Its raining cats and dogs!

What is the issue?

A recent decision of the Court of Appeal identifies seven factors to be considered and assessed in determining whether an overflow of water onto land is reasonable.[1]  These factors may have relevance to statutory agencies, Departments, Ministers and authorities responsible for public land or public infrastructure in particular, at times of heavy rainfall.

What was decided?

The Court of Appeal in Hazelwood Power Partnership v Latrobe City Council[2] held that the Morwell Main Drain was not a public drain for the purposes of the Water Act 1989.  Following that conclusion, the Court of Appeal considered whether the flow of water from the Morwell Industrial Estate and from the township of Morwell into the Morwell Main Drain was unreasonable.

Historically, the test of lawfulness for flow of water related to whether the landowner was uphill or downhill.  Called the 'free flow principle', it was considered that an owner of lower land was obliged to receive all flows of surface water onto his or her land that occurred naturally from the higher land.  The Water Act 1989 replaced the 'free flow principle' with a 'reasonableness' test.  That is, the question is no longer whether a flow of water is 'natural' but whether it is 'reasonable'.

The Court of Appeal agreed with the trial Judge's finding that the flow onto the Hazelwood land of waters generated in substantial part by the municipal drains on higher ground was reasonable.  The seven key factors considered in concluding that the flow of water was 'reasonable' were:

1. the contours of the land;
2. the use of the lands concerned and the lands in the vicinity;
3. the limited sense in which the water flow complained of from the Council drains could be said to be something other than a natural flow (ie, the 'free flow' principle);
4. the purpose for which and degree of care with which the Morwell Main Drain was originally constructed by the SECV in 1949;
5. there was no evidence of a lack of appropriate regard to the cumulative impact of the subsequent drainage works which occurred over time;
6. the fact that all drainage works were assumed to have appropriate statutory authority;
7. the fact of prior consent or acquiescence to the flows of water for more than 60 years, since the Morwell Main Drain was first constructed by the SECV for the purpose of diverting flows of storm and rain water run-off from entering the open cut mine. 

The Court of Appeal noted that the flow of water carries an ongoing risk of serious damage to the Hazelwood land and the northern batters in particular.  However in this case, the flow was considered to be reasonable.

What does it mean for me?

The Court of Appeal has provided decision-makers (and those who advise them) guidance in assessing the question of reasonableness of flow of water from public land or infrastructure into private drains or onto privately held land, identifying seven relevant considerations.

Alison O'Brien
Acting Victorian Government Solicitor

Eliza Bergin
Principal Solicitor

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[1] Hazelwood Power Partnership v Latrobe City Council [2015] VSCA 129 (Warren CJ, Osborn and Beach JJ).  See further, section 20 of the Water Act 1989

[2] [2015] VSCA 129

Attorney-General v Honourable Mark Dreyfus: When can burdensome freedom of information requests be refused?

Freedom of information (FOI) schemes in both Victoria and the Commonwealth give public entities the power to refuse unreasonably burdensome FOI requests.  In the case of agencies, requests may be refused where they would substantially and unreasonably divert the resources of the agency from its other operations. In the case of ministers, requests may be refused where they would substantially and unreasonably interfere with the performance of the minister's functions. 

A recent decision of the Full Court of the Federal Court, Attorney-General v Honourable Mark Dreyfus [2016]FCAFC 119, provides guidance as to when a request can be refused on this ground.

The decision, which was handed down on 6 September, concerned an FOI request made by the Hon Mark Dreyfus, a Member of the Commonwealth Parliament, seeking access to the diary entries of Commonwealth Attorney-General George Brandis.  Mr Dreyfus requested entries for the period 18 September 2013 to 12 May 2014 in a 'weekly agenda' format.  The diary entries were generally brief, containing the time of the meeting, the person to be met and occasionally a short description. 

The Attorney-General initially refused the request, on the basis that processing it would 'substantially and unreasonably interfere' with the performance of his functions.  The Attorney-General estimated that the process would take around 630 hours, including time spent gathering information that could not be gleaned from the entries alone and consulting with third parties mentioned in the entries.

The Administrative Appeals Tribunal set aside the Attorney-General's decision, a finding that the Full Court of the Federal Court upheld. 

The Federal Court's decision turned on the following two questions:

• When would the Attorney-General be required to consider extrinsic documents in determining whether a claimed diary entry could be released?
•  When would the Attorney-General be required consult with third parties to determine whether such a party might wish to claim an exemption?

In relation to both questions, the Court held that the Attorney-General would only be required to consider extrinsic documents or consult with third parties if it appeared from the face of the entries that this would be necessary.  The Court found that most of the entries did not require this.  The request could not, therefore, be rejected for substantial and unreasonable interference with the performance of the Attorney-General functions. 

The Federal Court's judgment is consistent with past determinations on similar issues.  In Fletcher and Prime Minister of Australia[2013] AICmr 11 (22 February 2013),  for example, the Australian Information Commissioner upheld a request for access to cross-bench meeting entries in the Prime Minister's diary for the period of about one year.

The decision is a useful reminder for public entities to adopt a pragmatic approach when considering whether a FOI request would be a substantial and unreasonable diversion of resources, and to keep in mind that it will be necessary to prove, with persuasive evidence, to the Freedom of Information Commissioner, or VCAT, that any claim that the processing of a particular FOI request would constitute a substantial and unreasonable diversion of resources would in fact do so.

Penina Berkovic 

Acting Managing Principal Solicitor

Andrew Field 

Managing Principal Solicitor

Foreign Resident Capital Gains Withholding Tax

Sales of certain taxable Australian property made after 1 July 2016 are subject to a new withholding regime introduced by the Tax and Superannuation Laws Amendment (2015 Measures No 6) Act 2016 (Cth).  Under this regime, purchasers are required to withhold 10 percent of the purchase price on all acquisitions of certain taxable Australian property and remit it to the Australian Tax Office (ATO) unless the vendor provides a clearance certificate.

This measure has been introduced to improve compliance with capital gains tax rules by foreign residents, but will have widespread implications for Australian residents involved in property transactions.

When does the measure apply?

The regime applies to contracts entered into after 1 July 2016 by which the purchaser acquires certain taxable Australian real property, including:

• Real property in Australia, including land, buildings, residential and commercial property;
• Lease premiums paid for the grant of a lease over real property in Australia;
• Mining, quarrying or prospecting rights;
• Company title interests; and
• Options or rights to acquire such property or such an interest.

Certain transactions are excluded, including real property interests of less than $2 million, transactions listed on an approved stock exchange, or where the vendor is under external administration or in bankruptcy.

What does this mean for purchasers of property with a market value of $2 million or more?

If the purchaser receives a valid clearance certificate from the vendor, withholding tax is not to be withheld from the transaction and the purchaser can rely on the certificate without making further enquiries.

If the purchaser is not provided with a valid clearance certificate before settlement, the purchaser must withhold 10 per cent of the purchase price and pay it to the ATO on or before the day the purchaser becomes the owner of the asset.  A short grace period applies before interest begins accruing.
Prior to settlement, all purchasers involved in the sale must complete an online Purchaser Payment Notification form, including the details of the vendors and the relevant asset. Once the form is processed, each purchaser will receive a payment reference number, payment slip and barcode.  These are used when making the payment to the ATO via electronic transfer, in person at Australia Post or mailed with a cheque.
There are significant penalties for failing to withhold the required amount, and administrative penalties may also apply.

What does this mean for vendors?

Australian resident vendors of relevant real property will need to apply for a clearance certificate and provide this to the purchaser before settlement to ensure no funds are withheld from the sale proceeds.

Vendors can apply for a clearance certificate at any time via the ATO's online application form.  Where the names of the registered proprietor and the taxpayer are consistent a certificate should be issued automatically within days.  Vendors should apply as early as practicable and check for consistency between ownership and tax records to avoid delays in the process.

A clearance certificate is valid for 12 months from the date of issue and can be used for multiple transactions, provided it is valid at the time the certificate is given to the purchaser.  If there are multiple vendors, each vendor will need to supply a clearance certificate to the purchaser.
Vendors will only receive credit for the tax withheld if the purchaser pays the relevant amount to the ATO.  Vendors should therefore ensure that appropriate contractual mechanisms are in place to cover these new obligations.

Significance to clients

This measure will need to be considered for every transaction involving Australian real property or any entity whose underlying value is principally derived from Australian real property.  The regime has broad application and will impact on a significant number of transactions, including where vendors are in fact Australian residents for tax purposes.

The Law Council of Australia, the Law Institute of Victoria and the Law Society of New South Wales have raised concerns about this initiative in a submission to the Federal Government, specifically that it will generate 'uncertainty, delays and a significant administrative burden' for Australians who purchase real estate with a market value of $2 million or more.
We will keep you informed if the ATO  issues rulings which exempt Australian government departments from the need to:

• obtain clearance certificates when they are a vendor; or
• remit the withholding tax to the ATO when they are a purchaser.

You can find out more on the ATO website.If you would like to discuss the impact on your department or agency, please contact:

Anthony Leggiero
Managing Principal Solicitor
03 9947 1430