Mayor Geoff Kettle says he is frustrated over the $1.9m settlement, negotiated following an abandoned court case.

Councillors unanimously signed off on the payment to a Bowral district property owner in a closed meeting session last Tuesday night, following lengthy discussion.

The McLachlan Group of companies mounted legal action in February, 2011 over a 20-metre easement for the Highland Source. The council acquired easement land from 147 property owners for the 81km Bowral to Goulburn water pipeline. While agreements were reached with most, sections of three properties, including McLachlans, had to be compulsorily acquired.

The companies, which own two properties on Sheepwash Rd at Bowral, challenged the Valuer General’s valuation from the outset.

In the NSW Land and Environment Court, solicitors for chairman Alex McLachlan claimed $27.5m in compensation for the fenced easement which cut 1.5km through his cattle stud properties, council general manager Warwick Bennett confirmed.

The holdings run 500 high quality breeding cows which are shown annually on the show circuit.

It is part of a wider grazing enterprise. The Goulburn Post understands the claim was based on safety and public liability, trespass and biosecurity concerns.

The downward spiral started when Council abandoned proceedings in 2013.

“It abandoned its arguments in the court case because of a lack of expert evidence countering the biosecurity concerns raised by the McLachlans in regard to the terms of the easement,” Mr Bennett said.

The court then had “no choice” but to award costs against Council.

But Mr Bennett and Cr Kettle said the implications of abandoning the case and its potential cost only became clear to councillors in August 2014, some nine months later. Mr Bennett was appointed general manager in June 2014 and was reviewing outstanding matters.

“When I told them (about the cost) they were surprised, shocked and very angry,” Mr Bennett said.

However a November 2013 Council resolution moved by Cr Kettle and seconded by Deputy Mayor Bob Kirk forewarned the possibility of compensation.

By this stage the case had been abandoned and in order to minimise impact, the Council decided to apply to the state government to rescind the original 20m easement acquisition on Mr McLachlan’s land.

Instead, it would be replaced with a six-metre easement, which was all that was required for the actual pipeline. The alteration provided for Mr McLachlan’s biosecurity concerns.

The council asked the government to deal with both applications simultaneously and in 30 days, not the usual ninety.

The resolution noted that Council would be responsible for any compensation or damages to the owner that resulted from the change in easement width.

The matter was discussed in closed session.

“Council was then liable for the financial costs incurred by McLachlans in addressing the biosecurity issues of the 20m easement since 2011, in particular, altering its operations to work the property with a fence on either side of the easement,” Mr Bennett said.

Council also had to foot the companies’ court costs and future compensation for the easement.

“We feel frustrated that we did not properly understand the full gravity and substantial implications that the abandoned court case had on Council’s finances,” Cr Kettle said.

“We understood that the matter was being dealt with and was under control, but it appears it was not.”

The mayor said his questions on why the case was stopped went unanswered.

After being told of the financial implications last August, councillors charged Mr Bennett with resolving the matter “as cost effectively as possible.” He and Cr Kettle met Mr McLachlan and solicitors for both parties early last week.

Councillors discussed the settlement behind closed doors, on the basis of ‘legal professional privilege and commercial negotiations’, for almost 45 minutes at last Tuesday’s meeting.

The $1.9m covers court costs and compensation. It also averts further Land and Environment Court action by the Group.

“Although this is a significant amount of money and a substantial cost to the community, after considering advice, this was the best solution that could have been achieved and the settlement was certainly much less than was being claimed by McLachlans.”

The money will come from $2,453,000 accrued in interest from investment of the pipeline’s original $10m loan.

The general manager said the settlement would otherwise have been used to help pay off the $9.2m owing.

But the loan would still be paid off over the same 30-year period. It will also not affect council’s recent decision to drop ratepayers’ Highland Source levy from $70 to $40 annually, or this year’s budget.

Mr McLachlan and former council general manager Chris Berry declined to comment.