Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1058 | Case summary

Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1058 | Case summary | Zoe

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2007/266565 HAISSAM ASSAFIRI v THE SHELL COMPANY OF AUSTRALIA LIMITED JUDGMENT 1 HIS HONOUR: These proceedings concern a former service station site on the Hume Highway at Cabramatta (the land). The plaintiff (Mr Assafiri) acquired the land by a contract for sale that was completed on 29 March 2006. Two days earlier, the then proprietor of the land, Wenzhou Pty Limited (Wenzhou) leased the land to the defendant (Shell). The lease, which was for a term of one year, required Shell to deliver up the land free of all its improvements (unless the lessor required otherwise) and, in broad terms, to "remediate" the land so that it could be put to its highest and best use without the need for further environmental remediation. The lease also required Shell to deliver a certificate from an independent expert to the effect that it had remediated the land appropriately. 2 Mr Assafiri claims that Shell has breached each of those obligations. He claims damages for breach of contract, said to be either the value of the benefit of a contract for sale of the land that (he says) was lost because of Shell's breaches, or, alternatively, the cost of doing the work that, he says, Shell left undone. The real issues in dispute 3 The parties agreed on the real issues in dispute. I set out (with inconsequential changes) the issues so agreed: 1. On the proper construction of clause 13.2(c) of the 2006 Lease, does the phrase "highest and best use… then permitted under the zoning of the Land" include a lawful existing use? 2. Whether the "highest and best use … then permitted under the zoning of the Land" on the proper construction of clause 13.2(c) of the 2006 Lease includes the potential attribute of subfloor excavation or a basement? 3. What was the "highest and best use (taking into account commercial opportunities then available or reasonably expected to become available to the Landlord) then permitted under the zoning of the Land" within the meaning of clause 13.2(c) of the 2006 Lease? 4. Was the Land in such a condition that Shell has sufficiently complied with clause 13.2(c) of the 2006 Lease and/or the June 2007 Agreement? 5. Did Shell provide to Mr Assafiri a certificate from an appropriately qualified independent person that Shell had complied with its obligations under clause 13.2(c) of the 2006 Lease, within the meaning of clause 13.2(d) of the 2006 Lease? 6. Did Shell engage in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth) in making: (a) the "Compliance Representations" (defined in paragraph 23A of the Further Amended Commercial List Statement ( the Statement ) ; (b) the "Reporting Representations" (defined in paragraph 24 of the Statement); and (c) the "Rental Representations" (defined in paragraph 33 of the Statement). 7. Was Shell negligent in making the alleged "Compliance", "Reporting" and "Rental" Representations? 8. The nature and amount of any loss and damage suffered by Mr Assafiri, in particular: (a) whether damages are recoverable for any contravention of the Trade Practices Act 1974 ; (b) whether damages are recoverable for any negligent misrepresentation; (c) whether damages are recoverable in respect of any breach of the 2006 Lease and/or the June 2007 Agreement, in particular: (i) the rescission by Global Trade Group on 6 July 2007 of a contract for the sale of land dated 16 January 2007; (ii) the estimated cost of demolition and removal from the land of all improvements then forming part of the land and debris caused by that demolition, within the meaning of clause 13.2(b); (iii) the estimated cost of remediation, within the meaning of clause 13.2(c); (iv) the work, if any, to bring the site to the standard required by clause 13.2(c); (v) the amount of any lost rental. (d) whether Mr Assafiri has failed to mitigate its loss in respect of the demolition and/or removal of the improvements forming part of the premises, or otherwise. 4 Unfortunately, the closing written submissions for Mr Assafiri did not directly address the issues thus agreed (although the agreed statement of issues had been handed up at the commencement of the third day of hearing, 18 August 2010, and final submissions were not taken until the seventh day of the hearing, 25 August 2010). Indeed, although the written closing submissions for Mr Assafiri did purport, at one point, to refer to the issues, what they referred to was not the agreed statement of issues but some antecedent and incomplete statement.

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5 The closing oral submissions for Mr Assafiri were no more focused on the agreed issues. They ranged at large and at length through the various factual and legal issues in the case, but did not do so by reference either to the agreed statement of issues or indeed to any other formulation of the issues, other than of the most basic kind. 6 The primary reason for requiring the parties to litigation to state the real issues in dispute is to focus both the evidence and the submissions on those issues, and to ensure that the Court deals with all issues. That purpose is undermined when parties do not address the issues. The Court's task is made more difficult, and there is a real risk of injustice to a party because a submission may be accidentally overlooked. Counsel for a party should address the issues in a way that makes it easy for the Court to understand what their client's submissions are on each issue. It is not appropriate to leave it to the Court to attempt to glean their client's submissions, on a particular issue, from a morass of relevantly unstructured verbiage. The witnesses in the case 7 Mr Assafiri gave evidence, as did relevant employees of Shell: Ms Emma Harvey and Mr Stephen Speer. I accept that, in general, each of them sought to give accurate evidence to the best of his or her ability. There are some qualifications to this. 8 I thought that Mr Assafiri sought to downplay what seem to be obvious advantages of the land as a site for a car sales yard. It is located on a heavily trafficked arterial road. It has excellent visibility, particularly for traffic travelling north, but also for traffic travelling south. It has frontage to three streets (the Hume Highway, Liverpool Street and Lovoni Road). It is a large site, with ample space both to display cars for sale and to accommodate customer parking. Nonetheless, Mr Assafiri consistently asserted that the location of a particular piece of land was irrelevant to whether it was suitable for use as a car yard; rather, it was purely a matter for the skill of the operator (see in particular T43-46, and see also T53-54). I do not accept this aspect of Mr Assafiri's evidence, which I note was inconsistent with a statement his principal affidavit that the land was "a good spot for a caryard". 9 There were also aspects of Ms Harvey's evidence that gave me some concern. I refer, in particular, to her evidence concerning the dealings between Shell and URS in relation to the draft URS report (see at [201] and following below). The hesitation with which she gave many of her answers, and the recurrent lack of recollection on various topics, did not sit well with the otherwise straightforward and direct way in which she answered questions. I had the distinct impression that Ms Harvey was aware that full and truthful answers to some of the questions put to her might not assist the cause of her employer, and that this may have contributed to her confessed lack of recollection in some cases.

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(2) to the extent necessary, the discrepancies can be resolved without considering questions of demeanour and the like, or undertaking an exhaustive analysis of the way in which each of those witnesses gave evidence. 12 Further, each party called experts: in the fields of environmental science and remediation, town planning and valuation. One of those experts, Mr Rodney Harwood, an expert in the field of environmental remediation called by Shell, was not impressive. Mr Harwood did not seem to me to be someone who sought to give independent expert evidence, or who was prepared to act on his professed acceptance of the fact that his primary duty was to the Court. On the contrary, both listening to Mr Harwood's evidence as he was cross-examined and reading the transcript of it, he appeared to be very much an advocate for the party by whom he was called. His evidence was replete with evasive and non-responsive answers. Further, on at least one occasion (in the course of questioning on his costings), Mr Harwood suggested that a particular item had been included in his costings, and that there was in existence a document which would show the detail. However, when pressed, he was forced to withdraw from this: "[i]t has been in my head and I have made calculations, but not in a formal sense". When pressed further, it appeared that the assertion that he had made, and sought to defend through the reference to the non-existent costing document, was wrong (T428.28 -430.7). 13 I do not accept Mr Harwood as an expert witnesses on whose evidence I can rely. To the extent that his evidence conflicts with that of Mr Nickalaos Kariotoglou, the relevant expert called for Mr Assafiri, in general I prefer the evidence of Mr Kariotoglou. 14 Otherwise, to the extent that there are aspects of the evidence of individual experts that I do not accept, I base my conclusions on an analysis of the substance of all the expert evidence in the relevant fields, not on considerations of demeanour or, more generally, "credibility". Factual background 15 The land had been used as a service station site for many years until late 1998. For most of that time, Shell owned the land and operated the service station. During 1996, the land was sold to Wenzhou, as were a number of other Shell service station sites. 16 On 27 March 1996, Wenzhou leased the land to Shell, for a term of 10 years with options to renew. That lease (the 1996 lease) included not only options for renewal, but also provision for a "Demolition Option Lease". Clause 13.4 of the 1996 lease entitled Shell to an option for one year, at the expiration of the 1996 lease or any option taken up under it, for the purpose of carrying out its obligations under cl 13.2 (which clause was in terms that were, if not identical to then not relevantly distinguishable from, cl 13.2 of the lease with which these proceedings are concerned). 17 Shell continued to use the land as a service station until 1998, when the underground fuel tanks were removed. 18 On 21 December 1998, Sydney Motor Market Pty Ltd (SMM), a company of which Mr Assafiri was sole director, made an agreement for sublease with Shell. On 15 May 1999, pursuant to that agreement, Shell granted a sublease of the whole of the land to SMM for a term ending on 26 March 2005 (the sublease). 19 In April 1999, SMM lodged a development application, DA 492/99, with Fairfield City Council (the Council). The Council approved that application, and gave consent to the use of the site as a car sales yard together with appurtenant showrooms and offices (the 1999 consent). The Council did not impose any condition requiring the environmental remediation of the land. 20 SMM took up the consent, and operated a car sales business on and from the land for a number of years. It was common ground between town planning experts called by the parties that the 1999 consent was a valid subsisting consent at all material times up until and including 2007, and that the land thus enjoyed the benefit of existing use rights as a car sales yard (or, in the terms of the Fairfield Local Environmental Plan 1994 (the LEP) to which I refer at [35] and following below), as a "motor show room". 21 On 2 September 2002, the Council granted consent to SMM to construct a "workshop extension" and erect appropriate signs. Again, the Council did not impose any condition requiring the environmental remediation of the land. 22 SMM vacated the land on 30 July 2005. 23 On 7 March 2006, Shell exercised its option under cl 13.4 of the 1996 lease, to take a one year "Demolition Option Lease". As a result, Wenzhou and Shell entered into the lease dated 27 March 2006, for a term of one year, referred to at [1] above (the 2006 lease). 24 As I have said, Mr Assafiri became proprietor of the land on 29 March 2006. Before that contract was completed, Mr Assafiri, through his solicitors, informed Wenzhou that he proposed to use the land as a car sales yard. Wenzhou notified Shell that Shell need not demolish and remove its improvements. That advice was important to Shell, because its obligation to demolish and remove improvements under cl 13.2(b) subsisted unless it agreed otherwise with Wenzhou. In the event, Shell decided that the improvements should be removed, and it commenced to perform what it regarded as its obligations under cl 13.2. 25 On 16 January 2007, Mr Assafiri contracted to sell the land to Global Trade Group Pty Ltd (Global). Global is a company associated with a Mr Hilayel, who had been employed by SMM as a sales manager. That contract (the Global contract) is the contract for sale referred to at [2] above. It is not suggested that Shell was notified of the intention to make that contract before it was made; on the contrary, Mr Assafiri accepts by his "pleading" that Shell was first notified of the existence of that contract by letter dated 16 January 2008. 26 Shell did not complete the performance of its obligations under cl 13.2 of the 2006 lease by 26 March 2007, the date of expiry of that lease. After some negotiation Mr Assafiri and Shell made an agreement on about 6 June 2007 (the June 2007 agreement) under which Mr Assafiri permitted Shell to go on the land in order to comply with its obligations under cl 13.2(c). In fact, some remediation work was carried out on the site between April and August 2007, and Shell received reports from Coffey Environments Pty Ltd (Coffey) and URS Australia Pty Ltd (URS) dealing with those works and their results. (Earlier work had been done by a company known as IT Environmental (Australia) Pty Ltd, which either was or became a subsidiary of Coffey. That company produced a report dated 4 August 2005. It is convenient to refer to that company under the "Coffey" name, and to that report as the 2005 Coffey report.) 27 Global rescinded the Global contract by notice dated 6 July 2007. Undoubtedly, it was entitled to do so; Shell did not submit otherwise. I shall return to the reasons for rescission when discussing Mr Assafiri's claim for damages. 28 On 20 July 2007, Council gave a further development consent to Mr Assafiri, for the erection of a portable temporary office building on the land "and the continued use of the site as a caryard". Again, the Council did not impose any conditions requiring the (further) environmental remediation of the land.

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(3) What, if any, remediation of the land is required if it is to be used for residential purposes? 30 There is no dispute that Shell has not fully complied with its obligations to remove all of its improvements. That is because it has not demolished and removed the concrete slab which covers the site. Shell's case is (as I have indicated) that the highest and best use of the land is as a car sales yard. It says that for the land to be so used, the slab will need to remain in place. To the extent that there are contaminants in the soil (and that some contaminants remain were not disputed, although there was some dispute as to the extent of residual contamination), Shell contended that the existing slab was an appropriate way to isolate, and thus in effect render harmless, those contaminants. 31 Mr Assafiri contended that the highest and best use of the land was for residential purposes. Thus, he submitted, the slab would have to be removed, and the problem of contamination would need to be addressed. 32 However, Mr Assafiri submitted further that, even if the land were to be used as a car sales yard, it was likely if not inevitable that the slab would have to be removed, in whole or in part. That was so, he submitted, either so that underground structures could be built (for example, some sort of basement for storage) or so that a properly constructed slab, with its necessary footing trenches, could be laid. Thus, Mr Assafiri submitted, even if the land were to be used as a car sales yard, it would be necessary for further remediation to be carried out. 33 It should not be overlooked that it is common ground that the existing slab must be removed if Shell's obligations under cl 13.2(b) are to be complied with. It is difficult to understand how, in those circumstances, the slab can be regarded as a sufficient way of dealing with the residual contaminants. In effect, Shell's case is that its own breach of contract (in not demolishing and removing the slab) excuses it from a further breach of contract (in not fully remediating the land in accordance with cl 13.2(c)). First issue: the proper construction of cl 13.2(c)

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Clause 13 34 I commence by setting out the relevant parts of cl 13 of the 2006 lease: 13.1 Tenant to yield up Land Subject to this clause 13, on the Ending Date the Tenant must yield up the Land to the Landlord. 13.2 Demolition, remediation, etc. Unless the Landlord and the Tenant agree otherwise, on or before the Ending Date the Tenant must: (a) remove all the Tenant's property from the Premises; (b) demolish and remove from the Land all improvements then forming part of the Premises and any debris caused by that demolition; (c) carry out any works to the Land necessary to ensure that on the Ending Date the Land is in such a condition that all environmental Laws or Requirements which apply to the Land or to an owner or occupier of the Land are complied with such that no environmental remediation is required for the Land to be used for the highest and best use (taking into account commercial opportunities then available or reasonably expected to become available to the Landlord) then permitted under the zoning of the Land; and (d) provide to the Landlord a certificate from an appropriately qualified independent person that the Tenant has complied with its obligations under clause 13.2(c). The provision of such a certificate will not relieve the Tenant from its obligations under clause 13.2(c). 13.3 Disposal of improvements In performing its obligations under clause 13.2, the Tenant may dispose of the improvements then forming part of the Premises for its own benefit. Title to those improvements will vest in the Tenant on them being served from the land. … 13.7 Earlier breaches The expiry or termination of this Lease will not prejudice or affect any of the Landlord's rights or remedies against the Tenant for an earlier default by the Tenant. The zoning of the land 35 The zoning of the land is governed by the LEP, an environmental planning instrument made pursuant to the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act). It was common ground that the land was in a zone known as "zone 2(a) Residential A". For convenience, I will use the expression "residential 2(a)". 36 Clause 8 of the LEP stated as follows: 8 Zone objectives and development control table

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(3) Without limiting the generality of subsection (2) (e), a use is to be presumed, unless the contrary is established, to be abandoned if it ceases to be actually so used for a continuous period of 12 months. The parties' submissions 40 Mr Corsaro of Senior Counsel, who appeared with Mr Doyle and Mr Auld of counsel for Mr Assafiri, submitted that the land was zoned under the LEP, and, accordingly, that it was the LEP that should be understood as stating "the zoning of the Land" for the purposes of cl 13.2(c) of the 2006 lease. Thus, Mr Corsaro submitted, it was necessary to go to the development control table for land in the relevant zone (residential 2(a)) to see what was "permitted". By reference to the development control table, Mr Corsaro submitted that what was "permitted" was, relevantly, anything other than a prohibited use stated in that table. 41 Since the table identified, among other things, business premises and motor showrooms uses (but not residential use) as prohibited, Mr Corsaro submitted that use as a motor showroom could not be a permitted use. 42 Mr Lancaster of Senior Counsel, who appeared with Mr Bilinsky of counsel for Shell, submitted that one needed to consider cl 13.2(c) in the light of all relevant contextual information. Further, he submitted, since the parties had made reference to "the zoning of the Land", one should give the word "zoning" the meaning that it had in planning law. That meant, Mr Lancaster submitted, that one could properly have regard to the whole of the statutory and regulatory context dealing with the uses to which land might or might not be put. 43 Mr Lancaster noted that there were circumstances in which land could be used for particular purposes without the need for development consent: that is, circumstances outside the development control table (read in conjunction with cl 8 of the LEP) which allowed uses of land to be carried on lawfully. He referred to exempt development and complying development. He noted, further, that land could lawfully be used for an existing use even though that existing use was said to be a prohibited use under cl 8 and the development control table. 44 Thus, Mr Lancaster submitted, when the parties referred to "use… then permitted under the zoning of the Land", they should be taken to have intended all uses that, at the termination of the lease, could be carried on lawfully. That conclusion was supported, Mr Lancaster submitted, by the parenthesised words ("(taking into account commercial opportunities then available or reasonably expected to become available to the Landlord)"), which directed attention to what it was that the parties had in contemplation the landlord might do after termination of the lease. Mr Lancaster, whilst acknowledging that the landlord at the date of grant of the lease was Wenzhou, noted that Shell was aware that Mr Assafiri had negotiated with Wenzhou for the purchase of the land. Mr Lancaster pointed to a body of evidence that, he said, indicated that Mr Assafiri had made it known to Shell, before the lease was granted, that he proposed to use the land as a motor showroom after termination of the lease. 45 In reply, Mr Corsaro turned to the definition of "existing use". He noted that an existing use was one that, but for the statutory preservation effected by s 107, of the EPA Act would be a prohibited use under an extant environmental planning instrument. 46 Mr Corsaro submitted that an existing use could never be a "use… permitted under the zoning of the Land", simply because it was of necessity a use prohibited by that zoning, the continuation of which was rendered lawful by the relevant provisions of the EPA Act. 47 Further, Mr Corsaro pointed to relevant provisions of the Environmental Planning and Assessment Regulation 2000 (NSW). Part 5 of that Regulation, which was made pursuant to s 108 of the EPA Act, dealt with existing uses. At the time the lease was made, cl 41 of the Regulation (which appears in Part 5) read as follows (cl 41 has since been amended, but it is not necessary to look at the amended form): 41 Certain development allowed

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(1) An existing use may, subject to this Division: (a) be enlarged, expanded or intensified, or (b) be altered or extended, or (c) be rebuilt, or (d) be changed to another use, but only if that other use is a use that may be carried out with or without development consent under the Act. (2) A use to which an existing use is changed is itself taken to be an existing use for the purposes of the Act and may, subject to this Division, be changed to another use. 48 It followed from cl 41 (as it stood in 2006), Mr Corsaro submitted, that an existing use could be changed to any other use (including one otherwise prohibited) which other use would itself become an existing use. Mr Corsaro submitted that the parties could not have intended the search for highest and best use to encompass not only any current existing use but also other hypothetical uses into which that current existing use could have been transmuted. Decision 49 I start with the proposition that the construction of cl 13.2(c) requires the Court to take into account the whole of the relevant terms of the 2006 lease, the language used by the parties in the provision that is to be construed, the surrounding circumstances known to the parties and the purpose or object of the transaction. Further, I accept, where the parties have used words that have a specialised or technical meaning known to the law, there is a strong presumption that they intended those words to have that specialised or technical meaning. And if reasonable people in the position of the parties would understand that there was a statutory context within which the contract operated, that context may be taken into account in construing the document. See, generally, Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [148] to [177] (Campbell JA, with whom Spigelman CJ agreed). 50 The purpose of the 2006 lease was to give Shell a period of 12 months within which to carry out its obligations under cl 13.2. Those obligations were (to summarise the four paragraphs of cl 13.2):

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(4) to provide independent expert certification of compliance with the obligation to remediate. 51 In short, Shell was to leave the land cleared and in a state where it could be redeveloped and used to best account, without the need for further money to be spent on removing or neutralising contaminants that resulted from Shell's occupation and use. 52 Undoubtedly, Wenzhou and Shell knew that the land had been used for some years by Mr Assafiri (through SMM) as a car sales yard. Further, they knew that Mr Assafiri had entered into a contract to buy the land from Wenzhou. Mr Assafiri had stated to Wenzhou, and Wenzhou had stated to Shell, that he did not want the improvements to be demolished (from which it was open to infer that he intended to put the land to use once more as a car sales yard). Shell ultimately did not comply with that request, perhaps because of the terms in which it was framed; nothing turns on this. 53 In those circumstances, to construe the relevant words of cl 13.2(c) ("highest and best use… then permitted under the zoning of the Land") to exclude use for a purpose for which the incoming purchaser had used the land for a period of about five years, and for which the land had existing use rights, involves an element of commercial absurdity. The parties, had they turned their corporate minds to the point, would have regarded use by Mr Assafiri as a car sales yard as a "commercial opportunity then available or reasonably expected to become available" to him. 54 Although, of course, cl 13.2(c) should be construed having regard to circumstances known to the parties at the commencement of the 2006 lease, the question of highest and best use, and the associated question of available commercial opportunities, fall to be assessed by reference to circumstances as they might exist at the conclusion of the lease. That follows because the highest and best use is what is "then permitted". The point of time called up by the adverb "then" is the "Ending Date". Likewise, the commercial opportunities to be assessed are those "then available" to the landlord; and again, the point of time called up is the Ending Date. Wenzhou and Shell, the parties to the 2006 lease, knew when they made it that Mr Assafiri had purchased the reversion, and must have expected that settlement of the sale to him would take place at some time during the term of the 2006 lease. It is thus relevant to take into account what those parties knew, or had they turned their minds to it would have known, of Mr Assafiri's intentions in relation to the land. 55 In essence, the submission for Mr Assafiri is that the words "then permitted under the zoning of the Land" direct attention to, and only to, the relevant development control table in the LEP. But that table forms part only of a complex system of controls on the use of land. The LEP itself recognises that land may be used for particular purposes without consent (see cl 6A referring to exempt development, which in turn calls up, although not expressly, s 76 of the EPA Act). 56 Again, the LEP operates in a statutory context that recognises, and protects, existing use rights. The LEP expressly refers to existing uses in cl 6A(2)(b). 57 Thus, the parties, if properly advised, would have understood that cl 8 of the LEP (which specifies what it is that the development control table states for each zone to which it refers) is not the sole source of permissibility for the use of land within the City of Fairfield. Why, then, in talking of the highest and best use permitted under the zoning of the land, should they be taken to have been restricting themselves only to uses permitted by cl 8, read in conjunction with the relevant provisions of the development control table? More briefly, why should they be taken to have intended to exclude any other lawful and available use of the land? 58 Clause 8 of the LEP does not in terms speak of "permission" to use land. Rather, it states, among other things, the purposes for which development may be carried out without or with consent, and the purposes for which development "is prohibited". Mr Corsaro submitted that permission is the antonym of prohibition, so that subcls (2) and (3), in stating the purposes for which development could be carried out with or without consent, stood in opposition to subcl (4), and must therefore be regarded as conveying the concept of permission. 59 I am not sure that the starting point of this submission is correct. But whether or not permission and prohibition are properly to be regarded as antonyms does not seem to me to assist in the resolution of the question of construction. That is because, when one looks at cl 8(1) of the LEP, it is clear that nothing in it gives permission for development to be carried out where that development is of a kind that may only be carried out with development consent (i.e., of a kind falling in the third item of the development control table that applies to the particular land). 60 It may be correct to say that cl 8, read in conjunction with the relevant part of the development control table, gives or conveys permission to use land for a purpose specified in the second item of the development control table - by reference to cl 8(1)(b), a purpose for which development may be carried out without development consent. But that is not the case for a purpose covered by cl 8(1)(c). The permission to carry out development falling into that category comes from the Council or other consent authority, not from the terms of the LEP. At most, the LEP opens the door to, or perhaps more accurately does not close the door to, consent. 61 In short, at least in the context of cl 8 of the LEP and the relevant part of the development control table, the absence of prohibition to carry out certain development cannot be equated with permission to carry out that self-same development. 62 These considerations, and the scheme of the EPA Act to preserve the availability of existing use rights, suggest that a wide construction should be given to the words "highest and best use… then permitted under the zoning of the Land". They should be taken to refer to uses which may lawfully be carried on either with development consent (where that is necessary) or without it (where, for whatever reason, it is not necessary). That construction seems to me to give proper effect to the commercial purpose of cl 13.2, to take account of the statutory scheme within which the concept of "zoning" of land operates, and to avoid the commercial absurdity of which I spoke earlier. Indeed, it avoids a wider absurdity: namely, excluding from consideration all development that may lawfully be carried on on the land (whether by way of existing use rights, or because it is exempt or complying development, or with consent), and restricts the field of inquiry to some only of those uses: namely, in the context of the development control table, uses that may be carried on if they are the subject of development consent. But in terms of legality, there is no point of distinction between uses that, on this construction, may not be considered and the narrower category of uses that may be considered. 63 The concept of "zoning" is a creature of the EPA Act, and is effected by environmental planning instruments made under the authority of that Act. The EPA Act expressly preserves the continuance of existing uses, notwithstanding that, by definition, they are uses that would otherwise be prohibited by an environmental planning instrument. I see no basis for disregarding the EPA Act as an available source of permission, for the purposes of cl 13.2(c). On the contrary, I think that it is appropriate to construe cl 13.2(c) by taking into account what is, as I have said, the statutory framework by virtue of which the concept of zoning presently exists (and in 2006 existed), and by authority of which environmental planning instruments are (and in 2006 were) made. 64 That approach to construction is facilitated by the parenthesised words in cl 13.2(c). Those words require the search for the highest and best use to take into account commercial opportunities available, or reasonably expected to become available, to the landlord when the lease comes to an end. The opportunity for the landlord to avail himself (in Mr Assafiri's case) of an existing use right to use the land as a car sales yard is, on any view, a commercial opportunity; and it is common ground that it was an opportunity available to Mr Assafiri on 27 March 2007. It would be absurd if, having taken into account that commercial opportunity in the search for highest and best use, one would then be required to disregard it because it was not "permitted" by the applicable development control table. It would be placing absurdity on absurdity to disregard it for that reason when the relevant absence of permission (and express prohibition) in the development control table was overridden by s 107 of the very Act that gives legal authority to the environmental planning instrument in which the development control table is contained. 65 I do not accept Mr Corsaro's submission that the effect of the Regulation, in so far as it dealt with existing use rights in 2006, renders the construction for which Shell contended untenable. No doubt, as a matter of theory, under the Regulation as it then stood, one existing use could be converted to another (which by definition would be a use otherwise prohibited under an applicable environmental planning instrument). No doubt, in theory, that would have meant, as at 27 March 2006, that the potential uses to be taken into account were accordingly numerous. However, the exercise of ascertaining the highest and best use was not one to be undertaken at large, or in a vacuum. It was required to be undertaken by reference to, among other things, "commercial opportunities then (i.e., as I have said, at the expiry of the lease) available or reasonably expected to become available to the Landlord". 66 In other words, the search for highest and best use is limited by two things:

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(2) such commercial opportunities as might reasonably be expected to become available to the landlord at the end of the lease. 67 It is therefore not correct to say that the parties were expected to rummage around among all the prohibited uses set out in the relevant part of the development control table. They were required to consider only so many of those uses as were available or reasonably likely to become available to the Landlord. Clause 13.2(c) contains its own inbuilt limitation on the range of available non-conforming uses to which the existing non-conforming use might be converted. 68 Mr Corsaro relied on the fact that the town planning experts had agreed that "the purposes of a car sales yard would not be permitted under the zone [sic] of the Land". Whilst I accept that the experts in question are highly qualified, and I respect their opinions on questions within their areas of expertise, the question is not one of expertise but, rather, of construction of the relevant words of cl 13.2(c) according to the principles that I have explained. I do not regard the agreement of the experts as bearing on the resolution of the issue. 69 For those reasons, the first issue should be answered "yes". Second issue: basement as an attribute of highest and best use 70 This issue arises because Mr Assafiri has said that, if the land is to be developed and used as a car sales yard, pursuant to the existing use rights, it would be advantageous to have underground storage space. He said that SMM's business had been plagued by vandalism, and that it would be desirable to have underground facilities, both to hold cars safe overnight and for repair and servicing. Mr Assafiri said that there were car sales yards in the general vicinity that had underground or basement areas. I accept this, although I accept also that such yards are relatively few in number. The parties' submissions 71 Mr Corsaro submitted that use of the land as a car sales yard comprehended, or could include, that use facilitated by, or with the benefit of, a basement area. Use with a basement would, he submitted, contribute to, or enhance, the highest and best use of the land. 72 Mr Lancaster submitted that the phrase "highest and best use" referred to the purpose for which development could be carried out, not the means (or physical configuration of the land) by which that development might be carried out. The inclusion (or exclusion) of a basement would not change the use of the land. He relied on the decision of Kirby P in North Sydney Municipal Council v Boyts Radio and Electrical Pty Ltd (1989) 16 NSWLR 50 at 59, where his Honour said that the ascertainment of what was covered by existing use rights required a broad or liberal approach, and "the determination of the appropriate genus which best describes the activities in question". Decision 73 In my view, the reference to "highest and best use" is a reference to the purpose of use, not the means by which that purpose is carried out in a particular case. That is clear when one looks at the context ("highest and best use… then permitted under the zoning of the Land"). The development control table in the LEP focuses attention on kinds of use, not the physical means by which those uses are carried out when land is developed. Likewise, in dealing with existing uses, the EPA Act focuses on the kind, or (as Kirby P said) "genus", of use, not on the precise configuration of the land and improvements. 74 The point is well illustrated by the fact that, as Mr Assafiri said, some car sales yards operate with the benefit of basements and others do not. It cannot be said that those in the former category are used for the purpose of car sales yards and those in the later category are not. They are all so used; but the use is (as one would expect) undertaken in different ways, or using different facilities, from yard to yard. 75 That is not to say that the ability to have a basement is irrelevant. It is something to be taken into account in considering whether Shell complied with its obligations under cl 13.2(c) (issue 4). It is not, however, relevant to classification of use, or ascertainment of the highest and best use. 76 The second issue should be answered "no".

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The valuation evidence 79 Mr Peter Dempsey gave evidence for Mr Assafiri. Mr Gregory Windred gave evidence for Shell. Messrs Dempsey and Windred conferred, and produced a joint report. They agreed that, if the land were to be valued for residential use, Mr Dempsey's valuation of $890,000.00 was "not unreasonable". However, they disagreed as to the value of the land as a car sales yard. 80 Mr Dempsey did not undertake the task of valuing the land as a car sales yard in his evidence in chief. As he noted in his report dated 26 May 2009, he had been "specifically required to exclude any use that relies on existing use rights as such rights are expressly prohibited under the zoning of the land" (para 42). He formed a view, based on his interpretation of cl 13.2(c) of the 2006 lease, that "the highest and best use of the land is reflected by the highest value arising from the permitted land use" and that "the only permitted" uses are those under the actual zoning of the land being those uses permitted in the 2(a) Residential A zone" (para 44; emphases in original). As was stated in the joint report, he "valued the property as per its prevailing zoning… disregarding the previous car sales yard usage as having been operated under "Existing Use Rights" which had subsequently lapsed (under s 107 of the EPA Act 1979)." 81 Mr Windred did undertake a valuation of the land based on the assumption that it could be used as a car sales yard. On that basis, by reference to what he said were some six comparable sales that he identified and described, Mr Windred derived a value of between $550.00 and $600.00 per square metre, leading to a range of $1,229,800.00 to $1,341,600.00. Mr Windred selected, as a mid-range figure, a rate of $581.40 per square metre, or a total land value of $1,300,000.00. 82 Mr Dempsey replied to Mr Windred's valuation. He asserted that only one of the six comparable sales identified by Mr Windred was in fact truly comparable. He said, based on that sale, that if the land were to be valued on the basis that it could be used as a car sales yard, it would have a value in the range of $760,000.00 to $805,000.00. 83 Neither valuer relied on the Global contract as evidence of the value of the land. Mr Dempsey had been asked to proceed on the basis that it was an arms' length sale. However, it became clear, during his cross-examination, that he was not prepared to accept, or act on, that assumption. His reasons for disregarding the assumption were, to put it neutrally, unpersuasive. 84 Mr Dempsey undertook a discounted cash flow (DCF) analysis of the net present value to Mr Assafiri of the amounts that he would be likely to receive pursuant to the Global contract, had it preceded to completion. That analysis was justified because the terms of the Global contract included provisions to the following effect:

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(4) that before transfer of title, Global would take a lease of the land and pay rent. 85 Mr Dempsey's DCF analysis showed that, at a discount rate of 8% per annum, the present value of the cash flows under the Global contract, on the assumptions that he identified, was $1,836,000.00 at the date of the contract (16 January 2007). 86 Mr Windred also undertook a DCF analysis of the receivables under the Global contract. He noted that, to move from the result of that DCF analysis to a valuation of the land based on the Global contract, one would need to deduct legal and selling expenses and other costs (including for approvals and consultants); make an allowance for profit and risk (which he put at 15%); make an allowance for holdings costs (which he put at 7% for two years); and make an allowance for "Land Purchasing Costs" (presumably, stamp duty and the like, which he put at 5.5%). 87 On that basis, Mr Windred derived an adjusted net present value of $1,281,547.00. He said, perhaps not surprisingly, that this analysis supported his attribution of value at $1,300,000.00. 88 In my view, if one is to take the Global contract as a comparable sale, it is necessary to make at least some of the adjustments to which Mr Windred referred. Clearly, in assessing the value of a contract that required work to be done and deferred payment of the consideration, one would need to take into account not only the cost of doing that work but also associated costs, and the holding costs for the time that it took for the purchase price to be received. It would also be necessary to take into account selling costs and purchasing costs. It is doubtful whether a profit and risk allowance should be made in the case of an owner-developer in Mr Assafiri's position (vis-a-vis-Global). If this were not done, the figure derived by Mr Windred would increase by the amount of that allowance, $234,197.00, to $1,515,744.00. That figure is in line with Mr Windred's evidence that, if one were to compare the receivables under the Global contract with his value of $1,300,000.00, it would be necessary also to add to his figure the estimated value of the improvements that Mr Assafiri was required, by the terms of the Global contract, to construct. 89 Each valuer valued the land in its condition at the time of valuation - that is to say, with no improvements other than the slab. Mr Windred said, in effect, that on the assumption that the improvements would cost $300,000.00 to construct (which was one of the assumptions underlying Mr Dempsey's DCF analysis), the value of those improvements would feed straight through to the bottom line of his valuation, increasing it to a figure in the order of $1.6 million. 90 However, Mr Windred did not take the Global contract into account among his comparable sales. He said in his report that he was "not aware of whether this Contract was at "arms' length" and [had] not had direct regard to this contract to this Contract as evidence of value". The parties' submissions 91 In essence, Mr Corsaro and Mr Lancaster each submitted that the valuer called by his client should be preferred. Each criticised aspects of the work done by the other valuer. It is not necessary to set out the detail of those submissions. Decision 92 I prefer the evidence of Mr Windred to that of Mr Dempsey, to the extent that the two are in conflict. My reasons for doing so can be stated shortly:

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(7) there were some aspects of Mr Dempsey's cross-examination that troubled me. I refer, by way of example and without intending to be comprehensive, to the points that I have already made as to "range"; to his view that an incoming purchaser might think that there was a risk of getting building approval - that was no more than unfounded speculation on Mr Dempsey's part; and to his attempts to downplay the positive attributes of the land - to which I have referred at [8] above - as a site for a car yard. 93 Accepting, as I do, Mr Windred's evidence in preference to that of Mr Dempsey where the two are in conflict, I accept that the value of the land, for use as a car sales yard in March 2007, was approximately $1.3 million. 94 As at March 2007, the land had the benefit of existing use rights as a car sales yard. That had been specifically confirmed by the Council in a letter of 28 December 2006 to Mr Assafiri. In that letter, Mr Mark Stephenson, who was a senior development planner in the employ of the Council, said, of the 1999 consent, that it "was considered operational when construction and occupation were completed and a Construction Certificate and Occupation Certificate issued. Therefore this approval will never lapse and stays with the property forever (i.e. there is no time limit on when you can rebuild)". That letter appears to reflect the operation of s 109B of the EPA Act. Of course, existing use rights can be lost by abandonment (see sub-ss 107(2)(e),(3) of the EPA Act). But it was not suggested that the existing use rights that apparently underpinned the views set out in the letter of 28 December 2006 had been abandoned as at 27 March 2007. If (a matter not argued, and accordingly one on which I express no view) they have been abandoned since, that is irrelevant. 95 It follows, contrary to the assumption on which Mr Dempsey undertook his valuation, that the exercise of ascertaining highest and best use needed to consider not only use in accordance with the residential 2(a) zoning of the land but also use as a sales car yard pursuant to the existing use rights flowing from the 1999 consent and the activation of that consent by SMM's use of the site thereafter. 96 On that basis, acceptance of Mr Windred's value of $1,300,000.00 on the assumption that the land is used as a car sales yard, and comparison of that value to the agreed value of $890,000.00 for use for residential purposes, establishes that the highest and best use of the land as at March 2007 was as a car sales yard. Issue 3 should answered accordingly. Fourth issue: did Shell comply with its obligations under cl 13.2(c) of the 2006 lease and the June 2007 agreement? 97 If, as I have just concluded is the case, the highest and best use of the land in March 2007 was as a car sales yard, then Shell's obligations under cl 13.2(c) may be restated as requiring it to: Carry out any work to the Land necessary to ensure that on the Ending Date the Land is in such a condition that all environmental Laws or Requirements which apply to the Land or to an owner or occupier of the Land are complied with such that no environmental remediation is required for the Land to be used as a car sales yard. 98 However, that obligation is preceded by the obligation set out in cl 13.2(b): to demolish and remove improvements. 99 It follows that the extent of remediation required under cl 13.2(c), although considered in the context of highest and best use as a car sales yard, assumes that Shell's improvements (including, specifically, the slab) have been demolished and removed. What work did Shell do? 100 Shell did not remove the slab. It commissioned a company known as ANC Foster Pty Ltd (ANC) to remediate the land, and commissioned Coffey to carry out scientific work, such as testing for contaminants, overseeing the work to be done by ANC and reporting on results. 101 Shell, through Ms Harvey, appears to have assumed that remediation was required to prepare the land for residential use. Mr Corsaro devoted much attention to this understanding, both in his cross-examination of Ms Harvey (and of Mr Speer) and in submissions. I do not understand the relevance of the point. What is relevant is not what Shell thought was required, but what cl 13.2(c) of the 2006 lease required, taking into account what was in fact the highest and best use of the land (in accordance with cl 13.2(c)) as at March 2007. If Shell was wrong in that, it matters not that they attempted (and on any view failed) to remediate the land to a sufficient standard for residential use. Shell is entitled to put its case (as it did) on the basis that the highest and best use of the land was as a car sales yard, and that accordingly what cl 13.2(c) required was remediation to a standard sufficient for that use. 102 The scope of work prepared by ANC provided for the removal and disposal of 80 tonnes, or 33 square metres, of concrete slab and the excavation and remediation of 1000 cubic metres of underlying soil. It was a proposal for remediation by a process known as "landfarming". 103 To stand back from the detail for a moment: the evidence indicated that remediation could be undertaken in at least three different ways:

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The parties' submissions 108 Mr Corsaro's submissions were directed primarily to the case that the highest and best use of the land was for residential purposes. However, he submitted, even if this were incorrect, nonetheless the question of the extent of work required must take into account the starting point set by cl 13.2(b): demolition and removal of all improvements, including the slab. 109 Further, Mr Corsaro submitted, it was not correct to assess the extent of remediation required on the basis of assumptions that any improvements on the land would be a "slab on ground" construction, and would not involve an excavated basement. 110 Thus, Mr Corsaro submitted, remediation was necessary to deal with, and render safe, the full extent of the remaining contamination. 111 Mr Lancaster submitted that there was no need for further remediation. He relied on the fact that, at no stage when the Council gave a consent to the use of the land as a car sales yard, or for associated development, did it require that any environmental remediation works be carried out. As he noted, the combined effect of the Contaminated Land Management Act 1997 (NSW) (the CLM Act) and State Environmental Planning Policy No. 55 - Remediation of Land (SEPP 55) was that the Council was required, as part of the process of considering the relevant development applications, to consider whether any environmental remediation was required. He submitted that the Court should infer that the Council had performed its duty, and had reached a conclusion that no such remediation was required. 112 Further, Mr Lancaster submitted, whilst it might be best practice to prepare an EMP and to cap the land, that was not required. In essence, his submission appeared to be that the existing capping was a sufficient means of control of the remaining contaminants. 113 Finally, Mr Lancaster submitted, it was irrelevant that Mr Assafiri, or a lessee or purchaser from him, might wish to construct a basement. Decision 114 As I have said, I start with the proposition that assessment of the extent of remediation required, to render the land fit for use as a car sales yard without further remediation, should proceed on the assumption that the existing slab has been demolished. 115 The next stage of the analysis requires recognition of the fact that there are contaminants remaining in the land, and that once the slab is removed (as it should be) there will be no mechanism to control the escape of those contaminants. 116 On that basis alone, it seems to me that some form of remediation is required. That could be achieved by capping (either by using a concrete slab or a clay or synthetic material). It could be achieved by landfarming. Or it could be achieved by excavating, removing and replacing (with clean fill) all contaminated soil. 117 I note, in any event, that the unchallenged evidence of another expert (engineer) called by Mr Assafiri, Mr Art Candarakis, was that the existing slab was not an effective sealant, because of its defective condition. Mr Candarakis was not required for cross-examination. His report included the following observations and comments (which I have paraphrased):

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(7) in conclusion, "the existing footings and slab are totally unsuitable as footings for any new construction". 118 I accept that evidence. It confirms, as a matter of fact rather than a matter of construction of cl 13 of the 2006 lease, that the existing slab cannot be regarded as an appropriate mechanism for containment of the contaminants in the land. It also confirms, although this is not the present point, the importance to Mr Assafiri of having Shell comply with its obligations under cl 13.2(b). 119 I do not think that it is appropriate to ignore the fact that Mr Assafiri, a lessee or a purchaser may wish to construct a basement on the site. Shell's obligation under cl 13.2(c), taking into account the finding I have made as to highest and best use, was to ensure that no further environmental remediation was required for the land to be used as a car sales yard. The use of the verb "ensure" connotes "to make certain", or "to secure" a result or outcome (see the Australian Oxford Dictionary, Second Edition, 2004). Read as a whole, in my view cl 13.2(c) required Shell to make certain that no further remediation would be required before any reasonable mode of user of the land as a car sales yard could be undertaken. To put it another way, it was not for Shell to dictate the mode of user (or employment) of the land for its highest and best use as a car sales yard. 120 Thus, in my view, the extent of remediation required must take into account the possibility that the user of the land might include the construction and use of a basement, unless that could be said to be unnecessary or unreasonable. In my view, such user cannot be said to be unnecessary or unreasonable. I accept Mr Assafiri's evidence that a basement would be beneficial to the use of the land as a car sales yard, both to protect vehicles from vandalism when the yard was unoccupied (i.e., outside working hours) and to enable repair works and the like to be carried on separately from the business of selling. It follows that a slab on ground construction, as advocated by Shell and its consultants, would be insufficient; and so would any alternative method of capping. 121 Further, the proposal for capping does not address the problem of migration of contaminants through groundwater. There is some evidence that this has occurred, and that contaminants have migrated from the land to adjacent public land. At one stage, Coffey suggested that further testing of groundwater should be carried out, but Shell (through Ms Harvey) did not authorise this. 122 It is important to understand that the expert evidence for Shell goes no higher than to assert that no further remediation is required because the remaining contaminants are adequately sealed off by the existing slab. For the reasons that I have given, that approach is incorrect. It ignores the fact that the slab should have been removed (cl 13.2(b)). It ignores the deficiencies in the slab of which Mr Candarakis gave evidence. It expressly excludes any basement development on the land. Once those limitations are understood, there is no further basis for concluding that Shell has complied adequately with its obligations under cl 13.2(c). That it did not do so appears to be Ms Harvey's view, by inference from her evidence referred to at [152] to [154] below. 123 Nor do I think it is significant that the Council has not, in approving any development application since 1999, required remediation as a condition of consent. I am prepared to accept that I should proceed on the basis that the Council was aware of, and turned its mind to, its obligations under the CLM Act and SEPP 55. But the applications that were made to the Council:

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(2) did not require any penetration through, or other disturbance of, the concrete slab that has been on the land at all material times. 124 Thus, there was no reason for the Council to think that there was a specific problem with contaminants. No doubt the Council would have been aware that the land had been used as a service station, and thus that it was likely that the land would be contaminated. However, because the slab was not to be disturbed or penetrated, there was no reason for the Council to think that it would not function as a mechanism for controlling the escape of such contaminants as might be present in the land. 125 The Council's failure to require environmental remediation, as a condition of any of the development consents, is no evidence that further remediation would not be required once the existing slab is removed. Indeed, the irrelevance of the Council's imputed opinion can be seen from the fact that, even on Shell's evidence, some remediation was required, and was undertaken, at a time after all those consents were given. 126 Of course, the consent given by the Council to Shell's demolition works did put it on notice that the slab would be removed. However, no doubt, the Council understood also that this was part of the process of remediation. That consent (unlike the earlier consents on which Shell relied) was not a consent to use of the site as a car sales yard, and thus the Council was not required to consider whether the site was in a safe state (from the perspective of contamination) for use as a car sales yard. 127 Further, as a result of Shell's partial performance of the works the subject of consent 1695/2005, Mr Assafiri, as the owner of the land, is liable to complete those works. See s 121B of the EPA Act, noting in particular item 16 of the table set out in that section. This potential liability underscores the point that the question of the extent of remediation cannot be divorced from the antecedent obligation to demolish the existing slab. 128 Issue 4 should be answered "no". Fifth issue: compliance with the certification obligation in cl 13.2(d) 129 Shell's case is that it satisfied its obligation under cl 13.2(d) of the 2006 lease by providing to Mr Assafiri a copy of the final report of URS, dated 31 August 2007. Mr Assafiri says that the URS report (as I shall call it) does not satisfy Shell's obligations under cl 13.2(d) because:

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(7) there were no unacceptable risks for onsite residents or visitors. 132 The executive summary concluded: The assessment conducted and presented within this report has been undertaken on the assumption of the sites current condition. This report has not addressed potential for exposure to COPC ["Contaminants of Potential Concern"] identified insitu (which exceed adopted screening guidelines on the site) that may be excavated and brought to the surface of the site (and stockpiled) or disposed offsite. It should also be noted that future excavation activities may encounter odorous soils, however based on the information that was available at the time of completion of this report, they do not pose a significant health risk. Overall On the basis of the available data (and assumptions made by URS see recommendations above) and consideration of the potential use of the site for residential and commercial use (assuming buildings are constructed as slab on grade with no basement) no unacceptable risks to human health have been identified on the site that may be associated with impacts in groundwater and insitu soils present on the site. 133 However, the report was subject to limitations. Section 9 stated: URS Australia Pty Ltd (URS) has prepared this report in accordance with the usual care and thoroughness of the consulting profession for the use of The Shell Company of Australia and only those third parties who have been authorised in writing by URS to rely on the report. It is based on generally accepted practices and standards at the time it was prepared. No other warranty, expressed or implied, is made as to the professional advice included in this report. It is prepared in accordance with the scope of work and for the purpose outlined in the Proposal dated 2 nd May 2007. The methodology adopted and sources of information used by URS are outlined in this report. URS has made no independent verification of this information beyond the agreed scope of works and URS assumes no responsibility for any inaccuracies or omissions. No indications were found during our investigations that information contained in this report as provided to URS was false. This report was prepared between May and August 2007 and is based on the conditions encountered and information reviewed at the time of preparation. URS disclaims responsibility for any changes that may have occurred after this time. This report should be read in full. No responsibility is accepted for use of any part of this report in any other context or for any other purpose or by third parties. This report does not purport to give legal advice. Legal advice can only be given by qualified legal practitioners. 134 There was no evidence that URS has authorised anyone other than Shell to rely on the report. Further, as the last paragraph of Section 9 makes clear, URS did not accept that (for example) the executive summary could be relied upon by itself, without reading the whole of the report in full. The parties' submissions 135 Mr Corsaro launched a sustained attack on the asserted independence of URS. He relied on the fact that both the URS report and a soil validation report by Coffey, on which URS relied, had been the subject of extensive negotiation, as to their contents, between the authors and Shell. Mr Corsaro submitted that Shell's intervention in the forms of those reports went far beyond what might be expected, and was sufficient to compromise the independence of the authors. 136 Mr Lancaster's primary submission was that no certificate was required, because at all material times the land did not need any remediation for use, or continued or further use, as car sales yard. That was so, he submitted, because the land had been so used from 1999 to 2005, pursuant to consents given by the Council without any need for remediation, and must have remained so. It followed, Mr Lancaster submitted, that if no work were required under cl 13.2(c), then there was nothing to certify. 137 Mr Lancaster submitted, alternatively, that there had been no more than robust debate, aimed at clarifying and focusing each of the reports, and that it did not impair the essential independence of the authors. Mr Harwood had expressed a view to that effect; but for the reasons that I have indicated above, I do not regard Mr Harwood as an acceptable independent expert witness. I am not prepared to place any weight, let alone dispositive weight, on this aspect of his evidence. 138 As to whether or not the URS report should be regarded as a "certificate" Mr Lancaster noted that no particular form of words was required. He submitted that the Court should take a broad view to the construction of the obligation to provide a certificate. He relied on the ordinary English meaning of "certificate" as including "document wherein a fact is formally certified or attested" (Oxford English Dictionary accessed online meaning 3.a.). 139 Otherwise, the parties' submissions essentially followed, and elaborated on, the brief outline of the disputes that I indicated at [129] above. Decision

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141 Shell's primary position - that no certificate was required - cannot be accepted. First, for the reasons that I have given, I do not accept that no remediation was required. Secondly, the submission is premised on the proposition that because the land had been used, in its existing state of improvement, as a car sales yard without remediation it could continue to be so used notwithstanding that all those improvements were to be demolished and removed before the need for remediation could be assessed, and the extent of any necessary remediation determined. Again, this submission appears to be taking advantage of one breach on the part of Shell to justify another. The URS report is not a certificate 142 I accept that clause 13.2(d) imposes no particular formal requirement for a document to be a certificate. I accept, further that it is irrelevant that Shell produced a form of certificate in draft for URS to complete and that URS, apparently at the instigation of its internal lawyers, was not prepared to provide such a certificate. The question of compliance with cl 13.2(d) is a matter for the Court, and is not determined by whatever the parties may have thought was required. 143 Mr Lancaster relied on the opinion of the Privy Council in Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279. The respondent in that case bought goods from a supplier in Taiwan. It requested its bank, the appellant, to issue a letter of credit to authorise the seller to draw on the appellant's correspondent in Taiwan to cover the cost of the goods FOB. It was a condition of the letter of credit that the seller should furnish a "Certificate of Inspection". The seller produced, in respect of each shipment, a document issued by a surveyor which certified that the surveyor had supervised the packing of boxes of the goods, described the goods so packed, stated that the packing was in good condition for shipping and (by implication) that there was no apparent defect in the goods or the manner of their packing. The documents did not certify that the goods conformed to the contract under which they had been sold. 144 The opinion of their Lordships was given by Lord Diplock. He said:

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(2) state that those obligations had in fact been met. 146 In the present case, the question is whether the URS report can be regarded as meeting those requirements. I do not think that a great deal of assistance is gained from the opinion of their Lordships in Jalsard, or from the particular observations of Lord Diplock to which I have referred. 147 The Australian Oxford Dictionary defines a certificate as "a formal document attesting a fact, especially… a fulfilment of requirements". The word is cognate with the verb "certify" which is defined, in the same dictionary, to mean "make a formal statement of; attest; attest to… declare by certificate…". 148 The URS report does not attempt or purport to address the requirements of cl 13.2(c). It is in terms "an assessment of risks to human health associated with the presence of hydrocarbon impacts identified within soil and groundwater at [the land]… assessed in accordance with the current zoning and form commercial land use". The requirements of clause 13.2(c) are not identified either in terms or by reference. There is no statement, either expressly or by implication, "that all environmental Laws or Requirements which apply to the Land or to an owner or occupier of the Land are complied with". There is no statement "that no environmental remediation is required for the Land to be used for its highest and best use…". 149 A conclusion that there are no unacceptable risks for onsite commercial workers, onsite intrusive workers, onsite residents or their visitors is, no doubt, of some importance. It may be a step in reasoning towards the conclusion that the requirements of cl 13.2(c) have been satisfied. But it is not in itself a statement, or certification, of satisfaction of those requirements. 150 Again, there is nothing in cl 13.2(c) which limits the work to be undertaken to use effected through buildings constructed on a slab on ground, or without a basement. But to the extent that the URS report does "certify" anything, it is limited to exclude other forms of user of the land. 151 I do not think, in any event, that a requirement to certify something is answered by giving a report, in terms addressing a different concept, comprising, as I have said, some 265 pages. As I have noted, Mr Lancaster submitted that the certification could be found in the executive summary. But as Section 9 of the report makes clear, it is a document to be read in full. Even if that does not require a perusal of the more than 200 pages of appendices, tables and the like, the report itself exceeds 50 pages in length. I cannot accept that Wenzhou and Shell intended that Shell's obligation to provide a certificate could be satisfied by the provision of a document of that length, which at most addressed some only of the issues to which the certificate was to have been addressed. 152 One thing which is crystal-clear from the evidence of Ms Harvey is that URS was not asked to report (or, if that is the correct way of regarding what it did, "certify") on the basis that, so far as she understood it, Shell had completed its obligation of remediation. She agreed that Shell had not completed "cleaning up" the site to residential standard, and demolishing and removing its improvements, because it had run out of time when the "quit date" of 26 March 2007 occurred (T280.20 - 281.5). She agreed, too, that Coffey's investigative work and testing had stopped at 5.5 metres (below surface level) because that was the reach of the machine used, not because Coffey was satisfied that there were no contaminants below that level (T276.5-277.25). She agreed, further, that Coffey had not "validated" the site, but merely the work that had been undertaken up until the date of the validation report, 4 April 2007 (T288.35 - .50). 153 Against that background, Ms Harvey agreed that the HRA carried out by URS was done when Shell's work of remediation had not been completed (T292.41-293.14). The last two questions and answers in this passage are instructive (T293.6-.14): Q. Have I put the position unfairly to you or to Shell that simply you didn't have enough time so you decided to press ahead and get Coffeys to validate an incompletely remediated site and for URS to prepare a risk assessment for a partially remediated site, is that a fair summary? If I am being unfair, tell me I am? A. Yes.

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(2) the remediation would be to the level required for residential use. 159 The former proposition is clear from the terms of the development application submitted to the Council on 15 September 2005 by RM Knight and Associates Pty Ltd (Knight), a consultant retained by Shell in relation to the remediation of the land in pursuance of Shell's obligations under cl 13.2(c). The Council's response to Knight of 5 October 2005 reminded Knight of Shell's obligations, under SEPP 55 and other relevant guidelines, "[s]hould the site undergo re-development for a more sensitive land use". 160 The second proposition is made good by a "Project Management Plan" prepared by Ms Harvey in October 2005. A draft of that plan stated, as did the final version: The ESA has been completed. Soil and groundwater impact above ILs [Investigation Levels] review of ESA [Environmental Site Assessment] results indicates site not likely to pass HRA for residential development, as per the zoning at the site. Excavation and remeidation [sic] required. Retail reviewing requirements of the lease as to whether best indented use - commercial or zoning - residential is required to reliquish [sic] the site. Retail have confirmed remediation to residential is required. 161 The "Environmental Site Assessment" to which Ms Harvey referred was the 2005 Coffey report, prepared on 4 August 2005, which Ms Harvey received and considered. That report showed, according to its executive summary, that hydrocarbon concentrations "exceeding EPA [Environmental Protection Agency] guidelines for sensitive land use were detected" in five different samples taken from various parts of the site. It stated that "[p]otential sources of hydrocarbon impact at and around the site" included "former product-related infrastructure", material that had been used to back fill the area from which the underground tanks had been removed, and the areas where "fuel dispensers and associated pipes, pipe trenches and backfill" had been located. The report further showed what appear to be additional hydrocarbon concentrations at various different areas of the site, and "Groundwater Impact" from hydrocarbons for identified groundwater samples. 162 The body of the Coffey report indicated, among other things, that "Chemicals of Potential Concern" could migrate from the site in liquid or gaseous form, either with the groundwater that flowed beneath the site or through trenches and other conduits running into and from the site. The report suggested that this could affect workers undertaking excavation near the site and, perhaps, residential properties to the east of the site. It said also that "[i]n the event that impacts were present below existing on-site buildings, future occupants may be exposed to hydrocarbon vapours via vertical migration and intrusion to buildings". I understand this to mean that if there were excavation below the existing improvements on the site, there would be a consequential possibility that hydrocarbon vapours would emerge from the subsoil. 163 The authors of the Coffey report were not called to give evidence. Thus, the Court is left with Ms Harvey's assessment of the significance of the report - as indicating that the land was "not likely to pass HRA for residential zoning". In other words, I think, it is reasonable to proceed on the assumption that Shell understood, from the Coffey report of 4 August 2005, that work would be needed to make the site fit for residential development; and that Shell believed that this was the likely future use for which remediation should be undertaken. 164 There is a conflict between the evidence of Ms Harvey and that of Mr Speer as to who it was in "Retail" that gave Ms Harvey the advice set out in the Project Management Plan. Ms Harvey said it was Mr Speer. Mr Speer denied this. If the dispute needed to be resolved (and I am not sure that it does) I would prefer Ms Harvey's evidence. That is because in October 2005, Mr Speer was aware of the content of the obligation under cl 13.2(c), and that it included demolition and removal of all improvements including the slab. Further, Mr Speer had been advised by other consultants retained by Shell that if the slab were to be demolished, the existing use rights would lapse and the highest and best use would be for residential purposes, in accordance with the zoning as residential 2(a). The obvious inference is that Mr Harvey thought at the time that performance of Shell's obligations under cl 13.2(c) would mean that the land could only be used thereafter for residential purposes, and thus that, as a matter of necessity, remediation to a standard appropriate for that use was required. It is therefore likely that, had Ms Harvey asked Mr Speer to what standard the land should be remediated (as she said she did), he would have replied as she noted in her contemporaneous document. 165 As noted at [159] above, the Council reminded Knight that remediation in accordance with SEPP 55 and other guidelines might be required if the land were to be redeveloped "for a more sensitive land use". In my view, it is clear that use for residential purposes would be "more sensitive" than use as a car sales yard. It follows, in my view, that Shell, at least through its consultant Knight and probably directly, was aware that relevant obligations under SEPP 55 and other relevant guidelines would apply to the remediation. 166 In short, the evidence (and I have cited only a small portion of it) leads, and leads only, to the conclusion that at the time Shell was preparing to comply with its obligations under cl 13.2(c), it intended to remediate the land as vacant land, and understood that this would require remediation to enable the land to be put to residential use. 167 However, that position changed. By December 2005 (but before the Council gave consent to the application lodged by Knight), Shell became aware that it would be very much to its commercial benefit "if we can meet our obligation of handing back a clean site by 25 March" (this refers to the land). An email of 9 December 2005 from Mr Stuart Turner, Shell's property management coordinator, to Ms Harvey and others, dealing with the subject of "Wenzhou Quits" referred to Shell's obligations under various leases from Wenzhou. (In Shell's internal jargon, a "quit" is a decision to hand back a leased site to the lessor, appropriately remediated, at the termination of a lease). 168 Mr Turner's email said, in part: As discussed earlier Coles Express Beecroft… has been confirmed today, as a quit. We have the same obligations for this site as we do with all other Wenzhou sites - i.e.: demolition and removal of improvements and remediation to highest and best use… Of the WenZhou sites, Warwick Farm [i.e., the land] is the most critical to Babcock and Brown [the manager of the Wenzhou portfolio] and they have indicated that if we can meet our obligation of handing back a clean site by 25 March, it would be unlikely that they would envoke the 12 month demolition / remediation clause for the balance of the quits. Given that we don't know when the DA will be approved we need to look at alternative solutions to meeting the March 25 deadline… (Emphasis in original) 169 The email continued by referring two strategies that Shell could pursue, to enable it to meet the "March 25 deadline" and referred to a potential cost saving of "approx $600k!!". One option suggested was removal of contaminated soil so that "we can then undertake a risk assessment on the groundwater (as opposed to any ongoing treatment) which will allow us to meet our obligation". 170 From at least that time on, I think, it can be inferred that Shell decided not to carry out in full its obligations under cl 13.2 of the 2006 lease. As a result, it did not demolish and remove all its improvements, but left the slab in place. It carried out a limited program of soil decontamination. It sealed over the affected area, and handed back the site knowing, from the work undertaken by Coffey, that there were still areas where soil buried under the slab contained hydrocarbon contaminants, including some that were carcinogenic. The drawing of the inference referred to at the start of this paragraph is facilitated by the unexplained failure of Shell to call relevant witnesses. See at [211] below. 171 I have set out that history not because it is the subject of a separate claim but because, in my view, it is relevant to an understanding of the steps that Shell took to procure URS to alter its draft report (and to procure Coffey to alter its draft soil validation report, which in final form was one of the source documents on which URS relied). It is those steps upon which Mr Corsaro relied as showing that Shell had so completely "intermeddled" in the production of the URS report that it could not be regarded as a document produced by an independent expert. It is to some of the detail of that "intermeddling" that I now turn.

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176 There was no evidence to suggest that the Coffey soil validation report in its final form was unreliable or inaccurate. But even if it were, there is no reason to think that URS knew (or should have known) of that hypothetical fact. Nor is there any other reason to think that URS should have questioned, or had reason to regard as unreliable, the Coffey soil validation report in its final form. 177 Accordingly, to the extent that Mr Corsaro submitted that the URS report was unreliable because it was based in part on the Coffey soil validation report, I would reject that submission. The URS report 178 I turn to the URS report. Again, it is clear that Shell, through Ms Harvey, made a substantial contribution to the final form of that report. It does not follow, merely because this happened, that the report should not be regarded as a report from an independent expert. 179 It is instructive to look at reports furnished by experts to the Court. In those circumstances, UCPR r 31.23 applies, and the experts are required to, and usually do, acknowledge their obligations to the Court as set out in UCPR Schedule 7. It may be the case that the expert will submit a draft report to the lawyers by whom, on behalf of the party intending to rely on the report, he or she was retained. It may happen that the expert discusses the draft report in conference with those lawyers, or counsel retained by them. There is nothing wrong with this, at least at the level of principle. On the contrary, if the result of the discussion is to focus the expert's attention on the issues to which his or her evidence is relevant, and to dissuade the expert from discussing matters on which his or her opinion is of no relevance, then such intervention is valid. What is not acceptable is that the lawyers dictate the content of the opinion. So long as the report that results from this process represents the views of the expert, held in good faith on the basis of facts known to or assumed by the expert, the final version of the report may well be something on which the Court can rely. It is not necessarily corrupted by the process of analysis and discussion that may have led to the shaping of its form. 180 By analogy, a certificate from an independent (and duly qualified) expert under cl 13.2(d) of the 2006 lease would not be corrupted, or unreliable, or cease to be a certificate for the purposes of that paragraph, simply because it had been the subject of discussion, or its contents the subject of negotiation, between the expert and Shell. What is essential is that the views expressed in the report be the views of the expert, not the views of Shell. To put it another way, what is essential is that the views expressed in the report are genuinely and independently held by the expert, notwithstanding that the formulation of those views may have evolved from discussions with Shell. It is necessary to bear in mind that Ms Harvey (the person who contributed to the shaping of the final version of the URS report) does have expert qualifications in the field of environmental science. 181 In short, I do accept that discussion - even robust discussion - between Shell and URS is not something that, of itself, would mean that URS ceased to be an independent expert. 182 URS submitted a draft HRA report to Shell on 17 June 2007. Thereafter, Shell sent further data to URS, and URS prepared a revised draft report dated 4 July 2007. Ms Harvey sent that draft to Mr Geoff Borg, Shell's Environment Standards Advisor, at Shell's "Centre of Excellence" (COE). Her email said, leaving out salutations and the like: I am hoping that you might be able to squeeze a HERA review into your busy schedule. It is urgent and is a potential litigation case. Pleeeeease! [sic] 183 Mr Borg replied on 24 July 2007. He said that he, or the COE, had considered the exclusions or limitations in the draft URS report, namely, 1. No basements will be included in future developments; 2. Effects of seasonal conditions of the flux of soil vapour to surface receptors; and 3. Potential periodic occurrence of groundwater shallower than that identified in investigations completed to date.

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184 Mr Borg commented on those matters as follows: It is noted that URS identify this report as a "conservative quantitative risk assessment". It is reasonable to expect that such a conservative assessment would take into account potential circumstances; such as variation in seasonal conditions that could alter vapour flux or groundwater conditions, that could affect the outcomes of the modelling used in the risk assessment. The conclusion to the risk assessment would then be either no intolerable risk OR potential risk to human health. The latter conclusion would then require recommendations to collect further data to enable revision of the exposure modelling to better approximate actual size conditions (and reduce conservatism) or recommendations to reduce the risk to receptors. If a conservative assessment concludes there is no intolerable risk then there should be no recommendations. With regards to the current conclusions and exclusions (and related recommendations), CoE suggests: 1. The zoning and the local Council's building policies / requirements be reviewed to confirm whether basements could be included in future development of the site. If there is a high likelihood of basements then Shell will need to consider whether it is better to assess this risk now versus the potential for claims from future developers should impact be identified or a future Statutory Audit find the development cannot occur unless this exposure pathway is assessed and the risk (if present) managed. 2. URS need to confirm whether the conservatism employed in this risk assessment takes into account potential changes in soil vapour flux and groundwater occurrence for this site based on their knowledge of climatic and groundwater conditions in the Sydney region from there experience in conducting such risk assessment across this area. If this knowledge is built into their assessment then this should be stated in the Executive Summary to support their conclusions of "no unacceptable risk" instead of recommendations. If this knowledge has not been utilised then it is suggested the HERA be revised to include this. 3. If URS consider that the exclusions as stated could mean there is a potential risk to human health under these conditions then Shell needs to know this now and a strategy developed to address this. CoE notes there is no commentary in the Executive Summary regarding the potential occurrence of shallow soil that may smell of hydrocarbons. This issue is raised in the context of such a discovery by a future developer could initiate a claim against Shell regardless of the findings of the HERA. Once you have reviewed this e-mail, please send a meeting request to arrange a time to discuss and confirm CoE have reviewed this draft HERA in the correct context and agree a strategy for this project before URS are contacted to review the report. 185 Ms Harvey sent that document on to URS, together with comments "from the lawyers". The comments from the lawyers, so far as they can be read (the email has been imperfectly printed or copied) are as follows: 1. Basement testing The Report is premised on the assumption that no basement will be constructed as part of any subsequent development of the Site, and provides that further testing will need to be performed prior to any basement being constructed. It will be helpful if URS are able to clarify why such testing was not undertaken when they were on-Site in June, and whether there is good reason, for example, to think that a basement will not be built as part of any development. Shell may also seek an indication of how long such further testing will take, and what will be involved. 2. Vapour testing We need to clarify the reason for the Report's caveat that further vapour testing needs to be conducted in summer. That is, whether existing vapour testing results are borderline and there is a genuine risk that seasonal conditions will exacerbate them, or whether this represents URS ' professional caution, and is a pro forma qualification regularly included in reports completed in the winter months. 3. Groundwater testing We understand that the unusual amount of rain in early June has resulted in an ambiguity in the groundwater level readings. We need to clarify with URS how long it would take for them to do the additional tests referred to in order to resolve this issue. The other questions that we have had from the lawyers relates to the provision of a certificate that states the site has been remediated per the requirements of the lease. I understand that you have not reviewed the lease and are unlikely to provide the certificate (a draft as prepared by the lawyers has also been attached) however I need to ask if you would be willing to complete something similar or prepare a short letter summary of the suitability of the site. If you have any questions regarding the attached or the comments give me a call. 186 Ms Harvey forwarded, in its entirety, Mr Borg's email of 25 July 2007. 187 URS replied on 26 July 2007. Omitting formal parts, URS said:

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Thanks for the email below URS have considered the comments raised by legal and the Shell CoE and provide the following response: Basement modelling has not been conducted at this site. URS can complete basement modelling, however this may present an unacceptable health risk based on the soil gas data collected on the site (this would need to be confirmed by URS by completing the modelling). The building type assessed in the model was consistent with other similar buildings in the local area. As such, basement modelling was not conducted. The existing data set could be used to conduct some HR modelling for a basement scenario, however a number of assumptions relating to basement construction details and these may not be relevant to actual plans made by a developer. As such, this would introduce an additional level of uncertainty and therefore, may be better modelled when these details are available. Further modelling and revision of the HERA could be completed with the existing data set, however there would be limitations. This can be completed as a variation and the results communicated to Shell, who can decide if they wish to include it in the current report. URS recommends vapour sampling during the summer months as vapour sampling in winter (and on one occasion only) cannot determine the potential for vapour concentrations to vary throughout the year, particularly in the warmer summer months following drier weather. Only sampling will confirm the potential for seasonal variation and whether such variation is of potential concern. One round of data cannot provide information of variation between sampling events and seasonal variation of potential vapour emissions on the site. As this is one of the vary areas of uncertainty in the assessment presented it is important that the issue be closed out. In regards to the Standing Water Level Measurements reported in draft form to URS from Shell based on a recent GME conducted by Coffey. Based on the data submitted there was a large degree of uncertainty in the standing water levels recorded at MW5 and MW6 (onsite), and this needs to be further confirmed by the consultant as to the well construction details and depth to groundwater (by further investigation). The presence of a perched aquifer on the site has not been presented in the risk assessment and if confirmed to be present on site (by further field works by Shells consultant) then the risk assessment will require revision. It is noted at the time of completion of the HHRA by URS, this data was available only in draft format and no information was provided about how the data was collected. If a percher water aquifer is confirmed to be present onsite, then groundwater data from this aquifer will be used to address direct contact by future onsite users and intrusive maintenance workers. The purpose of the HERA was to review the adequacy of the data provided and highlight uncertainties and data gaps. The scope of the HERA completed was not to collect additional groundwater data. We can discuss further the best way for this data to be collected. Odourous soil which may or may not be present on the site is not a human health issue. Therefore it has not been addressed in the human health risk assessment. It is an aesthetic issue to be managed by a site specific management plan. Further to your request to provide a Certificate under Lease, we are looking into the options of how URS may be able to do this. One of our team (Fran Mitchell) is working through this with our in-house legal counsel and will come back to Shell with some comment shortly. 188 Mr Andrew Barwick of Shell, who had become involved in the preparation of the URS report, had a telephone discussion with URS on 3 August 2007. His note of that conversation reads (so far as it is legible) as follows: Shell understands why they have not modelled basement [illegible] we need to understand if basements can actually be built there in the future. RS [sic; ? URS] basement issues quite common done on current buildings in the area increased pressures for land may lead to basements in the future. if any basement goes to 3m most of the contamination would be cut out anyway off for this report, leave basement out because buildings of the area reflect this [illegible] will send email explaining basement issue Certificate With their lawyers Off recommends that we now give council the reports however, notes that reports will have to be made for 3 rd party reliance vapour in summer vapour - 1 round usually not sufficient unless the land is collected in worst possible time 2 mid summer [illegible] collected in mid winter and when damp concentrations really very low [illegible] may still be below. Should have done that first time will add comments re: variability - if there is a risk they will let us know Summer vs winter looking at soil moisture and soil temp!! MW5 & MW6 [illegible] more than likely remove these two wells from the assessment as erroneous Smelly soil - could still be smelly soil however quantitative assessment says ok as it is - however excavation to 3m will expose pockets of odours / contaminated soil. 189 URS' view of what it was being asked to do is shown by an internal email of 6 August 2007 from Ms Amanda Lee, an environmental chemist who seems to have had day to day responsibility for preparation of the report, to her supervisor Ms Francine Mitchell. Omitting formal parts, that email stated: Jackie had a telephone call with Shell on Friday and the outcomes were: 1. I have to model a basement at the site and send the email of results to Shell. This wont be until Jackie is ok to review what I have modelled (ie hopefully late this week next week). 2. We have to draw up a scope of what we were asked to do by Shell (ie I think this is where legal come in). If you are able to assist with this task I would appreciate it. 3. Jackie was going to address the seasonal variation in soil gas measurements using data and examples from other sites. 4. I got Andrew H to review the groundwater gauging and chemical parameters at MW05 and MW06, Shell have requested that we omit the data and recommendations to re-gauge these locations. Andrew H was happy to discount the data and agrees after review with Andrew Barwick that the data is rubbish - we need to qualify this in the report. 5. We have to make a comment that potentially in excavations (which may occur on the site in the future) the site may be odorous, but this does not present a health issue. Basically Shell have asked us to removal all recommendations from the report. That's about it 190 Ms Mitchell was not happy with the idea that recommendations should be removed. She said in an email to, among others, Ms Lee of 6 August 2007: I know the URS lawyers will not be convinced that this is a good idea, particularly if we are providing a third party reliance to the Landlord. Do you know the background if Shell are still seeking Third Party Use? 191 On 15 August 2007, URS submitted a quotation to Shell for further work. Omitting formal parts, that quotation read as follows: URS have had a telecon regarding the requests from Shell for the Warwick Farm Onsite Human Health Risk Assessment. Detailed below is the proposed deliverable and dates and cost variations associated with each task. 1. Complete Vapour Modelling using a basement onsite. This will be provided to Shell in a letter of recommendations report. Shell will receive this letter report on Tuesday 21 st August (following receipt of approval - anticipated today). The associated costs with this additional work is estimated at (Senior Project Manager $118 x 8 hours $944 and Risk Assessment principal $204 x2 hours) $1,352 excluding GST. 2. Discussion and data on seasonal variations of soil gas and flux hood emissions testing. This will be provided in the same letter as outlined above (same delivery date). The associated costs with this additional work is estimated at (Senior Project Manager $118 x 2 hours and Risk Assessment Principal $204 x 1 hours) $440 excluding GST. 3. Review of current groundwater data (removing MW5 and MW6). This will also be provided in the letter report stated above (and main text of report will also be updated) and if necessary that URS deems that there is further groundwater investigations required based on reduced data set, we will communicate this to Shell by Friday 17 th August. This additional work (Senior Project Manager $118 x 6 hours) is estimated at $708 excluding GST 4. Odorous soil comments will be incorporated in the final copy of this report. This will be issued once acceptance of the letter is reviewed by Shell. 5. Statement of Third Party Use, this work will be completed by URS legal in consultation with Shell legal. An estimate of the cost variation for this will depend on the format of the Third Party Use and a cost estimate will be provided when further information is available on Shell's requirements. … 192 Mr Barwick, who was one of the addressees of that email, annotated a printout. His comments included the following:

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193 The result of all that deliberation was expressed in an email of 15 August 2008 from Mr Barwick and Ms Harvey to "Dear all" of URS. Omitting formal parts, that email (which appears to reflect Mr Barwick's notes) read as follows: Emma and I have spoken and wish to proceed as follows: 1) No need for extra modelling. At this stage, we only want to assess the basement risk based on what is in the area and what information you can glean from Council LEPs etc. As such, in the main report we need URS to clarify this point - why basements have not been included in the model based on what is in the area and what can / can not be built there. 2) We agree with this item and commission approx $440. URS are to use guidelines on data extrapolation and see what you get. All results to be in separate recommendation letter. Should the results of this exercise be favourable, they are to be incorporated into main report. 3) We understand that the URS hydrogeologist has to be comfortable with the characterization of the groundwater for that to feed into the modelling. There is nothing we can do here but see what the results are! Results of this review will be in the letter report. However, I am still confused - should the result of this review be favourable, would the main report then be modified to reflect the changes??? 4) We agree that a comment along the lines of odorous soil does not necessarily mean a risk' will be incorporated. 5) Statement of Third Party reliance is with the lawyers. Please clarify outcome directly with Emma. Amanda, please confirm your understanding of the above and confirm item 3. 194 URS replied, by an email dated 20 August 2007 which attached a draft letter, apparently to be read by Shell in addition to the formal report. That email read (omitting formal parts): … Please find attached the URS letter which addresses concerns raised by Shell in relation to the draft URS report "Onsite Human Health Risk Assessment, Former Shell Warwick Farm Service Station" dated 4th July 2007. Please note that the contents of the letter are proposed to be included in the Final report. All of the information presented in the attached letter is in accordance with the current contract between URS and Shell (Shell Contract-RETAIL CP-VDMZ 05/20). Please contact me should you require any additional information. … 195 Mr Barwick, who appears to have taken over responsibility for the process of "certification", replied as follows (omitting formal parts): … Emma and I have reviewed the attached letter and are generally satisfied. Two points of note: 1. Section 3.1.3, 4 th para - the way this paragraph is worded gives the impression that groundwater contamination in that area of the site has occurred. I am unsure to the level of incorporation of this letter into the final report on a word for word basis. If you are to include this section, might want to soften it a little…"… it is considered that potential groundwater contamination (if any) that may have resulted from this source…" 2. Again, we are unsure as to how much content of the letter will be incorporated into the report. Whilst we understand most of scientific content, we felt that the recipients of the final report may not. Please provide a combination of scientific dialogue and simple, succinct concluding statements where required. … 196 It seems that the question of "third party use" had not been dealt with to URS' satisfaction. On 28 August 2007, Ms Mitchell of URS sent an email to Ms Harvey dealing with this subject. Omitting formal parts, it read: … Further to our discussion, please find following draft on the Third Party Use statement for Shell. We have considered Shell's request and are willing to provide a third party use statement in our report subject to the following conditions: (i) the Interested Party is limited to the landlord at the date of the report, i.e Wenzho Pty Ltd (ii) the TPU incorporates a limit of liability to Shell, the Interested Party, or both collectively to the amount of $20,000 in the aggregate. (iii) the Interested Party agrees to indemnify URS against (a) any liability in excess of the $20,000 and (b) unauthorised use of the report. We propose that the fees required to prepare and issue the Third Party Use statement is conducted on a fees and expense basis. At this stage, it is estimated that a total of approximately 12 hours for a cross section of staff (project and legal) are required. An estimate of the fees involved for the Statement is approximately $1900 ex GST. Can you please authorise this variation to the project budge. A return email would be satisfactory for this purpose. Could you please provide your comments on the draft statement and then we will arrange finalisation of the report with the statement appended. Please do not hesitate to contact me with any questions. … 197 It is not clear whether Shell ever paid the "third party use" fee. Presumably it did not, because the URS report, in its final form, was not expressed to be a document on which "the landlord" could rely. 198 The final version of the URS report was dated 31 August 2007, and presumably given to Shell at about that time. 199 Some of the email correspondence is worded in a way that might be regarded as, at best, unfortunate. For example, on 22 May 2007, Ms Lee of URS wrote to Ms Harvey and Mr Barwick referring to "the preliminary results for the human health risk assessment" for the land and asking Ms Harvey to contact Ms Lee "if you would like to discuss further options on how to proceed". The email concluded: URS have stopped writing this report until we are informed by Shell about what outcome they would like to achieve on this site, bearing in mind the difficulty with current site access. 200 Perhaps that wording was no more than unfortunate. But, since Ms Lee was not called to give evidence (nor was Mr Barwick), I do not propose to speculate on benign interpretations. Ms Harvey denied that she understood URS to be asking for instructions on how to write the report (T328.5-.30). However, it is impossible, having listened to Ms Harvey's evidence on this point, to put out of mind the fact that she appeared to be extremely uncomfortable, and that this passage of her evidence in particular (indeed, the whole of her evidence concerning the interaction between Shell and URS in relation to the final form of the URS report) was marked by lengthy pauses and apparent failures of recollection. Those failures of recollection stand in marked contrast to what appeared to be otherwise an extremely good recall of relevant events. 201 Ms Harvey accepted that she made suggestions to URS, for the amendment of its draft report, which were to Shell's advantage; but that was "for clarification" (T338.16-.39): Q. You considered the draft URS report for the purposes of recommending changes? A. Yes.

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Q. All of those issues and to your knowledge the limitations in the report were, so far as you understood, inconsistent with URS being able to certify that Shell had remediated that site to the highest and best use so far as you understood it, correct? A. Yes. 210 It is an available - indeed, in my view, a compelling - inference, on the basis of the correspondence between Shell and URS, and Ms Harvey's evidence in cross-examination, that Shell took deliberate steps to limit the ability of URS to report on the extent and effect of remediation undertaken by Shell. In my view, there is another available - again, indeed, compelling - inference that the extent of Shell's intervention in the process of production of the URS report was sufficient to compromise URS' independence. I say that partly because of the extent and nature of the changes suggested by Shell but, in particular, because of the limitations that Shell placed on the ability of URS to investigate and report (for example, in relation to the basement). 211 In circumstances where many relevant witnesses were not called - including Mr Borg, Mr Barwick and perhaps Mr Turner from Shell, and Ms Lee and Ms Mitchell from URS - I feel more confident in drawing those inferences. I have the uncomfortable impression that Ms Harvey was chosen in effect as the scapegoat to explain, as best she could, the deficiencies in the way that Shell dealt with in the remediation of the land and the obligation to certify under cl 13.2(d). Further, the drawing of those inferences is facilitated if one takes into account the apparent change in Shell's approach to its obligations under cl 13.2(b), (c), as discussed at [158] to [170] above. 212 Were it necessary to do so, I would conclude that URS was not independent, for the purposes of cl 13.2(d). Sixth and Seventh issues: misleading or deceptive conduct; negligent misrepresentation 213 The case articulated in Mr Assafiri's further amended commercial list statement was based on correspondence passing between the parties' legal representatives in April and May 2007. Various representations are said to emerge from that correspondence, which are said to have been misleading or deceptive or alternatively negligent. 214 That case was addressed in the closing written submissions for Mr Assafiri. However, the case that was put in oral closing submissions was based on representations said to have been made orally by Mr Speer. I do not propose to deal with a case based on unpleaded representations. 215 As to the case based on correspondence: it is convenient to start with the relief claimed. That relief is damages calculated on a basis that seeks, in effect, to treat the representations as having contractual force. Mr Corsaro did not articulate the way in which damages might be recoverable on that basis. He was wise not to do so. 216 In those circumstances, it is difficult to see why the case based on misleading or deceptive conduct, or negligent misrepresentation, was pressed. The lack of utility in that case is emphasised by the fact that the damages claimed by Mr Assafiri for breach of contract include loss of rental, or as it was put opportunity cost, for the time that it has taken for him to remediate the land. Leaving aside a small amount in consultant's costs, that appears to overlap with the claim for damages for misleading or deceptive conduct or negligent misrepresentation. 217 In any event, the matter can be dealt with quickly. Shell's only defence to the claim with which these issues are concerned (limited to the claim for $2,300.00 for consultants' costs) is that, in fact, Shell did comply with its obligations under cl 13.2(c) of the 2006 lease and the June 2007 agreement. Since I have concluded (and Ms Harvey's evidence makes it clear) that Shell did not do so, it follows (as conceded at para 98 of Shell's closing written submissions) that it is liable for damage in the sum of $2,300.00. Eighth issue: damages 218 I have just dealt with sub issues (a) and (b). I turn to issue (c)(i). That relates to Mr Assafiri's claim for loss of the benefit of the Global contract. Relevant terms of the Global contract 219 The Global contract was made on 16 January 2007. There is no suggestion that, at the time the 2006 lease was made or indeed at any time relevant to these proceedings, Shell had actual knowledge that Mr Assafiri was intending to sell the land. 220 The contract price was $2,200,000.00 exclusive of GST. A 1% deposit - $22,000.00 - was paid. Clause 44 of the contract was intended to mirror cl 13.2(c), (d) of the 2006 lease. Clause 45 gave Global a right of rescission in the event that cl 44 was not complied with. Those clauses read as follows: 44. The Parties agree that should the Vendor not deliver to the purchaser on or before 1 st April 2007 a copy of a Certificate from an appropriately qualified independent person that the land has been remediated and is at that date in such condition that all environmental laws or requirements which apply to the land or to an owner of occupier of the Land have been complied with such that no further environmental remediation is required for the land to be used for the highest and best use (taking into account commercial opportunities then available or reasonably expected to become available to the Vendor) then permitted under the Zoning of the Land then in such event the provisions of cl 45 will apply. 45. The Parties agree that in the event that the vendor breaches cl 44 whether or not the Vendor is at fault, the Purchaser may by notice in writing to the other party rescind this Agreement and provided that the party who issues such a notice is not otherwise in default hereunder the provisions of Clause 19 hereof shall apply to such rescission save that such rescission will be deemed by the parties to be rescission ab initio. The Purchaser may at it's sole option prior to serving a Notice of Rescission, elect in writing served on the vendor to proceed with the contract at a price reduction of $780,000 and the parties agree such price reduction is just and fair compensation for the loss of value to the Purchaser and the likely cost of such remediation as may be required to permit the use of the Land. The parties agree that upon service of such election to proceed, the right of rescission available under this clause shall thereafter expire and be of no effect. 221 By clause 46, Mr Assafiri was required to commence to erect a motor showroom within one month of providing a certificate under cl 44. The motor showroom was to be constructed so that it conformed to the 1999 consent, the plans for which were apparently identified. 222 Mr Assafiri did not comply with cl 44. Global exercised its right under cl 45. The parties' submissions 223 Mr Corsaro submitted that the loss of the benefit of the Global contract fell within the first limb or alternatively the second limb of the formulation of the test for recoverability of damages in Hadley v Baxendale (1854) 9 Exch 341 at 354. 224 Mr Corsaro relied on cl 14 of the 2006 lease. That clause gave Shell a right of first refusal in the event that Wenzhou (or Mr Assafiri) wished to dispose of its (or his) interest in the land during the term of the lease. It reads as follows: 14. Right of first refusal etc 14.1 The Landlord must not during the Term dispose of: (a) its interest in the Premises or any part of that interest; or (b) its interest in any larger parcel of land of which the Premises forms part or any part of that interest (whether by sale, lease, declaration of trust or otherwise) to a person other than the Tenant unless:

[149]

(c) either; (i) at least 32 Business Days before that disposal the Landlord has offered the interest to the tenant on terms no less favourable to the Tenant than the terms of the proposed disposal to that person; or (ii) that disposal is the result of the sale of the interest under the hammer at a public auction and, at least 32 Business Days before that public auction, the Landlord gives to the Tenant: (A) notice of the date, time and place of that public auction; and (B) a copy of the agreement under which the interest is offered for sale at that public auction; and (iii) if a result of the disposal will be that the Landlord of this Lease will be or include a person other than Wenzhou Pty Limited, the Landlord procures that that person grants to the Tenant a power of attorney in the same terms as the power of attorney in clause 16.4. 14.2 If the Tenant accepts the Landlord's offer under clause 14.1(c) within 32 Business Days of that offer being made then a contract for the sale of the interest by the Landlord to the Tenant on the terms offered under clause 14.1(c) will be created between them. 14.3 If the Tenant does not accept the Landlord's offer under clause 14.1(c) within 32 Business Days of that offer being made then: (a) the Tenant will be deemed to have rejected that offer; and (b) the Landlord will not be obliged to sell the interest to the Tenant. 225 It followed from cl 14, Mr Corsaro submitted, that the parties contemplated sale of the reversion during the term of the lease, and thus must have had in contemplation that the loss of such a sale would be a natural consequence of the breach of cl 13.2(d). Alternatively, he submitted, cl 14.1 was sufficient to bring the matter within the second limb of Hadley v Baxendale. 226 Mr Lancaster submitted that the loss of the sale was too remote to sound in damages, in circumstances where it was conceded that Shell had not been notified of the sale (or its loss) until well after the relevant events. He submitted that damages under the first limb of Hadley v Baxendale would be loss of the value of the certificate. As to the second limb of Hadley v Baxendale, Mr Lancaster submitted that Shell could only be liable if, in the light of what it knew or should be taken to have known at the time the 2006 lease was made, it could have foreseen that a consequence of breach of cl 13.2(d) would be that Wenzhou would lose the benefit of a sale of the reversion. 227 Mr Lancaster relied on the decision of the English Court of Appeal in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 and on the decision of the Court of Appeal of this state in Stuart Pty Limited v Condor Commercial Insulation Pty Limited [2006] NSWCA 334. The relevant principles 228 I start with Hadley v Baxendale. Before I turn to the well known statement of principle, it is instructive to look at the facts. 229 The plaintiff was a miller. A vital shaft in its mill broke. The mill could not function. The plaintiff engaged the defendant, a common carrier, to take the broken shaft to a firm of engineers, who would use it as a pattern to make a new one. According to the reporter of the case, the defendant's clerk "was told that the mill was stopped, that the shaft must be delivered immediately, and that a special entry, if necessary, must be made to hasten its delivery" (see the headnote at 341; and see also the summary of the case, immediately following the summary of the pleadings, at 344). 230 However, in Victoria Laundry, Asquith LJ, who gave the judgment of the Court (Tucker, Asquith and Singleton LJJ), said at 537 that "[t]he head-note is definitely misleading" in so far as it stated those facts. His Lordship pointed out that if the Court of Exchequer had accepted those facts as proved, it would have decided the case the other way around. However, his Lordship said, it was "reasonably plain" that the Court did not so find. As Asquith LJ pointed out, Alderson B said at 355 "that the only circumstances here communicated by the plaintiffs to the defendants at the time the contract was made were that the article to be carried was the broken shaft of a mill and that the plaintiffs were the millers of that mill". 231 The jury awarded damages for loss of profits during the period of stoppage. The defendant sought an order for a new trial. The application was dealt with by the Court of Exchequer. Alderson B gave the judgment of the Court. His Lordship stated "the proper rule" as follows (at 354): Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. 232 That is the passage always quoted. But his Lordship's elaboration, at 355-356, shows what it was that the Court had in mind in relation to what is often called "the second limb": Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. 233 The rationale for that approach was, as his Lordship said at 355: For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them. 234 In the result, their Lordships concluded that damages for loss of profits whilst the mill remained stopped were too remote. In the view of the Court, it was not necessarily foreseeable, from what the defendant had been told, that the mill would be stopped until the replacement shaft was manufactured, delivered and installed.

[156]

(6) as Asquith LJ pointed out in Victoria Laundry at 538, "where knowledge of special circumstances is relied on as enhancing the damage recoverable that knowledge must have been brought home to the defendant at the time of the contract and in such circumstances that the defendant impliedly undertook to bear any special loss referable to a breach in those special circumstances". 237 In a case that is very similar to the present, Gavin Lightman QC, sitting as a deputy High Court judge, considered that the vendor of a leasehold property was not liable in damages to the purchaser for non-completion, where the purchaser had on-sold that property: Seven Seas Properties Ltd v Al-Essa (No.2) [1993] 1 WLR 1083. In that case, the plaintiff, purchaser, on-sold the property to a third party on the very day that it contracted to buy the property from the defendant. The defendant refused to complete. The third party sought damages from the plaintiff, and the plaintiff in turn sought damages from the defendant. It argued that the defendant might reasonably be supposed to have had in contemplation that the plaintiff would on-sell and that, if the plaintiff did so, the defendant's failure to complete would render the plaintiff liable to damages. Lightman QC held that for the plaintiff to recover damages, it was necessary that the defendant be on notice, at the date of the contract, of the intention of the plaintiff to enter into the contract of on-sale, and that the plaintiff's ability to complete that contract depended on the defendant's performance of its contractual obligation to the plaintiff. He said at 1088 that the defendant: …will only be held to have accepted the risk if he was on notice of the purpose and intent of the plaintiff in entering into the contract with him, and the consequent exposure of the plaintiff to the risk of damage of the character in question in the event of the defendant's breach. 238 That decision was cited, with apparent approval, by Beazley JA (with whom Ipp JA agreed "generally" and Tobias JA agreed) in Stuart at [47] to [50]. Decision 239 It is necessary to focus attention on the way that the case on causation was articulated in the further amended list statement. Reference is made to cls 44 and 45 of the Global contract (see paras 9 and 10 of the statement of contentions). The breaches alleged are of cl 13.2(b), (c) and (d) of the 2006 lease (see para 13 of the contentions). The consequences of those breaches are said to be that Mr Assafiri could not and did not comply with his obligations under cl 44 of the Global contract (see para 17 of the contentions) and that, accordingly, Global rescinded (see para 18 of the contentions). 240 Thus, the case that is put is that:

[164]

246 Nor do I accept that the loss of the benefit of the Global contract is the natural consequence of a breach of cls 13.2(b), (c), and (d) together. The natural consequence of a breach of cl 13.2(b) is that the landlord would be put to expense in demolishing and removing whatever fixtures had been left on the land. The natural consequence of a breach of cl 13.2(c) is that the landlord would be put to the expense of completing remediation to the appropriate standard. The damages would be, in the ordinary way, the costs of taking those steps. 247 Thus, whether the question of causation is assessed by reference to cl 13.2(d) alone, or by reference to paras (b) and (c) as well, I do not think that the loss of the benefit of the Global contract falls within the first limb of Hadley v Baxendale. Does it fall within the second? 248 If the question is to be answered by reference to what Wenzhou and Shell should reasonably be supposed to have had in their contemplation on 27 March 2006, the answer must be "no". Undoubtedly, they knew that Wenzhou, the landlord, had contracted to sell the reversion to Mr Assafiri. There is no evidence to show that Shell was aware of the terms of that contract. Such knowledge as they had of Mr Assafiri's intentions, with regard to the land, might have suggested to them that he would once again use it as a car sales yard. Certainly, his communications with Wenzhou, and through Wenzhou to Shell, so suggested, as did other steps taken by him. In circumstances where Mr Assafiri had not contracted to on-sell the land as at 27 March 2006, it is difficult to see why it should have been within the reasonable contemplation of Wenzhou and Shell, as at that date, that he might do so in the future. 249 As I have said, Mr Corsaro relied on cl 14.1 of the 2006 lease to show that the parties had within their contemplation a possible future sale of the reversion. That, I think, is putting far too much weight on cl 14.1. Undoubtedly, it shows that the parties foresaw, or contemplated, that there might be a sale of the reversion during the term of the 2006 lease. But the second limb of Hadley v Baxendale requires more than foreseeability. It requires, as Lord Reid said, either that the defendant should, or the reasonable person in his place would, have had in contemplation loss of the kind suffered. I accept, as McHugh JA said in Alexander, that what is required is contemplation of the general nature of loss or damage and the general manner of its occurrence, rather than the precise chain of causation. But it is still necessary to show more than foreseeability; and in my view, cl 14.1 does no more than establish foreseeability. 250 To bring the matter whin the second limb of the test in Hadley v Baxendale, it would be necessary to show, not only that the parties should reasonably have had in their contemplation the probability of a sale of the reversion during the term of the 2006 lease, but also that such a sale would have been undertaken on the faith, or in the expectation of performance, of Shell's promise in cl 13.2(d). In the present case, there is no basis for thinking that the parties should reasonably have had in their contemplation that Mr Assafiri would on-sell the land, let alone that he would do so in terms that picked up (or sought to pick up) and rely on Shell's obligations under para (d). 251 For essentially the same reasons, the position is no different if the case of causation, in relation to the loss of the benefit of the Global contract, is based on paras (b) and (c) as well as of para (d). 252 I conclude that Mr Assafiri is not entitled to damages for loss of the benefit of the Global contract. 253 If I were wrong in this, I would assess the value of the lost benefit at $1,515,744.00, for the reasons given at [88] above, and make allowance for the present value of the land, $1,300,000.00. Mr Assafiri cannot have damages for loss of the benefit of the sale without bringing to account the value of the asset that he still holds. Of course, if the highest and best use of the land were for residential purposes, so that its value should be taken to be $890,000.00, this would be the amount to be allowed to offset the value of the loss of the benefit of a Global sale. Since Mr Windred's assessment of the value of the lost benefit takes into account selling costs, the amount of $890,000.00 would need to be adjusted by deducting an amount for selling costs, calculated in the same way. Alternative claim: cost of demolition and removal of improvements, and of any further remediation required 254 It is convenient to deal with these matters together. Shell accepts that it did not remove certain improvements, and that it is liable for the reasonable cost of their removal. There is a dispute as to the proper cost of doing so, and as to an alleged failure to mitigate. 255 Before I deal with those matters, I should note that Shell does not suggest that its liability, for the proper cost of demolition and removal, is diminished because of Mr Assafiri's assertion, at one point in time, that he wanted the improvements to remain. 256 The dispute as to quantum is between Mr Kariotoglou and Mr Harwood. Mr Kariotoglou asserts that the cost of demolition and removal is about $85,000.00. Mr Harwood said that the cost would be "half" that amount. The attack on Mr Kariotoglou's figure was supported by his concession that the figure had been one which he did not assess himself, but which Mr Assafiri had given him (T150.27-.49). However, there was in evidence a quotation for the work from a company known as Front Force Demolition and Excavation Pty Limited, dated 16 November 2007. The quotation, for the demolition, excavation and removal of all improvements, was for $126,000.00 plus GST. It was given on the basis that the excavated material would be classified as "Virgin Excavated Natural Material"; presumably, if the material were contaminated, the cost would be higher. 257 In those circumstances, the figure given to and accepted by Mr Kariotoglou of $85,000.00 seems to be conservative rather than excessive. 258 The issue as to mitigation is that Mr Assafiri should only be entitled to the cost of demolition and removal as at the time of Shell's breach, not the current cost. However, as I have just said, the quotation in evidence (for substantially more than the amount of the claim) was dated 16 November 2007, or about 2 ½ months after Shell furnished Mr Assafiri with the URS report. Given that Shell, after the termination of the 2006 lease, worked spasmodically on the site until August 2007, Mr Assafiri can hardly be criticised for not himself having attended to demolition and removal of the improvements before that time. Even if there were some increase in costs from August to November 2007, the disparity of $41,000.00 between the amount of the claim and the amount of the quotation suggests that the amount claimed is not unreasonable, and has not been inflated by the passage of time. 259 For the reasons that I have given, I do not regard Mr Harwood's evidence to the contrary as having any persuasive force. In my view, this aspect of the claim should be allowed, in the amount of $85,000.00. 260 The issues as to the cost of further remediation were in essence, whether it was necessary at all; whether, to the extent that it was necessary, some form of capping was sufficient; or whether, as Mr Kariotoglou proposed, it was necessary that the mode of remediation be in effect removal and disposal of all contaminated material, and the importation and placement of clean fill. Mr Harwood accepted that if it were necessary for the land to be given a clean bill of environmental health (my words, not his), then in general Mr Kariotoglou's approach to remediation was appropriate (T423.14-.43). 261 Mr Kariotoglou's estimate of remediation costs was, as amended by him following his conclave with Mr Harwood, in the range $1,110,000.00 to $1,130,000.00 (as stated in their joint report). I am satisfied, based on Mr Kariotoglou's evidence in cross-examination, that this estimate included some double counting (in relation to management and supervision). I am satisfied also that, as Mr Kariotoglou effectively conceded in cross-examination, he overstated the quantity of material that should be removed and replaced. It should also be noted that his estimate included the amount just discussed, of $85,000.00 for demolition and removal of Shell's remaining "improvements". 262 Leaving aside that last amount, I formed the view that Mr Kariotoglou's revised estimate overstated three amounts, because of internal overlaps in his break-up of his costings. The first of those areas of overlap relates to management. The revised estimate included a figure of $56,000.00 (item (b), relating to remediation management). Some of the work in that appeared to overlap with a subsequent item of Mr Kariotoglou's costing (item (p), relating to "environmental field work", in the sum of $103,360.00). It is difficult to be precise, and the task of estimating the proper amount to be allowed is not assisted by the fact that, here as elsewhere, I do not find Mr Harwood's evidence persuasive. The total of those two items is, in round figures, $160,000.00. In my view, it would be appropriate to reduce that total by $30,000.00. I accept that it is not possible to give a detailed justification of the amount of this reduction. It is based on my view that there is some degree of overlap. 263 The other area where there appears to be some degree of overlap is Mr Kariotoglou's allowance of $45,000.00 for a validation report (item (q)). Again, this seems to me to be an over-estimate given the allowance for preparation of a remedial action plan, the allowance for remediation management (which I acknowledge has just been reduced) and the allowance for environmental field work. In my view, the overlap requires a reduction of the order of $20,000.00. Again, I accept, it is not possible to give a detailed justification of this conclusion. 264 The remaining area is somewhat more clear-cut. Mr Kariotoglou allowed for the disposal of 2,815 tonnes of contaminated material at a unit rate of $135.00 per tonne. He conceded in cross-examination that his estimate included the removal of material which was not contaminated, and that it could be refined. The total "refinement" was of the order of 498 cubic metres, although, as Mr Kariotoglou said, if the removal of material were to be refined in this way, there would be an additional cost involved in ensuring that contaminated material was not left onsite. The arithmetic consequence of reducing Mr Kariotoglou's figure, of $464,475.00, for removing and disposing and disposing of contaminated material, by taking out 498 cubic metres is that it should be reduced to $382,305.00. Allowing some amount for extra supervision, and accepting that the process is not exact, I think that justice would be done between the parties if the item were reduced by $80,000.00, which takes account of both the reduction in material removed and the need for some additional supervision. 265 Those adjustments require a reduction, in Mr Kariotoglou's revised estimate for further remediation, in the amount of $130,000.00. If one applies that reduction to the mid point of his range (as I have said, in round figures, the range was $1,110,000.00 to $1,130,000.00), one comes to an allowance of $990,000.00 for further remediation. I repeat that this includes Mr Kariotoglou's allowance of $85,000.00 for demolition and removal of those "improvements" that Shell left on site. The claim for loss of rental 266 The claim for loss of rental was put on the basis that it represented, in effect, the opportunity cost of not being able to put the land to use because Shell's improvements had not been demolished and removed and the land had not been remediated. I accept, as Mr Lancaster submitted, that if damages were allowed for the loss of the benefit of the Global contract then no claim should be allowed for opportunity cost (or loss of rental). However, I have rejected the claim for damages representing the loss of the benefit of the Global contract. 267 Accordingly, in principle, Mr Assafiri is entitled to damages for his inability to put the site to productive use for some period of time, following the cessation of Shell's attempts at remediation. Clearly enough, Mr Assafiri was required, in the exercise of his obligation to mitigate his loss, to undertake that task himself. It was suggested that he was unable to do so, because of lack of funds. The parties did not address on the consequences of this, or, in particular, of the application of the reasoning of the House of Lords in Owners of Dredger Liesbosch v Owners of Steamship Edison [1933] AC 449. 268 In those circumstances, I think, the appropriate course is to allow a reasonable (or notional) period for Mr Assafiri to do that which Shell should have done, and to allow damages for loss of use of the land during that period. 269 The evidence is somewhat sparse. However, one can infer, from the terms of the 1996 lease, that Wenzhou and Shell contemplated that it might take Shell 12 months to demolish its fixtures and remediate the land. That inference flows from the grant of the "Demolition Option Lease" in cl 13.4 of the 1996 lease. It was the exercise of that option which led to the grant of the 2006 lease. 270 It could be said that Shell had undertaken some of the works required by cl 13.2 of the 2006 lease. However, Mr Assafiri was put in the position where not all of those works were carried out. Accordingly, he was required himself to undertake those works. One would think that it might take him a little longer than it would have taken Shell. In the circumstances, and taking a broad brush approach, I think that it is fair to allow some 12 months from the cessation of Shell's activities for loss of use of the land. Thus, Mr Assafiri is entitled to an amount for loss of use of the land from 27 March 2007 (when Shell yielded up the land) until 31 August 2008 (calculated from the date when Shell provided Mr Assafiri with the URS report, in purported satisfaction of its obligations under cl 13.2(d) of the 2006 lease). That is a period, rounded off to 27 August 2008, of some 17 months. 271 Mr Corsaro submitted that the value of the lost opportunity, or of loss of use, could be quantified by reference to a number of different benchmarks. He referred to the rent that might have been paid by Global had its sale proceeded to completion, had the building works been carried out and had it taken a lease as contemplated by the Global contract. Another benchmark to which Mr Corsaro pointed was the amount paid by Shell under the 2006 lease. To my mind, bearing in mind both the test in Hadley v Baxendale and the need to do some sort of rough justice between the parties, it is the latter benchmark that is appropriate. 272 Accordingly, Mr Assafiri is entitled to damages for loss of use of the land, or opportunity cost, at a rate equating to that payable had the 2006 lease continued according to its terms. That lease provided for an annual rent of $102,653.00, to be adjusted after the first 12 months of the lease by not less than 103% and not more than 106%. Using the approximate midpoint of that range of adjustments leads to a monthly rent, for the notional second year of the lease, of $8,940.00. Mr Assafiri is thus entitled to damages for lost rent, or opportunity cost, of $151,980.00, less the amounts actually paid by Shell whilst it was in occupation of the land after 26 March 2007. Mitigation 273 That leaves the issue of mitigation. As to loss of rental, or opportunity cost, that is dealt with by my allowance of damages for a reasonable period within which Mr Assafiri should have carried out the works left undone by Shell. As to Mr Kariotoglou's costs for further remediation (as adjusted by him following the joint conference with Mr Harwood and as further adjusted by me), the figures appear to be based on an estimate prepared by Mr Kariotoglou as at the date of his primary report, 27 May 2009. On the basis of my conclusion that it is reasonable to assume that Mr Assafiri completed the outstanding works within 12 months after August 2007, there may be an element of over-allowance in allowing the cost of further remediation at May 2009 rates (which would involve some degree of inflation from August 2007). However, I think, this can be dealt with by adjusting the basis on which interest on damages should be paid. 274 In relation to the amount for demolition and remediation ($990,000.00), I note that Mr Assafiri has undertaken some of the works required. Interest should be allowed, at the rate from time to time applicable under UCPR Schedule 5, on those amounts that Mr Assafiri paid, from the date or dates of payment. As to the balance (i.e., the amount of $990,000.00 found by me less the total of the amounts actually paid by Mr Assafiri to date), interest should run from 27 May 2009. 275 In respect of the damages for lost opportunity, interest should run from the notional dates for payable of each instalment of rental (of course, allowing for amounts actually paid). Conclusions and orders 276 Mr Assafiri is entitled to damages for misleading or deceptive conduct and breach of contract, calculated in the manner set out at [217], [265] and [272] above. 277 I make the following orders:

Assafiri v The Shell Company of Australia Limited

At a glance

Court

Decision date

Before

Source

Judgment (167 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (5)

Cited By (2)