Caltex Australia Petroleum Pty Ltd v Charben Haulage Pty Ltd

THE CALTEX SERVICE STATION SITE AT KILLARA 1 These two appeals arise out of the purchase by Charben Haulage Pty Limited ('Charben'), the first respondent in each appeal, of two adjoining parcels of land in Killara, NSW, known as 692B and 694 Pacific Highway (together referred to as 'the Site'). The parcel known as 692B Pacific Highway ('Lot U') was owned by the appellant in the first appeal, Caltex Petroleum Pty Limited ('Caltex'). The parcel known as 694 Pacific Highway ('Lot T') was owned by Paul Ward-Harvey and David Clifton Ford ('the Lessors') and was the subject of a lease to Caltex. Caltex conducted a service station on Lot U and used a workshop erected on Lot T in connection with the service station. Charben complained that the Site was affected by hydrocarbon pollution consequent upon use over many years as a service station and workshop and that, after purchase, it incurred substantial cost and expense in remediating the Site, so that it could be used for commercial and residential purposes. 2 In early 1997, Caltex decided to close the service station and sell Lot U. Pending the closure and sale, a further lease of Lot T was granted to Caltex ('the Lease'). The Lease was for a term of seven months and one day expiring on 31 May 1998. The Lease imposed environmental obligations on Caltex in the following terms: '22.3 (a) As soon as is reasonably practicable after the date of this lease and on the expiration or sooner determination of this lease the Tenant must at its own expense provide the Landlord with an Environmental Audit Report ("Report"). (b) The Report must: (i) identify all environmental damage, contamination, pollution and breaches of any relevant legislation arising out of or in any way connected with the Tenant's use and occupation of the premises at any time; and (ii) specify a remedial programme in respect of any environmental damage, contamination, pollution or breach. (c) The Tenant must take all necessary steps to ensure that the remedial programme is put into effect at the cost of the Tenant. 22.4 (a) The Tenant must at the Tenant's expense provide the Landlord with a Validation Report after the remedial programme has been completed. The Validation Report must be prepared by an independent consultant approved by the Landlord who is experienced in the preparation of Validation Reports. (b) The Validation Report must certify that the remedial programme set out in the Report has been complied with to a standard acceptable to the Landlord. 22.5 The Tenant indemnifies and agrees to keep the Landlord indemnified against all claims, demands, damages, fines, expenses, clean-up notices and liability of any kind relating to environmental damage, contamination and pollution for which the Landlord may be or become liable during the Term or after the expiration or sooner determination of this lease, and resulting from any act, matter or thing occurring during the Tenant's use or occupation of the premises.' 3 On 19 March 1998, Emil Ford & Co ('Emil Ford'), the Lessors' solicitors, requested Caltex to provide an Environmental Audit Report pursuant to the Lease. On 7 April 1998, Caltex approached the appellant in the second appeal, Environmental and Earth Sciences Pty Limited ('EES'), for a quote for performing an environmental assessment of Lot T. On 15 April 1998, EES provided Caltex with a proposal for such work. The proposal noted that the work was 'to specifically investigate the quality of the soil and groundwater (if encountered) within the property'. Bores were to be dug to depths of two to four metres 'or drillrig refusal', and other methods of detection were to be undertaken. The proposal also said that EES would advise if remedial action was required due to any migration of contamination offsite. 4 EES provided a report to Caltex on 19 May 1998 ('Report 19844'). A copy of Report 19844 was provided to Emil Ford, who complained about its failure to specify a remedial program in respect of petroleum hydrocarbon contamination that had been discovered by EES. Emil Ford required the contaminated area to be remediated. 5 On 27 July 1998, Ku-ring-gai Municipal Council ('the Council') granted permission to Caltex, subject to certain conditions, to remove from Lot U underground storage tanks that had been used to store petroleum products. Those conditions included that Caltex undertake testing to determine the level of soil contamination and the extent of remediation works required and to submit a report to the Council. Upon completion of the decontamination, a final report prepared by an accredited site auditor was to be submitted to the Council. 6 Removal of underground storage tanks from Lot U took place in July 1998. In August 1998, underground storage tanks were removed from Lot T. 7 On 10 August 1998, EES presented to Caltex a proposal to carry out 'validation' and partial supervision of remediation of the Site. On 13 August 1998, Mr Simon Caples of Caltex instructed Mr Philip Mulvey, the managing director of EES, to proceed with 'the decommissioning activities'. Work commenced almost immediately. On 19 October 1998, EES wrote to Caltex with a proposal for the removal of contaminated soil from the rear of the workshop portion of Lot T and provision of a 'validation' report for Lot T. That proposal was accepted. 8 On 22 October 1998, the Council approved demolition of the service station on Lot U. On the same day, commercial waste was removed from the rear of the workshop on Lot T. However, complete removal of waste material was not possible because of possible undermining of embankments. 9 Emil Ford continued to press for an Environmental Audit Report pursuant to the Lease and, on 9 November 1998, EES produced a further report ('Report 19844B') under cover of a letter dated 9 November 1998. The letter advised that the tank excavation had been 'validated' according to the 'Guidelines for assessing service station sites - December 1994' ('the Guidelines') published by the Environmental Planning Authority of New South Wales ('the Authority'). The letter also said that 'Validation of the site was undertaken in accordance with current industrial/commercial guidelines in keeping with the property's current zoning'. 10 Report 19844B related only to Lot T. Its introduction noted that a potential existed for hydrocarbon impacts, due to the workshop activities and the presence of two underground storage tanks used in connection with the service station on Lot U. The objective to be achieved was stated to be to 'validate the site after remediation to confirm the site is suitable for industrial usage'. Work done to meet that objective was said to include the following: '• validation of tank pit excavation after removal of [underground storage tanks]; • validation of material used to backfill the tank pit excavation; • removal of contaminated fill material identified at the rear of the leased site; • validate excavation at rear of leased site; and • provide a report to [Caltex], which includes validation sample locations, laboratory results and a summary of works undertaken.'

11 In relation to 'hydrogeology', Report 19844B stated that 'Any groundwater encountered during the study was interface drainage, between the soil and weathered shale horizons'. Report 19844B went on to describe the removal of the tanks and the contaminated soil associated with them, which had been removed to, and treated on, the adjoining service station site. Additionally it was said that, upon removal of the tanks, some sand was found to be wet due to water trapped in the tank pits or interface drainage between the backfill sand and natural soil profile. This was said to have no odour or visible sheen to suggest any hydrocarbon impact. 12 Report 19844B also stated that EES had used the Guidelines. After describing the sampling strategy undertaken in accordance with the Guidelines, Report 19844B went on: 'Groundwater and/or interface drainage was not encountered during validation sampling except in the tank pit thus relevant groundwater criteria have not been consulted.' The test samples and laboratory results were then gone into in some detail. 13 In the part of Report 19844B headed 'CONCLUSION' the following appeared: 'Remedial works undertaken on the leased portion of the site at 692 Pacific Highway, Killara, Sydney, included the removal of a 10000 L unleaded petrol UST and a 14000 L premium unleaded petrol UST, validation of the tank excavation, removal of heavy metal contaminated insitu fill material from behind the work shop, validation of the excavation and validation of the site. The laboratory results for TPH and BTEX confirm that the tank void was validated according to the NSW EPA Guidelines for assessing service station sites - December 1994 and the area is now suitable for any landuse. Statistical analysis of lead confirms this, while all organic analyses [sic] were below the instruments [sic] levels of detection. Removal of insitu contaminated fill material has been undertaken as far as the site allows, without undermining of the trees and embankment. An area between two and five metres wide on the western boundary of the site, (less than 50 m3 in volume) remains where the fill could not be removed because of mature trees. For complete removal of the soil some large trees would have to be felled and a retainer fence would need to be temporarily erected to contain dislodged boulders. Despite containing elevated levels of metals, the fill material currently does not pose a threat to neighbouring sites as it is [sic] comprises a low volume and is held in place by the tree roots of trees which are quite healthy. If the site is to be demolished it is recommended at this time that the surface material on the western boundary of the site is removed with the appropriate controls stabilisation and safety controls in place. The site is safe for current use.' 14 On 19 November 1998, Caltex's solicitors provided a copy of Report 19844B to Emil Ford.

PURCHASE OF THE SITE BY CHARBEN 15 Caltex retained two firms of real estate agents to act jointly in connection with the sale of Lot U. The Lessors also instructed those agents in connection with the sale of Lot T. The agents were thereby able to offer the two parcels together in a single line. 16 Mr Dimitrios ('Jim') and Mrs Victoria ('Vicky') Janakis became interested in purchasing the Site for the purpose of undertaking a new development on it. Neither of them had previous experience in property development. However, Vicky Janakis was the daughter of Mr Steven ('Steve') Paradisis, who had had extensive property development experience, acting through a company called Caldas Holdings Pty Ltd ('Caldas'). Steve Paradisis operated Caldas with his son, Theodore ('Theo') Paradisis, a licensed builder. Steve Paradisis made most of the commercial decisions and Theo Paradisis was responsible for organising building work. 17 Steve Paradisis, acting on behalf of Jim and Vicky Janakis, first became aware that the Site was for sale in October 1998. He subsequently negotiated the purchase of the Site for a total purchase price of $1,100,000. Steve Paradisis instructed his own solicitor, Mr Barry Beilby of Beilby Poulden & Costello, to act on behalf of Jim and Vicky Janakis in connection with the purchase. Mr Beilby suggested that they should acquire the Site in the name of a company controlled by them. Charben was incorporated, or acquired, for that purpose. 18 On 27 November 1998, Emil Ford sent to Mr Beilby a copy of the page of Report 19844B headed 'CONCLUSION'. Shortly afterwards, Jim and Vicky Janakis attended Mr Beilby's office, when Mr Beilby informed them that it was safe to sign and exchange contracts for the sale of Lot T 'because of the information we were given about the state of the land'. 19 On 27 November 1998, a contract for the sale of Lot T for a purchase price of $400,000 was entered into between the Lessors, as vendors, and Charben, as purchaser ('the Lot T Contract'). The Lot T Contract contained a certificate under the Environmental Planning and Assessment Act 1979 (NSW), which showed the zoning of Lot T to be 'BUSINESS 3(a) - (A2) RETAIL SERVICES'. No use was permitted without development consent. Some purposes were prohibited altogether. Thus, dwelling houses were prohibited in that zone, except those used in accordance with purposes permitted in the zone. Residential unit buildings and commercial uses were permissible, with the Council's consent. 20 The Lot T Contract contained eight special conditions, including acknowledgments by Charben that Lot U had been used for the storage and dispensing of petroleum products, that the Lessors made no warranty that Lot T was free from environmental pollution and that Charben accepted Lot T as described in the special conditions. Paragraphs (a) to (c) of special condition 8 were as set out in Schedule 1 to these reasons. The Caltex Contract also contained a certificate from the Council showing that the zoning of Lot U was the same as Lot T. 21 Allen Allen & Hemsley ('Allens') acted for Caltex in connection with the sale of Lot U. On 4 December 1998, a contract for the sale of Lot U for a purchase price of $700,000 was entered into between Caltex, as vendor, and Charben, as purchaser ('the Caltex Contract'). The Caltex Contract contained a number of special conditions dealing with contamination of Lot U, including clauses 43 and 44. Those clauses were as set out in Schedule 2 to these reasons. 22 After the Caltex Contract was entered into, work by EES on Lot U continued under the supervision of Ms Tracy Leanne Bauer. On 16 February 1999, Allens informed Mr Beilby of their instructions that all underground tanks had been removed from the Site and that Caltex expected remediation works to be completed earlier than 15 April 1999, the date for completion referred to in clause 44.7(a) of the Caltex Contract. 23 Charben retained Balmain NB Commercial Mortgages Limited ('Balmain NB') to arrange finance for the purchase of the Site. On 19 February 1999, Balmain NB wrote to GIO Finance seeking an advance in the sum of $1 million, to be secured by way of first mortgages over the Site and over the home of Jim and Vicky Janakis at Belrose. The covering letter relevantly said: 'The site was previously used as a motor vehicle station, with adjoining associated workshop. The vendor of the larger site, [Caltex] will undertake full remediation of the site prior to settlement of the sale contract. The adjacent site has been sold by private interests and contains a brick workshop building which the applicant is going to demolish.' 24 In the enclosed proposal for finance, reference was made to the fact that, under the Caltex Contract, Caltex would provide Charben with an environmental report 'Which will confirm the property may be used for [Charben's] proposed use which [Charben] acknowledges shall be in accordance with the purposes and uses permitted by the present zoning of the property'. 25 It appears that the proposed financier required a contamination assessment of the Site. By no later than 1 March 1999, Geotechnique Pty Limited ('Geotechnique') had been instructed by Steve Paradisis to carry out an investigation of the Site. Some form of examination of the site was carried out by Geotechnique on 2 March 1999. On 9 March 1999, Mr Beilby wrote to Geotechnique, asking for their report as soon as possible 'as our client is leaving for overseas'. Thus, it is clear that in March 1999, Mr Beilby was aware that an investigation of the Site was being conducted by Geotechnique. 26 On 15 March 1999, Mr Beilby wrote to Emil Ford enquiring whether the Lessors would extend the settlement date for the Lot T Contract to 31 July 1999, on the basis that Charben would pay interest on the outstanding balance of the purchase price. That letter may have crossed with a letter from Emil Ford, of the same date, noting that settlement was due on 15 April 1999 and requesting the transfer, as a matter of urgency, so that it could be signed prior to the departure of one of the Lessors overseas. 27 An internal memorandum of GIO Finance, of 16 March 1999, refers to a letter from Balmain NB requesting a split settlement for the proposed loan to Charben. The reason given was that Charben wished to purchase Lot T, but would not be receiving an environmental report for two months. The internal memorandum said that an amount of $400,000 was requested to enable completion of the purchase of Lot T, on the security of the Belrose property. The internal memorandum referred to a 'Valuation Assessment where we require clear EPA report for the property at Killara (previous Caltex Service Station)… Once we receive the EPA report for Killara, we will advance the balance of funds. EPA report is expected in June 99.' 28 A copy of a report, prepared by Geotechnique, was sent to Steve Paradisis at his home on 16 March 1999 ('the Geotechnique Report'). In its covering letter to Mr Paradisis of 16 March 1999, Geotechnique said: 'The report provides a summary of soil sampling procedures, chemical analysis and an assessment of the contamination status of the site. Based on the results of the assessment, it is considered that the soils within the site do not pose a significant risk of hazard to human health or the environment under the proposed commercial development.' 29 The executive summary attached to the Geotechnique report contained the following statements: 'This summary presents the results of a preliminary contamination assessment, carried out at Lot T… The investigation was commissioned by Mr S Paradisis. It is understood that the proposed development will include office and retail space, occupying the bulk of the site area. There is also an option for residential units as part of the development. The purpose of this assessment is to determine whether the site may or not be contaminated. … Based on the results of the environmental assessment, it is concluded that the site, under the proposed development, does not pose a significant risk of hazard to the environment or human health and is therefore suitable for the proposed commercial development and the option of residential apartments. Should it be proposed to remove any of the existing fill materials located beneath the existing workshop, two options are available:

1. Re-use as filling on another industrial or commercial site. 2. Disposal at an EPA approved Landfill, following consent by the NSW EPA. …' [emphasis added] 30 In the body of the Geotechnique report, the following qualification appeared: 'Whilst this preliminary environmental site assessment has been thorough and in accordance with current acceptable guidelines and industry practice, the potential exists for contamination to be present between sampled locations. Should "suspect" materials be encountered during site preparation and construction, this office should be contacted for inspection, possible sampling and testing. Reference must be made to the "Environmental Notes" in Appendix E, which set out details of the limitations of this report.' 31 Appendix E of the Geotechnique Report relevantly said as follows: 'Although information provided by an environmental site assessment can reduce exposure to the risk of the presence of contamination, no environmental site assessment can eliminate the risk. Even a rigorous professional assessment may no [sic] detect all contamination within a site. Contaminants may be present in areas that were not surveyed or samples [sic], or may migrate to areas which did not show signs of contamination when sampled. Contaminant analysis cannot possibly cover every type of contaminant which may occur, only the most likely contaminants are screened. … Environmental site assessments are prepared in response to a specific scope of work required to meet the specific needs or [sic] specific individuals. an [sic] assessment prepared for a consulting civil engineer may not be adequate to a construction contractor or another consultant civil engineer. An assessment should not be used by other persons for any purpose, or by the client for a different purpose. No individual, other than the client, should apply an assessment, even for its intended purpose, without first conferring with the consultant. No person should apply an assessment for any purpose other than that originally contemplated, without first conferring with the consultant.' 32 Curiously, Steve Paradisis asserted in evidence that he had not seen the Geotechnique Report until the solicitors acting for Charben in the proceeding showed it to him, about ten months before the hearing began in May 2003. The primary judge accepted the evidence of Steve Paradisis that he did not read the Geotechnqiue Report in 1999. Jim Janakis denied all knowledge of the Geotechnqiue Report and Theo Paradisis gave no evidence about it. 33 However, Mr Beilby gave evidence that the finance company required a full auditor's report in relation to Lot T. He said that Geotechnique was the firm employed by Steve Paradisis for the purposes of carrying out that requirement. It was not until the Geotechnique report was received by the finance company that Charben was able to complete the purchase of Lot T. Completion of the purchase of Lot T took place on 15 April 1999. 34 In the meantime, Charben retained a firm of architects, Leffler Simes Pty Ltd ('Leffler Simes'), to advise it in relation to development of the Site. On 18 March 1999, Leffler Simes submitted to the Council a development application for a commercial development on the Site. The documents submitted with that application included a 'Statement of Environmental Effects' prepared by Leffler Simes. Under the heading 'Geotechnical & Archaeological' in that document, the following appeared: 'Old fuel tanks have been removed from the site and an E.P.A. Certification of the site will be gained prior to excavation activities.' 35 On 8 April 1999, the Council wrote to Leffler Simes. After referring to Charben's development application and the consent of the owners of Lot T and Lot U, the Council's letter said, relevantly, as follows: 'The development site includes both the ex-service station site and the workshop site. Both properties are potentially contaminated land under the provisions of Part 7A of the Environmental Planning and Assessment Act 1979. It is noted that remediation works are in progress at the service station site. The main purpose of this correspondence is to request that 3 copies of the report into the potential contamination of the workshop site and any remediation required, to make the site suitable for the proposed use, be provided to the Council to enable an assessment to be made under the provisions of Part 7A of the Act. You are requested to advise of the progress of the remediation of the service station site and the likely completion date of the works.' [Emphasis added] 36 On 19 April 1999, Leffler Simes responded to the Council's request of 8 April 1999, relevantly saying: '1. Workshop site. Attached for your information and records are three copies of the Environmental Site Assessment Report for the workshop site as requested. The main conclusion of the report is that no remediation works are required to the site. 2. Service station site. As noted in your letter, the remediation of the service station site is proceeding. The work is due to be completed in about eight weeks.' The parties were unable to identify to the Court with certainty 'the report into the potential contamination of the workshop site and any remediation required' referred to in the Council's letter of 8 April 1999. The primary judge assumed that the Council was referring to Report 19844B. However, that seems unlikely, since there is no reason to think that Leffler Simes would have had access to Report 19844B. Mr Beilby had only received a copy of the page containing the Conclusion to Report 19844B. It is more probable that it was the Geotechnique Report. 37 Remediation work was still continuing on Lot U at the time when completion of the purchase of Lot T took place. On 16 August 1999, Ms Bauer responded to an enquiry by Mr Caples by saying that EES was '˝ way' through the job. 38 On 11 February 2000, EES provided a third report to Caltex ('Report 19844C'). Report 19844C related solely to Lot U. The covering letter, addressed to Caltex, dated 11 February 2000, stated that the 'tank excavations have been validated according to [the Guidelines]'. It also said that validation 'was undertaken in accordance with the proposed residential guidelines'. 39 The 'INTRODUCTION' to Report 19844C noted that Lot U was being sold and was to be redeveloped for residential purposes. The section of Report 19844C headed 'OBJECTIVES' stated that the objective to be achieved during the remediation process was 'to validate the site to confirm it is suitable for the proposed residential usage'. Work undertaken to meet the objective was said to include the following:

• validation of tank pit excavations and piping excavations after removal of USTs and associated pipework;
• validation of material used to backfill excavation (both imported fill and bio-remediated soils);
• validation of the site as a whole; and
• provision of a validation report. 40 In the section of Report 19844C headed 'DISCUSSION', it was explained that samples had been collected from the floor and walls of the excavations after the removal of the underground tanks and they had been analysed to confirm that hydrocarbons had not impacted the surrounding soil. Validation samples were collected to assess whether any migration of contaminants had occurred to the rest of Lot U from the tankpit area. All hydrocarbons and lead levels tested were found to be non-detectable or below the Guidelines. It said that 'groundwater and/or interface drainage' was not encountered during validation sampling and that, therefore, groundwater criteria were not consulted. 41 The 'CONCLUSION' to Report 19844C was in the following terms: 'Remedial works undertaken on 692B Pacific Highway, Killara, Sydney, included the removal of fourteen USTs and associated fixtures, validation of the excavations, removal of heavy metal contaminated fill material and validation of the site. All known primary sources of hydrocarbon contamination including 14 USTs and associated pipework have been removed from the site. Organic laboratory results for TPH, BTEX, PAH, phenols and inorganic results for lead, confirm that the USTs and pipeline excavations have been validated according to the NSW EPA (1994) - Threshold concentrations for sensitive land use - soilsgiven in the NSW EPA (1994) - Guidelines for assessing service station sites. Validation analysis of bioremediated backfill shows that all TPH, BTEX, lead and other heavy metals are below the above mentioned guidelines. The laboratory results for TPH, BTEX, PAH, phenols, and lead on samples collected from boreholes and validation samples covering the remainder of the site confirm that the subsurface soils have been validated according to the NSW EPA (1995) - Sampling design guidelines and were below the values given in the NSW EPA (1994) - Threshold concentrations for sensitive land use - soils given in the (1994) - Guidelines for assessing service station sites (Table 4). Given the above, validation results for potential contaminants associated with a former service station site, show that this site is suitable for residential landuse in accordance with the relevant guidelines.' [Emphasis added] 42 On 14 February 2000, Allens forwarded a complete copy of Report 19844C to Mr Beilby. The covering letter pointed out that completion of the Caltex Contract was due to take place on or before 29 February 2000. After receiving a copy of Report 19844C from Allens, Mr Beilby telephoned Steve Paradisis, who went to Mr Beilby's office. Mr Beilby read extracts from Report 19844C to Steve Paradisis and told him that it concluded, so far as he could see, that the Site was clean. Steve Paradisis relayed that information to Jim and Vicky Janakis, who agreed that Charben should complete the Caltex Contract. After some dispute between the solicitors as to the date for completion, the Caltex Contract was completed on 16 March 2000.

DEVELOPMENT OF THE SITE BY CHARBEN 43 At about the time of completion of the Caltex Contract, Steve Paradisis retained the services of Prominent Projects Pty Limited ('Prominent') to assist in the proposed development of the Site. Subsequently, Prominent, through Mr Peter Taylor, recommended the employment of HLA Envirosciences Pty Limted ('HLA'). The managing director of HLA, Mr Christopher Kidd, was a site auditor accredited by the Authority. 44 On 10 April 2000, the Council notified Leffler Simes of the outstanding obligation, on the part of Caltex, to provide a report to it from an accredited site auditor with respect to the remediation of Lot U. As indicated above, the provision of such a report and site remediation had been a condition of the Council's approval for removal of the tanks. The Council had rejected Report 19844C, because the person who certified it was not a site auditor approved by the Authority. Mr Beilby advised Allens and requested that Report 19844C be amended to comply with the Council's requirement. Caltex declined to do so. 45 In May 2000, HLA sent facsimile communications to EES requesting clarification of aspects of its reports. On 15 May 2000, EES responded, through Ms Bauer, saying that EES 'would be happy to provide information and assistance relevant to these reports'but could not do so until EES was commissioned by Caltex to undertake the work. A copy of that response was sent to Mr Caples. 46 On 30 May 2000, Ms Bauer, on behalf of EES, sent a facsimile transmission to Steve Paradisis at Charben. The facsimile relevantly said: 'I have spoken briefly to Simon Caples at [Caltex] regarding your previous discussions with me… He has been provided with a copy of the questions from the Auditor and has provided approval for [EES] to answer these where possible and pertinent. [EES] undertook the work according to a brief set with Caltex, which did not involve an Auditor in the investigation or remediation process. We will provide information and answers to the queries put forward as long as you return this letter signed, agreeing that the indemnity in the contract of sale covering Caltex and their consultants undertaking environmental work on the site prior to sale still abides. Should the Auditor require additional work to meet the brief of the Auditor then this work will be the responsibility of the current owner, not that of Caltex. It will take approximately 6 hours of time to answer the Auditor's queries at a cost of $480… If you agree with the costs above and that the indemnity clause still holds, [EES] can have the answers to the Auditor by Thursday 1 June 2000. …' On 31 May 2000, Steve Paradisis sent a copy of that facsimile to EES endorsed with his acknowledgement and agreement to the above. EES subsequently provided a response to HLA's enquiries. 47 In the meantime, on 23 May 2000, the Council granted Charben's application for commercial development of the Site. However, the approval was subject to a condition that the consent was not to operate 'until evidence of the decontamination of the site is submitted to the satisfaction of the Acting Director Environment and Regulatory Services and any additional conditions that may arise as a result of consideration of relevant reports'. 48 On 21 June 2000, HLA sent to Prominent a draft site audit report, prepared by Mr Kidd. It identified a number of deficiencies in the work done by EES. Mr Kidd said that additional validation works were required to confirm the contamination status of the Site, which he said could be conducted either prior to the commencement of development earthworks or during the course of the earthworks. 49 Steve Paradisis retained Geotechnique to prepare a remediation action plan. A draft remediation action plan was sent to Mr Kidd. Mr Kidd commented on the draft and a copy was provided to the Council. On 9 August 2000, and on the basis of the draft remediation action plan, the Council gave its consent for demolition and construction of earthworks to proceed on the Site. However, the Council emphasised that it would not issue a construction certificate, permitting construction of a new building, until it received a site audit statement saying that the Site was suitable for the proposed land use. 50 Caldas was engaged to manage site operations on behalf of Charben. Theo Paradisis acted on behalf of Caldas. A contractor engaged by Caldas demolished the buildings on the Site. 51 On 6 September 2000, Geotechnique issued a revised remediation action plan that took account of Mr Kidd's comments on the draft. Mr Kidd approved the approach provided for in the revised remediation action plan and agreed that excavation of the Site could proceed. The system of work required by Mr Kidd was adopted. Progress was slow and excavation extended over several months. 52 On 6 November 2000, Mr Kidd carried out an inspection of the Site. He noted strong hydrocarbon odours and recommended that Caldas obtain advice from Geotechnique about additional testing, remediation excavation and stockpile options. Geotechnqiue carried out further testing, which showed that contamination in some locations exceeded acceptable limits. Geotechnique recommended additional aeration of the stockpile. 53 On 18 January 2001, Geotechnique informed Theo Paradisis that the Site was suitable for the proposed commercial development and said that a validation report was being prepared and would be sent to Mr Kidd. A validation report was issued on 22 January 2001. That led a delegate of the Council to issue a construction certificate for a new building on 25 January 2001. Caldas immediately poured a large concrete slab at the back of the Site, which was intended to be the lower level car park floor for the proposed development. 54 However, on 30 January 2001, Mr Kidd inspected the Site, in company with Theo Pradisis. Mr Kidd was dissatisfied. Accordingly, he directed additional investigation, including testing of groundwater below the relevant part of the Site. Geotechnique undertook further tests required by Mr Kidd and reported to him on 7 February 2001. Mr Kidd passed Geotechnique's results on to Theo Paradisis, with a direction that the area of contamination be delineated and an assessment be made of the offsite migration of the contamination in both soil and groundwater. He required preparation of a new remediation action plan in relation to that work. 55 Thereafter, further consultants were retained to advise in connection with the contamination and remediation of the Site. Ultimately, a bioventing system was installed on the Site in accordance with designs provided by those consultants. Installation of the bioventing system took about six weeks. Construction work resumed in early May 2001 and by August 2001 the roof structure for the proposed new building was in place. 56 On 13 August 2001, the Council commenced a proceeding in the Land and Environment Court of New South Wales, seeking to restrain construction work on the Site on the basis that the work was not permitted until all contamination had been remediated and the Site had been validated by an accredited site auditor. Construction work was suspended for another seven months while a validation certificate was obtained. On 26 March 2002, HLA certified the Site to be suitable for the proposed commercial land use. Construction work recommenced in April 2002 and the new building was completed early in August 2002. An occupancy certificate was issued by the Council on 9 August 2002.

THE PROCEEDING BEFORE THE PRIMARY JUDGE 57 The proceeding in the Federal Court was instituted on 28 June 2002. Charben's claims were spelled out in a further amended statement of claim filed on 11 April 2003 ('the Statement of Claim'). In written submissions to the primary judge, counsel for Charben summarised the primary causes of action along the following lines:

• a claim against Caltex for breach of clause 44 of the Caltex Contract, in failing to carry out the Works, as defined in clause 44.2(a);
• a claim against both Caltex and EES for damages;
  • under the Trade Practices Act 1974 (Cth) ('the Trade Practices Act') for misleading conduct arising from the provision of the Conclusion from Report 19844B;
  • under the Trade Practices Act for misleading conduct arising from the provision of Report 19844C;
  • for negligent misstatement arising from the provision of Report 19844B and Report 19844C;
  • for negligence arising from the failure to take sufficient care in carrying out the remediation works on the Site. 58 Caltex filed a cross-claim against EES claiming indemnity for any liability it might have to Charben. Caltex also filed a cross-claim against Charben, seeking declarations as to the continuing effect of the indemnity in clause 44.4 of the Caltex Contract. 59 The primary judge rejected the claims against Caltex based on misleading conduct, negligent misstatement and negligence. However, his Honour found that Charben's claims against Caltex, based on breach of clause 44 of the Caltex Contract, and against EES, based on misleading conduct in relation to Report 19844B and Report 19844C were established. His Honour rejected the claims against EES based on negligent misstatement and negligence, but found EES liable on the basis of misleading conduct in relation to Report 19844B and Report 19844C. 60 The primary judge ordered judgment in favour of Charben against Caltex and EES in the sum of $2,147,800. His Honour also ordered judgment for Caltex against EES in the same amount on the cross-claim by Caltex against EES. While his Honour said that the cross-claim by Caltex against Charben should fail, his Honour did not make an order dismissing that cross-claim. The failure to do so appears to have been an oversight, although Charben has taken no steps to remedy the oversight. 61 Caltex and EES both appeal from the orders made by the primary judge. Charben relies on the notice of contention in the Caltex appeal, seeking to support the primary judge's orders against Caltex, on the basis of the claim for misleading conduct arising from the provision of Report 19844C and the Conclusion from Report 19884B. Charben also relies on the notice of contention in the EES appeal, seeking to support the primary judge's orders against EES on the basis of negligence in carrying out the remediation of the Site. Questions also arise on the appeals and notices of contention in relation to the quantification of damages.

THE CALTEX APPEAL 62 It is convenient to deal separately with the discrete questions raised by the Caltex Appeal, Charben's Notice of Contention and the cross-claim by Caltex against Charben.

CONCLUSIONS OF THE PRIMARY JUDGE ON BREACH OF CONTRACT 63 The primary judge found that EES did not reduce the level of petroleum hydrocarbon contamination of Lot U to a level that would permit its use for a combined residential/commercial building, or even for a wholly commercial building. His Honour concluded that the word 'cause' in clause 44.2(a) was of significance, meaning to produce or bring about a particular effect. His Honour considered that the obligation of Caltex under clause 44.2(a) was to produce the effect that its environmental consultant reduce the pollution level to the requisite degree, or to be the cause of that happening. His Honour considered that the clause required more than an ineffective instruction. 64 The primary judge rejected Caltex's reliance on clause 44.4(a). His Honour characterised the real question that arose under clause 44.4(a) as being whether it should be interpreted as a release from an action for breach of clause 44.2(a). While his Honour accepted that, read literally, clause 44.4(a) has that effect, it was necessary to read clause 44.2(a) in the context of the special conditions as a whole. 65 His Honour concluded that Charben's right to object to an unsatisfactory environmental report, under clause 44.5, was irrelevant; there was nothing wrong with the terms of Report 19844C, only with its accuracy and the sufficiency of the remediation works that were required to be undertaken under clause 44.2(a). His Honour accepted the submissions by Charben that Caltex had not remediated Lot U so as to permit the use of Lot U for Charben's proposed use without further remediation of the petroleum hydrocarbon pollution and that it followed that Caltex was in breach of clause 44.2 and was liable to Charben for damages for that breach.

CONSTRUCTION OF THE CALTEX CONTRACT 66 The Caltex Contract was not in any sense a contract of adhesion. Rather, it was the result of commercial negotiation between Allens and Mr Beilby. Mr Beilby requested amendments to the special conditions proposed by Allens and amendments were made, although not all of the amendments requested were accepted by Allens. It is clear that Charben accepted a degree of commercial risk in entering into the Caltex Contract. That is apparent from the terms of several of its clauses. 67 Clause 32(c) provided that Charben could not make a claim, objection or requisition or rescind or terminate in respect of any environmental hazard or contamination. Clause 43 then contained an acknowledgement of the previous use of Lot U. Charben acknowledged that it had inspected Lot U and was aware that it had been used for the storage and dispensing of petroleum products. By clause 43(b), it was provided that Caltex did not warrant or undertake that all petroleum equipment (as defined in 43(a)) had been removed or would be removed before completion. Under 43(d), Charben accepted Lot U as described in clause 43 and was not to make any requisition, objection, claim for compensation or other claim or delay completion or rescind or terminate in respect of any matter arising out of the matters set out in that clause. 68 Clause 44.1(a) provided that Caltex would remove all underground tanks, the existence of which was known to it or became known to it prior to completion. Clause 44.1(b) contained an express denial of any warranty or undertaking that all tanks would be removed. Once again, Charben accepted a commercial risk in that regard. Clause 44.1(d) picked up the same exception as is to be seen in 43(d), namely, that Charben was to accept Lot U as described and was not to make any claim or rescind or terminate in respect of any of the matters referred to in clause 44.1(a). 69 Clauses 32(c), 43(d) and 44.1(d) are all directed to the same end, namely, to eliminate any entitlement to rescind or terminate on the part of Charben by reason of the previous use of Lot U as a service station. The effect of clauses 32(c), 43(d) and 44.1(d) was that Charben was to be precluded from any right to rescind the Caltex Contract by reason of environmental hazard, contamination, the fact that Lot U had been used for the storage and dispensing of petroleum products or the fact that there might still be petroleum equipment left on Lot U. Those clauses indicate the acceptance of a commercial risk on the part of Charben. It is against the background of that acceptance of risk that clause 44 falls to be construed. 70 Clauses 44.2 and following are intended to alleviate, to some extent, the burden imposed upon Charben by clauses 32(c), 43(d) and 44.1(d). Nevertheless, clause 44.4 makes clear that, to the extent that any obligations were imposed upon Caltex prior to completion, those obligations were to be discharged from the date of completion. 71 Under clause 44.2(a), Caltex agreed to cause its environmental consultant to reduce the levels of petroleum hydrocarbon pollution to a level that would permit the use of Lot U for Charben's proposed use ('the Works'). Under clause 44.2(b), upon the completion of the Works, Caltex was to provide Charben with an environmental report from its environmental consultant that indicated that the Works had been completed. Under clause 44.2(c), completion was conditional upon completion of the Works and Caltex providing Charben with the environmental report referred to in 44.2(b). Section 44.4(a) then provided that, from completion, Caltex was to be released from all claims in respect of the Works, the Environmental Report or any contamination. 72 Under 44.5, if Charben was not satisfied that the report indicated that the Works had been completed, then it might so notify Caltex. Upon receipt of such notice, Caltex might either rescind or refer the environmental report to a certified contaminated site auditor, who was to determine whether the Works had been completed. That determination was to be final and binding on the parties. 73 The word 'indicates' in clauses 44.2(b) and 44.5 must be construed in the light of the scheme of clause 44 just outlined. It does not mean simply that the environmental report states in terms that the Works had been completed. It would not be sufficient to satisfy the condition in clause 44.2(c) for Caltex to provide a report that did no more than state that the Works had been completed. It required something more than that. Clause 44.5 would be otiose if the word 'indicates' simply meant 'states'. It must mean that the environmental report demonstrates on its face, in professional detail, in accordance with appropriate guidelines, that the levels of pollution have been reduced to the relevant level. 74 That involved describing what work has been done, such that a certified contaminated site auditor would be in a position to determine whether the Works had in fact been completed. Clause 44.5 did not contemplate a physical inspection of the Site, although it would have been possible. Rather, clause 44.5 contemplated no more than an examination of the environmental report by the certified contaminated site auditor. Thus, if the report did not indicate, in the relevant sense, that the Works had been completed, the auditor would make a determination to that effect. It would follow that Caltex had not, at that stage, discharged its obligation under clause 44.2(a). Accordingly, by reason of clause 44.2(c), it could not have enforced completion at that stage. 75 It may be that clause 44.3 would then come into play. Thus, if further work were required in order to produce a report that indicated, in the relevant sense, that the Works had been completed, Caltex may become aware that the cost of the Works would exceed $50,000. Charben would then have the option of agreeing to pay the excess or of running the risk that Caltex might rescind. If Charben was not prepared to bear the excess over $50,000, Caltex would have the option of either rescinding or carrying out the Works at its own expense and producing an environmental report that indicated, in the relevant sense, that the Works had been completed. In the latter case Caltex could then insist upon completion by Charben. 76 Those provisions indicate an intention that, following exchange of contracts, Caltex was to have the obligations imposed by clause 44.2(a), subject to clause 44.3, (which provided that Caltex could rescind if the cost of the Works exceeded $50,000). On the other hand, they also clearly indicate that, on completion of the Caltex Contract, Caltex could walk away without any further concern about contamination of Lot U. The obligations of Caltex under 44.2(a) were not intended to continue after completion. On the assumption that Report 19844C satisfied clause 44.2(b), Caltex discharged its obligation prior to completion and was entitled to rely on clause 44.4. 77 The clear intent of clause 44.2 was to impose upon Caltex an obligation to cause the Works to be carried out. However, clause 44 provided its own mechanism for determining whether Caltex had performed that obligation. That is to say, unless the challenge contemplated by clause 44.5 was triggered, the Environmental Report was to be determinative of whether Caltex had performed its obligation under clause 44.2. Even so, that obligation was to come to an end upon completion, as the release and the indemnity in clause 44.4 made abundantly clear. 78 Thus, clauses 44.1, 44.2, 44.3 and 44.5 had effect only so long as the Caltex Contract was executory. They are to be contrasted with clause 44.4, which provides for a release and discharge and an indemnity 'from the date of completion'. The parties evinced a clear and unequivocal intention that, once completion had occurred, Charben was to have no claim against Caltex in any way connected with the Works, the Environmental Report or any environmental contamination of Lot U. Further, Charben agreed to indemnify Caltex against any claims by third parties against Caltex as a result of the existence of any environmental contamination in Lot U. Charben agreed to accept the risk of such claims after completion. 79 That scheme indicates the extent of the respective risks that the parties negotiated for in relation to Lot U: Caltex accepted responsibility for the removal of any underground tanks, the existence of which was known to it prior to completion. That removal had to be carried out at the expense of Caltex, whatever that expense may be. Caltex was then to expend up to $50,000 in any necessary remediation work and to produce evidence, in the form of a report indicating, in the relevant sense, that it had carried out the remediation work. However, Caltex could not be compelled to expend more than $50,000 in the carrying out of remediation work. Charben, on the other hand, could not be compelled to complete the purchase of Lot U unless the remediation work was effected to reduce pollution to a level that would permit its use for Charben's proposed use. However, Charben could not compel Caltex to spend more than $50,000 on remediation work. If there was a dispute as to whether the remediation work had been successful, that dispute was to be resolved by the auditor under clause 44.5. 80 Caltex sold Lot U to Charben for $700,000, under a contract that purported to limit Caltex's liability for remediation to the sum of $50,000. It would be a curious result that Caltex is nevertheless liable to Charben for a sum in excess of $2.1 million for failing to remediate Lot U. That result flowed because the primary judge misconstrued clause 44. The effect of clause 44.4 was to discharge the obligation of Caltex under clause 44.2. His Honour erred in coming to a different conclusion.

CHARBEN'S CLAIM AGAINST CALTEX BASED ON THE EES REPORTS 81 Charben contended that Caltex, in effect, adopted Report 19844B and Report 19844C and must be taken to have made to Charben any representation contained in them. 82 The two Reports were clearly technical and were based on specific expertise. Caltex did not furnish any part of Report 19844B to Charben. It only furnished Report 19844C in performance of its obligation to provide an environmental report under clause 44.2(b). It did not adopt Report 19844C as its own. It clearly provided Report 19844C as a statement by EES, as its environmental consultant. 83 Each of Report 19844B and Report 19844C was printed on EES stationery and signed by EES personnel, as were their covering letters. There was no evidence, and nothing in either Report, to suggest that any Caltex representative played any part in their formulation. 84 Caltex passed on each Report to a firm of solicitors, under circumstances from which it may be inferred that Caltex would have expected the Report to reach any prospective purchaser. Nevertheless, nothing was said or done by Caltex that might reasonably have conveyed the impression that it was adopting the contents of either Report as its own statements. The primary judge concluded that neither Report constituted a representation made by Caltex, as distinct from a representation made by EES that Caltex passed on to another person in ignorance of its misleading nature. 85 Under the Lease, Caltex was obliged to furnish an environmental audit report and then take all necessary steps to ensure that a remedial program was put into effect. Report 19844B was provided by Caltex to the Lessors in order to discharge its obligations under the Lease. However, while Caltex commissioned Report 19844B, and gave directions from time to time about remediation work, a reader would understand that the statements in Report 19844B were assertions by EES, not by Caltex. 86 Similarly, Caltex furnished Report 19844C to Charben pursuant to its obligations under clause 44.2(b) of the Caltex Contract. Once again, while Caltex commissioned Report 19844C, and may have given directions from time to time about remediation work, a reader would understand that the statements in Report 19844C were assertions by EES and not statements by Caltex. 87 The primary judge found that there was no evidence that any Caltex officer knew that either Report contained misleading information. His Honour concluded, therefore, that there was no basis for suggesting that Caltex, or any officer of Caltex, was knowingly concerned in making any misleading statements contained in the Reports. 88 The primary judge rejected Charben's contention that Caltex engaged in conduct in contravention of the Trade Practices Act or was involved in such a contravention. His Honour made no error in doing so.

CROSS-CLAIM BY CALTEX BASED ON CLAUSE 44.4(b) 89 In its cross-claim against Charben, Caltex sought indemnity from Charben in respect of any liability that it has in the proceeding and in respect of any loss or damage that it incurs in and about the proceeding. Those two claims were really matters of defence, which could have been pleaded by way of defence in order to avoid circuity of action. 90 However, Caltex also claimed further relief, consisting of declarations concerning the operation of clause 44.4(b), in so far as it constitutes an indemnity in respect of claims by third parties. The relief sought by Caltex in its cross-claim against Charben included the following: '(c) A declaration that clause 44.4 of the [Caltex Contract] continues to bind Charben and that Charben is obliged to comply with the clause. (d) A declaration that any loss or damage (including legal costs) incurred by Caltex in responding to the EPA notification and/or responding to and complying with the EPA declaration are amounts which Charben is liable to indemnify Caltex pursuant to clause 44 of the [Caltex Contract]. (e) A declaration that pursuant to clause 44 of the [Caltex Contract] Charben is to indemnify, and to keep Caltex indemnified, from any and all losses and damages incurred as the result of any environmental contamination being present in, under, on or in the vicinity of [Lot U]. (f) An order that the assessment of the quantum of the indemnity to be provided to Caltex by Charben is to be referred to a Judicial Registrar pursuant to Order 38 for assessment from time to time upon applicant [sic] by Caltex as loss and damage is suffered by Caltex, until such time as 90 days after [the Authority] declares [Lot U] to be free from contamination.' The reference to 'The EPA Notification' and 'The EPA Declaration' appear to be references to a notice received by Charben from the New South Wales Department of Environment and Conservation concerning a declaration by the Authority that land in the vicinity of the Site is a 'Remediation Site' under the Contaminated Land Management Act 1997 (NSW). 91 The primary judge dealt with the issue quite summarily. Having referred to the discussion earlier in the reasons of the relationship between Clauses 44.4 and 44.2 and the acceptance of Charben's submission that Clause 44.4 did not release Caltex from its obligations under 44.2, his Honour concluded that Caltex's cross-claim against Charben must fail. However, as indicated above, his Honour did not order that the cross-claim be dismissed. Thus, the appeal by Caltex is not from an order dismissing the cross-claim but from the failure of the primary judge to make the declarations and orders referred to above. Technically, however, the cross-claim is still on foot. 92 In its amended notice of appeal, Caltex claimed, inter alia, the following orders, either in addition to, or in lieu of, orders made by the primary judge: ' (c) a declaration that clause 44.4 of the [Caltex Contract] continues to bind Charben and that Charben is obliged to comply with the clause;

(d) a declaration that, pursuant to clause 44.4(b) of the [Caltex Contract], Charben is to indemnify, and keep Caltex indemnified, from any and all claims, liabilities, demands, suits, proceedings, losses, costs, penalties or damages incurred by Caltex as a result, directly or indirectly, of any environmental contamination being present in, under or on the [Lot U] or in, under or on land which is in the vicinity of [Lot U];'

93 The only ground in the amended notice of appeal that would support those orders is that the primary judge: 'erred in failing to find that the effect of clause 44.4(b) of the [Caltex Contract] is that [Charben] must indemnify [Caltex] in respect of any liability that [Caltex] has incurred or will incur as a result of these proceedings (or the subject matter of these proceedings)'. 94 At present, there is no lis before the Court that would justify the making of declarations in the form sought by the cross-claim. The effect of the conclusion reached above, as to the proper construction of clause 44, is that the indemnity contained in clause 44.4 continues to be effective, notwithstanding completion of the Caltex Contract. In so far as clause 44.4(b) consists of an indemnity by Charben in favour of Caltex against any claims made in the future as a result of any environmental contamination in, under, or on, Lot U, that indemnity would continue in force. However, whether a particular claim that might be made in the future falls within the indemnity would depend upon the precise nature of the claim. There is no utility in making a declaration in the abstract about the operation of clause 44.4. 95 In the circumstances, the appropriate course would be to decline to make declarations, but on the basis that that declinature does not constitute an issue estoppel as to the effect of clause 44.4(b). Rather the cross-claim would be dismissed as premature, on the basis that there is not yet a genuine lis that it would be appropriate for the Court to determine.

CONCLUSION AS TO THE CALTEX APPEAL 96 It follows from the above conclusions that the appeal by Caltex should be upheld. The judgment in favour of Charben against Caltex should be set aside. In lieu of the orders made by the primary judge, there should be orders that the proceeding be dismissed as against Caltex and that the cross-claim by Caltex against EES be dismissed. The costs of the proceeding below and of the appeal are reserved. The parties are to file and serve brief written submissions on costs by 4:00 pm on Friday 27 January 2006.

THE EES APPEAL 97 It is convenient to deal first with the questions raised by EES in relation to the findings of the primary judge based on the Reports. It will then be necessary to deal with the allegation of negligence in carrying out the remediation, although that question would become otiose if the appeal by EES failed.

CHARBEN'S CLAIMS AGAINST EES BASED ON MISLEADING CONDUCT 98 The primary judge found EES liable under s 82 of the Trade Practices Act as a consequence of contravention of s 52 of the Trade Practices Act. His Honour made that finding on the basis that Report 19844B and Report 19844C contained significant misrepresentations and that their contents were critical in inducing Jim and Vicky Janakis, guided by Steve Paradisis and Mr Beilby, to cause Charben to purchase Lot T and Lot U. 99 His Honour found that Charben relied on the conclusions in the Reports in deciding to purchase Lot T and Lot U. His Honour concluded, therefore, that Charben had suffered loss or damage because the two Reports misled Charben into believing that it was purchasing parcels that were respectively suitable for 'any landuse' or 'residential landuse', when they were not. His Honour found that the expenditure incurred in making the Site suitable for commercial use was damage suffered by conduct that contravened s 52.

The Representations Found By The Primary Judge 100 His Honour found that there were four representations made by Report 19844C, the first and fourth of which were also made by Report 19844B, although there was a possible qualification as to whether the fourth representation extended only to part of Lot T. Charben no longer relies on the second and third representations. The two representations still relied on related to 'the relevant guidelines'. The relevant representations found by the primary judge were:

• the Site had been validated in accordance with the relevant guidelines; · the Site was suitable for residential land use in accordance with the relevant guidelines.

101 The term 'Guidelines' was defined by the primary judge as the guidelines for assessing service station sites published by the Authority. That publication, which was in evidence, was defined in the Statement of Claim as: 'NSW EPA (1994) - Contaminated Sites: Guidelines for Assessing Service Station Sites' 102 His Honour found that the work carried out by EES in relation to validation of both parcels, prior to the delivery of the respective Reports, was insufficient to satisfy the Guidelines. His Honour also found that the Site had not been remediated to a standard suitable for residential land use. Accordingly, his Honour found that the representations were misleading and deceptive. 103 Paragraph 8E of the Statement of Claim alleged that Report 19844B contained, relevantly, the following representations: '(a) the removal of tanks, the removal of heavy metal contaminated fill material from behind the work shop and other remedial work had resulted in the appropriate remediation of [Lot T];

(b) following the remedial works, the validation of the excavation and [Lot T] generally had occurred;

(c) the tank excavation had been validated according to the NSW EPA Guidelines for Assessing Service Station Sites - December 1999 and in accordance with current industrial/commercial guidelines in keeping with rezoning of the Site at the time;

(d) [Lot T] generally was suitable for any land use.' 104 Paragraph 16 of the Statement of Claim alleged that Report 19844C contained, relevantly, the following representations: '(a) the Site, or alternatively [Lot U], had been validated according to the NSW EPA (1994) - Contaminated Sites: Guidelines for Assessing Service Station Sites, and the NEHF (1998) Health-based soil investigation levels. … (j) the Site, or alternatively [Lot U], had been remediated to a standard suitable for residential land use.'

Reliance On The Representations 105 Paragraph 9A of the Statement of Claim alleged that Charben relied on the truth and accuracy of the representations in Report 19844B in exchanging and completing the purchase of Lot T. Paragraph 17 of the Statement of Claim alleged that Charben relied on the truth and accuracy of the representations made by Report 19844C, by completing the purchase of Lot U, not making written objection to Report 19844C and assuming that Caltex had caused EES to reduce the levels of pollution on the Site, or alternatively Lot U, to a level that would permit Charben to use the Site for any purpose permitted by the zoning of the Site. 106 The primary judge said that there was no doubt in his mind that, in deciding to purchase each of Lot T and Lot U, Charben relied on the statements made in Report 19844B and Report 19844C, especially the statements in the respective conclusions of the Reports as to the suitability of the relevant land 'for any landuse' or 'for residential landuse'. 107 The primary judge had no doubt that Mr Beilby read the Reports and discussed their contents with both Steve Paradisis and Jim and Vicky Janakis. His Honour did not consider that Steve Paradisis was 'a great reader of reports', but considered that he was aware of the possibility that the Site would be affected by hydrocarbon pollution. His Honour entertained no doubt that Steve Paradisis listened carefully to Mr Beilby's summaries of the conclusions of the Reports and that Steve Paradisis passed on the essence of the conclusions to Jim and Vicky Janakis. His Honour accepted that Jim and Vicky Janakis placed total trust in Steve Paradisis and would have accepted his assurance that the Reports were satisfactory. His Honour concluded that that belief would only have been confirmed by what they were told by Mr Beilby.

Whether Reliance Was a Major Issue 108 The primary judge accepted that reliance was in issue on the pleadings and that Charben had the onus of establishing that it was induced to act to its detriment in some way in reliance upon Report 19844C. That involved the Court making findings as to the state of mind of relevant witnesses. The most important relevant mind, as will appear, was that of Mr Beilby. 109 However, when his Honour came to write reasons for his conclusions, his Honour believed that reliance was not a major issue and made the following observations: 'To the extent that reliance is an issue in relation to any cause of action, that issue should be resolved in the applicant's favour. In fact, although reliance was not admitted at trial, it was not a major issue.' In the light of the submissions to the primary judge by both Caltex and EES, it was not entirely correct to say that reliance was not a major issue. The submissions in relation to each of Report 19844B and Report 19844C are summarised below.

Report 19844B 110 In its written submissions to the primary judge, Charben said: 191. 'The evidence that [Report 19844B] materially contributed to the decision to purchase Lot T, and thus to the decision to proceed with the development, is not seriously contested. Early on the day of exchange Mr Beilby… asked for and obtained the covering letter and conclusions of [Report 19844B]. Mr Beilby marked parts of that document before discussing it with Mr S Paradisis and perhaps with Mr and Mrs Janakis. Contracts were subsequently exchanged. It follows that [Report 19844B] contributed to the purchase of Lot T and therefore for the development of the Site. 192. Mr Janakis gave evidence that he would not have exchanged on the contract for [Lot T] but for the advice given to him that Lot T was suitable for the proposed use. The advice given to Mr Janakis by Mr Beilby and Mr S Paradisis was materially influenced by the [Report 19844B] Extract. It is not necessary to show that the [Report 19844B] Extract was the sole or dominant cause of the decision to exchange on the contract… 193. Causation is a question of fact which must be determined by applying common sense to the facts of each particular case. In this case, the conduct of EES and Caltex in forwarding misleading representations in the knowledge that potential purchasers would be the recipients of those misrepresentations must be causative of reliance by those purchasers on the representations.' 111 However, in its written submissions, Caltex submitted that it was necessary to identify representations made in the extract from Report 19844B that were conveyed by Mr Beilby to representatives of Charben. Caltex submitted that the present case was not one where Charben appointed Mr Beilby as its agent to review that extract and make the decision to enter into the Lot T Contract on the basis of the extract. Rather, Caltex submitted, Mr Beilby was merely a conduit for the purpose of interpreting the extract and relating its contents to representatives of Charben. 112 Caltex submitted that there was nothing in the extract from Report 19844B that would have permitted Mr Beilby to conclude that Lot T was 'clean' in the sense of completely uncontaminated or even that it would permit the construction of a commercial or combined residential/commercial development that would require a development approval. Caltex pointed out that Steve Paradisis said that he relied upon Mr Beilby to give him a 'clean soil report'. If Steve Paradisis relied upon Mr Beilby's statement that the Site was clean, then he relied upon a representation that was not made by EES. 113 Caltex further submitted that it would have been entirely irrational for Charben to act on the basis that the extract from Report 19844B contained representations that reasonably entitled Charben to rely upon them for the purpose of believing that Charben could use Lot T for its proposed use: to know that a property with residual contamination is safe for use as a mechanical workshop tells one nothing at all about whether the same property is fit for use as a commercial or combined residential/commercial redevelopment. Caltex submitted that nothing said in the extract was capable of being a representation that materially misled or deceived Charben into entering into the Lot T Contract. 114 Caltex also submitted that Charben plainly had an intention of using both Lot T and Lot U for the purpose of constructing the one commercial or one residential/commercial development. That use was not consistent with the use for which Lot T was fit, whether that be regarded as an industrial use or the current particular use. Caltex asserted that, even if Charben was misled into completing the purchase of Lot U because it acted upon the representation that Lot U was fit for standard residential use, that did not permit Charben to believe, rationally, that the representation concerning Lot U extended to Lot T or that Charben could implement its proposed use on Lot T. Caltex ultimately submitted that the only conclusion that was available was that Steve Paradisis (and Jim and Vicky Janakis if they were told) simply took a punt on the suitability of Lot T for their intended use. 115 Caltex also referred to the Geotechnique Report as having significance. The first significance was that it was the only report received by Charben that advised that Lot T was suitable for the actual use proposed by Charben. The conclusion to Report 19844B only stated that Lot T was safe for its current use, which was a mechanical workshop. The body of Report 19844B, in a part not given to Mr Beilby, made it plain that EES had adopted the threshold levels for commercial/industrial sites in the relevant part of the Guidelines and the objective was to confirm that Lot T was suitable for industrial use. Caltex submitted that Charben could not have relied upon the extract from Report 19844B so long as it retained its stated intention of leaving the residential option open. 116 Caltex drew attention to the statement in the executive summary to the Geotechnique Report that remediation options were to be recommended if contamination was found. Caltex submitted that that statement showed that Geotechnique at least understood that there was a possibility that Lot T remained contaminated in a way that would affect Charben's proposed use. Caltex also drew attention to the fact that Steve Paradisis was an experienced and apparently successful property developer, who was in the process of acquiring substantial real estate on behalf of his daughter and son-in-law for the purpose of constructing a substantial development for their long term future. Caltex submitted that, since Steve Paradisis plainly commissioned and received the report from Geotechnique, if he did not read it in detail, he was cavalier. The Geotechnique report was not the sort of report that calls for cursory examination. 117 In its written submissions, EES submitted that Charben could not have been led to believe that any clean up work would go beyond permitting more than commercial use. Attention was drawn to Special Condition 8(b) of the Lot T Contract, whereby Charben specifically acknowledged that the Lessors did not warrant or represent that Lot T was free from environmental contamination, or that the clean up works would be completed. EES submitted that, in the light of the special conditions of the Lot T Contract, Charben's claims that it entered into the Lot T Contract on the basis of a belief that it was suitable for commercial or combined residential/commercial development should be rejected and that the contemporaneous material demonstrated that Charben, or its advisers and backers, were openly accepting the risk of contamination and making decisions accordingly. 118 EES also drew attention to the Geotechnique Report as being the only environmental report received by Charben that advised that Lot T was suitable for the actual use proposed by Charben. EES referred to evidence from Mr Beilby in cross-examination that the finance company requested an auditor's statement in regard to validation of Lot T. Mr Beilby agreed that Geotechnique had been employed by Charben for the purpose of carrying out the validation exercise. EES adopted the submissions made by Caltex that the Court should not accept the evidence of Steve Paradisis that he had not previously seen the Geotechnique Report. The finance company required that there be an independent report as to the contamination position of Lot T and Geotechnique was retained for that purpose.

Report 19844C 119 In its written submissions to the primary judge, Charben made the following assertion: '220. There can be no argument about the reliance upon and causative impact of [Report 19844C], for completion of the purchase of Lot U depended upon an appropriate remediation report, and completion was postponed until [Report 19844C] was provided.' That submission, of course, is not directed to the question of whether anyone was induced by any representation contained in Report 1944C. Rather it is directed to the proposition that the provision of the Environmental Report, as contemplated by clause 44.2 of the Caltex Contract, was a condition precedent for completion. Thus, if Report 19844C were prepared negligently, in breach of a duty owed by EES to Charben, there may have been a causal connection between that breach and the loss following from the completion of the Caltex Contract. However, that says nothing about reliance upon the particular representations found by his Honour to have been made by Report 19844C. 120 In its written submission to the primary judge, Caltex submitted that the only convenient way to deal with Charben's claim based on Report 19844C was to identify the representations that the evidence established were relied upon by Charben. If Charben did not rely upon a particular representation, then that would obviate the need to analyse Report 19844C in order to determine whether the representation was made and whether it was false or misleading. Caltex then proceeded to deal with the evidence as to what each of Jim Janakis, Steve Paradisis and Mr Beilby understood from Report 19844C. 121 In its written submissions to the primary judge, EES also drew attention to the elaborate scheme for the management of contamination risk contained in the Caltex Contract. EES submitted that the Caltex Contract clearly contemplated that Charben would retain its own environmental consultant for the purposes of advising it in relation to the report to be provided by Caltex. EES submitted that the existence of the regime provided for in clause 44 of the Caltex Contract confirms that Charben was aware of the not remote possibility that Lot U might still be contaminated. EES submitted that Charben was seeking relief in circumstances where the only inference available was that its directors and advisers went into the development project knowing full well the risks before them and choosing to ignore them. 122 EES specifically submitted that one of the issues that arose in the proceeding was whether it could be shown that Charben relied upon the representation allegedly made by the Reports. EES drew specific attention to the fact that Steve Paradisis, who was the primary decision maker, did not read or rely upon any of the Reports. It was said that Steve Paradisis's behaviour could not be considered as the kind that would come within the acceptable range of behaviour to be expected within the relevant class of consumers. EES pointed out that having a solicitor read a single line from a complex scientific report was not the kind of behaviour that a potential purchaser of a service station site would regard as acceptable. EES drew attention to the fact that neither director of Charben read the EES Reports and that Mr Beilby was unable to recall with any certainty whether he discussed the reports with Jim and Vicky Janakis.

The Evidence of Reliance 123 All the evidence in chief on the question of reliance was given by affidavit, and the only oral evidence given on that question was in the course of cross-examination. That, in itself, is unfortunate. For Charben to succeed, it was necessary for his Honour to make specific findings as to the state of mind of relevant witnesses, namely Jim Janakis, Steve Paradisis and, in particular, Mr Beilby, concerning the representations that his Honour found were made and were misleading or deceptive because they were false. However, his Honour undertook no detailed analysis of the evidence in his reasons, presumably because of his apprehension, which EES says was a misapprehension, that reliance was not a major issue. 124 His Honour found Jim Janakis, Steve Paradisis and Mr Beilby to be impressive people. Vicky Janakis did not give evidence. It will be necessary to consider all of the evidence to determine whether, even if it is assumed, as it must be, that the three relevant witnesses are accepted as truthful and reliable witnesses, the evidence supports his Honour's conclusions as to reliance.

Jim Janakis 125 Jim Janakis learnt that Mr Beilby would be acting on the purchase of the Site. He was aware that ground contamination might be a problem for a site where a service station had been operating. Although he knew that contamination could be an issue on such a site, his understanding was that a purchaser would not buy a site without the contamination being cleared. To his mind, it was for the vendor to make good all contamination before any such property was transferred. He assumed that this would happen and he left it to Steve Paradisis or Theo Paradisis to negotiate a contract that made certain that whatever contamination existed would be cleaned up by the vendor before he and his wife came to own it. 126 Jim Janakis told Steve Paradisis that their bank was not going to lend the money they needed to buy the Site because it would not take the risk of lending on a service station site. Steve Paradisis told him that the concern the bank had was that land of a service station site is sometimes contaminated but that there was no risk here, because Caltex had agreed to make sure that it was all clean before the land was sold. Steve Paradisis told Jim Janakis that he would get the finance to proceed and Jim Janakis said that he and Vicky would leave it to Mr Paradisis to arrange everything. 127 The statement by Steve Paradisis that Caltex had agreed to clean the land to make it suitable reassured Jim Janakis that they would be getting land appropriate for a commercial/residential development to be designed by Steve Paradisis's architect. Jim Janakis told Steve Paradisis that he and Theo Paradisis had authority to do everything that needed to be done to build the development. 128 Shortly before exchange of the Lot T Contract, Steve Paradisis told Jim Janakis that there were two blocks of land and not one, and that there were two separate owners. He said that Caltex owned the bigger block and others owned the smaller of the blocks. He said that the owners of the smaller block had a contract that was ready to exchange. He explained that Caltex was still cleaning up the contamination on the larger block and that it may take some time for the contracts to be ready for that one. Steve Paradisis told Jim Janakis that he should see Mr Beilby and exchange contracts on the block that was ready. Steve Paradisis gave Jim Janakis reasons why it was in their interest to proceed for exchange of contracts on the block that was then ready. 129 A few days later, Jim and Vicky Janakis met Mr Beilby for the first time. Mr Beilby spoke about the Lot T Contract, but Jim Janakis could not recall what advice he gave. Jim Janakis was not willing to commit Charben to buy a block of land with contamination on it, and he recalled being assured that it was safe to sign the contract and exchange, because of the information they had been given about the state of Lot T. He recalled having the impression that there was no contamination on Lot T because of what he was told by Mr Beilby. However, he could not recall the precise terms of the discussion. He said that, if he had been told that there was a risk that Lot T contained contamination, which required further cleaning up, he would not have instructed Mr Beilby to proceed with the purchase; he said would not have committed Charben to buying land where the practical choice would have been to continue to look for another site, which did not have that risk. 130 Jim Janakis had no recollection of seeing the letter from Emil Ford of 27 November 1998 or the Conclusion from Report 19844B that was attached. He could not recall one way or the other whether Mr Beilby showed him that document or went through its contents. He said that at the time he signed the Lot T Contract, he had the belief and understanding that any contamination that might have been present on that block had been cleaned up by Caltex and that Lot T could be further developed without Charben having to spend any significant cost in doing remediation work. Based on that belief and understanding, he was willing to proceed with the purchase and would not have done so if Mr Beilby had advised him that it was not in his interests to exchange contracts. 131 Jim Janakis said in cross-examination that he had no experience in developing and would not know what was going on. He relied solely upon Steve Paradisis for his advice. He relied upon Steve Paradisis to give him authority to go and sign the contracts. When Steve Paradisis told him that he had authority to go and sign the contracts, so far as he was concerned that was an end of the matter and that was as much as he needed to be told. 132 After Jim Janakis signed the Lot T Contract, he left it to Steven Paradisis to carry out all the work of borrowing the money. He was not involved in anything concerned with finance. He was just told to go and sign the documents. He had no idea of what was happening so far as reports about Lot T were concerned. He was told by Mr Beilby that the contracts were ready to be exchanged and he went in and signed the contracts. He was told by Mr Beilby that the land was basically suitable for what they wanted to use it for and that the contracts were ready for signing. 133 Mr Beilby did not tell Jim Janakis, when he went to sign the Lot T Contract, that he had a report from an environmental scientist about the condition of the land. Jim Janakis said that, if there had been any environmental report by an environmental person he would not understand it. On the other hand, he agreed that if he had been shown a report by an environmental scientist as to the condition of Lot T, he would have remembered it. Jim Janakis relied on Mr Beilby when he told him that it was appropriate to sign the contract. 134 Jim Janakis did not recall being told by Mr Beilby that Lot T was safe for its current use. He was unaware that the finance company had required Lot T to be reconsidered by another environmental firm and he was not aware that the finance company had been provided with another report by Geotechnique as to the status of Lot T, so far as contamination was concerned. He had no knowledge of that at all. 135 In December 1998, Steve Paradisis told Jim Janakis that Caltex was cleaning up Lot U, and that contracts were now ready to sign. Steve Paradisis told him that it was going to take some time for Caltex to finish the work and that the Caltex Contract required Caltex to clean up, and to provide Charben with a report, before settlement, saying the land was clean. Steve Paradisis told him that it was going to take Caltex a little more time to finish, but settlement was not going to take place until Caltex had cleaned up Lot U to the stage where it could be developed. He said that the contract was ready for Jim and Vicky Janakis to sign and they should see Mr Beilby. Jim Janakis could not recall being shown any report about the time that he signed the Caltex Contract. 136 When Jim Janakis went to Mr Beilby's office, he did not have any conferences with him. Mr Beilby explained what the conditions in the contracts were and that the contracts were ready to be signed. Jim Janakis could not remember being told that there were conditions in the Caltex Contract relating to the question of Caltex not being liable for any condition of the land. Jim Janakis agreed that, if he had been advised that Caltex was not going to take any responsibility for any contamination that might be found on the land, that is something that he would not have forgotten. Mr Beilby did not tell him that he had a report from an environmental scientist. Jim Janakis said that, at that stage, they were there for the sole purpose of signing the contracts in the belief that the land was ready for developing, because Steve Paradisis had told them to go and sign the contracts. 137 Jim Janakis would not have been willing to sign the Caltex Contract if he had not been assured that Caltex was going to clean up the land and that they were only going to settle once that had been done, and a report saying that it had been done was provided to them. If Jim Janakis had been told that there was any risk that Caltex was not going to clean up the land before settlement, or if he had been told that there was a risk that contamination would remain, which required Charben to do substantial work in order to undertake a development on the land, he would not have committed Charben to buying Lot U. Charben had a practical choice of not buying Lot U at that time. 138 Jim Janakis's willingness to sign the Caltex Contract, and to instruct Mr Beilby to exchange, was in consequence of what he was told at Mr Beilby's office and his understanding that Caltex was going to complete all of the work necessary to remove the pollution on Lot U to a level that permitted them to undertake the development without further substantial cost of cleaning up the site. Without that belief and understanding, he would not have proceeded. 139 After the Caltex Contract was signed, a significant amount of time went by. Jim Janakis did not speak to Mr Beilby in that period. However, he spoke to Steve Paradisis or Theo Paradisis and was told that Caltex was still cleaning up Lot U and that they were waiting on a report saying that the work was finished. At some stage, he was told that a report had been received by Mr Beilby. He could not recall one way or the other whether he saw the report after it was received by Mr Beilby. 140 However, he recalled a conversation with both Steve Paradisis and Theo Paradisis about what the report said before they settled on Lot U. The substance and effect of what Steve Paradisis said was that a report that had been given to them by Caltex that stated that Lot U was clean and was suitable for the development. Steve Paradisis said that the contamination that was previously on Lot U had been cleaned and that there was no risk that the development would be affected by whatever was on Lot U. He said that Lot U was clean so that they could proceed to develop, even to put in residential units if they wanted. He said that the report said that everything was alright and that they could go ahead and settle and start to develop. 141 Jim Janakis was prepared to commit Charben to proceed to settle on Lot U because he was reassured by what Steve Paradisis told him. If he had been told that Report 19844C was wrong and that Lot U continued to have substantial contamination on it, he would not have settled. He was not prepared to commit Charben to buying land and was not prepared to undertake a development, with the risk of having to spend substantial money to make the land suitable for development. He believed what Steve Paradisis told him about Report 19844C and he acted on the faith of what Steve Paradisis said about it. He was reassured that it was appropriate for them then to proceed to settle because Caltex had spent the money necessary to clean up Lot U and because Caltex was giving them a report to prove that that had happened. 142 Significantly, none of that evidence indicates that Jim Janakis had any knowledge of the existence of the Guidelines. Nor does it indicate that Jim Janakis had any understanding or belief that Report 19844C contained the representations found by his Honour. Rather, Jim Janakis relied on the contractual obligations undertaken by Caltex and simply left it to Steve Paradisis and Mr Beilby to look after the interests of Charben.

Steve Paradisis 143 Steve Paradisis first became aware of the Site in about October 1998, when driving past. He stopped and saw a building standing at the northern end, which appeared to be long abandoned, and saw a lot of excavation at the other end. He concluded that it was clearly a former petrol station. 144 He subsequently negotiated with an agent and agreed on a price of $1.1 million to buy the Site. It was his impression, from his conversation with the agent, that the contract for sale would require the vendor, Caltex, to clean the Site and provide the purchaser with a clean soil report prior to settlement. It was only after the price was agreed that Steve Paradisis learned that he was dealing with two separate properties with separate owners. 145 Steve Paradisis originally expected that exchange would take place on both properties at the same time. For reasons that he cannot recall, he had the impression that Caltex was delaying on exchanging the contracts for Lot U and also had the impression that the vendors of Lot T wanted to exchange quickly. 146 Steve Paradisis formed the view, as a result of his conversation with the agent, that if Caltex did not enter into a contract for the sale of Lot U to Charben, the worst case scenario would be that they would sell Lot T either to the new purchaser of Lot U or to the open market. Either way, he was confident they would get their money back. As a result of the conversation with the agent, he felt comfortable in advising Jim Janakis and Vicky Janakis to exchange on Lot T first, as he thought that, by signing the contract for the purchase of Lot T, they were more or less securing the purchase of Lot U. He instructed Mr Beilby to act on the purchase of the properties. 147 Steve Paradisis was aware that there was a risk of petrol station sites being contaminated and therefore the most important thing, for him, was to ensure that Caltex would be responsible for cleaning up any contamination. When he had previously purchased former service station sites, he only decided to buy the site when he understood that the owner had the responsibility of dealing with any contamination and was required to provide him with a report saying that the site was clean. 148 Steve Paradisis and Mr Beilby spoke about contamination. Mr Beilby gave him some advice, but Steve Paradisis could not recall what he was told. However, he said he had no reason to believe that he did not follow Mr Beilby's advice. The advice given by Mr Beilby led Steve Paradisis to understand that contracts could be exchanged and that Caltex would make all contamination good by ensuring that the properties would be suitable for either residential or commercial development. Mr Paradisis had the understanding, from what Mr Beilby told him, that it was safe to exchange on Lot T before they exchanged on Lot U. He believed, from his conversation with Mr Beilby that the condition of the soil on Lot T would not affect the development and no money would have to be spent to clean up the soil to proceed with the building. The advice from Mr Beilby convinced him that he should advise Jim and Vicky Janakis to exchange on Lot T while they waited for Allens to prepare the contracts for the sale of Lot U. Following his discussions with Mr Beilby, he advised Jim and Vicky Janakis to go and sign the contract for Lot T and advised them that they should purchase both lots and undertake a development on it. 149 Mr Beilby and Steve Paradisis discussed the Caltex Contract and the soil on Lot U. Steve Paradisis discussed with Mr Beilby what Caltex had to do before settlement, although he could not recall precisely the words used. Mr Beilby advised him that Caltex had to clean Lot U and to provide a clean soil report before settlement. That was consistent with his own experience from the other former service station sites that his company had developed. His concern was always ensuring that Charben was buying a clean site. 150 The understanding that Steve Paradisis had of the Caltex Contract was that Caltex was obliged to clean Lot U and give him a clean soil report verifying that the site was clean. He told Mr Beilby to make sure that they had a clean soil report from Caltex before settlement. He said that he told Mr Beilby that, time and time again. 151 It was only because Steve Paradisis believed that Caltex would clean up Lot U and provide Charben with a clean site report that he recommended that Jim and Vicky Janakis buy the properties and undertake the development. He was reassured by the advice he received from Mr Beilby that he would receive a clean soil report and that that requirement was in the Caltex Contract. His willingness to advise Jim and Vicky Janakis to enter into the Caltex Contract was as a result of his understanding that Caltex would clean the Site to a standard that meant they could build the type of property that they wished to build. If he had been told that there was no requirement for Caltex to clean Lot U, so that Jim and Vicky Janakis did not have to spend money cleaning up the Site and to provide a clean soil report, he would not have advised them to exchange on either block. 152 Steve Paradisis did not ask Geotechnique to review or assess any contamination on or from Lot U or any of the remediation works that were being carried out on Lot U. He said that he did not do so because there was still work being carried out on Lot U. He said his decision to recommend the development to Vicky and Jim Janakis was because he believed that Caltex would clean up the Site and provide a clean site report. He would not otherwise have recommended the Site or the project to them. 153 In late February 2000, Mr Beilby telephoned Steve Paradisis and told him that he had received a report from Allens. Steve Paradisis then met Mr Beilby, who showed him a copy of Report 19844C. Steve Paradisis did not read Report 19844C, but had a conversation with Mr Beilby, the substance and effect was that he asked Mr Beilby what Report 19844C said. He asked whether it said that the land was clean. He asked Mr Beilby to check the sections that dealt with whether the land was clean. Mr Beilby read the Report and read out various sections of it to him and said that he concluded 'as far as I can see, that the site is clean. Lets get the finance sorted and then we can settle'. 154 Steve Paradisis said that it did not occur to him that Report 19844C might include information that was not correct. He trusted the experts to tell him whether or not the Site was OK for him to build on and he understood that the experts had said that the Site was OK to build on. He understood that Report 19844C was very important and it convinced him that everything was alright to advise Jim and Vicky Janakis to go ahead and settle. Without Report 19844C, he would not have considered advising them to settle. It was absolutely necessary that they had a report that told them that the Site was clean before he advised them to settle. 155 Steve Paradisis telephoned Jim Janakis and had a conversation, the substance and effect of which was that he told Jim Janakis that the report had come in and it said that the Site was clean. He said that they just needed to organise the finance and they could go ahead and settle on Lot U. Jim Janakis responded by asking Steve Paradisis to help him out in organising the finance so they could go ahead and settle. 156 Steve Paradisis had no exact recollection as to why he engaged Geotechnique. He said his concern was whether sufficient investigation had taken place of the material in, and underneath, the building on the workshop site. He said that he arranged for Geotechnique to do further investigations because he wanted assurance that there was no contamination in the workshop, because he could not see any evidence of testing there. Mr Paradisis had no recollection of ever reading the Geotechnique Report. He claimed that his first recollection of receiving the Geotechnique Report was when his solicitor showed it to him two months before the hearing. He said that he could not believe it. He accepted that he may have received it and not looked at it, but asserted that he had never seen it until the solicitor showed it to him. 157 On 11 March 1999, Steve Paradisis drove to the Site to have a look at what works were taking place. In July 1999, he was not pleased that there was going to be further delay. However, he thought that was an indication that the remediation was being carried out properly and that the delay would mean that, when settlement took place, he would have a clean site. 158 In cross-examination, Steve Paradisis did not recall whether he had been shown the letter from Emil Ford of 27 November 1998. He could not remember whether he saw the Lot T Contract. However, he said that Mr Beilby probably showed it to him and he definitely discussed it with Mr Beilby. 159 Steve Paradisis did not recall whether he had a copy of the Caltex Contract. He said that he did not understand what the Caltex Contract said. Mr Beilby sat across the table and explained 'this and that'. He told Mr Beilby to make sure everything was OK. 160 Steve Paradisis accepted that he took on the responsibility for negotiating everything on behalf of Charben, although he was never a director of Charben. Jim and Vicky Janakis had a very minor involvement and Jim Janakis was not present at any conference between Steve Paradisis and Mr Beilby. 161 All of the evidence of Steve Paradisis clearly indicates that, in advising Jim and Vicky Janakis to settle with Caltex, Steve Paradisis relied on what Mr Beilby told him about the contractual obligations of Caltex under the Caltex Contract, and not on any representation contained in Report 19844C, or any other report from EES, about the Guidelines.

Mr Beilby 162 Mr Beilby said that Steve Paradisis telephoned him on several occasions in or about November 1998 and told him that he was building an investment property for his daughter and son-in-law. He had found a property, which was the old Caltex service station site on the Pacific Highway, Killara. He subsequently told Mr Beilby that they had decided that they wanted to set up a company to purchase the land and build the development. He asked Mr Beilby to sort out a shelf company for them to purchase and said that he would call Mr Beilby soon and let him know the vendor's name, so that he could sort out the contracts. Mr Beilby arranged for the purchase of a shelf company, which was to be the vehicle for the purchase and development of the land. 163 On or before 27 November 1998, Mr Beilby made a note that Steve Paradisis had told him that they had agreed upon a price for the Killara property and that the vendors' solicitors were Emil Ford and Allens. On 27 November 1998, Mr Beilby received a facsimile from Emil Ford enclosing special conditions for a contract for sale of Lot T and a copy of the 'Conclusion' from Report 19844B. He made some markings on the third paragraph of the Conclusion. 164 After reviewing the special conditions for the proposed contract and the Conclusion of Report 19844B, Mr Beilby telephoned Steve Paradisis and took him through the special conditions and discussed the Conclusion of Report 19844B with him. He could not recall the words he used and apparently he made no note of the conversation. His belief as to the effect of the words was that he told Steve Paradisis that the vendors had provided their special conditions, which included a disclaimer regarding the previous use of the land as a workshop. He said that the vendors were giving no warranty as to the environmental condition of Lot T but had provided a copy of the conclusion from a validation report prepared by EES on behalf of Caltex, which said that removal of in situ contaminated fill material had been undertaken as far as the site allowed and that the site was safe for current use. 165 Mr Beilby said that there was a section of the report that referred to a 50 cubic metre area that had not been fully tested. He said that there was always a risk taking on a site like this, but that the report said that, apart from that small section, the site was clean. He said that the report also concluded that, despite containing elevated levels of metals, the fill material currently did not pose a threat to neighbouring sites, as it comprised a low volume and was held in place by the tree roots of trees that are quite healthy. Steve Paradisis told Mr Beilby that that sounded like it was all OK and that he would let his daughter and son-in-law know that, and would arrange for them to come in and sign the contract. 166 Mr Beilby said in his affidavit evidence in chief that it was only because of his reading the Conclusion to Report 19844B that he believed that, apart from a small section, Lot T was clean and suitable for development. He said that, had he not believed that, he would not have advised Charben to exchange contracts for the purchase of Lot T. 167 Mr Beilby agreed that a finance company required the provision of an environmental auditor's statement in regard to the validation of Lot T. He always presumed from the start that they would require something for a lender, whoever the lender was. He recalled that the finance company requested a full auditor's report in relation to Lot T. Geotechnique was the firm that was employed by Steve Paradisis for the purpose of carrying out that requirement. It was not until the Geotechnique Report was received by the finance company that Charben was able to complete the purchase of Lot T. 168 Mr Beilby went through the special conditions in the Caltex contract in great detail. He dictated a letter to Allens requesting changes to the draft contract. 169 Mr Beilby received Report 19844C on 14 February 2000 and recalled reading it. He highlighted part of the text of Report 19844C with a yellow highlighter, including the conclusion page. He also underlined with pen the word 'residential' in the last sentence of the conclusion page. He said that he concluded from his reading 'of the conclusion and from the report as a whole that the site was suitable for residential use which is the highest level that could be asked for'. Following that, he telephoned Steve Paradisis and said words the substance of which was that they had finally received 'a copy of the report from Caltex' and that the conclusion in the report is that the Site 'has been validated and is clean'. He told Steve Paradisis that he could let Jim and Vicky Janakis know that 'we are ready to proceed to settlement'. Mr Beilby could not recall whether he provided a copy of Report 19844C to Charben. 170 Mr Beilby made no file notes or diary notes and kept no record relating to any of his conversations with Steve Paradisis. Accordingly, conversations in his affidavit evidence in chief are a reconstruction. However, Mr Beilby could recall a conversation with Steve Paradisis concerning the conclusion of Report 19844C and claimed that he knew the substance of what he said. He said he went through the conclusions in detail with Steve Paradisis. 171 Mr Beilby said that it was only because of his reading of Report 19844C that he believed that Lot U was clean and suitable for development. Had he not believed that, he would not have advised his client to proceed to settlement of the Caltex Contract. 172 Mr Beilby was aware that the finance company also required an auditor to carry out work in relation to Report 19844C and he endeavoured to get EES to audit their report itself. He said that the lending authority was convinced to grant money without compliance with the request for an auditor, although he did not recall whether he or Steve Paradisis convinced the lending authority. 173 Thus, Mr Beilby gave no evidence that he knew of the existence of the Guidelines. Nor did he give any evidence that he believed that Report 19844C contained the representations found by his Honour or that he understood it to make any such representations. Again, it is clear that Mr Beilby relied upon the contractual obligations of Caltex under the Caltex Contract.

Reliance on Report 19844B 174 The claim by Charben to have relied upon the Conclusion to Report 19844B appears to be quite implausible. There was no representation to the world at large in Report 19844B. There was nothing in Report 19844B to suggest that EES was accepting responsibility to anyone other than Caltex or the Lessors for the accuracy of report 19844B: there was nothing in Report 19844B to suggest that EES believed that anyone other than Caltex or the Lessors might place any reliance upon its contents. 175 It would be very curious indeed for Mr Beilby and Steve Paradisis to have relied upon the conclusion to a report to which they were not privy and which was prepared in circumstances not fully known to them, without making some enquiry of its author. It would be even more curious for them to have relied on an extract from such a report, yet to have given no attention to the report expressly commissioned by Steve Paradisis in relation to Lot T. 176 Nevertheless, his Honour appears to have accepted that both Steve Paradisis and Mr Beilby ignored the Geotechnique Report. It would be extraordinary that Steve Paradisis would instruct Geotechnique to prepare a report, for which he would doubtless have paid a fee to Geotechnique, and then ignore the report entirely. It would be extraordinary that Mr Beilby would ask for the Geotechnique Report as soon as possible, because his client was going overseas, and then ignore the Geotechnique Report when it was received. It would be extraordinary indeed, in those circumstances, for them to rely on an extract from a report from EES, with whom they had had no communication. It would be curious in the extreme that, if he was intending to rely on representations contained in Report 19844B in advising Charben to complete the Caltex Contract, Mr Beilby did not make known to EES the reliance that was to be placed upon Report 19844B in deciding whether to complete the purchase of Lot U. 177 The representation pleaded in the Statement of Claim in relation to Report 19844B was that Lot T 'generally was suitable for any land use' and that Lot T 'did not pose a threat to neighbouring sites'. The only evidence given by Mr Beilby concerning Report 19844B is that it was only because of reading that report that he believed that, apart from a small section, Lot T was clean and suitable for development and that, had he not believed that, he would not have advised Charben to exchange contracts for the purchase of Lot T. That evidence does not support a finding that Mr Beilby was induced to give advice by a representation that Lot T had been validated in accordance with relevant guidelines or that Lot T was suitable for residential land use in accordance with relevant guidelines. 178 Ultimately, his Honour concluded that it did not matter whether EES engaged in misleading conduct in relation to Report 19844B, because it was sufficient that EES engaged in misleading conduct in relation to Report 19844C. His Honour accepted that the intention of Charben was to purchase both Lot T and Lot U and to develop them as one site. If the purchase of Lot U had not been completed, then Lot T would have been resold, presumably at about the same price at which it was purchased, and no loss would have been suffered. It is necessary, therefore, to focus only on the question of reliance on Report 19844C.

Reliance on Report 19844C 179 Charben's case was based on the proposition that Mr Beilby was induced to advise Charben to complete the Caltex Contract in reliance upon the two representations that the primary judge found were made by Report 19844C, namely, that the Site had been validated in accordance with the Guidelines and that the Site was suitable for residential land use in accordance with the Guidelines ('the Report 19844C Representations'). It was no part of Charben's case that Jim and Vicky Janakis, Steve Paradisis or Theo Paradisis understood Report 19844C to make any representations. There is no suggestion that any of them ever paid any attention to Report 19844C. Thus, the evidence of Mr Beilby as to his reliance upon Report 19844C, in giving advice to the representatives of Charben, is critical. 180 There are real difficulties with Charben's case of reliance on the the Report 19844C Representations. In dealing with the reliance, the primary judge did not advert to the significance of the contractual obligations arising under Clauses 43 and 44 of the Caltex Contract, relating to remediation and the provision of the Environmental Report referred to in clause 44.2(b). Those provisions support a finding that, when the Environmental Report was provided pursuant to Clause 44, Charben would rely upon it in deciding its future action. Completion was, under Clause 44.2(c), conditional upon completion of the Works and Caltex providing the Environmental Report. Under Clause 44.7(b), completion was to take place, in effect, 14 days after Caltex provided Charben with an Environmental Report that indicated that the Works had been completed. 181 However, so long as any report that was provided as the Environmental Report satisfied the requirements of Clause 44.2(b), Charben did not have any option but to complete the purchase of Lot U, unless it exercised its rights under Clause 44.5 to notify Caltex that it was not satisfied that the Environmental Report indicated that the Works had been completed. If Report 19844C satisfied the requirements of Clause 44.2(b), Charben simply had no option but to complete the Caltex Contract. It is difficult to see, therefore, how Mr Beilby could say that, had he not believed, from his reading of Report 19844C, that Lot U was clean and suitable for development, he would not have advised Charben to proceed to settlement. 182 A further difficulty for Charben's case, based on the Report 19844C Representations is that, as indicated above, Mr Beilby did not mention the Guidelines in any of his evidence. Mr Beilby's evidence was that, from his reading of the Conclusion in Report 19844B, he believed that Lot T was suitable for residential use. Whether or not Report 19844C contained a representation that the Site, or Lot U, had been 'validated' in accordance with the relevant guidelines, there is no evidence that Mr Beilby understood Report 19844C to say that. It is not possible, therefore, to find that Mr Beilby was induced, by representations to the effect found by the primary judge, to give any advice to his client, Charben. 183 The scheme of Clause 44 may lead to the conclusion that EES owed a duty to Charben to take care when preparing a report that indicated that the levels of petroleum hydrocarbon pollution of Lot U had been reduced to a level that would permit the use of Lot U in accordance with the purposes and uses permitted by the then zoning of Lot U. That, however, is a different matter altogether from the question of whether Mr Beilby was induced, by some representation about the Guidelines, to advise Charben to complete the Caltex Contract. 184 In completing the purchase of Lot U pursuant to the Caltex Contract, Charben was performing the contractual obligation imposed upon it. No basis has been advanced by Charben as to how, if the representations found to have been made by Report 19844C were known to be false, it could have done anything other than complete the purchase of Lot U.

Conclusion As To Reliance 185 The analysis of the evidence set out above indicates that there should be no finding as to reliance on the Report 19844C Representations. At no stage did any witness say that he understood Report 19844C to make either of those representations. It is difficult, therefore, to see how any inducement could have resulted from any such representations. 186 The evidence before the primary judge does not support a finding that Charben was induced by the Report 19844C Representations to enter into or complete either the Lot T Contract or the Caltex Contract. Accordingly, the cause of action under s 82 of the Trade Practices Act consequent upon alleged contravention of s 52 of the Trade Practices Act must fail. 187 However, as will appear below, that is not necessarily an end of the matter. If, on its face, Report 19844C satisfied Clause 44.2(b), Charben was compelled, as between Caltex and itself, to complete the Caltex Contract, unless it triggered the provisions of clause 44.5 and gave appropriate notice to Caltex that it was not satisfied that Report 19844C did not indicate that the Works had been completed so as to reduce the levels of petroleum hydrocarbon pollution to the relevant level. 188 Although the primary judge made a finding that Report 19844C contained a representation that the Site was suitable for residential land use in accordance with the relevant guidelines, that representation was not pleaded in those terms in either paragraph 8E or paragraph 16 of the Statement of Claim. Paragraph 16 asserted a representation that the Site, or alternatively Lot U, had been remediated to a standard suitable for residential land use. His Honour made no finding as to whether Report 19844C made that representation. 189 The Environmental Report to be provided by Caltex under clause 44.2 of the Caltex Contract was to indicate that work, consisting of reducing the levels of petroleum hydrocarbon pollution to a level that would permit the use of Lot U for Charben's proposed use, had been completed. Caltex acknowledged that that use was to be in accordance with the purposes and uses permitted by the present zoning of Lot U. The present zoning of Lot U was one that permitted residential unit buildings and commercial and retail premises, with the consent of the Council. 190 The case was conducted on the basis that Report 19844C satisfied clause 44.2(b) of the Caltex Contract. That is to say, it was an environmental report from Caltex's environmental consultant 'which indicates that the Works have been completed'. It was not suggested on the hearing of the appeal that Report 19844C did not indicate that the Works had been completed. It must follow that Report 19844C indicates that works consisting of the reduction of the levels of petroleum hydrocarbon pollution of Lot U, caused by its use as a service station, to a level that would permit the use of Lot U for Charben's proposed use, in accordance with the 'BUSINESS 3(a) - (A2) RETAIL SERVICES' zoning of Lot U, had been completed. 191 Such a statement, of course, has nothing to do with the Guidelines. Nevertheless, it is clear enough from the evidence of reliance summarised above that, in advising Charben to complete the Caltex Contract, Mr Beilby relied upon Report 19844C as indicating that the Works had been completed. If that statement were false and it were misleading or deceptive for EES to provide Report 19844C to Caltex, it may have been possible to conclude that there was a contravention of s 52 of the Trade Practices Act. However, that was not the case as pleaded by Charben and it was not the case about which the primary judge made findings. 192 However, the representation pleaded in paragraph 16(j) is certainly reminiscent of the language of the Conclusion of Report 19844C. The conclusion asserts that all known primary sources of hydrocarbon contamination had been removed. However, it concluded by stating that the validation results showed that Lot U was 'suitable for residential landuse in accordance with the relevant guidelines', the language of the representation found by the primary judge. 193 Thus, there could be no complaint about a finding that Report 19844C made a representation that Lot U was suitable for residential land use in accordance with the relevant Guidelines. However, there has been no complaint about a failure to find that there was a representation that the hydrocarbon pollution of Lot U had been reduced to a level that would permit use in accordance with then present zoning of Lot U, whether or not that was in accordance with any relevant guidelines.

Falsity of the Representations 194 Charben's claims as to the falsity of the first and fourth representations were based upon a section of a report of Dr Ian C. Swane dated December 2002, headed 'Assessment of the EES Site Evaluation Program'. Section 6.1.1 of Dr Swane's report, which was contained under that heading, was reproduced verbatim as particulars of the allegation made in the Statement of Claim that the Site, or alternatively Lot U, had not been validated according to the Guidelines. The same particulars were, for the most part, relied on as to the falsity of the fourth representation found by the primary judge. 195 In the light of the conclusion that Charben was not induced by either of the Report 19844C Representations, it is not strictly necessary to deal with the assertion that there was a contravention of s 52 of the Trade Practices Act because those representations were misleading or deceptive. However, since a great part of the time taken for the hearing of the appeals was devoted to that assertion, it is desirable to deal with it. 196 Assuming that Charben relevantly relied on the representations that the primary judge found had been made by Report 19844C, the question arises as to whether those representations were misleading or deceptive. In paragraph 18 of the Statement of Claim, Charben alleged that the representations in Report 19844C were misleading and deceptive in a number of respects. The sub-paragraphs of paragraph 18 assert the negative of the representations alleged in paragraph 16 of the Statement of Claim. The only relevant paragraphs for present purposes are paragraphs 18(a) and 18(j), referring to the representations alleged in paragraph, 16(a) and 16(j). 197 Thus, paragraph 18(a) alleges that the Site, or alternatively Lot U, had not been validated according to the Guidelines as: (i) soil samples were not collected at the recommended frequency across the Site, or alternatively across Lot U, below the depth of the estimated storage tanks as recommended in Section 2.2.4 of the Guidelines; (ii) most validation samples used by EES for general site coverage were taken at a shallow depth of less than 1 to 1.5 m with the result that Report 19844C was not able to properly and reasonably assess the potential for soil contamination on the Site, or alternatively on Lot U, at depth; (iii) no groundwater wells were constructed or groundwater samples collected as recommended in section 2.3 of the Guidelines, with the result that Report 19844C was not able to properly or reasonably assess the potential for groundwater contamination, even though the data indicated that the Site had been extensively contaminated; (iv) no appropriate assessment was provided on the off-site migration potential of contaminants in either the groundwater or as soil-gas; (v) the Site had not been remediated to a standard suitable for residential or commercial land use as required by section 4 of the Guidelines as large quantities of soil, rock and groundwater were later found to be highly contaminated at levels that were significantly above the residential criteria; (iv) quality assurance and quality control standards, specified in Appendix C of the Guidelines, were not met; (vii) Report 19844C did not satisfy 'Guidelines for Consultants Reporting on Contaminated Sites', another publication of the Authority. 198 Accordingly, on the pleadings, the question of whether the first representation found by the primary judge was misleading or deceptive calls, for the most part, for a detailed analysis of the Guidelines and the extent to which Report 19844C failed to comply with the Guidelines. There are several qualifications to that observation:

• Particular (ii) of paragraph 18(a) of the Statement of Claim asserts, without any reference to the Guidelines, that Report 19844C was not able to assess the potential for soil contamination properly and reasonably.
• Particular (iv) of paragraph 18(a), without any reference to the Guidelines, refers to the failure to provide appropriate assessment of the off-site migration potential of contaminants.
• Particular (vii) of paragraph 18(a) refers to the Authority's 'Guidelines for Consultants Reporting on Contaminated Sites', without indicating the respects in which there was failure to comply with those guidelines. 199 Paragraph 18(j) of the Statement of Claim alleged that the Site, or alternatively Lot U, had not been remediated to a standard suitable for residential land use since: (i) the Site was not validated in accordance with the Authority requirements, as described in paragraph 18(a) of the Statement of Claim;

(ii) large quantities of soil and rock that remained at the Site, or alternatively which remained on Lot U, were subsequently found to significantly exceed the soil threshold concentrations specified in section 2.5 of the Guidelines and other Authority guidelines;

(iii) groundwater at the Site was subsequently found to significantly exceed the groundwater threshold concentrations specified in section 2.5 of the Guidelines and other Authority guidelines;

(iv) large quantities of soil and rock that remained at the Site, or alternatively that remained on Lot U, were found to be malodorous and not to meet the aesthetic requirements specified in section 2.5.2 of the Guidelines and other Authority guidelines;

(v) large quantities of soil and rock that remained at the Site, or alternatively which remained on Lot U, remained with sufficiently high concentrations of volatile petroleum hydrocarbon gas to be a hazard to human health;

(vi) separate phase products were not contained or removed from the water table at the Site, or alternatively the water table on Lot U, as specified in section 3 of the Guidelines and other Authority guidelines;

(vii) the Site, or alternatively Lot U, was not remediated to a standard that was protective of human health and the environment as required by section 4 of the Guidelines and other Authority guidelines. 200 While the representation alleged in paragraph 16(j) of the Statement of Claim made no reference of remediation to a standard suitable for residential use in accordance with the Guidelines, the particulars of falsity contained in paragraph 18(j) refer to the Guidelines, except for particular (v), which referred to large quantities of soil and rock remaining on the Site with sufficiently high concentrations of volatile petroleum hydrocarbon gas to be a hazard to human health. The other particulars refer to other Authority guidelines, without specifying any particular guidelines.

Findings of the Primary Judge 201 The primary judge concluded that there were two respects in which EES failed to comply with the Guidelines. First, his Honour concluded that there was a failure to comply with paragraph 2.2.4 of the Guidelines, which requires that soil samples be taken at a minimum of three depths, one of which 'must be below the estimated depth of the former tanks'. His Honour found that it was common ground that EES did not do that, either on Lot T or Lot U. Secondly, paragraph 2.3 of the Guidelines requires that, if any groundwater is found at a site, it should be collected and submitted for laboratory analysis and that, where groundwater is present, there should be at least one monitoring well drilled on the site to assess groundwater quality. His Honour found that there was a failure to comply with that requirement, although the deficiency appears to have been in relation to Report 19844B, which dealt only with Lot T and not with Lot U. 202 The Guidelines contain material under the following headings: '2 ASSESSING FORMER SERVICE STATION SITES … 3 REMEDIATING FORMER SERVICE STATION SITES … 4 VALIDATING FORMER SERVICE STATION SITES … 5 REPORTING' Thus, the Guidelines draw a distinction between assessing a site, remediating a site and validating a site. The first representation found by the primary judge was that the Site had been validated in accordance with the Guidelines. His Honour made no specific findings as to whether Report 19844C or EES failed to comply with the Guidelines in assessing or remediating the Site or Lot U. 203 The primary judge found that, having regard to its failure to delineate the extent of hydrocarbon contamination, EES was in no position to make the statement in Report 19844C that Lot U was 'suitable for residential landuse' and was in no position to make the statement in Report 19844B that Lot T, or at least its former tank area, was 'now suitable for any landuse'. His Honour considered that, in her oral evidence, Ms Bauer effectively conceded that EES was in no position to make either of those statements and that the problem was that neither of the Reports stated any limitation as to the suitability of the relevant land for any particular use. The reference to the failure to delineate the extent of hydrocarbon contamination is a reference to the conclusion reached by his Honour in relation to the second and third representations that his Honour found were made by Report 19844C. While those representations were not pressed by Charben on the hearing of the appeals, it is necessary to say something about them to explain his Honour's finding in relation to the fourth representation. 204 The primary judge found that Report 19844C contained a representation that significant vertical migration of contaminants was unlikely. That was the second representation. His Honour concluded that, whether or not the evidence expressly negatived that representation, the expert evidence clearly established that EES was not in a position to make such a representation, because no groundwater samples were collected from beneath the Site for testing. Accordingly, the contamination status of the groundwater beneath the Site was largely unknown. 205 The third representation found by the primary judge was that the former service station activities had not impacted on the Site down gradient of the fuel storage activity. His Honour found that, having regard to the failure by EES to delineate the migration of contaminants, it was not in a position to make that statement. His Honour rejected what he characterised as 'fanciful theories' as to the source of contamination found in two monitoring wells at the rear of the Site. 206 The primary judge's conclusions concerning hydrocarbon contamination and the unsuitability of the Site for residential land use without further remediation were not expressed in terms of a failure to comply with the Guidelines, notwithstanding that the relevant representation found by his Honour was that the Site was suitable for residential land use in accordance with the relevant Guidelines. No reference was made to any specific part of the Guidelines dealing with the delineation of the extent of hydrocarbon contamination or the migration of hydrocarbons. 207 The particulars of paragraph 18(j) refer to sections 2.5, 3 and 4 of the Guidelines. The primary judge made no findings about whether there was compliance by Report 19844C in relation to sections 2.5, 3 or 4 of the Guidelines. However, the first particular of falsity of the fourth representation repeats the particulars of falsity of the first representation. In those circumstances, it is appropriate to deal only with the question of whether the Site, or alternatively Lot U, was validated according to the Guidelines in the respects in which his Honour found a failure, namely, inadequate soil samples and inadequate testing of groundwater. 208 First, it is desirable to say something about the Guidelines.

The Guidelines 209 The Guidelines contain a PREFACE as follows: 'The NSW Environment Protection Authority (EPA) has prepared these guidelines for assessing and remediating service station sites in order to protect the environment and minimise the risk to public health from the future use of service station sites in NSW. This document has been prepared by the Contaminated Sites Section, Hazardous Substances Branch of the EPA in consultation with the Department of Water Resources, the Australian Institute of Petroleum and the Service Station Association. The EPA expects these guidelines will be used by environmental consultants, local councils, real estate agents, valuers and other groups with an interest in this area.' 210 The INTRODUCTION to the Guidelines is in the following terms: 'The Australian oil industry began to rationalise the number of service station sites in the early 1970s. At that time there were about 20,000 operating service stations in Australia, but the Service Station Association estimates that by the end of this decade there will be only 6,500 stations still in operation (Service Station Association 1992). Of the many thousands of decommissioned service station sites in NSW, there may be some with elevated concentrations of petroleum product in soil and groundwater. Because such elevated concentrations could pose an unacceptable risk to human health and the environment, a site contamination assessment may be necessary. If a service station site is being redeveloped, the appropriate planning consent authority (e.g. the local council) may require site assessment and remediation as part of the conditions of redevelopment approval (NSW Department of Planning 1991).' 211 Section 2 of the Guidelines, which is headed 'ASSESSING FORMER SERVICE STATION SITES', describes that process as follows: 'Assessment of old service station sites should conform to the Australian and New Zealand Guidelines for the Assessment and Management of Contaminated Sites… An approach to site assessment is discussed below. The site assessment should be documented in a detailed Site Assessment Report (see Section 5)'.

Section 2 contains subheadings as follows: '2.1 Desktop study before field work … 2.2 Assessing the soil of a former service station site … 2.3 Assessing groundwater at a former service station site … 2.4 Chain of custody … 2.5 Threshold concentrations … 2.6 Chemical analysis' Section 2.2.4 of the Guidelines, which is under the heading Assessing the Soil of a Former Service Station Site, sets out a proposed general sampling strategy. Section 2.3, as indicated above, deals with the assessment of groundwater. 212 Section 2.2.4 relevantly provides as follows: 'For a site area of 0.2 hectares, the site assessor should sample at least 28 evenly distributed sampling locations. This corresponds to an evenly-spaced grid of about 8.5 m. This sampling density is based on the 95% probability of finding a circular area 10m in diameter of elevated analyte concentrations at the soil surface (Gilbert 1987). At each sampling location, the site assessor should take soil samples at a minimum of three depths. Two of the sampling depths should be between 0-200 mm and 200-500 mm, depending on the soil stratigraphy and any apparent contamination. The third sampling depth should be below the estimated depth of the former tanks. Two samples should be taken at each depth, one for field screening and the other for laboratory analysis.' 213 Section 2.3 of the Guidelines deals with the assessing of groundwater in the following terms: 'If any groundwater is found at a site, it should be collected and submitted for laboratory analysis. The groundwater samples should be taken at the point where the saturated zone meets the unsaturated zone, or at greater depth based on field observations of contamination, using sampling procedures outlined in Appendix C. The 'Minimum Sampling Protocol' in Table 2 should help the site assessor select sampling locations, sampling depth and sampling density, and give him/her an idea of the contaminants that may be present. If the site assessor needs to vary this protocol, he/she should record the reasons for the variations. Where groundwater is present, the site assessor should drill at least one monitoring well on the site to assess groundwater quality. The reasons for the number and location of the well(s) should be documented.' 214 Appendix C to the Guidelines contains the following relevant item: '4. Groundwater The installation of groundwater monitoring wells and sampling of groundwater should be undertaken by suitably qualified personnel using currently acceptable practices. Refer to NSW Department of Water Resources (1992).' 215 Section 2.3 contains a table specifying the minimum groundwater sampling protocol. The table is relevantly as follows: Table 2 Minimum groundwater sampling protocol - Service station sites Location Minimum No. Action Analytes of boreholes Adjacent to and down hydraulic gradient of any contamination sources on site One per contaminated area on site Collect auger/borehole soil samples and water samples from monitoring wells. The sampling depth will be dictated by the local hydrogeological conditions. …

216 Section 2.5 of the Guidelines relevantly provides as follows: '2.5 Threshold concentrations Threshold concentrations are included in these guidelines… to assist site assessment. However, the scientific information needed to derive threshold concentrations is incomplete for some analytes, and guideline recommendations cannot be made. Threshold concentrations also have to allow for the limitations of available remediation technologies. … 2.5.1 Groundwater Groundwater quality is protected in New South Wales… it is an offence to pollute waters, including groundwaters… 2.5.2 How threshold concentrations have been selected Threshold concentrations have, wherever possible, been selected from Australian sources… In cases where the information was not available locally, Netherlands sources have been used… The threshold concentrations are based on an assessment of potential human health and ecological impacts. In some cases, the threshold concentrations may have to be lowered for aesthetic reasons. Threshold concentrations for soil and waters have not been harmonised to equilibrium conditions. Chemical equilibria may effect threshold concentrations.' Section 2.5 also contains tables setting out threshold concentrations for soils and waters. 217 Section 3 then deals with 'REMEDIATING FORMER SERVICE STATION SITES'. The preamble of that section relevantly says: 'Remediation strategies should take into account the environmental impact of the actual remediation operations, including the impact on air quality, water quality, noise levels and waste management…' 218 Section 3.1 relevantly provides as follows: 'Hierarchy of remediation methods. The EPA encourages the use of on-site, in-situ, emission controlled and economical treatment technologies. The following preferred options, in decreasing order of preference, should be used to remediate contaminated soils at service station sites: · On-site in-situ remediation of soil and groundwater… · On-site ex-situ treatment and remediation of soil and groundwater… · On-site landfarming… at sites where the soils are contaminated with low concentrations of volatiles or at sites remote from residential areas. · Off-site controlled soil treatment. · Off-site controlled remediation of soil… · Off-site disposal to a licensed waste depot… · 'Cap and contain' strategy with human health/ecological risk assessment to conform remediation is appropriate.' 219 Section 4 of the Guidelines deals with validation in the following terms: '4. VALIDATING FORMER SERVICE STATION SITES Validation sampling and chemical analyses must be carried out to demonstrate that the site has been remediated to a standard that is suitable for the proposed land use, and is not harmful to human health or the environment. The results of a successful validation should be contained in a Validation Report. PID and FID data are not enough to validate remediation of a site without supporting laboratory data. QA/QC procedures should be included in the validation sampling and analysis program (US EPA 1989). Judgmental sampling (i.e. sampling that does not use a systematic sampling pattern) is not appropriate for validation sampling. A systematic sampling pattern is recommended for the validation sampling plan. The data obtained from the validation program should be statistically analysed. For a former service station site to be validated, the upper 95% confidence limit on the average site concentration for each analyte must be below the relevant threshold concentration. 4.1 Validating surface soils To validate the remediation of surface soils, samples should be collected on a regular 8.5 metre grid or any demonstrably similar sampling pattern. This sampling density is consistent with that specified in section 2.2 above. 4.2 Validating tank excavation pits To validate a single tank excavation pit, one sample should be collected from the floor and one from each wall of the pit. To validate a multiple tank excavation pit, the number of samples should be increased to give a sampling density similar to that used to validate a single tank excavation pit. 4.3 Validating excavated remediated material and imported fill To validate remediated excavated homogeneous material, one sample per 25 m3 should be collected and analysed for site contaminants. Samples should be collected from the undisturbed bulk of the material, rather than from surface soils. To validate imported fill, one sample per 25 m3 should be collected and analysed for the site analytes specified for imported fill, as listed in Table 1. Samples should be collected from the undisturbed bulk of the imported fill, rather than from surface soils.'

Soil Samples 220 The primary judge dealt with the alleged failure to take adequate soil samples in the following way: 'In a report in which he reviewed reports prepared by the respondents' expert witnesses, Dr Swane opined that '[i]nsufficient soil samples were collected below the elevation of the storage tank in the area outside the tank pit, so that no proper assessment could be made of the migration potential for petroleum hydrocarbons down the site'. Paragraph 2.2.4 of the Guidelines requires sampling of the soil of a former service station site to be taken at a minimum of three depths, one of which must be below the estimated depth of the former tanks. It is common ground that EES did not do this, either on Lot T or Lot U.' 221 EES disputes that it was common ground that EES did not take samples below the estimated depth of the former tanks. EES says that the primary judge concluded that it was common ground that EES did not do what was required in paragraph 2.2.4 of the Guidelines, without addressing the detailed response by the witnesses called by EES and Caltex to Dr Swane's opinion. Thus, Ms Bauer, who prepared Report 19844B and Report 19844C, responded in detail to Dr Swane's opinion. A report by Mr Roger Parker filed on behalf of Caltex also took issue with the reasons given by Dr Swane. 222 In its submissions to the primary judge, Charben asserted that the Guidelines provided that samples at each sample location should be taken at a depth below the estimated depth of the former tanks. That assertion fairly reflects a sentence within s 2.2.4 of the Guidelines. The submissions then asserted: 'That this was not done is evidenced by the report of Dr Swane prepared at the Court's request.' It appears that, at some stage, Dr Swane was asked to review reports prepared by witnesses called on behalf of EES in response to Dr Swane's first voluminous report. Dr Swane produced a brief three page report on 13 May 2003, well into the trial. The first two pages of the further report consisted of a table commenting on observations made by Ms Bauer and Mr Stephenson on paragraphs of Dr Swane's first report. 223 The third page contained a statement by Dr Swane that he had reviewed reports produced by various witnesses. The report then went on to say: 'In reading these reports I have not found any information that changes any of the opinions given in my [earlier reports] regarding my concerns with the EES validation of the Killara site. These concerns are: (1) No groundwater wells were constructed or groundwater samples, with the result that EES was unable to properly assess the potential for groundwater contamination on-site. (2) No appropriate assessment was provided on the off-site migration potential of contaminants in either the groundwater or as soil-gas; (3) Insufficient soil samples were collected below the elevation of the storage tanks in the area outside the tank pit, so that no proper assessment could be made of the migration potential for petroleum hydrocarbons down the site; …' [Emphasis added] 224 Those observations were not directed to the Guidelines, but appear to be directed to the general competence of the validation carried out by EES. For example, the language of paragraph (3), which was cited verbatim by his Honour, does not follow the language of section 2.2.4 of the Guidelines. While those opinions may well be relevant to the question of whether EES carried out the validation negligently, they do not appear to bear on the question of whether Report 19844C complied with the Guidelines. 225 Section 6 of Dr Swane's report is concerned with 'Assessment of the EES Site Validation Program'. Paragraph 6.1 contains a 'Summary Opinion', in which Dr Swane said that the Site had not been validated according to the Guidelines. Dr Swane's opinion then provided seven reasons why validation had not been according to those standards. Those seven reasons are the particulars set out in paragraph 18(a) of the Statement of Claim. The first was as follows: '(i) soil samples were not collected at the recommended frequency across the Site, or alternatively across [Lot U], below the depth of the estimated storage tanks as recommended in section 2.2.4 of the EPA (1994) guidelines.' 226 The first question that arises in relation to section 2.2.4 of the Guidelines is the meaning properly to be attributed to the following sentence: 'The third sampling depth should be below the estimated depth of the former tanks.' The complaint appears to be that, at a number of sampling locations, no sample was taken to a level below the depth of the former tanks on the Site. However, that raises the question as to whether the Guidelines mean a depth below the surface at the sampling location that is greater than the depth of the tank from the surface where the tank is located. That is of considerable significance in the present case because of the steep slope of the site to the west. The question does not appear to have been addressed at the trial and was not addressed by his Honour. 227 Section 6.5 of Dr Swane's first report deals with the frequency of soil validation samples in Report 19844C. Dr Swane says, at section 6.5.8: 'The results of my assessment indicate that soil samples were not collected at the recommended frequency across the Site, or alternatively across [Lot U]. The main deficiencies include, but are not limited to: (i) soils below the depth of the estimated storage tanks, and particularly near the soil/rock interface, were not tested at the required frequency; (ii) surface soils outside the tank pit excavations were not tested at the required frequency; (iii) … (iv) …' 228 Ms Bauer, in paragraph 102 of a report prepared by her in response to Dr Swane's first report, said: 'Dr Swane's assertion is incorrect. EES's scope of works for Caltex did not require that validation samples be collected below the depth of the UST's. Nor did EES suggest in the conclusion of report 19844B or 19844C that we had collected samples for general site coverage below the RL of the UST's. … The majority of samples collected across Lot T were collected from below the depth of the base of the UST's… where samples were collected at the base of the tank pit excavations (which is below the base of the UST's), below the floor of the existing building and in excavation at the rear of the site. These surfaces were at or below the base of the tank pit excavations. Samples at the base of the tank pit excavations and on the south western half of Lot U were collected at or below the RL of the UST's…' 229 Ms Bauer then went on to say: 'The tank pit excavations on Lot T were sampled in accordance with the [Guidelines] in that samples were collected from each wall and floor for each tank as per Section 4.2. Samples were collected from the floor of the excavation located below the base of the former USTs on this site and all results for the TPH/BTEX in samples analysed from the walls and floors of the UST excavation were below guidelines, giving no cause to excavate beyond this depth… (c) On Lot U… samples were collected at the base of the tank pit excavations which was below the depth of the former storage tanks. …' 230 In response to paragraph 6.5.8 of Dr Swane's report, Ms Bauer responded as follows: '(i) …samples were collected from the base of the tank pit excavations which are below the depth of the USTs. Samples collected further down the slope of each Lot are also below the RL of the base of the USTs. …samples were collected at the frequencies required. Samples were not collected at depths of 7 to 8 metres below the surface at the soil/rock interface as there was no basis for such a collection to be taken and nor would such a collection have identified groundwater… (ii) Soil samples were collected at the required frequency across the site… (iii) [The Guidelines refer] to the collection and analysis of two samples from the tank pits in natural soil and one for lines (if separated from the tank pit) for lead. This frequency of lead analysis in soils was more than met on both Lot T and Lot U. (iv) …samples of imported fill were collected at the required frequency.' Ms Bauer's responses appear to adopt a different view as to the construction of section 2.2.4 of the Guidelines. 231 It may be that Dr Swane was expressing a view, not as to the requirements of the Guidelines, but as to what proper practice would have required. Thus, at section 6.5.12 of his report he said as follows: '6.5.12 In my opinion, the Site had a high risk that the deeper soils and rock could be contaminated, due to the inherent features of the Site and the fact that a high proportion of USTs at service station sites have been found to leak. The main feature that gives this Site a high risk of deep soil/rock contamination is the topography of the Site. The Site has a steeply sloping topography, with the USTs being located in the upper part of the Site. This meant that leaks from the UST were able to migrate downwards under gravitation forces. 6.5.13 The fuel would have been able to seep through the natural clay soil and the shale bedrock via cracks, fissures and permeable lenses that are inherently present in these materials in Sydney…' 232 Ms Bauer responded to those paragraphs of Dr Swane's report as follows: 'Dr Swane gives his opinion that the site, referring to Lot T and Lot U, had a high risk that the deeper soils and rock could be contaminated due to the inherent features of the site, the main one being the topography and also given the fact that many USTs at service station are found to leak. The information discussed by Dr Swane is supposition and he does not support his reason for thinking that there was a high risk of the deeper soils and rock with hard evidence. In fact [EES]'s final validation data in combination with Geotechnique's data for soil removed from the site and at the level of the current basement car park show no evidence of significant deep soil contamination…' 233 In the course of oral argument on the hearing of the appeals, senior counsel for Charben suggested that the thrust of Charben's complaint is that, if samples had been taken in accordance with section 2.2.4 of the Guidelines, groundwater would have been found and be shown to have been present, so as to engage clause 2.3 of the Guidelines, requiring a monitoring well to be drilled. That, however, appears to be a gloss on the way in which the complaint is pleaded and the way in which his Honour dealt with the issue. Senior counsel contended that, in paragraphs of his Honour's reasons where reference is made to 'groundwater' and 'interface drainage', his Honour was in truth setting out reasons for concluding that clause 2.2.4 had not been satisfied. That is not a fair reading of his Honour's reasons. 234 It may be that, upon a detailed analysis of the evidence, the conclusion could be drawn that there was a failure by EES to take samples of soil at the depths required by the Guidelines. However, the conclusion that samples had not been drawn at the appropriate depths should not have been drawn on the basis that that was common ground.

Groundwater 235 The complaint in relation to assessment of groundwater appears to be two-fold. First it was said that groundwater was present and therefore at least one monitoring well should have been drilled. Secondly, it was said that, even if there was no groundwater present, the last paragraph of section 2.3 of the Guidelines required that monitoring wells should still have been drilled unless excavation and chemical testing of the tank pits and other areas showed that there has been no migration of contaminants. That second complaint, however, appears to involve a misconception. That is to say, section 2.3 simply excludes the need for the drilling of monitoring wells, even if groundwater is present, if it is established that there has been no migration of contaminants: it does not impose an alternative basis for requiring drilling wells. 236 Paragraph 2.3 of the Guidelines requires that, if 'any groundwater is found at a site, it should be collected and submitted for laboratory analysis' and that where groundwater is present, 'the site assessor should drill at least one monitoring well on the site to assess groundwater quality'. In Report 19844B, the following statement appeared: 'Any groundwater encountered during the study was interface drainage, between the soil and weathered shale horizons.' The primary judge concluded, in effect, that Report 19844B indicated that 'groundwater and/or interface drainage' was encountered in the tank pit on Lot T. 237 There was considerable argument as to whether the statements in Report 19844B truly reported the finding of groundwater or interface drainage. Ms Bauer's evidence was clearly to the effect that she did not drill according to the Guidelines, because she did not consider that any groundwater had been intercepted in the course of the examination by EES. 238 Ultimately, the primary judge accepted evidence from Mr Parker that he would have made a different judgment from the judgment that was made by EES. Mr Parker's evidence was that, 'If you really didn't know what it was, the guidelines would suggest you should put in a well'. However, that is not what the Guidelines say. Indeed, it is not clear that his Honour found a failure to comply with paragraph 2.3 of the Guidelines. Rather, his Honour appears to have found that EES failed to meet an appropriate standard in exercising its judgment as to whether paragraph 2.3 of the Guidelines was engaged. 239 This complaint depends upon whether groundwater was found at the Site or whether groundwater was present on the site. EES says that it found no groundwater and there was no groundwater present on the site. 240 The term 'groundwater' is not defined in the Guidelines and there was apparently no evidence as to any special meaning of the word. The term is defined in the Macquarie Dictionary as 'the water beneath the surface of the ground, consisting largely of surface water that has seeped down'. In the Shorter Oxford English Dictionary, the word is defined as 'water held in the soil or in pores, crevices, etc, in rock, especially that below the water table, any underground water'. 241 Charben points to the following sections of Report 19844B as indicating that EES did in fact find groundwater, at least on Lot T: '3.4 Hydrogeology The site is underlain by clay soils and shale, with minor sandstone sequences which tend to have moderate water yield. The topography of the surrounding area suggests that groundwater flow would be to the west and southwest. Any groundwater encountered during the study was interface drainage, between the soil and weathered shale horizons. … 4.4 Local Stratigraphy … Following removal of the tanks, backfill sand was found to be wet due to water trapped in the tank pits or interface drainage between the backfill sand and natural soil profile. This water had no odour or visible sheen to suggest that there was any hydrocarbon impact. Water was pumped from the pit… prior to backfilling and compaction. … 5.0 Application of relevant guidelines ... Groundwater and/or interface drainage was not encountered during validation sampling except in the tank pit thus relevant groundwater criteria have not been consulted.' 242 Ms Bauer accepted that no groundwater investigations were conducted by EES and that, accordingly, it was not possible to assess the level of contamination in the groundwater on the Site. The primary judge observed that Ms Bauer drew a distinction between interface drainage and the underlying water table. She said that groundwater was not intercepted on the Site and that she expected it to be below 10 m depth. In her report, in response to paragraph 6.1.1(iii) of Dr Swane's report, saying that no groundwater wells had been installed, Ms Bauer relevantly said: 'No groundwater wells were constructed as this was not part of the work brief. It should also be noted that section 2.3 of [the Guidelines] begins by stating "If any groundwater is found at a site it should be collected and submitted for laboratory analysis." The report states that no groundwater was found during works at either site and this was one of the reasons why no groundwater samples were collected or analysed. Drilling to groundwater at depth was also not required. There was no evidence of any likely contamination to groundwater, and no reason to drill to groundwater. No groundwater was found therefore none was sent for analysis.' 243 His Honour, after citing that passage, made the following observation: 'Ms Bauer did not dispute the evidence of Dr Swane and Mr Kidd as to the need to undertake more extensive investigation if the Guidelines were to be satisfied. In cross-examination, Ms Bauer accepted that, based on the data it had accumulated, EES was not in a position to rule out the risk of offsite migration of contamination; indeed, on the basis of Mr Campbell's site notes, there was a 'potential' for off-site migration.' 244 After referring to the evidence of Mr Roger Parker, an expert witness called to give evidence on behalf of Caltex, who did not give evidence relevant to the question of how s 2.3 of the Guidelines would operate, his Honour simply reached the conclusion that the work carried out by EES in relation to validation of both Lot T and Lot U was insufficient to satisfy the Guidelines. However, a fair reading of the passages from Report 19844B cited above suggests the author was intending to draw a distinction between groundwater and interface drainage and that, since no groundwater or interface drainage was encountered, except in the tank pit, it was unnecessary to consult the groundwater criteria contained in s 2.3 of the Guidelines. 245 Dr Swane addressed the question of groundwater sampling in Part 6.7 of his report. He said: '6.7.1 The EES… validation reports indicate that no groundwater monitoring wells were constructed and sampled by EES at any stage of the investigation, remediation or validation of the Site. 6.7.2 In my opinion, the depth of the bore holes, test pits and excavations that were made at the Site during the investigation, remediation and validation programs and reported by EES (February 2000) were not deep enough to investigate potential groundwater contamination… 6.7.3 In my opinion, the Site had a high risk of groundwater contamination due to the potential for any leaks from the USTs to penetrate downwards into the deeper soils and rock… At the Killara Site, any leaks from the USTs would have continued to seep downward under gravity until the water table was reached. … 6.7.7 Because of the physical condition at the Site and the evidence that the USTs had leaked, it is my opinion that the groundwater at the Site should have been investigated as recommended in Section 2.3 of [the Guidelines]…' 246 It is by no means clear that Dr Swane was expressing the opinion that the Guidelines required investigation. Rather, he appears to be suggesting that, because of the particular characteristics of the Site, the investigation referred to in section 2.3 should have been carried out, even if the prerequisites in s 2.3 were not satisfied, namely, groundwater being found. 247 Ms Bauer responded to Dr Swane's comments as follows: '6.7.3 Dr Swane is incorrect when he says that the site had a high risk of groundwater contamination due to the potential for leaks from the USTs. Based on both [EES] and Geotechnique soil validation data, there was no evidence of a high risk of groundwater contamination occurring. … 6.7.6 Dr Swane states that the validation data obtained by [EES] showed that the USTs had leaked and caused significant contamination of the soils at the site… This statement is incorrect… 6.7.7 Based on the facts presented in Point 6.7.6 above, Dr Swane is wrong when he says that groundwater at the site should have been investigated.' 248 The issue between Dr Swane and Ms Bauer, therefore, appears to have been whether groundwater should have been investigated, not whether the Guidelines required investigation. It is difficult, therefore, to follow his Honour's reasoning that led to the conclusion that there was a failure to comply with section 2.3 of the Guidelines. 249 The preponderance of the evidence was that it was good professional practice to test for groundwater, given the nature and history of the Site. That may have been relevant in a case based upon EES's negligence but it is not relevant to a case based upon failure to comply with the Guidelines. Nowhere did the witnesses or his Honour identify any provision in the Guidelines requiring particular testing to ascertain whether there was groundwater present. The Guidelines set out what is required by way of the sampling and testing. Section 2.3 of the Guidelines comes into operation only if groundwater is found in the course of that testing. That was Ms Bauer's understanding of the Guidelines, as reflected in her correspondence to Caltex. That understanding is correct. There is no requirement in the Guidelines for the further testing that the witnesses spoke of. 250 At the hearing of the appeals, reliance was also sought to be placed upon the evidence of Dr Swane that refers to the requirements of a number of other guidelines published by the Authority. From this, it was submitted, one could discern a general objective to do the type of testing the witnesses spoke of. No reference is, however, made in the Statement of Claim to any guidelines other than those relating to former service station sites. Other guidelines are therefore irrelevant. 251 The question is whether Ms Bauer found groundwater on Lot T. The only aspect of Report 19844B to which his Honour had regard was the statement at an early point in Report 19844B that appears to equate groundwater with interface drainage. At a later point, Report 19844B states that the wetness of backfill sand found when excavating the tank pits was either attributable to water trapped in the tank pits or interface drainage between the sand and the natural soil profile. In that part of Report 19844B that is headed "Application of relevant Guidelines", it is stated categorically that groundwater and/or interface drainage was not encountered during validation sampling. 252 In her affidavit evidence and under cross-examination, Ms Bauer stated that no groundwater was found. She said that there was some rainwater in the excavation pits. This would of course not be characterised as groundwater. There had been rainfall during the excavation process. Ms Bauer went on to say that, whilst there was no groundwater 'as such', there could have been interface drainage between the fill and the clay. A fair construction of what Ms Bauer was saying, there and in her report, is that water in the nature of interface drainage was not observed, but it was considered a likely possibility for the cause of the sand's wetness, given the soil profile. At a later point in her evidence Ms Bauer referred to the soil being of a low permeable nature. She explained that any interface drainage was from rainfall and it followed a particular pathway. 253 The conclusion to be drawn from the evidence is that the only water encountered in the excavation pit was rainwater, and it was that water that was considered to be likely to drain between the sand and the soil. As such, it may have been 'interface drainage'. That is consistent with later statements in Report 19844B. The reason Ms Bauer was focussed upon the possibility of water travelling in this way, was because she was considering the potential for migration of contaminants. She formed the opinion that that was not likely to have occurred. The correctness of that opinion is not in question. 254 It follows that there was no evidence of groundwater being encountered. The reference in the early part of Report 19844B may be seen as loose, and even inaccurate, in expression. It would have been correct to say that the only relevant matter that arose in connexion with the question of migration of groundwater was interface drainage. That is consistent with the balance of Report 19844B. Therefore, the evidence did not support a finding of non-compliance with the Guidelines in that respect.

Conclusion as to Falsity 255 The evidence did not support the findings of misrepresentation made by the primary judge in relation to either Report 19844B or Report 19844C. Nor did the evidence establish that the Guidelines had not been complied with, in the respects found by the primary judge.

CHARBEN'S CLAIM AGAINST EES BASED ON NEGLIGENT MISSTATEMENT 256 Charben made a claim against EES for damages for negligent misstatement arising from the provision of Report 19844B and Report 19844C. The basis of the claim was as follows:

• EES knew, or ought to have known, that Charben would rely on any representation made by Caltex and EES concerning the remediation works carried out on the Site, or on Lot U or Lot T, and on any representation about the Works and the testing, sampling and validation of any remedial works carried out on the Site, or Lot U or Lot T, in order to determine whether it should complete the Lot T Contract or the Lot U Contract, or should object to any environmental report provided by Caltex under clause 44.5 of the Caltex Contract, or should assume that the levels of petroleum hydrocarbon pollution had been reduced to the relevant level, such that Charben could proceed to develop the Site;
• In those circumstances, EES owed Charben a duty to take reasonable care in making any representation to Charben concerning the remediation works carried out on the Site, or Lot T or Lot U; [emphasis added]
• In the circumstances referred to in the Statement of Claim in relation to the making of misleading and deceptive representations in contravention of the Trade Practices Act, EES made representations negligently. 257 Thus, the claim based on negligent misstatement alleged that representations were made to Charben. The pleading of the cause of action based on negligent misstatement provides no particulars to the alleged negligence or breaches of any duty to take care in making any such representation. Rather, the pleading, in effect, does no more than assert that, because the representations were misleading and deceptive, they were made negligently. However, making a representation that is misleading or deceptive does not necessarily constitute negligence or a breach of a duty to take care. Further, there was no basis for concluding that any representation in Report 19844C was made by EES to Charben. 258 Accordingly, the claim based on negligent misstatement rose no higher than the claim based on contravention of s 52 of the Trade Practices Act. That claim, which was dependant upon the making of misleading and deceptive representations, is dealt with at length above. On the hearing of the appeal, Charben accepted that its claim based on negligent misstatement did not add anything to its claim based on contravention of s 52 of the Trade Practices Act. If it succeeded on the latter, it had no need of the former. If it failed on the latter, it could not succeed on the former. For that reason, Charben abandoned any reliance upon its notice of contention in relation to its claims based on negligent misstatement. 259 It may be that a different cause of action would have been available to Charben. As outlined above, the effect of clause 44 of the Caltex Contract was that Charben was not bound to complete the purchase of Lot U until the Works, as defined, were completed and Caltex had provided Charben with the Environmental Report, as defined. However, subject to Caltex performing its other obligations under the Caltex Contract, once the Works were completed and the Environmental Report, as defined, had been provided to Charben, Charben was bound to complete, unless it invoked the process contemplated by clause 44.5 and notified Caltex that it was not satisfied that the Environmental Report indicated that the Works had been completed so as to reduce the levels of pollution to the relevant level. 260 As indicated above, it was not suggested on the hearing of the appeal that Report 19844C did not indicate that the Works, as defined, had been completed. Indeed, the proceeding appears to have been conducted on the basis that Report 19844C satisfied clause 44.2(b) of the Caltex Contract, in that it was an environmental report from Caltex's environmental consultant 'which indicates that the Works have been completed'. That is to say, the parties appear to have accepted that Report 19844C indicates that Works consisting of the reduction of the levels of petroleum hydrocarbon pollution of Lot U, caused by its use as a service station, to a level that would permit the use of Lot U in accordance with the purposes and uses permitted by the present zoning of Lot U, had been completed. It is tolerably clear from the evidence summarised above that Mr Beilby understood that Report 19844C indicated, in the relevant sense, that the Works had been completed and, in reliance upon and induced by that indication, advised Charben to complete the purchase of Lot U. 261 If that indication was made negligently in breach of a duty of care owed to Charben, there may have been a basis for liability on the part of EES. However, no such allegation is made in the Statement of Claim. Rather, as indicated above, specific representations were alleged. The primary judge found that certain of the specific representations alleged by Charben that had been made by EES in Report 19844C were made negligently. However, no witness called on behalf of Charben said that he understood Report 19844C to make any of the alleged specific representations. On the other hand, his Honour was not asked to decide, and did not decide, whether EES was negligent or failed to take care in providing a report that indicated, in the relevant sense, that the Works had been completed. 262 The primary judge found that EES knew or ought reasonably to have known, that Report 19844C would be communicated to members of an identifiable class, being prospective purchasers of Lot U, for the purpose of inducing them to enter into the type of transaction that Charben did in fact enter into, namely, purchase of Lot U from Caltex. His Honour found that EES also knew that it would be very likely that any purchaser would enter into such a transaction in reliance on the terms of Report 19844C and thereby risk incurring economic loss if Report 19844C was wrong. 263 However, as his Honour observed, the question was whether Charben had a right of action against EES in relation to those negligent statements in circumstances where Report 19844C was delivered by EES to Caltex and not to Charben. His Honour concluded that, since Report 19844C was neither produced at Charben's request nor produced by EES with the intention of causing Charben to act in reliance upon it, the circumstances were not such as to impose upon EES a duty to that identifiable class, of prospective purchasers of Lot U, to take care in producing Report 19844C, indicating that the Works have been completed. 264 There is no evidence that Charben was aware of the terms of clause 44 of the Caltex Contract, which required the provision of the Environmental Report by Caltex's environmental consultant. On the other hand, Ms Bauer was aware that Caltex wanted a report to show that the levels of hydrocarbon pollution in Lot U had been reduced, although she said that she was not aware that Caltex was going to use a report from EES to demonstrate to potential purchasers that Lot U was suitable for someone to buy for residential land use. She accepted that Caltex would show Report 19844C to someone who was coming to Lot U with an interest in buying it. Ms Bauer accepted that a prospective purchaser of Lot U might be an interested party to whom Report 19844C might be addressed. 265 Ms Bauer also accepted that anyone purchasing Lot U would be an interested party for the purchaser's own purpose, although Ms Bauer did not know what purpose any particular purchaser might have. That evidence was given in the context of questions concerning the introduction to the EPA's guidelines for consultants reporting on contaminated sites. The introduction to those guidelines is in the following terms: 'The purpose of these guidelines is to ensure that reports prepared by consultants on the investigation and remediation of contaminated land contain sufficient and appropriate information to enable efficient review by regulators, the Site Auditor and other interested parties.' That is to say, Ms Bauer accepted that a prospective purchaser might be an interested party to whom the EES Report might be addressed, although she could not know what the purpose of such a purchaser might be. 266 It is by no means clear that, in such circumstances, EES was not under a duty to take care in providing Report 19844C, even if EES had no knowledge of the terms of the Caltex Contract. Having regard to the pleading of the negligent misstatement claim and the abandonment of any reliance upon that claim on the appeal, it is not necessary for this Full Court to make a decision on the question of whether EES owed a duty to prospective purchasers of Lot U in preparing Report 19844C. However, these reasons should not be taken to be an endorsement of the view that no duty of care was owed by EES to Charben in the circumstances of this case.

CHARBEN'S CLAIM AGAINST EES BASED ON NEGLIGENCE 267 Charben seeks to support the orders of the primary judge against EES on the basis of its pleading of negligence. In essence, the claim in negligence was that EES owed a duty to Charben to take care in carrying out the work of reducing the levels of petroleum hydrocarbon pollution of Lot U to a level that would permit the use of Lot U in accordance with the purposes and uses permitted by the then present zoning of Lot U. Charben asserted in the Statement of Claim that, in the circumstances referred to in paragraphs 17A and 18 of the Statement of Claim, EES breached that duty, in that it carried out that work negligently. 268 Paragraph 17A alleges that: (a) Lot T had not been appropriately remediated; (b) Lot T had not been validated in accordance with the appropriate applicable standards; (c) the tank excavation had not been validated according to the Guidelines, nor had it been validated in accordance with current industrial/commercial guidelines in keeping with the zoning of Lot T at the time; (d) Lot T generally was not suitable for all land uses; (e) Lot T posed a threat to neighbouring sites. 269 Paragraph 18 alleges that: (a) The Site or, alternatively Lot U, had not been validated according to the Guidelines in the respects identified by Dr Swane, as indicated above. (b) The Site or, alternatively Lot U, was not validated as a whole since the validation work did not include: o the testing of any groundwater; o the proper validation of soils and rock located down gradient of the storage tanks and at a depth of 1.0 - 1.5 metres below the ground surface; o the assessment of the odorous conditions of soils and rock remaining at the Site or, alternatively Lot U; o the assessment of volatile hydrocarbon gas levels in the ground at the Site or, alternatively Lot U. (c) Report 19844C provided no information that supported the view that the subsurface conditions at the Site or, alternatively Lot U, were likely to prevent significant migration of petroleum hydrocarbons. (d) The tank pit was not able to be considered successfully validated for the reasons referred to in (a) above. (e) Certain validation samples did not show that the former service station activities had not impacted on the Site or, alternatively Lot U. (f) Phytotoxicity was a concern for the Site or, alternatively Lot U, as it was being validated for standard residential land use, as specified in the Guidelines. With certain soils, the Guidelines recommended that other tests be undertaken to determine the appropriate phytotoxicity-based investigation levels. The use of the phytotoxicity criteria recommended by the Authority would have meant the use of lower and more stringent soil acceptance criteria for metal contaminants in the remediation works. (g) The Guideline levels for the protection of terrestrial organisms depended on the intended land use, rather than the subsurface conditions on the Site or, alternatively Lot U, contrary to the assumption made by EES. (h) The organic laboratory results for certain substances did not confirm that the storage tanks and pipeline excavations had been appropriately validated according to the Guidelines for the reasons referred to in (a) and (b) above. (i) The laboratory results for certain substances on samples collected from bore holes and validation samples that covered the remainder of the Site or, alternatively Lot U, did not confirm that the subsurface soils on the Site or, alternatively Lot U, had been appropriately validated according to the Guidelines. (j) The Site or, alternatively Lot U, had not been remediated to a standard suitable for residential land use in the respects identified by Dr Swane. 270 The breaches of duty alleged in paragraphs 17A and 18 are not entirely appropriate to disclose a case of failure to take reasonable care in carrying out the remediation work. The primary judge made no findings as to those allegations, except in so far as they alleged failure to comply with the Guidelines, since his Honour concluded that there was no duty of care by EES to Charben, as alleged in the Statement of Claim. 271 Having concluded that there was no duty of care owed by EES to Charben as the purchaser of Lot U, his Honour did not examine the evidence with a view to determining whether there was a breach of such a duty, on the part of EES, in reducing the levels of pollution. That question had nothing to do with whether Report 19844C contains false representations about the Guidelines. On the other hand, the question has a lot to do with whether the Works were carried out in a non-negligent manner. Of course, whether the remediation work complied with the Guidelines may be relevant to the question of negligence. 272 Dr Swane's report says something about those matters and suggests that EES may have failed to achieve an appropriate professional standard. Ms Bauer, Mr Rodney Clifford Harward, a hydrogeologist, and Mr Roger John Parker, a consulting engineer specialising in contaminated land assessment and remediation, each made detailed written reports responding to Dr Swane's report. The primary judge did not resolve the conflict between those witnesses because of the view his Honour took on the question of whether EES owed Charben a duty to take care. 273 The principles for determining when a purchaser of land will have an entitlement to recover damages for economic loss from a defendant who provided services negligently to the purchaser's predecessor in title are by no means clear. At least two prerequisites must be satisfied before liability can be established. In the present case it must be shown, first, that there was a relevant element of known reliance or dependence by Caltex on EES in carrying out the Works or an assumption by EES of responsibility to Caltex in carrying out the Works. Secondly, it must be shown that Charben was, in a relevant sense, vulnerable to the economic consequences of any negligence on the part of EES in carrying out the Works. That second requirement may involve demonstrating that Charben could not have protected itself against the economic loss that it alleges it has suffered. Vulnerability, in the relevant sense, is Charben's inability to protect itself from the consequences of want of reasonable care on the part of EES, either entirely or at least in the way that would cast the consequences of loss on EES (see Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [23], [24] and [26]. 274 Whether or not EES owed a duty of care to Caltex will depend upon the arrangements between EES and Caltex that gave rise to the performance of remediation work by EES on Lot U. 275 The instructions that resulted in preparation of Report 19844C were given to EES by Caltex in August 1998. On 10 August 1998, EES wrote to Caltex relevantly saying: 'Validation of Caltex Killara and adjacent workshop, NSW In response to our recent conversation [EES] are pleased to present a proposal to carry out validation and partial supervision of remediation of the Caltex service station Killara and the adjoining leased workshop located at 692 Pacific Highway Killara, NSW. We understand that the site on which the service station is located is owned by Caltex… and the adjoining site on which the workshop is located is leased by Caltex… Both sites are for sale and use as a service station would be discontinued. … Remediation would be undertaken by A.C.A Foster Pty Ltd. The removal of the tanks will not be supervised. Contaminated soil and backfill will be stockpiled on site for classification by [EES] for offsite disposal or compaction on site. It is estimated that this will involve two half day inspections. While or before the tanks from both sites are being removed, the fill beneath the workshop and the fill at the rear of the service station site will be investigated to ensure compliance with the medium density residential criteria (NEHF D Criteria). This will be undertaken as part of the site validation. If the fill proves to be contaminated removal will be supervised and then validated. Once tanks are removed all tank pits will be sampled in accordance with the NSW EPA Guidelines for assessing service station sites. The remainder of the sites will be validated after remediation of fill, if any, according [to] NEHF D criteria and NSW EPA Soil sampling guidelines.' That proposal was accepted by Caltex on 13 August 1998 by facsimile from Mr Caples saying: 'Please proceed with the decommissioning activities at Killara…' 276 On 19 October 1998, EES wrote to Caltex, for the attention of Mr Caples, relevantly saying as follows: 'In response to your phone conversations with Philip Mulvey on the 15 and 16 October 1998, [EES] are pleased to present a proposal to undertake the removal of metal rich contaminated soil from the rear of the leased workshop portion of [Lot T]. [EES] conducted an Environmental Site Assessment (ESA) on this property in April 1998 and carried out validation of the tank pits at the front of the site during September 1998. On completion of remedial works a validation report is to be provided to Caltex… for [the] purpose of validating the site in accordance with the current NSW guidelines for commercial/industrial sites (NEHF health based investigation levels (1998)). Remediation work will be undertaken by [EES] with scientific supervision and validation by [EES]. 1.0 Objectives and insurance The project brief specifies the following to be carried out: - carry out removal of metal rich contaminated soil at the rear of the leased site and dispose to the adjacent Caltex owned service station site; and - provide a validation report for the leased portion of the site. … 2.0 Methodology All services such as power, water, gas, electricity and telecommunications were located and all unnecessary services disconnected prior to tank decommissionign (sic) which occurred in September 1998. A security fence was also put in place at this time on the Pacific Highway frontage. … 3.0 Occupational health and safety requirements … 4.0 Validation The validation works will be conducted according to the NEHF health based investigation levels (1998) for commercial/industrial sites and according to the NSW EPA Sampling design guidelines (1995). … 5.0 Time scope and bioremediation The removal of contaminated fill from the rear of the site is expected to be completed within a week. Laborotory (sic) analysis will be undertaken on a three day turnaround. Depending on laboratory results and whether further work is required, a validation report can be supplied within three days of receiving final laboratory results. 6.0 Project cost …' 277 Report 19844B was forwarded to Caltex under cover of a letter dated 9 November 1998, which was signed by Ms Bauer. The letter included the following: 'The tank excavation has been validated according to the NSW EPA Guidelines for assessing service station sites - December 1994. Validation of the site was undertaken in accordance with current industrial/commercial guidelines in keeping with the property's current zoning.' Other relevant parts of Report 19844B and its conclusion are set out above. 278 The INTRODUCTION section of Report 19844C recognised that the Site was being sold by Caltex. That section relevantly said: '[EES] were requested by [Caltex] to undertake validation of the former Caltex service station located at 692B Pacific Highway, Killara, NSW. The site is being sold and is proposed to be redeveloped for residential purposes. The former service station operated in conjunction with a workshop located immediately to the north of 692B, the two lots being known as 692 Pacific Highway, Killara. Prior to handing back the lease on the workshop site, [EES] decommissioned underground storage tanks on the site including remediation and validation works. These activities [were] presented in [Report 19844B]. A potential exists for hydrocarbon impacts on the site relating to the presence of a number of underground storage tanks (USTs) and associated piping. … This study was conducted according to [EES's] proposal… dated 10 August 1998, and a letter from [Caltex] approving the proposed works dated 13 August 1998. 279 The OBJECTIVES section of Report 19844C relevantly said: 'The objective to be achieved during the site remediation process was to validate the site to confirm it is suitable for the proposed residential usage. Work undertaken to meet this objective included the following:

• validation of tank pit excavations and piping excavations after removal of USTs and associated pipework;
• validation of material used to backfill excavation (both imported fill and bioremediated soils);
• validation of the site as a whole; and
• provision of a validation report. The work undertaken to meet the above is discussed in the following sections.' 280 Thus, the terms of Report 19844C demonstrate that EES knew that it had been commissioned in connection with the proposed sale of Lot U. That question was explored in the course of oral evidence given by Ms Bauer. She accepted that she was aware that Caltex was looking at selling Lot U and wanted Lot U remediated as suitable for residential land use. 281 Ms Bauer accepted that EES had a duty to let Caltex know if EES was of the opinion that, following remediation and validation, the Site had characteristics that either made it necessary for further work to be done or imposed constraints in the way that development could be undertaken. However, Ms Bauer would not accept that any such duty had anything to do with a proposed sale. Nevertheless, that assumption of responsibility may well be sufficient to satisfy the first element necessary to establish liability on the part of EES. 282 Charben was in a position where it had no contractual or other right, after it entered into the Caltex Contract, to ascertain whether the hydrocarbon pollution of Lot U had been reduced to the relevant level. It was dependent upon the terms of clause 44 of the Caltex Contract. The effect of clause 44 was to impose upon Caltex a contractual obligation to instruct its environmental consultant to carry out the Works and to provide a report from its environmental consultant indicating that the Works had been completed. Under clause 44.5, Charben was afforded the opportunity of having the Environmental Report referred to a certified contaminated site auditor to determine whether the Works had been completed so as to reduce the levels of hydrocarbon pollution to the relevant level, assuming Caltex did not rescind the Caltex Contract upon notification by Charben pursuant to clause 44.5. In circumstances where Charben was bound to complete the Caltex Contract if, on its face, the Environmental Report indicated, in the relevant sense, that the Works had been completed, EES could not have protected itself against the economic loss that it now claims. Charben was vulnerable to the risk of loss from the failure of EES to carry out the Works competently and in accordance with relevant professional standards. 283 However, Charben was under no compulsion to enter into the Caltex Contract. It could have negotiated different terms concerning the reduction of pollution levels. For example, Charben could have stipulated for its own consultant to supervise and oversee the Works and to provide a report indicating that the hydrocarbon pollution had been reduced to the relevant level. Charben was acutely aware of the potential risk, as the terms of clause 44 of the Caltex Contract and the special conditions of the Lot T Contract eloquently demonstrate. 284 In its pleaded defence, EES asserted that, if Charben has suffered loss or damage, it was caused, or was contributed to, by Charben's own conduct or negligence. Relevantly, EES particularised Charben's conduct and negligence as follows:

EES'S CLAIM TO INDEMNITY 290 In its defence, EES asserted that the exchange of facsimiles of 30 and 31 May 2000 between EES and Charben constituted an agreement that the indemnity clauses contained in the Caltex Contract would apply to Charben and that Charben would hold EES free from all actions and liability in respect of Report 19844C. EES then asserted that, if EES has any liability in the proceeding to Charben, such liability falls within the terms of the indemnity. EES also asserted that any costs incurred by it in respect of the proceeding also fall within the terms of such indemnity. 291 The primary judge observed that EES made no submissions in support of its assertion to be entitled to indemnification by Charben. His Honour concluded, in any event, that the defence has no substance. His Honour considered that, having regard to the lack of any discussion about the indemnity, it was questionable whether it could be regarded as part of any agreement between Charben and EES. His Honour concluded that, assuming it was, the substance does no more than acknowledge the continued application, as between Charben and Caltex, of the special conditions in the Caltex Contract and it did not confer on EES any right of indemnity. 292 The facsimile of 30 May 2000 was sent in the context of EES obtaining the consent of Caltex to respond to the questions from HLA in relation to Report 19844C. It does not purport do more than confirm the continuation of the indemnity in the Caltex Contract. It does not purport to create any new entitlement to indemnity in favour of EES that did not previously exist. The indemnity in clause 44.4 of the Caltex Contract was not expressed to extend to 'Caltex and their consultants' but refers only to Caltex as 'the Vendor'. The primary judge correctly rejected any defence based on the indemnity contained in the Caltex Contract.

CONCLUSION AS TO THE EES APPEAL 293 It follows that the EES appeal must also be upheld. The judgment in favour of Charben against EES should be set aside. In lieu of the orders made by the primary judge, there should be an order that the proceeding be dismissed. The costs of the proceeding below and of the appeal are reserved. The parties are to file and serve brief written submissions on costs by 4:00 pm on Friday 27 January 2006.

ISSUES RELATING TO LOSS AND DAMAGE 294 In the light of the above conclusions, it is not necessary to deal with the issues as to quantum raised in the Caltex appeal. EES adopted the submissions made by Caltex in relation to those issues. However, since the issues were argued in full, it is desirable to say something about them. It is possible, of course, that the issues would not arise in the same way in the assessment of damages for negligence, if there were a finding that there was a breach of duty by EES as pleaded in the Statement of Claim. 295 The primary judge dealt with what was described as a point of principle concerning 'Increased costs before February 2001'. The issue concerned a head of damage consisting of the costs incurred by Charben for removal of contaminated soil from the Site. His Honour concluded that an additional sum had to be paid to 'Glencoe' for removal of soil from the Site, which would not have been incurred if there had been remediation of the Site to the appropriate level. His Honour found that the additional expense was incurred because the soil was not disposable at a regular dump and had to be carted to a specialised facility (conducted by Enviroguard). 296 However, the cost of ensuring that the Site was completely free from contamination was not necessarily loss occasioned by any breach of clause 44 of the Caltex Contract or misleading statements that remediation had been carried out in accordance with the Guidelines. That is to say, Caltex was not obliged to restore Lot U to the condition in which it would have been if it had never been used for a contaminating purpose. Further, there was no finding that compliance with the Guidelines would not have achieved that condition. The only evidence before the primary judge was that, since Lot U had been used as a service station, it would be necessary for excavated material to be disposed of at a special dump, even if the pollution on Lot U had been reduced to the appropriate level. Accordingly, there was no evidence that Charben had incurred additional costs in disposing of the contaminated soil above the cost that it would have incurred had the pollution been reduced to the appropriate level as described in clause 44.2(a) of the Caltex Contract. 297 The only evidence on that topic was from Theo Paradisis. Theo Paradisis said that, if the soil had been 'clean fill', it would have been possible to dump the soil at another site, which was close to Killara and which was being managed by a business colleague. He said that dumping the soil at the Enviroguard facility was more expensive than dumping clean soil, as he had to pay Enviroguard for the cost of dumping and the trucks had to travel further to dump the soil. 298 Theo Paradisis gave his evidence in chief by affidavit. His Honour said that he did not accept that the reference to how he would have been able to dispose of 'clean fill' was a reference to soil that had never been contaminated at all. His Honour observed that Theo Paradisis had previous experience with service station sites and knew that a former service station site was unlikely ever to be in pristine condition. His Honour concluded that the term 'clean fill' was used to refer to fill that was able to be accepted at any regular dump, being fill that posed no hazard to a normal urban environment. 299 However, there was no basis for that conclusion. Theo Paradisis did not say that. On the other hand, he does not appear to have been cross-examined about the statement in his affidavit. A sentence in his affidavit appears to have been rejected and, as it stands, the affidavit simply refers to 'clean fill', without explaining what Theo Paradisis meant by that term. He was asked some questions about the quantity of material taken by Enviroguard. 300 Neither the affidavit evidence nor the cross-examination was directed to elucidating what Theo Paradisis meant by 'clean fill'. His responses in cross-examination rather suggest that he had in mind that the whole of the excavated material from the site was industrial waste. That seems to be different from 'clean fill'. Thus, he said in cross-examination that most of the soil was classified as 'industrial waste, that is still like a contaminated waste and it had to go to an industrial landfill'. Theo Paradisis said that it was his understanding all along that the soil was contaminated but to varying degrees. He said that obviously the top layer was the worst form of contamination and the rest was all industrial and inert and 'that is a form of contaminated soil'. 301 The primary judge was somewhat generous to Theo Paradisis in dealing with what Theo Paradisis meant by the term 'clean fill' in relation to dumping waste. His Honour gave a construction to language that, on one view, was quite unequivocal, being a construction that entirely changes the meaning of the language of the affidavit. There was undisputed evidence that, even if Lot U had been remediated to the level contemplated by clause 44.2(a), the excavated material would not be regarded as 'clean fill' and would have required disposal in the way in which it was actually disposed of. His Honour erred in concluding that there was any evidence that additional cost was incurred in the transport of excavated material, by reason of the fact the pollution of Lot U had not been reduced to the extent contemplated by clause 44.2(a). 302 The position may have been different if it had been found that EES was negligent in carrying out the remediation. If there were a finding that, without negligence, the Site would have been remediated to the condition it would have been in but for use as a service station and mechanical workshop, the expense may be regarded as attributable to the negligence. That would depend upon any finding as to breach of the duty owed by EES and the consequence of that breach of duty, assuming that EES owed such a duty. 303 Several further minor issues were raised in the Caltex appeal. However, those issues have not been pressed by Caltex. 304 A further issue was raised by EES concerning the installation on the Site of a bioventing system. EES contended that the carrying out of that work was unnecessary to achieve remediation and it was unreasonable for Charben to have done that work. EES contended that there was no causal connection between any conduct on its part and the expense incurred by Charben in the installation of the bioventing system. 305 However, the position might be different if Charben were to succeed against EES because EES breached a duty owed to Charben to take care in carrying out the remediation. In order remediate the Site, Charben relied on the advice of qualified consultants as to whether the installation of the bioventing system was necessary. It acted reasonably in doing so, to ensure that the Site was fit for the purpose for which Charben acquired it. The primary judge made no error in finding that the cost of the installation was an expense reasonably incurred in order to overcome the contamination. Whether it was an expense that was caused by any breach of duty to take care is another question, which would fall to be determined when any breach of duty has been established. 306 Finally, an issue was raised by Charben concerning the disallowance by the primary judge of the sum of $10,000 in relation to the fees of Geotechnique and HLA. The fees related to a site audit and expenditure on testing. The evidence before the primary judge indicated that, whether or not the Site was properly remediated, the Council would require a site audit to establish that fact and fees would have been incurred in providing such an audit. One could reasonably assume that such an audit would involve expenditure on testing. There is no error on the part of the primary judge in deducting the sum of $10,000 as an allowance for such expenditure.

RELEVANT PROVISIONS OF THE LOT T CONTRACT 8. (a) The Purchaser acknowledges that: (i) the adjoining property comprised in Folio Identifier U/391532 and known as 692B Pacific Highway, Killara ("the adjoining property") has been used for the storage and dispensing of petroleum products; (ii) the owner of the adjoining property has installed underground tanks for the storage of petroleum products on the property sold under this Contract for Sale; (iii) the Vendor has requested the owner of the adjoining property to remove the underground tanks and clean up environmental contamination on the property caused by the owner of the adjoining property to a commercial standard; (iv) the excavations resulting from clean up works or from the removal of the underground tanks have been or will be backfilled and the filling has not been and will not be compacted; and (v) in connection with the removal of the underground tanks and clean up works, water, electricity and gas services and telephone connections to the property may be disconnected.

(b) The Purchaser acknowledges that the Vendor does not warrant or represent that: (i) the property is free from environmental contamination; (ii) the clean up works will be completed; (iii) if the underground tanks remain on or under the land at the Completion date, they may be or have been rendered fit for use; and (iv) soil on the property has been or will be compacted to any particular standard or that the property is suitable for construction of improvements on the property.

(c) The Purchaser accepts the property as described in this special condition 8 and must not make any requisition, objection, claim for compensation or other claim or delay completion or rescind or terminate in respect of any matter arising out of any of the matters set out in this special condition.

RELEVANT PROVISIONS OF THE CALTEX CONTRACT 43. ACKNOWLEDGEMENT OF PREVIOUS USE (a) The Purchaser acknowledges that the Purchaser has inspected the property and is aware that it has been used for the storage and dispensing of petroleum products. The Purchaser further acknowledges that various structures have been erected on the property and that receptacles for the storage of petroleum products and pipes, valves, pumps and other means of transport and dispensing of petroleum products (the "Petroleum Equipment") have been installed on and under the land. (b) The Vendor does not warrant or undertake that all Petroleum Equipment has been or before completion will be removed from the property. In the event that any Petroleum Equipment remains on or under the land on the date of completion, then the Purchaser acknowledges that that Petroleum Equipment is no longer available for use and may be or have been rendered unfit for use. (c) The Purchaser further acknowledges that the Purchaser is aware that excavations resulting from clean up works or from the removal of underground receptacles for the storage of petroleum products or resulting from demolition of improvements have been or will be backfilled and that the filling has not been and will not be compacted. The Vendor does not warrant or represent that soil on the property has been or will be before completion compacted to any particular standard nor does the Vendor warrant or represent that the property is suitable for construction of improvements on the property. The Purchaser acknowledges that the Vendor does not make any such warranties or representations and shall not make any requisition, objection, claim for compensation or other claim or delay completion or rescind or terminate in respect of compaction (or lack thereof) of any soil on the property or the property's suitability for construction of improvements. (d) The Purchaser accepts the property as described in this clause and shall not make any requisition, objection, claim for compensation or other claim or delay completion or rescind or terminate in respect of any matter arising out of any of the matters set out in this clause. 44. ENVIRONMENTAL WORKS 44.1 Removal of tanks (a) The Vendor will remove from the property all underground tanks for the storage of petroleum products, the existence of which tanks is known to the Vendor or becomes known to the Vendor prior to completion. (b) The Vendor does not warrant or undertake that all tanks for the storage of petroleum products have been or before completion will be removed from the property. In the event that any such tanks remain on or under the land on the date of completion, then the Purchaser acknowledges that they may be or have been rendered unfit for use. (c) The Purchaser further acknowledges that the Purchaser is aware that excavations resulting from the removal of underground tanks for the storage of petroleum products have been or will be backfilled and that the filling has not been and will not be compacted. The Vendor is not obliged to excavate or remove from the property any pavement, hard stand area or foundation of any improvement nor replace any such items which may be excavated. (d) The Purchaser accepts the property as described in this clause and shall not make any requisition, objection, claim for compensation or other claim or delay completion or rescind or terminate in respect of any matter arising out of any of the matters set out in this clause. 44.2 Works The Purchaser acknowledges and agrees that: (a) after the Vendor removes the tanks in accordance with clause 44.1, the Vendor will cause its environmental consultant to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the use of the property for the Purchaser's proposed use which the Purchaser acknowledges shall be in accordance with the purposes and uses permitted by the present zoning of the property (the "Works")" [sic] (b) upon completion of the Works, the Vendor will provide the Purchaser with an environmental report (the "Environmental Report") from its environmental consultant which indicates that the Works have been completed; (c) completion is conditional upon completion of the Works and the Vendor providing the Purchaser with the Environmental Report; (d) the Vendor is unable to determine the time required for the completion of the Works and the Purchaser shall not make any requisition, objection, claim for compensation or other claim in respect of the Works being delayed by reason of the Vendor obtaining the necessary consents from the local authorities to commence and complete the Works, adverse weather, the rate of evaporation or anything else beyond the control of the Vendor. (e) the Vendor does not represent or warrant that the Purchaser will be entitled to use the property for the Purchaser's proposed use specified in clause 44.2(a) nor that the zoning of the property permits or will permit that use and that the Purchaser has satisfied himself in relation to the use to which he will be entitled to undertake on the property. 44.3 Cost of Works (a) The Vendor shall notify the Purchaser if the Vendor becomes aware that the cost of the Works will be in excess of $50,000.00 and the Purchaser shall then notify the Vendor within 14 days of service of the Vendor's notice whether the Purchaser will pay the cost of the Works in excess of $50,000.00 (the "Excess"). (b) If the Purchaser notifies the Vendor that the Purchaser will pay the Excess or if the Vendor is of the opinion that the cost would not exceed $50,000.00 the Vendor shall at its own expense up to $50,000.00 carry out the Works in accordance with Clause 44.2. (c) If the Purchaser notifies the Vendor that it will not meet the Excess or if the Purchaser fails to notify the Vendor in accordance with Clause 44.3(a) within the 14 days referred to in that Clause, the Vendor may either: (i) carry out the Works at its own expense; or (ii) rescind this contract by written notice to the Purchaser. (d) If paragraph (b) applies, the Purchaser shall pay the Excess to the Vendor on completion, but if completion does not occur for any reason (other than default by the Vendor or valid rescission by the Vendor or the Purchaser) the Purchaser shall pay the Excess to the Vendor within 5 days of receiving notice to do so. 44.4 Release and indemnity (a) From the date of completion, the Purchaser releases and discharges the Vendor from all actions, suits, causes of action, claims and demands (including, without limitation, any claim or demand for costs or expenses) which the Purchaser:

against the Vendor arising out of or in any way connected with the Works, the Environmental Report, or any environmental contamination in, under or on the property or in, under or on land which is in the vicinity of the property. (b) From the date of completion, the Purchaser indemnifies the Vendor against any claims, liability, demands, suits, proceedings, losses, costs, penalties or damages incurred by the Vendor as a result, directly or indirectly, of the existence or otherwise of the Works, the Environmental Report or any environmental contamination in, under or on the property or in, under or on land which is in the vicinity of the property. 44.5 Objection to Environmental Report If the Purchaser is not satisfied (acting reasonably) that the Environmental Report indicates that the Works have been completed so as to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the Purchaser's proposed use of the property as specified in clause 44.2(a) then the Purchaser may so notify the Vendor (but only within seven (7) days after the Vendor provides the Purchaser with the Environmental Report and in this respect time is of the essence). Upon receipt of such notice, the Vendor may either: (a) rescind this contract and refund the deposit monies paid under this contract to the Purchaser and the provisions of clause 19 shall therefore apply; or (b) refer the Environmental Report to a certified contaminated site auditor (Auditor) who will determine whether the Works have been completed so as to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the Purchaser's proposed use of the property as specified in clause 44.2(a). The Auditor to whom the Environmental Report is referred pursuant to paragraph (b) will act as an expert and not as an arbitrator and the determination of the Auditor will be final and binding on the parties. 44.6 Auditors Costs The Auditor's costs in providing the Auditor's determination under clause 44.5(b) will be: (a) payable by the Purchaser if the Auditor determines that the Works have been completed to the standard referred to in clause 44.2(a) in which case it is a condition of completion that the Purchaser pay those costs to the Vendor on completion; or (b) payable by the Vendor if the Auditor determines that the Works have not been completed to the standard referred to in clause 44.2(a). 44.7 Completion date The completion date is the later of: (a) 15 April 1999; or (b) 14 days after the Vendor provides the Purchaser with the Environmental Report where the Purchaser has not notified the Vendor under clause 44.5 within the period permitted under that clause; or (c) if the Purchaser has notified the Vendor under clause 44.5 within the period permitted under that clause, the date which is 7 days after the Auditor has determined that the Works have been completed to the standard referred to in clause 44.2. 44.8 Rescission If the Purchaser fails to complete this contract on or before the completion date (other than as a result of default by the Vendor), then the Vendor is entitled to rescind this contract and refund the deposit monies paid under this contract to the Purchaser and the provisions of clause 19 shall therefore apply. 44.9 No Merger This clause 44 will not merge on completion. I certify that the preceding three hundred and six (306) numbered paragraphs and three (3) numbered schedules are a true copy of the Reasons for Judgment herein of the Honourable Justices Tamberlin, Kiefel and Emmett.

Counsel for the Appellant: S D Robb QC with M S Henry

Counsel for the First Respondent: P T Taylor SC with D T Miller (14, 15, 16 and 17 February 2005) F Corsaro SC with P T Taylor SC (10 and 11 August 2005)

Solicitor for the First Respondent: PWC Legal (to 4 April 2005) Phillips Fox (from 4 April 2005)

Counsel for the Second Respondent: J J Webster SC with M Green

Solicitor for the Second Respondent: Colin Biggers & Paisley

Date of Hearing: 14, 15, 16 and 17 February 2005 and 10 and 11 August 2005

Date of Judgment: 22 December 2005

Counsel for the Appellant: J J Webster SC with M Green

Solicitor for the Appellant: Colin Biggers & Paisley

Counsel for the First Respondent: P T Taylor SC with D T Miller (14, 15, 16 and 17 February 2005) F Corsaro SC with P T Taylor SC (10 and 11 August 2005)

Solicitor for the First Respondent: PWC Legal (to 4 April 2005) Phillips Fox (from 4 April 2005)

Counsel for the Second Respondent: S D Robb QC with M S Henry

Date of Hearing: 14, 15, 16 and 17 February 2005 and 10 and 11 August 2005

Date of Judgment: 22 December 2005