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Nichols Constructions Pty Ltd v Intensia Pty Ltd[2017] QDC 319

Nichols Constructions Pty Ltd v Intensia Pty Ltd[2017] QDC 319

DISTRICT COURT OF QUEENSLAND

CITATION:

Nichols Constructions P/L v Intensia P/L [2017] QDC 319

PARTIES:

NICHOLS CONSTRUCTIONS PTY LTD

(ACN 010 763 505)

(plaintiff)

v

INTENSIA PTY LTD (ACN 144 893 363)

(defendant)

FILE NO/S:

(Southport) D20/13

DIVISION:

 

PROCEEDING:

Civil trial

ORIGINATING COURT:

District Court of Queensland

DELIVERED ON:

22 December 2017

DELIVERED AT:

Brisbane

HEARING DATE:

12, 13, 14 and 15 December 2016 and written submissions to 23 May 2017

JUDGE:

Andrews SC DCJ

ORDER:

  1. Declare that the plaintiff is entitled to forfeit the deposit of $172,500. 
  2. The counterclaim is dismissed.
  3. The parties are at liberty to apply in respect of interest and costs. 

CATCHWORDS:

CONTRACT – RESCISSION – Where contract for sale of land – where land contaminated with asbestos after contract – whether seller knew land would become contaminated – whether breach of warranty that seller not aware of any facts or circumstances that may lead to the land as being classified as contaminated land within the meaning of the Environmental Protection Act 1994

CONTRACT – RESCISSION – Where seller warrants there is no outstanding obligation to give a notice under the Environmental Protection Act 1994 of notifiable activity being conducted on the land – where removal of asbestos from buildings into a bin for transport away from land sold – whether breach of warranty – whether asbestos was being “disposed of on the land” within the meaning of the Environmental Protection Act 1994

CONTRACT – RESCISSION – ESSENTIAL TERM – Whether obligation not to do anything regarding the property that may significantly alter it or result in later expense for the buyer is an essential term – whether by reason of asbestos contamination the seller breached that obligation – whether that breach gave the buyer a right to terminate

CONTRACT – RESCISSION – Where sewer line undisclosed on title and by contract – whether material error, encroachment or mistake – whether material to the buyer – whether material objectively – whether buyer entitled to terminate

STATUTES – INTERPRETATION – Where removal of asbestos from buildings into a bin for transport away from land – whether a “notifiable activity is being carried out on the land” within the meaning of the Environmental Protection Act 1994

Environmental Protection Act 1994 (Qld) section 371, 373, 374, schedule 3

Frankel v Paterson [2015] NSWSC 1307

Kelly v Arkdev Pty Ltd [2005] QSC 318

Liverpool Holdings Ltd v Gordon Lynton Car Sales Pty Ltd [1978] Qd R 279

Tarbet Investments Pty Ltd v Overett [1983] 1 Qd R 280

Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1

COUNSEL:

Thomae for the plaintiff

Charles Wilson for the defendant

SOLICITORS:

Parker Simmonds Solicitors & Lawyers for the plaintiff

Small Myers Hughes for the defendant

Issues

  1. [1]
    A buyer of land gave notice of termination of contract prior to settlement. The notice alleged asbestos contamination of the land. The primary issue is whether the buyer’s termination was valid. It maintains four discrete bases for validity of its termination.
  1. [2]
    The buyer relies on three asbestos related arguments. The issues for those are whether:
  1. The seller knew at the date of contract of any facts or circumstances that may lead to the land being classified as contaminated? If it did, then it thereby breached its warranty at contract clause 7.4(3)(a)(ii) and the buyer was at liberty to terminate (I find that the seller was not aware.)
  1. Removing asbestos from the land and taking it to a waste disposal facility meant asbestos was being “disposed of on the land” or that a “notifiable activity is being carried out on the land” within the meaning of the Environment Protection Act 1994 (Qld) (EPA). If those legal premises are correct the disposal was a “notifiable activity” under the EPA and the seller may have incurred an obligation to notify a relevant authority if the seller had known of the notifiable activity and the seller would breach its warranty at contract clause 7.4(3)(a) that it had no outstanding obligation to give such a notice. (I find that the legal premise was incorrect.)
  1. The seller was, by reason of asbestos contamination, in breach of its obligation at contract clause 8.3(1) to not do anything regarding the land that may significantly alter it or result in later expense for the buyer. (I find that the seller was not in breach). Is clause 8.3(1) an essential term? (No it is not.) Did the breach give Intensia a right to terminate? (I find that if the seller had been in breach, the breach would not have given the buyer a right to terminate.)
  1. [3]
    After giving its notice of termination of the contract the buyer did not offer to settle. The seller then purported to terminate.
  1. [4]
    In preparation for this proceeding, the buyer learned of an undisclosed encumbrance, a sewer line and added a fourth basis for termination, raising the issue whether:
  1. The presence of the sewer line over the title of Lot 2 and Lot 3 was a material error, encroachment or mistake within the meaning of clause 7.5(4) of the contract. If so, the buyer would have been at liberty to terminate. (I find that it was not material.)
  1. [5]
    The seller seeks the deposit held by the stakeholder. If the contract was validly terminated by the buyer, it seeks the return of the deposit from the stakeholder and damages from the seller.

Relief Claimed

  1. [6]
    The seller, Nichols Constructions Pty Ltd (Nichols), claims:
  1. a declaration that Nichols effectively rescinded the contract;
  1. a declaration that it is 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;
  1. payment of interest on $172,500 at 10.65%pa from 15 January 2013.
  1. [7]
    The buyer, Intensia Pty Ltd (Intensia),  counterclaims 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;
  1. statutory interest.

The facts

  1. [8]
    Anne Lovel had lived at 10 Ahern Street Labrador at the Gold Coast, from about 2000 to about 2010. In about 2005, she purchased a property at 10 Ahern Street and two properties adjoining 10 Ahern St, being 8 and 8A for a total $1,490,000. She rented 8 and 8A out for market rent. They were never vacant. She had no trouble finding tenants for 8 and 8A because she had a rental agency.
  1. [9]
    In about 2008, Anne Lovel applied for development approval for the construction of 62 units for an affordable housing project. When Anne Lovel obtained development approval for the property she told her son, Mr Lovel, but he was disinterested in knowing more about her development plans at that time.
  1. [10]
    Anne Lovel had borrowed about $2.9m from Nichols and the loan was secured by a mortgage over the three parcels of land. Nichols claimed that Anne Lovel’s debt rose to about $4.5m. Anne Lovel disputed the amount and it was not paid. Ultimately, Nichols foreclosed.
  1. [11]
    In October 2012 Nichols was mortgagee in possession and Anne Lovel, then residing in Hong Kong, was mortgagee of those 3 adjoining parcels of registered land (the land) described as:

1.1  Lot 1 on RP104405, 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 St)

1.2 Lot 2 on RP104405, 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 St)

1.3 Lot 3 on RP80133, 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 St).

  1. [12]
    On each of the three lots was a single freestanding dwelling. Another improvement was 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, there had been an asbestos audit of the three dwellings and the boundary fences which had been there at that time. The auditor concluded that there had then been:

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. [13]
    On about 2 October 2012 Nichols 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 a demolition of the dwellings in accordance with a survey plan was subject to conditions including “All removal of asbestos to be carried out by a person holding an “A” class licence under the Workplace Health & Safety Regulation 1997.” It is uncontested that the weight of asbestos materials in the improvements on the land before demolition exceeded five tonnes.
  1. [14]
    By 10 October 2012 Nichols had engaged a demolition contractor Bastemeyer Group Pty Ltd (Bastemeyer) to demolish the improvements. Bastemeyer has since gone into liquidation. Bastemeyer in turn engaged a subcontractor, Alan Bingham of A & B Demolition, to remove asbestos, timber and windows.
  1. [15]
    Mr Bingham did not hold such an “A” class licence. He held a B class licence. It was enough for removing bonded asbestos but not unbonded asbestos. He inspected the dwellings before he commenced work and saw only bonded asbestos. In this proceeding it is significant to distinguish between bonded and unbonded asbestos. The EPA refers to bonded and unbonded asbestos without defining them. The difference between the two was adequately explained[1]as follows:
  1. bonded asbestos, also called non-friable asbestos, consists of asbestos fibres, which are usually bonded with other materials, such as cement;
  1. unbonded asbestos, also called friable asbestos, is loosely bound, easily turned to powder with light pressure, or asbestos fines. 
  1. [16]
    The way a sheet of bonded asbestos is dealt with during its detachment from a building and its removal from the building site may cause it to break into pieces and some of the pieces may be friable though the original sheet had not been. During demolition of a building containing bonded asbestos, the bonded asbestos, if sawn, broken or crushed may convert into pieces some of which could be friable asbestos. A reasonable demolisher would generally try to avoid converting asbestos from bonded to unbonded during demolition.
  1. [17]
    Mr Bingham began his tasks at the land on about Wednesday 10 October 2015. Mr Bingham did his removal work by hand and his only tools were a hammer, chisel and drills.  Mr Bingham had been removing asbestos from houses for about 17 years.  He had held his “B” class licence during that time.  He had never received complaints about the performance of his asbestos removal work.  He had regularly worked with Bastemeyer and described John Bastemeyer as “our contractor to do all the jobs”.  Mr Bingham described Mr Bastemeyer as “the demolition man” who would hire Bingham to come in.  Mr Bingham could recognise friable asbestos immediately.  His work process involved attempting to comply with the obligations under the Workplace Health and Safety Regulations.  He understood that to involve spraying PVC glue where nails are to be extracted, using plastic under the eaves when they are being removed so as to catch anything that drops, placing all asbestos into bins and taping any such bins with two lots of plastic sheeting.  Because he had worked with Bastemeyer before, he knew that Bastemeyer’s usual process was to pick up a full bin immediately and to remove it from site. Mr Bingham’s practice was to prevent asbestos sheets from breaking.  He had about five people working on the land.  After all the asbestos was removed, the practice was for Bastemeyer to attend with machinery to crush the other materials on site and take that rubbish away.  Mr Bingham had formed an opinion that there was no friable asbestos on the land. He formed that opinion after an inspection in advance of attending to remove asbestos.  Mr Bingham’s practice was to prepare a document to satisfy the requirements of the Workplace Health and Safety Regulations and he expected Bastemeyer to prepare its own.
  1. [18]
    Some old houses can contain friable asbestos which has been deliberately used around plumbing. There is no evidence that the three dwelling contained any when Mr Bingham inspected them before commencing his work on them. Mr Bingham claimed that he had not seen any such friable asbestos in the dwellings on the land. But he explained that if there had been some which had not been noticed on the initial inspection and had not been included in a list of asbestos to be removed “it would have went straight in the bin.” I accept that Mr Bingham was competent to recognise if there had been friable asbestos associated with plumbing and was competent to remove it and put it in the bin. He and his workers wore masks and gloves. There is a possibility I need not explore that there was breach of a regulation involved in Mr Bingham’s holding a “B” class licence. If there was a reasonably foreseeable possibility that friable asbestos would be encountered in the dwellings, it would have been in small quantity and capable of easy and safe disposal. I am not satisfied that Mr Bingham’s “B” class licence prima facie rendered him incompetent to safely remove all asbestos from the dwellings and seal it in a bin.
  1. [19]
    Intensia submitted that because the land had been fenced for demolition, regulations required that an asbestos register for the property be created and kept. It is unnecessary for me to rule on that submission but I will assume it to be correct. Mr Bingham did not maintain a register. He claimed that was Bastemeyer’s responsibility. Bingham regarded the register as irrelevant for the safety of his team because he said that he checks the premises anyway and so he knows what asbestos is present. Mr Bingham relied upon Bastemeyer to attend to all other requirements such as notifying council and writing to neighbours, putting up safety fences and signs and arranging for a competent independent person to inspect the site at the end of asbestos removal work. These are things Bingham regarded as required to be done for every job and Mr Bingham expected that Mr Bastemeyer would attend to those obligations and assumed that Bastemeyer did.
  1. [20]
    Mr Bingham remembered filling a bin on the land to the brim. However he could not remember whether there had been one bin or two or whether the bin that was filled to the brim was a 10m³ bin. He was adamant that when he left the site, no asbestos remained. I infer that he meant that there was no asbestos other than that which was sealed under plastic in a bin awaiting removal. I am not satisfied that this opinion was dishonest.
  1. [21]
    Anne Lovel’s son, Mr James Lovel (Mr Lovel), walked past the land on 11 October 2012 and saw a green, Colorbond fence. He believed it was to deter squatters. I am satisfied that he did not know the fence was erected as part of a plan for demolition.
  1. [22]
    Anne Lovel knew before October 2012 that there was a sewer line under 10 Ahern Street and that there was a large stormwater drain also. They were not things she discussed with Mr Lovel. She also knew that the dwellings had materials containing asbestos in them. She learned that by 2003. Concerned about potential health risks from asbestos, in about 2005 she engaged Mr Luke Duggan to give her a report about the asbestos. She gave copy to Mr Nichols who advised her that the asbestos would not be a problem. That advice is consistent with the report.
  1. [23]
    By 2012, when Mr Lovel became interested in purchasing the property, Anne Lovel was living in Hong Kong. She had left for Hong Kong on 30 January 2012.
  1. [24]
    On 12 October 2012, Nichols as the seller and Intensia as the buyer entered into a written contract of sale[2](the contract) in respect of the land. Intensia acted as undisclosed agent for Ambitious Ventures Pty Ltd (Ambitious). Neither Intensia, nor Ambitious had anticipated or approved the demolition. Nichols entered into the contract as mortgagee in possession exercising power of sale.  The mortgagor was Ms Anne-Marie Lovel. By the contract, Intensia agreed to pay the purchase price of $1,725,000. When Intensia entered into the contract, neither Mr Waldeck nor Mr Lovel knew that Nichols had arranged for the dwellings to be demolished. 
  1. [25]
    Mr Lovel made it clear[3]that he had no intention to develop the land after purchase and no intention to arrange for construction of a development.  He would have applied the rental income to the cost of obtaining, some years later, an approval for development for a higher and better use for the whole of the land.  He knew that Nichols had an approval for re-development which had lapsed.  Mr Lovel had no interest in seeking to have that renewed.  The agent for Nichols had actually offered Mr Lovel an assignment of the plans and Mr Lovel indicated that he was not interested and preferred to hold the dwellings to rent them. 
  1. [26]
    On 12 October 2012, prior to Intensia’s entry into the contract Mr Lovel was:
  1. the sole director of Ambitious;
  1. keen to conceal from Nichols his interest in purchasing the land;
  1. a former resident of 10 Ahern St, having lived there with his mother for some period between 2000 and 2010.
  1. [27]
    Mr Lovel believed that he had good reason to use Intensia as undisclosed agent for Ambitious to conceal the fact that he was connected with the proposed purchase. Mr Lovel feared that if Mr Nichols knew that Mr Lovel was interested in the purchase, Mr Nichols might seek to exploit what he may have perceived to be a sentimental attachment given that Mr Lovel had lived there, with his mother, for some period. As well, Mr Lovel was concerned that Mr Nichols may have been hostile to Mr Lovel or averse to selling to him because of his mother’s history as Nichol’s defaulting creditor.
  1. [28]
    Mr Lovel intended that after Intensia completed the contract, the three houses would be let and that the rent would defray the holding costs Ambitious would incur for the land.
  1. [29]
    Ben Waldeck (Mr Waldeck) was the sole director of Intensia and a friend of Mr Lovel.  Intensia contracted to buy in the expectation that Intensia was buying the land and improvements including dwellings on the land. That expectation accorded with the Reference Schedule of the contract which described the present use of the land as “Residential Dwellings”. Intensia’s director Mr Waldeck acted at Mr Lovel’s direction when he caused Intensia to enter into the contract as an undisclosed agent for Ambitious.
  1. [30]
    Ambitious was intended to be registered as owner at completion by direction to Intensia in accordance with a deed of 11 October 2012.[4]Ambitious had available the means of paying the adjusted purchase price at completion.  That evidence comprised the account statements in and summarised in the covering sheet to ex 11.
  1. [31]
    On 12 October 2012:
  1. an unregistered sewerage easement (sewer line) ran in a north-south direction along the western boundary of Lot 1 (10 Ahern St), and through the middle of Lot 2 (8A Ahern St) and Lot 3 (8 Ahern St) and burdened all three lots;
  1. a registered drainage and stormwater easement, registered easement in gross 601654573 (drainage easement), ran in an east-west direction along the southern boundary of Lot 2 (8A Ahern St), burdening that lot. 
  1. [32]
    No encumbrances were disclosed in the contract. The Reference Schedule of the contract, at the section for disclosing “Matters Affecting Property” and in particular for disclosing “Title Encumbrances” had “Nil” inserted.
  1. [33]
    The existence of the drainage easement was disclosed in Land Title Office searches in respect of Lot 2 (8A Ahern St) and was a matter known by Intensia and by Mr Lovel, at the time that Intensia entered the contract.[5]Mr Lovel had, by the date of contract, been admitted as a solicitor and he knew of the existence of the drainage easement. In spite of that knowledge, Mr Lovel deliberately filled in “Nil” on the encumbrance’s portion of the reference schedule to the contract. Mr Lovel did this so that he might claim contractual compensation from Nichols if the contract was not altered by Nichols to disclose the drainage easement.[6]The contract was not altered by Nichols to refer specifically to the drainage easement.
  1. [34]
    The sewer line was not shown on title searches for Lots 1, 2 or 3.
  1. [35]
    Nichols submits that Mr Lovel first became aware of the sewer line’s existence from, at latest, 19 December 2012. Nichols submits that on that date Mr Lovel received a topographic survey[7]and that it disclosed the sewer line. Reference to that survey shows that it is difficult to interpret.  The survey was received by SMH Solicitors.  Mr Lovel had then no actual experience with property development.  I accept the evidence of Mr Lovel that he did not learn of the sewer line until long after Intensia elected to terminate.  There is a potential issue as to whether Mr Lovell knew on 4 December 2012 of the unregistered sewer line. I am unsure why Mr Lovel’s knowledge of the sewer line on 19 December is relevant. In any event, I am satisfied by Mr Lovel’s evidence that he did not learn of it until he read a valuation of the land by Mr Forbes. That must have been at some date after 14 April 2015.  One sees from the valuation that Mr Forbes inspected the land on 14 April 2015.  I accept that Mr Lovell was unaware of the sewer line until after this proceeding commenced and after he read that valuation report. 
  1. [36]
    After the contract was signed by the parties on Friday 12 October 2012, the contract was held by Mr Mark Parker, solicitor of Parker Simmonds solicitors for Nichols. Mr Parker held a power of attorney for Nichols and signed the contract for Nichols.
  1. [37]
    Nichols does not submit that Mr Lovel or Mr Waldeck were aware before Intensia went to contract that Nichols intended to demolish the dwellings or that demolition may have begun.[8]Nichols no longer contends that Intensia learned of the demolition before entering into the contract and I find that it did not.
  1. [38]
    Intensia alleges that on 12 October 2012 Nichols “well knew of the reasonable likelihood that the lands might be classified as contaminated land within the meaning of the” EPA.[9]. I deal with Intensia’s allegation below and reject it. A director of Nichols at that date was Mr Nichols.  Mr Nichols was a licensed builder and the holder of a “Builder-Medium Rise” licence since before September 2003.
  1. [39]
    On Monday 15 October 2012, Mr Parker received the $172,500 deposit from Intensia and he then inserted in the contract’s reference schedule at the space for the contract date, the date “15. 10. 12”. He did not discuss that insertion with the buyer before inserting that date. The parties accept[10]and I find that the contract was entered into on 12 October 2012.
  1. [40]
    Intensia no longer contends, as it had, that the insertion of the date was a material alteration of the contract.
  1. [41]
    Demolition by Bastemeyer, as opposed to Mr Bingham’s removal of asbestos, windows and timber, started by 15 October 2012. On 15 October 2012 a photograph[11]reveals that a mechanical digger was carrying out demolition on one of the three houses and shows that another of the three houses was not then demolished. On the evening of 15 or 17 November 2012 or on both evenings, Mr Lovel walked past the properties and saw that Lot 1 (10 Ahern St) had been stripped to its frame or was almost entirely demolished. He was shocked. The purchase price represented the bulk of the capital available to Mr Lovel.  It was important to him to be able to rent the three houses on the property so that he could cover his holding costs until a future time when the property could be re-developed. When he arranged to have Intensia enter into the transaction, Mr Lovel regarded the income he could generate from the three dwellings as a critical feature of the transaction.  He did not have the capital to build or to get any other kind of approval.[12]His long term plan, until then, was to put revenue from the land towards its holding costs and the future cost to obtain a development approval in four to seven years when the planning scheme would, he hoped, allow for more intense development and when the market, he hoped, would have improved. He planned for Ambitious to hold the land until it was time to sell, with a new development approval, to a developer for a large capital gain.
  1. [42]
    Mr Bingham finished working on the land by about 17 or 18 October 2012. He gave evidence that, by then, the asbestos he had removed was wrapped in plastic and placed by him in the bin which Bastemeyer had provided and which Mr Bingham expected Bastemeyer to remove. Bingham had removed asbestos many times and done many similar jobs in his twenty year career. He claims to have removed it all from the land competently and to have left all asbestos wrapped and in Bastemeyer’s bin on site.
  1. [43]
    On 27 November 2012, SMH Solicitors for Intensia prepared a letter to the solicitors for Nichols, informing them, among other things, that following entry into the contract, “Intensia ascertained the existence of the easement”.  It was a reference to the drainage and stormwater easement.  That assertion was false.  It was false because Mr Lovell knew of the drainage and stormwater easement before Intensia entered into the contract.  On the first day of trial Mr Lovell gave evidence, not obvious from that day’s transcript, that he had not given instructions to send that letter. Mr Lovel was recalled to give evidence to explain that he had authorised the sending of that letter but that he was unaware of the false statement within it when he authorised it to be sent. I accept his explanation. That episode of correcting mistaken evidence does not cause me to doubt Mr Lovel’s honesty.
  1. [44]
    The letter also wrote of reserving rights to claim compensation in respect of the registered easement and the demolition. The registered easement is the drainage and stormwater easement.
  1. [45]
    Three witnesses gave opinions as to the weight of the bonded asbestos which would have required removal from the land. Each agreed that it would have exceeded 5.52 tonnes. Intensia contends for a finding that it was materially more than 5.52 tonnes. On the evidence it was materially more than 5.52 tonnes and about 8 to 10 tonnes.
  1. [46]
    Where or how Bastemeyer disposed of the balance of asbestos materials was never explained. Neither party called Mr Bastemeyer to give evidence.
  1. [47]
    There is a single waste transport certificate in evidence. Exhibit 1, Document 37. It suggests that 5.52 tonnes of asbestos were disposed of by Bastemeyer on 18 October 2012 at a waste disposal facility. That certificate records that the delivery came from Burleigh Heads. There are no certificates which record a delivery from Labrador or Helensvale. The certificate, on its face, does not appear to relate to asbestos taken from the land
  1. [48]
    Intensia paid stamp duty assessable on the transfer on 22 November 2012, as appears from the stamped contract (ex 13).
  1. [49]
    By 4 December 2012 the three houses on the land and the fence, had been demolished.
  1. [50]
    SMH at all times acted for Intensia. SMH sent to Parker Simmonds a facsimile letter[13]dated 4 December 2012, timed at 3:55pm. It gave the solicitors for Nichols notice that, notwithstanding “your client demolishing the improvements on the lots”, Intensia elected to proceed to settlement. By the date Intensia elected to affirm the contract it knew that the houses at the property had been demolished and that the land was then a vacant site. Nichols concedes[14]that at the date Intensia elected to affirm the contract, namely 4 December 2012, there is no evidence that Intensia knew that the Ahern St properties were contaminated by asbestos.
  1. [51]
    After demolition of the improvements on the land and the removal of much asbestos, asbestos contamination was found on the land. Mr Lovel was told something about old houses and asbestos by a friend. He was concerned that asbestos might be a problem. He arranged for SMH to commission Octief Pty Ltd to inspect the land. Octief employed as an environmental consultant and occupational hygienist, Mr Appleton. He inspected the land on 17 December 2012 and collected soil samples.
  1. [52]
    Mr Appleton prepared a report.[15]  The report was issued on 21 December 2012.  It found that during the walk-over inspection, suspected asbestos cement sheet debris was seen across much of the site.  It recommended the engagements of a suitably qualified person to more accurately determine the extent of the contamination.  One of the five soil samples contained asbestos fines in the range of 2-7 millimetres.  At that size the fines in that sample would be classified as unbonded asbestos. It follows that four of five samples did not contain asbestos.
  1. [53]
    When Mr Lovel received the Octief report he immediately instructed SMH to terminate the contract. But there was a delay. Ms Schultz, who was involved with Intensia’s file for litigation against Nichols, went on leave. Mr Lovel was told by someone at the solicitors’ office that it was the end of the year and that there was no rush to communicate termination to the vendor and that it could be done in the New Year. But Mr Lovel made up his mind to terminate when he read the Octief report. He looked for another investment immediately.
  1. [54]
    It is likely that Mr Lovel caused Ambitious to enter into a contract to buy Unit 35/226 Varsity Parade for $230,000 after he decided to terminate but before Intensia’s solicitors sent a notice to Nichols purporting to terminate. Having committed to purchase that unit, if Ambitious had proceeded with the purchase of the land it would have been obliged to borrow funds. While obtaining a loan was something he believed Ambitious probably could have achieved, Mr Lovel explained that he preferred to buy properties without borrowing. It seems that Mr Lovel was determined before the end of 2012 that Intensia should terminate and that Ambitious would invest capital elsewhere. This finding seems to me to be generally irrelevant to the merits of Intensia’s various arguments about its right to terminate. It is relevant to the issue of whether Intensia was willing to complete the purchase after Mr Lovel read the Octief report.
  1. [55]
    I am not satisfied that Intensia was willing to complete the contract at any time in January 2013.
  1. [56]
    Generally, the arguments about Intensia’s right to terminate do not depend on Mr Lovel’s subjective reasons for wishing to terminate. There is one exception. When assessing Mr Lovel’s evidence as to his personal view of the materiality of the undisclosed sewer line on 11 January 2013, it is relevant that he was determined not to settle and had a different investment planned for some of the capital.
  1. [57]
    On 7 January 2013 Bastemeyer by its employee Brad, engaged Aztech Services, to send two workers to the land to perform a surface pick of asbestos debris.  The Aztech employees attended on 8 January 2013 and encountered a lot of vegetation.  It does not necessarily follow that the vegetation was present or in a similar state when Bingham did his asbestos removal work on the land in October 2012. The vegetation made asbestos pieces more difficult to see and collect. The employees informed their superior that they would need to scrape the vegetation off to clean the surface.  Aztech sent a schedule of rates to Bastemeyer. Bastemeyer requested that the work be performed the next day. 
  1. [58]
    On 10 January 2013 Aztech Services contracted for two trucks to be at the land to transport the soil to a dump near Ipswich. Bastemeyer arranged for an excavator to scrape the land and for two trucks to collect the scrapings.  Aztech’s director, Mr Hodgkinson attended. He was not confident at trial of the accuracy of his memory of the events on 10 January. The asbestos debris which Mr Hodgkinson remembered seeing was all bonded. While it led him to form the opinion that the debris was consistent with a substandard asbestos removal job he could not say for a fact that that was the cause.[16]  He could not say whether asbestos which he saw scraped up by the excavator on the day he attended, had been buried asbestos.  He remembered seeing chunks of bonded asbestos amongst the vegetation.  About 153 tonnes of soil was removed from the land. Soil scraping and loading into trucks certainly occurred on 10 January 2013 when Hodgkinson saw it. It probably occurred also on 11 January 2013. Aztech Services invoice[17]of 11 January 2013, properly interpreted, supports that finding. Mr Hodgkinson confirmed that the suggestion of work twice performed on 10 January was explicable as a typographical mistake for 10 and 11 January.[18]
  1. [59]
    The quantity of asbestos debris left behind after it should have been removed in October was not trivial or negligible in nature[19]and required rehabilitation of the land costing between $5,000 and $50,000. That range is relevant for the EPA. In fact the cost was about $34,000 paid by Nichols to Aztech Services.
  1. [60]
    Neither Bastemeyer nor A & B Demolition was Nichol’s agent for the purposes of the asbestos removal in October. If asbestos contamination of the land was known to either Bastemeyer or A & B Demolition, that knowledge was not deemed at law to be the knowledge of Nichols. Intensia accepts Nichols did not have such constructive notice.[20] 
  1. [61]
    There was no direct evidence that unbonded asbestos littered the land prior to the entry into the contract. There is an issue as to whether the bonded asbestos had been buried in the land or discarded on the land during demolition by Bastemeyer or A & B Demolition. Intensia contends that it was. For direct evidence of discarded or buried asbestos, Intensia relies upon evidence of asbestos found after demolition. I am satisfied that the land was contaminated with asbestos either during or after the demolition of the improvements on the land. Nichols does not contend otherwise.
  1. [62]
    I am not satisfied that by the time of entry into the contract on 12 October 2012, that bonded asbestos had been buried in or discarded on the land. Intensia has not sought such a finding.
  1. [63]
    One month and seven days after electing to proceed to settlement, SMH solicitors for Intensia, on 11 January 2013 at 11.31 am, gave Parker Simmonds solicitors for Nichols, a notice purporting to terminate the contract alleging breach of warranty arising from non-disclosure of asbestos contamination.[21]As Aztech Services charged for three technicians for 8.5 hours each for that day for remediation at the land, it is probable that remediation was not complete by the time Intensia gave its notice of termination.
  1. [64]
    Parker Simmonds, as stakeholder, retains and Nichols has refused to authorise the release of the deposit, despite demand by Intensia on 14 January 2013.[22]Parker Simmonds has invested the deposit.
  1. [65]
    On the Settlement Date, 15 January 2013, Intensia did not offer to settle. Nichols, by its solicitors, purported to terminate the contract and forfeit the deposit on account of Intensia’s failure to settle.[23] 
  1. [66]
    There is a valuation of the land as at 15 January 2013 that the site “as is” with the benefit of an impact assessable development approval for a Low Rise Apartment Building dated 20 October 2011 which facilitated the construction of 2 three and four storey buildings providing 22 two bedroom units exclusive of GST was $1,725,000.00.  The highest and best use at that date was as a residential development site subject to compliance with conditions contained in the Development Approval dated 20 October 2011. The valuation expressly took into account those conditions. That is the opinion contained in a valuation report[24]by Mr Forbes, a registered valuer.  The special instructions to Mr Forbes from SMH Solicitors were to provide comments as to the impact on the site value on the basis of the drainage and stormwater easement recorded on the title of Lot 2 was removed or relocated to the property’s boundary.  That was the only easement of which Mr Forbes was advised by SMH.  During research by Mr Forbes, he learned of a second easement which he called a “sewer easement”.  He discovered that reading the town planning documents prepared by Humphrey Reynolds Perkins, Town Planners which were available on the Gold Coast City Council Planning website.  The valuation opinion was done on the basis that the amalgamated site, the land, was affected by the drainage and stormwater easement and also by the sewer line. It seems that the drainage and stormwater easement was problematic in that it was not approved for removal or relocation but the sewer line was. The presence of the easement and the sewer line did not reduce the density of the development allowed. He noted that the approval provided for far higher number of bedrooms than were allowed as of right and approved a slightly higher site coverage.

Intensia abandoned two grounds of termination

  1. [67]
    During addresses Intensia abandoned two grounds it alleged had given it a right to terminate on 4 December 2012. The two grounds were:
  1. That by demolishing the dwellings after Nichols went to contract for the sale of the properties with the improvements, Nichols was unable to convey what it had promised to give at settlement;[25]
  1. That Nichols materially altered the effect of the contract by filling in “15 October 2012” as the “Contract Date” in the reference schedule, not the date of formation of the contract (12 October 2012) in circumstances where the warranties in cl 7.4 spoke from the “Contract Date”.[26]

Intensia’s two asbestos related breach of warranty points

  1. [68]
    The breach of warranty points pleaded by Intensia[27]fall into two limbs following the structure of cl 7.4(3) of the contract. Nichols gave two warranties which I highlight below. The first is in in clause 7.4(3)(a)(i) and the second is in clause 7.4(3)(a)(ii). Intensia has a different argument in respect of each warranty, though each argument relates to the alleged handling of asbestos to the contract date and the proposed handling of asbestos after that date.
  1. [69]
    Clause 7.4(3) of the contract provided, so far as seems relevant, as follows:

Clause 7.4 Seller’s Warranties

(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.

(3)(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;

  1. [70]
    The Settlement Date having been Tuesday 15 January 2013, two Business days before it was Friday 11 January 2013. That was the day Intensia, by SMH, purported to terminate by notice in writing to Parker Simmonds. Intensia was within time for giving such a notice.
  1. [71]
    The “Contract Date” in clause 7.4(3)(a) is accepted by the parties to be 12 October 2012. On and by that date, Nichols had not given notice to the administering authority under EPA of notifiable activity being conducted on the land and had not given Intensia any notice under the EPA. It is Intensia’s case that Nichols should have given notice to each.

The warranty in clause 7.4(3)(a)(i)

  1. [72]
    Whether the warranted obligation in clause 7.4(3)(a)(i) to give notices arose for Nichols, turns on various matters including the meaning of the pivotal expression “notifiable activity … being conducted on the land”. In essence, that issue is one of statutory interpretation of EPA measured against some factual premises. What was happening on the land on 12 October 2012? Did Nichols know of it? If Nichols knew of it, was it a “notifiable activity being carried out on the land”? Did Nichol’s knowledge impose upon Nichols an obligation that was outstanding on 12 October 2012 to give a notice to the administering authority under EPA?
  1. [73]
    There are multiple factual issues involved. But the simplest approach is to consider the one which Intensia focussed upon: was “notifiable activity … being conducted on the land” irrespective of whether Nichols knew that it was or whether Nichols had an outstanding obligation to give a notice.
  1. [74]
    Bingham and his team had begun removing asbestos on 10 October, by hand, sealing in Bastemeyer’s bin the asbestos they removed. It was foreseeable that it would ultimately be taken from the land for disposal. That is the only relevant activity which was being carried out on the land at dates relevant to this issue. It is not established that any demolition by Bastemeyer had begun before 15 October. That was after the contract was formed.
  1. [75]
    The answer to the question of whether a notifiable activity was being conducted on the land by Bingham and his team on 12 October seems ultimately to depend on the question of statutory interpretation of whether removing asbestos from improvements on land for the purpose of its transport from the land to a waste disposal facility amounts to asbestos being “disposed of on the land” within the meaning of the Environment Protection Act 1994 (EPA). If that legal premise is correct the disposal was a “notifiable activity” under the EPA and the seller, if it new that it had begun, incurred an obligation to notify a relevant authority and the seller breached its warranty at contract clause 7.4(3)(a) that it had no outstanding obligation to give such a notice.
  1. [76]
    EPA provided, at section 371, so far as is relevant:

371 Owner … of land to notify administering authority

  1. (1)
    If the owner … of land becomes aware a notifiable activity is being carried out on the land, the owner … must, within 22 business days after becoming aware the activity is being carried out, give notice under the subsection to the administering authority in the approved form. 

Maximum penalty—50 penalty units.

  1. (2)
    If the owner … of land becomes aware the land has been, or is being, contaminated by a contaminant the owner … knows is a hazardous contaminant, the owner … must, within 22 business days after becoming aware the land has been, or is being, contaminated, give notice under the subsection to the administering authority in the approved form.

Maximum penalty—100 penalty units.

  1. (3)
    However, the owner … of land does not commit an offence against subsection (1) or (2) if the administering authority has already been given notice under the subsection about the activity or contamination.
  1. [77]
    I accept Intensia’s submission that “notifiable activity” in the warranty bears the meaning assigned by the dictionary in schedule 4 of EPA which in turn directs the reader to schedule 3 (notifiable activities). Nichols did not submit otherwise.
  1. [78]
    Item 3 of Schedule 3 of EPA defines “notifiable activity” as including:

3   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.
  1. [79]
    An issue exists as to the meaning of “disposing of” in Item 3 of Schedule 3 of EPA. The expression “disposing” and cognate expressions are not defined in EPA. As a matter of ordinary English meaning, “dispose” means “get rid of”: Australian Oxford Dictionary. Or “dump” or “the act of disposing, or of disposing of, something” Macquarie Dictionary.
  1. [80]
    Intensia submitted that the “relevant activity of concern, of course, is ‘disposing’ of asbestos. That activity must be activity ‘being carried out on the land’”. I accept that submission. It is consistent with the words of the section. It is consistent with limiting the burden of section 371(1) of the EPA to the owners of land on which the relevant notifiable activity (disposing of unbonded or more than 5t of bonded asbestos) is carried out, as opposed to the owners of land which once held asbestos or across which asbestos was transported. 
  1. [81]
    Inconsistently with his fundamental premise that the “disposing” must be activity “being carried out on the land” Intensia’s counsel changed to a different premise.
  1. [82]
    Intensia’s counsel began by submitting that “the activity of demolishing the dwellings and transporting asbestos waste materials to the waste disposal facility involved ‘disposing’ of asbestos”. I agree those two combined processes may loosely be described as having involved a “disposing of asbestos” within the meaning Item 3 of Schedule 3 of the EPA. The fact that a combination of three processes ends with a “disposing” does not mean that each process is a “disposing”. In the factual premise for Intensia’s submission, there are at least three processes: demolition on the land, transport off the land and delivery at a waste disposal facility off the land. One process was “on the land” and two processes were off the land.
  1. [83]
    Intensia further changed its fundamental premise by submitting that:
  1. Item 3 of schedule 3 is engaged by activity on a lot that involved disposing of bonded asbestos of more than 5t on or off the land;
  1. The content of item 3 of schedule 3 should be read back into s 371, however the requirement that “notifiable activity” be “carried out on the land”, properly construed, does not mean in respect of item 3 that the asbestos must be “disposed of” “on the land” (in the sense of buried or stored);
  1. The requirement that disposing of asbestos should be “carried out on the land”, properly construed, is satisfied where a not immaterial step involved in the disposal process occurs on the land, without requiring that every step or the end point of the process (the disposal) should occur on the land.
  1. [84]
    The essential difference between the interpretation contended for by Intensia and what I regard as the better interpretation is this: Intensia contends that section 371 EPA obliges an owner of land who knows that asbestos on the land is to be disposed of elsewhere, while I regard it as obliging an owner of land who knows that asbestos is to be disposed of on the owner’s land.
  1. [85]
    I see no adequate basis for adding the words “a not immaterial step involved in” to the words “disposing of … asbestos” when interpreting the obligation imposed by the combined operation of Item 3 of schedule 3 and sub-section 371(1). It would have the unintended consequence of extending obligations to owners from whose land asbestos has been removed and to owners across whose land asbestos is transported. The sub-section operates sensibly if interpreted as applying to the owners of land where the disposal, by dumping or destruction or burial or permanent storage is carried out and makes the addition of further words unnecessary.
  1. [86]
    The better interpretation is to use the ordinary meaning of “disposing” for Intensia’s factual hypothesis. If so, the “disposing” would not occur during demolition, nor when the loose asbestos would remain on the land awaiting collection, nor on the journey to the waste disposal facility, nor on unloading at the facility, but it may occur at the waste disposal facility, on the assumption that some further process there occurred whereby the facility took custody of and destroyed, transformed or permanently stored the asbestos. On that hypothesis, within the meaning of s 371 a notifiable activity would occur where there was a disposing and that would be at the waste disposal facility.
  1. [87]
    I note a further factual hypothesis alleged by Intensia, namely that asbestos abandoned before or during demolition was bulldozed into the land. On the hypothesis that unbonded asbestos is bulldozed into the land where the demolition occurs, there would be a notifiable activity on that land, within the meaning of s 371. This follows because the indefinite abandonment of residual asbestos on the land, whether buried or lying upon the land, would be a “disposing of unbonded asbestos” on the land within the meaning of Item 3 of schedule 3 of EPA. The fact that there may also be a disposing of some asbestos at the waste disposal facility would not prevent a disposing of other asbestos from occurring on the land. There would be one disposing of asbestos on the land and another disposing of different asbestos at the waste disposal facility.
  1. [88]
    I reject the submission for Intensia that removal of asbestos from buildings on land, its transport from the land to a waste disposal facility and its burial, storage or destruction at the facility involves a “notifiable activity … being carried out on the land” within the meaning of section 371(1) of the EPA.
  1. [89]
    Removal of asbestos from the improvements on the land had begun by Bingham by 12 October 2018. I am not satisfied that demolition by Bastemeyer began before 15 October 2012. Removal of asbestos from the improvements was not a notifiable activity being carried out on the land. There was no notifiable activity being carried out on the land at the contract date of 12 October 2012. There was no obligation on Nichols to give notice to the administering authority under EPA of notifiable activity then being carried out.
  1. [90]
    The absence of a notice from Nichols was not a breach of the warranty at clause 7.4(3)(a)(i). It did not give Intensia a right under clause 7.4(3)(b)(i) to terminate.

The warranty in clause 7.4(3)(a)(ii)

  1. [91]
    On 12 October 2012 did Nichols know of any facts or circumstances that may lead to the land being classified as contaminated? If it did, then it thereby breached its warranty at contract clause 7.4(3)(a)(ii) that it was not then aware of any facts or circumstances that may lead to the land being classified as contaminated, and it was at liberty to terminate by clause 7.4(4).
  1. [92]
    There is a difference between land being classified as contaminated and land being contaminated. Clause 7.4(3)(ii) is concerned with a seller’s awareness of facts or circumstances that may lead to land being “classified” as contaminated land.
  1. [93]
    EPA does not make provision for land to be “classified” as “contaminated land”, although the language of cl 7.4(3)(a)(ii) tends to suggest otherwise. EPA does provide for the administering authority to “decide” that land is “contaminated land”: s 374; and upon so deciding, the administering authority is obliged to record particulars of the land in the environmental management register: s 374. Giving cl 7.4(3)(a)(ii) a commercial operation that best achieves its objects, land that is “classified as contaminated land” within the meaning of that sub-clause, properly construed, means land that the administering authority under the EPA has decided is “contaminated land”.
  1. [94]
    The process by which the administering authority may arrive at a decision that land is “contaminated land” is specified in s 373. By that section, if the administering authority has conducted a preliminary investigation of land, or is given a report by the occupier of the land or another person about an investigation conducted or commissioned by the occupier or other person, and the administering authority reasonably believes that the land is contaminated land, the administering authority must give notice about the contamination to the owner of the land: s 373(2), inviting submissions from the owner: s 373(4)(e).
  1. [95]
    It follows that circumstances can exist which may lead to asbestos being deposited on land but which are unlikely to lead to the administering authority under the EPA deciding that land is contaminated.
  1. [96]
    There is no evidence:
  1. That the land has been classified as “contaminated land”; or
  1. That the administering authority has decided that the land is “contaminated land” within the meaning of EPA; or
  1. That the administering authority has conducted a preliminary investigation of the land; or
  1. That the other events have occurred which trigger the administering authority’s obligation to give notice to the owner about the contamination of the land.
  1. [97]
    On the contrary, the evidence is that there was a temporary asbestos contamination satisfactorily disposed of at the seller’s expense by 11 January 2013 in a process that took about two days and was complete within hours after the buyer gave notice to terminate.
  1. [98]
    The type of asbestos contamination and the ease with which it may be disposed of are relevant in determining whether a seller know of any facts or circumstances that may lead to the land being classified as contaminated.
  1. [99]
    There is no direct evidence that Nichols knew on 12 October 2012 that the land would become contaminated by asbestos during or after demolition. Intensia’s pleaded case is that Nichols well knew of the reasonable likelihood that the lands might be classified as contaminated land within the meaning of EPA.
  1. [100]
    There is no evidence that it is foreseeable that a demolition of asbestos containing improvements by a reasonably competent demolisher is likely to contaminate land at the demolition site, even temporarily. Intensia’s case primarily depends upon satisfying an onus of proof that Nichols knew at the time it entered the contract that the demolition may cause asbestos contamination of the land and that it may lead to the administering authority under the EPA deciding the land is contaminated.
  1. [101]
    Intensia sought to bolster that case with inferences.

Jones v Dunkel inferences

  1. [102]
    Intensia asks the court to draw inferences from the failure by Mr Nichols to give evidence and the failure by Mr Bastemeyer to give evidence. It submits that the unexplained failure by Mr Nichols to give evidence makes it open to the court to draw a number of inferences as to the state of knowledge of Nichols through Mr Nichols. Those inferences include inferences that, when Nichols entered into the contract:
  1. Nichols knew that Bastemeyer, or A&B Demolition, or both of them, may not carry out asbestos removal work in a safe or competent manner and that, if they did not, then asbestos removal work at the site would have a potential adverse effect on the environment and contaminate the lots;
  1. Alternatively to that, Mr Nichols wilfully shut his eyes to the possibility that either or both of them may not carry out asbestos removal work in a safe and competent manner and that if they did not, the asbestos removal work at the site would have a potential adverse effect on the environment and contaminate the lots; and
  1. Mr Nichols was aware that demolition may lead to the lots being classified as “contaminated land” within the meaning of EPA.
  1. [103]
    I infer that this submission relates to the state of knowledge of Nichols at the date of the contract on 12 October 2012. It is not established that at 12 October 2012 anything more had been done by way of demolition at the land than that the very experienced Mr Bingham had started work with his team removing asbestos materials by hand with a view to placing them in a bin sealed with plastic. The fact that Mr Bingham did not hold the correct licence for removing friable asbestos, if he had found any, does not lead to the conclusion that he could not have removed it, if he had found any. The fact that an asbestos register was not kept on site during the days when the asbestos was removed and may have been a matter known to Mr Nichols, does not readily lead to the inference that Nichols would have known that the contractors may not carry out the work in a safe or competent manner. I accept the evidence of Bingham to the effect that he and his team would have known where the asbestos was irrespective of the existence of a register and that it was their job to remove it before Bastemeyer brought in machinery to crush the balance of the dwellings.
  1. [104]
    Mr Bastemeyer did not give evidence. Among other things, Intensia submits that I may properly draw the inferences from his unexplained failure to give evidence that:

Bastemeyer knew that A&B Demolition may not carry out the demolition and asbestos removal work in a safe and competent manner and that, if A&B Demolition did not, then asbestos removal work at the site would have a potential adverse effect on the environment and potentially contaminate the site and alternatively that Bastemeyer wilfully shut his eyes to that possibility.  I do not draw those inferences.

  1. [105]
    There was no evidence that either Bastemeyer or A&B Demolition had a history of poor performance with respect to asbestos removal, or that Nichols knew of such a history and the failure to call them does not persuade me to draw the inferences urged against Nichols. I am not satisfied that Nichols anticipated that the contractor Bastemeyer or its sub-contractor would perform an incompetent demolition or that either entity would by their incompetence cause a contamination such as that which Nichols rectified at its own cost of more than $30,000. It is improbable that Nichols would engage a demolisher whose competence Nichols suspected.
  1. [106]
    Further, I am not satisfied that Mr Bastemeyer was a witness Nichols could reasonably be expected to have called.
  1. [107]
    I am not satisfied that Nichols knew that there may be contamination of the land with asbestos during demolition. I am not satisfied that Nichols breached its warranty at clause 7.4(3)(a)(ii).

Was Nichols, by reason of asbestos contamination, in breach of its obligation at contract clause 8.3(1) to not do anything regarding the Property that may significantly alter it or result in later expense for the buyer? Is clause 8.3(1) an essential term? Did the breach give Intensia a right to terminate?

  1. [108]
    The breach of post contract obligations point is pleaded by Intensia at paragraphs 35A to 35D of the fifth amended defence and counterclaim and Intensia relies on cl 8.3 of the contract. That clause provided:

8.3 Seller’s Obligations After Contract Date

  1. (1)
    The Seller must use the Property reasonably until settlement.  The Seller must not do anything regarding the Property […] that may significantly alter them or result in later expense for the Buyer.
  1. [109]
    I accept Intensia’s submission that on a date after contract, after 12 October 2012, the dwellings were demolished and the site was during that period contaminated by asbestos.
  1. [110]
    Intensia submitted at par 244 of its written submissions that there is no evidence that:
  1. The land was remediated before it elected to terminate the contract by letter of 11 January 2013.
  1. The remediation works undertaken by Aztech Services for Nichols at the site were completed before Intensia elected to terminate the contract.
  1. [111]
    I accept those submissions. I reject the further related submission that the court cannot find that the properties were restored to pre-contamination state. I am not satisfied that any asbestos had been buried on the land. I am not satisfied that as a result of the possibility of burial of asbestos that I should infer that it could not be established that all asbestos was found. I find that the remediation of the land by Aztech Services was completed on 11 January 2013 to a state where the land was uncontaminated by asbestos, though the last of the work on the land occurred some hours after Intensia gave notice to terminate. The EnviroHealth lab report dated 11 January 2013 (ex 1, doc 44) is evidence that each of several soil samples taken from the land was free of asbestos. That is not conclusive proof of remediation of all the land, but it corroborates the probability that two to three days’ effort by Aztech Services to achieve remediation was successful. The competence of Aztech Services to take reasonable care to achieve remediation was unchallenged.
  1. [112]
    Intensia’s submissions disguise the composite issues arising from its reliance on clause 8.3 of the contract. It must establish that any breach of that clause was such as to give it a right to terminate. At the date of giving notice to terminate, 11 January 2013, a contractor was about to complete the remediation. The probability at the time when the notice was given was that there would be no later expense for the buyer as a result of prior contamination of the land.
  1. [113]
    Intensia pleaded that the demolition and resulting asbestos contamination constituted conduct in breach of clause 8.3. Intensia made clear by its written submissions at par 250 that it relies for its asserted right to terminate for breach of clause 8.3 only on the need for Intensia to carry out remediation works cleaning up asbestos contamination. Clause 8.3 creates an obligation which was imposed on Nichols not to do an act. It was further pleaded that the obligation was “(a) objectively and intrinsically of central importance to the Contract; (b) accordingly an essential term of the Contract; (c) further, accordingly an “Essential Term” of the Contract as that term is defined by cl 1.1(k) (sic) of the Standard Terms.”
  1. [114]
    The submission assumes that Nichols did an act, namely that it contaminated the site with asbestos. It did not. Whether it was Bastemeyer or A&B Demolitions, or some other entity, none was established to be Nichol’s agent. That is enough to dispose of this argument.
  1. [115]
    If I am wrong about that, the next issue is whether the breach by Nichols was of an essential term at law or or an “Essential Term” under the contract so as to give Intensia a right to terminate. The significance for Intensia of a finding that clause 8.3 is an “Essential Term” is that for any failure to comply with such a term the buyer may terminate. If clause 8.3 is an “Intermediate Term” under the contract, the contract permits the buyer to terminate only if the breach is fundamental.
  1. [116]
    Clause 8.3 is not defined as an “Essential Term” of the contract. See clause 1.1(2)(k) which defined the Essential Terms without reference to clause 8.3. That definition expressly provided that “nothing in this definition precludes a court from finding other terms to be essential”.
  1. [117]
    Counsel for Intensia did not advance any submissions about why clause 8.3 is an Essential Term or an essential term. Intensia’s pleading alleges that clause 8.3 was “objectively and intrinsically of central importance to the Contract”. I reject that allegation. The importance of clause 8.3 was not obvious. It covered a multitude of potential acts by a seller. Some acts which result in later expense to the buyer may be insignificant. It is more practical to treat clause 8.3 as an Intermediate Term so that the seriousness of a breach can be measured to determine whether the breach justifies termination. I reject the implied submission that clause 8.3 was an “Essential Term” or an essential term.
  1. [118]
    Intensia did not submit that contamination with asbestos was a fundamental breach.
  1. [119]
    The most appropriate time to judge the breach’s seriousness is at 11 January 2013. If the breach was judged at 11 January 2013, it was not serious. The land was about to become completely remediated with no risk of expense to Intensia for asbestos removal.
  1. [120]
    I reject this ground for termination.

Was the presence of the sewer line over the title of Lot 2 and Lot 3 a material error, encroachment or mistake within the meaning of clause 7.5(4) of the contract?

  1. [121]
    Clause 7.2 of the contract provided:

Encumbrances

The Property is sold free of all Encumbrances other than the Title Encumbrances and Tenancies.

  1. [122]
    Clause 7.5(4) of the contract relevantly provided:

7.5 Survey and Mistake

...

  1. (4)
    If there is a material error, encroachment or mistake, the Buyer may terminate this contract before settlement.
  1. [123]
    The sewer line was not disclosed on the Title. There was no issue taken about whether the sewer line was an Encumbrance. There was no issue taken about whether the undisclosed sewer line was an error, encroachment or mistake. The issue is whether it was a material one. If it was material, Intensia was, by clause 7.5(4) given liberty to terminate.
  1. [124]
    The onus is upon Intensia to prove it was “material” within the meaning of that word in clause 7.5(4).
  1. [125]
    Intensia does not claim equitable relief. Intensia does not rely on and does not plead a claim for relief under s 69 of the Property Law Act 1974 or the rule in Flight v Booth. Its claim is to an entitlement to terminate on or after 11 January 2013 based upon clause 7.5(4) of the contract.[28] 
  1. [126]
    It follows from the rejection of each of the other grounds for termination that when Intensia reported to terminate on 11 January 2013 the termination was ineffective unless, unbeknown to Intensia at the time, it had a right to terminate arising from clause 7.5(4) of the contract. Neither party made submissions about the date at which the materiality of the error, encroachment or mistake is to be judged. I interpret clause 7.5(4) as requiring materiality to be judged objectively on the basis of the facts and circumstances existing at the time of the termination.
  1. [127]
    Both parties accept that the assessment is an objective one. However, Intensia submits that the purchaser’s actual state of mind is relevant. That was accepted in Frankel v Paterson [2015] NSWSC 1307 at [61] by Young AJA.  The issue in that case was not based on a clause like 7.5(4) of the contract but the issue was somewhat similar.  The buyers sought to be excused from specific performance under the rule in Flight v Booth.  The issue was whether a misdescription was “in a material and substantial point, so far affecting the subject matter of the contract that it may reasonably be supposed that, but for such misdescription, the purchaser might never have entered into the contract at all”.[29] 
  1. [128]
    Counsel for Nichols did not dispute that Intensia’s state of mind could be relevant notwithstanding that the ultimate test was an objective one. Submissions proceeded as if Intensia’s state of mind was Mr Lovel’s state of mind. I proceed on the basis that it is appropriate to consider Mr Lovel’s state of mind about whether the sewer line was “material” within the meaning of that word in clause 7.5 of the contract. The word “material” is not defined in the contract. Clause 7.5 distinguishes between “immaterial” matters for which a buyer’s only remedy is compensation and “material” matters for which a buyer has a right to terminate or a right to compensation on condition that the buyer claims the compensation before settlement.
  1. [129]
    Counsel for both parties referred to authorities unrelated to clause 7.5 but which considered what matters were sufficiently material to justify relief from specific performance or a right to rescind.  I regard reference to such authorities as helpful when considering how to distinguish between “material” and “immaterial” in clause 7.5.
  1. [130]
    In Liverpool Holdings Ltd v Gordon Lynton Car Sales Pty Ltd[30]the issue before the Full Court of Queensland concerned a contract for the sale of land where the seller promised to convey the land free from encumbrance.  At settlement the seller could only convey the land affected by an easement.  In considering whether the buyer could rescind, the trial judge concluded that the issue was whether the buyer was obtaining, essentially, what it bargained for and was not obtaining something so materially altered in character as to be in substance a different thing from that contracted for.  The Full Court agreed with that approach. 
  1. [131]
    In Tarbet Investments Pty Ltd v Overett[31]GN Williams AJ followed Liverpool Holdings and determined that whether the encroachment is characterised as a defect in title or a defect in quality in the property sold, the right to rescind depended upon whether the property was something different from what the purchaser bargained for so as to be in substance a different thing from which the purchaser contracted to buy. 
  1. [132]
    His Honour derived support from a statement by Barwick CJ in Travinto Nominees Pty Ltd v Vlattas[32]where Barwick CJ found that a purchaser could rescind a land sale contract for a defect in title if the error was “so material as to make the property something which, had he known of the matter, erroneously omitted or misdescribed, he would, in all probability, not have purchased”. 
  1. [133]
    In Kelly v Arkdev Pty Ltd[33]Dutney J referred to each of those authorities and expressed the view that the effect of them is that “at the very least the defect in title must be one where the purchaser, had it been aware of the defect would not have entered into the contract either at all or on the same terms including as to price”. 
  1. [134]
    With those authorities in mind, when considering the state of mind of Mr Lovel, it seems that one practical approach is to ask the question, on the assumptions that Mr Lovel, on 11 January 2012 was willing for Intensia to proceed to settlement, would he have regarded the discovery of the sewer line as so affecting the land that it was so materially altered in character as to be in substance a different thing from that contracted for.

Mr Lovel’s subjective attitude to the materiality of the sewer line

  1. [135]
    Intensia’s counsel led evidence from Mr Lovell[34]on the hypothesis that Mr Lovel had known on 12 October 2012 that there was a sewer line.  Mr Lovel was thus being asked to speculate on how that hypothetical knowledge would have affected him if he had learned of it years before. Mr Lovel spoke of each of the undisclosed sewer line and the undisclosed drainage and stormwater easement as easements. He was being asked to reconstruct a history he had not experienced. It was a difficult task. He answered the hypothetical question by explaining that he would not have expected to be able to relocate the easements and that the combined effect of the easements, to him, was fatal to a decision to develop the site in the future.  He explained that even if he had the ability to relocate one or both of the easements he thought there was an issue about whether he would have the financial resources to do so and it seemed to him that he would not have entered into the contract because of the constraint that it put on future development. I do not find Mr Lovel’s hypothetical reconstruction persuasive.
  1. [136]
    Mr Lovel’s evidence about his plans before the houses were demolished was inconsistent with that answer to counsel’s hypothetical question. And Mr Lovel’s evidence about his plans after the houses were demolished was also inconsistent with that answer. Under neither alternative did Mr Lovel contemplate developing. He did not plan to devote resources to relocate the drainage and stormwater easement. He did not propose to undertake any civil works. I do not accept that he would have planned to relocate the sewer line. He contemplated holding the land for four to seven years awaiting changes to the Gold Coast Planning Scheme when he would obtain a development approval and sell the land to a developer.
  1. [137]
    It was on Mr Lovel’s mind at material times that the Gold Coast Planning Scheme was past due for a new scheme and he believed it was just a matter of time before a scheme would allow for a higher density development than previously or for a seven-storey limit on his land’s side of Ahern Street. More than that, he thought the property market was on the upswing and that in the medium to long term there was potential for significant capital gain. He was not interested in maximum profit. He disdained what he perceived to be Nichols’ maximum density, maximum profit approach to development if it ignored visual amenity.
  1. [138]
    Mr Lovel gave evidence about why he would have rented the dwellings on the property if they had not been demolished. He had explained that he had tied up most of his capital in the purchase and that with ongoing liabilities, rates and land tax he did not have the capital to do anything else with the site or to build on it or to get any other kind of approval so the dwellings were critical in his decision to purchase. With the houses for rent, I accept that he had planned to wait “four, five, six years at a minimum” in the hope that the Gold Coast Planning Scheme would change to permit 7 storeys on his side of Ahern Street. Mr Lovel had hoped to rent 10 Ahern Street to his mother and her partner for market rent. Given that it was a four bedroom house with a large yard and garage he estimated that the market rent would be between $450 and $650 per week. He regarded 8A Ahern Street as requiring some repairs before it could be rented. He thought 8 Ahern Street with three bedrooms and a carport would yield about $100 to $150 per week less than 10 Ahern Street.
  1. [139]
    When considering plans after he learned of the demolition, Mr Lovel said that he elected to proceed in spite of the demolition because he believed that Ambitious would have been entitled to a GST credit on the basis that, without dwellings, the land was a taxable supply and he expected a GST credit of about one eleventh of the purchase price to be available to Ambitious. He thought that and a potential claim against the vendor for compensation might permit him to cover holding costs and eventually the cost to obtain a better development approval[35]so that he could resell the site for a profit. His anticipated holding period was “four to five years.  Be, you know, up to seven years.”[36]
  1. [140]
    The potential claim against Nichols for compensation, of which Mr Lovel spoke, may have been an arguable entitlement, ventilated in correspondence, which Intensia had to claim compensation for the seller’s failure to disclose the drainage and stormwater easement. Mr Lovel gave evidence of wanting to investigate compensation for the existence of that registered easement.[37]It shows that Mr Lovel was content in December 2012 to treat the drainage and stormwater easement as not sufficiently material to withdraw from the contract but as a bargaining chip for compensation. In the words of clause 7.5(2)(d) of the contract, the omission to describe the registered drainage and stormwater easement as an encumbrance was an “immaterial” mistake to Mr Lovel, though a potentially rewarding one because of its potential for use in a compensation claim.
  1. [141]
    But the potential claim which Mr Lovel thought he had may have also been in respect of the demolition. After the demolition Mr Lovel believed that he had an arguable claim for compensation in respect of demolition.[38]
  1. [142]
    Whatever claims Mr Lovel was investigating and contemplating before and after the demolition, one matter is clear. Mr Lovel regarded the drainage and stormwater easement as significant only as a source of potential compensation for Ambitious. It was not otherwise “material” to his use for the land.
  1. [143]
    Mr Lovel knew that the Gold Coast Planning Scheme was past its due date and that a new scheme was pending. He regarded that as increasing the prospect of an approval for a development with higher density. Mr Lovel thought that there was “a very large opportunity for a capital gain.”[39]
  1. [144]
    Mr Lovel knew that Nichols had a development approval. He knew that approval was obtained under the outgoing planning scheme. Mr Lovel had not seen that approval but was not interested in obtaining an assignment of the copyright in the plans to construct. Mr Lovel was not in a financial position to construct. Further, he believed he understood the style of development which Mr Nichols used and Mr Lovel preferred a different style of development although he accepted that his preference was likely to be less profitable.
  1. [145]
    I am satisfied that Mr Lovell did not intend at any material time to develop the land or undertake any construction costs.
  1. [146]
    I accept that Mr Lovel would not have relocated the sewer line if Ambitious had become registered proprietor. But that was because he had no plan to do more than obtain a development approval. Whether he would have had the capital or the capacity to borrow the funds to relocate the easements was irrelevant to Mr Lovel’s intended use of the land. Mr Lovel was proposing to hold and then sell the land to a developer.
  1. [147]
    Mr Lovel did not suggest that he was concerned that the cost to a developer of shifting one or both easements would deter a developer from buying the land from Ambitious or that he considered what the cost of shifting easements would be for a developer as a proportion of the cost of a development or that he considered how it would impact upon the developer’s profit margin.
  1. [148]
    On the assumptions that on 11 January 2012 Mr Lovel was willing for Intensia to proceed to settlement, I am not satisfied that knowledge of the sewer line would have been material to Mr Lovel. It would have been immaterial in the sense that he would have been content to proceed to settlement. Further, Mr Lovel’s attitude before that date with respect to the other easement, the drainage and stormwater easement, had been to treat that easement and the demolition as opportunities for claiming compensation rather than reasons to terminate. The discovery of the unregistered sewer line would have given Intensia a stronger basis to seek compensation clause 7.5 of the contract than the existence of the registered drainage and stormwater easement. This is because the sewer line was not on the title while the drainage and stormwater easement was a “Title Encumbrance” contemplated by clause 7.2 of the contract. This further reason leads me to conclude that the sewer line was not “material” to Mr Lovel or Intensia.

Was the sewer line objectively material?

  1. [149]
    It is now necessary to consider whether the sewer line was objectively “material”.
  1. [150]
    The value of the land on 15 January 2013 was $1,725,000. That was the same as the contract price, notwithstanding that the dwellings had been removed and that the valuer was aware of the sewer line.
  1. [151]
    Nichols went on to develop the land. It did not wait the four to seven years which Mr Lovel had contemplated waiting with a view to greater capital gain.
  1. [152]
    The costs incurred by Nichols for its development are of some benefit in assessing the materiality of the sewer line. Nichols developed the land in 2013. Nichols diverted the sewer line for $279,774.67. That represented 5.4% of the developer’s building costs of $5,148,492.06.[40]  Those building costs did not include the cost of the land.  Thus the cost for diverting the sewer line was a smaller percentage of the developer’s overall cost for the development.  The lots sold for $8,897,000. Treating the cost of the land as $1,725,000, the development was probably reasonably profitable.
  1. [153]
    As the highest and best use of the land was for redevelopment with land and building costs of the order of seven million dollars, I am not satisfied that the sewer line which was able to be moved for such a small percentage of the developer’s costs would have deterred a purchaser or made the property something different from what a purchaser bargained for.
  1. [154]
    The existence of the sewer line had not prevented two earlier development applications from being approved. I refer to Anne Lovel’s approval and the approval used by Nichols.
  1. [155]
    The area of the land over the drainage easement was 4.47% of the combined area of the land while the area over the sewer line was 4.93%. Each easement may have had the capacity to affect the conditions of approval for a development including the number and type of units which could be built. Mr Bell, town planning expert, regarded a sewer line as likely to be under every property.[41]Mr Forbes substantially agreed with Mr Bell that the existence of a drainage easement and sewer line did not have a detrimental impact on the utility of the land.  In spite of the presence of the easement and sewer line Mr Forbes noted that the approval granted to Nichols on 20 October 2011 had provided for a far higher number of bedrooms than were allowed as of right and a slightly higher site coverage. 
  1. [156]
    It does not necessarily follow from the fact that Nichols was required to move the sewer line as a condition of its approval that the sewer line would have been obliged to be moved for every development approval. But I proceed on the basis that the existence of the sewer line at least created a risk that it would affect either the cost of a development or the number and size of units to be constructed.
  1. [157]
    The sewer line was not shown to have affected the type of the development done by Nichols or the number, size or type of units Nichols built. The cost of the development may have been increased by the cost of relocating the sewer line. It was a small percentage increase in the developer’s costs and did not create a risk the development would be unprofitable.
  1. [158]
    I am not satisfied that it would have deterred a purchaser from purchasing the land whose highest and best use was for redevelopment. I am not satisfied that the error was so material that the property was something different from what the purchaser bargained for or that in all probability the purchaser would not have purchased.
  1. [159]
    Intensia has failed to satisfy its onus that the presence of the sewer line was a material error, encroachment or mistake.
  1. [160]
    The undisclosed sewer line did not give Intensia a right to terminate the contract. In the absence of a basis for Intensia to terminate the contract, Intensia did not raise any argument against Nichols’ claim that it terminated the contract and forfeited the deposit on account of Intensia’s failure to settle.
  1. [161]
    I find that Nichols is entitled to forfeit the deposit of $172,500. Nichols appears to be entitled to interest pursuant to clause 2.4(2) of the contract. Nichols made no submission as to whether it seeks the interest earned from the stakeholder’s investment of the deposit or a rate allegedly published by the Queensland Law Society as at 15 January 2013 or both. It is appropriate that the parties have liberty to apply with respect to the appropriate orders for interest and costs having regard to my reasons.
  1. [162]
    It follows that Intensia’s counterclaim should be dismissed.
  1. [163]
    Intensia made a variety of claims for damages on the premise that the court would declare that it validly terminated the contract on 11 or 14 January 2013.
  1. [164]
    It is unnecessary to determine them.

Footnotes

[1] Mr Rentoul’s report ex 41and his oral testimony.

[2] Ex 1, doc 4. The contract was in the form of the 9th edition of the standard contract for houses and residential land, approved by the REIQ and the Queensland Law Society, comprising a reference schedule and standard terms.

[3] T2-31.

[4] Ex 5.

[5] Sixth amended reply 3(c)(i) to (iii) and Rejoinder to fifth amended reply 3(i)-(k).

[6] T2-48: L 6-7.

[7] Ex 27.

[8] T1-89: L 40

[9] 5ADCC par 10(d).

[10] Plaintiff’s closing submissions par 28 and defendant’s closing submissions par 5.

[11] Ex 1, doc 21.

[12] T2-30: L35.

[13] Ex 1, doc 31.

[14] Plaintiff’s written submissions par 42.

[15] Ex 1, doc 36. 

[16] T3-30: L 40-44.

[17] Ex 36.

[18] T3-31: L 35.

[19] Nichol’s written submissions par 33.

[20] Intensia’s concessions at Defendant’s written submissions in reply par 9 and Nichol’s written submissions par 39.

[21] Ex 1, doc 42.

[22] Ex 1, doc 45

[23] Ex 1, doc 48.

[24] Exhibit 32 at p 19.

[25] Defendant’s written submissions in reply 23 May 2017 par 3.

[26] Defendant’s written submissions par 23.

[27] At paragraphs 8 to 19 of the amended counterclaim in Intensia’s fifth amended defence and counterclaim.

[28] See fifth amended defence and counter-claim, paragraphs 24 and 26 and written submissions paras 219-221.

[29] Frankel op. cit [30]. 

[30] [1978] Qd R 279. 

[31] [1983] Qd R 280, 288-89. 

[32] (1973) 129 CLR 1, 24.

[33] [2005] QSC 318 at [31].

[34] T2-42.

[35] T2-63: L 42.

[36] T2-30: L 1-20.

[37] T2-66: L 13 and T2-67: L 3.

[38] T2-30: L 42.

[39] T2-64: L31.

[40] Ex 1, Doc 68. 

[41] T48: L 25. 

Close

Editorial Notes

  • Published Case Name:

    Nichols Constructions P/L v Intensia P/L

  • Shortened Case Name:

    Nichols Constructions Pty Ltd v Intensia Pty Ltd

  • MNC:

    [2017] QDC 319

  • Court:

    QDC

  • Judge(s):

    Andrews DCJ

  • Date:

    22 Dec 2017

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2017] QDC 31922 Dec 2017Plaintiff'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 FiledFile Number: Appeal 766/1819 Jan 2018-
Appeal Determined (QCA)[2018] QCA 19117 Aug 2018Appeal dismissed: Fraser and Gotterson JJA and Atkinson J.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Frankel v Paterson [2015] NSWSC 1307
2 citations
Kelly v Arkdev Pty Ltd [2005] QSC 318
2 citations
Liverpool Holdings Ltd v Gordon Lynton Car Sales Pty Ltd [1978] Qd R 279
2 citations
Tarbet Investments Pty Ltd v Overett [1983] 1 Qd R 280
1 citation
Tarbet Investments Pty. Ltd. v Overett (1983) Qd R 280
1 citation
Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1
2 citations

Cases Citing

Case NameFull CitationFrequency
Intensia Pty Ltd v Nichols Constructions Pty Ltd [2018] QCA 191 4 citations
1

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