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[2009] NSWSC 672
defendant. The plaintiffs’ claims for specific performance, damages and equitable compensation were dismissed. The Sprys were entitled to retain the $40,000 deposit. Detadot was entitled to the $100,000 plus...
The court decided that the $100,000 retained from the Campbell Street sale was not a general fund for all contamination investigations or treatment. It could be used only if Detadot was responsible for contamination and legally liable to deal with it. The plaintiffs did not prove that condition. They also had no agreed right to delay settlement of the separate Princes Highway purchase until the disputed contamination claim was paid. Their claims failed, the Sprys kept the deposit, and Detadot received the trust money plus interest.
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2,318 words · generated 02/10/2026
This was a dispute arising from two related land sale contracts, followed by a disagreement about how to interpret a later arrangement concerning possible contamination at one of the properties.
On 27 July 2007, Kayzanate Pty Limited contracted to buy the Princes Highway Property at Moruya from Russell and Beverly Spry for $400,000. The deposit was $40,000, and completion was due 12 months after exchange. On the same day, Kayzantan Pty Limited contracted to buy the Campbell Street Property from Detadot Pty Limited for $2.25 million. That contract required completion by 31 December 2007. The two contracts dealt expressly with contamination: special condition 39 described each contract as the whole agreement, while special condition 40 stated that the land was sold in its existing condition, including as to any contamination, and that the purchaser would make no contamination-related requisition or claim for compensation, delay or damages. The purchaser also acknowledged receiving a Shell CD-ROM concerning possible contamination ([4]–[5]).
No linked legislation citations have been extracted yet.
Before exchange, the plaintiffs’ director, Phillip Smith, and Mr Spry discussed the Campbell Street site’s history as a service station. Their accounts differed about whether Mr Spry said it had been “cleaned up” or remediated. The judge did not treat that alleged pre-contract discussion as displacing the written contracts’ terms ([3], [5]).
As the Campbell Street completion date approached, the plaintiffs raised the need for contamination information. Their solicitor said the purchaser’s mortgagee required a clearance certificate and asked for evidence of remediation. The defendants disputed that the contract required them to provide it. They nevertheless offered cooperation with an assessment, while maintaining that cooperation did not extend the completion date ([6]–[11]).
The Campbell Street contract settled on 15 February 2008. Before settlement, the parties exchanged letters proposing that $100,000 be kept aside while the contamination issue was investigated. They disagreed later about what the arrangement covered. The plaintiffs said it required payment of assessment and treatment costs, even if responsibility for contamination was not established. The defendants said the fund was limited to remediation of contamination for which Detadot was responsible ([13]–[16], [29]–[30]).
The plaintiffs commissioned Coffey Environments to undertake assessments. The Phase 2 report was described by the judge as leading to the conclusion that any contamination was minimal or negligible. The plaintiffs nevertheless claimed costs for reports and an estimated treatment amount, and sought to have those sums paid from the retained fund or adjusted against the Princes Highway purchase price ([18]–[24], [41], [45]–[47]).
The defendants later served a Notice to Complete for the Princes Highway contract and, after the dispute remained unresolved, terminated it. The plaintiffs sought specific performance and compensation. The defendants sought declarations confirming termination, the right to keep the deposit, and Detadot’s entitlement to the retained $100,000. Bergin CJ in Eq dismissed the plaintiffs’ claims and made findings in favour of the defendants ([25]–[28], [48]).
The central issue was contractual construction: what did the February letters mean when they referred to “contamination analysis and treatment”? The judge approached that question by considering the words in their setting and the objective the parties were trying to achieve. Paragraph 38 cites McCann v Switzerland Insurance and Synergy Protection Agency Pty Ltd v North Sydney Leagues’ Club Limited for construing the agreement in light of surrounding circumstances and purpose.
The correspondence did not stand alone. The parties had already signed contracts containing an entire-agreement term and a specific contamination provision. The purchaser had received information about possible contamination and had agreed not to make certain claims or delay settlement on that basis ([5], [37]). The defendants had also repeatedly stated that they wanted the Campbell Street settlement to proceed and that, in their understanding, a polluter rather than an owner could bear responsibility for remediation ([13], [37]–[40]).
The judge accepted that “contamination analysis” meant finding out whether contamination requiring treatment existed, rather than merely analysing substances already found on site ([40]). But that interpretation did not resolve who would pay. Looking at the correspondence as a whole, the court concluded that the fund was reserved for contamination that Detadot had caused and was legally liable to treat or remediate. The arrangement was not an unconditional promise to pay for all assessment and treatment costs, whoever was responsible ([40]).
The distinction mattered because the plaintiffs’ claim included the costs of Coffey’s reports and an estimated treatment sum. The court found that they had not established contamination caused by Detadot for which it was liable to remediate. It also noted that the July claim did not identify a part of the Coffey report showing Detadot was the contaminator or supporting the claimed $22,000 treatment estimate ([45]–[47]). The finding was not simply that there had been no investigation. Rather, the evidence did not satisfy the condition the court found in the parties’ agreement.
A separate question was whether the alleged contamination debt could prevent settlement of the Princes Highway contract. The court found that the parties contemplated a purchase-price adjustment if Detadot was liable for rectification and the costs exceeded $100,000 ([41]). But the claim made was below that amount, and the correspondence did not establish a term allowing the plaintiffs to refuse settlement until the alleged debt was paid. The agreement did not make one contract’s completion conditional on resolving the other transaction’s disputed claim ([41]–[43]).
For specific performance, the judgment states that the plaintiff had to prove it was ready, willing and able to complete according to the contract, relying on Mehmet v Benson at [27]. The court found that the first plaintiff could not impose the unpaid contamination claim as a new condition of settlement. The defendants were entitled to serve a Notice to Complete and terminate the Princes Highway contract. The specific performance claim therefore failed, as did the compensation claims. Clause 9.1 entitled the Sprys to retain the deposit, and Detadot was entitled to the trust funds plus interest ([43]–[48]).
This judgment did not purport to change the general law of contract construction or specific performance. Its stated method was to interpret the particular February letters in their setting. At [38], the court cited McCann and Synergy for considering surrounding circumstances and the parties’ objectives when construing the agreement. The judgment’s contribution in this dispute is its application of that method to the language “contamination analysis and treatment” and the retained $100,000.
Before the court’s determination, the parties had competing readings of the letters. The plaintiffs’ reading treated the fund as covering assessment and treatment regardless of whether Detadot caused the contamination. The defendants’ reading limited the fund to rectification of contamination for which Detadot was responsible. The court accepted a qualified version of the plaintiffs’ interpretation of “analysis” as determining whether contamination existed, but accepted the defendants’ position on the condition governing payment: Detadot had to have caused the contamination and be legally liable to remediate it ([29]–[40]).
The judgment also states the readiness, willingness and ability requirement for specific performance by reference to Mehmet v Benson ([27]). It applies that requirement to the plaintiff’s attempt to make settlement conditional on payment of the alleged contamination debt. The judgment does not set out a new test for specific performance; it applies the cited requirement to the facts and contract before it.
After judgment, the parties’ dispute was resolved on the claims before Bergin CJ in Eq: the plaintiffs’ claims were dismissed, the Sprys were entitled to retain the deposit, and Detadot was entitled to the trust money and interest ([48]). The judgment itself does not establish a general rule that every contamination-retention arrangement has the same meaning. Its conclusions depend on the particular correspondence, contracts and evidence in this case.
The supplied judgment does not report later judicial treatment of this decision. It would therefore be unsupported to say whether later courts followed, distinguished or otherwise treated Kayzanate. The cases identified in the judgment as authorities are McCann, Synergy and Mehmet; those are cited in the judgment, not later treatments of it.
At [38], the judge states that the letters “are to be construed in the light of the surrounding circumstances and the objectives the parties were trying to achieve.” In plain English, the court did not decide the meaning of the February letters by isolating a single phrase. It considered the transaction, the earlier contract terms, the correspondence and the purpose of retaining money.
At [40], the judge says that “contamination analysis” meant finding out whether contamination requiring treatment existed, rather than analysing substances found on site. In plain English, the phrase referred to investigating whether there was a problem that needed remediation. That did not mean Detadot had promised to pay every cost of investigating the site.
The same paragraph states that the parties did not intend Detadot to pay for assessment, analysis or treatment “irrespective of who caused that contamination.” This is the decisive qualification. The fund was linked to Detadot’s responsibility and legal liability, not simply to the existence of a contamination concern.
At [41], the court found that a price reduction was contemplated if Detadot was liable and the cost exceeded $100,000. In plain English, the purchase-price adjustment was conditional. It was not an all-purpose mechanism for deducting any amount claimed by the purchaser.
At [42], the judge says there was no agreed condition allowing the plaintiffs not to settle the Princes Highway purchase if the alleged debt was unpaid. This explains why the contamination dispute did not, on the court’s construction, suspend the separate sale contract.
Finally, [48] records the operative result: the plaintiffs’ claims were dismissed, the Sprys could retain the $40,000 deposit, and Detadot could receive the $100,000 plus interest. This is the outcome of the litigation, rather than a general statement about how all contamination disputes must be resolved.
The reasoning is most directly relevant to disputes in which parties exchange correspondence after entering into a land sale contract and agree to retain part of the purchase money while investigating possible contamination. It is particularly pertinent where the written contract already addresses contamination, but later correspondence appears to establish a separate fund or payment arrangement.
The critical features here were that the original contracts were stated to contain the entire agreement, included a specific contamination clause, and were followed by letters discussing a retained sum and the polluter’s potential responsibility ([5], [37]–[40]). The court treated those features as part of the context for interpreting the later arrangement.
The judgment may also be relevant where a party claims that a contamination-related debt under one transaction permits it to withhold completion under another contract. The court’s conclusion turned on the absence of an agreed condition linking settlement of the Princes Highway contract to payment of the disputed debt ([41]–[43]). The case therefore illustrates the importance, in construing this particular kind of dispute, of identifying whether the parties actually made one completion obligation conditional on the other.
The reasoning is fact-sensitive. The judgment does not establish that references to “analysis” or “treatment” always have the meanings adopted here. Nor does it decide generally who is legally responsible for contamination. The court’s finding was that the parties intended the fund to be available only where Detadot had caused contamination and was legally liable to remediate it, and that the plaintiffs had not proved that condition on the evidence before the court ([40], [45]–[47]).
The judgment supplied for analysis does not discuss any later decision treating Kayzanate. It therefore provides no basis for describing the decision as followed, distinguished, approved or rejected by later courts.
The authorities expressly identified within this judgment are McCann v Switzerland Insurance, Synergy Protection Agency Pty Ltd v North Sydney Leagues’ Club Limited, and Mehmet v Benson. McCann and Synergy are cited at [38] in connection with construing agreements by reference to surrounding circumstances and objectives. Mehmet is cited at [27] for the requirement that a plaintiff seeking specific performance prove readiness, willingness and ability to complete according to the contract. Those are authorities relied on by Bergin CJ in Eq, not later cases applying Kayzanate.
The judgment’s own result should accordingly be described narrowly: it resolved the interpretation of these parties’ February 2008 correspondence and the related claims under the two contracts. The text supplied does not support a conclusion about its subsequent reception or wider precedential status.
The judgment does not determine the ultimate environmental condition of the Campbell Street site for every purpose. It records the court’s view that the Coffey report’s “irresistible conclusion” was that any contamination was minimal or negligible, and finds that the plaintiffs failed to establish contamination caused by Detadot for which it was liable to remediate ([21], [45]). Those are findings relevant to the claims tried, not a comprehensive environmental determination for all later uses or regulatory purposes.
The judgment also does not identify the specific statutory provisions governing responsibility for contamination. The parties’ correspondence referred to the Environmental Planning and Assessment Act and the Contaminated Land Management Act, and discussed the polluter and owner, but the judgment’s stated reasoning does not decide a statutory liability claim under those Acts ([6], [12]–[13]). It would therefore be inaccurate to treat the outcome as a definitive ruling on statutory contamination liability.
The operative order concerning costs remained to be settled. Paragraph 49 directed the parties to provide short minutes and an agreed costs order, with argument if they could not agree. The supplied text does not record the later costs determination.
Finally, the judgment does not provide any later-case history for Kayzanate. Any assessment of subsequent treatment would require sources beyond the judgment text supplied here.
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CITATION : Kayzanate Pty Limited & Anor v Russell Spry & Beverly Spry & Anor [2009] NSWSC 672
DECISION : Plaintiffs' claims dismissed. Defendants entitled to payment of funds held in trust account.
CATCHWORDS : CONTRACT - Construction of contract - "Contamination analysis" and "treatment" - Whether defendant agreed to pay for assessment of site, subject of a sale contract, irrespective of whether defendant liable in respect of remediation of contamination - Whether plaintiff entitled to specific performance - Whether defendant entitled to retain deposit - Whether defendant entitled to payment of balance of purchase moneys held in trust account
McCann v Switzerland Insurance (2000) 203 CLR 579 CASES CITED : Mehmet v Benson (1965) 113 CLR 295 Synergy Protection Agency Pty Ltd v North Sydney Leagues' Club Limited [2009] NSWCA 140
Kayzanate Pty Limited (First Plaintiff) PARTIES : Kayzantan Pty Limited (Second Plaintiff) Russell Spry & Beverly Spry (First Defendants) Detadot Pty Limited (Second Defendant)
COUNSEL : A Hourigan (Plaintiffs) J Anderson (Defendants)
SOLICITORS : Penrhyn Parker (First and Second Plaintiffs) Wayne Boom (First and Second Defendants)
6440 of 2008 KAYZANATE PTY LIMITED & ANOR v RUSSELL SPRY & BEVERLY SPRY & ANOR JUDGMENT 1 The first plaintiff, Kayzanate Pty Limited, entered into a contract to purchase land at 2775 Princes Highway, Moruya, New South Wales (the Princes Highway Property) for $400,000 (the Princes Highway Contract). The vendors are the first defendants, Russell Elford Spry and Beverly Ann Spry. The plaintiff seeks an order that the defendants specifically perform the Princes Highway Contract. 2 The Princes Highway Contract was entered into at the same time as the second plaintiff, Kayzantan Pty Limited, entered into a contract for the purchase of land at 91 Campbell Street, Moruya (the Campbell Street Property) for the purchase price of $2.25 million (the Campbell Street Contract). The vendor of the Campbell Street Property, was the second defendant, Detadot Pty Limited (Detadot). 3 Prior to the contracts being exchanged the director of the plaintiffs, Phillip Russell Smith, had a conversation with Mr Spry during which they discussed the issue of whether the Campbell Street property had been contaminated. Mr Spry informed Mr Smith that the petrol tanks had been removed from the site and that there were now inspection wells in those locations. Although Mr Smith gave affidavit evidence that Mr Spry had said that the site had been "cleaned up to the satisfaction of Council", it appeared to me that in cross-examination he moved away from that evidence and claimed that Mr Spry said that the site had been "cleaned up and remediated once the tanks had been removed". 4 Both contracts were exchanged on 27 July 2007. The deposit paid on the Princes Highway Contract was $40,000. The deposit paid on the Campbell Street Contract was $250,000. The completion date for the Campbell Street Contract was 31 December 2007. The completion date for the Princes Highway Contract was 12 months from 27 July 2007. 5 Each contract included the following Special Conditions:
39 WHOLE AGREEMENT The parties acknowledge that the terms and conditions set out in this contract contain the entire agreement as concluded between the parties as at the date of this contract notwithstanding any negotiations or discussions held or documents signed or brochures produced or statements made prior to the execution hereof and the contract by any representation (verbal or otherwise) made by or on behalf of the vendor which is not included in this contract or any schedules or annexures hereto or documents identified in this contract and initialled by the parties.
40 The subject premises are not only sold in their present condition and state of repair, but also in relation to the state of contamination if any that may exist on the subject premises. In that regard the purchaser acknowledges that the purchaser shall make no requisition, claim for compensation or delay in settlement or damages claim in respect of any contamination of the subject site. The vendor does confirm that it and it's (sic) principals are not aware of any contamination of the site. The purchasers acknowledge receipt of the CD-ROM made available by Shell in relation to possible contaminations (including HFC) of the subject land.
6 Mr Smith instructed his brother, Roderick A Smith, a solicitor practising at the firm Penrhyn Parker Solicitors (Penrhyn Parker), to act on his behalf. On 18 December 2007 Penrhyn Parker wrote to Mr W Boom, the solicitor for the defendants, in relation to various matters including the issue of possible contamination of the Campbell Street Property. That letter included the following:
In respect to the contamination of the site your client was well aware that this site had been previously used as a petrol station. In discussions with Phillip Smith, Mr Spry actually mentioned he knew the site had been contaminated and that he thought it had been capped once the tanks had been removed…
The potential contamination was confirmed in both our town planners reports on the site and also by the valuer who has noted it in his report. Our further enquiries at Eurobodella Council reveal that there is a notation on the register that this site is potentially a contaminated site that may require attention and remediation. We understand that as your client had not lodged a DA for a hire usage the council did not enforce a report at the time. However in the event that a hire usage is sought then the council will treat this site as contaminated and require a full report done.
We will require evidence of remediation and certification that the site has been properly remediated. Pursuant to the EP & A Act this obligation of remediation travels with the contaminator and then the owner of the land and we are entitled to request this information/evidence prior to settlement. This is an obligation pursuant to legislation and can not be contracted out of. We further note that this is a requirement of our incoming mortgagee.
It is further noted that Council made the comment that the current owner may be responsible for further contamination because of its current usage and location of certain machinery and equipment on the site and therefore pursuant to the said Act your client will be liable for remediation. The hierarchy under the legislation allows the EPA to enforce this against the polluter in priority to enforcing this against the owner. This obligation, according to the legislation does not cease on disposal.
As a suggestion I think it may be appropriate to commission a ( sic ) accredited site auditor to do an initial assessment on the site. If there is no issue then we can settle and your client can be assured that he will not be liable in the future for any remediation or rectification works that the EPA may enforce against the polluter. 7 On 19 December 2007 Mr Boom responded to Penrhyn Parker's letter advising that there was no contractual basis for making a demand on the defendant that it should provide evidence of remediation and certification. The letter also included the following:
v My client does rely upon the terms of the Contract to any claims that your client seeks to make regarding contamination. In relation to the Contract I confirm that Contracts were exchanged on 27 July 2007 and it was only on the 14 December 2007 that you raised this contamination issue for the first time. Your client had ample time to raise this contamination issue and indeed the matter referred to on the second page of your facsimile 18 December 2007 clearly suggests the mind of the representative's of your client was turned to this issue either immediately before or around the time of exchange of Contracts. I understand, from my client, that such discussions occurred prior to the exchange of Contracts. In any case, the raising of this issue at this stage when there is only a few working business days until the scheduled completion date under the Contract is unacceptable. The timing for the raising of this contamination issue is such that it should have been raised many, many months ago and addressed by our two clients with due process and due timing. The lateness of your raising of this issue could cynically be perceived as an attempt to delay completion of this matter.
vi I note your suggestion that it may be appropriate to commission an expert to do an initial assessment of the site. It is submitted to you that your client should have commissioned an expert to obtain such a contamination assessment of the site many months ago and perhaps even prior to exchange of Contracts. Your client was well aware the site had previously been used as a service station prior to exchange of contracts.
8 Mr Smith accepted in cross-examination that shortly before 18 December 2007, the mortgagee required a certificate of clearance in relation to contamination in respect of the Campbell Street Property. He also accepted that when the valuer and the mortgagee informed him of the need to obtain a such a certificate the plaintiff was then unable to depend upon the finance from the incoming mortgagee. On 20 December 2007 Mr Boom advised Penrhyn Parker as follows:
This letter is to confirm that my client will most certainly provide assistance and co-operate in every reasonable way to the have the Audit Report carried out. It is obvious both of our clients seek to have that Report completed as soon as possible.
My client has been in contact with [name] who is the occupier of the site confirming the site audit is to be carried out as soon as possible by the expert that you have engaged.
Hopefully we will be able to proceed with completion of this matter on 31 December 2007. 9 Settlement did not occur by 31 December 2007 and in late January 2008 Detadot served a Notice to Complete on the first plaintiff. By this time the environmental specialist, Coffey Environments Pty Ltd (Coffey), on Mr Smith's instructions, had inspected the Campbell Street Property but had not produced a report. On 31 January 2008 Penrhyn Parker wrote to Mr Boom claiming that the Notice to Complete was defective and referring to what was described as Mr Boom's concession that the contamination issue needed to be resolved. The letter also suggested that Detadot was estopped from serving a Notice to Complete until the contamination issue was resolved. Penrhyn Parker promised to forward Coffey's report to Mr Boom as soon as it was available. 10 On 1 February 2008 Mr Boom responded to Penrhyn Parker's letter in terms that included the following:
I confirm with you that my client has only ever wanted completion in accordance with the terms of Contract. My client did offer to assist and co-operate in relation to a site contamination inspection so that your client may obtain a report. I confirm my client at no stage ever consented to an extension of the time for completion until your client had obtained some contamination report. Simply put, my client did indicate co-operation and assistance in relation to your client obtaining such contamination report, but did so in the interests of assisting your client to proceed to completion in accordance with the terms of the Contract. 11 Mr Boom emphasised the second plaintiff's delay in obtaining a report on possible contamination of the Campbell Street Property and advised that he was instructed that the settlement should occur on or before Friday 15 February 2008. 12 On 8 February 2008 Penrhyn Parker responded to Mr Boom's letter enclosing a copy of the report from Coffey for "your client's reference" and suggesting that there had been "potential site contamination" by Detadot and that contaminants had not been disposed of properly. The letter included a claim that Detadot, "as the contaminator", was liable for rectification and continued:
We are intending to move forward to the next stage of inspection which includes full analysis and soil samples of the site. Only then will we be in a position to ascertain the full extent of the contamination and the cost of rectification.
Your client was adamant that there was no contamination at all from the service station usuage ( sic ) as the site had been fully treated. It was on this basis that our client entered into the contract of sale. After exchange when we pressed for evidence of this he was not able to assist us. Further to this we now know he was responsible for ongoing contamination too which he did not reveal to us. As you know, pursuant to the Environmental Planning and Assessment Act and Contamination (sic) Land Management Act, the contaminator is ultimately liable for rectification. This takes precedence ahead of the land owner being liable.
In light of your client's non disclosure we are quite concerned about his intentions to attend to his statutory obligations. Further as your client is a company, it may wish to divest itself of assets to further avoid its obligations. We are prepared to settle this matter with a sum set aside from settlement funds held in an account as agreed for the purpose of payment of rectification. As we have no idea of the costs of this rectification at this stage I suggest a sum of $150,000 be set aside from settlement funds until the quantum of the costs of rectification can be determined. Once the costs of rectification is determined and it is less than this sum we are happy for the difference to be released.
Alternatively if your client is not prepared to accept this proposal we suggest there be an agreement entered into that the sum of rectification be quantified prior to settlement of the block of land on the Princes Highway and such sum be offset against that settlement.
As you can appreciate with your client's attitude to disclosure to date on the issue of contamination we are looking for a solution which will ensure your client meets his obligations. 13 On 11 February 2008 Mr Boom responded in terms that included the following:
My client's ( sic ) accept the proposal contained in paragraph 3 on page 2 of your email transmission regarding contamination. However my client is concerned that there be no delay regarding completion of this matter pending the drafting and approval of both of our clients of (an agreement) as referred to in that paragraph. If such an agreement was to be entered into and agreed to by all parties, then it would need to be done in the very near future (the next day or so) so as completion was still able to occur prior to 5pm this Friday 15 February 2008. Obviously if such an agreement is not able to be agreed upon and signed by the parties prior to scheduled completion this Friday, then my client Company would prefer and does state that it would then proceed to completion upon the proposal contained in the previous paragraph (paragraph 2 page 2). However instead of the suggested sum of $150,000.00 being set aside from settlement funds, my client suggests that the sum set aside be $100,000.00. I confirm that sum of $100,000.00 could be placed in an account in both of our respective client's names at the Commonwealth Bank in Moruya.
In relation to contamination I indicate to you that my understanding of the law is that the contaminator is ultimately liable for rectification. I agree that such law does take precedence ahead of the land owner being liable again so far as I am aware.
In relation to any contamination that my client has caused, I am instructed that the only two possible areas in which my client could have contributed to contamination of the site are as follows:- (a) The wash bay work area - surface contamination only and virtually nothing below ground level. (b) Waste oil storage area - as a result of oil spillage when the oil was being tipped into the oil storage area pit. I have been instructed that both of these areas would contain an absolutely minimum amount of contamination which, according to my client, could be rectified by the use of a shovel and a small two wheeled trailer.
From an overall point of view the most important thing from my client's point of view is the completion of this matter. It is requested that completion occur pursuant to the above as soon as possible. 14 On 12 February 2008 Penrhyn Parker wrote to Mr Boom in terms that included the following:
As agreed in writing between the solicitor for Spry/Detadot P/L and the solicitor for Kayzanate P/L and Kayzantan P/L being for costs of contamination analysis and treatment on 91 Campbell Street, Moruya. 18 By letter dated 7 May 2008 Coffey wrote to Penrhyn Parker with reference to the previous "Environmental Site Assessment" dated 12 February 2008. Coffey recommended that a detailed Phase 2 Environmental Site Assessment be undertaken which would include taking samples of groundwater and soils, installation of additional groundwater wells and validation of soils and backfill. The scope of works included: a review of previous assessment reports; hazardous materials demolition survey; an intrusive sampling program; and data analyses and reporting. Coffey advised that the estimated cost of such work was $56,285.77 including GST. 19 It is common ground that the plaintiffs instructed Coffey to proceed with the Phase 2 assessment. 20 On 21 May 2008 Mr Boom wrote to Penrhyn Parker disputing the plaintiffs' entitlement to lodge a caveat and requesting that a Transfer of the Princes Highway Property be submitted for approval and signature by the vendors. On 25 May 2008 Penrhyn Parker wrote to Mr Boom advising that the first plaintiff would be in a position to settle "assuming your client honours their obligations". That letter requested details of all contamination and treatment of the site, with the suggestion that earlier requests had gone unanswered. On 25 May 2008 Penrhyn Parker wrote to Mr Boom in terms that included the following:
For you and your client's information the analysis of the site in respect to contamination is well under way. Drilling and sampling was essentially completed last week. I note that your client was not able to assist with access keys for the observation pits as requested unfortunately. However the inspection pits were still able to be accessed by breaking the plates on the top.
We anticipate having a full analysis and costings by mid June 2008. At that stage we will be able to fully quantify the costs of analysis and if required, treatment of the site for contamination. This costs ( sic ) is your client's costs, as agreed prior to settlement. 21 By letter dated 30 July 2008 Coffey presented its final Report of the Phase 2 assessment of the Campbell Street Property to the plaintiffs. Although the Report is somewhat technical, the irresistible conclusion from it is that any contamination was minimal and/or negligible. Although the copy of the report in evidence is dated 30 July 2008, Penryhn Parker wrote to Mr Boom on 14 July 2008 referring to the fact that he had already received a copy of the Report and claiming as follows:
Some contamination has been identified and is noted in the report. As per the agreement your client is obliged to pay the costs of analysis and treatment of any contamination on the said site.
I quantify the costs of analysis and treatment as follows:
Please forward to us the sum of $84,708.07 (less $2,000 being for outstanding interest). The balance of the trust account can then be released to your client, but only on the issuing of the said cheque as per this paragraph. 22 On 29 July 2008 Penrhyn Parker wrote to Mr Boom referring to their letter of 14 July 2008 noting that they had not received the courtesy of a reply or the trust cheque as requested "which you are required to forward to us as per the agreement". 23 On 29 July 2008 Mr Boom served a Notice to Complete on the first plaintiff providing for settlement on 15 August 2008. On the same day Penrhyn Parker wrote to Mr Boom claiming that the Notice to Complete was defective. That letter included the following: Your client's ( sic ) have not yet satisfied their debt on 91 Campbell Street despite our request for you to do so. Your client offered the above property as security as well as monies held by you in trust. Until there is agreement and payment of the outstanding debt pursuant to the terms as agreed between the writer and you on behalf of your client you are not in a position to serve a valid notice to complete.
We are ready willing and able to settle this matter when the said debt is paid. Alternatively we can take the debt off the purchase price of this property. Please advise whether your client will accept this position and if so we will make arrangements for settlement. 24 On 1 August 2008 Mr Boom wrote to Penrhyn Parker analysing the Coffey report and emphasising the lack of any need for remediation. That letter rejected the claim for $84,708.07. It also suggested that the $22,000 estimate for treatment of the contamination was a total fabrication as it did not relate to and was not consistent with the Coffey report. Mr Boom sought agreement for the $100,000 to be released to Detadot. 25 The parties continued to bicker in further correspondence until they reached an impasse. The defendant served a Notice of Termination in September 2008 and Lapsing Notices in respect of the Caveat in December 2008.
Proceedings Commenced 26 These proceedings were commenced on 31 December 2008. They were heard on 18 June 2009 when Mr A Hourigan, of counsel, appeared for the plaintiff and Mr J Anderson, of counsel, appeared for the defendant. 27 By Amended Summons, filed in Court on 18 June 2009, the plaintiffs seek an order for specific performance of the Princes Highway Contract with an order that the purchase price be adjusted "pursuant to the Contamination Agreement in relation to the contamination analysis and potential treatment of contamination" on the Campbell Street Property. In this regard the onus is on the plaintiff to prove that it is ready, willing and able to complete the contract according to its terms: Mehmet v Benson (1965) 113 CLR 295, per Barwick CJ at 307-308. The plaintiff also seeks damages (or equitable compensation) in the amount of $220,019.57 alleged to be the cost of the contamination analysis and potential treatment on the Campbell Street Property. 28 The defendants, by Cross-Summons filed on 6 April 2009, seek a declaration that Detadot is beneficially entitled to the $100,000, representing part of the purchase moneys of the Campbell Street Property; a declaration that the Princes Highway Contract was lawfully terminated; a declaration that Mr and Mrs Spry are entitled to retain the deposit of $40,000 paid at the time of exchange of the Princes Highway Contract; and consequential orders. The February 2008 agreement 29 The plaintiffs allege that agreement (referred to in the Amended Summons as the "Contamination Agreement") was reached between the plaintiffs and the defendants in February 2008 that $100,000 would be retained from the settlement moneys of the Campbell Street Contract to be used for "contamination analysis" and "contamination treatment" of the Campbell Street property. The defendants concede that they agreed that such fund would be set aside, but only on the basis that it would be used to rectify any contamination for which the defendant, Detadot, was found to be liable. The defendants do not accept that there was agreement to pay any amount for the assessment of the site, being the costs of the reports produced by Coffey, nor to pay for the contamination treatment, unless it was established that Detadot was the contaminator. The plaintiffs also allege that the parties agreed that if the contamination analysis and treatment cost more than $100,000 then the purchase price of the Princes Highway Property, the contract for which was due to settle 12 months from 27 July 2007, would be reduced by that additional amount. 30 The plaintiffs' claims rely in part on the existence of the alleged agreement in respect of which the pivotal letters are those dated 12 February 2008 and 13 February 2008. The plaintiffs contend that the expression "contamination analysis" in the letter of 12 February 2008 means the assessment of the site to see whether there was any contamination. The defendants contend that "contamination analysis" means the analysis of substances, or contaminants, found on the site, rather than the assessment of the site to see if there were any contaminants on the site. The Coffey reports 31 In support of their contentions the defendants relied on the following passage of the Coffey report dated 7 May 2008: The proposed scope of the limited assessment has been designed to assess whether there is significant contamination associated with the activities of the former service station by targeting the service station's areas of environmental concern (AEC's) identified during the previous assessment. That is, the proposed scope of works is not of the site as a whole, nor of sufficient detail to allow Coffey to provide a statement of site suitability for the proposed land use. 32 The defendants also emphasised the title to the preliminary report as an "Environmental Site Assessment". Section 2 of Coffey's letter of 7 May 2008 included the notation that the "assessment" was preliminary in nature and did not include sampling and analysis of either soil or groundwater. Section 3 referred to the proposed objectives of the scope of works and advised that it was to:
… sample and analyse soil and groundwater collected from the service station's AECs identified by the previous Phase 1 ESA to assess whether there is grose ( sic ) contamination associated with the activities of the former service station which may affect the use of the site for the proposed redevelopment (from a contamination point of view). 33 The proposed scope of works was to include:
An intrusive sampling program to assess the previously identified AEC's; and
Data analysis and reporting. 34 There are numerous references to the "Site Assessment" and the section entitled "Data Analysis and Reporting", included the following:
Following the receipt of the laboratory analytical results, three (3) copies of a Limited Phase 2 Environmental Site Assessment report would be prepared. This would be prepared in accordance with the NSW EPA (1994) 'Guidelines for Consultants Reporting on Contaminated Sites' and include the following: A review of the previous assessment reports; A summary of the sampling methodology; An analysis of the laboratory testing results including a comparison of the results against the adopted guideline threshold criteria for the proposed use of the site; An assessment of soil conditions and the potential impact of such on the suitability of the site for the proposed land use (from a contamination point of view); and Recommendations on further works (if required). 35 The Report dated 30 July 2008 records that Coffey was commissioned by Mr Smith, of the second plaintiff, and makes clear that the Phase 2 work was a sampling and analysis program in which soil was drilled and sampled from 18 bore holes located across the site; with laboratory analysis of soil samples for a range of potential contaminants; and screening of duplicate soil samples for volatile ionisable compounds including data analysis interpretation and reporting. 36 The defendants submitted that the terminology utilised in the Coffey reports demonstrates the difference between the two processes of assessing a site and the analysis of the soil/samples taken from the site. It was submitted that the term "contamination analysis" in the letter of 12 February 2008, refers to the latter and not the former. Surrounding circumstances 37 The correspondence between the parties prior to the letters of 12 and 13 February 2008 made clear that the defendants were of the view that the plaintiffs had inappropriately delayed obtaining any report in respect of possible contamination of the site. The completion date for the Campbell Street Contract was 31 December 2007 and by the time of these letters the defendant, Detadot, had served a Notice to Complete. The parties agreed that the Contract was the whole agreement between them (Special Condition 39) and specifically dealt with the matter of contamination (Special Condition 40). The second plaintiff was provided with a CD-ROM from Shell in relation to the possible contaminants that may be found on the land and the second plaintiff agreed that it would not make any requisition claim for compensation or delay in settlement in respect of the contamination of the subject site (Special Condition 40). These matters were emphasised in the defendants' correspondence to the plaintiffs prior to the letters of 12 and 13 February 2008. 38 The agreement in those letters is to be construed in the light of the surrounding circumstances and the objectives the parties were trying to achieve by setting aside the fund of $100,000: McCann v Switzerland Insurance (2000) 203 CLR 579 per Gleeson CJ at [22]; Synergy Protection Agency Pty Ltd v North Sydney Leagues' Club Limited [2009] NSWCA 140 per Allsop P at [22]. 39 One of the reasons the fund was set aside was so that the settlement of the Campbell Street Contract would not be further delayed. The defendants' contentions in relation to the construction of the expression "contamination analysis" have an element of ingenuity but I am not satisfied that they are consistent with the parties' intentions. The defendant, Detadot, was willing to defer receipt of the balance of $100,000 of the purchase price until its liability, if any, for contamination was ascertained. Detadot was keen for settlement to occur and had already stated in Special Condition 40 of the Campbell Street Contract that it, and its principal, were unaware of any contamination of the site. It reiterated this in the correspondence leading up to the letters of 12 and 13 February 2008. 40 I am satisfied that when the parties used the expression "contamination analysis", they meant finding out whether there was any contamination on the site that required treatment, rather than analysing the substances that may be found on the site. The expression "contamination treatment" is not so controversial. From the surrounding circumstances, including the correspondence referring to: the "hierarchy under the legislation"; the EPA pursuing the "polluter" rather than the land owner; Mr Boom's understanding that the "contaminator is ultimately liable for rectification"; and the context of the letters of 12 and 13 February 2008; I am satisfied that the parties intended that the $100,000 fund was to be set aside and used if contamination was found that was caused by Detadot and for which Detadot was legally liable to treat or remediate. The parties did not intend that Detadot would pay for the site assessment or analysis or treatment irrespective of who caused that contamination. Adjustment of Purchase Price on Princes Highway 41 It appears that at the time they struck their agreement in February 2008 the parties assumed that they would be in a position by the time settlement was due for the Princes Highway Contract to know the extent of Detadot's liability, if any, for rectification of contamination. I am satisfied that they intended that if Detadot was so liable, and the cost of analysis and treatment was greater than $100,000, the contract price of the Princes Highway Contract would be reduced to reflect that amount. As it turned out, the amount sought by the plaintiff from Detadot was less than $100,000. The letter of 14 July 2008 made a claim for $84,708.07 less $2,000. At trial counsel for the plaintiff conceded that such a claim should be reduced further by the figure $6,600 for the Phase One report from Coffey. 42 When the plaintiffs made the demand in the letter of 14 July 2009, there was no suggestion that the purchase price of the Princes Highway Contract needed to be adjusted. There was no condition agreed to by the parties that if the defendant failed to pay that alleged debt, the plaintiff was entitled not to settle the purchase of the Princes Highway property. 43 Although the plaintiffs suggested in correspondence that the Princes Highway Property had been offered to secure the alleged debt, such claim is without foundation. The completion date for the Princes Highway Contract was 12 months from 27 July 2007. The plaintiff was not entitled to place a condition on Mr and Mrs Spry that Detadot must pay the alleged debt prior to settlement of the Princes Highway Contract. The defendants were entitled to serve the Notice to Complete and were entitled to terminate the Princes Highway Contract. 44 The first plaintiff's claim for specific performance will be dismissed. The defendants are entitled to retain the deposit pursuant to clause 9.1 of the Princes Highway Contract. Damages or Equitable Compensation 45 Although there was a reference in the Coffey Report to a program for removal of asbestos in a "maintenance" program, the plaintiffs have failed to establish that there was any contamination caused to the site by Detadot for which it is liable to remediate or rectify the site. The agreement reached between the parties in respect of the contamination was, as found above, that if the defendant was liable to rectify or remediate contamination on the site the $100,000 could be used for that purpose.
46 The letter of 14 July 2008 requesting the defendant, Detadot, to pay an amount both for the reports and remediation does not refer to any aspect of the Coffey report identifying Detadot as the contaminator or alternatively any contamination requiring removal or remediation which would cost $22,000. 47 The plaintiffs' claim for damages must fail. It will be dismissed. The defendant, Detadot, is entitled to be paid the $100,000 held in Mr Boom's trust account. Conclusion 48 The first plaintiff's claim for specific performance will be dismissed. The second plaintiff's claims for damages or equitable compensation will be dismissed. The defendants, Mr and Mrs Spry, are entitled to retain the deposit of $40,000. The defendant, Detadot, is entitled to payment of the $100,000 plus interest held in the defendants' solicitors' trust account. 49 The parties are to bring in Short Minutes of Order together with an agreed costs order when the matter is listed for directions on 28 July 2009 at 9.30 am. If they are unable to agree on a costs order, I will hear argument at that time.
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Kayzanate Pty Limited & Anor
Russell Spry & Beverly Spry & Anor
The plaintiffs’ claims for specific performance, damages and equitable compensation were dismissed. The Sprys were entitled to retain the $40,000 deposit. Detadot was entitled to the $100,000 plus interest held in the defendants’ solicitors’ trust account. Costs were left for agreement or argument at directions.