Posted on November 24, 2014 by Frances Tse

When is an administrative decision ‘irrational’?

The Court of Appeal recently handed down the decision of Arnold v Minister Administering the Water Management Act 2000 [2014] NSWCA 386 which considered whether a decision by the Minister administering the Water Management Act 2000 (‘WM Act’)  to make a water sharing plan (‘Plan’) was manifestly unreasonable because it was affected by irrationality.

In 2001, the Lower Murray Groundwater Source was declared a groundwater management area under the WM Act.  In the same year, an organisation named Ecoseal prepared a model (‘Ecoseal Model’) that estimated the maximum sustainable yield of that groundwater source was 83.7GL/year.

In 2002, another organisation named Aquaterra identified flaws in the Ecoseal Model. Aquaterra considered that the estimated sustainable yield values were not sufficiently robust. However Aquaterra went on to state that the Ecoseal Model was generally in conformity with best practice and the estimated sustainable yield values were ‘roughly in the correct order’ and could be adopted as interim measures.

In 2006, the Minister made the Plan for the groundwater management area. The effect of the Plan was that over time, existing entitlements to water in that area would be reduced so that the extraction limit would eventually be equal to the estimated maximum sustainable yield set out in the Ecoseal Model, that is, 83.7GL/year.

Farmers who were affected by the Plan commenced proceedings in the Land and Environment Court seeking the LEC’s review of the Minister’s decision. Justice Biscoe dismissed the application and appeal proceedings were then brought to the Court of Appeal.

The farmers argued that, amongst other things,  the Minister’s decision to make the Plan was manifestly unreasonable because the extraction limit in the Plan was based on the Ecoseal Model which was so flawed and unreliable that it was irrational to adopt it.

Both experts that gave evidence at the LEC proceedings agreed that the Ecoseal Model was flawed. One of the experts was of the view that the flaws were so fundamental it meant that the Ecoseal Model was unreliable and provided no assistance in determining the estimated sustainable yield. The other expert was of the view that despite ‘low reliability’ of the Ecoseal Model, it nevertheless provided information which was of value such that it was not unreasonable to use it.

The Court of Appeal unanimously held that the Minister’s decision was not irrational and therefore not manifestly unreasonable.

The Court of Appeal adopted the test for irrationality used by the High Court in an earlier immigration case that an allegation of ‘illogicality’ or ‘irrationality’ must mean something other than emphatic disagreement. In that regard, the High Court stated,

‘…the test for illogicality or irrationality must be to ask whether logical or rational or reasonable minds might adopt different reasoning or might differ in any decision or finding to be made on evidence upon which the decision is based. If probative evidence can give rise to different processes of reasoning and if logical or rational or reasonable minds might differ in respect of the conclusions to be drawn from that evidence, a decision cannot be said by a reviewing court to be illogical or irrational or unreasonable, simply because one conclusion has been preferred to another possible conclusion.”

The Court of Appeal noted that:

• Aquaterra regarded the Ecoseal Model as having some probative value and that it was capable of use, and
• it was open for the LEC to accept the opinion of the expert that considered the Ecoseal Model to be of some value.

As a result, whilst there was strong disagreement between the parties’ experts as to the correctness of the Minister’s decision, the Court of Appeal held that, using the test set out by the High Court, there was no illogicality or irrationality in the Minister’s decision.

The argument of irrationality is not raised as often as other grounds of review of administrative decisions. This case therefore is a good reminder of the test that the Courts would use to determine if a decision is irrational. It seems to me that the threshold to argue that a decision was made irrationally is high given that a decision based on a document with only some probative value will likely be considered a rational decision.