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- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Hampton Irrigators Pty Ltd v Toowoomba Regional Council  QSC 272
HAMPTON IRRIGATORS PTY LTD
ACN 064 888 633
TOOWOOMBA REGIONAL COUNCIL
ABN 99 788 305 360
BS No 9181 of 2020
Supreme Court at Brisbane
9 September 2020
1 September 2020
PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – DECLARATIONS – APPROPRIATE FORM OF RELIEF - DISCRETION OF COURT – where the applicant and respondent entered into an agreement for the supply of water – where a dispute arose in 2019 after the respondent raised a concern about the levels of radionuclides in the water at the applicant’s Kleinton Bore – where the applicant retained an expert to provide a report on the radiological water quality – where the expert concluded that the water was suitable for human consumption – where the respondent purported to terminate the agreement on the basis that the water was not fit for potable use due to the presence of excessive radionuclides and that the agreement was thereby frustrated – where the parties continued to test the water quality – where there is compelling evidence that the water is potable in regard to its radiological water quality – where the applicant seeks three declarations: (1) that the water capable of being extracted from the applicant’s bore is suitable for human consumption; (2) that the termination of the agreement by the respondent is void; (3) that the agreement remains binding on the parties – where the respondent agrees that the second and third declaration should be made but disputes the first – whether the declarations ought to be made in the terms sought by the applicant
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – RELEVANT CONSIDERATION GENERALLY – where the respondent has allowed the proceedings to continue when it should have known it had no chance of success – where the applicant seeks its costs on an indemnity basis – where the respondent accepts that it must pay the applicant’s costs but submits that costs should be assessed on the standard basis – whether the respondent should be ordered to pay the applicant’s costs on the indemnity basis
Leneham v Legal Services Commissioner  QCA 133, applied
D Cooper QC for the applicant
D Favell for the respondent
Creevey Russell Lawyers for the applicant
Clayton Utz for the respondent
- Hampton Irrigators Pty Ltd (HI) was established in 2001 to conduct a private irrigation scheme to, among other things, provide irrigation to farms in the Hampton area. It established a bore at Kleinton and, on 14 March 2008, entered into an agreement with the Crows Nest Shire Council (CNSC) whereby HI would sell bore water to CNSC and CNSC would sell raw dam water to HI (the Water Supply Agreement).
- After the CNSC amalgamated with a number of other local authorities to become the Toowoomba Regional Council (TRC) there was, on 10 August 2016, a variation of the Water Supply Agreement with HI. It changed from being a water purchase agreement to a water swap agreement.
- For the purposes of this application, the relevant clauses of the Water Supply Agreement are:
“25.1 The parties do not provide any warranty in relation to the quality or the suitability of the Water for any purpose.
25.2 Title and risk relating to the Dam Raw Water will pass from TRC to HI at the Extraction Points.
25.3 Title and risk relating to the Bore Water will pass from HI to TRC at boundary of the Bore Land.”
- The water flowed peacefully until July 2019 when, for the first time, TRC raised a concern about the levels of radionuclides in the water from the Kleinton Bore. Radionuclides can occur naturally in water and there are accepted levels for the safe consumption of water containing them.
- This led to HI retaining Dr Ross Kleinschmidt – an acknowledged expert in the field and a former consultant to TRC – to evaluate the tests which had been undertaken of the water. In his final report of April 2020, he concluded that:
- (a)the radiological water quality was suitable for human consumption,
- (b)the Kleinton Bore water supply was suitable for:
- direct use of the raw water as potable supply, or for irrigation use, or
- use as an augmentation supply to existing water infrastructure.
- On 2 September 2019, TRC purported to terminate the agreement. The basis advanced was that the water from the bore was “no longer safe … owing to the presence of excessive radionuclides”. It was asserted that the agreement had become “frustrated and unenforceable due to unforeseeable excess of contaminants in the bore water making it unfit for potable use”.
- Correspondence passed between the parties and, on 27 September 2019, TRC asserted that the agreement had been terminated pursuant to the force majeure clause in the Water Supply Agreement.
- In November 2019, the parties met with a view to resolving the dispute between them.
- On 5 November 2019, the parties met and reached a consensus on a number of matters. The record of what was agreed at that meeting is not disputed by TRC. In an email of the same day as the meeting, the outcomes were recorded and, in particular, the following:
“It was agreed that ‘the science’ would be the key determiner in a way forward. It was also agreed that Queensland Health’s position on the water quality would ultimately decide the acceptability (or otherwise) of the HI bore water.”
- The only possible variation to that agreement appears in an email from TRC to HI of 24 December 2019 where the following appears:
“The science decision now has another caveat on it in relation to causing material harm to the creek that the water would be discharged into.”
- I note that that possible “caveat” did not refer to potability.
- Water samples were taken by both HI and TRC from the bore between February and May of this year. Each of those samples was analysed by the Radiation and Nuclear Sciences Unit in the Department of Health. It is described as being the radiation safety agency for Queensland and the final arbiter on the question of water quality so far as radiation is concerned.
- In a letter from the Department of Health to Dr Kleinschmidt of 12 August 2020 in which the findings of Dr Kleinschmidt were considered, the following appears:
“… the water is suitable for potable use in regard to its radiological water quality.”
- Dr Kleinschmidt also examined the sample results obtained by the TRC for its water samples and concluded that they corresponded with the HI test results. It follows then that there is compelling evidence that the bore water is potable in regard to its radiological water quality.
- All of the above was known to TRC yet, until this matter came on for hearing, it refused to acknowledge any of these findings. It continued to assert, or at least it did not withdraw from its assertion, that the Water Supply Agreement had been frustrated. At the hearing of this matter, it conceded that its purported termination of the Water Supply Agreement was unlawful. It does that on the basis that neither party to the agreement provided any warranty in relation to the quality or the suitability of the water that they provided – see cl 25.1 of the Water Supply Agreement.
- The TRC accepts that declarations should be made to the effect that its purported termination was void and of no effect and that the Water Supply Agreement remains binding on the parties to it.
- The TRC, though, opposes the making of the first declaration sought, namely that the water capable of being extracted from the Kleinton Bore is suitable for human consumption. It says that the declaration should not be made because there is no utility in the court making such a declaration. That is based upon the provision of the contract which makes the quality of the water irrelevant. Further, it submitted that, even if there were utility, the declaration should not be made because there is a contest of fact. It says that it remains “concerned in respect of the quality of the water and potential environmental impact”. As there is, it says, this factual dispute, the matter should proceed by way of pleadings.
- The TRC has not provided any evidence to demonstrate why it continued to assert that the level of radionuclides was at a level which made the water unsuitable for human consumption. It has asserted that position since July 2019. It has had more than a year to obtain material to support its assertion. Yet it comes to court with nothing that might support that stand in any way. It has drawn water samples and if it has any test results it does not rely on them. It is now too late to assert that there is a factual dispute in the absence of any basis for that.
- While the Water Supply Agreement does not contain any warranties as to the fitness of the water for human consumption, there has been a dispute between the parties for some 15 months about that precise point. In an attempt to resolve the matter, the parties reached an agreement about the final arbiter for that particular question. That arbiter has given its decision. All of that was, of course, done in an informal way and with an eye to reducing the costs to the parties and avoiding litigation. The attitude of TRC, though, has meant that litigation was necessary because it maintained a position which could not be justified with respect to the termination of the contract. The declaration sought by HI will have utility because it will bring to an end a dispute between the parties.
- The declarations sought are as follows:
- (a)that the water capable of being extracted from the Applicant’s bore located at Kleinton is suitable for human consumption,
- (b)that the termination of the water supply agreement dated 14 March 2008, as varied by deed dated 10 August 2016 (the Water Supply Agreement) by the Respondent is void and of no effect,
- (c)that the Water Supply Agreement remains binding on the parties to it.
- The respondent concedes that the second and third declaration sought should be made. For the reasons I have given, I will make a declaration in terms similar to the first declaration sought by HI. In its present form the first declaration covers suitability for human consumption on all bases. I will make a declaration which is confined to the matter which was in dispute between the parties, namely the potability of the water in regard to its radiological water quality.
- HI seeks its costs of this application on an indemnity basis. The TRC accepts that it must pay the costs but says that they should be assessed on the standard basis.
- The principles relating to the awarding of costs on the indemnity basis were considered in Leneham v Legal Services Commissioner where the following appears:
“ The categories in which the discretion to award costs may be exercised are not closed. The well-known principles set out in authorities such as Colgate-Palmolive Company v Cussons Pty Ltd do not define or limit the ambit of the discretion. As was observed by Basten JA in Chaina v Alvaro Homes Pty Ltd, the general rule remains that costs should be assessed on a party and party basis and the standard to be applied in awarding indemnity costs ought not ‘be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part’. Some relevant delinquency on the part of the unsuccessful party or unreasonable conduct is demonstrated, that may warrant an order for indemnity costs. As stated in LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo:
‘Whilst the awarding of costs on an indemnity basis will always ultimately depend upon the exercise of a discretion in the particular circumstances of each individual case, the justification for an award of indemnity costs continues to require some special or unusual feature of the particular case.”
 Special circumstances warranting indemnity costs may be demonstrated where a proceeding has been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success.” (citations omitted)
- In this case, TRC has allowed these proceedings to continue when it should have known that it had no chance of success. I order that the respondent pay the applicant’s costs on the indemnity basis.
- HI is to bring in minutes of order which reflect these reasons.
 QCA 133.
- Published Case Name:
Hampton Irrigators Pty Ltd v Toowoomba Regional Council
- Shortened Case Name:
Hampton Irrigators Pty Ltd v Toowoomba Regional Council
 QSC 272
09 Sep 2020