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Intensia Pty Ltd v Nichols Constructions Pty Ltd

 

[2018] QCA 191

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Intensia Pty Ltd v Nichols Constructions Pty Ltd [2018] QCA 191

PARTIES:

INTENSIA PTY LTD
ACN 144 893 363
(appellant)
v
NICHOLS CONSTRUCTIONS PTY LTD
ACN 010 763 505
(respondent)

FILE NO/S:

Appeal No 766 of 2018

DC No 20 of 2013

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

District Court at Brisbane – [2017] QDC 319

DELIVERED ON:

17 August 2018

DELIVERED AT:

Brisbane

HEARING DATE:

23 May 2018

JUDGES:

Fraser and Gotterson JJA and Atkinson J

ORDERS:

  1. The appeal is dismissed.
  2. Unless the court receives submissions to the contrary to this costs order within seven days of judgment being delivered, the appellant should pay the respondent’s costs of the appeal.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the parties contracted for the sale of the land – where it was held at first instance that the appellant’s termination of the contract was not justified – where the appellant argued on appeal that its termination was justified as the respondent had breached cl 7.4(3)(a)(ii) of the standard REIQ contract in its warranty that it was not aware of any facts or circumstances that may lead to the land being classified as contaminated land under the Environmental Protection Act 1994 (Qld) at the time of contract – where the respondent had demolished dwellings on the land before entry into the contract – where, after the date of contract, the demolition of the buildings caused the contamination of the land with asbestos – whether the phrasing “may lead to” should be construed broadly to incorporate mere possibility – whether the respondent had breached cl 7.4(3)(a)(ii) such as to give the appellant a right to terminate

Environmental Protection Act 1994 (Qld), s 14, s 16, s 17, s 371, s 373, s 374, s 421, s 458, s 540A, sch 3, sch 4

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, cited

Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70, cited

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, followed

Re Golden Key Ltd [2009] EWCA Civ 636, cited

Turrisi Properties Pty Ltd v LJ & BJ Investments Pty Ltd [2010] QSC 325, approved

COUNSEL:

C C Wilson for the appellant

D Thomae for the respondent

SOLICITORS:

Byrne & Lovel Lawyers for the appellant

Parker Simmonds Lawyers for the respondent

  1. [1]
    FRASER JA:  I agree with the reasons for judgment of Atkinson J and the orders proposed by her Honour.
  2. [2]
    GOTTERSON JA:  I agree with the orders proposed by Atkinson J and with the reasons given by her Honour.
  3. [3]
    ATKINSON J:  On 11 January 2013 the appellant, Intensia Pty Ltd (“Intensia”), gave notice to the respondent, Nichols Constructions Pty Ltd (“Nichols Constructions”), that it was terminating a contract for the sale of land (“contract”) which had been made between the parties on 12 October 2012.  After a trial in the District Court it was held that the termination of the contract by Intensia was not justified.  The deposit of $172,500 held by a stakeholder was ordered to be released to Nichols Constructions.
  4. [4]
    Intensia appealed that decision to this court with five detailed grounds of appeal.  However, at the hearing, it abandoned all but one of those grounds of appeal.

The factual background

  1. [5]
    The written contract for the sale of land, in the form of the ninth edition of the standard contract for houses and residential land approved by the REIQ and the Queensland Law Society, was entered into by Intensia as buyer and Nichols Constructions as seller.  Nichols Constructions entered into the contract as mortgagee in possession exercising its power of sale.  Intensia acted as an undisclosed agent for Ambitious Ventures Pty Ltd (“Ambitious Ventures”).  It was a commercial arms-length contract.
  2. [6]
    The purchase price was $1,725,000.  The deposit of $172,500 was received on 15 October 2012 and that date was then inserted by the solicitor for Nichols Constructions, who was the stakeholder for the deposit, in the relevant space on the contract as the contract date.  In fact, as both parties contended, the contract was entered into on 12 October 2012.
  3. [7]
    The contract was for the sale of three adjoining parcels of land (“the land”) described as:
  1. (1)
    Lot 3 on RP 80133, in the County of Ward, Parish of Nerang, being all that land referred to in the Title Deed reference no 15743058 and situated at 8 Ahern Street, Labrador, Queensland (“8 Ahern Street”);
  2. (2)
    Lot 1 on RP 104405, in the County of Ward, Parish of Nerang, being all that land referred to in the Title Deed reference no 15248216 and situated at 8A Ahern Street, Labrador, Queensland (“8A Ahern Street”); and
  1. (3)
    Lot 2 on RP 104405, in the County of Ward, Parish of Nerang, being all that land referred to in the Title Deed reference no 13858153 and situated at 10 Ahern Street, Labrador, Queensland (“10 Ahern Street”).
  1. [8]
    On each of the three lots there was a single freestanding dwelling.  There was also a fence running part of the length of the boundary between 8 and 8A Ahern Street.  The dwellings on the land each contained bonded asbestos in the roof and walls.  Seven years before the date of the contract, there had been an asbestos audit of the three dwellings and the boundary fences which had been there at the time.  The auditor concluded that there was:

“A.C. fibre cement sheeting, commonly known as old type fibro.  On the date of inspection the fibre cement covered in this report was found in good condition and may remain left in-situ and its conditions monitored … These products do not pose a risk from exposure to airborne fibres so long as the materials are not disposed or have work carried out upon them.  I.e. cut, sanded, drilled, etc … No asbestos products or materials were found during this inspection that warranted immediate removal …”

  1. [9]
    The trial judge found that on or about 2 October 2012, Nichols Constructions obtained a building assessment report and a notice that its development application for demolition of the dwellings had been approved.  The building assessment report advised, among other things, that the buildings on the land “may have asbestos and therefore special work procedure is required.  See Conditions of Approval.”  The development application decision notice approving the demolition of the dwellings in accordance with a survey plan was subject to conditions including “all removal of asbestos to be carried by a person holding an ‘A’ class licence under the Workplace Health & Safety Regulation 1997.”
  2. [10]
    By 10 October 2012, before entering into the contract with Intensia, Nichols Constructions engaged a builder, Bastemeyer Group Pty Ltd (“Bastemeyer”), to demolish the three dwellings.  Bastemeyer engaged an asbestos removal contractor, Alan Bingham of A&B Demolition, to remove the asbestos, timber and windows.  Mr Bingham had a “B” class licence which only allowed him to remove bonded asbestos.  He was, however, very experienced and had no trouble distinguishing between bonded asbestos which he was able to remove safely and unbonded asbestos which he was not licensed to remove.  Mr Bingham’s job was to remove the asbestos and wrap it appropriately in plastic and place it in a bin which Bastemeyer had provided and which Bastemeyer would then remove.  Mr Bingham began his asbestos removal on the land on about Wednesday 10 October 2012.  He found no unbonded asbestos during the removal which took place.
  3. [11]
    Intensia did not know at the date of its entry into the contract, 12 October 2012, that Nichols Constructions intended to demolish the dwellings.
  4. [12]
    Bastemeyer’s demolition had started by 15 October 2012.  The land was contaminated with asbestos, as the learned trial judge found, either during or after the demolition of the improvements on the land.  His Honour also found that he was not satisfied that at the time of entry into the contract on 12 October 2012, unbonded asbestos had been buried in or discarded on the land.  His Honour accepted that on a date after the contract, that is after 12 October 2012, the dwellings were demolished and the site was during that period contaminated by asbestos.  It was not so contaminated as at the date of contract.
  5. [13]
    On 4 December 2012, Intensia elected to affirm the contract in spite of the demolition of the buildings on the land of which it by then knew.  It was not, however, until 21 December 2012 that Intensia obtained a report that showed that the land had become contaminated with unbonded asbestos.  Although it did not notify Nichols Constructions until 11 January 2013, at no time thereafter was Intensia willing to complete the contract.  The contract was due for settlement on 15 January 2013.  On 11 January 2013 Intensia gave a notice to Nichols Constructions purporting to terminate the contract alleging breach of warranty arising from non-disclosure of asbestos contamination.  On the settlement date, Intensia did not offer to settle and Nichols Constructions purported to terminate the contract and forfeit to itself the deposit on account of Intensia’s failure to settle.  The stakeholder continued to hold the deposit and not release it to either party.
  6. [14]
    Litigation ensued with the seller, Nichols Constructions, as plaintiff claiming:
  1.  a declaration that Nichols Constructions effectively rescinded the contract;
  1.  a declaration that it was entitled to forfeit the deposit of $172,500;
  1.  payment of the deposit to it;
  1.  payment of interest earned on the deposit from the Westpac Banking Corporation; and
  1.  payment of interest on $172,500 at 10.65% per annum from 15 January 2013.
  1. [15]
    The buyer, Intensia, counterclaimed for:
  1.  a declaration that Intensia validly terminated the contract;
  1.  payment of the deposit and interest;
  1. general damages for breach of contract in the amount of $156,818.18 for loss of bargain representing the difference between the market value of the land sold and the contract price; or,

alternatively, consequential damages representing the value of Intensia’s lost opportunity to receive a GST tax input credit, either offsetting any liability as to GST or entitling it to receive a credit;

  1. damages for breach of contract in the sum of $108,123.63 for consequential loss of opportunity to earn rent income after the dwellings were demolished;
  1. alternatively to the relief claimed at 3 and 4, if, but only if, unsuccessful in recovering damages under 3 and 4, wasted transaction costs; and
  1.  statutory interest.
  1. [16]
    After the trial, the learned District Court judge ordered:

“1. The deposit of $172,500, plus any accrued interest, held by Parker Simmonds Lawyers be released to the Plaintiff;

  1.  the Defendant pay the Plaintiff’s costs:
  1. (a)
    of the proceeding, including reserved costs, up and until 11 November 2016 on the standard basis, to be assessed if not agreed;
  1. (b)
    of the proceeding from 12 November 2016, on an indemnity basis.”
  1. [17]
    On appeal, Intensia sought the following orders:

“(a) The whole of the order made by the learned District Court Judge on 22 December 2017 be set aside;

  1. (b)
    In lieu thereof:
  1. (i)
    an order declaring that the appellant validly terminated the contract;
  1. (ii)
    an order declaring that the appellant is entitled to a refund of the deposit of $172,500.00 paid under the contract;
  1. (iii)
    an order for the repayment of the deposit to the respondent together with accretions pursuant to cl 2.4(2) of the contract;
  1. (iv)
    an order that the respondent pay the appellant damages in the sum of $279,446.20 for breach of contract;
  1. (v)
    an order that the respondent pay the appellant interest on monies due and owing and damages pursuant to s 58 of the Civil Proceedings Act 2011 (Qld); and
  1. (vi)
    an order that the respondent pay the appellant’s costs here and below.”
  1. [18]
    However during argument Intensia conceded that if it were successful on appeal the question of damages claimed by it in paragraphs 36 to 41 of its counterclaim and paragraph 4 of its prayer for relief would have to be remitted to the District Court.
  2. [19]
    The only ground of appeal argued on the hearing was:

“(d) The learned District Court Judge erred in failing to find that the appellant was entitled to terminate the contract in reliance on cl 7.4(3)(a)(ii) of the contract in circumstances where as at the date of contract:

  1. (i)
    the obligation of disclosure under cl 7.4(3)(a)(ii) constituted an essential term of the contract on the application of general law principles;
  1. (ii)
    as the learned District Court Judge found (at [13], [14] and [17] of the Judgment) the respondent had commenced demolishing the dwellings which it knew were, or may be built of asbestos containing materials;
  1. (iii)
    because of the risk of contamination, demolition of dwellings that may be built of asbestos containing materials, if the demolition was not carried out with care, constituted facts or circumstances of which the respondent was aware that ‘may’ lead to the land being classified as contaminated land within the meaning of the Environmental Protection Act 1994 (Qld), noting the evidence of Mr Hodgkinson that his observations of debris at the site on 10 and 11 January 2013 were consistent with jobs that were a result of uncontrolled asbestos removal work (T.3-30, ll 42-44);
  1. (iv)
    the respondent did not disclose the said facts or circumstances in the contract (ex 12) and there is no evidence that it did so by a notice given to the appellant under the Environmental Protection Act 1994;
  1. (v)
    non-disclosure of the said facts or circumstances constituted a breach of cl 7.4(3)(a)(ii) grounding a right of termination.”

The appellant’s submissions

  1. [20]
    The appellant submitted that it was entitled to terminate the contract under cl 7.4(3)(b)(i) of the contract because of the terms of cl 7.4(3)(a)(ii) of the contract wherein the seller warranted that it was not aware of “any facts or circumstances that may lead to the land being classified as contaminated land” within the meaning of the Environmental Protection Act 1994 (Qld) (“EPA”).
  2. [21]
    It submitted that the error of the trial judge appeared from the following matters.  Clause 7.4(3)(a)(ii) posited a nexus between identified “facts or circumstances” and land “being classified as contaminated land”.  The proper characterisation of the posited nexus was indicated by the drafter’s use of “may lead to” which in this context, properly construed, is an expression of possibility (in contradistinction to probability).  The expression “may lead to” meant “may as a future possibility bring about”: it had application to risks, not probabilities or eventualities.  The relevant nexus was otherwise expressed in unqualified terms.
  3. [22]
    It was submitted the learned judge held that posited nexus would not exist unless:
  1. (i)
    the regulator had conducted a preliminary investigation of the site or other events had occurred which triggered the regulator’s obligation to give notice to the owner about contamination of the land;
  1. (ii)
    the respondent knew as at the contract date that the land would become contaminated by asbestos during demolition; and
  1. (iii)
    either:
  1. (A)
    Bastemeyer and A & B Demolition had a history of poor performance, and the respondent knew of such a history and anticipated that they would perform an incompetent demolition; or
  1. (B)
    it was foreseeable that the demolition of asbestos containing improvements by a reasonably competent demolition contractor was likely to cause contamination of the land, even temporarily.
  1. [23]
    The appellant submitted that an assumption that demolition would be carried out with due care was not an assumption that was warranted on the facts of this matter, or apparently one warranted generally, noting the evidence of a witness called at trial by the appellant, Joshua Hodgkinson (of Aztech Services), that the debris observed at the site was consistent with jobs that were a result of uncontrolled asbestos removal work.  It was submitted that the assumption gives insufficient weight to the fact that asbestos contamination is a serious matter of health and safety about which buyers (as members of the public) are aware and properly concerned.
  2. [24]
    It was also submitted the court’s construction imposed on cl 7.4(3)(a)(ii) an operation that strained against the language of the clause (“may” does not mean “likely”); and as such, the court’s construction gave cl 7.4(3)(a)(ii) an overly restricted operation that undermined the beneficial policy of disclosure to which the clause was intended to give effect.
  3. [25]
    It was submitted that the protection of environmental and personal health and safety is assisted by giving cl 7.4(3)(a)(ii) an application that imposes on sellers an obligation to disclose an intention to demolish asbestos containing structures; a construction of cl 7.4(3)(a)(ii) that casts an obligation of disclosure as stated does not impose a disproportionate burden on sellers selling land with asbestos structures to be demolished after the contract date; and disclosure in the contract is an easy matter.
  4. [26]
    It was submitted that the obligation of disclosure under cl 7.4(3)(a)(ii) constituted an essential term of the contract on general law principles.  The respondent was aware as at the contract date that the dwellings were, or may be, built of asbestos containing materials; and that the dwellings were to be demolished, noting that the respondent had obtained a Demolition Works Approval on 2 October 2012 (ten days before the contract date).  The respondent did not disclose those facts or circumstances in the contract and there was no evidence that it did so by a notice given to the appellant under the EPA.  It was therefore submitted that non-disclosure of those facts or circumstances constituted a breach of cl 7.4(3)(a)(ii) of the contract grounding a right of termination.

The respondent’s submissions

  1. [27]
    The respondent’s outline of submissions dealt with all five grounds of appeal as it had not been informed until the afternoon before the hearing of the appeal that only one ground of appeal would be argued.  Fortunately counsel for the respondent relied at the hearing on a document entitled “summary of respondent’s oral argument” which dealt only with the remaining ground of appeal.
  2. [28]
    The respondent submitted that it is not controversial that the meaning of the words in cl 7.4(3)(a)(ii) is to be found by construing them objectively to produce a commercial result, rather than relying on the parties’ subjective understanding of them.[1]
  3. [29]
    It submitted that clear wording of the clause:
  1. (a)
    required the seller to have knowledge of any “facts or circumstances”
  1. (b)
    that knowledge had a temporal requirement, “at the time of the contract”
  1. (c)
    then applied that knowledge to the requirements under the EPA for land to be determined as contaminated.
  1. [30]
    The respondent submitted that cl 7.4 was to inform buyers under a contract for sale of land that, as at the date of the contract, the subject land:
  1. (a)
    was contaminated and on the environmental management register; or
  1. (b)
    was contaminated, or reasonably believed to be contaminated, and not yet on the register.
  1. [31]
    The primary judge found that the contractual meaning of the wording in the clause that “the land being classified as contaminated land within the meaning of the EPA”, was a reference in particular to section 373 of the EPA.
  2. [32]
    As to the facts or circumstances, the respondent relied on the following findings by the primary judge as to the facts and circumstances as follows:
  1. (a)
    on 2 October 2012, Nichols Constructions obtained a building assessment report and notice that:
  1. (i)
    its development application for demolition of the buildings on the Land had been approved and noted that the buildings on the land “may have asbestos”;
  1. (ii)
    the conditions to the approval provided that “All removal of asbestos to be carried out by a person holding an “A” class licence under the Workplace Health & Safety Regulation 1997”;
  1. (b)
    on 10 October 2012, Nichols engaged Bastemeyer, a demolition contractor, to demolish the buildings on the land and Bastemeyer engaged an asbestos removal subcontractor, Mr Bingham of A&B Demolition, to remove asbestos;
  1. (c)
    on or about 10 October 2012, Mr Bingham:
  1. (i)
    determined that there was only bonded asbestos in the buildings to be demolished; and
  1. (ii)
    commenced to remove asbestos from the buildings on the land.
  1. (d)
    as at 12 October 2012:
  1. (i)
    the land was not contaminated with asbestos, or classified as, or the administering authority had not decided that the land was, “contaminated land” pursuant to the EPA;
  1. (ii)
    there was no evidence that Mr Nichols knew that the land would be contaminated by asbestos during or after demolition;
  1. (iii)
    there was no evidence that it was foreseeable that a demolition of asbestos containing improvements by a reasonably competent demolisher is likely to contaminate land at the demolition site;
  1. (e)
    on 12 October 2012, Nichols and Intensia entered into the contract which provided for the buildings on the land as part of the conveyance;
  1. (f)
    by 15 October 2012, demolition of the buildings on the land commenced (as opposed to asbestos removal);
  1. (g)
    on 21 December 2012, Intensia obtained a report that the land was contaminated with asbestos;
  1. (h)
    on 11 January 2013, Intensia purported to terminate the contract by alleging breach of warranty arising from non-disclosure of asbestos contamination;
  1. (i)
    on 11 January 2013, the contractors engaged by Nichols Constructions completed the asbestos remediation of the land; and
  1. (j)
    on 15 January 2013 the contract was due for settlement.
  1. [33]
    The respondent submitted that the primary judge found that there was no evidence of the requirements of the EPA for the land to be classified as contaminated.
  2. [34]
    The ordinary definition of “may” describes the “possibility” of an event occurring.  The respondent submitted that it is difficult to reconcile how Intensia construed cl 7.4(3)(a)(ii) to reach a sensible commercial construction by importing the “reasonable likelihood” that demolition of the dwellings on the land would lead to the land being classified as “contaminated land”.
  3. [35]
    It submitted that on its proper construction the contractual disclosure requirement under cl 7.4(3)(a)(ii) was applicable where the land was contaminated (at the date of contract) and was likely to require remediation, notwithstanding that the land did not yet appear on the contaminated land register.  It was submitted that this is consistent with the academic commentary in Christensen SA, Dixon WM, Duncan WD and Jones SE, Land Contracts in Queensland, 4th Edition, The Federation Press at p 151.
  4. [36]
    Nichols Constructions submitted that Intensia did not prove that it was foreseeable that the demolition of the buildings on the land by a reasonably competent demolisher would lead to, even temporarily, to the land being contaminated with asbestos.  Rather, Intensia asked that inferences be drawn from events occurring after the date of contract that Nichols Constructions must have known that Bastemeyer would contaminate the land.
  5. [37]
    Further detailed written submissions in response were relied upon by the appellant.

Consideration

  1. [38]
    Clause 7.4(3) of the contract set out the following Seller’s Warranty:

“(3) (a) The Seller warrants that, except as disclosed in this contract or a notice given by the Seller to the Buyer under the Environmental Protection Act 1994 (“EPA”), at the Contract Date:

  1. (i)
    there is no outstanding obligation on the Seller to give notice to the administering authority under EPA of notifiable activity being conducted on the Land; and
  1. (ii)
    the Seller is not aware of any facts or circumstances that may lead to the Land being classified as contaminated land within the meaning of EPA.
  1. (b)
    If the Seller breaches a warranty in clause 7.4(3), the Buyer may:
  1. (i)
    terminate this contract by notice in writing to the Seller given within 2 Business Days before the Settlement Date; or
  1. (ii)
    complete this contract and claim compensation, but only if the Buyer claims it in writing before the Settlement Date.”
  1. [39]
    The correct approach to the construction of such a contract is well settled.  In 2015 in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[2] the High Court held:

“In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.  That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract …

Other principles are relevant in the construction of commercial contracts.  Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties … intended to produce a commercial result’.  Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” (footnotes omitted).

Accordingly, the interpretation of this contract is governed by the principle that the parties intended it to make commercial sense.

  1. [40]
    In Electricity Generation Corporation v Woodside Energy Ltd[3] the High Court quoted with approval from a decision of the Court of Appeal of England and Wales:[4]

“As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’.  A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.”

  1. [41]
    The contract refers to the EPA.  The part of the EPA which is referred to in cl 7.4(3)(a) is Chapter 7 Part 8, which deals with notifiable activity and contaminated land.  Part 8 provides for the inclusion of land on an environmental management register, investigation of land on that register, remediation of the land, site management plans and notices, including notices to be given to proposed purchasers, about land recorded in the register.  Also relevant is the requirement found in s 540A(1)(d) of the EPA for the administering authority, the Chief Executive, to maintain an environmental management register and a contaminated land register.
  2. [42]
    Section 371 provided, at the relevant times, that if the owner or occupier of land becomes aware that a notifiable activity is being carried out on the land, the owner or occupier must give notice to the administering authority.  Notifiable activities are set out in Schedule 3 to the EPA and include relevantly as the third item:

“Asbestos manufacture or disposal—

  1. (a)
    manufacturing asbestos products; or
  1. (b)
    disposing of unbonded asbestos; or
  1. (c)
    disposing of more than 5t of bonded asbestos.”

That notice must be given within 22 business days after the owner or occupier becomes aware that the activity is being carried out.  The learned trial judge found that none of those activities were being carried out on the land.  It was not suggested on appeal that the finding was wrong.

  1. [43]
    Under s 371(2), if the owner or occupier of the land becomes aware that the land has been, or is being, contaminated by a contaminant that the owner or occupier knows is a hazardous contaminant then a similar notice must be given.  A “hazardous contaminant” is defined in Schedule 4 of the EPA to mean:

“[A] contaminant, other than an item of explosive ordnance, that, if improperly treated, stored, disposed of or otherwise managed, is likely to cause serious or material environmental harm because of—

  1. (a)
    its quantity, concentration, acute or chronic toxic effects, carcinogenicity, teratogenicity, mutagenicity, corrosiveness, explosiveness, radioactivity or flammability; or
  1. (b)
    its physical, chemical or infectious characteristics.”

Section 14(1) of the EPA defines environmental harm as “any adverse effect, or potential adverse effect (whether temporary or permanent and of whatever magnitude, duration or frequency) on an environmental value, and includes environmental nuisance.”  Material environmental harm is defined in s 16 of the EPA which provides:

“(1) Material environmental harm is environmental harm (other than environmental nuisance)—

  1. (a)
    that is not trivial or negligible in nature, extent or context; or
  1. (b)
    that causes actual or potential loss or damage to property of an amount of, or amounts totalling, more than the threshold amount but less than the maximum amount; or
  1. (c)
    that results in costs of more than the threshold amount but less than the maximum amount being incurred in taking appropriate action to—
  1. (i)
    prevent or minimise the harm; and
  1. (ii)
    rehabilitate or restore the environment to its condition before the harm.
  1. (2)
    In this section—

maximum amount means the threshold amount for serious environmental harm.

threshold amount means $5000 or, if a greater amount is prescribed by regulation, the greater amount.”

Serious environmental harm, at the relevant times, was defined in s 17 of the EPA as follows:

“(1) Serious environmental harm is environmental harm (other than environmental nuisance)—

  1. (a)
    that is irreversible, of a high impact or widespread; or
  1. (b)
    caused to an area of high conservation value or special significance; or
  1. (c)
    that causes actual or potential loss or damage to property of an amount of, or amounts totalling, more than the threshold amount; or
  1. (d)
    that results in costs of more than the threshold amount being incurred in taking appropriate action to—
  1. (i)
    prevent or minimise the harm; and
  1. (ii)
    rehabilitate or restore the environment to its condition before the harm.
  1. (2)
    In this section—

threshold amount means $50000 or, if a greater amount is prescribed by regulation, the greater amount.”

Land contaminated by a hazardous contaminant is defined in Schedule 4 to be “contaminated land.”

  1. [44]
    Section 373 of the EPA, at the relevant times, provided that if the administering authority is given notice by a person other than the owner of the land (in particular, an occupier or the local government) or it otherwise reasonably believes that a notifiable activity has been or is being carried out in the land, or the administering authority has conducted a preliminary investigation or is provided a report that leads it to reasonably believe the land is contaminated land, then the administering authority must give notice to the owner of the land, unless its investigations show that the land is not contaminated land.  That notice must, inter alia, inform the owner that the administering authority is considering including particulars of the land in the environmental management register and invite submissions from the owner about whether or not the land has been, or is being used, for a notifiable activity or is contaminated land.
  2. [45]
    Section 374 of the EPA, at the relevant times, provided that the administering authority must, after considering any submissions made by the land’s owner decide whether the land has been, or is being, used for a notifiable activity or is contaminated land.  If it so decides, then the administering authority must record particulars of the land in the environmental management register, unless the land is no longer being used for a notifiable activity and the land has been investigated and the administering authority is satisfied the land is not contaminated land.
  3. [46]
    Section 421 of the EPA, at the relevant times, set out the statutory requirements under the EPA as to when notice must be given to a proposed buyer of land.  It provided:

421 Notice to be given to proposed purchaser of land

  1. (1)
    This section applies to the owner of land if—
  1. (a)
    particulars of the land are recorded in the environmental management register or contaminated land register, or
  1. (b)
    the land is the subject of—
  1. (i)
    a notice under section 373 informing the owner that the administering authority believes the land has been, or is being, used for a notifiable activity or is contaminated land; or
  1. (ii)
    a notice to conduct or commission a site investigation; or
  1. (iii)
    a remediation notice; or
  1. (iv)
    a notice that the administering authority is preparing, or requiring someone else to prepare, a site management plan for the land; or
  1. (c)
    the land is the subject of an order under section 458.[5]
  1. (2)
    If the owner proposes to dispose of the land to someone else (the buyer), the owner must, before agreeing to dispose of the land, give written notice to the buyer—
  1. (a)
    if particulars of the land are recorded in the environmental management register or contaminated land register – that the particulars have been recorded in the register and, if the land is subject to a site management plan, details of the plan; or
  1. (b)
    if the owner has been given a notice under this part – that the owner has been given a notice under this part and particulars about the notice; or
  1. (c)
    if the land is the subject of an order under section 458 – that the land is the subject of the order and particulars about the order.

Maximum penalty – 50 penalty units.

  1. (3)
    If the owner does not comply with subsection (2), the buyer may rescind the agreement by written notice given to the owner before the completion of the agreement or possession under the agreement, whichever is the earlier.
  1. (4)
    On rescission of the agreement under subsection (3)—
  1. (a)
    a person who was paid amounts by the buyer under the agreement must refund the amounts to the buyer; and
  1. (b)
    the buyer must return to the owner any documents about the disposal (other than the buyer’s copy of the agreement).
  1. (5)
    Subsections (3) and (4) apply despite anything to the contrary in the agreement.”
  1. [47]
    As Margaret Wilson J held in Turrisi Properties Pty Ltd v LJ & BJ Investments Pty Ltd,[6] there is an element of public as well as private benefit in the requirements of s 421 of the EPA.  It provides consumer protection but also regulates the sale of affected land consistently with the objects of the EPA.
  2. [48]
    The appellant conceded, however, that no notice was required to be given to it by the seller of the land pursuant to s 421 of the EPA.  It rather relied upon there being a breach of the seller’s warranty found in cl 7.4(3)(a)(ii): that is that the seller warranted that it was not aware of any facts or circumstances that may lead to the land being classified as contaminated land within the meaning of the EPA.  The appellant submitted that the respondent was aware of facts or circumstances that might lead to the land being classified as contaminated land and hence the appellant had the right to terminate the contract.  The determination of this appeal depended on the question of whether or not the appellant was entitled to and did validly terminate the contract for the sale of land.
  3. [49]
    The learned trial judge found that, as at the date of contract, the seller was not aware of any facts or circumstances that might lead to the land being classified as contaminated.  He was not satisfied that the respondent knew that there may be contamination of the land during demolition and therefore concluded that he was not satisfied that the respondent breached the warranty found in cl 7.4(3)(a)(ii).
  4. [50]
    A breach of the warranty in cl 7.4(3)(a)(ii) requires that each of the following satisfied:
  1. (1)
    the seller is aware of any facts or circumstances;
  1. (2)
    the seller is aware that that fact or circumstance may lead to;
  1. (3)
    the land being classified as contaminated land within the meaning of the EPA.
  1. [51]
    An immediate problem arises that there is no provision in the EPA for land to be “classified as contaminated land”.  However, there is a requirement under s 540A(1)(d)(ii) of the EPA for the Chief Executive to maintain a contaminated land register.  Contaminated land is land contaminated by a hazardous contaminant as defined in Schedule 4 of the EPA.  It would appear, although it is not explicitly included, that unbonded asbestos, if it is improperly treated, stored, disposed of or otherwise managed would be considered a hazardous contaminant because its toxic effects would be likely to cause material environmental harm.  So, giving a commercial operation to cl 7.4(3)(a)(ii) one could interpret the requirement that the land be classified as contaminated land as a requirement that the land be listed as contaminated land on the contaminated land register.
  2. [52]
    The EPA provides how the administering authority can or must be notified that land is contaminated land.  The first method is found in s 371(2) of the EPA which provides that the owner or occupier must inform the administering authority with 22 business days after becoming aware that the land has been, or is being, contaminated by a hazardous substance.  In this case, there was no evidence which suggested that at the date of contract the respondent, the owner of the land, knew that the land had been or was being contaminated by the hazardous contaminant, unbonded asbestos.  Accordingly it was under no obligation to report the contamination.  There was no reason for it to form the view that the land may become contaminated and hence that it would then be required to report that contamination to the administering authority within 22 business days.  The seller was not aware of any facts or circumstances that would cause it to form the view that the land may become contaminated land on the evidence before it at the time of contract.
  3. [53]
    It knew from the approval of its application for demolition of the buildings that the buildings may contain asbestos.  That asbestos had been described in an auditor’s report commissioned by the mortgagor some years earlier, which showed the presence of AC fibre cement sheeting in good condition.  The evidence suggested that the principal of Nichols Constructions had been given the auditor’s report some time in 2009.
  4. [54]
    The seller engaged a builder to conduct the demolition.  The seller had no reason to suspect that the builder would not engage a competent asbestos demolition expert to remove the asbestos from the dwellings.  It would impose an unduly onerous burden on a land owner and one not supported by the wording of the clause, if it was obliged to assume that, if it retained a builder specialising in demolition work, who retained an asbestos removal contractor who was licensed to remove the type of asbestos that was found, it was nevertheless obliged to assume that the work might be carried out so negligently and incompetently that it may lead to the owner being required to report contamination of the land to the EPA and the land then being listed on the contaminated land register.  The fact that contamination did occur in this case cannot be used as ex post facto justification for holding that the seller must have been aware that that might happen and so have been obliged to disclose it in the contract or be in breach of the seller’s warranty found in cl 7.4(3)(a)(ii) entitling the buyer to terminate the contract.  There was no basis for the seller to form the view, at the relevant time, that the land might become contaminated by a hazardous contaminant which would oblige it to report that contamination to the administering authority within 22 business days.
  5. [55]
    The second method of the land becoming listed on the contaminated land register is the one which was considered by the trial judge.  It is the considerably more complicated procedure set out in s 373 and s 374 of the EPA referred to in detail in [44]-[45] of these reasons.  There was no evidence capable of suggesting that the seller was aware of any facts or circumstances at the time it entered into the contract which could lead to the land being listed as contaminated land as a result of that statutory process.

Conclusion

  1. [56]
    It follows that the appellant has failed to make good its only ground of appeal.  This is because the learned District Court judge did not err when he found that the appellant was not entitled to terminate the contract in reliance on cl 7.4(3)(a)(ii) of the contract.
  2. [57]
    The appeal should be dismissed.  Unless the court receives submissions to the contrary to this costs order within seven days of judgment being delivered, the appellant should pay the respondent’s costs of the appeal.

Footnotes

[1] Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 [11]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656 [35].

[2]  (2015) 256 CLR 104 at 116-117 [47]-[51].

[3]  (2014) 251 CLR 640 at 657 [35].

[4] Re Golden Key Ltd [2009] EWCA Civ 636 at [28].

[5]  Section 458 of the EPA provides the circumstances in which a Magistrate may make an order for an authorised person to enter the land and conduct actions, investigation or work to remediate the land.

[6]  [2010] QSC 325 at [124].

Close

Editorial Notes

  • Published Case Name:

    Intensia Pty Ltd v Nichols Constructions Pty Ltd

  • Shortened Case Name:

    Intensia Pty Ltd v Nichols Constructions Pty Ltd

  • MNC:

    [2018] QCA 191

  • Court:

    QCA

  • Judge(s):

    Fraser JA, Gotterson JA, Atkinson J

  • Date:

    17 Aug 2018

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QDC 319 22 Dec 2017 Plaintiff's claim for declaratory relief that the plaintiff is entitled as vendor to forfeit the defendant's deposit allowed; counterclaim dismissed: Andrews SC DCJ.
Notice of Appeal Filed File Number: Appeal 766/18 19 Jan 2018 -
Appeal Determined (QCA) [2018] QCA 191 17 Aug 2018 Appeal dismissed: Fraser and Gotterson JJA and Atkinson J.

Appeal Status

{solid} Appeal Determined (QCA)