Schieb v Burnheim

Water is essential to rural Australia. Drought and flood are the stuff of national life and legend. These proceedings concern access to water for a property in country New South Wales. The principal claim between the parties was settled, save as to costs. This judgment resolves a cross-claim. The parties agreed that argument about the costs of the principal claim should abide determination of the cross-claim.

The Great Artesian Basin lies far below the properties of the Coonamble Shire. Bores drilled hundreds of metres into the ground release water from that vast aquifer to irrigate crops and provide water for stock. One such bore is formally known as the “New Wingadee No. 4 Bore Scheme”. Locals call it the “Wiona Bore”. In this judgment I shall call it the “Scheme” or the “Bore” interchangeably as the context requires.

Several properties are entitled to draw water from the Bore for free in return for contributing to its capital costs from time to time. The owners of those properties are members of the Scheme under a contract to which each member is a party and which sets out their rights and responsibilities in relation to the Bore (the “Bore Agreement”). New members can be admitted to the Scheme by vote of the members and provided that not more than two members dissent. The cross-defendants, Donald “Don” Schieb and his wife Ainslie Schieb (the “Schiebs”), have together been a member of the Scheme since its establishment in 2001.

At an auction in March 2011, the cross-claimants, Peter Burnheim and his wife Leah Burnheim (the “Burnheims”), jointly purchased a property called “Mikimba” with the Schiebs. While Mikimba had dams to hold surface water and had the Castlereagh River on its western boundary, it did not have established bore water on the property. The parties agreed to subdivide Mikimba so that each couple became the registered proprietor of approximately half of the property, with the Burnheims to acquire the eastern portion and the Schiebs the western portion. After much disputation and the commencement by the Schiebs of the principal claim in these proceedings, that subdivision has since occurred in April 2020.

In September 2014 (and again in April 2017) the members of the Scheme refused the Burnheims’ application to become a member. However, the Scheme members have agreed to sell (and are selling) water from the Bore to the Burnheims under licence at a price for a 10 year period, but terminable on 12 months’ notice (without a breach of the agreement) or a month’s notice (in the event of a breach, such as non-payment or unauthorised extensions to the water supply).

These proceedings concern whether the Schiebs have breached a promise to ensure that the Burnheims would become a member of the Scheme so that the Burnheims’ eastern half of Mikimba would be able to draw water from the Bore for free, subject to any capital cost contributions as required under the Bore Agreement. The Burnheims’ claims are made in contract and, in the alternative, under the Australian Consumer Law (“ACL”).

Having purchased Mikimba, the parties entered into a Deed of Partition (the “Deed of Partition”) to record their agreement to subdivide the property. The claim in contract requires the Court to construe the Schiebs’ obligations under clause 12.3 of the Deed of Partition “to do all things necessary and sign all appropriate documentation to enable Burnheim (sic) water rights to the Wingadee No 4 Water Scheme”.

The Burnheims contended that clause 12.3 is an unconditional promise to bring about their membership of the Scheme. In the alternative, they submitted that even if it was in the nature of a best endeavours clause to bring about that membership, the Schiebs had not even done that. The Schiebs denied the Burnheims’ constructions of the Deed of Partition and said, in any event, that they had complied with their obligations under clause 12.3 by procuring the current licence arrangements for the Scheme to sell bore water to the Burnheims.

The Burnheims’ claim in contract succeeds for two reasons. First, a promise to “do all things necessary… to” is a promise to achieve the specified result. Second, the expression “water rights” (my emphasis) in the context of clause 12.3 means a permanent legal entitlement to use water without charge from the Bore that comes only with membership of the Scheme, as opposed to a licence to draw water at a price and for a term with no enforceable legal right of renewal.

The Burnheims’ case under the ACL requires the Court to accept that shortly before the parties made their offer to purchase Mikimba after it had been passed in at an auction in March 2011, Mr Schieb said to Mr Burnheim words to the effect of “Don’t worry about water, because I can get you onto the Wingadee No. 4 Bore Scheme, and in the meantime, you can have access to water on Nullabar” (“Nullabar” being the Schiebs’ property adjoining Mikimba).

The Burnheims submitted that this was a representation that Mr Schieb would arrange for the Burnheims to become a member of the Scheme. They contended that in reliance on that representation they had bought Mikimba together with the Schiebs to obtain, in turn, their subdivided half. The Burnheims submitted the words were a representation as to a future matter made without reasonable grounds and so constituted misleading or deceptive conduct under s 18 of the ACL.

The Schiebs denied the representation had ever been made. They also submitted that the claim under the ACL was statute barred. The summons in these proceedings was filed on 30 May 2018, and the cross-claim on 9 August 2018. According to the Schiebs, any cause of action under the ACL had arisen when the Burnheims bought Mikimba in 2011. These proceedings had been commenced and the cross-claim had been filed more than 6 years later. Any action by the Burnheims was therefore statute barred by reason of s 236 of the ACL.

The Burnheims’ claim under the ACL also succeeds. The Court accepts that the alleged representation was made by Mr Schieb. This is because it is inherently probable and because the Court has found Mr Schieb’s recollection of events the subject of these proceedings to be unreliable and prefers the evidence of Mr Burnheim. The Schiebs have failed to rebut the statutory presumption under s 4(2) of the ACL as to lack of reasonable grounds for making the representation.

Nor is the claim statute barred under s 236 of the ACL. The Burnheims’ cause of action under the ACL did not arise until damage was suffered. The alleged representation concerned a future event that was a type of contingency. The Burnheims did not suffer damage until that future event did not happen when their application to join the Scheme was refused at the meeting of the Scheme members held in September 2014.

Neither party submitted that the measure of damages differed depending upon the cause of action. The Burnheims are entitled to damages in the sum of $131,821.04, comprising:

Mr G Campbell of Counsel appeared for the Burnheims. Mr D Roberts of Counsel appeared for the Schiebs. Without intending any disrespect, in what follows I shall refer to the parties by their given names. Furthermore, I note without discourtesy to Mrs Schieb and Mrs Burnheim that there was no issue that, to the extent it is legally relevant, they were bound by the acts of their respective husbands. Their primary role was as joint registered proprietors of the relevant properties and as signatories to the Deed of Partition. While Mrs Schieb and Mrs Burnheim filed brief affidavits, neither was cross-examined. They were not the instigators of the critical events which have caused the present dispute.

These proceedings were first commenced in the Real Property List by summons filed on 30 May 2018. The Schiebs sought an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) that Mikimba be sold, trustees be appointed as trustees of the land on statutory trust for sale, and the net proceeds of that sale be divided equally between the Schiebs and Burnheims.

On 9 August 2018 the Burnheims filed a statement of cross-claim seeking damages for:

On 7 June 2019, Justice Darke made orders which, inter alia, noted that the parties had resolved the principal proceedings (save as to costs), undertaking to do all acts and things necessary to complete the plan of subdivision of Mikimba and transfer the eastern portion (identified as “Lot 101”) to the Burnheims and the western portion (identified as “Lot 102”) to the Schiebs. The plan of subdivision was finally registered on 27 April 2020.

Accordingly, the only issue for determination at the hearing set down before me on 17 and 18 August 2020 was the Burnheims’ cross-claim. On the first day of hearing, Mr Campbell on behalf of the Burnheims said that they did not press the Collateral Contract argument (see paragraph [18(1)] above), such that the Burnheims’ cross-claim would proceed first as a claim for breach of clause 12.3 of the Deed of Partition only and then, in the alternative, a claim for misleading conduct under the ACL.

Counsel for both parties availed themselves of the opportunity to have the hearing listed for a third day on 20 August 2020, for the purpose of closing submissions. On this occasion, Mr Roberts sought leave to amend the Schiebs’ defence to the cross-claim to include that the Burnheims’ claim under the ACL was statute barred. Leave was granted and a further amended defence to the cross-claim was filed on 27 August 2020, pleading that the proceedings were statute barred pursuant to s 236 of the ACL. With the consent of the parties, leave was granted for a further amended defence to the cross-claim to be filed on 2 September 2020, which further refined the limitation defence. The parties agreed that the statutory limitation argument would be dealt with by written submissions only.

Finally, as I have recorded in paragraph [1] above, the parties agreed that because any order for costs (including in relation to the principal proceedings) could be affected by the outcome of the cross-claim, costs would be dealt with after judgment in the cross-claim was delivered. Following publication of these reasons, the parties will be given an opportunity to make submissions as to costs, including in relation to the principal proceedings.

With very limited exceptions, the facts were not in dispute. Nevertheless, due to the nature of the claims, damages sought and the contentious matters that were raised, it has been necessary to set out the facts in some detail.

However, it is neither practicable nor necessary to set out in detail every competing argument raised by the parties. Attention has been given to those matters which the Court considers dispositive. Where any reference is made to findings on contentious matters, it is cross-referenced to that part of the judgment where reasons for the findings are given. To the extent any other facts set out below were not agreed by the parties, I am satisfied they could not be sensibly disputed.

Both the Schiebs and Burnheims own rural properties in the Coonamble Shire. The parties have known each other for approximately 45 years, with Don also having been the Burnheims’ stock and station agent for about 10 years in the 1980s.

The Schiebs have owned and operated the grazing property “Nullabar” since 1978. Don works both as a farmer as well as a stock and station agent in the Coonamble Shire, associated with the businesses Elders and Wesfarmers. Additionally, he is a real estate agent with Ray White Rural in Coonamble. Don is also one of the original members of the Bore (see paragraph [29] below).

Peter has lived in the Coonamble Shire his whole life, with the exception of eight years when at boarding school. Since finishing school in 1974, Peter has worked on the land in the Coonamble area in some capacity, initially as a station hand and from 1979 as an owner when he – together with his wife, Leah – purchased the property “Bindaree” on the Wingadee Road. The Burnheims also own a block of land called “PJ’s”, which lies a further 20km down the Wingadee Road.

The Scheme relates to a capped and piped artesian bore located on the property “Wiona” in the Coonamble Shire. The Scheme was created by the Bore Agreement, which is a deed entered into on 8 January 2011.

The original Scheme members set out in the First Schedule to the Bore Agreement were -

The Bore Agreement refers to the subject bore as the “New Wingadee Partnership No. 4 Bore”. A bore known as the “Wingadee No. 4 Bore” ceased operating in or around 1998. However, both parties gave evidence that the subject bore has multiple names and is more commonly referred to by the Scheme members as the “Wiona Bore”, referring to the property on which it is located.

The Bore Agreement alone regulates the parties who may use the Bore, the land or properties that benefit from the Bore’s water as well as the administration and operation of the Scheme. The Bore Agreement includes:

A further deed was entered into on the same date, pursuant to which the original members set out in paragraph [29] above agreed to allow James William Goldsmith and Leonie Maree Goldsmith to together become an additional member of the Scheme on terms which included:

Following execution of the Bore Agreement, the Scheme members sank a bore for artesian water on Wiona at a cost of $130,000 shared between the 8 members. In the ongoing operation of the Bore, water is moved by pipe to the Scheme members’ land (as approved by the Scheme). The Scheme members share the cost of piping to their respective properties. However, the installation of tanks and troughs (being the infrastructure which ensures adequate water from the Bore can be stored on each property and is available for use) is the responsibility of each Scheme member.

It was accepted by the parties that the Goldsmiths (see paragraph [32] above) are the only new member to have joined the Scheme pursuant to clauses 15 and 16 of the Bore Agreement since the Scheme’s creation in 2001.

Pursuant to clause 9 of the Bore Agreement, since 2005 a number of parties have become Scheme members by way of deed of assignment, following the sale or disposal by original Scheme members of land benefitted by the Scheme.

A copy of the most recent Bore Licence Certificate issued by the NSW Department of Primary Industries, Office of Water (as it was then known) regarding the Bore was in evidence. The certificate (licence number XXBLXXXXXX) was issued on 1 July 2008 and, valid in perpetuity, listed 8 separate licence holders. However, the Court accepts the evidence from Don in cross-examination that this certificate does not reflect the current membership. Accordingly, the Court accepts that there were 9 members of the Scheme as at the time of the hearing.

Before leaving the findings of fact in relation to the Bore, it is convenient to set out two additional findings regarding the management and day-to-day administration of the Scheme. The Bore Agreement is silent on these issues.

First, Don gave evidence in cross-examination that the Scheme is supposed to have an annual meeting (T147:4-5), however accepted that the first Scheme meeting since 2001 was on 16 September 2014 (T135:49-136:3, T137:28-31). The Court is satisfied that the only other Scheme meetings have occurred in September 2015 (albeit without a proper quorum) and on 28 April 2017 (T146:49-147:4).

Second, for the reasons set out in paragraphs [126] to [130] below, the Court finds that Don was the manager of the Scheme from in or around May 2005 up until 28 April 2017, when he formally resigned from that position. Even accepting Don’s evidence that the role had fallen to him by default and that the duties were of a limited nature, I am satisfied, and certainly on the balance of probabilities, that if there was a manager of the Scheme responsible for its administration and operations during this period, it was Don.

In or around January 2011, Peter received an auction brochure in relation to the prospective auction of two properties from a deceased estate. The two properties - “Yallakool” and “Mikimba” – were both to be auctioned on 25 March 2011 at the Coonamble Golf Club.

Yallakool is located approximately 47 kilometres north of Coonamble. It is a farming property of approximately 1800 hectares, extending from the Wingadee Road frontage on its eastern boundary through to the Castlereagh River on its western boundary. The Schiebs’ property Nullabar extends along the southern side of Yallakool – that is, the two properties share a common boundary. At the time of the auction, there was a private bore on Yallakool (the “Yallakool Bore”), which lay on the eastern side of the property with existing infrastructure (pipes and troughs) to distribute the bore water to the rest of the property.

Mikimba is another farming property of approximately 689 hectares lying a little to the south of Yallakool, around 37 kilometres north of Coonamble. The property similarly runs from the Wingadee Road on its eastern boundary and has frontage to the Castlereagh River along the western boundary. The Schiebs’ property Nullabar abuts the north-western boundary of Mikimba. At the time of the auction, improvements on the property included a flat bottom silo and a small set of steel cattle yards on the eastern side of the property. Two stock water dams were also located on the eastern side, with another dam adjacent to the Castlereagh River on the western boundary. A crown land permissive occupancy of 191 acres, which was formerly an old stock route, was also located on the western portion of Mikimba.

In or around early March 2011, the Schiebs and Burnheims discussed jointly purchasing the property Yallakool. The Court is satisfied that Don and Peter inspected Yallakool and Mikimba prior to the auction, both alone and together in the company of a real estate agent. However, the Court accepts that until they were unsuccessful in their attempt to purchase Yallakool at the auction (see paragraphs [47] and following below), neither party had any interest in bidding for Mikimba.

Consistent with their interest in Yallakool, the parties negotiated a Deed of Agreement relating to their prospective bidding for the property (the “Yallakool Property Agreement”). Under the terms of the Yallakool Property Agreement, Don and Peter would subdivide the property between them. The Yallakool Bore and supporting infrastructure (see paragraph [41] above) would have fallen on the eastern portion of Yallakool, which the Burnheims were to acquire after the partition.

Rather than having to apply to the Scheme to extend access from the (Wiona) Bore (as required under the Bore Agreement), it was the Schiebs’ intention to leverage the existing infrastructure on the property to distribute the Yallakool Bore’s water to the western portion they were to acquire post-partition. At the insistence of Don, a clause on water access rights was therefore inserted into the Yallakool Property Agreement:

A final version of the Yallakool Property Agreement was not settled until the morning of the auction, at which time it was executed by both parties.

The auction for Yallakool and Mikimba was held on 25 March 2011 at the Coonamble Golf Club. Both the Schiebs and Burnheims attended in person.

Mikimba went to auction first and was passed in.

Don and Peter were then unsuccessful in their purchase of Yallakool, as the property sold at auction for a higher price than they were prepared to pay.

Following the close of bidding on Yallakool, the auctioneer sought to gauge interest from attendees in making further offers on Mikimba. The parties do not dispute that Don said words to Peter to the effect of “Are you interested?” and that Don and Peter then moved away from the bidding area to a separate area near the Golf Club’s bar to discuss the potential joint purchase of Mikimba. Although Ainslie and Leah observed their husbands participating in this discussion, they were not a part of it and did not hear what Don and Peter said.

What fell from both Don and Peter during this discussion is the contentious matter upon which the Burnheims’ case under the ACL turns. For the reasons set out in paragraphs [134] to [143] below, the Court finds that the version of events deposed to by Peter is to be accepted, with words to the following effect being said -

Under this prospective arrangement, Mikimba was to be divided north-south, the eastern half having frontage on the Wingadee Road and the western half having a frontage on the Castlereagh River. There was no dispute that at the time of the conversation referred to in the preceding paragraph, the parties were aware that:

There is no dispute that it was this contrast in the parties’ access to water on their proposed respective halves of Mikimba that necessitated Don’s assurance of “Don’t worry about water” to Peter. For the reasons set out in paragraph [134] and following below, the Court is satisfied, on the balance of probabilities and as a matter of actual persuasion, that Don’s further assurance of “I can get you onto the Wingadee No. 4 Bore Scheme” meant that he would arrange for the Burnheims to become a member of the Scheme, and so obtain permanent water rights. Peter asserts (and the Court accepts) that he would not have purchased Mikimba without such an assurance.

Following their discussions, Don and Peter made an offer of $700 per acre for Mikimba, which was rejected by the vendor. Don and Peter then agreed to make an offer to purchase Mikimba for $1,250,000, with each contributing $625,000 (plus fees). This offer was accepted.

Following their successful bid for Mikimba, the parties left the Golf Club and went to the Global Village Café in Coonamble. There was a dispute in the evidence as to whether they were joined by their respective bank managers, but nothing turns on this. The Court accepts that the parties used this time to celebrate their purchase and further discuss the particulars of the sale.

There was a further discussion between Don and Peter regarding the proposed subdivision of Mikimba and the Burnheims’ access to water on their eastern half of the property. It was common ground that words to the following effect were said -

In his affidavit evidence, Don submitted the rationale for this exchange was that because the existing dam water on Mikimba was not suitable for crop spraying (weed control), he offered Peter to take water stored on the Schiebs’ property Nullabar. I am satisfied that offer was made as an interim measure until the parties took steps to install new infrastructure (as to which see paragraphs [72] to [76] below) in anticipation of the Burnheims becoming a Scheme member and receiving water from the Bore in their own right.

After the events and discussions on 25 March 2011, the parties turned their attention to the proposed subdivision of Mikimba.

The Schiebs’ solicitor, Michael McHugh, prepared a first draft of the Deed of Partition in relation to Mikimba. Mr McHugh emailed this draft to the Burnheims’ solicitor (and daughter), Sara Clark at 8.03pm on 18 April 2011. Mr McHugh observed in the covering email -

At 9.27am on 19 April 2011, Ms Clark acknowledged receipt of the first draft and requested Mr McHugh provide a copy of the Mortgage Deed referred to in clause 6 of the draft Deed of Partition, and noted –

Ms Clark subsequently provided Mr McHugh at 11.55am that same day with a copy of an amended Deed of Partition, mortgage deed and proposed plan of subdivision, and stated in the covering email -

At 4.25pm on 19 April 2011, Ms Clark sent Mr McHugh a further draft of the Deed of Partition for approval. In the covering email, Ms Clark confirmed in relation to the Deed of Partition that -

At 5.22pm later that afternoon, Ms Clark sent Mr McHugh another further draft of the Deed of Partition. In the covering email, she explained -

The “further clause” inserted by Ms Clark was a new clause 12:

At some point between 5.22pm on 19 April 2011 and 21 April 2011 when the Deed of Partition was executed (see paragraph [67] below), clause 12 was amended so that the final version of the Deed of Partition contained:

It was Don’s affidavit evidence that the first occasion he saw clause 12 in its final terms was on 21 April 2011 when Ainslie and he executed the Deed of Partition (see the next paragraph). However, Don conceded during cross-examination that he had discussed the Deed of Partition, including the addition of clause 12, with Mr McHugh on the telephone on or around 20 April 2011 (T134:28-34, 42-48, T135:35-47).

By 21 April 2011, the parties had executed the Deed of Partition. There was evidence that the Burnheims may have signed the Deed before this date (T41:19-22), with the Schiebs attending the Global Village Café in Coonamble on 21 April 2011 to execute the Deed in the presence of Ms Clark. The Deed of Partition as executed bears the date 25 March 2011 (being the date of the auction), however it is not disputed that the Schiebs did not sign the document until 21 April 2011.

The operative terms of the Deed of Partition, as executed, included:

In accordance with Schedule 2 of the Deed of Partition (and the attached diagram referred to therein), the proposed plan of subdivision divided Mikimba into -

For convenience, I will hereafter refer to the eastern and western portions of Mikimba as “Lot 101” and “Lot 102” respectively.

On 2 May 2011 the Schiebs’ solicitor, Mr McHugh, retained Langford & Rowe Surveyors to complete a plan of subdivision of Mikimba for registration in accordance with the parties’ obligations under the Deed of Partition.

On 6 May 2011, the purchase of Mikimba was completed. After the parties took possession, Don provided the Burnheims with water on Lot 101 from his own resources on Nullabar for the purpose of spraying and watering stock.

In June 2011 the parties arranged for the installation of a new water tank to connect the Bore water stored in the Schiebs’ depot tank on Nullabar to Lot 101. Fencing materials were also purchased in order to place a fence along the north/south boundary line in accordance with the agreed subdivision. Don was invoiced a total of $12,735.54 for these materials, of which Peter paid $6,367.77 representing his half share.

The new tank was placed on Nullabar, just inside the north-western boundary with Mikimba. The tank was physically located on Nullabar, as opposed to Mikimba, because the Scheme members had not yet formally approved the Burnheims having access to water from the Bore. Nor had the Scheme members approved the extension of Don’s Bore water supply on Nullabar to his Lot 102. It appears that what they perceived to be Don’s presumption in doing this later became a source of tension between Don and the other Scheme members.

In or around August 2011, the parties engaged a contractor to erect the boundary fence along the north/south division. This work totalled $9,431 which was again borne equally by the parties, each paying $4,715.65.

In or around September 2011, further infrastructure was purchased and installed to provide access to water on Mikimba from the Bore at a cost of $13,327.92, again borne equally by the parties.

The Court accepts that sometime in 2011 after the purchase of Mikimba, Don approached four members of the Scheme to discuss approval for the Burnheims to take water directed from the Bore to benefit their Lot 101. The Court further accepts that, at this time, Don did not ask the members to approve the water supply he had extended to Mikimba (including the water given to the Burnheims from his own depot tank on Nullabar) as he “did not consider there was a need to do so”. There was no evidence before the Court as to either what was said in those discussions or what came of them.

For the reasons set out in paragraph [102] and following, the Court rejects Don’s evidence that it wasn’t until in or around 2013 that he learnt, for the first time, pursuant to the Deed of Partition there was a requirement under clause 12.3 that he “do something further concerning water”. However, the Court accepts that it wasn’t until this time that Don began to take active steps towards procuring the Burnheims’ membership of the Scheme, largely as a result from repeated enquiries from Peter as to the status of the membership application.

In or about September 2013, Don had a discussion with a fellow Scheme member, John Rackman, in relation to the Burnheims’ proposed membership application. Mr Rackman was Chair of the Scheme at the time. Mr Rackman said that there would need to be a meeting of the members to consider the Burnheims’ application.

It was accepted by the parties that this meeting did not occur until 16 September 2014 (the “September 2014 Meeting”). The delay was due to an inability on the part of Don to find a suitable time to achieve a quorum of members.

In anticipation of the upcoming meeting, on 9 September 2014 Peter wrote a letter to the Scheme setting out his case in support of his request that his wife and he be approved as a member of the Scheme. Peter provided Don with this letter and requested it be tabled at the September 2014 Meeting. The letter included:

The reference in the first paragraph to the “in principle” agreement is to the extension of the Schiebs’ Bore water supply line on Nullabar to their Lot 102. The reference to the “adjoining property” in the second paragraph is again to Nullabar and the new infrastructure installed by the parties (see paragraphs [72] to [76] above).

Also in advance of the September 2014 Meeting, Don told the other Scheme members of the effect of a number of resolutions to be proposed to the meeting (T111:24-36). Relevant to the issues in the current proceedings, these included resolutions to -

The September 2014 Meeting took place at Don’s offices at Ray White Rural in Coonamble. The motion seeking the Burnheims to become a member of the Scheme was lost 5 votes to 3. However, the alternative motion was considered and unanimously approved, resulting in a resolution by the Scheme members to supply water to the Burnheims for 12 months on certain terms.

The minutes of the September 2014 Meeting included:

Before leaving the findings of fact regarding the September 2014 Meeting, I pause to make four brief observations. First, Don’s own application to have the Bore water extended to benefit his Lot 102 was unanimously approved. Second, it was Don’s initiative to put forward the licence arrangement as an alternative option to full membership. Third, Don conceded that he was indifferent as to whether the Burnheims’ application to become members was approved (T150:21-27) and at times appeared to suggest that his “preferred option” was that they be given water under the licence arrangement (T139:8-17, T149:35-150:3). Finally, Don could not remember whether Peter’s letter of 9 September 2014 (see paragraph [81] above) had been tabled at the September 2014 Meeting, let alone given to him at all (T153:16-28). The state of the evidence does not permit the Court to make a finding one way or the other.

The outcome of the September 2014 Meeting was communicated to the Burnheims by the Scheme’s lawyers, Waterford Ryan Solicitors, on 13 October 2014. Peter responded on 10 November 2014 seeking clarification on a number of the terms under the arrangement, but indicating they were “likely to take up this offer”.

On or about 2 September 2015, a further meeting of the Scheme members was held (however with no quorum). At this meeting, the members approved the Burnheims’ access arrangements to water from the Bore for a period of 10 years, upon payment of the same amounts as resolved at the September 2014 Meeting.

On 30 March 2017, Peter wrote another letter to the Scheme members. This letter re-stated his desire for he and his wife to become a member of the Scheme for the purpose of obtaining Bore water on their Lot 101.

In anticipation of a further Scheme meeting, in or about April 2017 Don prepared a memorandum to the members setting out the steps he had taken to have the members consent to the Burnheims’ access to water from the Bore. It was Don’s evidence that this document was prepared in or around April 2014 prior to the September 2014 Meeting and although Mr Campbell’s challenge to this was resisted (T128:16-47), I am satisfied that this is not the case. It is more likely to have been written in or around April 2017 because:

Nothing turns on the apparent error in date. Further, and in any event, it is convenient to set out parts of that document and the actions Don said he had taken vis-à-vis obtaining the Scheme members’ consent to the Burnheims application. The memorandum continued:

The April 2017 Meeting was subsequently held at the Coonamble Bowling Club. The Burnheims’ application to become a member of the Scheme was again considered. On this occasion, the two letters written by Peter (see paragraphs [81] and [89] above) were read. The Scheme members rejected the Burnheims’ membership application, but again resolved 5 votes to 1 to offer Bore water to the Burnheims under a licence arrangement for a period of 10 years, upon payment of an annual charge.

The minutes of the April 2017 Meeting included:

This offer was communicated to the Burnheims on 1 May 2017, following which an invoice was issued requiring back payment of $2,500 for Bore water used up to the September 2014 Meeting (when the Scheme first approved the offer) and payment of $863 for the 2017 water rates.

While nothing turns on it, I note in passing that it is not apparent what “conflict of interest” Don had. Nor was he able to explain this when asked what it might be during the course of giving his evidence (T157:32-39).

The Burnheims continue to take water from the Bore under the terms of the licence arrangement.

The case at bar involves Don and Peter’s conflicting versions of the one key discussion upon which the Burnheims’ case under the ACL turns.

During closing submissions on the final day of hearing, Mr Campbell contended on behalf of the Burnheims that Don was an unreliable witness whose evidence on the parties’ discussion at the auction should not be given any weight. The Burnheims emphasised the inconsistencies between Don’s oral testimony and that of his prior affidavit evidence, contending this was illustrative of Don having “changed his tune” under cross-examination.

Mr Campbell advanced the following examples:

Mr Campbell submitted that the preceding matters meant that the Court should prefer Peter’s version of events regarding the parties’ discussion prior to their joint offer to purchase Mikimba.

Mr Roberts did not directly put Peter’s credit in issue. However, he argued that in cross-examination Peter had “gratuitously added to and embellished” his affidavit evidence setting out his (Peter’s) recollection of the events on the auction day in March 2011 and what was allegedly said by Don. The inference to be drawn from that submission was that it was Peter who was the unreliable witness and whose evidence should not be preferred over Don’s.

The Court rejects Mr Robert’s submission on Peter’s credibility. Peter gave his evidence in a confident, straightforward manner. The Court accepts Peter as a reliable, truthful witness.

In contrast, the impression I formed of Don was that he was an unsatisfactory witness whose recollection I could not accept as reliable. Don presented at times as uncooperative and stubbornly adhered to his version of certain events, even where such testimony could not be sensibly maintained. Don’s evidence was at times not only inconsistent with what contemporaneous documentary record there was, but also with previous evidence he himself had given, as well as with what, on all accounts, could only be viewed as the inherently likely version of events.

There are five reasons for the Court’s conclusion that Don’s recollection could not be regarded as reliable unless inherently likely or supported by contemporaneous documentary evidence.

First, there were a number of occasions where Don failed to accept propositions put to him which objectively were obvious, self-evident and clearly appropriate.

One example is Don’s evidence on whether he was a “manager” of the Scheme (which the Court finds he was; see paragraphs [126] and following below). Don was resolute in his evidence that he was not the manager of the Scheme and had never been appointed as manager (T104:3). Although Don on occasions accepted that responsibility for the running of the Scheme had fallen to him by default (T104:43-45), he continued to resist the characterisation that he had, in effect, assumed the role of manager (even if those duties were of a limited nature). Concessions on this topic were frequently qualified or later sought to be withdrawn. This exchange in cross-examination is typical (T104:5 – 105:21):

Don resisted the proposition that he had responsibility for the management of the Scheme even in the face of his own contemporaneous documentary evidence. In a memorandum to the Scheme members prepared in April 2017 (see paragraph [90] above), Don wrote (emphases added):

Don resisted the proposition that he was the sole signatory to the Scheme’s bank account, maintaining there were two signatories but was unable to recall who was the other signatory (T104:19-28, T105:1-3). This was against the evidence of a letter from Waterford Ryan Solicitors (the lawyers for the Scheme) dated 3 March 2017 which said, inter alia (emphasis added):

A further example of Don’s resistance to accept obvious propositions was his opposition to Mr Campbell’s suggestion that the Bore may have been referred to as the “Wingadee No 4 Bore” during the relevant period. Don was insistent that he would never have referred to the “Wingadee No 4 Bore” as the bore of that name closed down in 1998, was replaced by the “New Wingadee No 4 Bore” and that members of the Scheme referred to it as the “Wiona Bore” only (see T131:23-30). However, Don had accepted that the Department of Water (T93:14-17) and “solicitors” (T93:22-25, T94:10-12) may refer to it as the “Wingadee No 4 Bore” or “New Wingadee Number 4 Bore Scheme”, and gave evidence that the title of the Scheme’s bank account in or around 2011 was in fact “The Wingadee Number 4 Bore Scheme” (T104:15-17). Minutes of the Scheme’s meetings also referred to the Bore as the “Wingadee No. 4/10 Bore”.

Propositions that could not be sensibly disputed and that should have been accepted simply and quickly were resisted without cause, as the following exchange during cross-examination demonstrates (T130:25-39):

Second, the Court’s impression of Don as a witness was informed by his unsatisfactory explanation of the Yallakool Property Agreement. It was not in dispute that Don and Peter had initially discussed their intentions to purchase the property Yallakool, and had signed the Yallakool Property Agreement on the morning of the auction (see paragraphs [44] to [46] above). The Yallakool Property Agreement related to the prospective bidding concerning Yallakool and, if successful, how the parties would subdivide the land.

Don’s affidavit evidence was that there had been no discussion between Peter and himself about the terms of the Yallakool Property Agreement prior to 25 March 2011, and that “Mr Burnheim presented the agreement to me at the auction to sign prior to the bidding on “Yallakool””. During cross-examination it became readily apparent that this statement in Don’s affidavit was incorrect, however Don was reluctant to accept this and the inherently probable sequence of events.

In cross-examination, Don said that the first iteration of the Yallakool Property Agreement had been given to him prior to the auction on 25 March 2011 (T120:6-7, 20-22), that this version did not include anything about water on Yallakool (T120:3-4, 24-26) and that he, Don, had subsequently requested something to be inserted into the Agreement about water (T120:32-37). Clause 15 of the Yallakool Property Agreement was then inserted, prior to the parties signing the document on 25 March 2011:

Although Don accepted that the parties had discussed water on Yallakool “just prior to signing” the Yallakool Property Agreement on 25 March 2011 (T121:4-6), he continued to resist the obvious, as appears from this exchange during cross-examination (T121:18-123:27):

In attempting to convey that there had been no discussion between the parties in relation to the prospective purchase of Yallakool, Don was attempting to colour Peter’s version of events – in which Peter said Don and he had discussed water access rights on Mikimba prior to putting in their offer to purchase Mikimba – as unlikely.

Third, Don made a number of unsatisfactory attempts to distinguish the need for water on Yallakool as opposed to Mikimba. As is set out in paragraph [45] above, at Don’s own insistence a clause pertaining to water access rights was inserted into the Yallakool Property Agreement. Don gave evidence that the request for a “water agreement” was because had the purchase of Yallakool been successful and the agreed subdivision effected, the existing Yallakool Bore (and supporting infrastructure) on the property would have been on the Burnheims’ portion of the land, to which Don wanted access (T123:45-124:7).

Having conceded that he had insisted on a “water agreement” clause in the Yallakool Property Agreement, Don strenuously maintained that a similar agreement was not required in relation to Mikimba and as such had not been discussed between Peter and himself.

Don gave evidence that no water agreement was necessary for Mikimba because at the time of the auction on 25 March 2011, “everything was full of water” on Mikimba (T125:16). Don submitted that water was not an important consideration for the purchase of Mikimba as the region was “having a wet season” and that all dams on Mikimba were “full” and that the Castlereagh River traversing the property was “running” (T124:40-44). Don also referred to a presumptive purchase of Mikimba where the property “had flood over it and the vendor had written off a lot of money… because of the damage to the crops” due to all the water (T125:17-19).

Don’s position in the preceding paragraph cannot be sensibly maintained when considered in light of this evidence:

Fourth, Don also gave conflicting evidence on when the first discussion occurred between Peter and himself regarding the Bore. Don’s case was that no discussion regarding water access from the Bore for the Burnheims’ Lot 101 had occurred at any time prior to executing the Deed of Partition on 21 April 2011. In his affidavit evidence, Don deposed that at no time prior to 21 April 2011 did the parties “have any discussion whatsoever… concerning the new bore and the syndicate that operated it”. This stance was initially reiterated by Don during cross-examination (T131:47-132:4).

However, later in cross-examination Don then said that the first time any discussion occurred between Peter and himself about water access for Lot 101 was when the parties were negotiating the Deed of Partition at the Global Village Café in Coonamble on 25 March 2016, immediately following their purchase of Mikimba (T132:35-45, T133:15, 31-32; see also paragraphs [55] to [57] above). Although initially certain that this discussion at the Global Village Café did not include any reference to the Bore or Scheme so that the above statement in his affidavit remained correct (T133:17-23, 34-40, T134:3-7), Don eventually agreed his affidavit was wrong (T134:9-16).

Finally, and following from the preceding point, Don gave inconsistent evidence on his attitude towards the need for a water agreement in relation to Mikimba. As set out in the two preceding paragraphs, Don’s affidavit evidence was that no discussion about water had occurred prior to 21 April 2011 and that neither his wife Ainslie nor he “recall having any explanation of clause 12.3 to the deed as it was drafted” when they signed the Deed of Partition on 21 April 2011. This is not only inconsistent with the evidence I have previously referred to regarding the importance of water access on Mikimba (see paragraph [119] above), but also with Don’s own evidence that he had the benefit of discussions with his solicitor at the time of the negotiations to the Deed of Partition, including specifically in relation to clause 12 (T134:24-135:47). While I accept it is Don’s evidence that he only understood the nature of his obligations under clause 12.3 as requiring him to provide assistance to the Burnheims to gain access to water from the Bore (as opposed to obtaining membership of the Scheme), this does not cure the inconsistency in Don’s evidence regarding his attitude towards a water agreement in respect of Mikimba.

The cumulative effect of the matters set out in the preceding paragraphs and my observations of Don giving his evidence in the virtual witness box has led me to the conclusion that, while not dishonest, he is an unreliable witness, whose recollection of events cannot be accepted. Where there is a conflict in the evidence, the Court will not accept Don’s evidence unless it accords with the probabilities, is against interest or is supported by contemporaneous documents.

I will now set out my conclusions on the factual matters in dispute. By reference to the uncontested facts and what was inherently likely, informed by the Court’s findings on Don’s reliability as a witness, the Court is satisfied, on the balance of probabilities, of what follows and finds accordingly.

The Burnheims case under the ACL came to turn on the Court’s resolution of one key contentious matter, being the Burnheims’ assertion that Don had made an unconditional promise to bring about their membership of the Scheme so as to ensure “water rights” for Lot 101. This necessarily involves consideration of:

The Court finds that Don was the manager of the Scheme from in or around May 2005 up until 28 April 2017, when he formally resigned from that management position. In accepting Don’s evidence that the role had fallen to him by default and that the duties were of a limited nature, the Court is nevertheless satisfied as a matter of actual persuasion that Don was the manager of the Scheme during the relevant period.

The evidence before the Court which supports this finding has been set out in paragraphs [106] to [108] above, however it is appropriate here to record:

Although accepting that Don had occupied a management role for the Scheme, Mr Roberts sought to diminish the weight the Court could attribute to this. In written submissions on behalf of the Schiebs, Mr Roberts submitted that the Court should note that -

Mr Roberts contended that Don’s evidence should therefore be accepted that there was no one else that “actively did anything” and so he took the role upon himself. The inference to be drawn from this submission was that the position of “manager” was nominal and carried little responsibility.

Whether or not Don voluntarily assumed the role of manager by default is, with respect, irrelevant. There can be no dispute that if there was a manager of the Scheme responsible for its administration and operations during this period, it was Don and that he duly carried out duties in that capacity. The Court’s finding that the role of manager was something more than nominal is strengthened by the fact that Don was required to resign formally from the position at the April 2017 Meeting, before a new manager was appointed.

For the reasons already set out in paragraphs [52], [53] and [119] above, it cannot sensibly be disputed that the parties were aware of the state of access to water on Mikimba at the time of their joint purchase in March 2011. As is set out in paragraphs [116] to [119] above, the Court rejects Don’s submissions that water access was not an important consideration for the purchase of Mikimba.

Accordingly, the Court finds that both parties were aware, and understood, that:

In addition to the reasons set out in paragraph [131] above in support of this finding, it is also important to note that both Don and Peter are from the Coonamble Shire. On his own admission, Don is an experienced stock and property agent, familiar with the sale of rural properties in the area. As an experienced local farmer and manager of the Scheme, he knew how the Scheme worked. Peter has lived in the Coonamble Shire for almost his entire life, and worked on the land in the area in various capacities. He knew from his experience how the Scheme worked and said as much in evidence (T31:45-32:24). The Court finds that both men were well aware that water is an important consideration for property purchases in the area and how the Scheme operated. Furthermore, although their initial intention was to purchase Yallakool, both Don and Peter had inspected Mikimba in-person prior to the auction in March 2011 (see paragraph [43] above).

In light of the Court’s findings on the two preceding issues, taken together with the Court’s finding of Don as an unreliable witness, the Court finds that the discussion deposed to by Peter as having occurred between him and Don prior to making an offer to jointly purchase Mikimba did in fact occur.

The Court is satisfied not only that words to the following effect were said -

In opposing this version of events (and in favour of Don’s evidence that no such assurance as to Scheme membership was made), Mr Roberts contended that the Court should be mindful of Peter’s own evidence that he lived, worked and owned property in Coonamble and that he had “specific knowledge” about water in the area. Peter had further endeavoured to impress upon the Court that he was a “careful businessman”. These matters were said to tend against the inherent likelihood that Peter’s version of the discussion took place, particularly when considering that:

None of the preceding four points is at all persuasive.

There are five reasons why the Court does not accept Mr Roberts’ submission that Don’s version of events should be preferred over that of Peter’s.

First, it is inherently likely that the parties discussed water access. Not only did both men understand water to be an important consideration for property purchases in the Coonamble Shire, they were aware of the particular water access requirements on Mikimba (see paragraphs [131] to [133] above). There is no doubt that their respective experiences of the area are reflected in the observations made in the report of Jeffrey Heal of IPN New England & North West, one of the expert valuers retained in the proceedings:

Second, a discussion on water access is consistent with the parties’ behaviour in relation to the prospective purchase of Yallakool, where it was Don who insisted on the insertion of a reference to water access rights in the Yallakool Property Agreement as a necessary “condition for the future” (see paragraph [119(4)] above).

Third, Don made unsatisfactory attempts to distinguish the need for water on Yallakool as opposed to Mikimba. This has already been addressed in paragraphs [116] to [119] above, and for those reasons such a distinction cannot be sensibly maintained and must be rejected.

Fourth, for the reasons set out in paragraphs [126] to [130] above, the Court has found Don to be the manager of the Scheme at the time of the auction. The Court accepts the Burnheims’ submission that the words attributed to Don were more than plausible because he likely considered himself, as manager, to be in a position to “guarantee” membership. I am fortified in this conclusion when one considers Don’s own evidence that he extended his water supply from the Bore to his Lot 102 before seeking the members’ approval (as required under the Bore Agreement), because he considered such an application was a “mere formality” (see paragraph [127(3)] above).

Finally, the Court is satisfied that both Don and Peter understood at the time that one had to be a member of the Scheme in order to obtain water from the Bore. So much was apparent from the history of the Scheme to date, which had only ever contemplated access to the Bore by way of membership pursuant to either clause 9 or clauses 15 and 16 (all set out in paragraph [31] above). Don was an original member of the Scheme and for the reasons set out in paragraph [126] to [130] above, its manager from in or around May 2005 to the April 2017 Meeting. Peter also gave evidence that one had to be a member of the Scheme to get water and that in his lifetime he had “never heard of people getting water [from the Bore] without being a member” (T38:46-39:3).

There was no dispute between the parties as to the principles of contractual interpretation which the Court was to apply, which are conveniently summarised by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 (“Electricity Generation Corporation”), at [35] per French CJ, Hayne, Crennan and Kiefel JJ in this passage which I respectfully adopt and apply (citations omitted):

The approach set out in Electricity Generation Corporation was more recently endorsed and explicated by the NSW Court of Appeal in Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 (“Cherry”). In that decision, Leeming JA (with whom Gleeson and White JJA agreed) engaged particularly with the proposition of whether a Court may have regard to surrounding circumstances without first passing through an “ambiguity gateway”. His Honour said:

The parties were again in agreement as to the applicable provisions of the ACL:

The case in contract raised three questions:

An issue which I raised with the parties during the course of the hearing was the relevance, if any, of clause 8 of the Deed of Partition, which provided (emphasis added):

Mr Campbell submitted that when considered in the context of the other terms of the Deed and its overall commercial purpose, the condition in clause 8 does not preclude or limit the operation of other obligations, such as clause 12.3, while the plan of subdivision was being prepared or considered by Council, being necessary steps before it could be registered. Emphasis was placed on the fact that registration of a plan of subdivision can take time, especially in rural areas. In the case at bar, the time taken by the parties to register the plan of subdivision following conclusion of mediation on 9 May 2019 to the registration on 27 April 2020 was nearly a year.

Furthermore, there were a number of provisions of the Deed of Partition (set out in paragraph [68] above) that in their terms, or as a matter of obvious practicality, required performance during the period that registration of the plan of subdivision was pending. These included clause 5 “Co-ownership pending registration of plan” (setting out the parties’ rights and obligations inter se in relation to property pending registration of the plan), clause 6 “Mortgaging of Property”, clause 7 “Costs” and clause 9 “Stamp Duty”, all of which it was submitted required action regardless of whether or not the plan of subdivision was ultimately registered.

To demonstrate why the operation of clause 12.3 could not be “precluded” or “time limited”, Mr Campbell pointed to the importance of water to the operation of farming activities on the land and submitted that access to water must occur during the period that the plan of subdivision was pending, and even if there was ultimately no registration of the plan of subdivision, just as it must occur during all other times the land was being farmed.

Mr Campbell submitted that clause 8 was to be understood by reference to longstanding authority to the effect that if the condition for a conditional contract is not satisfied, the contract may be voidable by the innocent party at that time, depending on the circumstances: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441; [1950] HCA 35, Gange v Sullivan (1966) 116 CLR 418 at 441-442; [1966] HCA 55. As the plan of subdivision was registered on 27 April 2020 and the ownership of Lot 101 and Lot 102 transferred to the Burnheims and Schiebs immediately thereafter, the condition in clause 8 is satisfied and no issue of voidabiilty of the Deed of Partition arises. Clause 8 of the Deed of Partition has no other effect.

As to the construction of clause 12.3, Mr Campbell submitted that it was not a “best endeavours” or “reasonable endeavours” clause. It was a bespoke clause that imposed an unconditional obligation to bring about the result of enabling water rights. In the context of this contract and its surrounding circumstances, that could only mean making the Burnheims a member of the Scheme.

Further, and in the alternative, it was argued that Don’s inaction and lack of advocacy between 21 April 2011 and 16 September 2014 (being the first date a meeting of the Scheme members was held to vote) was a breach of clause 12.3 even on the construction advanced for the Schiebs. When the meeting of Scheme members finally happened, Don had done no more than propose the Burnheims’ membership, and had not taken any steps to advocate with any vigour, or at all, that the other members of the Scheme should support that outcome.

Mr Roberts submitted that clause 8 was an essential term, such that Don had no obligations in relation to water until the subdivision was registered. He drew attention to the fact that it was the Burnheims who had been delaying the subdivision (I note, as an aside, because they had not been made members of the Scheme), which ultimately necessitated the Schiebs filing their summons in these proceedings.

It was the Schiebs’ case that Don had done and signed all the necessary and appropriate documentation in relation to giving the Burnheims the water rights to the Bore, the result of doing so being the September 2014 Meeting held by the members of the Scheme resulting in an offer to supply water to the Burnheims on terms.

Mr Roberts argued that “water rights” in clause 12.3 included an arrangement to take water from the Bore and was not limited to ensuring that the Burnheims became members of the Scheme. Reliance was placed on what were said to be concessions made in Peter’s evidence:

Mr Roberts submitted that, as had been recognised by Peter in his evidence, Don had done everything he could to secure water from the Bore for the Burnheims in compliance with clause 12.3. The only thing he had not achieved for them was actual membership of the Scheme.

Finally, in the event clause 12.3 was considered ambiguous or uncertain, Mr Roberts sought to rely on the contra proferentem principle of construction. Clause 12.3 was the work of the Burnheims’ solicitor (and daughter), Ms Clark, and had been inserted on Peter’s instructions for the benefit of the Burnheims. It should therefore be construed against their interest.

The Court accepts Mr Campbell’s submissions (see paragraphs [149] to [152] above) as to the construction and operation of clause 8 of the Deed of Partition. This means that the Schiebs’ obligations pursuant to clause 12.3 came into effect upon execution of the Deed of Partition in April 2011. With the exception of clause 10 (which in terms refers to the transfer of road permits upon registration of the plan of subdivision) there is no operative provision of the Deed of Partition which in its terms or as a matter of logic would not be in effect unless and until the plan of subdivision was registered. The Deed of Partition sets out how the partition is to be achieved and what the rights and responsibilities of the parties are in relation to Mikimba pending that registration being completed. Clause 8 only has a practical operation if the plan were unable to be registered, in which case the principles discussed in the cases referred to in paragraph [152] above would have to be applied.

Turning to the construction of clause 12.3, the natural and ordinary meaning of the words “will do all things necessary and sign all appropriate documentation to [X]” is to create an obligation in fact to bring about X. It means “Schieb will enable Burnheim water rights…”. So to construe the clause is not to render the other words I have quoted surplusage, although even if it did, this is not a case where that would be a badge of error. In the context of this contract the additional words are what might be called “belt and bootstraps” drafting.

Quite apart from the purely textual basis which is the reason for the conclusion expressed in the preceding paragraph, I am fortified by two other provisions of the Deed of Partition that demonstrate that if the parties had intended clause 12.3 to operate as a “best (or all reasonable) endeavours” clause they would have said so. Clause 8 is expressly such a clause (“use their best endeavours to have the plan registered as quickly as possible”). Similarly, clause 13 provides that “all parties will do all things reasonable (sic) necessary to complete this matter as soon as possible”. Unlike clauses 8 and 13, clause 12.3 is an unqualified obligation, untied to notions of “best”, “reasonable” or “possibility”.

Finally, while I do not consider recourse to surrounding circumstances is necessary in this case, they support the same construction of an unqualified obligation to bring about the specified result. Peter and Don understood that Mikimba lacked secure access to water and, as clause 12.2 expressly acknowledged, without access to the Bore, the Burnheims’ half of Mikimba had only surface water in two dams (see paragraph [167] below). Those matters bespeak a need to secure water that had to be assured by an absolute obligation.

The case in contract turns on whether “enable Burnheim water rights to the Wingadee No 4 Water Scheme” means to bring about nothing less than the Burnheims becoming a member of the Scheme or whether it is satisfied by a contractual arrangement of the kind which the Burnheims currently enjoy.

The Court resolves this question in five steps.

First, the use of “Burnheim” is not consistent in clause 12. In the premises of the Deed of Partition where the parties are identified, “Burnheim” is defined to mean Peter and Leah and “Schieb” to mean Don and Ainslie. Those attributions are unconstrained by the chapeau to clause 1 (the interpretation clause) of “unless otherwise indicated by the context”. In clause 1, “Property” is defined, in effect, to mean the whole of Mikimba. There is no defined term to describe the land to be taken by each of the parties pursuant to the subdivision. That land is identified by blue (Burnheim) and green (Schieb) shading on an attached plan.

The Deed of Partition refers in several places to “Burnheim” and “Schieb” where that must refer to the natural persons. However, clause 12.2 provides that “The Parties further acknowledge that 2 dams are on Burnheim and 1 dam and the river are on Schieb”. In that clause the references are obviously to the land each party is to take rather than to the parties themselves.

The point of drawing this to attention is whether in clause 12.3 the expression “to enable Burnheim water rights” refers to the natural persons or so much of Mikimba as they are to take. I have not overlooked that resolving this may shed some light on the meaning of “enable”. For the sake of completeness, I express my view that “enable Burnheim” refers to Peter and Leah. This is because in the opening of clause 12.3 the reference to “Schieb will do all things” must refer to Don and Ainslie, and that at the end of that clause “on Burnheim’s portion of the land” must refer to Peter and Leah. Attributing consistency of drafting within the sub-clause to the author does not produce an absurd result, so I prefer the construction that Burnheim in both places in clause 12.3 refers to the natural persons. However, even if I am wrong in that, I do not think that the meaning of “enable” would be any different if “Burnheim” in “to enable Burnheim water rights” referred to Lot 101.

Second, it is necessary to determine the meaning of “enable” in the context in which it appears. It is, with respect to the author, not an obviously regular usage with the result that its meaning is not immediately obvious. Dictionary meanings include “authorise, empower (person to do); supply (person etc.) with means to do” (OED) or “to make able; give power, means, or ability to; make competent; authorise; make possible or easy” (Macquarie). In legal usage such as “enabling legislation” it is generally understood to make something legal that would not otherwise be so.

Dictionary definitions are no more than a tool, and one to be used with caution, in the interpretative exercise. In my respectful view, in the context of “to enable Burnheim water rights to the Wingadee No 4 Water Scheme” “enable” is being used in a basal sense of bringing something about. This is captured in how the Burnheims pleaded the effect of clause 12.3 in paragraph 5 of their cross-claim: that the Schiebs “would do all things necessary to obtain water rights for the Cross-claimants’ Property [meaning their Lot 101] from the Water Scheme”. The Court finds that on its proper construction “to enable Burnheim water rights” means “to enable Burnheim [meaning Peter and Leah] to obtain water rights” for their part of Mikimba from the Bore.

Third, what is meant by “water rights”? Neither party suggested that “water rights” was a term of art. Mr Campbell referred to the conclusion of Heydon J in ICM Agriculture v Commonwealth of Australia (2009) 240 CLR 140; [2009] HCA 51 at [199] that “water right” in s 6A(3) of the Valuation of Land Act 1916 (NSW) included rights conferred by bore licences, and the more general discussion by other judges in that case concerning the extent to which such rights were a species of property. In my view, and with respect, that decision does not assist in construing clause 12.3.

Reduced to essentials, the case at bar requires the Court to determine whether “water rights” means an entitlement to water by virtue of membership of the Scheme or whether it extends to the rights conferred by the agreement under which the Burnheims currently obtain water. There is no doubt that agreement gives the Burnheims a contractual right to water from the Bore. Had the clause said “a right to water from the Scheme”, the force of the Schiebs’ reliance on the current agreement would be far greater.

However, there are two textual indicators which decisively support the Burnheims’ interpretation. First, “water rights” as opposed to a “right to water” conveys something proprietary, substantial and, if not necessarily permanent, not easily brought to an end. Second, the clause does not speak of water rights from the scheme, but rather “water rights to” the Scheme (my emphasis). This again more naturally means an interest in the Scheme rather than merely a right to take water from the Scheme, that is to say in this case – membership.

Fourth, moving to the surrounding circumstances, I take into account the matters referred to in paragraphs [131] to [133] above. Furthermore, and critically, there is no doubt that both Don and Peter knew how the Scheme worked: membership by vote of the members, with members entitled to free water subject to capital contributions from time to time. Both men were experienced farmers in the Coonamble Shire. They knew about the importance of bore water and how landowners became entitled to use it on their land. When those circumstances are taken into account it would be completely unrealistic – in the absence of clear words otherwise – to discover an objective intention on their part that the expression “water rights to” the Scheme in the Deed of Partition meant anything less than membership of the Scheme.

Fifth, it is legitimate in assessing the commercial purpose of the Deed of Partition to compare the commerciality of the two alternatives which confront the Court. The respective couples were each making a significant investment to increase their landholdings in the district for the purpose of their businesses. They had all been farming in the area for many years and the Court readily infers from those matters that their intention was to add to their long-term assets. There is no suggestion they were short term traders in farming land. They also understood the importance of reliable access to water.

Taking those matters into account, the Burnheims’ construction of clause 12.3 that nothing less than membership of the Scheme was required makes eminent commercial sense. It is, subject to the terms of the Bore Agreement, permanent and cost effective in the sense that the water was free and there was no suggestion that the capital and maintenance costs were large or frequent (as to such costs see paragraph [32] above and paragraph [229(4)] below). Under the Bore Agreement, their entitlement could be transferred to their successors in title to Lot 101. There was also no suggestion that the Schiebs’ would be materially disadvantaged in any way if the Burnheims became a member.

On the other hand, the Schiebs’ construction leads to an uncommercial outcome for the Burnheims with no countervailing advantage to the Schiebs. On the Schiebs’ construction, clause 12.3 could be satisfied by an agreement to provide water where fundamental matters such as the term of the agreement, price, circumstances of termination and transferability were completely at large. Even if it was said that such matters were controlled by implied contractual obligations of reasonableness and good faith, the vagueness or potential permissible breadth of what would comply (depending on your point of view) would still leave the Burnheims in a commercially unsatisfactory condition.

It follows that a consideration of the commerciality of the alternatives only fortifies the Court’s conclusion that the reasonable businessperson would understand that clause 12.3 required the Schiebs to procure that the Burnheims became members of the Scheme.

The Court also accepts (assuming the same construction of “water rights”) the Burnheims’ alternative argument that the Schiebs’ breached clause 12.3 even if the content of their obligation was in the nature of a “best (or all reasonable) endeavours” clause. As appears from paragraphs [83] to [86] above, Don did not lobby or positively advocate to the other members of the Scheme that the Burnheims should be admitted to membership. He in fact appears to have been less than enthusiastic about their membership and gave the other members something of an “easy way out” by simultaneously propounding the alternative option of the agreement to supply the Burnheims with water from the Bore.

Finally, I reject Mr Roberts’ reliance on the contra proferentem principle. As he accepted, this is a rule of last resort (outside of the law relating to guarantees). It is only to be applied if ambiguity remains after all avenues of construction have been exhausted: Zhang v ROC Services (NSW) Pty Ltd; National Transport Insurance by its manager NTI Ltd v Zhang (2016) 93 NSWLR 561; [2016] NSWCA 370 at [140] per Leeming JA (Macfarlan JA agreeing). That is not this case. The application of textual, contextual and commercial considerations has resolved any potential ambiguity so that recourse to the contra proferentem principle is not required.

It follows, and the Court finds, that the Schiebs have breached their obligation under clause 12.3 of the Deed of Partition in that they have not brought about the admission of the Burnheims to be a member of the Scheme. Not one, but two attempts to admit the Burnheims have failed. In the absence of an express provision as to when this should have been achieved, an obligation to do so within a reasonable time from April 2011 would be implied. There was, with respect correctly, no suggestion on behalf of the Schiebs that such a reasonable time continues to run. On any view, it has well and truly expired.

In the alternative, the Burnheims pressed a claim for misleading or deceptive conduct under the ACL. The alleged misleading conduct was said to be an oral representation made by Don to Peter after Mikimba had been passed in at auction that if they purchased the property together, Don would arrange for the Burnheims to become a member of the Scheme for the purpose of securing water rights for the Burnheims’ Lot 101 (the “Water Representation”).

For the reasons set out at paragraphs [134] and [135] above, the Court has found that not only did Don say to Peter words to the effect of “Don’t worry about water, because I can get you onto the Wingadee No. 4 Bore Scheme, and in the meantime, you can have access to water on Nullabar”, but that these words were reasonably understood, and were in fact understood by Peter, to be an assurance that Don would arrange for the Burnheims to become a member of the Scheme, and so obtain permanent water rights.

Both parties accepted that the alleged conduct was conduct occurring in trade or commerce. Accordingly, the only issues to be addressed on the ACL claim are:

It was the Burnheims’ case that, in reliance on the Water Representation, the Burnheims:

In both his affidavit evidence and during cross-examination, Peter said that he would never have purchased Mikimba without an assurance of water rights as a member of the Scheme. Mr Campbell contended that this was clear evidence of Peter’s reliance on the Water Representation in agreeing to purchase Mikimba.

Mr Campbell also submitted that if the Court found the Water Representation had been made, the Burnheims were entitled to rely on s 4(2) of the ACL. The Water Representation was a promise of future action, that is, to arrange for the Burnheims to become a member of the Scheme. At the time the Water Representation was made, the Burnheims contended Don had no reasonable basis to have made that promise, and the Schiebs had not adduced evidence to the contrary.

As to the statutory limitation argument, Mr Campbell submitted that the Burnheims’ claim under s 18 of the ACL had been brought in time.

Mr Campbell submitted that the central question was at what point in time had the damage claimed by the Burnheims’ occurred? This in turn depended on characterising whether or not that damage had accrued on entry into the contract for sale of Mikimba on 25 March 2011 (as contended by the Schiebs, see paragraphs [197] and following below), or whether it was contingent. In arguing that the damage suffered by the Burnheims was in fact contingent, Mr Campbell submitted it did not crystallise until the September 2014 Meeting when the members rejected the Burnheims’ membership application.

While Mr Campbell accepted Mr Roberts’ submission that the seminal authority to be considered was that of Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514, [1992] HCA 55 (“Wardley”), the parties were at issue as the application of Wardley to this case.

Wardley involved an action by the State of Western Australia (the “State”) against merchant bankers in respect of misleading or deceptive conduct, inducing the State to grant an indemnity in favour of the National Australia Bank (the “Bank”) against a facility granted by the Bank to Rothwells. Rothwells defaulted soon after, the indemnity was called on, and the State paid the Bank $33 million. The representations to the State made prior to the entry into the indemnity - that Rothwells had very substantial net assets, that it did not suffer a capital deficiency, and that there were no substantial amounts owed to Rothwells by an individual (or interests associated with that individual) – were wrong at the time they were made.

However, the High Court held in Wardley that the State had not suffered a loss at the time of granting the indemnity to the Bank but rather, as the indemnity was reliant upon a contingency, merely assumed a risk. The loss or damage had only occurred when the State was called upon to honour its indemnity and not before.

Mr Campbell contended that the majority in Wardley found that risk of loss is not itself a category of loss, a principle unanimously upheld by the High Court in Murphy v Overton Investments (2004) 216 CLR 388; [2004] HCA 3 (“Murphy”). As the High Court again found in Murphy, the falsity of a representation at the time it is made is a distinct issue from the time the loss or damage is suffered.

In applying these authorities to the case at bar, Mr Campbell argued that the damage the subject of these proceedings, being primarily the difference in value of the Burnheims’ purchase of their half of Mikimba with and without water rights in the Scheme, was contingent on whether or not they obtained “water rights” to the Scheme. The success or failure of the Burnheims’ membership application was not determined before the vote of the Scheme members at the September 2014 Meeting, and (contrary to one of Mr Roberts’ submissions) the outcome of the vote could not have been known before this time. Accordingly, it was the Burnheims’ submission that the damage was contingent as at 25 March 2011 and remained contingent until the September 2014 Meeting, when it crystallised. Mr Campbell rejected the submission put forward by Mr Roberts that the Scheme’s vote on the Burnheims’ membership application was a foregone conclusion (in that it was always going to fail). Mr Campbell contended that there was no evidence that as at 25 March 2011 Don knew that the vote would fail, or even that the vote was certain to fail.

Finally, Mr Campbell contended some of the authorities relied on by the Schiebs should be viewed with caution, as they were more specifically negligent advice cases or had involved alternative claims for breach of contract and misleading or deceptive conduct.

The Schiebs’ primary case on the ACL claim was that the Water Representation had never been made, with the words attributed to Don never having been said. For this reason, it was never part of their case that Don had reasonable grounds to make the Water Representation. As set out in paragraphs [134] to [143] above, the Court is satisfied that the representation was made.

In any event, Mr Roberts contended that the Burnheims’ claim under the ACL also failed because even if the Water Representation had been made, the Burnheims’ cause of action was statute barred by reason of s 236 of the ACL.

The Schiebs agreed that the cause of action for misleading conduct accrues when loss or damage is suffered as a result of that conduct. It was therefore accepted that the sole issue for determination was when the damage claimed by the Burnheims occurred. However, if it was also accepted that the alleged Water Representation arose in a discussion between Don and Peter on 25 March 2011, then it was submitted that the damage was suffered at the time the parties entered into a commitment on 25 March 2011 to purchase Mikimba together. That is, time started running on 25 March 2011 and the statutory limitation period of 6 years expired in March 2017, more than a year before the proceedings were commenced on 30 May 2018 and cross-claim filed on 9 August 2018.

Mr Roberts accepted that the ascertainment of the State’s loss or damage by the High Court in Wardley could not be determined until the eventuality of extrinsic circumstances, namely the Bank calling upon the State to meet the indemnity. However, Mr Roberts disputed the alleged similarity between the current proceedings and Wardley, seeking instead to distinguish the two cases on the basis that the Burnheims’ cause of action was not similarly contingent. Two submissions were made in support of this distinction.

First, Mr Roberts contended that if the alleged Water Representation was accepted and Don was found to have made an unconditional promise to obtain their membership to the Scheme, then the Burnheims had a right to enforce that promise pursuant to either of ss 232 (injunction) or 236 (damages) of the ACL on and from 25 March 2011.

Second, particular emphasis was placed on evidence which, it was submitted, unequivocally demonstrated the Burnheims’ patent awareness that Mikimba did not have access to water at all, let alone in perpetuity at the time it was purchased. Accordingly, against the Burnheims’ submission that the damage was contingent and did not “crystallise” until the outcome of the September 2014 Meeting, Mr Roberts argued that the September 2014 Meeting “merely confirmed the position or the state of the land as regards water” as it was on 25 March 2011, namely:

Mr Roberts referred to a number of authorities where the damage suffered was found to be ascertainable at the time of the conduct. In particular, Mr Roberts submitted the factual matrix in the current proceedings was comparable to Winnote Pty Ltd (in liq) v Page t/as Freehill Hollingdale & Page (2006) 68 NSWLR 531; [2006] NSWCA 287 (“Winnote”).

In Winnote, the appellant client had suffered damage as a result of negligent advice provided by its firm of solicitors, because at the time the advice was obtained, the client acquired an ordinary lease of a property upon which it proposed to conduct a mining business. A mining licence was subsequently granted to another party and the client’s interest became, or was revealed to be, worthless. The Court of Appeal held by majority (Mason P and Tobias JA) that the client’s loss was not contingent but known at the time of the firm’s advice, when it obtained a bundle of rights inferior to those which it would otherwise have received absent the firm’s conduct.

Just as the appellant in Winnote was found to have purchased “damaged goods”, the Burnheims became bound to pay the purchase price of Mikimba for an elevated price because they thought, at the time, they were purchasing the land “with water rights”. The loss or damage propounded by the Burnheims (which the Schiebs denied) was immediately ascertainable, with Mr Roberts concluding in his written submissions that (emphasis in original):

Against the possibility the Court did find in fact that the Water Representation had been made and that the Burnheims’ claim was not statute barred, Mr Roberts submitted on behalf of the Schiebs that the Court should not be satisfied that Peter relied on those words in the way he had alleged for two reasons:

Finally, Mr Roberts contended in his written submissions that the Water Representation should be treated merely as an opinion on behalf of Don, not a statement made for the purposes of inducing Peter to enter into a joint purchase of Mikimba. To further counter any suggestion of inducement, emphasis was placed on Don’s unchallenged evidence that he could have purchased Mikimba outright and that the Burnheims had in fact required financial assistance (with their banker present at the auction) and that amendments had been made to the Deed of Partition to allow Mikimba to be mortgaged. In such circumstances, it was submitted it was clear Don had not induced Peter to join in the purchase of Mikimba.

Those matters which objectively support the Court’s finding that the Water Representation was in fact said to Mr Burnheim have already been set out in paragraphs [134] to [143] above.

Moreover, the Court is not persuaded by Don’s evidence given in cross-examination that the length of the conversation between he and Peter at the Golf Club bar (which Don tried to minimise) meant the Water Representation could not have been made. The inference to be drawn from this contention was that a brief conversation supported the Schiebs’ case that water access was not discussed at all prior to the parties’ purchase of Mikimba. I reject this proposition. It does not matter whether the conversation was 2 minutes or 10 minutes (as contended by Don and Peter respectively). On either view, I am satisfied the conversation at the Golf Club bar was long enough for the parties to discuss the salient particulars of the purchase, including the purchase price to be offered, how the property would be divided between them and, as a necessary corollary of this, water arrangements.

Turning to the limitation defence, the Court accepts Mr Campbell’s submissions (see paragraphs [189] to [194] above). Damage (including loss of value in Lot 101 or expenditure made in the expectation of membership of the Scheme) was contingent in the sense that it would only be suffered when the future matter – becoming a member of the Scheme – did not come to pass. Although obviously not the same type of contingency as a potential liability under a guarantee, it is a type of contingency that brings it within the limitation analysis of Wardley and Murphy.

The issue can be tested quite simply. If the Burnheims had been asked the day after they had bought Mikimba whether they had suffered any loss arising from Mikimba not being part of the Scheme, the answer would have been along the lines of “No, not yet. It all depends on whether Don gets us membership of the Scheme”. Furthermore, there is no evidence to support the Schiebs’ submission that it was always a foregone conclusion that the Burnheims would not have been admitted to the Scheme and the submission is rejected accordingly.

The limitation defence therefore fails. Don contravened s 18 of the ACL by making the Water Representation, being a representation as to a future matter without reasonable grounds by reason of s 4(2) of the ACL. The damage to the Burnheims caused by Don’s contravention was suffered in September 2014 when the members of the Scheme rejected the Burnheims’ application for membership. The Burnheims’ cross-claim relying on the ACL was filed well within the statutory limitation period, which would have expired in September 2020. Pursuant to s 236 of the ACL, the Burnheims are entitled to be compensated for the loss they have suffered because of Don’s contravention. I will consider the question of quantum in the next section of these reasons.

I will next deal with the other arguments raised by Mr Roberts. There are five points to be made.

First, the fact that the Burnheims may have had a present right to enforce the Water Representation by injunction under s 232 of the ACL from the date they bought Mikimba says nothing about when damage was suffered. If anything, it reinforces the conclusion that damage was not in fact suffered unless and until the Water Representation was not fulfilled. The Schiebs’ reference to an action for damages under s 236 of the ACL begs the question because it requires the person to have suffered loss or damage because of the contravening conduct.

Second, I do not accept the “lemon” argument, being that the Schiebs had bought damaged goods and that the September 2014 Meeting merely confirmed that status quo that had been known to the Burnheims. The difficulty with this argument is that it assumes the Burnheims bought the land at a higher price because they were buying it “with water rights”.

This assumption is wrong in two respects. First, there is no suggestion that the price the parties paid factored in water rights insofar as the transaction between them and the vendor is concerned (or as between themselves). Second, it is undisputed that Peter knew Mikimba did not have access to bore water at the time of the purchase. What the Burnheims were buying was not the land “with water rights”, but rather with Don’s assurance that he would in the future procure them to have those rights (understood as membership of the Scheme). To the extent the metaphor is helpful (if at all), the Burnheims’ share of Mikimba only became a lemon of the kind hypothesised by Mr Roberts when Don could not make good on the Water Representation. So understood, there is no relevant factual similarity between this case and Winnote.

Third, for the reasons set out in paragraphs [135] to [143] above, the Court rejects the submission that the Water Representation was not a representation that membership of Scheme would be arranged by Don for the Burnheims.

Fourth, as I have already recorded, the Court accepts Peter as a reliable witness and accepts his evidence that he relied on the Water Representation in purchasing Mikimba. Given the importance of access to water and the fact that both men understood that Lot 101 otherwise only had surface water, that reliance is also inherently likely. The fact that Peter may not have expressed that reliance to Don at the time of the purchase, while relevant, is in itself not sufficient to detract from the conclusion which the Court has reached on the question of reliance.

Fifth, the Court does not accept that the Water Representation can be properly characterised as a statement of opinion. In the context in which it was made, it was plainly a representation that Don would in fact arrange for the Burnheims to become a member of the Scheme (see paragraph [216] above).

Neither party suggested that, if the Burnheims were entitled to damages, there should be any difference in the quantification of those damages in contract or under the ACL. As the matter was argued, there was only one area of dispute as to quantum, which was whether the Burnheims had adequately proven the loss they claimed as the difference between the value of Lot 101 with and without an entitlement to draw water from the Bore as part of the Scheme. For the reasons which follow, the Court finds for the Burnheims on that question.

Both parties retained experts to value Mikimba for the purpose of determining the loss of value of what, with the registration of the subdivision, has become Lot 101, arising as a result of Don’s failure to arrange their membership of the Scheme and so secure water rights. Jeffrey Heal and Bruce Sharrock were retained by the Burnheims and the Schiebs respectively. The experts were cross-examined concurrently.

Pursuant to orders of the Court, Mr Heal and Mr Sharrock held a joint valuers’ conference and their agreed property values as at January 2019, insofar as they concerned Mikimba as a whole as well as Lot 101 and Lot 102 individually, were confirmed on 3 April 2019 as:

In considering those figures (the “Joint Valuers’ Summary”), four points should be made.

First, both Mr Heal and Mr Sharrock adopted a summation approach as the most appropriate method of valuation. This involved a market analysis of recent sales activity for comparable properties in the Coonamble Shire.

Second, for the purposes of the Joint Valuers’ Summary, Mr Heal and Mr Sharrock also agreed that in order to value Mikimba on the basis of the property having water access, it was necessary to deduct an allowance for the cost of drilling a bore on the property, together with the cost of associated infrastructure. An explanation of this methodology was provided by Mr Heal in his independent valuation report of September 2018:

With respect to valuing Lot 101 and Lot 102 individually, Mr Heal and Mr Sharrock agreed that each lot would be affected by a diminution in value of $110,000 “without water”, with each lot (treated as a standalone property) discounted by $40,000. This was in recognition that it would be an “overcapitalisation” for someone to expend $150,000 sinking a bore on either of the smaller, subdivided portions, with the discount reflecting what they considered to be the market determination of loss of value (T54:47-55:21, T58:27-33).

In response to questions in cross-examination from Mr Roberts as to the valuation methodology, Mr Heal again confirmed that he and Mr Sharrock had made inquiries from drillers who had drilled artesian bores in the Coonamble Shire, but that no driller had actually attended Mikimba on site prior to giving quotes (TT47:7-11).

Third, Mr Heal and Mr Sharrock accepted that the parties’ purchase of Mikimba in March 2011 for $1.25 million was market price, if not slightly above the market price on the assumption that parties often pay a premium where they are adjoining owners (as was the case) (T48:49-49:4, T49:18-23).

Finally, during cross-examination Mr Heal and Mr Sharrock confirmed they had understood their instructions to provide a valuation “with access” as being access to water rights in perpetuity (T53:48-54:1). As such, they had not undertaken a valuation exercise of “access” as a member of the Scheme as opposed to “access” under a licence arrangement (similar to the arrangement which currently gives the Burnheims access to water from the Bore). However, in giving this evidence, I did not understood them to be suggesting there was any material difference between access to water “in perpetuity” and as members of the Scheme. The real point of distinction was with a contractual right to draw water of the kind currently available to the Burnheims. Both valuers said they had never before heard of such an arrangement to draw bore water (T55:50-51:23).

On behalf of the Burnheims, Mr Campbell submitted that the quantum of damages calculated under either the contract claim or the ACL claim is $131,821.04, comprising:

Although no objections were initially raised to the tender of the Joint Valuers’ Summary on the first day of hearing, in written submissions provided in advance of closing submissions Mr Roberts sought to contend that certain aspects of Mr Heal and Mr Sharrock’s evidence should be “rejected” by reference to the principles set out in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 (“Makita”).

Mr Roberts submitted that the opinion given by Mr Heal and Mr Sharrock concerning the diminution of the value of the whole of Mikimba “without water” as it existed prior to the subdivision (being a reduction of $150,000) should be “rejected” as:

With respect to the diminution of the individual subdivided lots, for the reasons set out in the preceding paragraph Mr Roberts again challenged the reliability of the estimates.

When I asked Mr Roberts whether his submissions were in fact a late attempt to exclude the evidence, Mr Roberts confirmed that he accepted the evidence was “in” and that his submissions were confined to the weight the Court should give that evidence. However, Mr Roberts contended that because the principles set out in Makita had not been met, that part of the experts’ joint evidence should be rejected in its entirety, notwithstanding it was the only evidence before the Court on this aspect of the damages. I understood Mr Roberts’ reliance on Makita to be a submission that the valuers had not exposed their reasoning and that their reliance on the information they had obtained from the drillers was flawed because of the lack of precision (including the absence of an inspection of Mikimba) in that information.

Mr Campbell submitted that the experts had clearly exposed their reasoning, in particular by the passage reproduced in paragraph [224] above and adopted by Mr Sharrock, and that the valuers’ approach adequately allowed for the generic nature of the quotations obtained from the drillers.

The Court rejects Mr Roberts’ submission. As has often been said, valuation is an art and not a science. As Mr Campbell submitted, the valuers’ process of reasoning was clearly set out in their respective reports, which then formed the basis of the opinions they came to in the Joint Valuers’ Summary. Their approach, in the absence of “comparable sales”, of taking into account the value of drilling a bore is self-evidently logical and their reliance on the information they obtained from the local drillers, albeit generic to the area, not unreasonable.

Furthermore, there was no suggestion that the Schiebs could not have sought to adduce their own more specific evidence of the cost of drilling a bore on Lot 101 had they wished to do so. Instead, they acquiesced in their own expert’s adoption of the information that Mr Heal (for the Burnheims) had obtained from the drillers.

No one suggested there was any difference between the relevant property values in January 2019 and as at the date of hearing. The Court is therefore satisfied that the Joint Valuers’ Summary provides a reliable basis for the Court to find (as it does) that Lot 101 is worth $110,000 less than it would be if the Burnheims were able to irrigate it as members of the Scheme.

There will be judgment on the cross-claim for the Burnheims in the principal sum of $131,821.04. Subject to any special application, the costs of the cross-claim should follow the event. The parties will be given an opportunity to bring in short minutes and to make submissions in relation to the costs of the (settled) principal claim.