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Flooding claims the recent deluge

Feature Articles

Cite as: April 2011 85(4) LIJ, p.36

Recent clarification by the Supreme Court about liability in flooding claims will expand the types of cases falling within VCAT’s jurisdiction.

By Robert Sadler

Drainage law is complicated. There are lots of traps, and this article explores some of them.

By and large VCAT has exclusive jurisdiction to hear drainage and inundation claims.1 VCAT, not the courts, has jurisdiction if a claim can properly be brought under ss16 or 157 of the Water Act 1989 (Vic) (WA) or s74 of the Water Industry Act 1994 (Vic) (WIA). In these cases, common law claims are no longer available and the only claim available is the statutory cause of action.2

Section 16(1) of the WA deals with flows that do not emanate from an “authority’s works” causing damage. Normally a local council is not an “authority”. A s16(1) claim requires the applicant prove: (a) a flow; (b) of water; (c) from the land of a person to other land; (d) the flow must be “onto” the other land; (e) the flow must be “not reasonable”; and (f) the water must cause injury, damage or economic loss to another person (that is, the claimant). Liability attaches to “the person who caused the flow”.

Section 157 of the WA deals with flows from works of water authorities. Typically, “authorities” are the regional and rural water authorities. Section 74 of the WIA deals with flows from the works of the Melbourne water and sewage licensees – Yarra Valley Water, South East Water and City West Water. Save for one exception, mentioned later, s74 of the WIA and s157 of the WA are for all relevant purposes in identical terms. They provide that a water authority or licensee is liable for negligent or intentional flows from its works. Importantly, the onus is on the licensee to disprove negligent or intentional conduct.

This article refers generically to ss16 and 157 of the WA and s74 of the WIA as the “liability provisions”.

The need for a flow “onto land”

The previously unresolved issue was whether a wholly subterranean flow was a flow “onto land” for the purposes of the liability provisions. “Land” includes both the surface of the land and subsurface space. The question is not what constitutes land.3

Since 1996, VCAT Deputy President Michael Macnamara has maintained an oft-repeated position that the use of the preposition “onto” in ss16 and 157 shows that “the flow of water must entail a surface inundation at least to some degree”.4 However, in 2004 Senior Member Damien Cremean in Lakobend Pty Ltd v City of Boroondara5 disagreed with Deputy President Macnamara’s view.

In 2010, in the Supreme Court case of Pumpa & Ors v Goulburn-Murray Rural Water Corporation6 (Pumpa), Cavanough J expressed a disinclination to support the views of Deputy President Macnamara on this point.7

In Pumpa the claimants alleged that over many years water had flowed from particular salinity mitigation works of the authority, causing increased salinity in the soil and groundwater of their farms. The authority persuaded VCAT (constituted by Deputy President Macnamara) to dismiss the proceeding summarily under s75 of the Victorian Civil and Administrative Tribunal Act 1998 on the basis that, on the pleadings, it was doomed to fail. While in the end Cavanough J did not make any conclusive determination of the meaning of “onto land”, he expressed (at [19]) his doubt as to Deputy President Macnamara’s views as follows:

“In passing, however, I note that one of the stated purposes of the Water Act 1989 is ‘to eliminate inconsistencies in the treatment of surface and groundwater resources and waterways’: s1(l). Further, a ‘flow’ of water is defined to include ‘percolation’ and ‘seepage’ and to include ‘both surface and underground flow’: s3(1). Although the flow must be ‘onto’ land, the word ‘onto’ can sometimes be used to refer to movement that is not movement to the (top) surface of a thing. To take an example, one can say that a person stepped ‘onto’ a train or bus without conveying the meaning that the person stepped onto the roof of the train or bus. Similarly, land can be thought of as having layers or levels, with multiple surfaces below the surface of the top layer or level. A basement carpark with several levels comes readily to mind, but the same idea may extend to land free of any buildings. Further, I note that Deputy President Macnamara has taken the view that claimants must demonstrate a surface flow ‘at least to some degree’ [see [2008] VCAT 2268 at [56] and [58]]. With respect, this seems an odd touchstone. Neither Deputy President Macnamara nor the defendant seems to suggest that the damage must be wholly or even partly attributable to that part of the flow that occurs on the surface of the land. It is difficult to understand why Parliament would have intended that a minor surface manifestation (at least) should be a necessary condition of liability for damage arising from an otherwise subterranean flow of water. It may be doubted whether liability was truly intended to turn on such a matter . . . In England there can be liability at common law in respect of a wholly subterranean flow . . . ”.

Damage caused by chemical composition of water

In Goulburn Co-Operative Limited v Leongatha Water Board8 and at first instance in Pumpa & Ors v Goulburn-Murray Rural Water Corporation,9 Deputy President Macnamara expressed the view that to succeed in a s157 (or s16(1)) claim the damage must be “caused by flows of water not by the chemical composition of water”. Sections 16(1) and 157 both focus on the damage caused by “the water”, which in turn is the water constituted by the offending flow.

However, in Pumpa Cavanough J disagreed. His Honour found that damage caused by salinity in the water sufficed to meet the requirement that “the water cause the damage”. His Honour said (at [21]): “the Tribunal’s holding that a flow of water (as distinct from the water itself or its composition) must be to some extent causative of damage is incorrect . . . ”. His Honour found that the damage need not be caused by the movement or the flow of water and that damage caused by the chemical components carried by the water was sufficient to found an action under ss16 and 157.

One of the difficulties with this conclusion is that it is not always obvious what water is. The WA defines “water” as “water, whether or not it contains impurities” (s3), but almost all things are constituted by a substantial amount of water. When do the impurities (which relevantly cause the harm) reach a level where the substance in issue is no longer water?

I have, for instance, had experience in recent years with cases involving large flows of liquid coffee, large flows of melting ice and substantial chlorine flows. If it is the coffee in the water, the cold in the melting ice or the chlorine chemical in the chlorine flow which causes the injury, can it be said that these are nevertheless cases involving damage “caused by water”?

In Pumpa it was the salt in the water which caused the damage. Based on Cavanough J’s reasoning, it would appear that if the damage is caused by chemicals carried in water, then the damage is to be regarded as damage “caused by water”.

Negligent conduct and water authorities

Section 157 of the WA provides that if “as a result of intentional or negligent conduct” by a water authority in the exercise of a function under specified parts of the WA, a flow of water occurs from its works onto any land, and the water causes injury, damage to property or economic loss to a person, the authority is liable to pay damages to that person in respect of that injury, damage or loss. Importantly, the onus lies on the water authority to disprove intentional or negligent conduct if an offending flow occurs (s157(2)).

Through various versions of the legislation, the meaning of the phrase “negligent conduct” has caused consternation and difficulty in construction. The matter was agitated at length from the 1950s to 1980,10 with the result that water authorities claimed that it was virtually impossible for them to disprove negligent conduct.

In 2008, in Transpacific Cleanaway Ltd v South East Water Limited,11 the matter was agitated before VCAT. In 2000 a sewer was blocked by tree roots and this caused a sewer discharge. The authority fixed the problem. However, the roots grew back and in 2006 the sewer experienced another blockage, causing a sewer discharge and damage. The applicant sought relief under s74 of the WIA. The respondent licensee argued that liability relying on “negligent conduct” should be assessed using similar principles as a negligence claim at common law and that what it required, by reason of the reverse onus, to disprove was the absence of a duty, breach or causation. VCAT disagreed.

In 2010, on appeal in the Supreme Court in South East Water Ltd v Transpacific Cleanaway Pty Ltd,12 Cavanough J concluded (at [32]) that “the references to ‘negligent conduct’ in s74 of the WIA do not require that an independent duty of care be identified in accordance with the common law principles that govern the tort of negligence”.

His Honour pointed out (at [45]) that it is tempting to see the reference to “negligent conduct” in s74 as broadly corresponding to the “breach” element of the tort of negligence, as VCAT itself may have done in this case, judging by its language. He stressed, however, that liability under s74 (s157) was a freestanding, statutory cause of action, to be assessed according to the provisions of the WIA and the provisions of any other applicable statute, not according to common law principles save to the extent that the legislation itself indicates otherwise. To that end, questions of foreseeability or breach are irrelevant to the determination of liability.

In Transpacific the authority had argued that its position was strengthened by Parliament’s intention for public authorities to be able to limit exposure by reliance on s83(a) of the Wrongs Act 1958 (Vic). That section provides that in determining whether a public authority has, or has not, breached a duty of care, a court is to consider that the functions required to be exercised by the authority are limited by the financial and other resources that are reasonably available to it for the purpose of exercising those functions. Cavanough J disagreed and was not prepared to accept that those provisions of the Wrongs Act which work to potentially limit the liability of public authorities necessarily applied to claims under s74 (s157).

In addition, the licensee had argued that because it had met the service standards set by the Essential Services Commission (ESC) for maintenance, it could not be found “negligent”. Cavanough J concluded that the true construction of the WIA was not affected by the terms of the ESC’s service standards and was irrelevant to the question of whether South East Water Ltd owed a “duty” to Transpacific, “because that question was foreclosed and answered by ss74, 74A and 74B themselves”.

Damage caused by sewage flows

Assuming, as appears to be correct,13 that a flow of sewage is to be regarded as a flow of water for the purposes of the liability provisions, there is an inconsistency in the legislation in respect of liability for damage caused by sewage flows.

Sewage flows in metropolitan Melbourne are managed by “licensees” and liability arises under s74 of the WIA. The licences contain terms about the licensees’ responsibility to manage sewers. Section 74 attaches liability to flows arising from intentional or negligent conduct on the part of a licensee in the exercise of a function under its licence. The management of sewage flows is clearly conduct on the part of a licensee in the exercise of a function under its licence. Therefore a claim for redress for sewage inundation may be made, as in Transpacific, against the licensee under s74 of the WIA.

However, in regional and rural Victoria sewers are managed by authorities. Liability can arise only under the WA. The WA provides that liability under s157 arises if, as a result of intentional or negligent conduct on the part of an authority in the exercise of a function under “Part 8, Division 2, 3 or 5 of Part 10, or Part 11”, there is a flow of water from its works. However, an authority’s function to manage sewers does not arise “under Part 8, Division 2, 3 or 5 of Part 10, or Part 11”. It arises under Part 9. Therefore s157 cannot extend to sewage flows.

There is no apparent reason for this inconsistency. The lack of a legislative basis to bring a claim under s157 against a water authority for sewage flows was confronted in 2008 by VCAT in Wade v Barwon Region Water Authority.14 VCAT concluded that a claim for sewage inundation could not be brought under s157 and fell back on an examination of liability under s16(1). This is no doubt correct as a matter of literal construction of the WA as presently drafted. However, a s16(1) claim is a claim of “strict liability” and fault is irrelevant.15 As a result, a claim framed under s16(1) deprives the authority of the opportunity of arguing that the flow did not arise by reason of its intentional or negligent conduct.

In other words, if a sewage inundation occurs in metropolitan Melbourne, VCAT can conclude that a licensee is not liable because the flow did not arise by reason of its negligent conduct. However, if the sewage flow occurs in regional or rural Victoria, even if VCAT is satisfied that the authority was not “negligent” in the creation of the flow, it must find the authority liable if the other elements of s16 are met. This inconsistency is a matter which warrants parliamentary intervention.

Conclusion

Until 2010, much of the judicial reasoning giving meaning to the liability provisions had been cobbled together over the years by VCAT. The Supreme Court had had no opportunity to provide clarification. In 2010, the Court was given that opportunity and advanced constructions which will operate to expand the types of cases falling within VCAT’s jurisdiction.

ROBERT SADLER is a Victorian barrister, practising extensively in water law. The numbers in square brackets in the text refer to the paragraph numbers in the judgment.

1. See s19(1) and (10) Water Act 1989 (Vic). VCAT does not have jurisdiction to hear a claim for personal injuries arising from a “flow of water which is not reasonable”: see s19(1).

2. See s17(1) and Coles Myer v City West Water [1998] VSC 63; 14 VAR 37. See also RJ Sadler, “Unwanted water: liability for water flows in Victoria” (2002) 76(7) LIJ 66; RJ Sadler, “Wanted – water: rights of access to water” (2003) 77(3) LIJ 43.

3. Pipes under land constitute land for the purposes of the WA: cf. Gas & Fuel Corp of Victoria v City of Williamstown [1978] VR 677 in which underground gas mains were held to be “land”.

4. See Murray Goulburn Co-Operative Limited v Leongatha Water Board (1996) 11 VAR 205, 210; Transpacific Cleanaway Limited v South East Water Limited [2008] VCAT 1798 at [36]-[40]; Pumpa & Ors v Goulburn-Murray Rural Water Corporation [2008] VCAT 2268 at [56] and [58].

5. [2004] VCAT 1709.

6. [2010] VSC 169.

7. The author expressed a similar view: see Sadler RJ “Flooding claims: subsurface dangers for the unwary” (2007) 81(11) LIJ 41.

8. (1996) 11 VAR 205.

9. [2008] VCAT 2268.

10. See e.g. Re Armstrong v State Rivers and Water Supply Commission [1952] VLR 187 and State Rivers and Water Supply Commission v Crea [1980] VR 513.

11. [2008] VCAT 1798.

12. [2010] VSC 46.

13. See Barlow v South East Water Limited & Ors [2001] VCAT 659; Wade v Barwon Region Water Authority [2008] VCAT 907.

14. [2008] VCAT 907.

15. See Turner v Bayside City Council (1999) VAR 130 at 136; BE and D Mawby Pty Ltd v Bingham [2007] VCAT 813 at [39]ff.

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