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: