Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd
[2006] QCA 50
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- Notable Unreported Decision
- Appeal Determined (QCA)
- Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd[2006] QCA 50
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Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd[2006] QCA 50
Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd[2006] QCA 50
SUPREME COURT OF QUEENSLAND
CITATION: | Thiess Services P/L v Mirvac Queensland P/L [2006] QCA 50 |
PARTIES: | THIESS SERVICES PTY LTD ACN 010 725 247 |
FILE NO/S: | Appeal No 10901 of 2005 Appeal No 10902 of 2005 SC No 4205 of 2005 SC No 4276 of 2005 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 3 March 2006 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 15 February 2006 |
JUDGES: | de Jersey CJ, McPherson and Williams JJA Separate reasons for judgment of each member of the Court, each concurring as to the order made |
ORDER: | Each appeal dismissed with costs to be assessed |
CATCHWORDS: | CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – TERMS ESSENTIAL TO ENABLE PERFORMANCE – where the appellant entered into a contract with the respondent to remediate contaminated land for a sum of money – where the land had formerly been the site of industrial activities which resulted in the soil being contaminated – where a contractual document required the appellant to render the land suitable for use and to ensure its removal from the contaminated land register – where appellant contends that full remediation could not be efficiently, economically or reasonably achieved – whether a term surrounding economic viability/feasibility could be implied into the contract – whether external documents not incorporated into the contract could lessen the obligation of the appellant under the contract Environmental Protection Act 1994 (Qld), s 396 Integrated Planning Act 1997 (Qld) Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981 - 1982) 149 CLR 337, followed Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, followed Re an arbitration between Carr and The Shire of Wodonga [1925] VLR 238, followed Sirius International Insurance Co (Publ) v FAI General Insurance Ltd (2004) 1 WLR 3251, cited |
COUNSEL: | R A Holt SC, with D Logan, for the appellant W Sofronoff QC, with D Williams, for the respondent |
SOLICITORS: | Minter Ellison for the applicant Freehills for the respondent |
- de JERSEY CJ: The appellant sought a declaration as to the extent of its obligation under a written contract of 25 September 2003 between itself as contractor and the respondent as principal. It was a lump sum contract obliging the appellant to remediate 17 hectares of substantially contaminated land at Newstead, Brisbane, the site of a former gasworks. The issue is whether the appellant’s obligation was absolute, that is, to render the land suitable for any use; or whether, as the appellant essentially contended, it need discharge that obligation only if it could be done economically. The appellant’s application for a declaration to that latter effect was dismissed by the learned primary Judge, who made a declaration on the respondent’s cross-application upholding the construction for which the respondent contended. The appellant appeals against the dismissal of its application (appeal no 10901/05), and against the declaration made on the respondent’s cross-application (Appeal No 10902/05).
- The owners of the land wish, following its remediation, to develop it for commercial and residential use. That cannot occur while the land remains on the Register maintained by the Environmental Protection Agency. The land may be removed from that Register only if, after investigation, it is determined no longer to be “contaminated land” (s 396 Environmental Protection Act 1994 (Qld)). Land on the Register cannot be developed save with the approval, in this case, of the Environmental Protection Agency, under the Integrated Planning Act 1997 (Qld). Not surprisingly such approval would not be forthcoming in the case of substantially contaminated land.
- To facilitate and regulate remediation, the Environmental Protection Agency has issued terms of reference which provide for the appointment of independent, qualified assessors who are called “third party reviewers”. They may be appointed to approve plans to remediate contaminated land, and to monitor compliance with those terms.
- A remediation action plan dated 11 April 2003 was prepared by engineers Reid Crowther Pty Ltd for these owners and the respondent. A third party reviewer, Mr Roger Parker of Golder Associates, approved that plan on 14 April 2003. The remediation action plan contained a report to the respondent about the condition of the site, it set out criteria for remediation, and it prescribed a method of remediation which, if followed, would justify removal of the site from the Register.
- The primary contractual document is in the form of the “Australian Standard Form of Formal Instrument of Agreement”, and is dated 25 September 2003. It lists the following as the documents which comprise the contract (cl 2):
“It is agreed that each of the following documents shall together comprise the Contract between the parties:-
- AS2124-1992 General Conditions of Contract;
- Annexure to AS2124-1992;
- Special Conditions of Contract AS2124-1992;
- The Contractor’s ‘Tender Schedule: Lump Sum Price 12 September 2003’
- Annexures comprising:-
…
Part H – Lump Sum Rate and Volume Breakdown; and
Part I –Further Contract Documents
– Extracts from Conditions of Tender
–Extracts from Notice to Tenderers;
–Extracts from Principals and Contractor’s Correspondence
- Technical specification…”
- The most comprehensive description of the extent of remediation required of the appellant, contained within the contract documents, appears in the technical specification, and is directed to rendering the land “suitable for any land use”. The technical specification contains the following relevant provisions (emphasis added):
“1.1General Description
Nothing in this Specification shall be taken to limit or alter or otherwise affect the obligations of the parties as set out in the Conditions of Contract. The Specification will always be read as being subject to the rights and obligations of the parties under the Contract.
The work under this Contract comprises all the work required to remediate ground and groundwater contamination at the Newstead Riverpark Site, Brisbane. The work involves an extensive ground remediation program and groundwater collection, treatment and management program (including but not limiting any other works which are required to be performed by the Contractor) as follows:
- all approvals, permits, licences and the like;
…
3)Demolition of all structures, except gasholder No 2, concrete footings/foundations/piles, pipework, services and slab removal will be undertaken to access contaminated material or to validate the underlying material to an extent that the material can be rendered as suitable for any land use. All structures and infrastructure must ultimately be removed, except as otherwise agreed by TPR;
…
6)undertake remediation work incorporating excavation, validation and backfill as appropriate. Implementation of groundwater collection, treatment and management measures as required to facilitate excavation of impacted soil. Note that each excavation area or corridor will be validated and TPR sign off required prior to any subsequent infrastructure works. The Works include, but is not limited to:
- all works to remediate the Site including, but not limited to excavation, management of miscellaneous in-ground material such as asbestos and pipes including disposal, stockpiling, sampling, segregation, drying/draining, treatment and stabilisation, transport, management, material classification, all environmental, all health and safety management including all monitoring, disposal off-Site, on-Site backfilling and compaction of suitable material to various locations.
- Remediation work from western portion of Site towards eastern sector including along proposed gas main and 110kV high voltage power cable diversion route…
- Validation and progressive TPR sign off on validated parcels of land no longer required for remediation purposes.
…
- remediate gasholder and associated infrastructure…
- remediation works incorporating excavation, validation and backfill as appropriate for eastern portion of QRail Area 1 and QRail Area 3 to be undertaken during services realignment;
- remediate area between services realignment and river wall boundary;
…
- all validation, reporting, liaison and final TPR sign-off;
…
1.2Third Party Reviewer
Mirvac has appointed Mr Roger Parker of Golder Associates’ Melbourne Office as Third Party Reviewer (TPR) for the project. The role of the TPR is to review all relevant documentation associated with the proposed Remediation Action Plan, sign off on the proposed remediation strategy and when appropriate sign off that the Site is suitable for any land use or specific land uses if necessary. A detailed outline of the TPR Terms of Reference issued by the EPA is presented in the RAP.
The TPR will play a critical role in determining that the Works (in part and as a whole) have been completed to the required standard. The TPR’s decision will be a fundamental factor taken into account by the Superintendent and Principal when approving claims by the Contractor for progress in, and completion of, sections of the Works. The Contractor should be aware that the TPR, in the absence of EPA advice, will adopt a regulatory position regarding all environmental issues.
…
1.3Objective of the Contract
The objective of the Contract is to safely and efficiently remediate the Site in order to achieve “any land use” with the Site removed from the Queensland EPA Environmental Management Register with no management of the Site required.
The Intent of the Remediation as accepted by the TPR is stated in the TPR approved RAP dated 11 April 2003.
1.4The Remediation Action Plan
The contractor may adopt the methodology of the TPR approved RAP. The Principal makes no representation as to the extent of the remediation, including volumes, required to remediate the Site.
The Contractor may submit a remediation methodology which is different to that in the RAP. It is the Contractor’s responsibility to obtain (at the Contractor’s cost) the TPR’s approval for any remediation methodology which is different to the RAP methodology.
The Contractor may adopt other components of the RAP including but not limited to the EMP and OH&S Plan in whole or part. The Contractor shall obtain, at the Contractor’s cost, all approvals including but not limited to the approval of the TPR for any work or methodologies which differ from those outlined in the RAP and associated documents.
13.0Material treatment
…The Contractor must make his own determination of the volumes of the various types of materials requiring treatment and of the extent of treatment required to meet the remediation objectives.
The Contractor shall only use methods for treating materials that were nominated in the RAP and associated documents or which have otherwise been approved. Any variations to the agreed methods proposed by the Contractor shall only be used following a written approval from the Superintendent and the TPR.”
- The words “any land use” are taken, in all likelihood, from the Dutch Intervention criteria, referred to in para 1.3 of the remediation action plan (para [14] below).
- The term “Works” is defined in the Special Conditions as follows:
‘“Works” means:
(a)the whole of the work to be executed in accordance with the Contract, including variations provided for by the Contract, which by the Contract is to be handed over to the Principal; and
(b)the remediated Site.’
This is echoed in cl 1.1(6) of the technical specification set out above: “all works to remediate the Site”. There is no suggestion in these provisions of partial or qualified remediation.
- What is termed the “contractor’s primary obligation” is defined consistently with its being unqualified:
“The Contractor is primarily responsible for the performance of the work under the Contract in accordance with the provisions of this Contract and acknowledges that the Principal relies upon the advice, skill and judgment of the Contractor in the performance of the work under the Contract.
Without restricting the generality of the Contractor’s responsibilities, the Contractor shall ensure that the Works progress to completion in accordance with the Contract and is, in addition, responsible for (and will control, co-ordinate, administer and direct) all other activities necessary for the performance of the work under the Contract.”
- The latent condition provision, cl 12 of the special conditions, provides:
“Latent Conditions are –
(a)physical conditions on the Site or its surroundings, including artificial things but excluding weather conditions, which differ materially from the physical conditions which should reasonably have been anticipated by the Contractor at the time the Contractor’s tender if the Contractor had -
(i)examined all information made available in writing by the Principal to the Contractor for the purpose of tendering; and
(ii)examined all information relevant to the risks, contingencies and other circumstances having an effect on the tender and obtainable by the making of reasonable enquiries; and
(iii)inspected the Site and its surroundings; and
(b)despite Clause 12.1(a), the existence of any form of contaminant or of any contaminated material or contaminated water of any nature and in any quantity or concentration, in or on the Site, will not constitute a Latent Condition for the purposes of the Contract.”
It would be difficult to reconcile, with that provision, a term modifying the appellant’s obligation by reference to what is economically achievable (whatever that might denote).
- The contract accorded the respondent a right of termination. Significantly no comparable right is given to the appellant. Clause 44B provides:
“Without prejudice to any of the Principal’s other rights or entitlements or powers under this Contract, the Principal may for its sole convenience by written notice to the Contractor terminate the employment of the Contractor under the Contract. The Principal’s right to terminate for its sole convenience includes, without limitation, a right to terminate if high level contaminated material cannot be disposed of to a mono cell because the Environmental Protection Agency does not permit the disposal of high level contaminated material to a mono cell.
If the Principal terminates the employment of the Contractor under this clause the Contract will be deemed to be frustrated and the provisions of Clause 45 will be the Contractor’s sole remedy, subject to the Principal’s rights under the Contract, for the termination.
The amount to which the Contractor is entitled under this clause shall be full compensation for the termination and the Principal will not be liable upon any claim in respect of such termination other than in respect of the amount payable under this clause.”
- The substantial tenor of those provisions is to oblige the appellant to render the site suitable for any land use, including ensuring removal of the site from the Environmental Management Register, with no further site management required under the relevant legislation.
- The appellant’s contention depends mainly on statements within the remediation action plan which suggest that economic considerations might operate to reduce the extent of the appellant’s obligation. Although referred to in the contract (for example, as just seen, in cl 1.3 of the technical specification), the remediation action plan is not a contractual document as such. It was not compiled for incorporation into the contract, but to explain to the Environmental Protection Agency, and the respondent, what was proposed. Accordingly, where that plan refers to what can economically be effected, it speaks from the respondent’s perspective. The plan predated the tender process culminating in this contract. The appellant nevertheless relies upon it to attenuate its burden, should it emerge that full remediation cannot be effected “safely, efficiently and economically”.
- The provisions of the remediation action plan which give rise to the appellant’s argument are as follows (emphasis added):
“1.3Remediation objectives
“The primary objective of the project is to fully remediate the contaminated material in order to render the entire site suitable for any land use in accordance with the National Environmental Protection (Contaminated Lands) Measure, (NEPM) 1999, Queensland EPA guidelines, NSW EPA, Dutch Intervention and site specific risk-based criteria. In achieving the proposed remediation objective, it is intended that the site not be subject to inclusion on the Queensland EPA Environmental Management Register and that no long-term management of the site be required. Further…
Other objectives of the remediation project include:
[seven bullet points follow]
Site specific target clean up goals based upon human health and environmental risks have been developed for the site. These target clean up goals were developed to allow for a contingency in the event that contamination encountered at the site could not economically be remediated to allow any land use. The risk based criteria was developed based upon proposed land uses including ‘standard’ residential with garden/accessible soil, high density residential, commercial/industrial (including shops, offices and industrial) and open space parkland. Long-term management and the amendment of the Site Management Plan to reflect the management measures would be required if the primary objective of remediating the site to a level which allows any land use is not achieved.
Given the complexity of the site and the objective of rendering the site suitable for any land use, the intention and implications associated with various validation outcomes have been clearly outlined in this RAP. Section 10.1b provides a discussion of the remediation intent based upon several validation outcomes.
1.3.1Remediation Intent
The intent of the remediation program is to clean up soil and groundwater across the entire site to a condition such that EPA will remove the site from the Environmental Management Register (EMR). Failing this, the intent is to remediate as much of the site as possible so that the areas remaining with residual contamination have the least possible on-going management requirements in the resulting Site Management Plan. In particular, the objective is to achieve remediation of the site that does not require any on-going requirements for groundwater monitoring.”
A number of possible outcomes from validation of soil remediation and groundwater monitoring at the end of remediation have been discussed with the TPR. The preferred options of the developer are listed in descending order of preference as follows:
[three alternatives or possibilities are then listed].
…”
- The first paragraph of 10.1, under the heading “Threshold Criteria and Site Suitability”, provides (emphasis added):
“The nominated soil target clean up goals are based upon criteria that enable the site to be suitable for any use. The nominated clean up goals for the proposed ‘any use’ designation are presented in Section 4. Alternative risk-based threshold criteria derived from the detailed Health Risk Assessment are also discussed in Section 4. Note that these criteria are provided as a contingency in the event that the remediation works cannot economically achieve the desired remediation criteria.”
- I set out, finally, provisions of the contract as to price (emphasis added):
“The Contract shall be for a fixed lump sum price of $24,486,082 based on the Contractors own assessment of volumes and methodology.
The Contract Fixed Lump Sum Price shall be calculated from the Lump Sum Items listed in Tender Schedule: Lump Sum Price 12 September 2003.
The Lump Sum Items for the remediation works are payable by instalments in accordance with the percentage complete as assessed by the Superintendent. Such instalments shall be included in payments due to the Contractor for the remediation works.
…
The Lump Sum Items Tendered in the Tender Schedule: Lump Sum Price 12 September 2003 shall, in so far as it is otherwise provided under the Contract, include all mobilisation, establishment, demobilisation…together with all general risks, liabilities and obligations set out or implied in the Contract.”
As to the payment of instalments, the “tender schedule: lump sum price” provides that “all works” to ensure particular instances of decontamination be completed before the entitlement to payment of any part of the instalment arises.
- The quantities set out in the “lump sum price rate and volume breakdown” were provided to assist in valuing progress claims. The conditions state: “These quantities, however, are in no way warranted by the Principal” (that is, the respondent).
- The considerations which appear most substantially to have influenced the learned primary Judge to his conclusion, may be summarized as follows: the difficulty of determining with any certainty whether or not a particular level of decontamination would be “uneconomic”; the feature of its being a lump sum contract (as His Honour said, “the parties have negotiated a price with regard not only to careful estimates of the quantum of the works made by the Contractor but also to the risk that site conditions might be worse, and necessary remedial works might be more difficult than anticipated”); the express exclusion of any warranty or representation by the principal as to “the existing site or sub-surface conditions”, with the appellant expressly obliged to make its own “determination of the volume of the various types of materials requiring treatment and of the extent of treatment required to meet the remediation objectives”; the express provision that the existence of contaminated materials would not constitute a “latent condition”; and the according to the respondent of a right to terminate “for its sole convenience” where, for example, “high level contaminated material cannot be disposed of to a mono cell because the…Agency does not permit the disposal of high level contaminated material to a mono cell”, but, significantly by contrast, no such right being given to the appellant.
- The learned Judge addressed the provisions of the remediation action plan on which the appellant primarily draws, in this way (emphasis added):
“Provisions which refer to ‘intent’, ‘objectives’, goals and ‘preferred options’, normally, are not regarded as appropriate for fixing contractual obligations. There is more than usual difficulty in giving them such a role where they have not been given contractual force in any direct way by a provision of the Contract and are included in a document which the parties deliberately excluded from the instruments comprising the Contract. It is of some relevance also that the parties are substantial corporations experienced in entering into contracts of this kind. I regard it as unlikely that, despite clauses 1.2 and 1.3 (of the technical specifications), a reasonable person would expect that the extent of the remediation required of the Contractor had to be teased out of imprecise and discursive language in a secondary instrument.
A possible explanation for sections 1.3 and 1.3.1 (of the remediation action plan) is that they merely acknowledge the reality that, irrespective of the desires of the Principal and the contractual obligations of the Contractor, full remediation may not be able to be achieved. In that eventuality, they provide a guide to alternative courses of action, rather than providing a mechanism under the Contract for determining when less than full remediation is required and to what extent.”
- The learned Judge acknowledged that there was substance to the appellant’s overall contention, but considered those features, mentioned above, which favoured the respondent’s position, meant that it should prevail. The Judge recognized, in particular, that cl 1.2 of the technical specification arguably supported the appellant’s argument, but went on to characterize that as more explanatory than determinative in a contractual sense. Similarly, he held the language of cl 1.3, which refers to acceptance of “the intent of the remediation”, as being “not appropriate for the imposition of a contractual obligation”.
- In its written outline, the respondent emphasized a number of plain, contractual affirmations of the appellant’s absolute obligation:
“(a)to do ‘all work required to remediate ground and groundwater contamination at the Newstead Riverpark Site, Brisbane’ (1.1 Technical Specification, second para);
(b)to do ‘all works to remediate the Site’: (1.1(6) Technical Specification, first bullet point);
(c)to achieve the ‘objective of the Contract…to safely and efficiently remediate the Site in order to achieve ‘any land use’ with the Site removed from the Queensland Environmental Management Register with no management of the Site required’”: Clause 1.3 Technical Specification;
(d)to ‘ensure that the Works [defined to include the ‘remediated Site’] progress to completion in accordance with the Contract’: Special Conditions 14 ‘Contractor’s Primary Obligation’);”
submitting that
“the obligation is absolute so that no unexpected levels or quantities of contaminants will constitute a latent condition which would otherwise have permitted the Appellant to extra time to complete or to extra payment under clause 12.3 of the General Conditions; (whereas) on the other hand, the Appellant is free to choose whatever method it wishes to achieve the required result provided the Third Party Reviewer approves it.”
- The contractual documents expressly require the appellant to render the land suitable for any land use and to ensure the removal of the land from the Register. The appellant seeks to dispel that primary position through the incorporation of the provisions of the remediation action plan, especially via the second paragraph of cl 1.3 of the technical specification. The terms of that paragraph are not apt to displace a contractual intention otherwise clearly expressed. It is not immediately plain why the parties referred in the contract, without elaboration, to the intent of the remediation action plan, although I respectfully consider that His Honour’s analysis of that spells the matter out so far as one may reasonably surmise. It is important to recognize the genesis of the remediation action plan, as a document for the information of the Agency and the respondent. Insofar as it contemplates remediation which is “uneconomic”, it speaks from the respondent’s perspective. In its many express references, the contract itself expresses the appellant’s obligation in absolute terms. Had the parties intended, contractually, to allow for a fall-back, lesser possible obligation on the respondent, they would have made clear express contractual allowance for that possibility.
- We were pressed with the authorities establishing a court should construe commercial contracts in order to make commercial sense of them (see, for example, Sirius International Insurance Co (Publ) v FAI General Insurance Ltd (2004) 1 WLR 3251). That approach obviously does not justify disregard for what the parties have in terms contractually provided.
- It was submitted for the appellant that the second paragraph of cl 1.3 of the technical specification is ambiguous, so that resort may be had, extrinsically, to the content of the remediation action plan to interpret the contract proper. The appellant refers also to the use of the word “objective”, and the possibility, under cl 1.2, of the third party reviewer signing off that the site is suitable for only “specific land uses if necessary”. The references to the appellant’s obligation to render the land suitable for any land use, and to ensure the removal of the land from the Register, are plain and unambiguous to the point where they must prevail over vague references to the “objective” of the contract and the “intent” of the non-contractual Remediation Action Plan, as contained within cl 1.3.
- The appellant contended that if the contract would not otherwise bear this construction, a term should be implied which would relieve the appellant from the absolute obligation, should full remediation not be possible “safety, efficiently or economically”. By the express terms of the contract, the appellant is obliged to secure that result efficiently and safely. The latent condition clause means that the appellant is entitled to no extra payment because the work may prove more expensive than expected. Implying the proposed term would in those circumstances conflict with the express stipulations of the contract. Also, the scope of the implication would inevitably be uncertain, there being any number of ways of approaching the determination of the economics of the operation in the context of a range of possibly emergent circumstances. Such an implication could not withstand the strictures of Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-1982) 149 CLR 337.
- While, as the primary Judge acknowledged, the appellant’s position is arguable, I consider that he was right in his conclusion, that the clear and numerous acknowledgements in the plainly contractual documents of the appellant’s absolute obligation, could not be eroded or overborne by what might be drawn from the rather more “informal” references to the Remediation Action Plan, which lacks determinative contractual significance for the reasons His Honour expressed.
- I would order that each appeal be dismissed, with costs to be assessed.
- McPHERSON JA: I have read and agree with the reasons of de Jersey CJ for dismissing these appeals. I wish, however, to add some further observations of my own.
- In the way the appeals were argued before us, the question was presented in an abstract form as one depending for its decision entirely on the interpretation of the contract. That, in the end, is how it must be determined. However, ignoring the facts to which the contractual provisions are to be applied makes it more difficult to identify the issues involved.
- The material in the appeal record includes an affidavit from Mr Richard Molloy, civil engineer, who is the appellant Thiess’s project manager for the site remediation that is the subject of the contract. From the affidavit it appears that the problem which gave rise to this application concerned what is described as the Terrace Sands area located in the south eastern corner of the site adjacent to the Brisbane River, and comprising some 12% of the total area to be decontaminated.
- In that area, the cells have been excavated to a depth beyond those stated in Appendix G to the Remediation Action Plan. By cells, I understand it meant excavated cavities in which contaminated water can be trapped or stored and rendered innocuous. Investigations have, according to Mr Molloy, shown that contamination exists for a further 3.6m below this surface, making it 9.6m below the original ground level, whereas the Remediation Action Plan refers to excavation depths of 3.25m to 5.00m in cells AQ and BA.
- The Plan also contemplates that the sheet pile wall along the river would be 12m deep. This has, it is said, proved to be inadequate to permit excavation of the depths detailed in the Plan. Much greater depths have in fact been achieved by installing sheets 42% longer than those envisaged in the Plan. Even after doing this, the remaining contamination lies at a further depth and can be removed only if additional structural support is provided to the sheet pile wall. To carry out such work would take up to three months and cost an additional $1.5 million. Removing contamination at this depth would cost a further $500,000, increasing the contract sum by an additional 8%, and raising safety concerns by reason of the depth of the excavation and its propinquity to the River.
- Essentially, the case therefore comes down to this. The work that has to be done to comply with the contract by making the site free of contaminants, and so ensuring its removal from the Register, will be a great deal more difficult and expensive than was originally contemplated by the parties because of sub-surface conditions that were not known to exist at the time the contract was entered into. It is submitted by the appellant that this can be gathered from the Remediation Action Plan, which, however, is not a contract document.
- The problem confronting the appellant Thiess does not seem to me to differ in substance from that confronting many contractors who in unqualified terms undertake to perform work that, because of unforeseen and perhaps unforeseeable physical conditions, turns out to be much more difficult and expensive than originally expected or supposed. A well known example is Re Carr and the Shire of Wodonga [1925] VLR 238. The contractor there undertook to build a bridge for the Council, which involved sinking piers into the river bed, which was believed to consist of sandy clay or clay and gravel. In fact, in sinking the cylinders for the piers, it was discovered that there were unforeseen obstacles in the form of large logs buried in the alluvium of the river, as well as water, which increased the total cost of the work by 50%. The Full Court of Victoria held that there was no warranty, express or implied, on the part of the Council as to the absence of obstructions in the area having to be excavated for the piers, and that the additional cost of doing so occasioned by those obstructions could not be recovered from the Council.
- Of course, everything depends on the provisions of the contract between the parties, the relevant terms of which in the present instance are set out in detail in the reasons of the Chief Justice. Among them are the provisions of cl 12 of the special conditions of contract. They seem to me to make it impossible to imply in favour of Thiess any term which would relieve it from the obligation to do the further work and incur the additional cost required to bring the site to the required uncontaminated standard. Under cl 12(b) of those conditions, the existence of “contaminated water of any nature or in any quantity or concentration in or on the site” is not to constitute “a latent condition” for the purposes of the contract.
- Mr Holt SC sought to distinguish cases, of which Carr & Wodonga Shire Council is an illustration, by submitting that there the parties were not aware of the existence of the subterranean obstacles, whereas here they were in fact aware of the problem of contaminated water. The case here, he may have suggested, was analogous to one of contractual frustration. But, if approached that way, it would be closer to an instance of pre-contractual than post-contractual frustration. When entering into the contract, neither of the parties knew of the scope, nature or extent of the physical problem, which turned out to be much greater than expected. Under our law, what I have called pre-contractual frustration is dealt with as a form of common mistake. No one suggests that the circumstances of the present case would satisfy the requirements of that doctrine as laid down in Bell v Lever Brothers Ltd [1932] AC 161, or the subsequent decisions in which it has been considered.
- Nor, in the field of contractual frustration by supervening events, would the fact that the contract became unexpectedly more burdensome and expensive or “uneconomic” to perform give rise to a right on the part of the performing party to be relieved from it. See Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696. Clause 44B of the contract expressly invests Mirvac with a power to terminate the contract “for its sole convenience”. The clause confers an option, similar in its operation to those commonly found in contracts for the sale of land to be developed, conferring on the purchaser a right to “avoid” the contract if, for example, local government conditions of development prove unacceptable to the purchaser, or if finance is not available on satisfactory terms: Meehan v Jones (1982) 149 CLR 471. No corresponding option is given to the appellant. That is another reason for supposing that the appellant Thiess is bound by the contract if it becomes, as it appears to have here, unduly onerous to carry out.
- In my opinion, the appeals should be dismissed with costs.
- WILLIAMS JA: The relevant facts and issues relating to this appeal are fully set out in the reasons for judgment of the Chief Justice and McPherson JA which I have had the advantage of reading. I agree with all that has been said therein, but wish to add some reasons of my own for concluding that each appeal should be dismissed. I will not repeat unless necessary matters of fact set out in those judgments.
- In the principal appeal (10901/05) the substantive order sought by the appellant is a declaration in the following terms:
"(d) It be declared that, on a proper construction of the Contract, the appellant, in performing its obligations under the Contract and in particular in meeting the objectives stated in cl 1.3 of the Technical Specification, is obliged:
- to remediate the Site in order to achieve any land use and removal of the Site from the Queensland EPA Environment Management Register with no management of the Site being required:
- where such remediation is possible and may be effected safely and efficiently and economically; or
- alternatively, where such remediation is possible and it is reasonable in the circumstances for the appellant to effect such remediation; and
- where it is not possible to comply with paragraph (d)(i) as to the entirety of the Site:
- to remediate those parts of the Site in accordance with paragraph (d)(i), where such remediation is possible and may be effected safely, efficiently and economically; or
- alternatively, to remediate those parts of the Site in accordance with paragraph (d)(i) where remediation is possible and it is reasonable in the circumstances for the appellant to effect such remediation; and
- to remediate those parts of the Site, not remediated as required by (d)(i), so that those areas have the least reasonably possible ongoing management requirements."
- The argument advanced at first instance, and again to this Court, was to the effect that such declaration should be made either upon the proper construction of the contract between the parties, or, alternatively, after a term was implied supporting that declaration.
- The contract must be construed taking into account the context in which it came into existence; that is the surrounding circumstances known to both parties are relevant to the proper construction of the contract.
- In early 2003 the respondent prepared a short list of companies to be asked to tender for the performance of work remediating the site. A letter was written to the appellant on 13 March 2003 referring in general terms to the proposed work, referring to a draft Remediation Action Plan (RAP), and referring to the fact that the site was listed on the Queensland Environmental Protection Agency's Environmental Register. The formal invitation to tender was the letter dated 1 April 2003. It stated that tenders were called "for remediation of the . . . site in accordance with the Tender Documents". The relevant documents were Conditions of Tender, Special Conditions of Contract, Technical Specification and Forms of Tender and Tender Schedules. It stated that the approved RAP was soon to be available. In an affidavit the Queensland Manager, Remediation and Sustainability, of the appellant admitted receiving the final RAP in April 2003.
- The RAP was a document prepared for submission by the respondent to the Environmental Protection Agency setting out the proposed remediation plan. It stated that the "primary objective of the project is to fully remediate the contaminated material in order to render the entire site suitable for any land use in accordance with the Queensland EPA Draft Guidelines for the Assessment and Management of Contaminated Sites in Queensland, 1998." It recognised that if that was achieved no long term management of the site would be required. There was also reference in cl 1.3 of the RAP to the fact that the "primary objective of the project is to fully remediate the contaminated material in order to render the entire site suitable for any land use in accordance with the National Environmental Protection (Contaminated Lands) Measure, . . . Queensland EPA Guidelines, . . . Dutch Intervention and site specific risk based criteria."
- The RAP then went on to provide alternatives if "the site could not economically be remediated to allow any land use". As the RAP makes clear, it was the decision of the respondent that the site could not economically be remediated and what, in those circumstances, would be acceptable alternatives was a matter for the respondent's decision.
- Clearly the tender submitted by the appellant was submitted with full knowledge of the requirements of the Environmental Protection Act 1994 (Qld) and associated provisions in the Integrated Planning Act 1997 (Qld). It is also clear that the appellant was made aware of the requirement and meaning of the expression "any land use" in this specific context.
- On 25 September 2003 the parties executed a Formal Instrument of Agreement. That document recited that the appellant "has offered to carry out the remediation of the Site and the parties wish to enter into an agreement in relation to the remediation of the Site." That document then in cl 2 listed the documents which "together comprise the Contract between the parties". Importantly the RAP was not one of the documents listed. One of the documents so listed was the "Technical Specification for Newstead Riverpark Remediation September 15, 2003". The first paragraph of cl 1.3 thereof provided:
"The objective of the Contract is to safely and efficiently remediate the Site in order to achieve "any land use" with the Site removed from the Queensland EPA Environmental Management Register with no management of the Site required."
- In my view those words are clear and there is no doubt that given the history of the relationship between the parties resulting in the execution of the contract each party knew precisely what was meant by "any land use".
- The second paragraph of cl 1.3 was the subject of contention. It provided:
"The Intent of Remediation as accepted by the TPR is stated in the TPR approved RAP dated 11 April 2003."
- It was submitted that a consequence of that provision was that the RAP was incorporated into the contract. In my view that is not so. The first paragraph of cl 1.4 then went on to state:
"The Contract may adopt the methodology of the TPR approved RAP. The Principal makes no representation as to the extent of the remediation, including volumes required to remediate the Site."
- That to my mind makes clear that the reference in the Technical Specification to the RAP was no more than of background relevance. It drew the appellant's attention to the methodology for remediation which had been approved pursuant to the applicable legislation, but that methodology was in no way binding on the appellant. Its task was to achieve the required degree of remediation, by whatever method it chose, for the price stipulated in the contract.
- When one has regard to cl 12.1(b) of the General Conditions of Contract as inserted by the Special Conditions and cl 13 of the Technical Specification (both quoted in the reasons for judgment of the Chief Justice) it is clear that the respondent made no representation as to volumes of material requiring treatment, or the extent of treatment required to meet remediation objectives or as to the existence of any form of contaminant or contaminated water of any nature. Such matters were all clearly for the tenderer to evaluate before entering into a contract.
- It is also of importance to note the addition of cl 44B to the General Conditions of Contract made by the Special Conditions. That clause gave the respondent a right to terminate the employment of the appellant under the contract in certain circumstances, including "if high level contaminated material cannot be disposed of to a mono cell". The significance is that such a right was specifically conferred on the respondent without any such right being conferred also on the appellant.
- Whilst it is true to say, as contended for by counsel for the appellant, that a contract such as that in question here must be construed so as to make commercial sense, that does not permit the court to write a new contract for the parties. One cannot ignore an express contractual obligation merely because it is claimed that in the circumstances which have eventuated that obligation has become more onerous than was initially perceived.
- Further, one cannot import into a contract an implied term which significantly cuts down an express obligation contained in the contract.
- Here, in my view, the obligation assumed by the appellant pursuant to the contract, although extremely onerous, was clear. It cannot be said, given the evidence, that the appellant was not provided with material, available to the respondent, which indicated the onerous extent of its obligations.
- There is, in the long run, no basis for construing the contract as sought by the appellant nor is there any basis for inserting an implied term to give effect to that construction.
- In the circumstances appeal 10901/05 should be dismissed with costs.
- Before the learned judge at first instance the respondent made a cross-application seeking a declaration as to the obligation of the appellant on the proper construction of the contract. On that application the learned judge at first instance made a declaration in the following terms:
"It be declared that on the proper construction of the Contract, the respondent is obliged to do all that is possible to remediate the site with each of the following results:
(a) the site be rendered suitable for any land use;
(b) the site be removed from the Queensland EPA Environmental Management Register;
(c) there be no management of the site required."
- By appeal 10902/05 the appellant sought an order that that declaration be set aside. It was not submitted to this Court that if appeal 10901/05 was dismissed the declaration made on the respondent's application should be set aside.
- It follows that appeal 10902/05 should also be dismissed.
- The order of the Court should therefore be:
- the appeal in 10901/05 be dismissed with costs;
- the appeal in 10902/05 be dismissed with costs.