The contest between the owner of the Hazelwood Coal Mine and Power Generation Facility (Hazelwood) and Latrobe City Council (Latrobe) over who is responsible for a mining diversion drain at Hazelwood Coal Mine has concluded with delivery of judgment from Victoria’s Court of Appeal rejecting an attempt by Hazelwood to divest itself of responsibility for the Morwell Main Drain (MMD).

The finding at first instance and in the Court of Appeal involved important consideration of elements of the Local Government Act 1989 (Vic) and the Water Act 1989 (Vic).

The Hazelwood Mine and the MMD were constructed by the State Electricity Commission of Victoria (SECV) in 1949. The MMD was constructed as, and acted primarily as, a cut off drain diverting flows of water from entering the mine, and ultimately protecting the mine. The MMD drained stormwater from the southern parts of the township of Morwell, the Morwell Industrial Estate, Hazelwood land and the Princes Freeway through to the Morwell River. It is common ground that the majority of water flowing through the MMD flows from the Morwell township.

The litigation was triggered by an incident in February 2011, following heavy rainfall in the catchments surrounding the MMD and causing the northern batters of the mine, which supported the MMD, to partially collapse, a sinkhole to form in the MMD and cracks to develop in the Princes Freeway. Hazelwood was required to undertake substantial repairs and works on the MMD and surrounding areas costing in excess of $10 million.

Shortly following the incident, Hazelwood began asserting that the MMD had properly vested in Latrobe and that Latrobe was solely responsible for the operation and maintenance of the MMD and should bear all liability for the consequences of any damage both to or by the drain. Latrobe vehemently denied both ownership and responsibility.

Hazelwood sought judicial support, commencing proceedings in the Supreme Court of Victoria seeking declarations that:

  • Latrobe had been responsible for the sections of the MMD outside of Hazelwood’s land since in or around 1990, which took effect upon commencement of s 198 of the Local Government Act 1989 (Vic).
  • Latrobe had been responsible for the section of the MMD on Hazelwood’s land, since in or around September 1996, as a result of the privatisation of the mine, since the drain was no longer owned by a public authority, pursuant to s 198(2) of that Local Government Act 1989 (Vic).

Hazelwood’s alternate arguments were that if the MMD was not vested in Latrobe:

  • Latrobe had no right to cause public drainage water to discharge into the MMD and that Hazelwood had a right to stop the flow of water into the MMD (the self-help remedy); or
  • that the discharge of public drainage waters into the MMD was a trespass or a nuisance on Hazelwood’s property which should be stopped by the issue of an injunction.

Latrobe resisted these claims, arguing that, among other things, the MMD existed principally for the benefit of the mine and that in these circumstances, notwithstanding the public drainage function, it should remain the responsibility of Hazelwood, as the miner. Further, and in relation to the self-help remedy, Latrobe argued that this relief could result in flooding of the southern area of the township of Morwell.

The principal objective of the Supreme Court proceedings was to shift, as far as possible, responsibility for any future expense for maintenance and repair of the MMD to Latrobe, and away from Hazelwood. As His Honour Justice Garde later stated in his judgment of 19 November 2015 ‘[I]t was the sinkhole incident which triggered the dispute between HPP [Hazelwood] and Latrobe’ and that ‘[I]t is plain that HPP was concerned by the potential cost implications of the sinkhole incident.’

On 19 November 2015, Justice Garde of the Victorian Supreme Court delivered judgment, finding wholly in favour of Latrobe. His Honour found that:

  1. the MMD is a private drain and not a public drain
  2. the flow of water from council drains under the management and control of Latrobe into the MMD is reasonable for the purposes of ss 16 and 20 of the Water Act 1989 (Vic)
  3. the declaration and injunction sought by Hazelwood, which would have the effect of authorising Hazelwood to carry out works to block the entry of water from council drains into the MMD, should not be granted as the self-help remedy sought would potentially cause flooding of public and private property.

On 18 January 2016, Hazelwood sought leave to appeal Justice Garde’s decision on four grounds:

  1. The learned trial judge erred in finding that the words ‘public drain’ in s 198(1) of the Local Government Act are simply used in their common and ordinary meaning.
  2. The learned trial judge erred in failing to find that the MMD was a public drain, within the meaning of s 198(1), from at least September 1996, including, and as a result of, erring in finding that condition 5.4 of the Mining Licence applies to the flow of the Council public drainage water.
  3. The learned trial judge erred in finding that at all relevant times the flow of water from the Council public drainage system into the MMD was a ‘reasonable flow of water’ for the purposes of ss 16(2) and 20(1) of the Water Act.
  4. The learned trial judge erred in finding that Hazelwood’s claims for declaratory and injunctive relief should be refused on discretionary grounds, without taking into account that Hazelwood had submitted that any injunctive relief would appropriately be subject to a stay for a sufficient time to enable Latrobe to compulsorily acquire the MMD or construct an alternative means of drainage.

The Court of Appeal unanimously upheld Justice Garde’s decision on 3 June 2016.

The Court of Appeal noted that the ‘real thrust of Hazelwood’s case on the facts, as elaborated orally, was that, because the largest component of the water which flows into the MMD originates in areas drained by township drains, the MMD must be characterised as a public drain’ [165].

The Court of Appeal strongly disagreed with Hazelwood’s assertions and, in upholding Justice Garde’s decision, they identified the most significant factors in support of the conclusion that the drain is a private drain to be as follows:

  • the MMD was constructed entirely at the cost of Hazelwood’s predecessor in title
  • the purpose of the MMD, when first constructed and then when re-constructed, was to direct waters away from the open cut pit
  • the MMD forms part of the mine work plan and the ultimate form of drainage and stability measures adopted upon final rehabilitation of the area covered by the work plan is unresolved and subject to statutory obligations and obligations under the mining licence
  • the MMD accepts waters which originate, in part, from flows from Council drains as a result of agreements made by Hazelwood’s predecessor in title in the course of its management and control of the MMD
  • the agreement to accept municipal drainage waters into the MMD at the time the MMD was relocated was made by SECV, in part, to facilitate benefits to it, including the obtaining of planning approval for the relocation of the MMD
  • the agreement by the SECV, Roads Corporation Australia (RCA) and the Latrobe that the current connections would be installed under the Bypass embankment and into the MMD was intended to provide for a drainage solution controlled on its land by the mine operator [169].

The Court of Appeal further noted that, in relation to the self-help remedy, that:

  • were the Court to authorise the self-help sought by Hazelwood, the seriousness of the flooding consequences would result, to a material extent, from the fact that Hazelwood sought to stop not just the increase in flow from municipal drains since 1949 but the whole such flow [274]; and
  • Hazelwood accepted that the flow as at 1949 was reasonable, and complained of the increase in flow between 1949 and 1987, yet it did not restrict its claim for relief to the increase [275].

The Court of Appeal regarded this as a ‘significant matter providing a discrete basis for the refusal of discretionary relief and that the evidence made it abundantly plain that, if Hazelwood were to exercise self-help by blocking RCA drains, there was a substantial risk of flooding both parts of the Bypass and other properties north of the Bypass’ [277].

The decision is one of significance for a number of reasons:

  • Firstly, although the statutory predecessors of s 198 of the Local Government Act go back well over a century, prior to this decision, there had been no decision of an Australian court giving definition to the expression ‘public drain’. This decision makes clear that whilst the carriage of public drainage water may well be a necessary prerequisite to a finding that a drain is a ‘public drain’, it is not determinative of the question. The passage of what might be described as ‘public water’ through a drain alone does not sufficiently inform the inquiry, and consideration should be given to a number of factors when determining whether a drain is indeed a public drain.
  • Secondly, the decision confirms that the free flow principle, as accepted prior to Gartner v Kidman [1962] HCA 27, has been embraced, modified and extended in a number of ways in the Water Act.
  • Finally, the decision means that the MMD continues to be vested in and must be managed and controlled by Hazelwood. Had Latrobe been unsuccessful it could have cost around $100 million in future costs.

Latrobe was represented by David Laidlaw and Jacinta Atkinson of Maddocks.

A full copy of Hazelwood Power Partnership v Latrobe City Council [2015] VSC 638 can be found here.

A full copy of Hazelwood Power Partnership v Latrobe City Council [2016] VSCA 129 can be found here.