts.
In Arnold v Minister Administering the Water Management Act 2000  NSWCA 338, the applicants were farmers who held groundwater extraction entitlements in the Lower Murray region under the Water Act 1912 (NSW). Those entitlements were significantly reduced by the operation of the Act and the Water Sharing Plan for the Lower Murray Groundwater Source 2006 (the Plan), in the context of a national water sustainability arrangement involving the Natural Resources Management (Financial Assistance) Act 1994 (Cth) and the National Water Commission Act 1992 (Cth) (the Commonwealth legislation), and CoAG agreements, including a funding agreement.
The funding agreement provided for a program administered by the Commonwealth under which the Commonwealth was able to provide funding to NSW to assist in achieving the sustainability focussed objective of the program. Relevantly, as part of the program, NSW committed to reducing the level of licence holders' water entitlements to the groundwater systems in the Lower Murray region.
The applicants challenged the constitutional validity of the Plan and the Commonwealth legislation in the Land and Environment Court of NSW (the L&E Court) based upon an alleged infringement of both, or either of, the compulsory acquisition on just terms provision (s 51(xxxi)) and the reasonable use of waters of rivers for irrigation provision (s 100) of the Constitution. The principal relief sought by the applicants was a declaration that the Plan was invalid because it arose from Commonwealth legislation which they submitted was invalid insofar as it applied to water.
Lloyd J in the L&E Court dismissed the proceedings on the grounds that the L&E Court had no jurisdiction to grant the relief sought, the applicants did not have standing to seek the relief sought, and the proceedings disclosed no reasonable cause of action.
The applicants applied for and were granted leave to appeal the judgment to the NSW Court of Appeal. The Court of Appeal focussed on the issue of whether the L&E Court had jurisdiction in the proceedings to determine the validity of Commonwealth legislation by reason of infringement of s 51(xxxi) of the Constitution, and if so, whether the invalidity of Commonwealth legislation invalidated the Plan.
The Jurisdictional Issue
The Judiciary Act 1903 (Cth) and the Land and Environment Court Act 1972 (NSW) confer limited federal jurisdiction on the L&E Court in respect of matters which are classified within the subject matter of the court, or matters ancillary to a matter that falls within its jurisdiction. The question before the L&E Court was whether the question of validity of the Commonwealth legislation was ancillary to the validity of the Plan.
The Court of Appeal found that because the allegation of constitutional invalidity of Commonwealth conduct is a matter which, on the applicants' case, needs to be determined for the purposes of resolving the challenge to the validity of the Plan, then the matter falls within the jurisdiction of the L&E Court.
The Acquisition Of Property Issue
The basis for the applicants' argument against the validity of the Plan was that the Minister's legal authority under the Act was exceeded in endorsing the Plan because the Minister had taken into consideration an invalid Commonwealth law and/or an invalid funding agreement.
The Court of Appeal followed the procedure used by the High Court in Pye v Renshaw (1951) 84 CLR 58 in proceeding on the assumption that there is no valid Commonwealth law or extant funding agreement and found that nothing in the Act or the Plan suggests that the Act, or administrative decisions pursuant to the Act, depended on the existence of a valid Commonwealth law or funding agreement. The contention that the Minister's decision was made without legal authority was dismissed. In this case the validity of the Commonwealth legislation, or the existence of the funding agreement, was not relevant to the endorsement of the Plan.
Inevitably, as water use rights are terminated or returned to the environment, disaffected water users will seek grounds to challenge the administrative decisions which reduce their entitlements. This case highlights the complexity of interpreting several pieces of legislation aimed, directly or indirectly, at controlling the management of water resources.
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